Provident Financial Services Inc (PFS) (Q3 2026) Earnings Call Highlights: Record Revenue of …

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• Core Net Income: $84 million, or $0.65 per diluted share; up 17.5% year over year.

• Reported Net Income: $69 million, or $0.53 per share, impacted by noncore items.

• Total Operating Revenue: Record $238 million, driven by record net interest income and noninterest income.

• Net Interest Income: Record $208 million; grew 7% year over year.

• Noninterest Income: $30.5 million, slightly ahead of expectations, including $3.5 million elevated BOLI income.

• Wealth and Insurance Revenue: Wealth revenues grew 6% and insurance revenues grew 20% year over year.

• Adjusted Return on Average Assets: 1.3% annualized.

• Adjusted Return on Average Tangible Common Equity: Over 16% (16.6% core) for the sixth consecutive quarter.

• Adjusted Pre-Provision Net Revenue: Record $120 million, or $0.92 per share; 1.85% annualized of average assets, up 10% from $109 million a year ago.

• Net Interest Margin: Core NIM expanded 7 basis points to 3.16%; reported NIM expanded 2 basis points to 3.5%.

• Average Earning Assets: Increased $341 million, or 5.8% annualized, versus trailing quarter; average asset yield rose 7 basis points to 5.68%.

• Deposit Costs: Interest-bearing deposit costs 2.5% (up 13 basis points); total deposit costs 2.02% (up 10 basis points).

• Loans Held for Investment: Period-end balances increased $124 million, or 2.5% annualized; commercial loans grew 3% annualized; ~$550 million of commercial loans funded; pipeline over $3 billion.

• Deposits: Period-end deposits increased $262 million, or 5.4% annualized, driven by commercial and municipal growth.

• Loan-to-Deposit Ratio: Improved to 101.8%; target range 97% to 103%.

• Asset Quality: Nonperforming assets 55 basis points of total assets (23 basis points adjusted for senior housing resolution); net charge-offs 5 basis points for the quarter and year-to-date.

• Provision for Credit Losses: $5.2 million, driven by loan growth, portfolio mix changes and specific reserves; allowance coverage ratio up 2 basis points to 94 basis points.

• Noninterest Expense: Total $140.7 million including nonoperating items; core noninterest expense approximately $119 million.

• Noncore Expense Items: $17.5 million loss on debt extinguishment, $3.7 million core conversion costs, $465,000 early lease termination costs.

• Efficiency Ratio: 49.9%, stable from trailing quarter; adjusted expenses to average assets 1.84%.

• Capital Ratios: CET1 ratio grew to 10.9%; tangible common equity ratio decreased slightly to 8.4%; tangible book value per share decreased $0.26 to $16.15.

• Wealth Management AUM: Relatively stable at $4.4 billion.

• Guidance: Full year loan and deposit growth of 5% to 6%; Q4 noninterest income ~$29 million; full year effective tax rate ~28%; core ROA target 1.2% to 1.3%; Q4 core operating expenses ~$118 million to $120 million plus ~$1 million final conversion costs; core margin expected to expand 1 to 2 basis points in Q4.

Release Date: October 29, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Provident Financial Services Inc (NYSE:PFS) reported record total operating revenues of $238 million, driven by strong growth in both spread and fee-based businesses.

• Core net income was $84 million or $0.65 per diluted share, with an annualized adjusted return on average assets of 1.3% and adjusted return on average tangible common equity over 16% for the sixth consecutive quarter.

• Net interest income grew 7% year over year, and wealth and insurance revenues grew 6% and 20%, respectively.

• Asset quality remains strong with nonperforming assets at 55 basis points of total assets, and net charge-offs were only 5 basis points for the quarter and year-to-date.

• The bank successfully completed its core conversion over Labor Day weekend, which is expected to enhance data capabilities, efficiency, and customer experience.

Negative Points

• Provident Financial Services Inc (NYSE:PFS) reported noncore expense items that impacted reported net income, including a $17.5 million loss on extinguishment of debt, $3.7 million of core conversion costs, and $465,000 of early lease termination costs.

• The company expects a 1 to 2 basis point compression in net interest margin for each 25 basis point rate hike, indicating some liability sensitivity.

• Loan growth in the third quarter was 3% annualized, which is seasonally slower, and payoffs in the fourth quarter could impact net growth.

• The all-in incremental cost of deposits increased to about 3.25% from around 2.85% to 2.95% a quarter ago, reflecting higher funding costs.

• Tangible book value per share decreased $0.26 this quarter to $16.15, and the tangible common equity ratio decreased slightly to 8.4% quarter-over-quarter.

Q & A Highlights

Q: With the core conversion now complete, what are the immediate benefits and near-term opportunities, and how much is efficiency-focused versus revenue-driven? A: CEO Anthony Labozzetta called the conversion “brilliant execution” and said it frees the bank to focus on in-flight projects, notably a major data capabilities initiative to boost efficiency and decision-making. He noted a governance council overseeing AI for over a year and an internally developed AI agent (“B”) used during the conversion. The efforts span both efficiency and revenue opportunities, including building out lending capabilities.

Q: Given the bank’s liability sensitivity, how should we think about the NIM trajectory if the Fed delivers two or three hikes and then pauses? A: CFO Adriano Duarte said the balance sheet is mostly neutral to rates up or down, with roughly 1 to 2 basis points of compression per 25 basis point hike assuming no move on the long end. He added there are enough management strategies to sustain a fairly stable margin.

Q: Can you walk through the fourth quarter fee guide of approximately $29 million? A: CFO Adriano Duarte expects wealth management and insurance to grow versus the prior year, a pickup in bank fee income versus the third quarter (some fees were waived during conversion statement overlaps), strong SBA loan sales in the pipeline, and BOLI normalizing after running about $3.5 million above the typical run rate in the third quarter.

Q: How are you thinking about the cadence of expense growth in 2027? A: CFO Adriano Duarte expects to finish 2026 at roughly $474 million in core expenses, growing 3.5% to 3.75% into 2027. CEO Anthony Labozzetta added that in-flight investments sit within that framework and that positive operating leverage remains a big focus.

Q: Is the current loan pipeline a good run rate into next year, and what are the opportunities for loan growth in 2027? A: CEO Anthony Labozzetta said yes, projecting 5% to 6% loan growth next year, framed by market conditions and the bank’s producer capacity rather than guesswork. He said the bank could outpace that guidance depending on dynamics but “won’t spend on our credit culture.”

Q: Can noninterest-bearing deposits keep growing from here, or will higher rates cause a mix shift? A: CEO Anthony Labozzetta pointed to 5% NIB growth this quarter and expects continued expansion via commercial lending and treasury management, though changing rates could affect the pace. CFO Adriano Duarte added that higher rates may cause some transition from NIB to other deposit lines, but production should remain.

Q: Is it fair to assume loan growth picks back up in the fourth quarter, and are paydowns slowing with higher rates? A: CEO Anthony Labozzetta expressed confidence in the commercial pipeline’s pull-through, diversity and mix, reiterating roughly 6% growth for the year with a caveat that higher-than-expected prepayments could affect net growth. He stressed that volume alone isn’t the goal and the bank hasn’t loosened credit structure.

Q: What is the expected purchase accounting accretion going forward? A: CFO Adriano Duarte guided to roughly $50 million to $52 million over the next 12 months, or about $15 million per quarter, for securities and loans, ticking down a bit as prepayments on some CRE loans have slowed.

Q: With the reserve ratio drifting up from lows and a greater C&I mix, should we expect a steadily higher reserve cadence over the next four to five quarters? A: CEO Anthony Labozzetta said the pool basis has been stable around 90 basis points, with recent increases tied to one-off specific reserves, and sees no broad issues on the C&I side. CFO Adriano Duarte added that quarterly sector stress testing and internal loan reviews show nothing rising to a level of concern, and resolving the four senior housing credits should bring NPAs down to 23 basis points.

Q: What is the all-in incremental cost of deposits today versus a quarter ago, and what were municipal deposits at period end? A: CFO Adriano Duarte said the all-in incremental cost is about 3.25%, up from roughly 2.85% to 2.95% a quarter ago, and municipal deposits were around $3.6 billion at period end, typically the low point of the quarter.

Q: Can you update us on the buyback, the right pace, and how long the opportunistic repurchases can continue? A: CFO Adriano Duarte said the bank uses a three-year earn-back threshold, currently about the $22 mark, and is active when the stock dips below that. It has repurchased about 370,000 shares, with price sensitivity driving the approach.

Q: How active are M&A conversations, and what size, geography and type of partners would interest you? A: CEO Anthony Labozzetta said the lion’s share of focus remains on organic growth, but M&A is part of the job and the bank has optionality, so it isn’t forced to act. It would entertain culturally compatible deals with strategic purpose. Conversations are steady, “business as usual” since the post-regulatory-change pickup.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.