Provident Financial Services (NYSE:PFS) reported third-quarter 2026 core net income of $84 million, or $0.65 per diluted share, as record operating revenue and continued loan and deposit growth supported results. Reported net income was $69 million, or $0.53 per share, after non-core expenses including a loss on debt extinguishment and costs related to the company’s core systems conversion.
President and Chief Executive Officer Tony Labozzetta said the company’s adjusted return on average assets was 1.3%, while adjusted return on average tangible common equity exceeded 16% for the sixth consecutive quarter. Adjusted pre-provision net revenue reached a record $120 million, or $0.92 per share.
Revenue and Margin Growth
Total operating revenue reached a record $238 million, led by record net interest income of $208 million and non-interest income of $30.5 million. Year over year, net interest income increased 7%, while wealth-management revenue rose 6% and insurance revenue increased 20%, Labozzetta said.
Chief Financial Officer Adriano Duarte said average earning assets increased $341 million from the prior quarter, representing annualized growth of 5.8%. Average asset yields increased 7 basis points to 5.68%, while interest-bearing deposit costs increased 13 basis points to 2.5%.
Core net interest margin expanded 7 basis points from the preceding quarter to 3.16%, while reported net interest margin rose 2 basis points to 3.5%. The company is modeling one Federal Reserve rate increase in December and expects core margin to expand by 1 to 2 basis points in the fourth quarter.
During the question-and-answer session, Duarte said the balance sheet is largely neutral to both rising and falling rates. A 25-basis-point rate increase could result in 1 to 2 basis points of margin compression if the long end of the yield curve does not move, he said, though management believes it has strategies to maintain a relatively stable margin across rate environments.
Deposit and Lending Activity
Period-end deposits increased $262 million during the quarter, or 5.4% on an annualized basis, driven by commercial and municipal deposit growth. The company also reported growth in non-interest-bearing deposits and core business deposits. Provident’s loan-to-deposit ratio improved to 101.8%, within its targeted range of 97% to 103%.
Labozzetta said the bank expects deposits to keep growing, supported by initiatives in its small-business group and targeted specialty deposit verticals. He said market-rate changes could raise deposit acquisition costs and potentially cause some movement from non-interest-bearing accounts into other deposit categories, but management expects continued production across deposit lines.
Commercial loan balances increased 3% on an annualized basis in the third quarter, while period-end loans held for investment rose $124 million, or 2.5% on an annualized basis. Provident funded about $550 million of commercial loans during the quarter, and its total pipeline remained above $3 billion. More than half of that pipeline consisted of C&I, middle-market and specialty lending for the third consecutive quarter.
The pull-through-adjusted loan pipeline totaled $1.7 billion at quarter-end, with an average pipeline rate approaching 6.5%, compared with a 5.94% yield on the existing portfolio. Management continues to expect full-year loan and deposit growth of 5% to 6%, though Labozzetta noted that fourth-quarter payoffs could affect net loan growth.
Looking to 2027, Labozzetta said the company is projecting loan growth in the 5% to 6% range, contingent on market conditions and maintaining its underwriting standards. He said Provident would not compromise its credit culture to pursue loan volume.
Credit Quality and Capital
Asset quality remained stable, with non-performing assets equal to 55 basis points of total assets. The company recorded a $5.2 million provision for credit losses, driven primarily by loan growth, portfolio mix changes and required specific reserves. The allowance coverage ratio increased 2 basis points from the preceding quarter to 94 basis points.
Labozzetta said the bank is progressing toward a resolution by year-end for a senior-housing relationship that moved to non-performing status earlier in 2026. Excluding four credits expected to be resolved, non-performing assets would equal 23 basis points of total assets, he said. Commercial delinquencies improved during the quarter, while net charge-offs were 5 basis points for both the quarter and year to date.
Provident’s CET1 ratio increased to 10.9%. Tangible book value per share declined $0.26 during the quarter to $16.16, while the tangible common equity ratio declined slightly to 8.4%.
The company has repurchased roughly 370,000 shares in recent weeks amid market volatility. Duarte said management generally views buybacks through a three-year earn-back threshold and has been active when the stock trades below approximately $22 per share.
Conversion Costs and Outlook
Provident completed its planned core conversion over Labor Day weekend. Labozzetta described the project as a significant undertaking that affected virtually every aspect of the bank and said it was completed successfully with a focus on customer experience.
Reported results included a $17.5 million loss on extinguishment of debt from accelerated amortization of purchase accounting, $3.7 million in core conversion costs and $465,000 in early lease termination costs. Core non-interest expense was about $119 million, while the adjusted efficiency ratio was 49.9% and adjusted expenses as a percentage of average assets were 1.84%.
Management expects fourth-quarter core operating expenses of approximately $118 million to $120 million, including higher incentive accruals tied to stronger financial performance. The company also expects about $1 million of final costs related to the core conversion.
For the fourth quarter, Provident expects non-interest income of about $29 million. Management cited anticipated growth in wealth management and insurance, a pickup in bank fee income following conversion-related fee waivers, and SBA loan sales. Third-quarter non-interest income also benefited from elevated bank-owned life insurance income of $3.5 million.
The company maintained its full-year outlook for a 1.2% to 1.3% core return on assets, a mid-teens return on average tangible common equity and an effective tax rate of approximately 28%.
About Provident Financial Services (NYSE:PFS)
Provident Financial Services, Inc is the parent company of Provident Bank, a full-service community and commercial bank serving individuals, businesses and organizations. The bank provides checking and savings accounts, certificates of deposit, treasury management and other deposit products, along with residential mortgage, commercial real estate, commercial business and consumer lending.
Through its banking and wealth-management operations, Provident offers services that may include investment management, trust and fiduciary services, financial planning and insurance solutions.
