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    PFS
    Earnings call· Jun 2026(Q2 FY26)

    PROVIDENT FINANCIAL SERVICES Q2 FY26 earnings call PFS

    Jul 30, 2026 Source

    Executive summary

    Provident Financial Services Q2 FY26 — Record Revenues and Strong Loan Growth

    Provident Financial Services delivered a strong Q2 FY26, marked by record revenues and robust commercial loan growth, including a significant pipeline. Profitability metrics improved, reflecting positive operating leverage. While the deposit environment remains competitive, the bank is strategically investing in core funding initiatives and expects continued NIM expansion, albeit with slightly rising deposit costs. The company is also progressing with a core system conversion and other technology initiatives.

    Highlights

    5

    • Core net earnings reached $80 million or $0.61 per share, increasing 11% versus Q2 2025.

    • Achieved annualized adjusted return on average assets of 1.27% and adjusted return on average tangible common equity over 16%.

    • Record revenues of $235 million, driven by record net interest income of $203 million and record noninterest income of $32 million.

    • Record adjusted pre-provision net revenue of $118 million, representing $0.90 per share and an annualized core PPNR return on average assets of 1.87%.

    • Commercial loans grew 10% annualized, with $700 million in new fundings and a record pipeline of $3.2 billion.

    Concerns

    3

    • The operating environment for incremental funding is very competitive, particularly in consumer and municipal segments.

    • Deposit costs are expected to increase by 1-2 basis points over the next couple of quarters due to CD pressures and market competition.

    • Core system upgrade in Q3 2026 is expected to incur additional nonrecurring charges of approximately $4.5 million over the remainder of 2026.

    Guidance & targets

    10
    CategoryTargetConfidence
    Reported Net Interest Margin (NIM)
    3.45% to 3.50%
    high materiality
    High
    Core Net Interest Margin (NIM) expansion
    1 to 2 basis points expansion
    medium materiality
    High
    Full-year Loan and Deposit Growth
    5% to 6%
    high materiality
    High
    Quarterly Noninterest Income
    $29 million per quarter
    medium materiality
    High
    Full-year Effective Tax Rate
    28% to 28.25%
    medium materiality
    High
    Core Return on Average Assets (ROAA)
    1.2% to 1.3%
    high materiality
    High
    Return on Average Tangible Common Equity (ROTCE)
    Mid-teens
    high materiality
    High
    Quarterly Operating Expenses
    $117 million to $119 million
    medium materiality
    High
    Nonrecurring System Conversion Charges
    $4.5 million
    medium materiality
    High
    Deposit Costs
    Up 1-2 basis points
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Provident Protection Plus (Insurance)
    Strong performance driven by industry-leading customer retention and new client acquisition. Robust pipeline heading into H2 2026.
    Revenue growth H1 2026 vs H1 2025: 18%
    		—18%——
    Beacon Trust (Wealth Management)
    AUM grew benefiting from market appreciation and improved client retention. Management expects enhanced retention and new AUM from investments in sales, service, and advisory capacity.
    Assets Under Management: $4.5 billionRevenue growth H1 2026 vs H1 2025: 5%
    		—5%——
    SBA Group
    Good quarter for originations and loan sale activity.
    Gain on sale revenues H1 2026 vs H1 2025: 16%
    		————

    Operational metrics

    44
    Total Revenue
    $235 million
    Q2 FY26

    Record revenue.

    Net Interest Income
    $203 million
    Q2 FY26

    Record net interest income.

    Net Earnings
    $78 million
    Q2 FY26

    Reported net earnings.

    Core Net Earnings
    $80 millionincreased 11% versus Q2 2025
    Q2 FY26

    Adjusted for intangibles amortization.

    Core Noninterest Expense
    $116.9 milliondecreased slightly
    Q2 FY26

    Adjusted for non-operating and severance costs.

    Effective Tax Rate
    28% to 28.25%
    Full Year FY26

    Full year guidance.

    Share Repurchase Authorization
    over 2 million shares
    Q2 FY26 end

    Remaining on authorization. No buybacks executed during Q2.

    Commercial Loan Fundings
    $700 million
    Q2 FY26

    New commercial loans funded.

    Total Commercial Loans Growth
    10%annualized
    Q2 FY26

    Net basis.

    Commercial Loan Pipeline
    $3.2 billion
    Q2 FY26 end

    Record pipeline.

    Pull-through Adjusted Loan Pipeline
    $1.8 billion
    Q2 FY26 end

    Accretive relative to current portfolio yield.

    Period-end Loans Held for Investment Growth
    8%annualized
    Q2 FY26

    Quarter-over-quarter increase.

    Core Deposits Growth
    2%annualized
    Q2 FY26

    Largely driven by growth in commercial deposits.

    Deposit Pipeline (Deposit-focused bankers)
    $150 million
    June 30, 2026

    Built by newly added senior deposit-focused bankers.

    Period-end Deposits Growth
    9%annualized
    Q2 FY26

    Quarter-over-quarter increase.

    Provision for Credit Losses
    $9.3 million
    Q2 FY26

    Due to loan growth, specific reserves on individually evaluated impaired credits, and changes in portfolio mix.

    CRE Concentration Ratio
    399%
    Q2 FY26 end
    Noninterest Income
    $32 million
    Q2 FY26

    Record noninterest income. Goal to exceed 20% of revenues.

    Diluted EPS (GAAP)
    $0.60
    Q2 FY26
    Core Diluted EPS
    $0.61
    Q2 FY26
    Allowance Coverage Ratio
    92up 2 basis points from trailing quarter
    June 30, 2026
    Senior Deposit-Focused Bankers Added
    —
    So far in FY26

    Several senior deposit-focused bankers added, contributing to a $150 million deposit pipeline.

    Investment Securities Portfolio Roll-off
    $0.5 billion
    Annually

    Expected annual roll-off with NII benefit.

    Efficiency Ratio
    49.8%improved from trailing quarter
    Q2 FY26

    Adjusted for nonoperating expense items.

    Tangible Book Value Per Share
    $16.42increased $0.39 or 2.4% this quarter
    Q2 FY26 end
    Tangible Common Equity Ratio
    8.6%increased from 8.03% year-over-year
    Q2 FY26 end
    Annualized Adjusted Return on Average Assets
    1.27%
    Q2 FY26
    Adjusted Return on Average Tangible Common Equity
    16.2%
    Q2 FY26

    Core return, adjusting for amortization of intangibles.

    Adjusted Pre-Provision Net Revenue (PPNR)
    $118 million18% increase from $100 million in Q2 2025
    Q2 FY26

    Record PPNR.

    Annualized Core PPNR Return on Average Assets
    1.87%23 basis points improvement compared to Q2 2025
    Q2 FY26
    Average Earning Assets Increase
    $272 millionannualized 4.7% versus trailing quarter
    Q2 FY26
    Average Yield on Assets
    5.61%increased 8 basis points
    Q2 FY26

    Versus trailing quarter.

    Interest-Bearing Deposit Costs
    2.37%fell 2 basis points versus trailing quarter
    Q2 FY26
    Total Deposit Costs
    1.92%declined 2 basis points
    Q2 FY26

    Versus trailing quarter.

    Interest Income Recovery (NPLs)
    $2.2 million
    Q2 FY26

    On resolved nonperforming loans.

    Loan-to-Deposit Ratio
    102.6%improved slightly quarter-over-quarter
    Q2 FY26 end

    Target range 97% to 103%.

    Nonperforming Assets to Total Assets
    54
    Q2 FY26 end

    Asset quality remains strong.

    Net Charge-offs
    $1.9 million
    Q2 FY26
    Nonperforming Loans (excluding specific relationship)
    27
    June 30, 2026
    Core Expenses to Average Assets
    1.85%improved from trailing quarter
    Q2 FY26

    Adjusted for nonoperating expense items.

    Fixed-Rate Loan Portfolio Cash Flows
    $3 billion
    Next 12 months

    Expected cash flows from fixed-rate loan portfolio.

    Loan Yield (Current Portfolio)
    5.9%
    Q2 FY26 end
    BOLI Income (Monthly Run Rate)
    $800,000 to $900,000
    Monthly

    Expected monthly run rate for BOLI income.

    Prepayment Income from Loan Payoffs
    $300,000up quarter-over-quarter
    Q2 FY26

    Included in banking fees.

    Industry KPIs

    12
    MetricValueDetails
    Loans$398 millionUSD
    Deposits$445 millionUSD
    Rotce ROE16.2%%
    Capital returnsover 2 million sharesshares
    Fee income lines$32 millionUSD
    Allowance reserves92bps
    Net interest income$203 millionUSD
    Net interest margin3.48%%
    Net charge offs npls4bps
    Total operating expenses$116.9 millionUSD
    Provision for credit losses$9.3 millionUSD
    Efficiency ratio operating leverage49.8%%

    Risks & headwinds

    4
    Competitive deposit environmentNext couple of quarters (Q3, Q4 FY26)

    Deposit costs expected to increase 1-2 basis points over the next couple of quarters. Promo rates for new money market/CDs are around 4%.

    Mitigation: Strategic investments in deposit-focused bankers, digital, small business, and municipal banking; focus on lower-cost funds from treasury management and business banking; balancing promo rates with wholesale funding.

    Unpredictable loan prepaymentsOngoing

    Q2 prepayments were $340 million.

    Mitigation: Management is being selective on new loans, prioritizing those with large deposit balances; managed process to achieve loan growth targets.

    Nonperforming senior housing commercial relationshipExpected resolution by year-end (FY26)

    $82 million relationship, currently nonaccrual.

    Mitigation: Bankruptcy process proceeding as expected, with increased visibility towards final resolution; no material loss expected.

    Nonrecurring charges from core systems conversionRemainder of 2026

    Approximately $4.5 million in additional nonrecurring charges.

    Mitigation: Conversion is tracking well towards Labor Day target; part of ongoing technology initiatives.

    What to watch in Q3 FY26

    5

    Core NIM Expansion

    Q3 and Q4 FY26
    Current5 bps expansion in Q2 FY26 (core NIM 3.09%)
    Target1-2 bps expansion

    Why it matters

    NIM trajectory is a primary driver of bank profitability, especially given the current rate environment and deposit competition.

    We are currently modeling no further Federal Reserve rate actions for the remainder of 2026 and project approximately 1 to 2 basis points of core NIM expansion in the third and fourth quarter.

    Q&A highlights

    7

    Will deposit costs continue to rise, or can favorable repricing of time deposits offset competitive pressures on new deposits?

    Management expects deposit costs to increase by 1-2 basis points over the next couple of quarters due to CD pressures and market competition, with municipal inflows potentially offsetting some of this.

    “We expect costs to actually go up 1 or 2 basis points over the next couple of quarters, mainly on pressures, as you mentioned, on CDs and probably in competitive nature in our market at this point.”

    asked by Feddie Strickland · answered by Adriano Duarte

    2 min read7 chapters

    Detailed Narrative

    01

    Strong Q2 Performance and Profitability

    Provident Financial Services reported an outstanding Q2 2026, with net earnings of $78 million ($0.60 diluted EPS) and core net earnings of $80 million ($0.61 per share). The company achieved an annualized adjusted return on average assets of 1.27% and an adjusted return on average tangible common equity over 16%, demonstrating significant improvement in profitability and positive operating leverage.

    02

    Record Revenues Driven by NII and Noninterest Income

    The quarter was highlighted by record revenues of $235 million, fueled by a record net interest income of $203 million and a record noninterest income of $32 million. Adjusted pre-provision net revenue reached a record $118 million, or $0.90 per share, with an annualized core PPNR return on average assets of 1.87%, a 23 basis points improvement year-over-year.

    03

    Robust Commercial Loan Growth and Pipeline

    The commercial loan team funded $700 million in new loans during Q2, contributing to $1.1 billion year-to-date. Total commercial loans grew 10% annualized, primarily driven by 20% growth in the C&I segment. The bank ended the quarter with a record pipeline of $3.2 billion, with both CRE and C&I pipelines exceeding $1 billion, indicating a balanced growth strategy.

    04

    Competitive Deposit Environment and Strategic Initiatives

    Despite a competitive operating environment for deposits, core deposits (adjusted for municipal seasonality) increased $67 million, representing a 2% annualized growth rate, largely from commercial deposits. The bank is making strategic investments in deposit-focused bankers, digital capabilities, and small business and municipal banking, having built a nearly $150 million deposit pipeline as of June 30.

    05

    Improving Asset Quality and Credit Outlook

    Asset quality metrics improved quarter-over-quarter. Excluding a senior housing commercial relationship ($82 million) that migrated to nonaccrual last quarter, nonperforming loans would be 27 basis points of total loans. Management expects this relationship to be resolved by year-end with no material loss, and anticipates continued asset quality improvement in H2 2026.

    06

    Diversified Fee-Based Business Performance

    Noninterest income reached a record $32 million in Q2, contributing 14% of total revenue year-to-date, up from 12.5% in H1 2025. Provident Protection Plus (insurance) saw 18% revenue growth in H1 2026, while Beacon Trust's AUM grew to $4.5 billion, with revenues up 5%. The SBA group also had a strong quarter with 16% gain on sale revenue growth in H1 2026.

    07

    Technology Investments and Core Conversion

    The company's core conversion is on track for a Labor Day target. Alongside this, Provident is advancing other technology initiatives, including an internal AI agent to assist employees with customer inquiries, highlighting a focus on efficient, differentiated customer experience. Additional nonrecurring charges of approximately $4.5 million are expected for the remainder of 2026 related to the system upgrade.

    AI-generated summary of the company’s earnings call. Not investment advice.