Provident Financial Services (NYSE:PFS) reported second-quarter net earnings of $78 million, or $0.60 per diluted share, while core net earnings totaled $80 million, or $0.61 per share. President and CEO Anthony Labozzetta said earnings per share for the first half of 2026 increased 17% from the prior-year period as the company recorded higher net interest income and non-interest income.
The company generated adjusted pre-provision net revenue of $118 million during the quarter, representing an annualized core pre-provision net revenue return on average assets of 1.87%. Labozzetta said the measure improved 23 basis points from the second quarter of 2025, reflecting positive operating leverage as the bank expanded.
Loan production and growth outlook
Commercial loan fundings totaled $700 million in the second quarter and more than $1.1 billion for the first half of the year. Total commercial loans grew at a 10% annualized rate on a net basis, led primarily by 20% annualized growth in the commercial and industrial lending business, according to Labozzetta.
The company ended the quarter with a record commercial loan pipeline of $3.2 billion. Both its commercial real estate and C&I pipelines exceeded $1 billion for the second consecutive quarter. Duarte said the pull-through-adjusted pipeline was $1.8 billion at quarter-end and carried a rate of 6.33%, above the current portfolio yield of 5.9%.
Period-end loans held for investment increased by $398 million during the quarter, an annualized growth rate of 8%. Management raised its full-year loan-growth outlook to the high end of its prior range and now expects loan growth of 5% to 6% for 2026. Labozzetta said the ultimate outcome will depend in part on prepayment activity and production levels, which are typically lower during the summer.
On competition, Labozzetta said the bank continues to see lending competition but does not view it as “irrational,” citing the absence of significant underwriting concessions or unusually wide pricing differences. He said competitive conditions appear more pronounced on the funding side of the balance sheet.
Margin expansion and deposit competition
Reported net interest margin increased 8 basis points from the prior quarter to 3.48%, including a $2.2 million interest-income recovery on resolved nonperforming loans that contributed 4 basis points. Core net interest margin expanded 5 basis points to 3.09%.
Duarte said average earning assets rose $272 million, or at a 4.7% annualized rate, from the preceding quarter, while the average yield on assets increased 8 basis points to 5.61%. Interest-bearing deposit costs declined 2 basis points to 2.37%, and total deposit costs also fell 2 basis points to 1.92%.
Management is modeling no additional Federal Reserve rate moves in 2026 and expects core margin expansion of roughly 1 to 2 basis points in each of the third and fourth quarters. Reported net interest margin, including purchase-accounting accretion, is expected to range from approximately 3.45% to 3.50% for the remainder of the year.
During the question-and-answer session, Duarte said deposit costs are expected to rise by 1 to 2 basis points over the next several quarters because of pressure on certificates of deposit and broader market competition. He said anticipated municipal deposit inflows in the second half, typically priced below promotional CDs, should help offset part of the pressure.
Period-end deposits increased $445 million, or at a 9% annualized rate, driven by higher brokered deposits and commercial deposit growth. The company had used lower-cost Federal Home Loan Bank borrowings in the first quarter to offset seasonal municipal deposit outflows, then returned to brokered deposits in the second quarter. Its loan-to-deposit ratio improved modestly to 102.6%, within management’s 97% to 103% target range.
Fee income, credit quality and expenses
Non-interest income reached a record $32 million, bringing the first-half total to $64 million, or 14% of total revenue, compared with 12.5% in the first half of 2025. Labozzetta said Provident Protection Plus revenue rose 18% year over year during the first half, supported by client retention and new business. Beacon Trust revenue increased 5%, while assets under management rose to $4.5 billion. Gains on SBA loan sales increased 16% in the first half.
Duarte said management raised its non-interest income guidance for the third and fourth quarters to $29 million per quarter, from $28.5 million previously. He noted that insurance revenue is seasonal and that results also benefited from bank-owned life insurance death benefits and higher loan prepayment fees during the quarter.
Asset quality metrics improved from the preceding quarter. Nonperforming assets represented 54 basis points of total assets, while net charge-offs were $1.9 million, or 4 basis points on an annualized basis of average loans. The company recorded a $9.3 million provision for credit losses, reflecting loan growth, reserves on individually evaluated impaired credits and portfolio-mix changes. The allowance for credit losses stood at 92 basis points of loans at June 30.
Labozzetta said the bankruptcy process for a senior housing commercial relationship that moved to nonaccrual status in the first quarter was proceeding as expected. The four credits, totaling $82 million, are expected to be resolved by year-end with no material loss to the bank, he said.
Core non-interest expense was $116.9 million, excluding $1.5 million in systems-conversion costs and $900,000 in severance costs. The efficiency ratio improved to 49.8%, and management maintained its forecast for quarterly operating expenses of about $117 million to $119 million. The company expects another $4.5 million of nonrecurring conversion-related charges over the remainder of 2026 as it completes a planned core systems upgrade around Labor Day.
Capital and strategic priorities
Tangible book value per share increased $0.39, or 2.4%, during the quarter to $16.42. The tangible common equity ratio rose to 8.6% from 8.03% a year earlier. Provident did not repurchase shares in the second quarter and had more than 2 million shares remaining under its authorization.
Labozzetta said organic growth remains the company’s primary strategic focus, though mergers and acquisitions remain part of its strategy. He said the bank would be selective in potential transactions, emphasizing cultural alignment, financial returns and strategic fit.
About Provident Financial Services (NYSE:PFS)
Provident Financial Services, Inc is the bank holding company for Provident Bank, a regional commercial bank headquartered in Jersey City, New Jersey. The company operates a network of full-service branches across New Jersey, the New York metropolitan area and eastern Pennsylvania, offering a range of personal and business banking solutions.
Its core products and services include checking and savings accounts, consumer and residential mortgage loans, commercial real estate financing and small-business lending.
