Provident's Net Interest Margin Edges Up to 3.50%

The Tip Desk · November 1, 2026 · 4 min read

Net interest income reached a record $208.0 million in the third quarter as the margin edged up 2 basis points sequentially to 3.50%.

Provident Financial Services, Inc. (PFS), the holding company for Provident Bank, a community-oriented bank in New Jersey, Pennsylvania and New York, reported net interest income of $208.0 million for the three months ended September 30, 2026, a record that was $13.7 million above the year-earlier quarter.

The net interest margin increased 2 basis points sequentially to 3.50% from 3.48%. The sequential gain came from a 7 basis-point rise in the yield on interest-earning assets to 5.68% that more than offset an 8 basis-point increase in the cost of interest-bearing liabilities to 2.79%. Core net interest margin, which excludes purchase-accounting accretion and interest recovery on resolved non-performers, rose 7 basis points sequentially to 3.16% from 3.09%.

Average loans increased $311.9 million, or 6.37% annualized, to $19.88 billion, primarily from the total commercial portfolio. Total commercial loans, including mortgage warehouse lines, commercial mortgage, multi-family and construction, grew 3.4% annualized in the third quarter, down from 9.9% annualized growth in the second quarter. Loans held for investment totaled $20.17 billion as of September 30, 2026. The company said the net interest income increase was primarily due to originations of new loans at current market rates and the favorable repricing of adjustable-rate loans.

Total deposits increased $261.7 million, or 5.31% annualized, to $19.81 billion. Core deposits excluding certificates of deposit and wholesale deposits rose $233.7 million, or 5.76% annualized, to $15.42 billion. Average total deposits were $20.03 billion, up $1.61 billion, or 8.72%, from the year-earlier quarter. The cost of total deposits, including non-interest-bearing balances, was 2.02%. The loan-to-deposit ratio declined slightly to 101.8% from 102.6% at June 30, 2026, as non-maturity core business deposits rose.

Core pre-provision, net revenue was $119.5 million, or $0.92 a share, up $10.8 million from the year-earlier quarter, expanding PPNR return on average assets 9 basis points to 1.85%. President and Chief Executive Officer Anthony J. Labozzetta said building momentum in both spread and fee-based businesses drove 10% year-over-year growth in pre-provision net revenue.

Net income was $69.2 million, or $0.53 a share, after a $17.5 million one-time loss on extinguishment of debt from accelerated amortization of purchase-accounting adjustments, $3.7 million of core-conversion costs and $465,000 of branch-restructuring expenses. Core net income excluding those items was $84.3 million, or $0.65 a share. Total non-interest expense rose $21.4 million to $140.7 million versus the second quarter, mainly the debt-extinguishment loss, a $2.2 million increase in core-conversion costs and $1.0 million of higher data-processing expense. The core efficiency ratio was 49.93%.

Total non-interest income declined $1.4 million to $30.5 million versus the second quarter, driven by a $2.0 million drop in fee income, a $1.4 million drop in other income and a $935,000 drop in insurance agency income, partly offset by a $2.7 million increase in BOLI income. The company said the fee-income decrease was primarily related to decreases in loan-related and deposit fee income.

The provision for credit losses fell to $5.2 million from $9.3 million in the second quarter, consisting of a $7.2 million loan provision offset by a $2.0 million off-balance-sheet recapture. Net charge-offs were $2.4 million, or 0.05% of average loans. Non-performing loans were $140.1 million, or 0.69% of loans held for investment. The allowance for credit losses on loans was 0.94% of total loans and covered 135.20% of non-performing loans.

Provident Bank’s common equity tier 1 and total risk-based capital ratios were 12.5% and 13.4%, above well-capitalized levels. The tangible common equity ratio declined 20 basis points to 8.40% and tangible book value per share slipped to $16.16, both affected by an $83.0 million reduction in accumulated other comprehensive income. The loan pipeline totaled $3.03 billion as of September 30, 2026, with a weighted average interest rate approaching 6.50%.