Provident Financial Services, Inc. (NASDAQ: PROV), a bank holding company headquartered in Jersey City, New Jersey, reported modest loan growth in its fiscal fourth quarter ended June 30, 2026.
President and CEO Donavon Ternes said higher loan originations and lower prepayments supported expansion in the company's single-family loan portfolio.
Loans held for investment originations in the fiscal fourth quarter, up 5% from $44.2 million in the prior quarter.
Loan principal payments and payoffs declined 16% sequentially to $43.5 million from $52.1 million. Ternes said refinancing opportunities have become less attractive in the current interest-rate environment, contributing to lower prepayment activity.
Management expects September-quarter originations to remain near the upper end of the recent quarterly range of $29 million to $46 million.
Asset Quality Improves
Nonperforming assets were $505,000, or 4 basis points of total assets, as of June 30, 2026, down from $978,000 at March 31, 2026. The company had no loans in the early stages of delinquency at the end of June, which Ternes said indicated no emerging credit concerns.
Office-property exposure totaled $33.3 million, representing 3.2% of loans held for investment. Four commercial real estate loans totaling $818,000 are scheduled to mature in fiscal 2027. The company recorded a $95,000 recovery of credit losses in the June quarter, and the allowance for credit losses was 57 basis points of gross loans held for investment, down from 58 basis points in the preceding quarter.
Net Interest Margin Rises
Net interest margin rose 8 basis points sequentially to 3.21% in the June quarter, reflecting a 7-basis-point increase in the yield on interest-earning assets and a 4-basis-point decline in the cost of total interest-bearing liabilities. The cost of borrowings decreased 7 basis points to 4.04%, while the average cost of deposits increased 3 basis points to 1.36%.
Loans originated during the June quarter carried a weighted average rate of 6.03%, compared with 5.31% for the overall portfolio at June 30. Management expects loan yields to continue rising, with approximately $133 million of loans scheduled to reprice in the September quarter; the forecast weighted average rate for repricing loans is 7.10%, up 79 basis points from 6.31%.
We expect loan yields to continue rising, providing a tailwind to net interest margin.
Ternes also cited approximately $650,000 of accelerated amortization in the March quarter compared to about $400,000 in June. He said deposit costs appear to have reached their low point for the current cycle unless the Federal Reserve resumes cutting interest rates.
Approximately $81.7 million of Federal Home Loan Bank advances, brokered certificates of deposit, and government certificates of deposit are maturing in the September quarter at a weighted average rate of 4.05%.
Expenses, Capital Returns
Operating expenses were $7.7 million in the June quarter, compared with $7.6 million in the March quarter. Full-time-equivalent headcount stood at 158 at June 30, 2026, down from 163 a year earlier.
The company repurchased approximately 90,000 shares at a total cost of $1.5 billion during the June quarter and paid approximately $874,000 in cash dividends. Total capital returned to shareholders represented about 110% of quarterly net income.
