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DATE
Oct. 29, 2026
CALL PARTICIPANTS
- Head of Investor Relations - Michael Perito
- President and CEO - Tony Labozzetta
- Executive Vice President and Chief Financial Officer - Adriano Duarte
TAKEAWAYS
- Core Net Income -- $84.3 million or $0.65 per diluted share, excluding one-time items such as debt extinguishment costs and core conversion expenses.
- Core ROAA -- 1.3%, marking consistent profitability levels for the company.
- Total Operating Revenue -- $238 million, representing a record quarter for the bank.
- Net Interest Income -- $208 million, growing 7% year over year due to earning asset growth and margin expansion.
- Core NIM -- 3.16%, expanding 7 basis points from the trailing quarter.
- Adjusted ROTCE -- 16.6%, representing the sixth consecutive quarter above 16%.
- Total Deposits -- $19.81 billion, reflecting 5.4% annualized growth driven by commercial and municipal inflows.
- Noninterest-bearing Deposits -- 5% annualized growth during the quarter, supported by commercial and treasury management initiatives.
- Municipal Deposits -- $3.6 billion at quarter-end, showing typical seasonal low-point balances.
- Gross Loans Held for Investment -- $20.17 billion, increasing from $19.50 billion as of Dec. 31, 2025.
- Commercial Loan Funding -- $550 million during the quarter, despite seasonal slowdowns in the business.
- Total Loan Pipeline -- $3.03 billion, with middle-market C&I and specialty lending representing over 50% of the total.
- Pull-through Adjusted Pipeline -- $1.7 billion at quarter-end, with a weighted average rate approaching 6.5%.
- FY 2026 Growth Guidance -- 5% to 6% for both total loans and total deposits.
- Q4 2026 Core NIM Guidance -- 1 to 2 basis points of expected expansion, assuming a Fed rate increase in Dec. 2026.
- Q4 2026 Core Expense Guidance -- $118 million to $120 million, reflecting higher incentive accruals based on financial performance.
- CET1 Ratio -- 10.9%, indicating strengthened capital levels at the holding company.
- Nonperforming Assets -- 55 basis points of total assets, which management expects to decline to 23 basis points following the resolution of four specific credits.
- Net Charge-offs -- 5 basis points for both the current quarter and year to date.
- Provision for Credit Losses -- $5.2 million, primarily driven by loan growth and changes in portfolio mix.
- Wealth Management AUM -- $4.4 billion, remaining relatively stable during the quarter.
- Share Repurchases -- 370,000 shares in Oct. 2026, executed as the stock price traded near the company's threshold of approximately $22.
- Purchase Accounting Accretion -- $60 million to $62 million projected for the next 12 months.
- Loan Repricing Volume -- $3.3 billion in loans scheduled to reprice over the next 12 months at yields approximately 100 basis points higher than the current portfolio.
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RISKS
- Labozzetta stated, "we remain mindful that payoffs in the fourth quarter could have an impact on net growth," indicating a potential headwind to achieving net loan expansion targets despite a strong pipeline.
- Labozzetta noted that the "recent rise in interest rates also weighed slightly on our mortgage warehouse balances," suggesting rate volatility may pressure specific lending segments.
SUMMARY
Provident Financial Services, Inc. (NYSE:PFS) reported record total operating revenue of $238 million for the third quarter of 2026, supported by growth in both spread and fee-based businesses. Management stated that the successful core systems conversion completed over Labor Day weekend touched virtually every aspect of the bank and allows for enhanced focus on upcoming data and AI initiatives. Asset quality remained stable with net charge-offs at 5 basis points, while the company anticipates the resolution of several nonperforming credits by year-end. The bank maintained its full-year guidance for loan and deposit growth of 5% to 6% as it manages its capital position through opportunistic share repurchases and maintains a neutral interest rate risk profile.
- Tony Labozzetta stated, "Over Labor Day weekend, the bank completed its core conversion as planned," noting the initiative was a significant project for the organization.
- The company developed its own AI agent, named B, to assist with knowledge management and customer experience during the systems conversion.
- Management noted that the loan pipeline remains diversified, with C&I middle market and specialty segments making up more than 50% of the $3.03 billion total.
- CFO Duarte indicated that the bank's stock buyback strategy is opportunistic, targeting an earn-back period similar to an acquisition with a current price threshold of approximately $22.
- The bank is modeling one Federal Reserve rate increase for Dec. 2026 and expects core net interest margin expansion to continue into the fourth quarter.
- Treasury management and small business initiatives drove a 5% annualized increase in noninterest-bearing demand deposits.
INDUSTRY GLOSSARY
- AOCI: Accumulated Other Comprehensive Income, which includes unrealized gains and losses on certain assets and liabilities.
- BOLI: Bank-Owned Life Insurance, a form of life insurance purchased by banks where the bank is the beneficiary, often used to fund employee benefits.
- CET1 Ratio: Common Equity Tier 1 ratio, a key measure of a bank's capital strength and its ability to withstand financial stress.
- NIB: Noninterest-bearing deposits, which are accounts that do not pay interest to the depositor.
- NIM: Net interest margin, the difference between the interest income earned by a bank and the amount of interest paid out to its lenders and depositors.
- PPNR: Preprovision net revenue, which is total revenue minus noninterest expense before the provision for credit losses is deducted.
- ROTCE: Return on average tangible common equity, a performance ratio that measures the return on the portion of a bank's equity that is not composed of intangible assets.
Full Conference Call Transcript
Operator: Hello, everyone. Thank you for joining us and welcome to the Provident Financial Services third quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Michael Perito, Head of Investor Relations. Michael, please go ahead.
Michael Perito: Thank you. Good morning, everyone, and thanks for joining us for our third quarter 2026 earnings call. Today's presenters are President and CEO, Tony Labozzetta, and Executive Vice President and Chief Financial Officer, Adriano Duarte. Before beginning their review of our financial results, we ask that you please take note of our standard caution as to any forward-looking statements that may be made during the course of today's call. Our full disclaimer is contained in last evening's earnings release, which has been posted to the investor relations page on our website, provident.bank. Now I'd like to hand it off to Tony Labozzetta, who will offer his perspective on our third quarter. Tony?
Tony Labozzetta: Thank you, Michael, and good morning, everyone. I appreciate you joining us today to discuss our third quarter results. Provident continued its strong performance, delivering another quarter of solid financial results. With core net income of $84 million, or $0.65 per diluted share, our annualized adjusted return on average assets was 1.3%, and our adjusted return on average tangible common equity was over 16% for the sixth consecutive quarter. Total operating revenues of $238 million marked another record quarter and continued to be driven by good growth in both our spread and fee-based businesses. Year-over-year, net interest income grew 7%, and our wealth and insurance revenues grew 6% and 20% respectively.
Our adjusted pre-provision net revenue reached a record $120 million, representing $0.92 per share and an annualized core PPNR return on average assets of 1.85%. Over Labor Day weekend, the bank completed its core conversion as planned. This was a significant project that touched virtually every aspect of our bank. I'm extremely proud of our team for executing with excellence on this critical initiative. Their planning, collaboration, effort, and focus on the customer experience resulted in a very successful conversion. Our strong core profitability and ability to drive positive operating leverage while making significant investments, such as our core conversion, represents one of the key elements of our strategy.
Balance sheet trends during the quarter show continued positive momentum, keeping us on track to achieve the growth we guided to for the year. We saw solid expansion during the quarter in non-interest bearing deposits, and more broadly, our core business deposits, which drove deposit growth over 5% annualized. The bank remains focused on growing our deposits to fund our strong lending activity. We have several impactful deposit initiatives in flight, particularly in our small business group and within certain targeted specialty deposit verticals. Commercial loan balances grew 3% annualized in the third quarter, which, as a reminder, is typically a seasonally slower quarter for our business.
In addition to normal seasonality, the recent rise in interest rates also weighed slightly on our mortgage warehouse balances. Overall, activity and loan growth remain positive. We funded approximately $550 million of commercial loans during the quarter, and our pipeline remains over $3 billion. For the third consecutive quarter, our pipeline remains well-diversified with C&I middle market and specialty representing over 50% of the total. We are pacing to achieve approximately 6% loan growth for the year. Although, we remain mindful that payoffs in the fourth quarter could have an impact on net growth. Asset quality metrics were stable when compared to the prior quarter and remain at low levels.
We continue to make good progress on the senior housing relationship that migrated to non-performing status earlier this year and anticipate a satisfactory resolution by year-end. Adjusting our non-performing assets for the resolution of these four credits, our NPAs would be only 23 basis points of total assets. Overall, asset quality trends remain favorable. Commercial delinquencies have improved, and net charge-offs were only five basis points for both this quarter and year to date. The bank has strong balance sheet, and we continue to actively manage our interest rate risk profile. During the quarter, we saw improvement in both our loan-to-deposit and CRE concentration ratios.
Our CET1 ratio grew to 10.9%, and during the past few weeks, the bank has been buying back stock due to increased market volatility. Overall, I'm incredibly proud of the hard work of our employees. Our strong performance is a direct result of the culture we have at Provident. Now, I would like to turn the call over to Adriano for his comments on our financial performance. Adriano?
Adriano Duarte: Thank you, Tony, and good morning, everyone. As Tony noted, our adjusted net income for the third quarter was $84 million, or $0.65 per share, which increased 17.5% versus the third quarter of 2025. This produced an adjusted return on average assets of 1.3% and a core return on average tangible equity of 16.6%, adjusting for the amortization of intangibles. During the quarter, we had several non-core expense items that impacted our reported net income of $69 million, or $0.53 per share. These items included a $17.5 million loss on extinguishment of debt due to accelerated amortization of purchase accounting, $3.7 million of core conversion costs, and $465,000 of early lease termination costs.
Adjusted pre-provision net revenue was nearly $120 million or annualized 1.85% of average assets, a 10% increase from the $109 million, or 1.76% of average assets reported for the third quarter of 2025. Our record revenue of $238 million was driven by record net interest income of $208 million and non-interest income of $30.5 million. Average earning assets increased $341 million or an annualized 5.8% versus the trailing quarter, with average yield on assets increasing 7 basis points to 5.68%. Interest-bearing deposit costs were 2.5%, an increase of 13 basis points versus the trailing quarter, while total deposit costs were 2.02%, an increase of 10 basis points.
Our core net interest margin expanded 7 basis points to 3.16%, while our reported net interest margin expanded 2 basis points to 3.5%. We are currently modeling one rate increase by the Federal Reserve in December of 2026 and expect core margin to expand 1-2 basis points in the fourth quarter. Period end loans held for investment increased $124 million or an annualized 2.5% for the quarter. Our pull-through adjusted loan pipeline at quarter end was $1.7 billion. The pipeline rate is approaching 6.5% and remains accretive relative to our current portfolio yield of 5.94%. Period end deposits increased $262 million for the quarter or an annualized 5.4%. The increase was driven by commercial and municipal deposit growth.
Our loan-to-deposit ratio improved quarter-over-quarter to 101.8%, and we continue to target a 97%-103% range on this ratio. Asset quality remains strong, with non-performing assets representing 55 basis points of total assets. We recorded a provision for credit losses of $5.2 million for the quarter, driven mainly by loan growth, changes in portfolio mix, and required specific reserves. This brought our allowance coverage ratio up 2 basis points from the trailing quarter to 94 basis points. Non-interest income of $30.5 million was slightly ahead of expectations, partly due to elevated BOLI income of $3.5 million. In addition, we continue to see solid performance from both our insurance and wealth management divisions.
Wealth management AUM was relatively stable during the quarter at $4.4 billion. Total non-interest expense increased $140.7 million in the third quarter, reflecting non-operating expenses I previously noted. After adjusting for these items, core non-interest expense was approximately $119 million for the quarter. Adjusted expenses to average assets and the efficiency ratio were stable from the trailing quarter at 1.84% and 49.9%, respectively. We project quarterly core operating expenses of approximately $118 million to $120 million in the fourth quarter, with the increased range most notably driven by higher incentive accruals due to our stronger financial performance.
In addition to normal expenses, we will be incurring final costs associated with the successful core conversion of approximately $1 million in the fourth quarter. Our continued sound financial performance supported earning asset growth and again drove strong capital formation, excluding changes in AOCI. Tangible book value per share decreased $0.26 this quarter to $16.16, and our tangible common equity ratio decreased slightly to 8.4% quarter-over-quarter. Lastly, I'd like to share a couple of additional updates with our guidance. We continue to expect full-year loan and deposit growth of 5%-6% with non-interest income of approximately $29 million in the fourth quarter.
We expect a full-year effective tax rate of approximately 28%, and we continue to target a core ROA of 1.2%-1.3% with a mid-teens return on average tangible common equity. That concludes our prepared remarks, and we would be happy to respond to any questions.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Feddie Strickland with Hovde. Your line is open. Please go ahead.
Feddie Strickland: Good morning, Tony and Adriano. Just wanted to start on deposits, if we could. You guys have been able to consistently grow DDAs for two quarters in a row at this point. Can we see that starting to flatten out with higher rates and maybe some mix shift, or can you continue growing that given the momentum you talked about last quarter in Treasury and some other areas?
Tony Labozzetta: Well, our expectation that deposits will continue to grow. Obviously, market dynamics like changing rates may make the cost of acquisition a little higher than they presently are. But the strategies that we have both in production now and in flight, we expect that the laser focus that we have on deposits to continue to show growth in the upcoming quarters.
Feddie Strickland: Understood. But can the non-interest-bearing balances grow from here, you think, or are they relatively flat?
Tony Labozzetta: Well, we had a 5% growth this quarter in non-interest-bearing demand. The focus that we have in our commercial lending side and our treasury management side, we think we could continue to grow. Could I promise that it's going to be 5%? I think changing rates will also impact that as well. But we still expect to have some expansion in that. Obviously, depending on what happens to market rates and the delta between zero and the offering rate.
Adriano Duarte: Exactly. It might create a little bit of a transition from NIB to other deposit lines. But as Tony said, I think the production will definitely be there.
Feddie Strickland: Understood. Totally fair. Just switching gears to loans, just seems like a relatively stable pipeline linked quarter. You reiterated the guide here. Is it fair to assume you see the loan growth maybe tick back up in the fourth quarter? I also just wanted to ask if you're starting to see pay-downs slow at all with higher rates.
Tony Labozzetta: Yeah. When it comes to the commercial loan pipeline overall, I think we're very confident in not only its pull-through, but in its diversity and mix that's in that pipeline. I think rates would have to move, I would say more than 50 basis points, and depending on which part of the curve moves. Obviously, if the short part of the Fed moves, we might see some reduction in activity beyond a 50 basis point move in more of the C&I type loans. Obviously, if the Treasury curve moves, we could see that on the term loans like CRE, et cetera. But right now, we feel pretty strong about our pipeline.
The pull-through, the level that it's at, the activity that we're seeing flow in to replace the closed and funded business. I think as I mentioned in my opening remarks, I think we're seeing a 6% growth level. Obviously, I have to put a caveat that if we see prepayments beyond what we're anticipating, that could impact that number. But right now, it's looking good. But I will stress one more thing. Volume by itself is not important. I think we haven't bent one bit on credit structure. We continue to deal with some of the most notable sponsors. So we're feeling pretty good, not only about the level of production, but the quality of that production.
Just wanted to reiterate.
Feddie Strickland: Great. Thank you for the color. Just one more quick one, if I could, on accretion. Is there any significant change to that number? I think I had about $20 million, if my math's right, this quarter.
Adriano Duarte: Should tick down a little bit, Feddie. As prepayments have slowed down on some of the CRE loans. We're projecting for the next 12 months around 60-62.
Feddie Strickland: Got it. Thanks, Adriano. I'll step back.
Adriano Duarte: Thanks, Feddie.
Operator: Your next question comes from the line of Tim Switzer with KBW. Your line is open. Please go ahead.
Tim Switzer: Hey, good morning, guys. Thank you for taking my questions.
Tony Labozzetta: Great morning.
Adriano Duarte: Good morning.
Tim Switzer: Real quick. Sorry, Adriano. Can you repeat what the expected purchase accounting is going forward?
Adriano Duarte: For securities and loans, we anticipate somewhere between $60 million and $62 million for the next 12 months. About $15 million a quarter.
Tim Switzer: Got it. Okay, couldn't tell if it was 50 or 60. Got it. Five, zero. My other question for you guys.
Tony Labozzetta: Six, zero, Tim.
Tim Switzer: Oh, sorry. six, zero. My apologies. You guys have talked a good amount about the benefits of the core conversion, particularly in the commercial part of the business. Now that it's completed, could you maybe discuss what some of the immediate benefits are or already have been, and what the near-term opportunities going forward will be? How much of this is efficiency focused versus revenue opportunities?
Tony Labozzetta: That's great. That's a good question. I think the first thing I will draw back on in my comments, I couldn't do enough justice to how well that conversion took place. I think our team did an outstanding job. I would call it brilliant execution all the way across on how collaborative that was. Now that's behind us, it's going to allow us to continue our focus on the projects that we have in flight. Some of the things I'll point to is our data capabilities. We have a big project to enhance our data capabilities, which is going to obviously increase efficiencies. It's going to increase decision-making power within our organization.
When it comes to, we had probably over a year now, we've had a governance council around AI. That particularly is to ensure that any initiatives that we have are aligned with the business use cases. It's worked well. We've developed our own AI agent that we call B as part of our conversion, which I think it was very instrumental to the success in terms of empowering our organization with knowledge and answers so that we could have a great customer experience in the conversion. Moving forward, we expect to use our platform with enhanced data to continue to do these in-flight projects that we have and build along our loan capabilities and et cetera.
I could keep going, but I think I gave you the gist of what we're trying to accomplish.
Tim Switzer: Yeah, that was great color. I appreciate it. Then one last one, another follow-up on the NIM. Given the impact of rate hikes near term, you guys are a little liability sensitive, I feel like. But longer term, does that change over time? Is there a catch up on loan repricing or anything? And how should we think about the trajectory of the margin if we get, say, two or three hikes and then the Fed just kind of settles down for a little bit?
Adriano Duarte: Yeah. So our balance sheet position is mostly neutral across the board, both the rates down, rates up. Typically, we may see one to two basis point rate compression with a 25 basis point rate hike, but that takes into account no movement on the long run of the curve. And I think we have enough management strategies to sustain a pretty stable margin across all rate events.
Tim Switzer: Okay, great. Good to hear. Thank you guys.
Tony Labozzetta: Basis points expansion in the margin with a rate down.
Adriano Duarte: Right. Yeah.
Operator: Your next question comes from the line of Steve Moss with Raymond James. Your line is open. Please go ahead.
Steve Moss: Good morning, guys.
Adriano Duarte: Morning.
Tony Labozzetta: Good morning.
Steve Moss: Maybe just following up on expenses and the investments going forward. Just curious, I know you guys are getting to planning season for 2027, but just how you guys are thinking about the cadence of expense growth in 2027.
Adriano Duarte: On a core basis, Steve, we expect to finish out the year right around $474 million in total and probably a growth between 3.5% and 3.75% off of that into 2027.
Tony Labozzetta: What I would add to that is some of the projects that I talked about that are in flight are all within that paradigm that AD just discussed. Again, positive operating leverage is a big focus for us. As we invest, we expect that revenue return.
Adriano Duarte: Yeah. It has to match the revenue that we're producing.
Tony Labozzetta: Right.
Steve Moss: Right. I hear you guys there. That's helpful. In terms of just thinking about the back book repricing here, just kind of curious, is there any step up in cash flows in 2027 that maybe helps the margin?
Adriano Duarte: In 2027, it's kind of hard to say. With rates up, we might actually see a little bit of a slowdown, but we still have about just on natural maturities and a pretty conservative prepayment assumption, about $3.3 billion in loans repricing over the next 12 months. We're going from about 5.75% to, let's say, 6.5% or north of that. On the security side, about $350 million for the year that we anticipate repricing in the next 12 months.
Tony Labozzetta: Yeah. The only thing I'd add, Steve, is we're still seeing a good pickup on rate on the investment side as well. So really both parts of the earning asset leverage are still in place as we move into 2027 in terms of seeing pickup on yields to help offset some of the funding cost rise that we've seen in the last 90-100 days.
Adriano Duarte: Yeah, exactly. On the core basis, we're looking at north of 100 basis points pickup on each one of those line items.
Steve Moss: Okay, great. Appreciate that color there. Just in terms of thinking about credit. Hearing you guys in terms of the credit resolution, the reserve has kind of started to drift up a little bit over the last couple of quarters from the lows. Just thinking about modeling this going forward, obviously a more greater C&I mix, do we think that changes the reserve ratio just steadily higher over the next four to five quarters?
Adriano Duarte: We've been pretty stable on a pool basis, right around 90 basis points. Some of that increase has actually been on some one-off specific reserves that we needed to put up. But on a C&I basis, obviously something could pop in, but we don't see any broad possible issues there.
Tony Labozzetta: Yeah, I think I would add, Steve, that when it comes to that, there's a lot of look-sees in the organization. On a quarterly basis, we stress very different sectors of our loan portfolio from CRE or now into the C&I space. We do something we call Cramer, which is loan reviews within the teams. So we got a pretty good eye into what is coming down the pike, and there's nothing that we see today that is in any way, shape, or form, rising to a level of concern.
In fact, as we solve for the four credits that I mentioned, which is going according to plan and we expect it to move out by the end of the fourth quarter, our total NPAs will be down to 23 basis points. So it's looking pretty positive.
Steve Moss: No, great. Appreciate all that color here, and I'll step back in the queue. Thank you very much, guys.
Adriano Duarte: Thank you.
Tony Labozzetta: Thank you.
Operator: Your next question comes from Manuel Navas with Piper Sandler. Your line is open. Please go ahead.
Manuel Navas: Hey, good morning. The pipeline's.
Adriano Duarte: Morning.
Manuel Navas: Pretty steady, pretty strong. You're going to close the year out with solid loan growth. With rates not really impacting demand yet, is this a good run rate into next year? Kind of thoughts on the opportunities for loan growth next year?
Tony Labozzetta: Yeah. I think, yes. The short answer is yes, but I want to frame it in the context of it's not a guess. It's looking at what's happening in the market and looking at our capacity within our organization and the number of producers and teams that we have. When you do the simple math of it, again, we could outpace that guidance depending on certain dynamics. But the one thing we won't do is bend on our credit culture. We do project in that 5%-6% range for next year as well.
Manuel Navas: Appreciate that. The guide for fees in the fourth quarter, can you walk through some of the line items there? How do you get that $29 million?
Adriano Duarte: So both wealth management and our insurance lines, we expect to grow versus the prior year. On the bank fee income, we should see a little bit of a pickup in the fourth quarter versus the third quarter. We had some statement overlaps during the conversion process where we passed on some fees just to make sure the customer experience was what we need it to be. We have pretty strong SBA loan sales coming down the pike on the fourth quarter as well. BOLI is probably the one piece that it was a little bit of an uptick in the third quarter, as we mentioned, about $3.5 million higher than the typical run rate.
Manuel Navas: Okay. I appreciate that. And you talked about buyback being a little bit opportunistic here in October. Can you update that? And what would be the right pace there, and how long can this extend, that kind of opportunistic repurchase trend?
Adriano Duarte: Typically, we have a threshold as if we were acquiring ourselves. So the earn back is typically three years. Right now, the threshold is about that $22 mark. So we're active when the opportunity arises, and our stock price dips below that. Currently, we purchased back about 370,000 shares.
Manuel Navas: Thank you. So the price sensitivities would drive it? Okay. Thank you.
Adriano Duarte: Yeah. Currently, that's how we approach it, Manuel.
Manuel Navas: I appreciate it. Thank you for the commentary.
Adriano Duarte: Thank you.
Operator: Your next question comes from the line of Matthew Breese with Stephens. Your line is open. Please go ahead.
Matthew Breese: Hey, good morning.
Tony Labozzetta: Morning.
Matthew Breese: I wanted to talk a little bit about the loan-to-deposit ratio. You provided some guidance there. I guess within that, maybe help me out on a couple of areas. What were municipal deposits at the period end? I think the release noted they were down. I was just curious what the absolute level was. What is the all-in incremental cost of deposits today? How does that compare to a quarter ago?
Adriano Duarte: The all-in is about 3.25, Matthew, where probably a quarter ago, we were around 285-295 range. The municipal deposits are right around $3.6 billion at this point. But typically at quarter end, it is usually on the low side of those balances.
Matthew Breese: Okay. Just thinking about your loan-to-deposit ratio guide, I think it was, what, 97% at the low end?
Adriano Duarte: On the low end, yeah.
Matthew Breese: Yeah. If you were to hit that perfect, does that include growth in some of the higher cost areas like CDs and money market? Is that necessary to get there? Or is it more a function of loan growth?
Tony Labozzetta: You know, Matthew, I don't think that's how we think about it. That range is how we want to operate the business and manage our balance sheet to maximize our liquidity and our profitability. So where we fall in that range, and the reason the range is wide is because of some of that seasonality in the municipal business. But I think our intention just purely stated is to grow loans and fund them with core deposit initiatives that we have that Tony and AD mentioned. I think that's kind of how we think about growing the business. I would add one thing, that our expectation is that we're growing deposits in every one of our verticals.
That includes non-interest bearing and interest bearing. We want to outperform in the areas of the key core deposits. But in order for us to maintain that to get to that 97% or sub one, you're going to have to grow all of your deposit verticals. You can't do it with just one.
Adriano Duarte: Sure. And sometimes even being at that 97% may not be the most profitable approach to getting there.
Tony Labozzetta: Right.
Matthew Breese: Understood. I just wanted to get some sense for how to get there.
Adriano Duarte: Yeah.
Matthew Breese: Then stepping back just on M&A, I'd be curious how active are conversations these days, and maybe remind us in terms of size, geography, and type of banks you'd be interested in partnering with.
Tony Labozzetta: Great question. I always have to start this question by putting, as you have seen by our comments and our answers, and our hyper-focus as an organization is to make sure that organically we are growing every business line within this bank. I think we are doing so, and we are off to some good results. That being said, M&A is something that it is part of the job, right? You always have to have conversations. You have to know the markets around you. The way I would express it is this, we are fortunate enough to put ourselves in a position where we have optionality. The optionality would be that we are not forced to do anything.
If something were to take place in the conversations that is culturally compatible, gives us a strategic purpose, then we would entertain it. I want to make sure that everyone understands that the lion's share of our focus is on organic growth.
Matthew Breese: Tony, I would just be curious, are conversations starting to pick up a little bit? Just in terms of size and geography, I would be curious where you are interested.
Tony Labozzetta: Yeah. Matthew, I would say the conversations are always happening. I do not know if there has been a pickup. I think I would say since the regulatory changes when you had a kind of a hyper pickup, I think then it just got steady. Now it is just business as usual when it comes to M&A discussions.
Matthew Breese: Okay. I'll leave it there. Thank you.
Tony Labozzetta: Thank you. Thanks, Matthew.
Adriano Duarte: Thanks, Matthew.
Operator: This concludes today's question and answer session. I will now turn the call back to Tony Labozzetta for closing remarks.
Tony Labozzetta: Well, thank you everyone. I would like to mention again that we are very excited about Provident's future. We appreciate you joining us on the call today, and we look forward to speaking with you again after the holidays.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
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