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Date

Wednesday, January 28, 2026 at 10 a.m. ET

Call participants

  • President & Chief Executive Officer — Anthony Labozzetta
  • Senior Executive Vice President & Chief Financial Officer — Thomas M. Lyons

Takeaways

  • Net Income -- $83 million reported for the quarter, equating to $0.64 per share.
  • Annualized Return on Average Assets -- 1.34% for the quarter.
  • Adjusted Return on Average Tangible Common Equity -- 17.6% for the quarter.
  • Pre-Provision Net Revenue -- $111 million, representing an annualized ROA of 1.78% and a 2% sequential increase.
  • Total Revenue -- $226 million, a record, driven by $197 million in net interest income and $28.3 million in noninterest income.
  • Net Interest Margin (NIM) -- Reported NIM of 3.44%, up 1 basis point versus prior quarter; core NIM increased 7 basis points to 3.01%.
  • Loan Growth -- Period-end loans held for investment increased $218 million, annualized 4.5% sequentially; total annual commercial loan net growth was 5.5% after $1.3 billion in payoffs.
  • Loan Pipeline -- Quarter-end pipeline totaled $2.7 billion at a weighted average rate of 6.22%; pull-through adjusted pipeline at $1.5 billion.
  • Deposit Growth -- Core deposits grew $260 million, an annualized 6.6% sequential increase; average deposits increased $786 million, annualized 16.5% sequentially.
  • Deposit Costs -- Average cost of total deposits decreased 4 basis points to 2.1%; total cost of funds fell 10 basis points to 2.34%.
  • Noninterest Income -- Reached $28.3 million this quarter, with Beacon Trust revenue at $7.6 million and SBA loan sale gains at $946,000 for the quarter, totaling $2.8 million for the year.
  • Fee Revenue -- Record $28.3 million, including growth in insurance agency and wealth management fees, with Provident Protection Plus delivering 13% pretax income growth year over year.
  • Noninterest Expense -- Rose to $114.7 million, mainly from higher performance-based incentive accruals; efficiency ratio stayed at 51%.
  • Asset Quality -- Nonperforming assets declined by $22 million or 22% to 0.32% of total assets; net charge-offs were $4.2 million this quarter and 7 basis points of average loans for the year.
  • Allowance Coverage -- Allowance ratio dropped 2 basis points to 0.95% of loans at quarter-end; net negative provision for credit losses was $1.2 million.
  • Capital -- Tangible book value per share increased by $0.57 to $15.70; tangible common equity ratio rose to 8.48% from 8.22% last quarter.
  • Share Repurchase -- New authorization announced for up to 2 million additional shares repurchased.
  • Guidance: Loan and Deposit Growth -- Management projects 4%-6% annual growth in both loans and deposits for 2026.
  • Guidance: Noninterest Income -- Quarterly noninterest income expected to average $28.5 million in 2026.
  • Guidance: Core Return Metrics -- Targeting core ROAA of 1.20%-1.30% and mid-teens return on average tangible common equity for 2026.
  • Guidance: NIM -- Core NIM projected to expand 3-5 basis points next two quarters, with reported NIM in the 3.4%-3.5% range in 2026.
  • Effective Tax Rate -- Estimated at 29% for 2026, reflecting expected tax credit investments; $3.4 million discrete tax benefit realized in the quarter from energy production tax credit purchases.
  • Core Operating Expense Guidance -- Projected at $118 million to $120 million per quarter for 2026, with a slightly higher run rate in the second half.
  • Purchase Accounting Accretion -- Estimated at $60 million on the loan book for 2026.
  • Core System Conversion -- Scheduled for Labor Day weekend 2026, expected to result in $5 million in nonrecurring charges in second half 2026.
  • CRE Portfolio -- Commercial real estate portfolio exposure to NYC rent-stabilized multifamily is under 1% of total loans; all performing with no concerning credit trends noted.
  • Market Position -- Management does not intend to acquire CRE portfolios from competitors, preferring organic growth and internal capital redeployment.
  • Strategy: Talent Investment -- Ongoing hiring in middle market, insurance, wealth management, and treasury management is planned to support continuing growth.

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Risks

  • Performance-based noninterest expense rose for the quarter, with management attributing this to "increased performance-based incentive accruals" and projecting core expenses to further increase due to hiring and technology investments.
  • Deposit competition is described as ongoing and intensifying, with management stating, "if everybody has designs to grow high single digits, there's just not enough new money for the -- for everybody's needs."
  • Allowance coverage ratio decreased by 2 basis points to 95 basis points of loans at December 31, with a net negative provision for credit losses of $1.2 million recorded as asset quality improved and nonperforming assets declined to 32 basis points of total assets.
  • Nonrecurring core conversion charges of approximately $5 million are planned for the second half of 2026, impacting noninterest expense.

Summary

Provident Financial Services (PFS +0.45%) delivered record total revenue, net interest income, and noninterest income, underpinned by consistently expanding core profitability and organic growth across loans and deposits. Management highlighted that commercial loan production and originations hit quarterly and annual highs, while the quarter-end loan pipeline remained robust, indicating continued loan demand. Notable cost improvements included declining deposit and funding costs, while asset yields fell, offset by increased pipeline rates and expected back book repricing benefits to net interest margin. The company’s capital position strengthened, with increased tangible book value and a new share repurchase authorization reflecting management’s confidence in capital formation. Asset quality improved, with nonperforming assets and charge-offs decreasing, and credit reserve levels reduced in light of lower risk metrics. Technology investments—including a major core system upgrade in 2026—are expected to drive operational scalability, paired with planned investments in middle market, wealth, insurance, and treasury management talent to support future growth ambitions.

  • Management projects that every 25 basis point Fed rate cut may result in a 2-3 basis point improvement in core margin, with deposit and funding betas expected in the 25%-30% range.
  • Provident’s historical willingness to deploy capital for M&A was explicitly deprioritized, with organic growth and deepening existing client relationships cited as "primary focus."
  • The $5.7 billion in adjustable-rate loans scheduled to reprice over the next four quarters is expected to yield a 30-40 basis point pickup versus rolloff rates, contributing an estimated 4 basis points to margin.
  • Beacon Trust AUM was down on a spot basis but increased on average by $80 million sequentially, with management pointing to recent talent additions as supportive of future AUM and revenue growth.

Industry glossary

  • NIM (Net Interest Margin): The difference between interest income generated and the amount of interest paid out relative to average earning assets, a key profitability metric for banks.
  • Allowance Coverage Ratio: The ratio of allowance for credit losses to total loans, indicating reserve strength against potential credit losses.
  • CECL (Current Expected Credit Loss): A loan loss reserve accounting standard requiring banks to estimate expected lifetime credit losses on loans.
  • Purchase Accounting Accretion: The recognition of interest income resulting from adjustments to the carrying value of acquired loans, materially impacting reported net interest income.
  • Betas (Deposit/Funding Betas): Measures indicating how quickly and to what degree banks adjust deposit or funding rates in response to Fed rate moves.
  • Beacon Trust: Provident’s wealth management division, referenced for its revenue and asset growth metrics in the call.
  • Provident Protection Plus: The company’s insurance agency subsidiary, cited for its year over year pretax income growth.

Full Conference Call Transcript

Anthony Labozzetta: Thank you, Adriano, and welcome, everyone, to the Provident Financial Services Fourth Quarter Earnings Call. The Provident team delivered another strong quarter, driven by record revenues, favorable credit metrics and expanding core profitability. Throughout 2025, we built organic growth momentum on both sides of the balance sheet, which combined with positive operating leverage resulted in notable improvement in our financial performance. Accordingly, in the fourth quarter, we reported net earnings of $83 million or $0.64 per share. Our annualized return on average assets was 1.34%, and our adjusted return on average tangible common equity was 17.6%. Pre-provision net revenue was a record $111 million or an ROA of 1.78%.

Since closing the Lakeland transaction, we have grown core pre-provision net revenue every quarter. Turning to our balance sheet. Our commercial loan team generated total new loan production of $3.2 billion in 2025. Elevated loan payoffs of $1.3 billion, which were primarily in our CRE portfolio, partially offset our strong production, resulting in net commercial loan growth of 5.5% for the year. We remain focused on generating high-quality diversified loan growth. At year-end, our pipeline remained solid at $2.7 billion with a weighted average rate of 6.22%.

Our loan pipeline has consistently been north of $2.5 billion for the last 4 quarters, and more importantly, our originations have grown every quarter in 2025, peaking at over $1 billion in the fourth quarter. On the funding side, core deposits grew $260 million or 6.6% annualized compared to the linked quarter. Favorable trends in our commercial and consumer segments contributed to growth in our average noninterest-bearing deposits of 2% annualized. The deposit market remains competitive, but we continue to invest in our capabilities to drive meaningful growth in our core funding. Provident's commitment to managing credit risk and generating top quartile risk-adjusted returns has remained unchanged.

During the quarter, we successfully resolved $22 million of nonperforming loans while experiencing just $1.3 million in associated net charge-offs. As a result, nonperforming assets improved 9 basis points to a favorable 0.32%. The business environment in our market continues to be healthy. And as a reminder, our exposure to rent-stabilized multifamily properties in New York City is less than 1% of total loans, all of which are performing. Growing our noninterest income remains a strategic priority. We generated record fee revenue of $28.3 million in the quarter. I want to take a minute to highlight the momentum and diversity of our noninterest income. Provident Protection Plus continues to drive consistent growth in our insurance agency income.

New business and over 90% customer retention helped grow pretax income 13% year-over-year. Provident Protection Plus has a strong pipeline at the start of 2026, and I'm encouraged by the increased collaboration with both the bank and Beacon Trust, which should strengthen further in 2026. Beacon Trust saw revenue growth again in the fourth quarter, increasing to $7.6 million on approximately $4.2 billion of AUM. Beacon remains focused on both growth and retention, and we continue to make investments in talent to help achieve these goals. We also continue to invest in our SBA capabilities, which have been a more significant contributor to noninterest income in 2025, generating $946,000 of gains on sale in the fourth quarter.

For the full year, we have generated $2.8 million of SBA gains on sale, which is up from $905,000 in 2024. While total assets grew nearly $1 billion in 2025, our strong profitability helped further build Provident's capital position, which comfortably exceeds well-capitalized levels. As such, earlier this week, we announced a new share repurchase authorization that will allow us to buy back an additional 2 million shares. I'd like to conclude my remarks by discussing our strategic priorities for 2026. We expect to continue investing in revenue-producing talent across our middle market banking, treasury management, SBA, wealth management and insurance platforms.

We expect recent balance sheet growth momentum to be sustained and that loan payoff activity will normalize when compared to 2025. Finally, we are preparing for a core system conversion in the fall of 2026, an important investment that will enhance scalability and our digital capabilities. I'm confident in our team's ability to successfully complete this conversion, particularly given how seamlessly we integrated Lakeland Bank in 2024. I'm incredibly proud of the efforts and production of our employees. We are pleased with our organic growth momentum and improved profitability, and we continue to target sustained top quartile performance.

Now I'd like to turn the call over to Tom for his comments on our financial performance and to discuss our 2026 guidance. Tom?

Thomas M. Lyons: Thank you, Tony, and good morning, everyone. As Tony noted, we reported net income of $83 million or $0.64 per share for the quarter with a return on average assets of 1.34%. Adjusting for the amortization of intangibles, our core return on average tangible equity was 17.58%. Pre-provision net revenue increased 2% over the trailing quarter to a record $111 million or an annualized 1.78% of average assets. Revenue increased to a record for a third consecutive quarter at $226 million, driven by record net interest income of $197 million and record noninterest income of $28.3 million.

Average earning assets increased by $307 million or an annualized 5.4% versus the trailing quarter, with the average yield on assets decreasing 10 basis points to 5.66%. This reduction in asset yield was more than offset by a 13 basis point decrease in the cost of interest-bearing liabilities to 2.83%. While a reduction in net purchase accounting accretion limited our reported net interest margin expansion to 1 basis point versus the trailing quarter at 3.44%, our core net interest margin increased by 7 basis points to 3.01%. The company continues to maintain a largely neutral interest rate risk position, but anticipates future benefit to the core margin from recent Fed rate cuts and expected steepening of the yield curve.

The core margin for the month of December continued to trend upward at 3.05%. We currently project continued core NIM expansion of 3 to 5 basis points for the next 2 quarters with reported NIM estimated in the 3.4% to 3.5% range for 2026. Period-end loans held for investment increased $218 million or an annualized 4.5% for the quarter, driven by growth in multifamily, commercial mortgage and commercial loans, partially offset by reductions in construction and residential mortgage loans. Total commercial loans grew by an annualized 5.4% for the quarter. Our pull-through adjusted loan pipeline at quarter end was $1.5 billion. The pipeline rate of 6.22% is accretive relative to our current portfolio yield of 5.98%.

Period-end deposits increased $182 million for the quarter or an annualized 3.8%, while average deposits increased $786 million or an annualized 16.5% versus the trailing quarter. The average cost of total deposits decreased 4 basis points to 2.1% this quarter, while the total cost of funds decreased 10 basis points to 2.34%. Asset quality remains strong with nonperforming assets declining $22 million or 22% to 32 basis points of total assets. Net charge-offs were $4.2 million or an annualized 9 basis points of average loans this quarter, while full year 2025 net charge-offs were just 7 basis points of average loans. Current quarter charge-offs reflected the disposition of several nonperforming and underperforming loans and the write-off of related specific reserves.

We recorded a net negative provision for credit losses of $1.2 million for the quarter as year-end loan closings drove a decrease in approved commitments pending closing, asset quality improved, and there was modest improvement in our CECL economic forecast. This brought our allowance coverage ratio down 2 basis points from the trailing quarter to 95 basis points of loans at December 31. Noninterest income increased to $28.3 million this quarter with gains realized on calls of corporate securities and solid performance from our wealth management and insurance divisions as well as gains on SBA loan sales and increased core banking fees.

Noninterest expense increased to $114.7 million this quarter as strong operating results drove increased performance-based incentive accruals, while expenses to average assets and the efficiency ratio were consistent with the trailing quarter at 1.84% and 51%, respectively. Excluding the amortization of intangibles and the related average balance, these ratios were 1.76% and 48.15%, respectively. We project quarterly core operating expenses of approximately $118 million to $120 million for 2026, with the second half of the year run rate being slightly higher than the first half.

In addition to normal expenses, as Tony mentioned, we will be upgrading our core systems in Q3 of 2026 and expect additional nonrecurring charges of approximately $5 million in connection with this investment, largely to be recognized in the third and fourth quarter. Our sound financial performance supported earning asset growth and drove strong capital formation. Tangible book value per share increased $0.57 or 3.8% this quarter to $15.70, and our tangible common equity ratio increased to 8.48% from 8.22% last quarter. We realized a $3.4 million benefit to our income tax expense from the purchase of energy production tax credits for the 2025 tax year.

We are exploring opportunities to purchase additional similar tax credits for the 2026 year and open carryback years. Excluding the discrete benefit of any tax credit carrybacks, we currently project an effective tax rate of approximately 29% for 2026. Regarding additional 2026 guidance, we are expecting loans and deposits to grow in the 4% to 6% range, noninterest income to average $28.5 million per quarter and are targeting a core return on average assets in the 120% to 130% range with a mid-teens return on average tangible common equity. That concludes our prepared remarks. We'd be happy to respond to questions.

Operator: [Operator Instructions] Your first question comes from the line of Mark Fitzgibbon of Piper Sandler.

Mark Fitzgibbon: Tom, first question for you. I heard your comments on the effective tax rate being 29% for 2026. I guess I'm curious, those tax credit investments that you announced you made, I think it was $54 million. How does that flow through to the effective rate or when does it flow through?

Thomas M. Lyons: So that was in the Q4. Those are 2025 tax year benefits. So that was reflected in the $3.4 million we saw in reduction in income tax expense. Next year's purchases, the 2026 year will be realized in 2026 as a reduction. That's why we're dropping from close to 30% down to about 29% in our estimate of what the effective rate will be.

Anthony Labozzetta: It's spread out throughout the year. So it's not a onetime like we did in 2025.

Thomas M. Lyons: That's correct. We did them at the end of the year. So it should be spread through 3 quarters of the year in 2026.

Mark Fitzgibbon: Okay. Great. And then secondly, I saw the buyback announcement. I guess you have a little bit of excess capital. Could you help us think about how you'd rank your priorities for deployment of excess capital today?

Thomas M. Lyons: Yes, I don't think they've changed. Still profitable balance sheet growth is our primary objective. We think that's the longest-term value creator. But we wanted to add additional flexibility to our capital deployment options, which is why we refreshed the stock buyback plan.

Anthony Labozzetta: I think that's spot on. Organic growth is our primary focus. The second half of the year, we might look at our dividend as our productivity continues. Obviously, there's always the additional uses of capital we want to invest deeper into our insurance and wealth platforms. And then there's always in the background, the thoughts of mergers, but our primary #1 focus is organic growth.

Thomas M. Lyons: Yes. Our capital levels, we're comfortable with where they are now, and we're confident in our capital formation projections for the rest of the year. So again, that was another trigger, as Tony said, to both give some consideration in the remainder of the year to the dividend rate as well as to reintroduce some buyback options.

Mark Fitzgibbon: Okay. And I hear what you're saying, Tony, on M&A being sort of back of the list, so to speak. But if you were to look at bank deals, what kinds of things would you be looking for in a potential target?

Anthony Labozzetta: Well, I think, as I mentioned in the past, I think, the primary, I would start by saying this team is a pretty outstanding team, and we put together a pretty good engine. Everybody is meshing well. We got a good dynamic group from Board on down. And #1 thing is that the cultures have to be compatible so that we don't create a tremendous amount of hiccups in what we've been building here already that's producing value.

So that being said, we would also love to see some additional talent acquisition and then also perhaps new line of business or a market that we're not in, complementary things, adding to the wealth side or the deepening our insurance penetration is certainly something of value, but we do recognize that you can't get all those boxes checked off in any situation. So you have to pick up how many boxes do you want checked off in order to get the deal done, but a lot of good -- still a lot of good franchises out there that we think we could be good partners with. However, I did just cover what we thought was a value of verge.

Operator: Your next question comes from the line of Tim Switzer of KBW.

Timothy Switzer: I also want to congrats to Tom on his pending retirement.

Thomas M. Lyons: Thank you, Tim. Appreciate it.

Timothy Switzer: The first question I have is there's been a good amount of talk on conference calls this quarter about rising deposit competition in some of your core markets, particularly on pricing and -- what have you guys seen in the market? Where is the highest level of competition right now in terms of like category or geography? And does that maybe impact your NIM outlook or liquidity management at all?

Anthony Labozzetta: Well, I kind of want to say competition is heightening a little bit, but I see the competition for deposits in our market as being universal. It's always been there as long as I've been in this space. It kind of moves here and there in different segments. I would argue that everybody is in a fight for interest -- noninterest-bearing demand and low-cost money, and then that's part of your model. I think from our perspective, we're doing a good job with our core model. If you look this quarter, we had 16.5% growth on average balances. You're seeing, we produced nearly $479 million of commercial deposits this year that are -- tend to be your lower costing deposits.

Funding about 24% of our loan production. So those are all good things. So the competition is there. But if you go to market with the right talent and with the right approach, I think you can win your share. I would say a safe answer would be that if everybody has designs to grow high single digits, there's just not enough new money for the -- for everybody's needs. So that's what creates the competition. It's like what -- it's just not enough to cover everybody's growth needs.

Timothy Switzer: Got you. Yes, that makes sense. And then can you remind us on -- I think you have close to $5 billion to $6 billion of fixed rate loans repricing in your back book over the next year. Can you repress us on what that number is and maybe the gap on new origination yields versus what's rolling off?

Thomas M. Lyons: Yes. The total repricing over the next 4 quarters, this is on the adjustable side, it's about $5.7 billion. Looking for. Okay, back book repricing, cash flows, both amortization and prepays, we're looking at another $4.7 billion over the next 12 months as well. So the pickup in rate is about 30, 40 basis points. I think it adds about 4 basis points to the NIM.

Timothy Switzer: Got you. Okay. And then the last question I have is just on the CRE market trends. It seems like it's becoming a little bit healthier, volumes are improving, pricing holding up to rising. Trying to get -- like are you guys seeing the same thing there? And then I believe there's also -- due to some M&A in your market, there's a competitor looking to sell potentially some CRE portfolios in the New York market. Is that anything with your guys' capital levels you'd be interested in? Or just focused on organic?

Anthony Labozzetta: Yes. I mean, there's a couple of questions in there. I'll try to tackle them all. I'll start with the last 1 first. There's probably little to no desire for us to acquire anyone's portfolio since our productivity is quite high, and being able to allocate that capital to our clients is more important, right? So the relationship banking that we do, we would view that book acquisition as a filler and it's just not necessary for us in the way we approach our business. When you look at the CRE market overall, I do see a healthier CRE market. Our CRE book has held up incredibly well throughout any of these perceived cycles.

You're starting to see other banks that may have stepped a little bit back on the CRE space stepping back in. And certainly, the agencies, if you look at half of our prepayments that I mentioned in the call, 50% of them were with the agencies that basically are offering terms that we just don't do, which is high level of prepayments of IO is rather long-term IOs and high leverage and rates that are just not balanced with the risk reward.

So again, I think that the market is healthy, and you're always going to have spotty situations like right now, the big thought process is what's happening on the rent controlled, rent stabilized in New York with the new administration. We're attentive to it. We don't see anything even in our small portfolio that is alarming to us at this point. So knock on wood, everything appears to be healthy going into the 2026 year.

Operator: Your next question comes from the line of Feddie Strickland of Hovde Group.

Feddie Strickland: I wanted to touch back on loan yields a little bit. And Tom, I think you mentioned this a little bit in your opening comments, but is there the potential for yields to move up a bit as we move into early '26, just given the increase in the pipeline yield of 12/31 versus 9/30? And what you just talked about back book repricing?

Thomas M. Lyons: I think so stable to slight improvement overall.

Anthony Labozzetta: Yes, that makes sense. We had a little bit of a lift in the 5-year from the prior quarter of about 20 basis points, and that's where the yield improvement came from, where the rate improvement came from.

Feddie Strickland: Got it. And then just switching over to fees. I noticed the wealth AUM was down a little bit from last quarter despite what I'd imagine is positive market move impacts, but it still sounds like you're pretty bullish on '26. Can you talk a little bit about what drove AUM maybe a little lower in the fourth quarter?

Thomas M. Lyons: It was down a little bit on a spot basis, up on average, though, by about $80 million. We did have some net outflows for the quarter, but we did have some good strong business production during the period as well. So overall client count is pretty stable.

Anthony Labozzetta: Yes. I would add, it's a little bit more exciting of what we expect for 2026, right? So we've added some more talent to Beacon to augment the growth and retention strategies that are there. We brought in some teams along with that to help. Pretty exciting early indications. Obviously, it's way too early for any real huge material numbers to change, but we're seeing the engagement. We're seeing new-to-bank clients coming in. We're seeing a group that can deeper penetrate -- deeply penetrate both Provident and work with Provident Protection Plus and the bank to deepen those client relationships. So I'm pretty excited about the prospects for '26 when it comes to Beacon.

I'm expecting some pretty good things there.

Feddie Strickland: Got it. And just one last one for me. Just is there any desire or opportunity to expand the footprint a little bit more in adjacent geographies? More organically is what I'm talking about. I mean, maybe areas like Long Island, given some of the disruption there, maybe a little further south in the Philly suburbs? Or are you pretty happy with where you are today?

Anthony Labozzetta: Well, people that know me, I'm never really happy. So I would say that. Yes, all of the above. I mean, we're already out on Long Island in Manhasset, and we have an office in Astoria. So continuing to penetrate there is obviously intelligent. We like the Westchester, Rockland markets. We do like the mainline around Philly. All of those areas are where we already have teams down there. We don't have physical locations in that -- around that Philly market, but we already have lending teams down there, same as in Westchester and New York. And so seeing us expand geographically in those areas is not something that should surprise anyone on this call.

Feddie Strickland: Congrats, Tom, on the retirement.

Thomas M. Lyons: Thank you very much. Really appreciate.

Operator: Your next question comes from the line of Steve Moss of Raymond James.

Stephen Moss: Tom, congrats on your retirement. Maybe just starting back on the accretion numbers here. Just kind of curious, Tom, what you're thinking for total purchase accounting accretion for 2026?

Thomas M. Lyons: On the loan book, it's about $60 million for the full year.

Stephen Moss: Okay. Got it.

Thomas M. Lyons: The volatility there on prepayments, but that's our kind of base case model.

Stephen Moss: Right. Okay. So then a lot of the adjustable rate loans you're referring to that are repricing carry rate marks at the current time, just looking to convert those to kind of like a core margin, kind of how to think about that benefit?

Anthony Labozzetta: Not all. Some, not all, Steve, just because there's a blend -- a healthy blend of legacy Provident loans and leases.

Stephen Moss: Got it. And -- but it is about 3 to 4 basis points or 4 basis points to the margin just from the back book repricing, if I heard that correctly.

Anthony Labozzetta: That's correct, yes.

Stephen Moss: Okay. Perfect. And then my other question here is just kind of, Tony, in your prepared remarks, you mentioned the hirings planned for 2026. You kind of alluded to it a little bit in some of your earlier commentary. Just kind of looking for any specific niches, maybe you're looking to add how many people you're looking to hire in the upcoming year?

Anthony Labozzetta: Yes. As I mentioned the area, I think one of the biggest areas of focus, when we look at hiring the people, it's augmenting some of the things we're doing already, like in the insurance space and in our wealth space, you should expect to see a lot more on the production side and the retention side. I think the -- one of the greatest areas of investments for us this year is going to be in the middle market space. That range of $75 million to $0.5 billion in client size, we think that is an area that we haven't really penetrated deeply yet, comes with all the attributes that we like, strong deposits, strong relationships.

We're able to use our wealth group in those segments as well as our insurance. It meets not that our other clients don't, but this is an area that we think is very suitable for us in the scale that we're at. So there's going to be some good -- I wouldn't be surprised in there if you add another 3 to 5 additional complements in this year. Obviously, all of that is timed in the expense guidance we've given, and we were paying -- we are very attentive to positive operating leverage. So it's not -- we're not going to race ahead of ourselves.

Also, the other area that you could expect to see some growth, it is in our treasury management capabilities, particularly on the outbound deposit-only categories like deposit gathering functions. We want to deepen that investment as we move into -- deeper into '26. So great -- I mean, it's a great thing because we keep investing in our future and that it's exciting because we're having the growth, and we just want to make sure that we can continue to deliver the growth in '26 and '27. So hiring these productive individuals is going to be critical for us.

Stephen Moss: Okay. Got you. That's helpful. And then one last one for me on credit here. Just with the reserve has come down a fair amount over the course of the year. Curious what the potential is for maybe incremental reserve bleed here? Or is there just -- is there less give on that number here going forward?

Thomas M. Lyons: Yes. It's largely a model-driven exercise at this point. The macroeconomic variables drive the provision requirements. That said, it feels like we're at a base here, but we've been very consistent in our approach and our methodology throughout the year, and it really has been warranted as you could see, with 7 basis points in net charge-offs over the year. Good strong credit metrics, 32 basis points in NPAs, I think it's 40 basis points NPLs to loans. So the credit quality and the strong underwriting and the low leverage lending we do have all supported the lower allowance coverage ratio.

Operator: Your last question comes from the line of Dave Storms of Stonegate Capital Partners.

David Storms: Just wanted to start with -- you mentioned in the prepared remarks, a decrease in deposit costs. Just curious as to how you see the room to run here and if there's any specific initiatives that we should keep in mind as you continue to try to bring those costs down?

Thomas M. Lyons: I'm sorry, Dave, I had trouble hearing that. Could you just try to speak a little louder, please?

David Storms: Apologies, yes. Just around decrease in deposit costs. How much more room do you think there is to run here? And if there's any specific initiatives that we should keep an eye on as you're working through these costs?

Thomas M. Lyons: So we are still repricing downward. We didn't get the full benefit of the last cut reflected, which is one of the reasons we wanted to bring to everybody's attention that the margin for the last month of the quarter, December was 3.05% on a core basis. So we'll see the full benefit of that I think every 25 basis point cut that we may get gives us another 2 to 3 basis points in the core margin in terms of improvement. Overall, I'd say our betas are going to continue to run in the 25% to 30% range relative to the Fed rate cuts.

David Storms: That's great. And then just one more for me. You mentioned the core systems conversion. Is there anything more you can tell us about maybe the time line for that? And maybe any other tech investments or initiatives that you have on the horizon?

Anthony Labozzetta: I think that's the major initiative on the near-term horizon. The conversion is scheduled for Labor Day weekend of 2026. It's the IBS platform of FIS. It's a very commercial-oriented, very proven system commercial-oriented. -- we'll meet the needs -- our needs as we move into the future from a digital perspective or product perspective, everything that we need. It's comparable to a lot of banks between $25 billion and $150 billion are on it. And we talk to them, and the system works very well for them. So I think it's something that we need to do to position our bank for the growth that we're experiencing in our future.

Thomas M. Lyons: We expect to realize additional efficiencies in our processes as a result and enhancements that will help our product set and delivery to our customers.

Operator: This concludes our Q&A session. I will now turn the conference back over to Anthony Labozzetta for closing remarks.

Anthony Labozzetta: Well, thank you, everyone, for your questions and for joining the call. We hope everyone had a good start to the new year, and we look forward to speaking with you very soon. Thank you very much.

Operator: This concludes today's conference call. You may now disconnect.