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PF

PROVIDENT FINANCIAL HOLDINGS INC (PROV)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 delivered mixed results: revenue beat consensus while EPS missed. Revenue of $10.37M beat S&P Global consensus of $10.20M; EPS of $0.25 missed $0.29 consensus. Management flagged a higher effective tax rate (38.5%) due to a deferred tax asset write-off as a driver of the EPS shortfall *. Values retrieved from S&P Global.
  • Net interest margin expanded six bps sequentially to 3.00% (from 2.94%), with average asset yields up and funding costs modestly lower, supported by recovery of credit losses and stable credit quality .
  • Management expects modest NIM expansion next quarter, citing $104.7M of wholesale funding maturing in December at 4.61% and $109M in March at 4.15% that can be repriced lower; loan repricing dynamics are mixed (December +18 bps on ~$107M, March −32 bps on ~$104M) .
  • Capital return remained robust: $0.14 dividend declared for payment on December 4 and ~66.7K shares repurchased, with total capital distributions equaling ~117% of quarterly net income .
  • Near-term stock reaction catalysts: visible NIM expansion from repricing, disciplined OpEx run-rate (~$7.6–$7.7M/quarter), and continued buybacks; watch prepayments that are offsetting originations and a slight uptick in NPAs .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin resumed its upward trajectory to 3.00% (up 6 bps QoQ; up 16 bps YoY), driven by higher asset yields and slightly lower funding costs .
  • Strong credit performance with zero charge-offs and recovery of credit losses ($626K), aided by shortened expected loan life from lower mortgage rates .
  • Management discipline in capital returns: repurchased ~66.7K shares at $15.75 and maintained the $0.14 dividend; total capital distributions equaled ~117% of net income. “We believe that maintaining our cash dividend is very important… prudent capital returns to shareholders through stock buyback programs is a responsible capital management tool” .
  • Quote: “We anticipate improving fundamentals as the yield curve becomes more favorable and general economic conditions remain stable, though we recognize that balance sheet growth may remain a challenge” .

What Went Wrong

  • EPS missed consensus due to a higher tax provision ($1.05M; effective tax rate 38.5%), including a $251K write-off of deferred tax assets tied to expired non-qualified stock options .
  • Non-interest income declined 10% YoY to $813K, mainly on unrealized losses in other equity investments and lower deposit/card fees .
  • Non-performing assets rose to 0.15% of assets (from 0.11% QoQ), and classified assets increased to $7.1M; NPAs consisted of five single-family and two multi-family loans, with no 90+ day accruing loans .
  • Loan growth remained difficult as steady origination was offset by elevated prepayments; management loosened certain multifamily underwriting back to pre-COVID standards to support pipeline .

Financial Results

MetricQ1 2025Q4 2025Q1 2026
Diluted EPS ($)$0.28 $0.24 $0.25
Net Interest Margin (%)2.84% 2.94% 3.00%
Net Interest Income ($MM)$8.62 $8.88 $8.93
Net Interest Income after Recovery/Provision ($MM)$9.31 $9.05 $9.56
Non-interest Income ($MM)$0.90 $0.88 $0.81
Income Before Taxes ($MM)$2.69 $2.31 $2.74
Net Income ($MM)$1.90 $1.63 $1.68
Efficiency Ratio (%)79.06% 78.06% 78.35%
ROA (%)0.61% 0.53% 0.55%
ROE (%)5.78% 5.01% 5.17%
Balance Sheet KPIsQ1 2025Q4 2025Q1 2026
Loans HFI, net ($MM)$1,048.6 $1,045.7 $1,041.8
Total Deposits ($MM)$863.9 $888.8 $874.8
Borrowings ($MM)$249.5 $213.1 $213.1
NPL / Loans, net (%)0.20% 0.14% 0.18%
NPAs / Assets (%)0.17% 0.11% 0.15%
ACL / Gross Loans (%)0.61% 0.62% 0.56%
Tier 1 Leverage (Bank) (%)9.63% 10.11% 9.55%
CET1 (Bank) (%)18.36% 19.50% 18.19%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginDec quarter (Q2 FY26)Expect modest expansion (qualitative, prior dialogue) Management expects modest/moderate NIM expansion; asset yields and lower funding costs to support Maintained (clarified)
Wholesale Funding RepricingDec & MarNot quantified previously~$104.7M maturing Dec at 4.61%; ~$109M maturing Mar at 4.15%; expect lower WAC on repricing New numeric details
Loan RepricingDec & MarNot quantified previouslyDec: ~$107M +18 bps to ~6.89%; Mar: ~$104M −32 bps to ~6.70% New numeric details
OpEx Run-rateFY26Not provided~$7.6–$7.7M per quarter; current $7.6M normalized New
Balance Sheet GrowthFY26Growth-oriented stance notedShort-term strategy more growth-oriented; underwriting loosened in multifamily; growth challenged by prepayments Maintained (context updated)
DividendOngoing$0.14/qtr maintainedDeclared $0.14; payable Dec 4; record Nov 13 Maintained
Share RepurchasesOngoingActiveRepurchased ~66.7K shares; 150,321 shares remain authorized Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25 and Q4 FY25)Current Period (Q1 FY26)Trend
Net Interest MarginNIM rose to 3.02% in Q3; slipped to 2.94% in Q4 with asset yield/funding shifts NIM 3.00%; management expects modest expansion next quarter Improving
Funding Cost & RepricingBorrowings cost down in Q4 (4.58%); brokered CDs $131.0M at 4.24% Dec/Mar maturities can reprice lower; brokered CDs $123.8M at 4.10% Tailwind
Loan Growth & PrepaymentsQ3: Originations up; prepayments lower; Q4: higher prepayments interrupted growth Originations steady; elevated prepayments offsetting growth; underwriting loosened in multifamily Challenged
Credit QualityQ3/Q4: NPAs fell to 0.11%; no charge-offs NPAs rose to 0.15%; still no charge-offs; classified assets up Mixed
Capital ManagementConsistent dividends and active buybacks in Q3/Q4 $0.14 dividend; ~66.7K shares repurchased; distributions ~117% of net income Ongoing
CRE/Office ExposureNot detailed in Q3/Q4 PRsOffice exposure ~$36.9M (3.5% of loans); 9 CRE loans ($3.8M) maturing rest of FY26 Monitored

Management Commentary

  • “Strong credit quality and a shortened expected average life of our loan portfolio, resulting from lower mortgage interest rates, contributed to a significant recovery from the allowance for credit losses. In addition, our net interest margin resumed its upward trajectory, and our operating expenses remained well controlled” — CEO Donavon P. Ternes .
  • “We would expect to reprice these maturities to a lower weighted average cost of funds… All of this currently suggests that there continues to be an opportunity for net interest margin expansion in the December” .
  • “Our short term strategy for balance sheet management is more growth oriented… disciplined loan growth… FTE count… operating expenses ~$7.6–$7.7M per quarter” .
  • “We believe that maintaining our cash dividend is very important… we repurchased approximately 67,000 shares… capital management activities represented a 117% distribution of the September net income” .

Q&A Highlights

  • Balance sheet growth outlook: Loan growth remains difficult due to elevated prepayments despite steady originations; multifamily underwriting loosened back to pre-COVID norms to support pipeline .
  • NIM trajectory: Management affirmed expectation for modest NIM expansion next quarter, supported by asset repricing and lower funding costs amid Fed easing .
  • Allowance sensitivity: Lower mortgage rates shorten portfolio life, increasing prepayments/refinance potential and can drive outsized recovery of credit losses absent deterioration or significant growth; the reverse occurs when rates rise .

Estimates Context

MetricQ1 2026 Consensus*Q1 2026 Actual
Primary EPS ($)0.29*0.25
Revenue ($)10.20M*10.369M*
  • EPS missed by $0.04; primary driver was the higher effective tax rate (38.5%) due to a $251K DTA write-off tied to expired options, plus softer non-interest income; operating performance otherwise supported by recoveries and NIM expansion .
  • Revenue beat by ~$0.17M, reflecting net interest income after recoveries ($9.56M) plus non-interest income ($0.81M) *. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Expect modest NIM expansion near term as ~$214M in wholesale funding matures over the next two quarters at 4.61%/4.15% and is repriced lower; asset repricing is mixed but tailwinds exist from lower rates and adjustable resets .
  • Watch prepayments: Elevated refinance-driven payoffs are offsetting originations; loosening multifamily underwriting and a improving pipeline may help stabilize balances, but net loan growth remains challenging .
  • OpEx discipline: Management is signaling a normalized quarterly OpEx run-rate of ~$7.6–$7.7M, supporting operating leverage if revenue momentum continues .
  • Credit remains solid (no charge-offs) despite a modest uptick in NPAs; ACL/loans fell to 0.56% given shorter expected life from lower rates—monitor trajectory alongside rate moves .
  • Capital return is a support: $0.14 dividend maintained and continued buybacks (~66.7K shares in Q1); distributions totaled ~117% of net income—providing floor support but constraining capital build if loan growth accelerates .
  • Near-term trading setup: A visible NIM expansion path and lower funding costs are positive; risks include further non-interest income volatility and sustained prepayment pressure limiting asset growth .
  • Medium-term thesis: Moderating rates and a normalizing yield curve should benefit net interest income; disciplined underwriting and conservative CRE exposure (office ~3.5% of loans) support credit resilience .

Appendix: Additional KPIs

ItemQ1 2025Q4 2025Q1 2026
Brokered CDs ($MM) / WAC (%)$129.8 / 4.95 $131.0 / 4.24 $123.8 / 4.10
Loan Originations for Investment ($MM)$28.95 $29.39 $29.64
FHLB Borrowings Avg Balance ($MM) / Cost (%)$220.7 / 4.74 $195.8 / 4.58 $192.9 / 4.59
Recovery of Credit Losses ($MM)$0.697 $0.164 $0.626
Dividend per Share ($)$0.14 $0.14 $0.14 (declared, payable Dec 4)

Notes:

  • Items marked with * reflect values retrieved from S&P Global.