Executive Summary

Q2 FY2025 EPS was $0.13, down 54% sequentially vs $0.28 in Q1 and down 59% year over year vs $0.31, driven by a $586k provision for credit losses and higher non-interest expenses; net income was $0.872M vs $1.900M in Q1 and $2.141M in Q2 FY2024 .
Net interest margin expanded to 2.91% (+7 bps q/q; +13 bps y/y) as asset yields outpaced funding costs; management expects further margin expansion in March quarter, albeit at a slower pace given some near-term loan repricing headwind offset by wholesale funding repricing tailwinds .
Credit quality remains solid: NPAs were 0.20% of assets; no charge-offs; classified assets stable; CECL allowance stood at 0.66% of gross loans; non-accruals concentrated in single-family with no 90+ day accruing loans .
Capital returns continued: $0.14 dividend declared on Jan 23, 2025 and a new authorization to repurchase up to ~5% (~334,773 shares); 63,556 shares repurchased in Q2 at $16.04 average price .
Tactical catalysts: ongoing NIM expansion, disciplined loan growth at higher origination rates, and sizable wholesale funding repricing opportunity ($85.5M maturities at 4.50% in March) could support near-term NII; watch non-interest expense normalization to ~$7.5M run-rate and loan repricing mix across March/June .

What Went Well and What Went Wrong

What Went Well

Net interest margin increased to 2.91% (from 2.84% in Q1 and 2.78% a year ago) as asset yields rose faster than funding costs; management highlights further margin expansion potential tied to wholesale funding repricing and improved yield-curve dynamics .
Loan origination volume rose to $36.4M (vs $28.9M in Q1) with pipelines indicating similar production in March quarter; demand improving for single-family ARMs and underwriting eased in select segments to encourage volume .
Credit quality stable with NPAs at 0.20% of assets, no charge-offs, and limited office CRE exposure (~$40.4M; 3.8% of loans), plus minimal CRE maturities in 2025 (6 loans, $3.2M), supporting benign credit risk outlook .

Quote: “All of this suggests a continued expansion of the net interest margin in the March 2025 quarter, but at a slower pace than that experienced in the current quarter.” — Donavon P. Ternes, President & CEO .

What Went Wrong

Earnings compressed: net income fell to $0.872M and EPS to $0.13 (sequential -54%; y/y -59%) primarily due to a $586k provision (vs $697k recovery in Q1; $720k recovery y/y) and higher salaries/benefits and other operating expenses .
Efficiency deteriorated to 81.15% (from 79.06% in Q1 and 76.11% y/y) reflecting elevated non-interest expenses, including $100k executive search agency costs and $167k retirement plan expenses not expected to recur .
Deposits declined vs prior periods (total deposits $867.5M at 12/31/24 vs $863.9M at 9/30/24 and $911.98M at 12/31/23), with core deposits down and brokered CDs rising to $143.8M, keeping funding costs elevated despite recent declines in average deposit cost .

Financial Results

P&L Summary (USD Thousands, EPS in USD)

Metric	Q4 FY2024 (Jun 30, 2024)	Q1 FY2025 (Sep 30, 2024)	Q2 FY2025 (Dec 31, 2024)
Total Interest Income	13,916	14,075	14,021
Net Interest Income	8,451	8,616	8,759
Provision for (Recovery of) Credit Losses	(12)	(697)	586
Non-Interest Income	1,467	899	845
Non-Interest Expense	7,172	7,523	7,794
Income Before Income Taxes	2,758	2,689	1,224
Net Income	1,953	1,900	872
Diluted EPS	0.28	0.28	0.13

Margins and Efficiency

Metric	Q4 FY2024	Q1 FY2025	Q2 FY2025
Net Interest Margin (%)	2.74	2.84	2.91
Net Interest Spread (%)	2.54	2.66	2.74
Efficiency Ratio (%)	72.31	79.06	81.15
Return on Avg Assets (%)	0.62	0.61	0.28
Return on Avg Equity (%)	5.96	5.78	2.66

Year-over-Year Comparison (Q2 FY2025 vs Q2 FY2024)

Metric	Q2 FY2024 (Dec 31, 2023)	Q2 FY2025 (Dec 31, 2024)	y/y Delta
Net Income ($000s)	2,141	872	-1,269
Diluted EPS (USD)	0.31	0.13	-0.18
Net Interest Margin (%)	2.78	2.91	+0.13 pp
Efficiency Ratio (%)	76.11	81.15	+5.04 pp

Segment/Activity Breakdown – Loan Originations (USD Thousands)

Category	Q4 FY2024	Q1 FY2025	Q2 FY2025
Single-Family	10,862	22,449	29,583
Multi-Family	4,526	5,190	6,495
Commercial Real Estate	1,710	1,260	365
Construction	1,480	—	—
Commercial Business Loans	—	50	—
Total Originations	18,578	28,949	36,443

KPIs and Balance Sheet Snapshot

KPI	Q4 FY2024	Q1 FY2025	Q2 FY2025
Loans Held for Investment (EoQ, $000s, net)	1,052,979	1,048,633	1,053,603
Total Deposits (EoQ, $000s)	888,348	863,864	867,515
Brokered CDs (EoQ, $000s)	131,800	129,775	143,775
Borrowings (EoQ, $000s)	238,500	249,500	245,500
Non-Performing Assets / Total Assets (%)	0.20	0.17	0.20
Allowance for Credit Losses / Gross Loans (%)	0.67	0.61	0.66
Cash Dividend per Share (Quarter)	0.14	0.14	0.14
Shares Repurchased (Quarter)	48,476	93,641	63,556

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Operating Expense Run-Rate	FY2025	~$7.4–$7.5M/quarter (Q1 commentary)	~$7.5M/quarter; Q2 had $100k executive search and $167k retirement plan costs not anticipated to recur	Maintained (with one-off items noted)
Net Interest Margin Trajectory	H2 FY2025	Continued expansion in December; tailwind from lower wholesale funding costs (Q1)	Further expansion expected in March quarter, slower pace; loan repricing -5 bps in March, +57 bps in June; wholesale funding repricing tailwind	Maintained (qualitative refinements)
Loan Originations	March 2025 Quarter	Higher vs September; at/above high end of $19–$29M (Q1)	Similar to December quarter; around high end of recent range ($19–$36M)	Maintained
Wholesale Funding Repricing	Dec 2024 & Mar 2025	~$69.6M at 5.20% maturing in Dec; expected ~100 bps lower on reprice (Q1)	~$85.5M at 4.50% maturing in Mar; expected to reprice to high-3%/low-4%	Updated amounts/timing; favorable
Dividend	Ongoing	$0.14 per quarter (historical)	$0.14 declared for Mar 6, 2025 payment	Maintained
Share Repurchase Authorization	Programmatic	Ongoing buybacks under prior plan	New authorization up to ~5% (~334,773 shares); prior program canceled (21,691 shares remaining)	Raised capacity/renewed program

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY2025)	Current Period (Q2 FY2025)	Trend
Yield Curve & NIM	NIM inflection; expansion from 2.74% to 2.84%; lower wholesale funding expected; loan repricing down in Dec/March	NIM 2.91%; expect further expansion in March; loan repricing -5 bps in March, +57 bps in June; wholesale repricing tailwind	Improving; moderated pace near term
Loan Origination Pipeline	Higher pipelines; originations expected at/above high end ($19–$29M)	Originations $36.4M; pipelines suggest similar production in March around high end ($19–$36M)	Stable to improving
Funding Mix & Cost	Retail betas low; major opportunity in FHLB and brokered CDs repricing	~$85.5M wholesale funding repricing from 4.50% to high-3%/low-4% in March; deposit cost down to 1.23%	Favorable tailwind
Credit Quality & CRE Office	NPAs down to $2.1M; limited CRE maturities in 2024/2025	NPAs $2.5M; office exposure ~$40.4M (3.8% loans); 6 CRE loans ($3.2M) mature in 2025	Strong; watch slight NPA uptick
Operating Expenses	Run-rate guided to ~$7.4–$7.5M	Q2 above run-rate due to $100k search and $167k retirement costs; guidance maintained at ~$7.5M/quarter	Normalize expected
Capital Returns	Dividends and buybacks funded by bank dividend to holdco ($9M)	New 5% repurchase authorization; continued $0.14 dividend; 63,556 shares repurchased in Q2	Enhanced buyback capacity

Management Commentary

“Net interest income increased by approximately two percent from the prior sequential quarter and was largely the result of an expanding net interest margin… we remain active in our stock repurchase plan with our Board of Directors recently approving a new plan.” — Donavon P. Ternes, CEO .
“Our net interest margin increased to 2.91%… notable declines in average cost of deposits and borrowing… suggests continued expansion of the net interest margin in the March 2025 quarter.” — Donavon P. Ternes .
“We continue to look for operating efficiencies… Q2 included $100,000 executive search costs and $167,000 retirement plan expenses that are not anticipated in future periods… we continue to expect a run rate of approximately $7.5 million per quarter.” — Donavon P. Ternes .

Q&A Highlights

Loan growth trajectory: acceleration contingent on lower mortgage rates; current annualized growth ~1.9%; management aims to improve through H2 FY2025 and into FY2026 as curve normalizes .
Margin outlook: margin expansion expected to continue; March quarter has slight loan repricing headwind (-5 bps) offset by wholesale funding repricing (to high-3%/low-4%); June quarter loan repricing tailwind (+57 bps) could re-accelerate margin expansion .
Funding strategy: retail deposit rates already low; main opportunity is repricing brokered CDs and FHLB advances; example: brokered CDs maturing at 5.30% replaced at 4.10% .
Capital management: continued buybacks under new program and dividend maintenance viewed as important; repurchases and dividends totaled ~154% of FY2025 YTD net income .

Estimates Context

Attempted to retrieve Wall Street consensus (S&P Global) for Q2 FY2025 EPS and Revenue; data was unavailable due to request limit errors at the time of query. As a result, comparisons to consensus cannot be provided for this quarter [GetEstimates error: Daily Request Limit Exceeded].

Key Takeaways for Investors

Near-term earnings pressure stems from a swing to provision ($586k) and elevated non-interest expense; watch normalization of OpEx to ~$7.5M and credit provisioning cadence in coming quarters .
Structural margin tailwinds: wholesale funding repricing (~$85.5M in March at 4.50% to high-3%/low-4%), and yield-curve normalization support continued NIM expansion despite isolated loan repricing headwinds in March; June repricing appears favorable (+57 bps) .
Loan growth improving: originations at the high end ($36.4M) with similar expected in March; ARMs demand rising; underwriting eased selectively to support volume while maintaining credit standards .
Credit risk manageable: NPAs at 0.20% of assets; office CRE exposure modest (~3.8% of loans) with limited 2025 maturities; no charge-offs reported .
Funding mix dynamics: core deposits softer and brokered CDs higher ($143.8M), but average deposit cost declined to 1.23%; sustained wholesale repricing is key to compress funding costs .
Capital return cadence: $0.14 dividend maintained and new ~5% buyback authorization; Q2 buybacks (63,556 shares at $16.04) continue capital deployment, supportive for EPS over time .
Trading setup: absent consensus benchmarks, focus on sequential NIM trajectory and expense normalization into March/June quarters; positive beats likely if NIM widens as guided and provision moderates, with share repurchases offering additional support .

PROVIDENT FINANCIAL HOLDINGS INC (PROV)·Q2 2025 Earnings Summary