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PF

PROVIDENT FINANCIAL HOLDINGS INC (PROV)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered solid profitability and margin expansion: diluted EPS $0.28 (+115% q/q, +27% y/y) on net income $1.86M; net interest margin rose to 3.02% (+11 bps q/q, +28 bps y/y) .
  • Wall Street consensus was modestly low: EPS beat by $0.04 and revenue beat by $0.89M, supported by margin expansion, lower wholesale funding costs, and a credit-loss recovery* *.
  • Management expects further, but slower, NIM expansion in Q4 as ~$100.8M of wholesale funding and ~$110.9M of loans reprice; operating expense run-rate guided to ~$7.5–$7.6M per quarter .
  • Credit quality remained strong: NPAs fell to 0.11% of assets; allowance-to-loans declined to 0.62% on improved SFR collateral factors; early-stage delinquencies only $199K .
  • Capital return continued: $0.14 quarterly dividend declared (payable June 5) and ~51,869 shares repurchased at $15.30 average; capital ratios remain well above “well-capitalized” thresholds .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expansion persisted: “Our net interest margin has improved each quarter subsequent to June 30, 2024” (3.02% in Q3; +11 bps q/q, +28 bps y/y) .
  • Credit quality strengthened: NPAs/Assets declined to 0.11% (from 0.20% in June 2024); no charge-offs in the quarter .
  • Balance sheet/liquidity improved: deposits up to $901.3M and borrowings down to $215.6M; significant remaining borrowing capacity (~$470.8M) .

What Went Wrong

  • Operating expenses elevated: non-interest expense rose 10% y/y to $7.86M, including a nonrecurring $239K litigation settlement and $27K executive search costs .
  • Classified assets increased to $6.8M vs. $5.8M at June 30, 2024; allowance-to-loans ratio fell to 0.62% due to qualitative improvements (still adequate per management) .
  • Deposit mix shift toward time/brokered CDs raised deposit costs (avg deposit cost 1.26%, +8 bps y/y), although wholesale funding costs declined slightly .

Financial Results

Core P&L and Margins (quarterly comparisons)

MetricQ3 FY2024Q2 FY2025Q3 FY2025
Net Income ($USD Millions)$1.50 $0.872 $1.86
Diluted EPS ($)$0.22 $0.13 $0.28
Net Interest Income ($USD Millions)$8.56 $8.76 $9.21
Non-Interest Income ($USD Millions)$0.848 $0.845 $0.907
Net Interest Margin (%)2.74% 2.91% 3.02%
Efficiency Ratio (%)76.20% 81.15% 77.64%

Balance Sheet and Asset Quality (period-end)

MetricQ3 FY2024 (Mar 31, 2024)Q2 FY2025 (Dec 31, 2024)Q3 FY2025 (Mar 31, 2025)
Loans Held for Investment, Net ($USD Millions)$1,065.76 $1,053.60 $1,058.98
Total Deposits ($USD Millions)$908.12 $867.52 $901.32
Borrowings ($USD Millions)$235.00 $245.50 $215.58
NPAs / Total Assets (%)0.17% 0.20% 0.11%
Allowance for Credit Losses on Loans ($USD Millions)$7.11 $6.96 $6.58
ACL / Gross Loans (%)0.67% 0.66% 0.62%

Versus Wall Street Consensus (Q3 FY2025)

MetricActualConsensusSurprise
EPS ($)0.28 0.24*+0.04*
Revenue ($USD Millions)10.749*9.860*+0.889*

Values retrieved from S&P Global.*

Segment/Origination Breakdown

Loans Originated for Investment ($USD Thousands)Q3 FY2024Q2 FY2025Q3 FY2025
Single-family8,946 29,583 22,163
Multi-family5,865 6,495 4,087
Commercial Real Estate2,172 365 1,135
Commercial Business1,250 — 500
Total18,233 36,443 27,885

KPIs

KPIQ3 FY2024Q2 FY2025Q3 FY2025
ROA (%)0.47 0.28 0.59
ROE (%)4.57 2.66 5.71
Net Interest Spread (%)2.55 2.74 2.82
Efficiency Ratio (%)76.20 81.15 77.64
Brokered CDs (Balance, Cost)$130.90M; 5.19% $143.78M; 4.56% $129.77M; 4.34%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (trajectory)Q4 FY2025Expected expansion into March; slower pace vs Sep/Dec quarters Continued expansion expected in June quarter, but slower pace than Q3 Maintained expansion, pace moderated
Wholesale Funding RepricingQ4 FY2025~$85.5M maturing in March at ~4.50%, expected to reprice lower ~$100.8M maturing in June at 4.34%, expected to reprice lower; ~$46.3M in Sept at 4.50% Expanded maturities; continued cost tailwind
Loan RepricingQ4–Q1 FY2026Mar quarter repricing ~5 bps lower on ~$124.3M Jun quarter repricing +32 bps on ~$110.9M; Sept +13 bps on ~$112.7M Shift from minor headwind to tailwind
OpEx Run-rateFY2025~$7.5M per quarter ~$7.5–$7.6M per quarter (Q3 includes ~$239K litigation; $27K search costs) Maintained; acknowledged intermittent items
DividendQ3 FY2025$0.14 quarterly $0.14 declared; payable June 5, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY2025, Q2 FY2025)Current Period (Q3 FY2025)Trend
Net Interest MarginInflection point; NIM up 10 bps in Q1; deposit/borrowing costs began easing NIM 3.02%; positive impact from lower deferred loan cost amortization and $94K recovery; further expansion expected but slower Improving, moderating pace
Funding StrategyIncreasing brokered CDs; reprice wholesale funding lower; deposit decline in Q2 Opened government deposits desk; liquidity used to pay down FHLB advances; rates similar to wholesale Mix optimization; cost tailwind
Loan Origination/UnderwritingPipeline improving; loosened underwriting to support volumes Q3 originations $27.9M; pipelines similar to prior quarter; demand for ARMs; modest underwriting loosening Stable to modest growth
Credit Quality/ACLQ1 recovery driven by shorter average life; NPAs down; ACL 0.61% Recovery $391K on improved SFR collateral; NPAs down to 0.11%; ACL 0.62% Strong/stable
CRE Office Exposure~3.8% of loans; limited 2025 maturities ~3.8% exposure; 5 loans/ $2.9M maturing in 2025; confidence in underwriting Monitored, contained
Macro/Rate EnvironmentLooser Fed policy; yield curve starting to normalize Continued commentary on looser policy; expected NIM expansion as curve normalizes Supportive backdrop

Management Commentary

  • “The operating environment for Provident has improved…our net interest margin has improved each quarter…loan and deposit balances have grown…borrowings have declined…credit quality remains strong.” — Donavon P. Ternes, President & CEO .
  • “All of this suggests a continued expansion of the net interest margin in the June 2025 quarter, but at a slower pace than that experienced in the current quarter.” .
  • “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…” .
  • “We remixed the liability profile…opened up our government deposits desk…accumulated some government deposits…used liquidity to pay down FHLB advances.” .

Q&A Highlights

  • Funding mix and costs: Government deposits added at rates similar to wholesale; liquidity used to reduce FHLB advances and some brokered CDs .
  • NIM sustainability: Removing ~5 bps of nonrecurring margin benefit still implies expansion on asset and liability repricing; management cautiously optimistic .
  • Prepayment dynamics and ACL sensitivity: Mortgage rate volatility drives portfolio average life and provisions; slower prepayments lengthen life and can require provisions .
  • Capital returns approach: Maintain dividend and buybacks per annual business plan; repurchases would increase if share price declines, within allocated amounts .
  • Competitive landscape: Multifamily market includes aggressive under-pricers; PROV prioritizes sustainable spreads, may shift mix to single-family if multifamily pricing becomes uneconomic .

Estimates Context

  • EPS and revenue beat consensus: EPS $0.28 vs $0.24*; Revenue $10.749M vs $9.860M*; beats reflect NIM expansion, lower borrowing costs, and a $391K credit-loss recovery* *.
  • Estimate revisions likely: Models should reflect sustained NIM expansion into Q4, slightly higher OpEx run-rate ($7.5–$7.6M), improving credit quality, and deposit/balance sheet remix toward lower-cost funding .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Ongoing NIM expansion with identifiable repricing catalysts on both assets (~$110.9M in June; $112.7M in Sept) and liabilities ($100.8M in June; ~$46.3M in Sept) supports near-term earnings momentum .
  • Credit quality is a differentiator: NPAs at 0.11%, no charge-offs, and modest early-stage delinquencies ($199K) reduce downside risk to earnings stability .
  • Expense discipline intact despite intermittent items; run-rate guided ~$7.5–$7.6M provides operating leverage as margins expand .
  • Funding mix optimization (government deposits, reduced FHLB advances) should lower cost of funds and support spread stability .
  • Capital returns (dividend + buybacks) remain central to the story; robust capital ratios enable consistent shareholder distributions .
  • Watch competitive pricing in multifamily; management will tilt toward single-family to preserve spreads amid aggressive peers .
  • Near-term trading: Positive skew from EPS/Margin beats and visible repricing tailwinds; medium-term thesis hinges on execution of growth-oriented balance sheet strategy in a normalizing curve environment .