Earnings call transcript: Provident Financial Holdings Q4 2025 sees EPS miss, stock rises

Provident Financial Holdings (market cap: $100.58M) reported its fourth-quarter earnings for fiscal year 2025, revealing an earnings per share (EPS) of $0.24, which fell short of the anticipated $0.32. Revenue also missed expectations, coming in at $9.76 million compared to the forecasted $10.09 million. Despite these misses, the company’s stock price rose by 1.38% in pre-market trading, indicating a complex investor reaction. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation.

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Key Takeaways

• Provident Financial Holdings reported an EPS of $0.24, missing forecasts by 25%.
• Revenue fell short of expectations, with a reported $9.76 million.
• Despite the earnings miss, the stock rose 1.38% in pre-market trading.
• Loan origination volume increased by 5% from the previous quarter.
• Operating expenses decreased, showing improved cost management.

Company Performance

Provident Financial Holdings experienced mixed performance in Q4 FY2025. Loan originations increased by 5% to $29.4 million, suggesting growth in lending activities. However, the company faced challenges as loans held for investment decreased by $13.2 million. The net interest margin also saw an 8 basis point decline to 2.94%, which could impact future profitability.

Financial Highlights

• Revenue: $9.76 million, below the forecast of $10.09 million.
• Earnings per share: $0.24, missing the forecasted $0.32.
• Loan originations: $29.4 million, up 5% from the previous quarter.
• Operating expenses: $7.6 million, down from $7.9 million in March.

Earnings vs. Forecast

Provident Financial Holdings’ Q4 results showed a significant miss in both EPS and revenue. The EPS of $0.24 was 25% lower than the expected $0.32. Revenue also fell short by 3.27%, coming in at $9.76 million against a $10.09 million forecast. This performance may raise concerns about the company’s ability to meet market expectations.

Market Reaction

Despite missing earnings and revenue forecasts, Provident’s stock rose by 1.38% in pre-market trading, reaching $15.40. With a low beta of 0.32 and a 24-year track record of consistent dividend payments, the stock demonstrates relative stability. This increase suggests that investors may be focusing on other positive aspects, such as operational improvements or future growth prospects, rather than the immediate financial shortfall.

Outlook & Guidance

Looking ahead, Provident Financial Holdings remains optimistic about its growth potential, though InvestingPro’s analysis indicates a WEAK overall Financial Health score. The company expects loan repricing opportunities to expand its net interest margin, with $117 million in loans repricing in September and $98 million in December. This could provide a boost to future earnings, and analysts predict the company will maintain profitability this year.

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Executive Commentary

CEO Donovan Turnis highlighted the company’s strategic focus on loan portfolio growth and maintaining a higher loan-to-deposit ratio. He noted, "We are seeing consumer demand for single-family adjustable-rate mortgage products stabilize," indicating potential stability in this segment.

Risks and Challenges

• The decline in loans held for investment could affect future revenue streams.
• A decrease in the net interest margin poses a risk to profitability.
• Economic factors, such as higher mortgage rates, could impact real estate investments.

Q&A

During the earnings call, analysts inquired about the company’s loan portfolio mix and expense efficiency. Provident addressed these concerns by emphasizing its target mix of 50% single-family and 50% multifamily loans and highlighted its efforts to manage costs effectively.

Full transcript - Provident Financial Holdings Inc (PROV) Q4 2025:

Tiffany, Conference Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Provident Financial Holdings Fourth Quarter and Fiscal Year twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

If you would like to ask a question during that time, simply press star and the number one on your telephone keypad. I would now like to turn the call over to Donovan Turnis, President and Chief Executive Officer. Donovan, please go ahead.

Donovan Turnis, President and Chief Executive Officer, Provident Financial Holdings: Thank you, Tiffany. Good morning. This is Donovan Ternis, president and CEO of Provident Financial Holdings. And on the call with me is Peter Pham, our Senior Vice President and Chief Financial Officer. Before we begin, I have a brief administrative item to address.

Our presentation today discusses the company’s business outlook and will include forward looking statements. Those statements include descriptions of management’s plans, objectives or goals for future operations, products or services, forecasts of financial or other performance measures and statements about the company’s general outlook for economic and business conditions. We may also make forward looking statements during the question and answer period following management’s presentation. These forward looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ from any forward looking statements is available from the earnings release that was distributed yesterday from the annual report on Form 10 ks for the year ended 06/30/2024, and from the Form 10 Qs and other SEC filings that are filed subsequent to the Form 10 ks.

Forward looking statements are effective only as of the date that they are made, and the company assumes no obligation to update this information. To begin with, thank you for participating in our call. I hope that each of you have had an opportunity to review our earnings release that we distributed yesterday, which describes our fourth quarter and fiscal twenty twenty five results. In the most recent quarter, we originated $29,400,000 of loans held for investment, a 5% increase from $27,900,000 that were originated in the prior sequential quarter. During the most recent quarter, we also had $42,000,000 of loan principal payments and payoffs, which is an increase of 83% from $23,000,000 in the March.

Real estate investors have been more cautious as a result of the higher mortgage rates and uncertainties in the market, although we continue to see moderate activity in loans held for investment. However, we are seeing consumer demand for single family adjustable rate mortgage products stabilize, and we will continue to make prudent adjustments to our underwriting requirements within certain loan segments to encourage higher loan origination volume. Additionally, our single family and multifamily loan pipelines are higher in comparison to last quarter, suggesting our loan origination volume in the September will be similar to or higher than when compared to the June and around the middle to higher end of the range of recent quarters, which has been $19,000,000 and $36,000,000 For the three months ended 06/30/2025, loans held for investment decreased by approximately $13,200,000 with the decrease mostly coming from multifamily, commercial real estate and commercial business loans, partly offset by a small increase in single family loans. Current credit quality continues to hold up very well, and you will note that nonperforming assets were $1,400,000 at 06/30/2025, unchanged from 03/31/2025. Additionally, there were no loans in the early stages of delinquency at 06/30/2025.

We continue to monitor commercial real estate loans, particularly loans secured by office buildings, but are confident that based on the underwriting characteristics of our borrowers and collateral that these loans will continue to perform well. We have outlined these characteristics on Slide 13 of our quarterly investor presentation, which shows that our exposure to loans secured by various types of office buildings is $39,500,000 or 3.8 percent of loans held for investment. You should also note that we have just 10 CRE loans that total $5,100,000 maturing in fiscal twenty twenty six. We recorded a $164,000 recovery of credit losses in the June. The recovery recorded in the 2025 was primarily attributable to a decline in the balance of loans held for investment, a decline in historical loss factors and lower classified assets, partly offset by a slightly longer average life of the loan portfolio.

The outstanding balance of loans held for investment at 06/30/2025 decreased by $13,200,000 from 03/31/2025. The allowance for credit losses to gross loans held for investment was 62 basis points at 06/30/2025, unchanged from 03/31/2025. Our net interest margin decreased eight basis points to 2.94% for the quarter ended 06/30/2025, compared to the 3.02% for the sequential quarter ended 03/31/2025, the net result of a six basis point decline in the average yield on total interest earning assets and no change in the cost of total interest bearing liabilities. Our average cost of deposits increased to 1.33%, up seven basis points for the quarter ended 06/30/2025, while our cost of borrowing increased six basis points to 4.58% in the June compared to the March. The net interest margin was negatively impacted by approximately four basis points as a result of higher net deferred loan costs associated with loan payoffs in the June compared to the net average, net deferred loan cost amortization of the previous five quarters, in contrast to a two basis point positive impact in the March.

Also, the March had a benefit of three basis points from approximately $94,000 of loan interest recovery that was not replicated this quarter as a result of nonperforming loan payoffs and loan classification upgrade. New loan production is being originated at higher mortgage interest rates than the weighted average of the existing portfolio. The weighted average rate of loans originated in the June was 6.69% compared to the weighted average rate of 5.16% for our loans held for investment as of 06/30/2025. In addition, our adjustable rate loans are repricing at interest rates that are higher than their current interest rates. For example, we have approximately $117,000,000 of loans repricing in the September to an interest rate currently forecast to be 15 basis points higher to a weighted average interest rate of 7.23% from 7.08%.

Additionally, we have approximately $98,000,000 of loans repricing in the December to an interest rate currently forecast to be 15 basis points higher, similar to the September to a weighted average interest rate of 6.88% from 6.73%. I would point out that there is an opportunity to reprice the touring wholesale funding downward as a result of current market conditions where interest rates have moved lower across all terms. Excluding overnight borrowing, we have approximately $71,000,000 of Federal Home Loan Bank advances, brokerage certificates of deposit, and government certificates of deposit maturing in the September at a weighted average interest rate of 4.43. Additionally, we have approximately $105,000,000 of Federal Home Loan Bank advances, brokered certificates of deposit and government certificates of deposit maturing in the December at a weighted average interest rate of 4.61%. Given current market conditions, we would expect to reprice these maturities to a lower weighted average cost of funds.

All of this suggests there is an opportunity for expansion of the net interest margin in the September. We continue to look for operating efficiencies throughout the company to lower operating expenses. Our FTE count on 06/30/2025, was 163 compared to one hundred and sixty one year ago. You will note that operating expenses were $7,600,000 in the June, a decrease from $7,900,000 in the March. Operating expenses for the June represented a more normalized run rate.

In the March, operating expenses included $239,000 of litigation settlement expenses and 27,000 of executive search firm costs. For fiscal twenty twenty six, we expect a run rate of approximately $7,600,000 to $7,800,000 per quarter. Our short term strategy for balance sheet management is more growth oriented than last fiscal year. We believe that disciplined growth of the loan portfolio remains the best course of action at this time as we recognize that the Federal Open Market Committee has recalibrated the looser monetary policy and the inverted yield curve has begun to reverse back to an upwardly smoothing curve. We were successful in the execution of the strategy in the June with loan origination volume at the higher end of the quarterly range.

However, loan prepayments were higher than the prior sequential quarter, offsetting the higher loan production volume. The composition of total interest earning assets improved with a higher percentage of loans receivable and interest earning deposits to total interest earning assets and a lower percentage of investment securities to total interest earning assets. Additionally, the composition of total interest bearing liabilities improved with an increase in the average balance of deposits and a decrease in the average balance of borrowing. We exceed well capitalized capital ratios by a significant margin, allowing us to execute on our business plan and capital management goals without complications. We believe that maintaining our cash dividend is very important.

We also recognize that prudent capital returns to shareholders through stock buyback programs is a responsible capital management tool, and we repurchased approximately 76,000 shares of common stock in the June. For the fiscal year, we distributed approximately $3,800,000 of cash dividends to shareholders and repurchased approximately $4,300,000 worth of common stock. Accordingly, our capital management activities have resulted in a 129% distribution of fiscal twenty twenty five net income. We encourage everyone to review our June 30 investor presentation posted on our website. You will find that we included slides regarding financial metrics, asset quality and capital management, which we believe will provide additional insight on our solid financial foundation supporting the future growth of the company.

We will now entertain any questions that you may have regarding our financial results. Thank you. Tiffany, please proceed.

Tiffany, Conference Operator: Your first question comes from Frank Williams with Piper Sandler. Please go ahead.

Donovan Turnis, President and Chief Executive Officer, Provident Financial Holdings: Hi, everyone. Thank you guys for the 2026 outlook and the outlook on the back half of the year as well. I just have one question. Has the recent uptick in prepayments shifted your view on portfolio mix or originations? Basically, you guys leaning more into certain segments to offset the runoff?

Yes. Our mix is primarily what we would prefer, I suppose, is 50% single family, 50% multifamily. But to the extent we’re not meeting our goals with either of those buckets, we’ll increase the mix of one type over the other. As it occurs, single family has been outperforming on the volume perspective over the last few quarters. Although this quarter, we did realize more volume in multifamily and commercial real estate than the recent prior quarters.

Nonetheless, we’re not married to a straight mix in the portfolio as long as we’re generating the volume out of those two types. Awesome. Awesome. And just one other, I guess, on expenses. So that that’s very helpful, the outlook.

But is there an efficiency ratio that you guys target? I know earlier in, like, twenty twenty five ish, you guys bounced under that 70% efficiency 2024 rather. You bounced under that 70% efficiency. Is that something that you guys think you’ll be able to get back to? Well, it depends on portfolio growth, Frank.

What I would describe is that our current operating expense baseline we’ll be able to fund future growth of the loan portfolio into the balance sheet. And ultimately, as we grow the loan portfolio and grow total interest earning assets and ultimately grow total assets, we will be able to reduce that efficiency ratio over time into a better ratio for a smaller company such as ours from where we currently are. Awesome. Yeah. That’s it for me.

So thank you so much. I appreciate it.

Tiffany, Conference Operator: Your next question comes from Tim Coffey with Janney. Please go ahead.

Donovan Turnis, President and Chief Executive Officer, Provident Financial Holdings: Great. Thank you. Good morning, gentlemen. Good morning. Donovan, the the increased payout this quarter, a function of only some increased competition.

Is is it primarily on price that’s sufficient, or is it also structure? I think it’s probably both, Tim. If you were to look at our pricing, we’re priced relatively competitively in both single family and multifamily. But our underwriting characteristics are perhaps a little bit tighter than some of the others in the market, and that speaks to the credit quality we’ve had over time. And so I would argue it is probably more structured than it is priced.

Although in both single family and multifamily, we have been loosening underwriting restrictions. And really, with single family and multifamily, we’re probably back to underwriting to pre COVID criteria when we tightened up during COVID. But in commercial real estate other than multifamily, we’re still a little bit tighter, particularly in the office segment or some of the out of favor other segments. That’s helpful. And then just double checking my notes here.

On the the the loans that are repricing the next two quarters, what was the dollar value of that for the September? So September, we have approximately $117,000,000 repricing upward by approximately 15 basis points. Okay. And then for the December, what that 15 basis point improvement was to what percentage? Approximately $98,000,000.

Okay. And what was it what was it repricing to? 6.88%. Okay. Perfect.

That’s what was looking for. The expense outlook is is helpful. Is can you remind us what the seasonality is to that, given that you do operate on a fiscal year? Well, the March of every year, you’ll see higher operating expenses, primarily in the salary and benefits line because of employer taxes being paid until some of the higher wage earners max out, if you will, on some of those tax obligations. So the March is really the one quarter out of the three or out of the four that have a little bit of seasonality to it.

Okay. Okay. So no no no intermediate impact from, you know, salary adjustments? Well, yeah, July 1, we obviously have increases to merit, and that’s why we guided higher in that 7,600,000.0 to $7,800,000 range per quarter in the September and thereafter quarters in contrast to our prior guides, which are, I think were 7,600,000.0 to $7,700,000 per quarter. Okay.

Okay. That’s super helpful. And then just a question on the loan deposit ratio. Obviously, it’s elevated relative to peers. But as you saw in your earnings release, you have ample liquidity.

What the range of the loan deposit ratio that you set up with? Our business model, Tim, lends itself to a higher loan to deposit ratio. Since we’re essentially mortgage lenders for the bulk of our mortgage or the bulk of our loan portfolio, There are no drawdowns that come out of borrower requests on an ongoing basis, such as the P and I portfolio. So there’s no dry powder that the borrower can draw from with respect to our portfolio. So as we’re forecasting out cash flows, it’s a bit more stable for us than many.

And as a result of that, we can run higher loan to deposit ratios, and we have historically done so. Recently, we brought that down probably about five basis points. I think we were in the 120s, and now we’re in the mid-one teens. And we will continue to work that down as deposit liquidity improves, as deposit competition improves in our markets. Nonetheless, we are more comfortable with higher loan to deposit ratios.

Alright. That’s great color, Don, and thank you. Those are my questions.

Tiffany, Conference Operator: That concludes our question and answer session, and I will now turn the call back over to Donovan Ternis for closing remarks.

Donovan Turnis, President and Chief Executive Officer, Provident Financial Holdings: I appreciate everyone’s participation today on the call. As always, you can follow-up with us if you wish. We are always open to having individual conversations. And with that, I look forward to next quarter’s call. Thank you.

Tiffany, Conference Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.

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