Provident Financial (PROV) - 2025 Q4 - Annual Results

Financial Performance Summary Q4 & Fiscal Year 2025 Performance Overview Provident Financial Holdings reported net income of $1.63 million for Q4 2025, a 17% decrease year-over-year and a 12% decrease sequentially. For the full fiscal year 2025, net income was $6.26 million, down 15% from fiscal 2024. The decline was primarily driven by lower non-interest income and higher non-interest expenses, which were partially offset by increased net interest income and credit loss recoveries. Despite a quarterly dip in loan portfolio growth due to prepayments, the company noted improved fundamentals such as a better net interest margin, stabilized deposits, and reduced borrowings Q4 FY2025 vs. Q4 FY2024 Performance | Metric | Q4 2025 | Q4 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $1.63 million | $1.95 million | -17% | | Diluted EPS | $0.24 | $0.28 | -14.3% | Fiscal Year 2025 vs. Fiscal Year 2024 Performance | Metric | FY 2025 | FY 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $6.26 million | $7.35 million | -15% | | Diluted EPS | $0.93 | $1.06 | -12% | Q4 FY2025 vs. Q3 FY2025 (Sequential) Performance | Metric | Q4 2025 | Q3 2025 | Change | | :--- | :--- | :--- | :--- | | Net Income | $1.63 million | $1.86 million | -12% | | Diluted EPS | $0.24 | $0.28 | -14% | - CEO Donavon P. Ternes highlighted an improved operating environment in fiscal 2025, citing better net interest margin, stabilized deposit balances, declining borrowings, and strong credit quality, despite a temporary interruption in loan portfolio growth due to prepayments[3] Detailed Financial Analysis The company's financial performance in Q4 2025 was shaped by several key factors. Net interest income grew 5% year-over-year to $8.88 million, benefiting from a 20 basis point expansion in net interest margin to 2.94%. However, non-interest income fell 40% due to the absence of a prior-year gain, while non-interest expenses rose 6% on higher salary costs. A recovery of credit losses of $164,000 was recorded, compared to a smaller recovery in the prior year Net Interest Income Net interest income for Q4 2025 increased by 5% year-over-year to $8.88 million, driven by a 20 basis point rise in net interest margin to 2.94%. This improvement stemmed from a 16 basis point increase in the average yield on interest-earning assets and a 6 basis point decrease in average funding costs. The positive margin impact was partially offset by a 2% decrease in the average balance of interest-earning assets. Interest income on loans grew due to higher yields, while interest expense on deposits increased due to a shift towards higher-cost time deposits Net Interest Income and Margin (Q4 FY2025 vs. Q4 FY2024) | Metric | Q4 2025 | Q4 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $8.88 million | $8.45 million | +5% | | Net Interest Margin | 2.94% | 2.74% | +20 bps | | Avg. Yield on Interest-Earning Assets | 4.67% | 4.51% | +16 bps | | Avg. Funding Costs | 1.91% | 1.97% | -6 bps | - Interest income on loans receivable increased by 2% to $13.10 million, as a 13 basis point increase in the average loan yield (to 4.97%) offset a 1% decrease in the average loan balance[9][10] - Interest expense on deposits rose 5% to $2.98 million, primarily due to a 6 basis point increase in the average cost of deposits to 1.33%, reflecting a larger proportion of higher-rate time deposits[15] - Interest expense on borrowings decreased 15% to $2.24 million, driven by an 11% decrease in the average balance of borrowings and a 26 basis point reduction in their average cost[17] Provision for Credit Losses In Q4 2025, the company recorded a recovery of credit losses of $164,000, an improvement from a $12,000 recovery in the same quarter last year. The recovery was primarily attributed to a decline in the balance of loans held for investment and lower historical loss rates - A recovery of credit losses of $164,000 was recorded in Q4 2025, compared to a $12,000 recovery in Q4 2024[19] - The recovery was mainly due to a decrease in the loans held for investment balance and lower historical loss rates compared to the prior quarter[19] Non-Interest Income Non-interest income for Q4 2025 decreased significantly by 40% to $880,000 from $1.47 million in the prior-year quarter. The primary reason for this decline was the absence of a $540,000 net unrealized gain on other equity investments that was recorded in Q4 2024 - Non-interest income fell by $587,000 (40%) year-over-year, primarily because a $540,000 net unrealized gain from the prior year's quarter was not repeated[23] Non-Interest Expense Non-interest expense in Q4 2025 increased by 6% year-over-year to $7.62 million. The rise was mainly due to a $352,000 increase in salaries and employee benefits and a $103,000 increase in other operating expenses. Sequentially, expenses decreased by 3% due to a non-recurring litigation settlement in the previous quarter. The efficiency ratio worsened to 78.06% from 72.31% a year ago - Non-interest expense increased by $448,000 (6%) year-over-year, driven by higher salaries and employee benefits (+ $352,000) and other operating expenses (+ $103,000)[24] - The efficiency ratio increased to 78.06% in Q4 2025, compared to 72.31% in Q4 2024 and 77.64% in Q3 2025[25] Income Taxes The provision for income taxes was $680,000 for Q4 2025, representing a 16% decrease from the same quarter last year. The decline was a direct result of lower pre-tax income. The effective tax rate for the quarter was 29.5%, slightly higher than the 29.2% in the prior-year quarter Income Tax Provision and Effective Rate | Metric | Q4 2025 | Q4 2024 | Q3 2025 | | :--- | :--- | :--- | :--- | | Provision for Income Taxes | $680,000 | $805,000 | $797,000 | | Effective Tax Rate | 29.5% | 29.2% | 30.0% | Balance Sheet and Asset Quality Balance Sheet Analysis As of June 30, 2025, total assets stood at $1.25 billion. Loans held for investment decreased by 1% year-over-year to $1.05 billion. Total deposits remained virtually unchanged at $888.8 million, though there was a compositional shift from core deposits to higher-cost time deposits. Borrowings decreased, and the company maintained a strong liquidity position with $474.8 million in total available borrowing capacity Key Balance Sheet Items (as of June 30, 2025) | Metric | June 30, 2025 | June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $1.246 billion | $1.272 billion | -2.0% | | Loans Held for Investment, Net | $1.046 billion | $1.053 billion | -0.7% | | Total Deposits | $888.8 million | $888.3 million | ~0% | | Total Borrowings | $213.1 million | $238.5 million | -10.6% | | Total Stockholders' Equity | $128.5 million | $129.9 million | -1.1% | - Core deposits decreased by 6% to $576.5 million, while time deposits increased by 14% to $312.3 million, indicating a shift in deposit mix[16] - The company had total available borrowing capacity of approximately $474.8 million at June 30, 2025, from sources including the FHLB and the Federal Reserve Bank[18] Asset Quality Asset quality showed significant improvement year-over-year. Non-performing assets decreased by 46% to $1.4 million, representing just 0.11% of total assets at June 30, 2025, down from 0.20% a year earlier. The allowance for credit losses on loans decreased to $6.4 million (0.62% of gross loans) from $7.1 million (0.67% of gross loans), primarily due to improved qualitative factors and lower historical loss rates. No loan charge-offs occurred during the quarter Asset Quality Indicators | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Non-Performing Assets | $1.4 million | $2.6 million | | Non-Performing Assets to Total Assets | 0.11% | 0.20% | | Allowance for Credit Losses on Loans | $6.4 million | $7.1 million | | Allowance as % of Gross Loans | 0.62% | 0.67% | - Non-performing loans at June 30, 2025, consisted of seven single-family loans and one multi-family loan. The bank had no real estate owned (REO)[20] - No loan charge-offs were recorded during the quarters ended June 30, 2025, and 2024[21] Capital Management Share Repurchases and Dividends The company remained active in its capital return program. During the fourth quarter of fiscal 2025, it repurchased 76,104 shares at an average price of $15.00. For the full fiscal year, 285,170 shares were repurchased. The company also maintained its quarterly cash dividend at $0.14 per share - In Q4 2025, the Company repurchased 76,104 shares of its common stock at an average cost of $15.00 per share[28] - For the full fiscal year 2025, a total of 285,170 shares were repurchased at an average cost of $15.04 per share[28] - As of June 30, 2025, 217,028 shares remained available for repurchase under the current program[28] - A cash dividend of $0.14 per share was declared for the quarter, consistent with the prior year's quarter and the full fiscal year's dividend of $0.56 per share[40] Financial Statements and Highlights Condensed Consolidated Statements of Financial Condition This section provides the unaudited condensed consolidated balance sheets as of June 30, 2025, and for the four preceding quarters. It details assets, liabilities, and stockholders' equity, showing trends in key accounts like cash, investment securities, loans, deposits, and borrowings Condensed Balance Sheet (in Thousands) | | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Assets | | | | Total assets | $1,245,613 | $1,272,200 | | Liabilities and Stockholders' Equity | | | | Total deposits | $888,772 | $888,348 | | Borrowings | $213,073 | $238,500 | | Total liabilities | $1,117,068 | $1,142,259 | | Total stockholders' equity | $128,545 | $129,941 | Condensed Consolidated Statements of Operations This section presents the unaudited condensed consolidated income statements. It includes a comparison for the quarter and fiscal year ended June 30, 2025, versus the same periods in 2024, as well as a sequential quarter comparison. It breaks down revenues and expenses to arrive at net income and earnings per share Condensed Income Statement - Quarter Ended (in Thousands) | | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net interest income | $8,882 | $8,451 | | Total non-interest income | $880 | $1,467 | | Total non-interest expense | $7,620 | $7,172 | | Net income | $1,626 | $1,953 | Condensed Income Statement - Fiscal Year Ended (in Thousands) | | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net interest income | $35,469 | $34,923 | | Total non-interest income | $3,531 | $3,941 | | Total non-interest expense | $30,793 | $28,540 | | Net income | $6,255 | $7,351 | Financial Highlights This section provides a detailed breakdown of key financial ratios, per-share data, loan originations, asset quality metrics, regulatory capital ratios, and the composition of the investment securities, loan, deposit, and borrowing portfolios. Data is presented for the current quarter and fiscal year, with comparisons to prior periods Selected Financial Ratios (Q4 2025 vs Q4 2024) | Ratio | Q4 2025 | Q4 2024 | | :--- | :--- | :--- | | Return on average assets | 0.53% | 0.62% | | Return on average stockholders' equity | 5.01% | 5.96% | | Net interest margin | 2.94% | 2.74% | | Efficiency ratio | 78.06% | 72.31% | Total Loans Originated for Investment (in Thousands) | | Q4 2025 | Q4 2024 | | :--- | :--- | :--- | | Single-family | $18,303 | $10,862 | | Multi-family | $9,343 | $4,526 | | Total | $29,388 | $18,578 | Regulatory Capital Ratios (Bank) | Ratio | As of 06/30/2025 | As of 06/30/2024 | | :--- | :--- | :--- | | Tier 1 leverage ratio | 10.11% | 10.02% | | Common equity tier 1 capital ratio | 19.50% | 19.29% | | Total risk-based capital ratio | 20.51% | 20.38% | Asset Quality Details This table provides a detailed breakdown of non-performing assets as of June 30, 2025, and the four preceding quarters. It specifies non-accrual loans by category (single-family, multi-family) and confirms there were no accruing loans past due 90 days or more, and no real estate owned Non-Performing Assets Breakdown (in Thousands) | Category | 06/30/25 | 03/31/25 | 12/31/24 | 09/30/24 | 06/30/24 | | :--- | :--- | :--- | :--- | :--- | :--- | | Non-accrual Single-family loans | $948 | $925 | $2,530 | $2,106 | $2,596 | | Non-accrual Multi-family loans | $466 | $470 | $0 | $0 | $0 | | Total non-performing assets | $1,414 | $1,395 | $2,530 | $2,106 | $2,596 |