Provident Finl Hldgs Reports Q4 2026 Results: Full Earnings Call Transcript

On Wednesday, Provident Finl Hldgs (NASDAQ: PROV ) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below. This content is powered APIs. 4 million, with a decline in loan principal payments, resulting in modest loan growth.

Credit quality remains strong, with a decrease in nonperforming assets and no loans in early stages of delinquency. 21%, driven by higher loan yields and a reduction in the cost of interest-bearing liabilities. The company repurchased approximately 90,000 shares and paid $874,000 in cash dividends, returning about 110% of the June quarter's net income to shareholders. Provident Financial Holdings expects continued loan yield increases due to repricing and plans to maintain disciplined balance sheet growth despite a competitive deposit landscape.

Full Transcript Lacey, Operator Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Provident Finl Hldgs fourth quarter and fiscal 2026 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 this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.

I would now like to turn the call over to Donovan Ternus. Please go ahead. Donovan Ternus, President & CEO Thank you, Lacey. Good morning.

This is Donovan Ternus, President and CEO of Provident Finl Hldgs, and on the call with me is Peter Fann, 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 interest rates, economic, and business conditions.

We also may 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 statement is available from the earnings release that was distributed yesterday; from the Annual Report on Form 10-K for the year ended June 30, 2025; and from the Form 10-Qs and other SEC filings that are filed subsequent to the Form 10-K.

Forward-looking statements are effective only as of the date that they are made, and the Company assumes no obligation to update this information. Thank you for participating in our call. I hope that each of you has had an opportunity to review our earnings release that we distributed yesterday, which describes our fourth quarter and fiscal 2026 results. In the most recent quarter, loan originations increased while loan prepayments declined, resulting in modest loan growth of approximately $3 million, primarily in our portfolio of single-family loans.

2 million originated in the prior sequential quarter. 1 million in the March 2026 quarter. We have seen loan prepayment activity decline in the current interest rate environment as refinancing opportunities are less attractive. We continue to make adjustments to our underwriting requirements within certain loan segments to support disciplined, sustainable growth and origination volume.

Despite the volatility in the market, our loan pipeline has remained stable, suggesting our loan origination volume in the September 2026 quarter will remain at the upper end of the range of recent quarters, which has been between $29 and $46 million. We would also expect to see continued moderation in prepayment activity. Our credit quality remains strong. You will note that nonperforming assets were just $505,000, or four basis points of total assets, at June 30, 2026, a decrease from $978,000 at March 31, 2026.

Additionally, there were no loans in the early stages of delinquency at June 30, 2026, indicating no emerging credit issues. We continue to closely monitor commercial real estate loans, particularly loans secured by office buildings, but we believe, based on our borrower profiles and collateral characteristics, that these loans will continue to perform in accordance with their terms. 2% of loans held for investment. You should also note that we have just four CRE loans that total $818,000 maturing in fiscal 2027.

We recorded a $95,000 recovery of credit losses in the June 2026 quarter. The recovery recorded in the fourth quarter of fiscal 2026 was primarily attributable to a decrease in the expected life of the loan portfolio, resulting from loans repricing higher during the quarter, resulting in a larger incentive for the borrower to prepay. The allowance for credit losses to gross loans held for investment was 57 basis points at June 30, 2026, a slight decrease from 58 basis points at March 31, 2026.

21% for the quarter ended June 30, 2026, comprised of a seven-basis-point increase to the yield on interest-earning assets and a four-basis-point decrease in the cost of total interest-bearing liabilities. 36%. The net deferred loan cost amortization associated with loan payoffs in the June 2026 quarter compared to the average of the previous five quarters positively impacted the net interest margin by approximately three basis points, in contrast to a negative impact of seven basis points in the March 2026 quarter. New loan production is being originated at higher mortgage interest rates than the weighted average rate of the existing loan portfolio.

31% for loans held for investment as of June 30, 2026. In the September 2026 quarter, our adjustable-rate loans are repricing at interest rates that are higher than their current interest rates. 31%. I would note that the opportunity to reprice maturing wholesale funding downward is largely behind us in the current interest rate environment.

05%. Given the current interest rate environment, we expect to reprice these maturities at comparable cost of funds, perhaps somewhat higher. All of this suggests that any net interest margin expansion in the September 2026 quarter will likely be driven by higher loan yields. Our FTE count at June 30, 2026 was 158, compared to 163 one year ago.

We continue to look for operating efficiencies throughout the Company. 6 million in the March 2026 quarter. Our short-term strategy focuses on disciplined balance sheet growth by expanding our loan portfolio. We believe this approach is well suited to the current economic environment and the normalized yield curve.

During the June 2026 quarter, we were somewhat successful in the execution of this strategy with higher loan origination volume and a more moderate level of loan prepayments. As a result, the composition of our interest-earning assets and interest-bearing liabilities remained consistent with the prior quarter. We exceed well-capitalized capital ratios by a significant margin, providing flexibility 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 and effective capital management tool. 5 million, combined with approximately $874,000 of cash dividends paid to our shareholders. Total capital returned to shareholders represented approximately 110% of the June quarter's net income. We encourage everyone to review our June 30 investor presentation that has been 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. Lacey, Operator Again, I would like to remind everyone, if you would like to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Matthew Clark with Piper Sandler.

You may go ahead. Nick Branton, Analyst at Piper Sandler Hey, good morning everyone. This is Nick Branton on for Matthew. Thanks for taking my questions today.

Donovan Ternus, President & CEO Of course, thanks. Nick Branton, Analyst at Piper Sandler Maybe just starting on deposit costs, can you kind of just provide some more color on the trend you see and kind of where you see the total cost of deposits heading over the next couple quarters? Donovan Ternus, President & CEO Well, I think the trend is pretty much what you've heard from peers. It is a very competitive deposit landscape, and as a result of that competitive pressure, there are many institutions that are offering specials with respect to their money market accounts and with respect to their certificates of deposit.

And that, coupled with a pause by the Fed with respect to lowering of interest rates, suggests that deposit costs have probably reached their low this cycle unless the Fed were to reverse course. And as a result of that, we would expect deposit costs, and perhaps other wholesale funding, to stabilize or slightly increase from these levels. And as that works through our balance sheet and our liabilities, we would expect our deposit costs and perhaps our wholesale funding to go up a bit, although to forecast that specifically is pretty difficult. 7 million of wholesale funding that is coming up for repricing in the September quarter.

05%. And we don't see an ability to meaningfully reprice that wholesale funding at lower rates. In fact, it will probably reprice up by a bit, given the current economic environment. Nick Branton, Analyst at Piper Sandler Got it.

That's helpful. And then maybe switching to loan yields. Saw a nice uptick there this quarter. Can you kind of similarly walk through the main drivers there for the quarter and kind of let us know where you see the yields trending over the next couple of quarters as well?

Donovan Ternus, President & CEO Sure. So, as we described in the prepared remarks, we have approximately $133 million of loans repricing in the September 2026 quarter. Many of those loans are repricing for the first time, which suggests that they were probably originated in the September 2021 quarter, since many of our loans are 5:1 hybrids. And because they were originated perhaps five years ago, they were originated at much lower yields.

10% in the September quarter. Additionally, any new loan production coming on is coming on at higher interest rates than the existing portfolio weighted average interest rate. So we would expect loan yields to continue to rise in the September quarter, essentially becoming a tailwind to net interest margin. Now, the one caveat with respect to that—and that can swing loan yields dramatically from one period to the next—is what the payoff activity looks like and what that may mean for the accelerated net deferred loan cost amortization.

And that can best be illustrated, I suppose, by comparing the March 2026 quarter, when we had approximately $650,000 of accelerated net deferred loan cost amortization, in contrast to approximately $400,000 in the June quarter. And that difference was probably about a 10-basis-point swing in our loan yields just by virtue of that activity. So we think it is a favorable tailwind with respect to loan yields. And we think overall, as a result of that, we still have some wind at our back with respect to what we believe net interest margin may do in the coming quarter, but probably at a slower pace than what we've realized over the past few quarters.

Nick Branton, Analyst at Piper Sandler Great. That's everything from me. Thank you. Lacey, Operator Mr.

Ternus, there are no more questions at this point. Donovan Ternus, President & CEO Very good. I appreciate everybody's participation in the call today, and we look forward to speaking with you next quarter. Thank you.

Lacey, Operator Ladies and gentlemen, this concludes today's conference call. You may disconnect. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription.

For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.