PROV's Q1 Net Income Dips Amidst Rising Expenses, Asset Contraction

TL;DR

**PROV's shrinking balance sheet and declining net income make it a cautious hold, as rising expenses eat into an otherwise solid net interest income gain.**

AI Summary

Provident Financial Holdings Inc. (PROV) reported a net income of $1.681 million for the quarter ended September 30, 2025, a decrease from $1.900 million in the same quarter of 2024. Basic earnings per share also declined to $0.26 from $0.28 year-over-year. Total interest income slightly increased to $14.146 million from $14.075 million, primarily driven by a rise in loans receivable interest to $13.131 million from $13.023 million. However, total interest expense decreased to $5.216 million from $5.459 million, mainly due to lower borrowings interest expense, resulting in an improved net interest income of $8.930 million, up from $8.616 million. The company recorded a recovery of credit losses of $626,000, compared to $697,000 in the prior year. Non-interest income saw a decline to $813,000 from $899,000, while non-interest expenses increased to $7.634 million from $7.523 million, largely due to higher salaries and employee benefits. Total assets decreased to $1.230 billion at September 30, 2025, from $1.245 billion at June 30, 2025, with a notable reduction in total deposits to $874.839 million from $888.772 million.

Why It Matters

For investors, the slight dip in net income and EPS, despite improved net interest income, signals potential challenges in cost control and non-interest revenue generation for Provident Financial Holdings. The decrease in total assets and deposits could indicate a shrinking balance sheet, potentially impacting future lending capacity and profitability in a competitive banking landscape. Employees might face pressure if cost-cutting measures become more aggressive, while customers could see changes in deposit rates or loan offerings as the bank adjusts its strategy. The broader market will watch if this trend reflects wider pressures on regional banks, especially concerning deposit retention and managing unrealized losses on investment securities.

Risk Assessment

Risk Level: medium — The company holds $9.4 million in unrealized losses on investment securities held to maturity as of September 30, 2025, all in a loss position for 12 months or more, which could impact future capital if realized. Additionally, total assets decreased by $14.806 million from June 30, 2025, to September 30, 2025, and total deposits declined by $13.933 million, indicating potential liquidity and growth challenges.

Analyst Insight

Investors should closely monitor PROV's future filings for trends in deposit retention and asset growth, as the current quarter shows contraction. Evaluate the impact of rising non-interest expenses, particularly salaries and employee benefits, on profitability and management's strategy to mitigate these costs. Consider the implications of the persistent unrealized losses on investment securities for long-term capital stability.

Financial Highlights

revenue

$14.959M

total Assets

$1.230B

net Income

$1.681M

eps

$0.26

revenue Growth

+1.7%

Revenue Breakdown

Key Numbers

• $1.681M — Net Income (Decreased from $1.900M in Q3 2024)
• $0.26 — Basic EPS (Decreased from $0.28 in Q3 2024)
• $14.146M — Total Interest Income (Increased from $14.075M in Q3 2024)
• $5.216M — Total Interest Expense (Decreased from $5.459M in Q3 2024)
• $8.930M — Net Interest Income (Increased from $8.616M in Q3 2024)
• $7.634M — Total Non-Interest Expense (Increased from $7.523M in Q3 2024)
• $1.230B — Total Assets (Decreased from $1.245B at June 30, 2025)
• $874.839M — Total Deposits (Decreased from $888.772M at June 30, 2025)
• $9.4M — Unrealized Losses on HTM Securities (All in loss position for 12 months or more as of September 30, 2025)
• 6,474,230 — Shares Outstanding (As of October 31, 2025)

Key Players & Entities

• PROVIDENT FINANCIAL HOLDINGS INC (company) — Registrant
• Provident Savings Bank, F.S.B. (company) — Wholly-owned subsidiary of Provident Financial Holdings, Inc.
• FASB (regulator) — Financial Accounting Standards Board
• SEC (regulator) — United States Securities and Exchange Commission
• $1.681 million (dollar_amount) — Net income for Q3 2025
• $1.900 million (dollar_amount) — Net income for Q3 2024
• $9.4 million (dollar_amount) — Unrealized losses on investment securities held to maturity as of September 30, 2025
• $10.4 million (dollar_amount) — Unrealized losses on investment securities held to maturity as of June 30, 2025
• $1.230 billion (dollar_amount) — Total assets as of September 30, 2025
• $1.245 billion (dollar_amount) — Total assets as of June 30, 2025

FAQ

Risk Factors

• Interest Rate Sensitivity [medium — financial]: The company's profitability is sensitive to changes in interest rates. Fluctuations in market interest rates can impact both interest income and interest expense, affecting net interest margin. For the quarter ended September 30, 2025, total interest income increased slightly to $14.146 million, while total interest expense decreased to $5.216 million, leading to an improved net interest income of $8.930 million.
• Credit Risk and Loan Portfolio Quality [medium — financial]: The company faces credit risk associated with its loan portfolio. While a recovery of credit losses of $626,000 was recorded for the quarter ended September 30, 2025, compared to $697,000 in the prior year, continued economic downturns or specific borrower defaults could negatively impact asset quality and lead to increased loan loss provisions.
• Unrealized Losses on Securities [medium — market]: As of September 30, 2025, the company reported $9.4 million in unrealized losses on Held-to-Maturity (HTM) securities, all of which have been in a loss position for 12 months or more. While these do not directly impact net income under current accounting rules, significant or prolonged unrealized losses could signal underlying market risks and potentially impact future liquidity or capital if sales become necessary.
• Increased Operating Expenses [low — operational]: Non-interest expenses increased to $7.634 million for the quarter ended September 30, 2025, from $7.523 million in the prior year, primarily driven by higher salaries and employee benefits. Sustained increases in operating costs without corresponding revenue growth could pressure profitability.
• Regulatory Compliance [medium — regulatory]: As a financial institution, PROV is subject to extensive regulation. Changes in banking regulations, capital requirements, or compliance standards could necessitate significant investments in systems and processes, potentially increasing operational costs and impacting business strategies.
• Deposit Competition and Stability [medium — market]: Total deposits decreased to $874.839 million from $888.772 million at June 30, 2025. Competition for deposits and potential shifts in customer preferences or economic conditions could affect the company's funding sources and cost of funds.

Industry Context

Provident Financial Holdings Inc. operates within the highly competitive banking sector, characterized by evolving interest rate environments and increasing digital adoption. Banks are facing pressure to manage net interest margins while investing in technology and customer service. Competition for deposits remains intense, and regulatory scrutiny continues to shape operational strategies and capital requirements.

Regulatory Implications

As a regulated financial institution, PROV must adhere to stringent capital adequacy ratios and compliance standards set by bodies like the Federal Reserve and FDIC. Changes in interest rate policies by the Federal Reserve directly impact lending and borrowing costs. The company must also navigate evolving cybersecurity and data privacy regulations.

What Investors Should Do

1. Monitor Net Interest Margin trends
2. Analyze Expense Management
3. Evaluate Asset Quality and Loan Loss Provisions
4. Assess Impact of Unrealized Securities Losses

Glossary

Net Interest Income

The difference between the interest income generated by a financial institution and the interest paid out to its lenders and depositors. (A core measure of profitability for banks, indicating how effectively they are managing their interest-earning assets and interest-bearing liabilities. PROV's Net Interest Income increased to $8.930M from $8.616M.)

Basic Earnings Per Share (EPS)

The net income or profit divided by the total number of outstanding common shares of a company. (Indicates the profitability of the company on a per-share basis. PROV's Basic EPS decreased to $0.26 from $0.28 year-over-year.)

Non-Interest Income

Revenue generated by a financial institution from sources other than net interest income, such as fees, service charges, and trading gains. (Represents diversification of revenue streams. PROV's Non-Interest Income declined to $0.813M from $0.899M.)

Non-Interest Expense

Operating expenses of a financial institution that are not directly related to interest payments, such as salaries, rent, and technology costs. (A key component of operating costs that impacts overall profitability. PROV's Non-Interest Expense increased to $7.634M from $7.523M.)

Held-to-Maturity (HTM) Securities

Investments in debt securities that a company has the intent and ability to hold until their maturity date. (These securities are accounted for at amortized cost, but unrealized losses can still be significant, as seen with PROV's $9.4M in unrealized losses on HTM securities.)

Credit Losses

Losses incurred by a financial institution due to borrowers' failure to repay loans. (Indicates the quality of the loan portfolio. PROV recorded a recovery of credit losses of $626,000 for the quarter.)

Year-Over-Year Comparison

Compared to the prior year's quarter, Provident Financial Holdings Inc. saw a slight increase in total interest income ($14.146M vs $14.075M) and a decrease in total interest expense ($5.216M vs $5.459M), resulting in improved net interest income ($8.930M vs $8.616M). However, net income declined to $1.681M from $1.900M, and basic EPS fell to $0.26 from $0.28. Non-interest income decreased, while non-interest expenses rose, primarily due to higher personnel costs. Total assets and deposits also saw a slight reduction quarter-over-quarter.

Key Financial Figures

• $0.01 — ich registered Common stock, par value $0.01 per share PROV The NASDAQ Stock Mar

Filing Documents

• prov-20250930x10q.htm (10-Q) — 5545KB
• prov-20250930xex31d1.htm (EX-31.1) — 12KB
• prov-20250930xex31d2.htm (EX-31.2) — 12KB
• prov-20250930xex32d1.htm (EX-32.1) — 6KB
• prov-20250930xex32d2.htm (EX-32.2) — 6KB
• prov-20250930x10q001.jpg (GRAPHIC) — 35KB
• prov-20250930x10q002.jpg (GRAPHIC) — 34KB
• 0001010470-25-000005.txt ( ) — 24189KB
• prov-20250930.xsd (EX-101.SCH) — 79KB
• prov-20250930_cal.xml (EX-101.CAL) — 100KB
• prov-20250930_def.xml (EX-101.DEF) — 325KB
• prov-20250930_lab.xml (EX-101.LAB) — 570KB
• prov-20250930_pre.xml (EX-101.PRE) — 520KB
• prov-20250930x10q_htm.xml (XML) — 7508KB

Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements of

Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements of Provident Financial Holdings, Inc. filed as a part of the report are as follows: Condensed Consolidated Statements of Financial Condition as of September 30, 2025 and June 30, 2025 1 Condensed Consolidated Statements of Operations for the Quarters ended September 30, 2025 and 2024 2 Condensed Consolidated Statements of Comprehensive Income for the Quarters ended September 30, 2025 and 2024 3 Condensed Consolidated Statements of Stockholders' Equity for the Quarters ended September 30, 2025 and 2024 4 Condensed Consolidated Statements of Cash Flows for the Three Months ended September 30, 2025 and 2024 5 Notes to Unaudited Interim Condensed Consolidated Financial Statements 6 ITEM 2 -

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations: General 36 Safe-Harbor Statement 37 Critical Accounting Estimates 38 Executive Summary and Operating Strategy 39 Commitments and Derivative Financial Instruments 40 Comparison of Financial Condition at September 30, 2025 and June 30, 2025 40 Comparison of Operating Results for the Quarters ended September 30, 2025 and 2024 42 Asset Quality 49 Loan Volume Activities 51 Liquidity and Capital Resources 51 Supplemental Information 53 ITEM 3 -

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 53 ITEM 4 -

Controls and Procedures

Controls and Procedures 58 PART II - OTHER INFORMATION ITEM 1 -

Legal Proceedings

Legal Proceedings 58 ITEM 1A -

Risk Factors

Risk Factors 59 ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds 59 ITEM 3 - Defaults Upon Senior Securities 59 ITEM 4 - Mine Safety Disclosures 59 ITEM 5 - Other Information 59 ITEM 6 - Exhibits 60

SIGNATURES

SIGNATURES 61 Table of Contents PROVIDENT FINANCIAL HOLDINGS, INC. Condensed Consolidated Statements of Financial Condition (Unaudited) In Thousands, Except Share and Per Share Information September 30, June 30, 2025 2025 Assets Cash and cash equivalents $ 49,407 $ 53,090 Investment securities - held to maturity, at cost with no allowance for credit losses 103,877 109,399 Investment securities - available for sale, at fair value 1,544 1,607 Loans held for investment, net of allowance for credit losses of $ 5.8 million and $ 6.4 million, respectively; includes $ 1.0 million and $ 1.0 million of loans held at fair value, respectively; $ 732.9 million and $ 734.4 million pledged to Federal Home Loan Bank ("FHLB") - San Francisco, respectively; $ 221.4 million and $ 227.0 million pledged to Federal Reserve Bank ("FRB") - San Francisco, respectively 1,041,776 1,045,745 Accrued interest receivable 4,180 4,215 FHLB - San Francisco stock and other equity investments, includes $ 702 and $ 730 of other equity investments at fair value, respectively 10,270 10,298 Premises and equipment, net 8,992 9,324 Prepaid expenses and other assets 10,761 11,935 Total assets $ 1,230,807 $ 1,245,613 Liabilities and Stockholders' Equity Liabilities: Noninterest-bearing deposits $ 79,007 $ 83,566 Interest-bearing deposits 795,832 805,206 Total deposits 874,839 888,772 Borrowings 213,066 213,073 Accounts payable, accrued interest and other liabilities 14,532 15,223 Total liabilities 1,102,437 1,117,068 Commitments and Contingencies (Notes 6 and 9) Stockholders' equity: Preferred stock, $ 0.01 par value ( 2,000,000 shares authorized; none issued and outstanding) — — Common stock, $ 0.01 par value, ( 40,000,000 and 40,000,000 shares authorized, 18,229,615 and 18,229,615 shares issued, and 6,511,011 and 6,577,718 shares outstanding, respectively) 183 183 Additional paid-in capital

Description of Securities

Description of Securities Value Losses Value Losses Value Losses Held to maturity U.S. government sponsored enterprise MBS $ — $ — $ 85,978 $ 9,284 $ 85,978 $ 9,284 U.S. government sponsored enterprise CMO — — 3,405 78 3,405 78 U.S. SBA securities — — 255 3 255 3 Total investment securities - held to maturity — — 89,638 9,365 89,638 9,365 Available for sale U.S government agency MBS 37 — 13 — 50 — Private issue CMO — — 16 — 16 — Total investment securities - available for sale 37 — 29 — 66 — Total investment securities $ 37 $ — 89,667 $ 9,365 $ 89,704 $ 9,365 As of June 30, 2025 Unrealized Holding Losses Unrealized Holding Losses Unrealized Holding Losses (In Thousands) Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized

Description of Securities

Description of Securities Value Losses Value Losses Value Losses Held to maturity U.S. government sponsored enterprise MBS $ — $ — $ 90,022 $ 10,305 $ 90,022 $ 10,305 U.S. government sponsored enterprise CMO — — 3,435 108 3,435 108 U.S. SBA securities 324 1 — — 324 1 Total investment securities - held to maturity 324 1 93,457 10,413 93,781 10,414 Available for sale U.S government agency MBS 37 — 13 — 50 — Private issue CMO — — 17 — 17 — Total investment securities - available for sale 37 — 30 — 67 — Total investment securities $ 361 $ 1 $ 93,487 $ 10,413 $ 93,848 $ 10,414 On a quarterly basis, the Corporation evaluates the allowance for credit losses for its investment securities held to maturity and the credit losses for its investment securities held for sale based on Accounting Standards Codification ("ASC") 326, "Financial Instruments – Credit Losses." At September 30, 2025, all of the $ 9.4 million of unrealized holding losses were in a loss position for 12 months or more; while at June 30, 2025, all $ 10.4 million of unrealized holding losses were in a loss position for 12 months or more, except $ 1,000 of unrealized holding losses that were in a loss position for less than 12 months. The unrealized losses on investment securities were attributable to changes in interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities, which are predominately U.S. government sponsored enterprise securities that are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. Therefore, the Corporation has determined that the unrealized 9 Table of Contents losses are due to the fluctuating nature of interest rates, and not related to any potential credit risks within the investment portfolio. The Bank does not currently intend to

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