Provident Financial Q1 Profit Falls 28% on Credit Provision

Provident Financial Holdings Inc. (Nasdaq: PROV) reported a 28% sequential decline in fiscal first-quarter net income as a provision for credit losses offset stronger net interest income and a wider net interest margin. The Riverside, California-based community bank earned $1.6 million, or $0.25 per diluted share, for the quarter ended September 30, 2026, compared with $2.2 million, or $0.35 per share, in the preceding quarter.

The bank recorded a $777,000 provision for credit losses, reversing a $95,000 recovery in the prior quarter. Pre-provision, pre-tax income nevertheless increased about 4% to $3.0 million, reflecting improved spread income and lower operating costs.

Margin and net interest income increase

Net interest income rose approximately 5% sequentially to $9.8 million. Net interest margin expanded by 11 basis points to 3.32%, continuing its increase from 3.21% in the June quarter and 3.00% a year earlier.

Operating expenses declined about 2% from the preceding quarter to $7.6 million. Non-interest income fell approximately 37%, limiting the benefit from higher net interest income and lower expenses.

Return on average assets decreased to 0.52% from 0.73% in the prior quarter, while return on equity fell to 4.93% from 6.85%.

Loan balances edge higher as funding costs rise

Loans held for investment increased slightly during the quarter to approximately $1.04 billion. The portfolio’s weighted-average rate rose 12 basis points to 5.43%. Portfolio loan originations declined by less than 1% to $45 million, while principal payments decreased 6% to $41 million.

Gross loans held for investment totaled $1.033 billion at September 30. Single-family loans increased to $582.4 million from $549.5 million a year earlier, while multifamily loans declined to $381.6 million from $415.2 million. Commercial real estate loans totaled $69.1 million, compared with $71.0 million a year earlier.

The portfolio remained concentrated in California. About 20% of loans were in Riverside and San Bernardino counties, 41% were elsewhere in Southern California and 39% were in other parts of the state.

Total deposits declined 1% sequentially to $897.7 million, while their weighted-average cost increased four basis points to 1.47%. Time deposits accounted for 39% of deposits and totaled $351.8 million, including $158.0 million of brokered certificates of deposit. Uninsured deposits were approximately $188.6 million, of which $60.3 million were collateralized.

Borrowings increased 10% from the June quarter to $172.0 million, with their weighted-average rate rising two basis points to 4.02%. The bank reported remaining borrowing capacity of $239.1 million at the Federal Home Loan Bank of San Francisco, $175.1 million at the Federal Reserve Bank of San Francisco and $50.0 million through a correspondent bank.

Asset-quality measures remain low

Non-performing assets were approximately $500,000, or 0.04% of total assets, unchanged from the preceding quarter. The company reported no real estate owned, no net charge-offs and very low early-stage delinquencies.

The allowance for credit losses increased to $6.6 million from $5.9 million at June 30. The allowance represented 0.64% of loans held for investment, up from 0.57% three months earlier. Single-family loans accounted for 92% of the allowance allocation, while multifamily loans represented the remaining 8%.

At September 30, the bank had four non-performing mortgage loans totaling $500,000, down from seven loans totaling $1.9 million a year earlier.

Capital returns continue

Provident repurchased approximately 86,000 common shares during the quarter, reducing shares outstanding to 6.20 million. The bank subsidiary also paid a $13.0 million cash dividend to Provident Financial Holdings on September 30.

The bank’s Tier 1 leverage ratio was 9.25% at quarter-end. Its common equity Tier 1 and Tier 1 risk-based capital ratios were both 17.36%, while the total risk-based capital ratio was 18.40%.

The company identified changes in interest rates, deposit fluctuations, funding costs, local economic conditions and loan-credit performance as key uncertainties. Other disclosed risks included competitive pricing, regulatory changes, cybersecurity and third-party service disruptions, geopolitical developments, tariffs and broader fiscal-policy uncertainty.