Contradictions in Loan Strategy: Insights from the 2025 Q4 Earnings Call

Loan Origination and Portfolio Trends:
- Provident Financial Holdings originated $29.4 million of loans held for investment, a 5% increase from the prior sequential quarter, with loan principal payments and payoffs increasing by 83% to $42 million.
- The increase in loan origination was driven by a stabilization in consumer demand for single-family adjustable rate mortgage products, while the higher payoffs were attributed to cautious real estate investor behavior due to higher mortgage rates and market uncertainties.

Net Interest Margin and Funding Costs:
- The company's net interest margin decreased by 8 basis points to 2.94%, primarily due to a 6 basis point decline in the average yield on total interest-earning assets.
- This was partly offset by higher net deferred loan costs and an increase in the cost of deposits to 1.33%, up 7 basis points.

Capital Management and Dividend Distribution:
- Provident Financial Holdings distributed approximately $3.8 million of cash dividends to shareholders and repurchased approximately $4.3 million worth of common stock in fiscal 2025.
- This represents a distribution of 129% of fiscal 2025 net income, reflecting a strong capital management strategy and commitment to maintaining the cash dividend.

Operating Expenses and Efficiency Ratio:
- The company's operating expenses in the June 2025 quarter decreased to $7.6 million from $7.9 million in the March 2025 quarter, excluding one-time expenses.
- For fiscal 2026, operating expenses are expected to range between $7.6 million to $7.8 million per quarter, indicating a more normalized run rate while allowing for future growth of the loan portfolio.

Credit Quality and Loan Portfolio Composition:
- Nonperforming assets remained unchanged at $1.4 million, and there were no loans in the early stages of delinquency at June 30, 2025.
- The loan portfolio composition improved with a higher percentage of loans receivable and interest-earning deposits, while the percentage of investment securities decreased.