Provident Financial NASDAQ: PROV reported modest loan growth in its fiscal fourth quarter ended June 30, 2026, as higher loan originations and lower prepayments supported expansion in its single-family loan portfolio, President and CEO Donavon Ternes said during the company’s earnings call.
Loans held for investment originations totaled $46.4 million, up 5% from $44.2 million in the prior quarter. Meanwhile, loan principal payments and payoffs declined 16% sequentially to $43.5 million from $52.1 million. Ternes said refinancing opportunities have become less attractive in the current interest-rate environment, contributing to lower prepayment activity.
The company’s loan pipeline remained stable despite market volatility. Management expects September-quarter originations to remain near the upper end of the recent quarterly range of $29 million to $46 million, while prepayments are expected to continue moderating.
Credit Quality and Commercial Real Estate Exposure
Provident Financial said credit quality remained strong. Nonperforming assets were $505,000, or 4 basis points of total assets, as of June 30, down from $978,000 at March 31. The company had no loans in the early stages of delinquency at the end of June, which Ternes said indicated no emerging credit concerns.
The company continues to monitor its commercial real estate portfolio, particularly loans secured by office buildings. Its office-property exposure totaled $33.3 million, representing 3.2% of loans held for investment. Provident Financial also has four commercial real estate loans totaling $818,000 scheduled to mature in fiscal 2027.
Provident Financial recorded a $95,000 recovery of credit losses in the June quarter. Management attributed the recovery primarily to a shorter expected life for the loan portfolio as loans repriced higher during the period, increasing borrowers’ incentive to prepay. The allowance for credit losses was 57 basis points of gross loans held for investment at June 30, compared with 58 basis points at the end of the preceding quarter.
Margin Expands as Asset Yields Rise
Net interest margin rose 8 basis points sequentially to 3.21% in the June quarter. The improvement reflected a 7-basis-point increase in the yield on interest-earning assets and a 4-basis-point decline in the cost of total interest-bearing liabilities.
The cost of borrowings decreased 7 basis points to 4.04%, while the average cost of deposits increased 3 basis points to 1.36%. Net deferred loan cost amortization tied to loan payoffs had a positive effect of about 3 basis points on margin in the June quarter, compared with a negative 7-basis-point impact in the March quarter.
New lending is being originated at rates above those of the existing portfolio. Loans originated during the June quarter carried a weighted average rate of 6.03%, compared with a 5.31% weighted average rate for loans held for investment at June 30.
Management expects loan yields to continue rising in the September quarter. Approximately $133 million of loans are scheduled to reprice, with the company forecasting that their weighted average rate will rise 79 basis points to 7.10% from 6.31%.
“We would expect loan yields to continue to rise in the September quarter, essentially becoming a tailwind to net interest margin,” Ternes said in response to an analyst question.
He cautioned, however, that payoff activity and accelerated deferred loan-cost amortization can materially affect loan yields from quarter to quarter. Ternes cited approximately $650,000 of accelerated amortization in the March quarter, compared with about $400,000 in June, which he said accounted for roughly a 10-basis-point swing in loan yields.
Funding Costs and Capital Management
Management said the deposit market remains highly competitive, with financial institutions offering special rates on money market accounts and certificates of deposit. Ternes said deposit costs appear to have reached their low point for the current cycle unless the Federal Reserve resumes cutting interest rates.
Provident Financial expects deposit costs and potentially wholesale funding costs to stabilize or increase modestly. The company has approximately $81.7 million of Federal Home Loan Bank advances, brokered certificates of deposit and government certificates of deposit maturing in the September quarter at a weighted average rate of 4.05%. Management does not expect to refinance that funding at meaningfully lower rates and said costs could rise somewhat.
As a result, management said further net interest margin expansion in the September quarter would likely be driven primarily by higher loan yields, at a slower pace than in recent quarters.
Operating expenses were $7.7 million in the June quarter, compared with $7.6 million in the March quarter. Full-time-equivalent headcount stood at 158 at June 30, down from 163 a year earlier, as the company continued to seek operating efficiencies.
The company said it remains focused on disciplined balance-sheet growth through loan portfolio expansion and noted that its capital ratios exceed well-capitalized regulatory thresholds by a significant margin. During the June quarter, Provident Financial repurchased approximately 90,000 shares at a total cost of $1.5 billion and paid approximately $874,000 in cash dividends, according to management. The company said total capital returned to shareholders represented about 110% of quarterly net income.
About Provident Financial (NASDAQ:PROV)
Provident Financial Services, Inc NASDAQ: PROV is a bank holding company headquartered in Jersey City, New Jersey, that conducts its operations through its wholly owned subsidiary, Provident Bank. With origins dating back to 1839, the company has grown into a full-service financial institution offering a broad spectrum of products and services to individuals, small businesses and commercial clients.
The company's principal business activities include retail banking, commercial lending, mortgage finance and wealth management.
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