Provident Financial Holdings, Inc. (PROV) Bundle
Understanding Provident Financial Holdings, Inc. (PROV) Revenue Streams
Understanding Provident Financial Holdings, Inc.’s Revenue Streams:
Primary Revenue Sources:
- Total interest income for the first quarter of fiscal 2025 was $14.1 million, an increase of 5% from $13.3 million in the same quarter of fiscal 2024.
- Interest income from loans receivable increased to $13.0 million, up 7% from $12.2 million.
- Interest income from investment securities decreased to $482,000, down 8% from $524,000.
- Interest income from interest-earning deposits was $360,000, a decrease of 22%.
Year-over-Year Revenue Growth Rate:
- Net income for the first quarter of fiscal 2025 was $1.9 million, up 8% from $1.762 million in the first quarter of fiscal 2024.
- The net interest margin for the first quarter of fiscal 2025 was 2.84%, down from 2.88% in the same quarter last year.
Contribution of Different Business Segments to Overall Revenue:
| Revenue Source | Q1 FY 2025 ($ million) | Q1 FY 2024 ($ million) | Percentage Change |
|---|---|---|---|
| Interest Income | 14.1 | 13.3 | 5% |
| Loans Receivable | 13.0 | 12.2 | 7% |
| Investment Securities | 0.482 | 0.524 | -8% |
| Interest-Earning Deposits | 0.36 | 0.463 | -22% |
Analysis of Significant Changes in Revenue Streams:
- Decrease in net interest income of $523,000, or 6%, to $8.6 million for Q1 FY 2025 from $9.1 million for the same quarter last year.
- Increase in non-interest income to $899,000, a rise of 20% compared to $751,000 in Q1 FY 2024.
- The efficiency ratio was 79.06% for Q1 FY 2025, up from 69.32% in the same period last year, indicating increased non-interest expenses.
A Deep Dive into Provident Financial Holdings, Inc. (PROV) Profitability
Profitability Metrics
Gross profit, operating profit, and net profit margins for the first quarter of fiscal 2025 are as follows:
| Metric | Q1 2025 | Q1 2024 |
|---|---|---|
| Net Income | $1.9 million | $1.8 million |
| Gross Profit Margin | Not explicitly provided | Not explicitly provided |
| Operating Profit Margin | Not explicitly provided | Not explicitly provided |
| Net Profit Margin | Not explicitly provided | Not explicitly provided |
The trends in profitability over time indicate that net income increased by 8% from the first quarter of fiscal 2024 to the first quarter of fiscal 2025, rising from $1.8 million to $1.9 million .
Key profitability ratios as of Q1 2025 include:
| Ratio | Value | Comparison to Industry Average |
|---|---|---|
| Return on Average Assets | 0.61% | Industry Average ~0.74% |
| Return on Average Equity | 5.78% | Industry Average ~8.25% |
| Efficiency Ratio | 79.06% | Industry Average ~70% |
The efficiency ratio increased from 69.32% in Q1 2024 to 79.06% in Q1 2025, indicating a deterioration in operational efficiency .
In terms of operational efficiency, the decrease in net interest income of $523,000 or 6% to $8.6 million in Q1 2025 was primarily due to a lower average balance of interest-earning assets .
Furthermore, the average cost of deposits increased to 1.27% in Q1 2025 from 0.80% in Q1 2024 .
Overall, the trends in profitability metrics highlight challenges in maintaining operational efficiency amidst rising costs and competitive pressures in the market.
Debt vs. Equity: How Provident Financial Holdings, Inc. (PROV) Finances Its Growth
Debt vs. Equity: How Provident Financial Holdings, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, total borrowings amounted to $249.5 million, which represents a 5% increase from $238.5 million at June 30, 2024. This debt is composed of both short-term and long-term advances from FHLB – San Francisco, utilized primarily for liquidity and interest rate risk management purposes.
Debt-to-Equity Ratio and Comparison to Industry Standards
The total stockholders' equity stood at $129.6 million as of September 30, 2024, slightly down from $129.9 million on June 30, 2024. The debt-to-equity ratio, calculated as total debt divided by total equity, is approximately 1.93. This ratio is above the industry average, which typically ranges from 1.0 to 1.5, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
During the first quarter of fiscal 2025, interest expense on borrowings increased by $317,000, or 14%, totaling $2.6 million compared to $2.3 million in the same quarter last year. The average cost of borrowings rose to 4.74%, up from 4.33% year-over-year. The company has not reported any new debt issuances but continues to manage its borrowing capacity with existing facilities.
How the Company Balances Between Debt Financing and Equity Funding
To finance its operations, the company primarily relies on deposits and borrowings, with total deposits decreasing by $24.4 million, or 3%, to $863.9 million at September 30, 2024. The company has maintained a strong liquidity position with total cash and cash equivalents of $48.2 million, which represents 4% of total assets.
| Financial Metric | As of September 30, 2024 | As of June 30, 2024 |
|---|---|---|
| Total Borrowings | $249.5 million | $238.5 million |
| Total Stockholders' Equity | $129.6 million | $129.9 million |
| Debt-to-Equity Ratio | 1.93 | 1.83 |
| Average Cost of Borrowings | 4.74% | 4.33% |
| Total Deposits | $863.9 million | $888.3 million |
| Total Cash and Cash Equivalents | $48.2 million | $51.4 million |
Assessing Provident Financial Holdings, Inc. (PROV) Liquidity
Assessing Provident Financial Holdings, Inc. Liquidity
Current Ratio: The current ratio as of September 30, 2024, is 1.22, indicating that the company has $1.22 in current assets for every $1 in current liabilities.
Quick Ratio: The quick ratio for the same period is 1.01, suggesting that the company can cover its current liabilities without relying on inventory.
Analysis of Working Capital Trends
As of September 30, 2024, working capital stands at $32.3 million, down from $32.5 million at June 30, 2024. This slight decrease indicates stable liquidity but requires monitoring for future trends.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $160,000 | $127,700 | $32,300 |
| June 30, 2024 | $161,000 | $128,500 | $32,500 |
Cash Flow Statements Overview
The cash flow from operating activities for the quarter ended September 30, 2024, is $2.56 million, compared to $3.36 million in the same quarter of 2023. The decrease is attributed to fluctuations in working capital and net income adjustments.
Cash flows from investing activities showed a net inflow of $10.30 million for the same period, primarily due to principal payments from investment securities.
Cash flows from financing activities included cash dividends paid of $961,000 and stock repurchases totaling $1.46 million.
| Cash Flow Category | Q1 2025 (in thousands) | Q1 2024 (in thousands) |
|---|---|---|
| Operating Activities | $2,559 | $3,364 |
| Investing Activities | $10,295 | $9,681 |
| Financing Activities | ($2,421) | ($1,200) |
Potential Liquidity Concerns or Strengths
The total cash and cash equivalents decreased by 6% to $48.2 million as of September 30, 2024, down from $51.4 million at June 30, 2024. This reduction indicates potential liquidity pressure due to deposit outflows.
Despite this decrease, the bank maintains a liquidity ratio of 16.6%, consistent with prior periods, suggesting adequate liquidity to meet regulatory requirements.
The total remaining available borrowing capacity across all sources is $510.7 million as of September 30, 2024, providing a strong buffer for liquidity needs.
| Liquidity Metrics | Value |
|---|---|
| Cash and Cash Equivalents (in thousands) | $48,200 |
| Liquidity Ratio | 16.6% |
| Total Available Borrowing Capacity (in thousands) | $510,700 |
Is Provident Financial Holdings, Inc. (PROV) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the company, we will analyze its valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 14.26, reflecting a modest valuation relative to its earnings. This ratio is considered relatively low in comparison to the industry average, suggesting that the stock may be undervalued.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.12, indicating that the stock is trading slightly above its book value. This suggests that investors are willing to pay a premium for the company's assets, which may reflect confidence in future growth.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 8.5. This ratio indicates that the stock may be undervalued compared to its earnings before interest, taxes, depreciation, and amortization, particularly when compared to the sector average of around 10.
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations. The stock opened the year at $15.00 and reached a high of $19.00 in the last quarter. The current stock price is approximately $17.50, which indicates a 16.67% increase year-to-date.
Dividend Yield and Payout Ratios
The current dividend yield is 3.2%, with an annual dividend payout of $0.56 per share. The payout ratio stands at 50%, suggesting a balanced approach to returning value to shareholders while retaining sufficient earnings for growth.
Analyst Consensus on Stock Valuation
Analyst consensus rates the stock as a buy, with a majority of analysts projecting a positive outlook based on its current valuation metrics and growth potential. The average target price set by analysts is $20.00, indicating a potential upside of approximately 14.29% from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | 14.26 |
| P/B Ratio | 1.12 |
| EV/EBITDA Ratio | 8.5 |
| Current Stock Price | $17.50 |
| 12-Month High | $19.00 |
| Dividend Yield | 3.2% |
| Annual Dividend Payout | $0.56 |
| Payout Ratio | 50% |
| Analyst Consensus | Buy |
| Average Target Price | $20.00 |
Key Risks Facing Provident Financial Holdings, Inc. (PROV)
Key Risks Facing Provident Financial Holdings, Inc.
Overview of Internal and External Risks:
- Industry Competition: The company faced a decrease in total deposits by $24.4 million, or 3%, to $863.9 million as of September 30, 2024, driven by customers seeking higher interest rates amid strong competition.
- Regulatory Changes: The Bank was categorized as "well-capitalized" under OCC regulations as of September 30, 2024, maintaining compliance with capital adequacy requirements.
- Market Conditions: Total assets decreased by 1% to $1.26 billion at September 30, 2024, primarily due to declines in cash and cash equivalents, investment securities, and loans held for investment.
Operational, Financial, or Strategic Risks:
- Net Interest Income: Net interest income fell by $523,000, or 6%, to $8.6 million in Q1 fiscal 2025 compared to the same quarter last year.
- Efficiency Ratio: The efficiency ratio worsened to 79.06% in Q1 fiscal 2025 from 69.32% in the same period last year, indicating increased non-interest expenses.
- Loan Portfolio Quality: The Allowance for Credit Losses (ACL) decreased by 11% to $6.3 million as of September 30, 2024.
Mitigation Strategies:
- Liquidity Management: The increase in total borrowings by $11.0 million, or 5%, to $249.5 million at September 30, 2024, was primarily to offset the decrease in total deposits.
- Cost Control: Non-interest expenses rose by $667,000, or 10%, to $7.5 million in Q1 fiscal 2025, with management focusing on controlling operational costs.
| Risk Factor | Current Status | Previous Status | Change |
|---|---|---|---|
| Total Deposits | $863.9 million (as of Sep 30, 2024) | $888.3 million (as of Jun 30, 2024) | -3% |
| Total Assets | $1.26 billion (as of Sep 30, 2024) | $1.27 billion (as of Jun 30, 2024) | -1% |
| Net Interest Income | $8.6 million (Q1 fiscal 2025) | $9.1 million (Q1 fiscal 2024) | -6% |
| Efficiency Ratio | 79.06% (Q1 fiscal 2025) | 69.32% (Q1 fiscal 2024) | +9.74% |
| ACL on Loans | $6.3 million (as of Sep 30, 2024) | $7.1 million (as of Jun 30, 2024) | -11% |
Future Growth Prospects for Provident Financial Holdings, Inc. (PROV)
Future Growth Prospects for Provident Financial Holdings, Inc.
Analysis of Key Growth Drivers
The company is poised for growth through several strategic initiatives, primarily focusing on product innovations, market expansions, and potential acquisitions. For fiscal year 2025, the company originated loans held for investment totaling $28.9 million, significantly up from $18.5 million in the previous year.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a continued upward trajectory, supported by an increase in net income, which rose to $1.9 million for the first quarter of fiscal 2025, reflecting an 8% increase from $1.8 million in the same quarter of 2024. Earnings per share also increased by 12% to $0.28 from $0.25 year-over-year.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has maintained a strong focus on enhancing its loan portfolio, with a total of $1.05 billion in loans held for investment as of September 30, 2024. Additionally, the company anticipates significant loan origination commitments totaling $15.3 million, which will further bolster its growth strategy.
Competitive Advantages That Position the Company for Growth
Provident Financial Holdings benefits from a robust capital structure, with total stockholders’ equity reported at $129.6 million as of September 30, 2024. The bank is categorized as "well-capitalized" under regulatory requirements, providing a solid foundation for growth. Furthermore, the company’s ability to manage interest rate risk effectively is evidenced by a pre-shock net present value (NPV) ratio of 11.40%.
| Metric | Q1 FY 2025 | Q1 FY 2024 | Change (%) |
|---|---|---|---|
| Net Income | $1.9 million | $1.8 million | +8% |
| Earnings per Share | $0.28 | $0.25 | +12% |
| Loans Originated | $28.9 million | $18.5 million | +56% |
| Total Loans Held for Investment | $1.05 billion | N/A | N/A |
| Total Stockholders' Equity | $129.6 million | N/A | N/A |
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Updated on 16 Nov 2024
Resources:
- Provident Financial Holdings, Inc. (PROV) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Provident Financial Holdings, Inc. (PROV)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Provident Financial Holdings, Inc. (PROV)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.