Provident Financial Holdings, Inc. (PROV): 5 FORCES Analysis [Nov-2025 Updated]

You're looking to size up Provident Financial Holdings, Inc. (PROV) right now, late in 2025, and honestly, the competitive landscape is tight; with fiscal year 2025 revenue clocking in at just $39.00 million, you can see the pressure from larger rivals and the constant threat from FinTechs nipping at their deposit base. We've mapped out the five forces-from the power depositors wield in this high-rate environment to the high capital barriers that keep new chartered banks out-to give you a defintely precise, analyst-grade view of where the real risk and opportunity lie for this community bank. Dive in below to see the full breakdown.

Provident Financial Holdings, Inc. (PROV) - Porter's Five Forces: Bargaining power of suppliers

The power wielded by Provident Financial Holdings, Inc. (PROV)'s suppliers is a critical element in managing profitability, especially the Net Interest Margin (NIM).

Depositors have high power in a high-rate environment, pressuring the Net Interest Margin. For Provident Financial Holdings, Inc. (PROV), the Net Interest Margin rose to 3.02% in the third quarter of fiscal year 2025, an increase of 28 bps year-over-year, showing that asset yields outpaced funding costs in that period, though deposit costs remain a key lever. Total deposits for Provident Financial Holdings, Inc. (PROV) stood at $901.3 million as of March 31, 2025.

Wholesale funding sources, such as the Federal Home Loan Bank (FHLB), hold power due to the bank's need for liquidity. Provident Financial Holdings, Inc. (PROV)'s borrowings were down to $215.6 million in the third quarter of fiscal year 2025. The average cost of borrowing was 4.52% in the second quarter of fiscal year 2025. There is an expectation for repricing approximately $100.8 million of wholesale funding maturing in June and $46.3 million maturing in September at lower rates, which mitigates some of this supplier power. Some FHLBs have extended advance discount specials through December 31, 2025, offering a 5 bps discount on certain fixed-rate advances.

Core banking software providers have high power due to significant switching costs. The United States Core Banking Software Market size is projected to be worth around USD 7.62 billion by 2034, growing from USD 7125.61 million in 2025. Legacy systems are costly and complex to maintain, creating vendor lock-in, which translates directly into high supplier leverage for the incumbent provider.

Regulatory compliance services are specialized, giving those suppliers moderate leverage. While specific contract costs for Provident Financial Holdings, Inc. (PROV) are not public, the general industry challenge for regional banks to keep up with regulatory compliance due to smaller budgets suggests these specialized service providers maintain moderate pricing power.

Here is a snapshot of the funding structure elements relevant to supplier power:

The bargaining power dynamics are influenced by the current interest rate environment, as seen in the NIM expansion to 3.02% in Q3 FY2025.

• Depositor rate sensitivity is a constant pressure point.
• Wholesale funding repricing offers near-term cost relief.
• Software vendor lock-in is a structural, high-cost factor.
• Compliance service leverage is tied to specialization.

You should monitor the repricing of the remaining wholesale funding, which is projected to benefit the NIM further, albeit at a slower pace. Finance: review the Q4 2025 deposit beta against the Q3 2025 NIM of 3.02% by next Tuesday.

Provident Financial Holdings, Inc. (PROV) - Porter's Five Forces: Bargaining power of customers

The bargaining power of customers for Provident Financial Holdings, Inc. remains a significant factor, particularly in the commoditized segments of banking, though the company's regional footprint offers some insulation for relationship clients.

Customers face low switching costs for basic deposit and loan products. This is evident in the constant pressure on deposit pricing. For Provident Financial Holdings, Inc.'s banking subsidiary, the average cost of total deposits, which includes non-interest-bearing accounts, rose to 2.14% in the third quarter of 2025. Furthermore, the weighted average cost of interest-bearing liabilities for the company was 2.96% for the same period. These figures reflect the need to remain competitive to retain balances, especially as period-end deposits increased by $388 million or an annualized 8% in Q3 2025.

Commercial borrowers definitely have leverage to price-shop for loans across regional and national banks. Industry data from the third quarter of 2025 showed that aggregate commercial loan pricing tightened, with the weighted average spread moving from 2.63% in the second quarter to 2.31% in the third quarter. For context, average business loan interest rates at banks in October 2025 ranged from 6.7% to 11.5%. Provident Financial Holdings, Inc. is competing in this environment, where its pull-through adjusted loan pipeline carried a weighted average interest rate of 6.15% at the end of Q3 2025.

Deposit holders, especially those with money market or time deposit accounts, demand competitive rates. The increase in the total cost of funds for Provident Financial Holdings, Inc. to 2.44% in Q3 2025 signals that customers are moving funds to higher-yielding alternatives or demanding better rates to keep their money within the institution. The Net Interest Margin (NIM) of 3.43% in Q3 2025 is the result of this delicate balance between lending yields and deposit costs.

Provident Financial Holdings' community focus slightly lowers the power for relationship-driven clients. As the holding company for Provident Bank, which was founded in 1839 and operates 140 branches across New Jersey, eastern Pennsylvania, and parts of New York, this local presence fosters deeper relationships. With total assets at $24.5 billion as of June 30, 2025, the bank's community orientation, which 77% of community bank CEOs see as a key differentiator in 2025, can create stickiness that transcends pure rate shopping for established commercial and wealth management clients.

Here are key financial metrics illustrating the competitive pricing environment:

The company's ability to generate record revenue of $222 million in Q3 2025 while managing deposit costs suggests its relationship focus is somewhat effective in mitigating the broader customer power seen in basic product pricing.

Provident Financial Holdings, Inc. (PROV) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive intensity in Southern California, and honestly, it's a tough neighborhood for a smaller player like Provident Financial Holdings, Inc. The rivalry here is definitely high, facing down a host of much larger national and regional banks. It means every loan, every deposit, is a hard-fought battle.

The core products you offer-mortgages, checking accounts, basic business loans-are, for the most part, treated as undifferentiated commodities by the customer base. When the product is the same, the fight shifts entirely to price, service, and branch proximity, which puts pressure on margins for everyone.

The numbers clearly show the scale disparity. Provident Financial Holdings, Inc.'s fiscal year 2025 revenue was only $39.00 million for the year ended June 30, 2025, though the Trailing Twelve Months (TTM) revenue as of late 2025 was slightly higher at $39.22 Million USD. This relatively small top line, compared to peers, signals an intense, almost desperate, competition for every sliver of market share.

Consider the operational scale of the direct competitors you're up against in the region. Banc of California, Inc. and WaFd, Inc. operate on a completely different level, which is a major factor in rivalry. Here's a quick look at the scale difference based on their latest 2025 figures:

When you see those asset bases-tens of billions versus Provident Financial Holdings, Inc.'s much smaller footprint-you understand why the competition is so fierce. Larger banks can absorb more losses, invest more in technology, and offer more aggressive pricing. Also, the organic growth environment for smaller institutions in mature markets like Southern California is often slow.

This slow organic growth environment forces competitors to fight aggressively for market share rather than relying on expansion alone. For Provident Financial Holdings, Inc., this translates into specific pressures:

• Loan portfolio growth was interrupted in the June 2025 quarter due to loan prepayments.
• Net income for the fiscal year ended June 30, 2025, decreased 15 percent year-over-year to $6.26 million.
• The need to maintain competitive deposit rates while managing a lower net interest margin in recent quarters.

You defintely need to watch how the larger players like WaFd, which grew its FY2025 net income by 13% to $226.1M, deploy their capital and scale advantages against your local market position.

Provident Financial Holdings, Inc. (PROV) - Porter's Five Forces: Threat of substitutes

When you look at the competitive landscape for Provident Financial Holdings, Inc. (PROV), the threat of substitutes is quite pronounced, especially in the deposit-gathering and lending functions. Substitutes aren't direct competitors offering the exact same service; they are alternatives that satisfy the same customer need, often at a lower cost or with greater convenience. For a regional bank like Provident Financial Services, Inc. (PFS), which reported total assets of $24.5 billion as of June 30, 2025, this pressure directly impacts its Net Interest Margin (NIM).

High-yield savings accounts from FinTechs and online-only banks are strong substitutes for deposits.

This is where the immediate pressure on Provident Financial Holdings, Inc. (PROV)'s funding costs really shows. Customers are highly rate-sensitive for their liquid cash, and digital-first institutions don't have the overhead of physical branches. Provident Financial Services, Inc. (PFS) reported its average cost of total deposits, including non-interest-bearing deposits, was 2.14% for the quarter ended September 30, 2025. That's the cost Provident is paying to keep deposits on its books.

Now, compare that to what substitutes are offering. As of late 2025, the best high-yield savings account rates are hitting 5.00% APY from players like Varo Bank and AdelFi. Honestly, seeing rates that are more than 12 times the FDIC's national average savings account rate of 0.40% APY as of mid-November 2025 makes it tough to retain deposits without raising your own rates, which compresses your NIM. Here's a quick look at how those deposit costs stack up:

If you're trying to maintain a Net Interest Margin of 3.43% like Provident achieved in Q3 2025, every basis point you have to increase your deposit cost to compete with a 4.20% or 5.00% substitute directly erodes that profitability.

Credit unions offer similar community services with a tax-advantaged, non-profit structure.

Credit unions are a persistent substitute because they often share the community focus of a regional bank like Provident Financial Holdings, Inc. (PROV) but operate under a tax-advantaged, non-profit umbrella. They compete fiercely on deposit rates. For instance, the best Certificate of Deposit (CD) rate we saw in late November 2025 from a credit union was 4.50% APY for a 4-month term at Nuvision Credit Union.

This competition is set against the backdrop of the current Federal Reserve target range for the federal funds rate, which is 4.25% to 4.50% as of late 2025.

• Credit union CD rates can reach 4.50% APY for shorter terms.
• The federal funds rate target range is 4.25% to 4.50%.
• Online banks and credit unions generally offer more competitive rates than traditional banks.

Direct mortgage lenders and brokers substitute traditional bank loan origination.

For the lending side of the business, nonbank entities are the dominant substitute. They bypass the traditional bank structure entirely. Trends show that nonbank mortgage companies are capturing the majority of the market. In the first quarter of 2025, the nonbank share of total originations climbed to 66.4%.

This means for every 100 home loans originated, roughly 66 are coming from nonbank direct lenders or brokers, not from institutions like Provident Financial Services, Inc. (PFS). Non-bank mortgage companies originated 53.3% of all home loans nationwide in 2024. The overall mortgage lender market size is projected to hit $1,292.91 billion in 2025. You have to consider that specialized direct lenders are often faster and more focused on specific segments, like home purchases, where they held 66.1% of the market in 2024.

Investment platforms and robo-advisors substitute wealth management services.

Provident Financial Holdings, Inc. (PROV) also offers wealth management, but that segment faces substitution from automated platforms. The robo-advisor industry has matured, with global Assets Under Management (AUM) surpassing the $1 trillion mark. While the global market size for robo-advisory in 2025 is estimated at $10.86 billion, the total AUM managed by these platforms globally is much larger, with estimates placing it over $1.0 trillion by 2025.

The key competitive factor here is cost. The average annual fee charged by robo-advisors hovers at approximately 0.20% of AUM in 2025. For comparison, Vanguard Digital Advisor, a major player, manages about $311.9 billion in AUM. This low-cost, high-tech alternative directly substitutes for traditional, higher-fee advisory services that Provident might offer.

Here are the scale metrics for this substitute threat:

• Global Robo-Advisory Market Size (2025): $10.86 billion.
• Estimated Global Industry AUM (2025): Over $1.0 trillion.
• Leading Robo-Advisor AUM (Vanguard Digital Advisor): Approximately $311.9 billion.
• Average Annual Robo-Advisor Fee (2025): Around 0.20% of AUM.

Provident Financial Holdings, Inc. (PROV) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers for a new bank or FinTech to set up shop and start taking deposits or making loans against Provident Financial Holdings, Inc. (PROV) in the Inland Empire. Honestly, the hurdles are significant, but not insurmountable, especially for the nimble digital players.

Regulatory and capital requirements create high barriers for new chartered banks.

• The minimum Common Equity Tier 1 (CET1) capital requirement for large banks is set at 4.5 percent.
• New entrants must also contend with the Stress Capital Buffer (SCB) requirement, which is at least 2.5 percent.
• For community lenders, the proposed Community Bank Leverage Ratio (CBLR) reduction is from 9% to 8%, with a proposed effective date around October 1, 2026.
• The arduous process of applying for a full bank charter can take up to 2 years in some cases.

FinTech companies can enter with unbundled services (e.g., payments, specific lending) with less capital.

While a full charter is tough, FinTechs can use partnerships, though the regulatory landscape around Banking-as-a-Service (BaaS) remains somewhat uncertain due to the delayed implementation of the FDIC's proposed rollback of the 2020 brokered deposits rule, which was extended in October 2024. New entrants focusing on specific lending, like those providing consumer loans, still face compliance with AML/KYC requirements under the Bank Secrecy Act.

Establishing the local brand trust and physical branch network is a significant barrier to entry.

Provident Financial Holdings, Inc. (PROV) has deep roots in its primary market. As of September 30, 2024, the Bank operated 13 retail/business banking offices across Riverside County and San Bernardino County, which make up the Inland Empire region. This established physical footprint and local community involvement, such as the $40,000 contribution to the Provident Savings Bank Charitable Foundation in fiscal 2025, builds a level of trust that takes years to replicate.

New entrants in the Inland Empire region would face immediate, aggressive price matching.

Any new competitor would immediately be tested on pricing, especially on core lending products. Provident Financial Holdings, Inc. (PROV) originated $93.3 million in loans held for investment during the first nine months of fiscal 2025, showing active deployment of capital in the local market. This level of activity suggests established pricing and relationship management that new entrants would have to undercut significantly to gain traction.

Here's a quick look at Provident Financial Holdings, Inc.'s scale versus some of the regulatory benchmarks and a peer's recent performance, which gives you a sense of the capital base a new entrant would need to challenge:

If you're thinking about a de novo bank, you're looking at a multi-year, multi-million dollar capital commitment before you even book your first loan. Finance: draft 13-week cash view by Friday.