Message From the Chairman
Dear Shareholders:
I am pleased to forward our Annual Report for fiscal 2021. Last year at this time, I wrote in the Chairman’s Message that “I was confident our strong financial foundation will weather the current economic weakness” and I went on to describe that the significant economic slump resulting from the COVID-19 pandemic made it very difficult to forecast what the immediate future may hold for financial institutions and the country at large. Now, a year later, I am happy to report that the Company has weathered the significant economic disruption and a prolonged recession seems to be less likely than once thought. The current economic environment is much improved from this time last year. That is not to say however, that general economic conditions are back to pre-pandemic levels or that we will not face further economic disruption as the country recovers from the pandemic. As a result, our robust capital levels, conservative credit culture, and strong liquidity position will continue to support the Company through any future uncertainty.
Fiscal 2021
Overall, our fiscal 2021 financial results, described on the following Financial Highlights pages, are similar to those during the prior fiscal year. However, it should be noted that our business operations, like many of our peers, were significantly impacted by the federal, state, and local restrictions implemented to combat the pandemic. Nonetheless, all of our locations were open and we are proud of our efforts to serve our customers and communities in an extraordinary business environment. As a designated essential business under the pandemic protocol, we take our responsibilities seriously.
Last year, I described that our fiscal 2021 Business Plan forecast disciplined growth in loans held for investment, growth in retail deposits (primarily core deposits), control of operating expenses, and sound capital management decisions.
We experienced mixed results regarding these initiatives. Loan originations and purchases for the held for investment portfolio were $231.9 million in fiscal 2021, a seven percent decline from fiscal 2020. Additionally, an increase in loan prepayments resulted in a decline in the loans held for investment balance. On the other hand, core deposits, one of the most valuable assets of a banking franchise, increased by $74.5 million or 10 percent at June 30, 2021 from the same date last year; operating expenses for fiscal 2021 decreased by approximately four percent from the prior year (after adjusting for the Employee Retention Tax Credit in fiscal 2021 and the reversion of non-recurring litigation settlement expenses in fiscal 2020); and, we paid a quarterly cash dividend of $0.14 per share in fiscal 2021 while repurchasing approximately 105,000 shares of our common stock under the April 2020 stock repurchase plan.
Fiscal 2022
Similar to fiscal 2021, we plan to emphasize disciplined growth in loans held for investment and are encouraged by the origination volume generated in the last six months of fiscal 2021 suggesting loan demand has greatly improved; the continued growth of core deposits which has been remarkable during the past two fiscal years; disciplined control of operating expenses where we continue to improve operating efficiencies; and sound capital management decisions. We currently plan to return capital to shareholders in the form of cash dividends and believe that maintaining our cash dividend is very important to shareholders. Doing so takes priority over common stock repurchases, however, we also recognize that prudent capital returns through stock repurchase programs is a valid capital management tool that we will continue to use as a component of our capital management strategy. We are committed to single-family, multi-family, and commercial real estate mortgage lending as our primary sources of asset growth, however, in response to the uncertain economic environment, we may also deploy excess liquidity by investing in lower-risk investment securities and paying off borrowings as they mature. Similarly, we intend to increase the percentage of lower cost checking and savings accounts and decrease the percentage of time deposits in our deposit base while still growing total deposits. This strategy is intended to improve core revenue, over time, through a higher net interest margin and ultimately, coupled with the growth of the Company, an increase in net interest income.
A Final Word
I am pleased with our progress in navigating the pandemic and am confident that our strong financial foundation positions us well to face future challenges and to capitalize on opportunities as they develop.
In closing, I would like to recognize and thank our staff of banking professionals and Directors for their dedication to Provident. They are working diligently to support our customers and communities under unprecedented circumstances.
I would also like to express my appreciation for the support we receive from our customers and shareholders. We recognize that our long-term success is conditioned upon your ongoing goodwill. Thank you.
Sincerely,
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/s/ Craig G. Blunden | |
Craig G. Blunden | |
Chairman and Chief Executive Officer | |
