Message From the Chairman
Dear Shareholders:
I am pleased to forward our Annual Report for fiscal 2022 highlighting our improved financial results. Last year at this time, I wrote in the Chairman’s Message that “I was confident our strong financial foundation positions us well to face future challenges and to capitalize on opportunities as they develop.” Now, a year later, I am happy to report that the Company has capitalized on a better lending environment and has improved our interest-earning assets structure with a larger percentage of higher yielding loans held for investment and a smaller percentage of lower yielding investment securities and cash and cash equivalents. Also, while general economic conditions were erratic, our strong financial foundation was never tested by the economic malaise. Today, it seems like we may face a greater risk of recession coupled with higher inflation and other economic dislocations. But, I believe as strongly today as last year at this time, that our robust capital levels and conservative credit culture will continue to support the Company through any future economic disruptions.
Fiscal 2022
Overall, our fiscal 2022 financial results, described in the following Financial Highlights, are much improved from those realized during the prior fiscal years. Throughout the year the financial markets experienced a gradual return to near normal pre-pandemic economic conditions at least within the context of the banking environment and customer activity. These improved conditions resulted in better fundamental financial performance.
Last year, I described that our fiscal 2022 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 good results regarding these initiatives. Loan originations and purchases for the held for investment portfolio were $306.2 million in fiscal 2022, a 32 percent increase from fiscal 2021 volume. Additionally, loan prepayments declined this fiscal year and when combined with the increased loan origination and purchase volume the activity resulted in a 10 percent increase in loans held for investment. Also, core deposits, one of the most valuable assets of a banking franchise, increased by $36.8 million or five percent at June 30, 2022 from the same date last year; operating expenses for fiscal 2022 decreased by approximately four percent from the prior year (after adjusting for the Employee Retention Tax Credit in fiscal 2022 and 2021); and, we paid a quarterly cash dividend of $0.14 per share in fiscal 2022 while repurchasing approximately 257,000 shares of our common stock under the April 2020 stock repurchase plan. Our capital management activities resulted in a 93 percent distribution of fiscal 2022 net income.
Fiscal 2023
Similar to fiscal 2022, 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 2022 suggesting we will begin the new fiscal year with good loan demand; the continued growth of core deposits; 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. We also recognize that prudent capital returns through stock repurchase programs is an essential capital management tool that we will continue to use as a component of our capital management strategy. We remain committed to single-family, multi-family, and commercial real estate mortgage lending as our primary sources of asset growth and we will redeploy cash-flows from investment securities to support the growth of our loan portfolio. Similarly, we intend to increase the balances of lower cost checking and savings accounts and increase our time deposits to support the growth of total assets. This strategy is intended to improve core revenue, over time, through a higher net interest margin, higher net interest income and ultimately, coupled with the growth of the Company, an increase in net income.
A Final Word
I am pleased with our ability to navigate the uncertain economic landscape over the past few years 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. I would also like to express my appreciation for the support we receive from our customers, shareholders and the communities we serve. We recognize that our continued 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 | |
