PROV - Earnings call transcript Q1 2019 | Provident Financial Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, welcome to the First Quarter Earnings Call. [Operator Instructions] As a reminder, today’s call is being recorded. I would now turn the call over to your host, Craig Blunden. Please go ahead, sir.

Craig Blunden

Good morning, everyone. Financial Chairman call of Ternes, with Chief and Blunden, and Financial our Craig Operating, the on me Chief is and Provident CEO Holdings, President, This Officer. is Donavon

a Before we administrative to address. brief begin, item have I

general other outlook about products discusses Those for forward-looking of or outlook descriptions management’s services, business include the goals or or will plans, include forecast Our presentation objectives business company’s performance for and and statements conditions. today of the company’s measures statements. and statements future economic financial operations,

risk statement ended We from on question-and-answer and and annual also actual XX, a These the is are from differ during yesterday, Information was differ XX-K. may Form year factors number the report make from forward-looking that subsequent Form the to that any the those results to earnings actual period June forward-looking that statements the distributed for from available could are subject uncertainties, presentation. release results following today. filed materially XX-Qs management’s cause to and may of risks from discussed the the XXXX, statements Form XX-K forward-looking on

effective morning describes the each made, the business. update I hope of date this assumes you as the our first highlighting quarter statements our our and which I has you to to results. like release, only begin this no opportunity community in had begin by an results they’re earnings obligation would with, to review banking To our call. Forward-looking of company information. thank are participating of for that

strong, core below credit our and origination $XX in banking single million volume. has from growth year, last grow, $XX margin banking loan million $XX most as the quarter, but for disciplined the the family held reducing quarter. course XXXX quarter, portfolio purchased remain decreased result standards, September for our quarter, a $XX homes the the significant expectations of our recent in million to continue a to been prior the decrease of prior prepayments loan underwriting and from expanded, from the Over sequential In originated the community has quality the loans originated mortgage deposits interest and sequential of staff in investment, net million division

elevated quarter, held the experienced loan second quarter, we principal in the and the consecutive growth of million down also which for we payments slightly is During This is but million $XX.X investment. the the experienced of quarter payoffs. still $XX.X loans XXXX rate June tempering payoffs, from where

and the interest net associated previous the net Additionally, in of of estimate higher margin X that quarter comparison points loan approximately by loan and this average increase acceleration quarter. deferred amortization basis costs quarters lowered five in the we with to the September payoffs our

declined XX, ended loan approximately partially by the held months commercial X%, chase XXXX, new the September is growth for For will not for and single-family, declines and with largest XX by real offset investment have lenders underwriting credit but we develops leasing the environment. so. and cycle know begin we some And the to of don’t be loan cost production our charge-offs lenders so, done do mount. volume, Clearly, much core the those loans. intense, loans Competition estate in production given to until standards in multi-family competitive true

zero credit very delinquency were balances with XXXX. at early-stage We’re XX, September pleased though quality,

charge-off million, and June a quarter. during modest million quarter $X,XXX We very $XX,XXX decline a small net of XXXX recovery $X during of experienced net of during down of at low September XXXX, which the XXXX net compared XX, ended with modest the and just at from an recovery In year. levels addition, nonperforming the $X.X $XX,XXX a the the quarter, is March for XX, X% XXXX, September are now course assets remain

classified nonperforming in of levels for low the September a the of negative fiscal recorded the XXXX to assets small and $XXX,XXX we the provision date, recovery net result quarter. year a As

with pleased very these results. quality We’re credit

net compared a margin average increase of increase liabilities. Our by the interest quarter last on X the XXXX, of to and cost basis yield XX, expanded point as result interest-bearing year quarter XX same basis XX for the in a assets ended September basis the in total point points interest-bearing

deposits XXXX, So X September if point compared our quarter cost the increased to for year. that average noted the quarter XX, you just basis ended of same by last

balance the margin been and expanded the of XXXX It’s deposits for time also able the years. that the to quarter, in X.X% core course hold while decreasing highest the we’ve the level of balance the to past our of Over many months, cost core line September on deposits. noteworthy the XX deposits interest increasing net

adjusting model a We’re banking FTE to XXX down more mortgage employed generally employ banking business from challenging We still to mortgage environment. in banking, XXXX. the on June our respond XX, XXX mortgage currently FTE

by We, favorable XX%, platform. capacity less by then, declined capacity, also reduction fulfillment professionals. declined adjustments staff like when total staff our by a more quarter, has XX%, XXXX, taking by staff our and the started our responding origination XX% first from origination mortgage XX, two out our fulfillment environment During reducing with market changes while competitors, our staff in in are has by to reduced our we Since professionals, banking two of December pronounced we for commensurate are The our origination declined staff of division. opportunities.

September the the than sequential we applications loan September XXXX quarter decreased be the expect quarter significantly sequential the for information, XXXX, quarter, current a establishing quarter, margin on volumes September would in And XXXX prior mortgage based in December significantly ended the from improved The quarter from lower quarter. the sale New the new to XXXX quarter. than XX, lower high for December loan the prior range. and XXXX

FTE business with sale opportunities pricing recognizing in the We’ll as with adjust in loan be and not pressure will done volumes. competitive operating the resisted model offset market a mortgage count, that have necessarily to and have banking loan changes successfully past, we environment. We lower origination higher commensurate the continue margin our

year, comparison litigation During savings for the same quarter, the year’s to expense we But income banking quarter. quarter recent of operating after cost our expense XX% most approximately adjusting cost expenses to reduced origination a in business. staff, we’re variable last in fixed the limiting combination and mortgage have settlement not the statement, books recruiting also side we’re efforts of last recorded improving of by

a to because more channel more to new shakeout more Changes with lineup. origination have bonuses a affiliate recruiting It’s have the more less important staff now focused to some seem expected signing implement Our efforts resources as in of our loan few efficient in today the as product prevalent loan and our to themselves added becoming since products become industry. direct-to-consumer see be origination to system. employers. to They’ve also result stable fully been investing such these durations have more our we converted become unreasonable

management of is strategy the short-term sheet We portfolio growth action. that balance for quarter. from unchanged believe balance prudent best the is Our releveraging last course with sheet loan

margin, we’ll of do and wise the have that leverage the maintaining so. we cushion are future, above exceed We capital management foreseeable we capital each able these to on is and to on of business risk For the significant base plan believe execute significant ratios demonstrating total be and goals. regulatory X% XX% by confident, wide a currently ratios capital return our

have opportunities quarters. delayed we execute in repurchases over stock September our activity, better repurchase we the of in believing XXXX to Additionally, the on last Nonetheless, quarter, course year, will future September substantial our and We stock Investor XX executed encourage review on website. to have form posted repurchases. we of returns of everyone in our to shareholders the capital cash dividends Presentation

financial supporting financial any of regarding asset metrics, insight company. banking, results. find strong the future quality growth which included Thank that will we community our You’ll We’ll you we’ve additional believe banking, now capital slides the financial our entertain management, have you regarding and that may mortgage questions give on foundation, you.

Operator

Sandler from is ahead. question Please line go First the O’Neill. O’Brien, Instructions] [Operator you. of Tim Thank

Unidentified Analyst

This is for Tim actually O’Brien today. on Thomas

Craig Blunden

Very good.

Donavon Ternes

morning. Good

Unidentified Analyst

morning. Good

So the changes jump, due market? Or the any looks it on non-reoccurring of just just was that margin, to looking all there’s that in at the decent was gain events? conditions of a like sale

Craig Blunden

we the I to in disciplined have tell is done more We’ve we’re our some to comparison models. you whether the was it. to our sale would volume don’t in in event been know It of or not than we’ve can’t that in that it respect margin of in compressing the Much we higher in determine a make market. retail also there work margin. changes pretty compress sale production pricing to up to loan conditions holding think But drive production. so And percentage we of related offset with it case, to wholesale enough bringing loan margin we that’s because the volume firm that,

Unidentified Analyst

and quarter just Okay. pages, going to Got look And loan this what for the quarter, the compared then, elevated this prospects do switching growth forward? the previous given like payoffs quarter it.

Craig Blunden

Well are result with that, difficult loan competitors a we do, we actual as culture. won’t in that compete And we’re respect more loan what our characteristics on different a credit environment. a able originating growth credit we is risk many find can stressing model price, on necessarily underwriting many we’ll different than to applications, that be of as compete are in There environment. we difficult is but this our cases, because loan to dollars have

a the because it them borrowers, price, is today’s that. of environment. result that where that our would irrespective go we’re But we’re the dollars, of culture and credit giving in as the is higher think so our many end in to And we the that be accept volume to cases, willing of losing should credit day, and underwriting at lender loan

Unidentified Analyst

And and good switching average current much that. is – how you side, just on know That’s And Thank that, next? CD quarter the to specifically funding? for those do is the this on funding the set mature you guys funding detail. rate then, CD what to

Craig Blunden

with – Yes, to fingertips. our XX-Q, there’s table filed before deadline have recall, I and going as that’s in my at Form might I be the don’t be SEC. the That a that

there the in So, XX-Q. more will Form be information

Unidentified Analyst

back question. Okay. Thanks, from my step last here. was that I’ll

Operator

question of line Please Brian state Zabora. your The is the next from sir. company,

Brian Zabora

Good It’s guys. morning, Hovde Group.

as like, up Given as how side. gain sounds you’re It Let maybe sale of of higher far on on kind me range just maybe shift thinking that we’ve end – pricing? of you’re how be about sounds the follow that bit about could mortgage mortgage in like the me, it past? a talked to a on that the

Craig Blunden

Yes, I our the that and loan we We in last essentially range points investor basis that. with that’s quarters in set think new to sale based describe high upon margin XXX six the respect publish fair. our presentation, the a

that the going we’re to we’re is not bit pricing But to that from find about remain XXX, volume compress margin I as if that, because, our we up with think the not it our margins think inconceivable it in as we quarter. making in too disciplined So earlier, again, December respect described comes model a we we much.

Brian Zabora

Understood.

Okay. And you’re on quarter. it mentioned of the you kind buyback, then, delaying this

pull we near-term? the that think again group, think the I in industry-wide, and bank as So guess, about with back the you buybacks about may

Craig Blunden

Sure, it’s part of our plan. business

buybacks is what and coming We year and there. thing is. the once a July thinking our part We to have essentially plan, year out approve when our bank of business out our frankly those buybacks, holding It should the timing a X. our funding thought do of that from add, after for we cash we’re company. fiscal process authorization begins coming about essentially, dividends our is we the Only

company cash our toward significant than but to our only cash if proceeds the just was priority, which make completed maintain end that the to so of funding cash available dividend repurchases, also holding cash is higher for enough repopulating sales September, activity. the at not will, dividend, the repurchase And you essentially

Brian Zabora

called Also, on impact that outlook curious like your lastly, is the the any there what as maybe business completed potential potential you on for just now, trends cost side, just about the far a – efficiency? thoughts potential there. going be on positive the release expense restrict And forward? could is so good. there on as some conversion, do it better the that’s saves? the Or systems have great, More is you as out declining, expense press That’s in stock looks just

Craig Blunden

to is this expenses essentially were – can to files baked now. or can expenses, our deployment. have things more our With of or it their it’s assign because don’t applications, ship also completed year. they as efficient operating those files. underwriting respect earlier to it’s directly returns around. in. such into But respect Most helpful We as applicants or upload tax And WXs loan is to nature. that the well Everything already now duplicative of operating electronic We calendar operating were with more expenses now things

So at and procedures this new system processes we that efficiencies. respect to gain point, on to it’s implementing exploring will gain those and with efficiencies new the operating

Brian Zabora

thanks taking my for questions. And Great.

Operator

of sir. from is question Tim Next the Coffey. corporation, your state line Please

Tim Coffey

in quarter Thank you. anything morning, artificially there rate? Good tax have the during gentlemen. the – Was that lowered might

Craig Blunden

items case, stock there rate options discrete has BOLI an in that tax tax in institutions reduced to items. item. that’s were like, our rate, their item they’re comparison regarding is in everybody recovery dispositions the many While discrete that the of and tax statutory those essentially a which rate have, and on non-qualified the

So from that depending these in tax upon the occurs rate actually discrete the XX.XX%, items. of, XX.X%, with quarter I will respect fluctuate rate statutory what or think, to

Tim Coffey

to funding. And just talk switching gears then, about

last several deposits – You’ve over the sorry, bringing time last the deposits CDs, done a of over quarters. pretty I’m good down job

total can continue bring down growing million-ish have you still still to You outstanding. while something that deposits? Is $XXX

Craig Blunden

that necessarily uncomfortable we’re that time per declines, number difficult the becomes. not deposits farther The more with se. And equation

interest fact, your can the rising period costs a or fix you net actually of NIM margin. that’s some your In if interest rate in respect deposit to with longer market, helpful over time, of

been do we to more so. have we strategically, time continue or accomplish important needed that been than what we time to to we’ve and for But loan become for what instance, help gathering of fund fund long deposit of would been growth, and demonstrate if that we’ve able deposits component able growth. we’ve would a it to something a doing to growth is So to were loan that, better period

an the of amount at We capacity San wholesale of also bit funding Francisco. ourselves a of Federal quite Home fund to Loan capacity Bank extensive have

We have balance the very way deposits of little in on broker sheet.

issue, without will. it So deposits we a if becoming could regulatory legitimately broker increase you

so well of ourselves, as as fund there And retail a are funding CDs. number wholesale sources to

Tim Coffey

funding years get sure stable the It quarter? would two that the base about last same Did it hard in or exceptionally it over it and as to it’s way. harder of this so, your it do cost work keep been has year, I’m it’s – quarters? to is Or been much previous the

Craig Blunden

the about previous in as been It’s same quarters.

more raising are to loan and what again, path it’s the And discipline we things with redeployed the becomes we increase, which Although, out that as additional fund that in themselves gone down of the of markets well need respect to more matter and elsewhere. our if we yes, pressure sheet significantly, short-term yes, has federal difficult. the we relative target essentially, their to occurred, go see those to rate. the deposits of grew, can do But cash, that it, funds the the of have raising and moving loans see as, FHLMC growth a creates held-for-sale balance rates institutions quite one has be we’re down, it essentially

yes, keep with So market, go to the in rate the we becomes longer it rising more those it deposit cost stable. difficult retail the

Tim Coffey

the last are suggest steadily nearing credit seeing from on-the-ground that we’re although improving economic credit end, would – at over anything long your long two standpoint the been very that, well. Are quality you here, end in the that cycle we that of years same has it? And the vein, as

Craig Blunden

the sales I things we suggest single-family have to home over anything that month. turn respect quarter credit that seeing cycle September in don’t such – that come upon but see significantly quarters, would know most two is on data out based the we’re or the a as has going California, the that next to with declined recent

price so appreciation. on housing that And pressure puts

they increase pace but the increasing, in are to for that Rents also year ability were a We’re at not ago. rents. seeing decline the landlords still

respect put we really bit stretched se. to little But there’s deals. that multi-family fundamentally get per of nothing yes, pressure term those with we that should see suggests quality So that a a could credit

Tim Coffey

to say, where little you repurchase And be in, buybacks the the that and is; Okay. but two, next inclined given: still shares available on and a quarter, you apologize have April earlier the more aggressive of under calendar then, a touched Q&A, more bit I buybacks plan? this if amount on valuation I would be the I’m the in one, sorry, you missed the point,

Craig Blunden

of Yes, repurchase to to with I think respect our are factors positive all those ability shares.

capital now, view, know, six book of value in and better We’re we book instance. for consider characteristics that value. what opportunity with things what repurchases. XXX% stock respect were of business ago. a stock plan, grow presents, trading, context with can of or is value months of with do a I to a we That watch sheet balance franchise to within obviously trading XXX% when to Repurchasing do secondary prefer things number don’t There the entire we we XXX% our monitor our want those component, respect that or would are ratios. And determine to and we

Tim Coffey

multiple don’t of the going has about mortgage of into the been expect lenders three market? think activity, shakeout weak so to among aside. in years, I this would for see And Yes, low we’re seasonally an your you mortgage non-bank as bit origination quarters a a couple in then,

Donavon Ternes

been we’ve stakeout now, before a expecting Well, see to Tim.

a into practically or haven’t really we’ve think no slow would had as little that holiday we seen times, especially I we seasons spring summer would real this surprised since But more it fact, year. In than buying yes, get those we accelerate seen.

Tim Coffey

directly help that of your And competition right? lack decline sale gain margins, in would on

Craig Blunden

first. volume Well,

Tim Coffey

Volume. All right.

Donavon Ternes

surprised But we this again, we’re that at point. haven’t seen a more little

see. wait So let’s and

Tim Coffey

been Okay, all answered. Great, rest well you question right. Thank very of much. have my

Operator

this have questions no queue further in And Instructions] time. we at [Operator

Donavon Ternes

you. thank like our forward for All on quarter. you call. speaking joining Thank look we right. If there’s no And us to I’d further quarterly everyone conference questions, next to with

Operator

you does that do conclude your for gentlemen, thank and joining. Ladies you. Thank We conference.

good now day. Have a may disconnect. You

Provident Financial (PROV) 30 Oct 182019 Q1 Earnings call transcript