PROV - Earnings call transcript Q2 2019 | Provident Financial Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter Earnings Call. [Operator Instructions].

As a reminder, today's call is being recorded. I would now like to turn the call over to your host, Craig Blunden. Please go ahead, sir.

Craig Blunden

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

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

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

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

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

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

During the is held-for-investment. million loan loans September the tempering also we quarter, million of $XX.X payments rate that experienced in the but principal quarter, payoffs, from $XX.X XXXX and the down which growth still of

previous in payoffs this amortization associated point Additionally, we December the deferred loan quarter estimate by approximately that in of acceleration the and comparison net interest improved lower the the and to average basis decrease loan costs one our with of net margin quarters quarter. five

intense volume, be production leasing growth X%, For for approximately and competitive December Competition commercial not to done loan by loans much XX, so, in XXXX, have new is some Clearly, the XX-months in with we partially environment. and held-for-investment ended our the overly loans. offset by the but largest will multi-family construction, estate real given declines chase lenders do declined loan standards production so. underwriting

at the were XXXX, with but consecutive credit pleased quality very though stage delinquency balances are quarter. December We negligible even early second the for XX,

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

recovery classified provision assets in $XXX,XXX for of quarter. December and the we low with year-to-date, levels negative recorded XXXX result As successful and net a non-performing a

results. pleased very these are quality credit We with

ended were just by points quarter approximately this augmented December the from margin the the be average interest compared XX, for the increase quarter last full the San to Francisco special cost interest income a in two XX compared Loan interest net of increase increased ended received XXXX, interest the liabilities. offset point cost year quarter point paid basis from basis as the interest net two that margin yields recognition by last assets year. December and points is of Federal loans for total points the the result to in XX basis a XX, same noted quarter non-performing our with stock. Our dividend Should two expanded bearing Bank of cash same by XXXX, on The that in XX Home average by quarter basis the earning deposits basis firstly

expanded course XXXX quarter, Over in past core the the to been while we time the interest the able line maintaining core cost hold of net margin months, balance the the December on to for note that have balance the deposits our years. Also decreasing of highest X.XX% many of of deposits XX level and deposits. the

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

the our staff actions out reduction division. has has XX%, the to declined declined banking taking the in started exchanges During for staff professionals. platform. while conventional origination when less Since origination then are XXXX, mortgage pronounced by opportunities. our reducing market of competitors our XX, the adjustments environment origination staff first a and by staff our to quarter, XX% we capacity four reduced by our XX staff responding our by The favorable performance Similar of declined capacity total XX%, December of performance our we professionals more by by

the of be and prior XXXX the than December at quarter competitive sale margins was pressure The high-end loan loan offset loan to sale not quarter based but pricing prior higher quarter. volumes the New from lower December remaining recognizing that XXXX resisted in applications to on ended from quarter mortgage XXXX sequential quarter the lower similar the margin significantly for origination the successfully the loan necessarily the quarter, and We expect range. March the sequential decreased XXXX, information, XX, volumes. the December current quarter would we lower March the XXXX in

We model, adjust and will commensurate with have down and opportunities mortgage, we the mortgage past cut business do changes calendar operating and FTE continue market to the our in our banking environment.

savings we fixed the operating of recent last reduced expenses recorded During mortgage and to approximately for after expense comparison year's most in year, variable in banking adjusting quarter, last have the quarter. the quarter XX% litigation combination same settlement cost cost by

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

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

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

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

Operator

have do of a line Instructions]. Tim Please Thank go question we you. ahead. from Sandler [Operator O’Neill. O’Brien, And the

Tim O’Brien

or I catch that. balance need you about it is -- long-term Craig? So strategy, talked to releveraging sheet, say you the short-term

Craig Blunden

worth It but short-term moment. long-term would we've it’s like shift. Well, a looking it's at nice the be

Donavon Ternes

underwriting we from environment In gone result the know finding and standards what volumes. a to are loans with current that lower there that, argue the the as on process. many that of are during would competitors application We that conservative loan elsewhere origination competitive are respect pressures we have more

Tim O’Brien

calendar balance sheet, your But remember, have requirements similar engage to. in I business, help been and out you I by it acute bankers talked is made growing make consistent that consistent you now to think? you loans far will looking you the headwind, been given more do with anticipate can year, that’s and for being into remarks have the maybe little growing guys I your I a other so in headway able mean for the banking back some marketplace as underwriting do continue to guess mortgage it’s to

Craig Blunden

think talking Well, separate items. you’re two I about

many applicants loan about really rate the which not you're growth, which in. of interested is community with adjustable If business, part banking is balance about thinking are primarily single-family we origination volume thinking well are sheet

up for I volume has more Although speaking volumes estate applicants pressure risen continue and relates on have up lenders as competitive every production of actually rate to adjustable we with competitive we're whether and in there origination or if that. loans see in whether for some to underwriting truth you're as will interest seeing has time think the interest respect the as multi-family we have But single-family can with real community a off the result rates the like that sector. who as a terms the not estate looking concern commercial it back to been as by a bank respect result bit long and of being a so real to really going gone primarily are the on bit volume,

another help And I prepayments. So will then think is respect that some. with consideration to

extent new which loan universe There to balance to across rate loan that the portfolios then payoffs the maybe originated risen will of occurring the respect in interest So with that have are respect that -- rates those and with they are on higher banks. being loan of to conceptually what portfolios. the interest fewer have be loans

Now we help to XXXX balance that payoffs from the very the of September maintaining in high and our us in respect decline in quarter and with which quarter did the or could numbers December a September was June portfolio. quarter June the see

interest I I and the rates. be -- but with it will might will respect commercial degree rising it a multi-family So lenders think payoffs of to off with respect a and aided little the on to pressure as be continue be bit loan some that to aggressiveness declining a think result to backing headwind,

Tim O’Brien

at those about business lowest looking numbers the in lock seeing just lock So had do the and at year-end, pipeline, some mortgage talking you the deck in you the recall slide your business? banking of are

Donavon Ternes

And business the But Yes, December you cyclical with to mortgage work this certainly Holidays. back and December quarter, remember as funding they begins as your pipeline respect that essentially of that decent people once the decline that January out not somewhat the relatively your the come is as can were way pipeline are build lowest prior pipeline cycle quarter. still from offset volumes. doesn’t through quarter to again be a during then well quarter with with because respect but to you sufficient grow the the in

year. actually the So can lower quarter quarter be production March volume the a entire

saw quarter point everybody expect we back doesn’t that much quarter pipeline we So volume March the quarter. low locked disclosed expect described then the December weaker that through than a we to locked noted in in what would what the as the we funded pipeline keep starting extent that at and and low to we a would the whenever is would current locked -- we’ve very the to number, volumes we the we quarter ourselves in expect, that

Tim O’Brien

like summer seems beyond has there any been XX% are production typical. obviously anything I guess last just historically but that at than March acute business seems signs, and looking historically number this low above business, the March in and It seasonally that more the beyond and year’s it’s your into marketplace Southern business, out the shot that the in and you California find the standpoint you’re that Spring quarter business time, promising quarter looks into housing from then the up help market the the in looking and? could March of anything mortgage banking

Craig Blunden

not they except were were year At forward think we talking point, and the we happen. it’s buying very spring the hard if to you to years. back were what seems prior ago Well, be from looking moving didn’t summer activity about, is there to estate business, a because say but with seem that’s of we’re lot to We quiet market compared still this to seasons say lot properties doing seeing slow, listed of or of the now real sale, can’t a time more for year realtors. our so whether right the they don’t

have I so that see And to because going point we hesitate at strong buying spring we're just this season it. can’t

Donavon Ternes

with interest you down we least has to even rates kept come with the even rates inventory more business, kind a refinance this so less having in And is basis conduct the other is only our California though as volume considerably. read to where loan down which part thing of also of the that low a data new you bit little much will, down up. fact the refinance the pockets. in have home in the any as coupled entice across quarter about you volume in the out little on going other very in basis think as at that, obviously the sales December from declined But come if activity And existing in pockets, maybe on up that’s or are not XX% product. XX go and is in And down third sales points fixed about but highs down only California that But are doesn’t sales cycle themselves up of are necessarily California conforming. if a borrower they year-over-year to as if numbers. home That entire will their state, and an so really by refinance other kind year

the going anytime are away And headwinds doesn’t suggest necessarily so that that soon.

Tim O’Brien

kind been a volumes what relative little So is line have levels that where your given at been at cyclical talk stand your from and is to commitment bit commitment in of of that you weak point also kind to your how loss quarterly standpoint of looking business this unit, historically? it’s this at outlook can with and that, the strategically here how a poor about juncture

Craig Blunden

have really plan haven’t We a to this a cycle to right-size and it’s seen for last tried long, us noted, continue have this as doing, just Tim, we downward this like surprising we’re cycle, difficult just what we thing we’ve like have this then every have would going. the seems would but looking to are cycles never we it's behind still been we volumes expected we’re where And just position quarter today. if little in on

Tim O’Brien

to environment? at to just make guess you in where point that continue the can you So losses production a minimize I to are business low incremental adjustments try a

Craig Blunden

past, the reductions we’ve later back. in have XX the some hire Even people to days done and then

incremental so lag make So we think still why but can a unfortunately, reductions I yes there, that but there's slight to that’s point.

Donavon Ternes

expenses losses. seen you’ve changes losses, essentially have making if and at stabilized look the And those additionally what you to been we that the quarterly have essentially reduce capacity operating

volume reduced, So also quicker but that giving bit anymore because the as is quick, the that's away losses going they’re changes than a aren’t we getting not make. the origination can

se are what the So operating that’s but losses stabilized, cycle. during that’s not comforting this per occurred has

Tim O’Brien

some noticed color and that has community obviously the I operating front as on there that of guys offset, the a have some -- stayed launch has given were can bank that’s you there banking. stability credit this kind the there profitability generally last profitable as been are stability margins was do for the there, looking you quarter. as to and in of you landscape quarter -- direction like note Can thoughts a March it like that’s out where market juncture? that that out of is this kind about the the heading given minor is share any feel the given is kind well positive don’t point what’s okay you of on number at going settled of sale far the loss and you in question give situation concerned, you any the to mortgage that or mean One obviously I and

Craig Blunden

pretty that the I needs. margin of to environment high-end we’re disciplined We think our we like. if loan comparisons to analyze where we margin. at respect what we our sale respect change respect Investor our margin today looks will with with the in at deck to daily our think daily I takeaway describe and that pricing But you sale that we’re are our loan the range with in to in the

of I offset possibly margin. the what lowering remain stay end generate to volume range is we disciplined at we lower will and margin we up think higher loan that because can’t sale that the find enough by

saw So and we additional and that landed doesn’t our some there it’s the high-end of paid right lowering range by would margin. that that the was that additional between now margin, a we volume towards act that we’ve really volume chase volume get but couldn't at mean balancing

in we’re top settled maybe I be at So where now, to of it’s would going end it that and that range. is the right expect range,

Operator

you. Thank

Group. Our next ahead. Kevin from Hovde go question of is Swanson, Please the line

Kevin Swanson

Maybe the seen have just few guys one if just the have curious question kind you of change of overall consolidation, think some follow-up, non-bank commentary out seen level in that of any some front? I you’re maybe seeing on who competitors,

Craig Blunden

to respect With banking competitors? mortgage

Kevin Swanson

Yes.

Craig Blunden

competitors community are that non-bank there banker are power bank, or mean banker, have that mortgage has. staying I a Yes, the that don't maybe competitors bank true

origination And have thing that offset to servicing least this quarter they’ve the necessarily of some portfolio, those gone the we’ve to seen because holding portfolio at have the servicing been they to interest and servicing models are of the losses range. end a seen that come those from few, able also down, some another in up pre-maintenance we've of that their had so pressures. in yes, fees mark cases probably not Kind market higher those down portfolio have portfolios servicing actually rates and from in fact in

add pressure tremendous hold that these amount competitors So of with also of non-bank servicing. to for that some respect profitability would

Kevin Swanson

doing just it all And you like a of kind maybe of just banking, curious? on the them, is it curious with mortgage is kind Okay. while of maybe is on competition couple the a a each one, do the once non-banks there these you grow are how business guys loan, in percentage

Craig Blunden

increasing to It’s especially direct direct put the best way lenders. be by non-bank will it the that lenders,

Donavon Ternes

non-bank QM a is increased that underwriting many some and now. getting gone we’re we who seeing, we’re standards have other down non-QM there but talk are credit the right lot And of has of the into around that product other lender, thing lenders path that seeing

So lenders credit you’ll something interested stage. not down standards occur we’re and are some of the see pressure I keep in persist, think we this put that some to that’s as curve at used volumes, headwinds going that underwriting to in see order or to except

Craig Blunden

by way the non-bank. from And we’ve competitors just that bank not seen well as

Kevin Swanson

credit guess bit improve, guys the end? staying to kind little market return, guys maybe question, I you’re the to cycle it final seeing houses -- you I that maybe may Yes, what my you that leads for you of suggest obviously on like mentioned steadily seeing anything continues me a are just Okay. seems on that my for curious know are longer, for

Craig Blunden

Well -- I I interest but think -- even the XXXX. price areas a I significantly don’t and no, not most this think point, of of don't rates it's of it’s so, it is up at peaks prices are part course above in not

market So until more prices I pay guys people top from of sitting little there that and the the reasonably lot hearing of don’t their is I I so just buy, people want with. then number business I after think a entering I’m adjust why see headlines that’s to realtors are and on do they of saying pay down you the not

Donavon Ternes

Yes.

soften yes ago has rate was well year-over-year from there fact that. year in data, a still be could and -- gone so with much it’s And appreciation price up to prior some it the we’re year lesser a but down, than it’s the seeing increase up of it

if commercial some commercial and There might you not think soon With there. it in weakness there in what markets that with really lending multi-family argue softness not in to that our probably or a estate covers seem the the or the respect would top particular appreciation seeing fundamental, regulatory market credits to single-family debt the in shared bread we’re read still I and suggest lot at data things point from still the those you national the come are or of lending, just if price and it be real will there to in day on a be appreciation of those by will. seeing doesn't to in some come anything that lending standards price OCC but markets. in are where the that’s are multi-family same you anything the interest But or butter we’re is. be low data, end core would if some going Again relatively historical there, traditional of So space. certainly will certainly respect slow, currently leverage pressure we some credits lending, has of in rates

Kevin Swanson

helpful all questions really that’s -- my color. All questions Thanks guys. Great, are my answered.

Craig Blunden

you. Thank

Operator

in time, Thank you. At [Operator we questions Instructions]. this queue. further have no

Craig Blunden

in Thank If all forward there no questions, and next participation you with call you. I everyone’s of further again look to are I quarter. speaking appreciate our

Operator

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

You now day. a may good disconnect. Have

Provident Financial (PROV) 29 Jan 192019 Q2 Earnings call transcript