PROV - Earnings call transcript Q4 2019 | Provident Financial Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter earnings call. [Operator Instructions] And as a reminder, today's conference call is being recorded.

I would now like to turn the conference over to Mr. Craig Blunden. Please go ahead.

Craig Blunden

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

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

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

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

obligation effective the the made, of only company are this update date are assumes they statements Forward-looking as no to information. and

which in our thank with, has release, you review fourth call, begin you To hope quarter for our describes each to I earnings our of participating results. that and had opportunity an

prepayments margin underwriting net our reduced quality the below loan opportunities. expanded, Over (inaudible) has has our fiscal disciplined but standards loan interest deposits as has strong, growth have expectations our have the our year, stable, origination significant been course core which been credit of and been

for of increase originated $XX million investment, the million prior sequential quarter, and recent $XX we loans most the the in an In quarter. from purchased held

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

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

months decline loans. Competition standards in X.X% three for loan real decreased loans, multi-family volume a comparison loan balance will held we chase do we underwriting on lose to if and June loans estate construction heated, XX, for remains so. production growth and not the new investment XX, by For more must commercial but production in XXXX, in ended March XXXX, with approximately single-family to the

We're with pleased XX, credit balances that very June XXXX. note you'll at were delinquency quality, just $XXX,XXX early-stage and

XXXX, We the from just remained of results. these now $X quarter In of XXXX recorded year course XX% XX, levels low net fiscal addition, We're down with small fiscal very the nonperforming a $XX,XXX nonperforming at resulting June credit assets the negative the classified provision pleased quality recoveries. in very an in $X.X low at levels assets the June are million, which from million during decline year. is and

that of XX, quarter on by June quarter XX, ended and for the in X basis XX should net of by last our decreased increase interest-bearing expanded last to cost points liabilities. June for the the cost XXXX point compared Our points to interest in basis margin result a a as year assets the basis average X XX a deposits point basis compared interest-bearing noted same year. quarter of the It the average yield earning ended decrease XXXX be same quarter total

compressed of interest by on accelerated acceleration able deferred and to the payoffs, months, the our amortization net value franchise. past the X of core increased hold XX points this the of strength deposit loan approximately Over -- costs. in quarter of basis which deposits, X.XX% net the course as cost a been increase loan was result line of we've highlighting margin

It's in comparison prior many also our the quarters. noteworthy that to our range of top its margin of remains net interest at end

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

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

Additionally, and continued XXXX stock of the shares to returns XX,XXX substantial June common dividends -- shareholders we 'XX quarter, to and approximately in of form repurchases. capital in the on cash of stock execute purchased

to our completed origination have largely but increase do efforts to on have improving process single-family We of single-family originations. of loans, the portfolio regarding operations the the work mortgage we still scaling of in borrowing back mortgage loan our some salable

lending component to in loan loans As the are portfolio. and of X-K, XXXX Form our we described made large February a mortgage single-family single-family we X, committed and growing

reduce XX, June loan of resulting loan will homes reducing the work will growing the mobile mortgage and the risk XXXX. increasing components of percentage balanced believe homes these Over loans profile. in have XX% single-family we both portfolios, XX, portfolio in a single-family grown approximately our portfolio more from XXXX, still our XX% between on in credit toward while which family time, approximately As percentage to composition of June we

mortgage underwrite We past review our rate everyone loan portfolio to be our on loans products. website. where the with June presentation adjustable posted will XX investor Single-family originated encourage consistent and emphasize purchased, qualified standards and our activity

we financial additional capital insight growth slides that the we included of financial company. metrics, have you will You future believe and our quality supporting find which asset will the strong foundations on give regarding management,

you. you We financial Cynthia? any questions will results. now entertain have our regarding may Thank

Operator

Instructions] [Operator

from question of O'Neill. go line Tim the O'Brien ahead. and a Sandler have do from We Please

TimothyO'Brien

Good morning, guys.

First question.

talk the year? you fiscal Or can completed, for new the strategic talk start you'd mostly New -- and for with goals a about the also goals try for bit to of Year, maybe restructuring -- efficiency the little profitability year get to? to core efficiency like what can you you, the With

DonavonTernes

Tim, believe you ratio believe what from forecast from salable to or we don't know our able We significantly efficiency of loan metrics. were we'll do prior obviously running we under our originations. would be that getting out any to reduce we

And if so we standpoint will, of like ratios. from a would bank, traditional more community those you the look

there. So should improvement we significant see

The is thing respect same to profitability metrics. true with

be to there beginning our and of March as July at losses the losses presentation would If quarter, the with you'll were occurring eliminated result the salable that mortgage We quarter. production. from X respect you the loan obviously XX see that a look those in component investor in expect to origination

full-time Just number to we or color. of XXX report, XX, June FTE XXX call actions July the at described At we at employees. FTE. some result we've a XXX had -- give of as look you And had XX, FTE. our When a we had taken. December or we the At in at report, equivalent March FTE call XX, we

balance really because quarter 'XX as balance or we beginning the fiscal sheet has. changed our company much hasn't size although in quarter of a significantly, efficient more sheet So the or employment the QX are September

in the with to with although September specifics, because the can't or of we quarter. respect the our expect give we to be $X.X million not earnings there So you describe and we don't it onetime employment. that June And we a provide some costs provide did in quarter, reducing forecast nonrecurring guidance or would associated was

quarter And that quarter. the additionally, the started will XXX fact suggests not number there XXX also ended the there fourth which operating dropped into the that be the expenses quarter in we quarter with that that with we and in were adjusted September the FTE, FTE

So that going is operating adjusted perspective. down from to go as expense number well an

to the parts the or up view a we guidance, clean quarters So doing taken, as that quarter forecasting think those X September lot without fiscal to actions 'XX. much and obvious moving than actions. in the we there's we'll for really reasons And of first (inaudible) prior providing we we've be still our of respect better quarter subsequent with

TimothyO'Brien

a talked cut what on, been a the rate have earning that of you lot a of happen banks or loans on that loan assets a Moving onset is impact of rate today? today. with Do know reset to might cut sense give you lot be and profile that specifically occur of likely the yield would Can rate your cut immediately number? with the will likelihood or of banks this about from assets asked a today,

DonavonTernes

There for things are us couple a specifically. of

XXX, XXX, just shocks, shocks -- March to First basis you described shock or rate points. of associated we point net rate income all, or a where of plus minus XX-Q, XX instantaneous I'll with various a interest various XXX the

that shock of basis the instantaneous on XX. XXX focus shock or at by XXX interest an approximately March forecast subsequent Let's quarters X subsequent income the point reduce the minus would X.XX%. year We points our after net basis minus

we also we be to our but se in about disclose cut per Form were respect because modeling. negative June they'll our that And our by today At XX%, XX%, to them X.XX% will not going publishing those XX% be XX, numbers. I'm exposure XX-K, to in able with

position rates a So to we were at XX than downward in interest believe at we we move better June in XX. a are respect potential with March

XX. but asset-sensitive, were However, March less still we we are than so at

this described minus as the net not through on a a amount ultimately, And in go decline time XXX as occur income not will point expect line, we those by because that instantaneous because shock we declines an instantaneously. we would obviously basis, basis interest

in our There's respect balance to this. one with sheet factor complicating other

loans our notice off at XX assets XX, had take So will, held held table Those that if And a duration of if downward loans sale. June X because for we days. X the for previously, loans for repricing interest-rate with at scenario that. of cash, into had you we at extend sale held XX, within sale. of that our we XX look in automatically balance essentially some you'll were you sheet to June the risk balance Well, and

like cash than that generally June rate, see, cash earning would is and actually that cash have extent to we're position ability creates of effectively we into because our higher bit out in we of a which little the Fed the cash to or rate, the to And Secondarily, speaking. that redeploying a margin positive redeploy a at loans. loans interest XX our cash funds net that is higher a to yield loan movement would portfolio

cash because it. our loans able we it's sheet, redeploy to complicated more see bit the for a of out balance sale bit having transition being would than and So for little little a of to like held

funding subsequent we're are on the which is loans curve, total the belly assets So where at redeploying if we're we're from, rates to very typically low of our cash, side. the short growing and that getting

other every in sheet. like decompression but essentially So a will balance margin little have net as of time interest occurs, before bit growth we to occur institution, that's a that our

TimothyO'Brien

XX% that factors quarter. to potential reduction in, that the for is reflective going in be Does account XX% That sale in loans? to second a into that held take year adjustment sim calendar the And correct? for that

DonavonTernes

only our all portfolios. the not characteristics has loan It model in, our of factors Yes. of that repricing

all they against numbers, our interest those side, and we So side repricing liability that both as is adjust sheet, as balance are or forecasting the and asset the modeling forecasted on rates. of

TimothyO'Brien

do maturing you characterize have sense you weighted do the third near-term quarter characteristics third year Something other have are third And And rate average -- could quarter? deposit term is? for -- the their you base, -- calendar quarter? perhaps light deposits by the that much? on same repricing the shed what a deposits could the a of in token, in how you And that little

DonavonTernes

in years. see about deposit we've no the deposit Investor You our costs -- beta increasing balances not the up. rising as costs rates over of of result gone thing the course in done rates, a the we've rise presentation. couple deposit can what interest deposit of those or past interesting interest have There's during had And the

what that's do. any of deposit declining Fed also as choose have result a probably a the that, (inaudible) on path, won't embarks they costs if to As we

one to The our CDs. is respect retail exception that to with

are, we we pricing balance to And a in of will certain presentation costs grow also see have those deposit current the in CD to you been you'll similarly lose the that successful but what become category, aggressive will in repricing that balances So declining. those note we sheet, retail in CDs. We've investor also we more very been to deposits have only in retail to category. not deposits make balance grow that extent their

bringing pressure interest upward than the the actually deposits Fed movement of rates. while bit more the down had Fed So from experience the no is others side, deposit interest was rates a increasing even we our we've cost in though little could because

TimothyO'Brien

appreciate that to helpful note. That's I color.

XXX back could That XXX Just in of the XXX. the of the place when to FTE remind in take -- quarter, the -- getting you reduction, to us bulk the reduction did FTE quarter? that

DonavonTernes

the It was of middle quarter. the toward probably

I month like of wouldn't -- of argue the the So second or first it it I the would describe as the quarter. more quarter. as describe the month

TimothyO'Brien

million of quarter XXX captures essentially, a restructuring the of line, line, but cost that continued through comp expense $X.XXX hundred employment also the the And half couple the correct? regular of comp that thousand,

DonavonTernes

Yes, it does.

the as described of FTE per as those you the in fewer includes and so think $X.XXX we because additionally origination FTE loan quarter with XXX being by employees salable as down comp it incentive that you million $XXX,XXX a originations, impacted $X.XXX adjust commissions not went million, out quarter commissions. were onetime, of result much to XXX loan the really compensated because Although lower. those expense then se is many because during million that of dramatically was respect much And would volume if and not the as commission-based $X.XXX

TimothyO'Brien

on How -- base, received staff -- primarily all they a was much of compensated right? that

DonavonTernes

but originators, there our Not straight retail commission. were employees were who

Operator

time O'Neill. question Sandler from another do from O'Brien have At this Tim and -- we

TimothyO'Brien

I've might Donavon? since of you you I ask question So what have being, a you, rate, tax guess effective run your forward rate tax I'll up or go another Do rate end X. got sense

DonavonTernes

franchise of a basis. discrete that always items rate XX.XX%. the blended with the but there, the There's We Yes. that's in plus come statutory tax tax California XX% use on

So XX.XX%.

TimothyO'Brien

Great. know And this predominantly purchased originations? $XX then to million and in what were there of the quarter? happen purchases originations Was do loans quarter, -- this in-house you that

DonavonTernes

that in million of primarily purchased was purchased, and was that it June. was it single-family $XX and was Approximately purchased, and settled

TimothyO'Brien

for Okay. starting? you originators, as single-family far right? do community have are you the out beyond as far you're where in-house that do And -- fully in-house as -- there then bank or grow as you staffed concerned, production to you're have -- do you bankers, anticipate plans a headcount And needs build described

DonavonTernes

staffed reasons. we describe those -- first competitive not from would per single-family on an The of also don't that fully basis this is way a -- I all, numbers are or origination perspective, say se I would But not suggest reason. for we and the

some the moved essentially retail channel, occurring, we far primarily While retail still at distribution a have out amount. but of we smaller

that So through with become that our And may is been distribution channel, our exploring and are secondarily, hires with correspondent historically that primary as channels a channel. We've again of now, and single-family, of new respect there associated single-family a could purchase wholesale. channel. correspondent to out origination days, become and we But all some channel. be channel if does and new new a in

perhaps perspective an I is activity, a envision than a And on single-family portfolio could deal bifurcated to used then it's between salable. focus a because these interesting is where become coming to investor. purchase from area to easier in now in be investors secondary our market we into bit our and rather portfolio the there little with it And packages source staff and that loan going become and now able to that be what the sellers work member

TimothyO'Brien

quarter. this looking Was I fee that down? that, trailing, And atypical see forward? bit you income anything not at break can that little we mean Other a then elevated might going question. one in was last just there

DonavonTernes

No.

quarter, I it, in rate. our run $X.X I we of looks other presentation, if and you lower a million that's that the per it's like $X.X fees look has X it good think million investor slide Slide to average at on think the left

End of Q&A

Operator

further question no in are the There queue. questions

Craig Blunden

we if right. questions, speaking are All joining next on to and the look again call further Well, there no forward Thank us like everyone for to you all with we'd you. thank quarter. today,

Operator

and you Ladies that today. for Thank your for gentlemen, Executive participation for AT&T and Teleconference using Services. conclude conference your does

You may now disconnect.

Craig Blunden	Chairman and Chief Executive Officer
Donavon Ternes	President, Chief Operating and Chief Financial Officer
Timothy O'Brien	Sandler O'Neill

Provident Financial (PROV) 4 Aug 192019 Q4 Earnings call transcript