PROV - Earnings call transcript Q2 2021 | Provident Financial Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, there will be an opportunity for your questions and instructions will be given at that time. [Operator Instructions].

conference being today’s reminder, a call recorded. is As conference Craig Blunden. will now to the turn I over Please go ahead.

Craig Blunden

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

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

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

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

million held investment, the loans quarter. call. of To with, that begin review hope Forward-looking results. and prior statements purchased participating second in as thank quarter, from obligation originated an quarter has In information. loans I $XX our the this describes for are $XX.X you you effective are the recent to our the made earnings they we our decrease in no date update only million sequential opportunity each most the company had to for and a which release, of assumes of

that loans and rate we still elevated from XXXX loan XXXX is the real for experienced multifamily the growth in payments the borrowers payoffs, many $XX.X loan economic estate During lower for principal the tempering the September December investment. quarter conditions. held waiting of it credit $XX.X remains on down but quarter, of risk and competition commercial sidelines In million general better also million been quarter, which the for seems products and have

we regarding purchase it's requirements. underwriting production diligence difficult single Additionally, cautious our still particularly with on are season loan complete loans packages, family to consistent because individual due

credit For XXXX, loans estate the held investment December three declines XXXX to compared XX, growth construction XXXX. the loan real family, in months XX, XX, approximately by categories, is early by holding Current decreased in $XXX,XXX September just for and will commercial you single up ended X% with and multi-family balances the quality category. stage December well partly at that offset delinquency were note

XXXX. of result was However, TDR at triggering forbearance. non-performing nonaccrual another payments a resume not expiration extended being for We their the as the $X.X period XX three able assets non-performing assets result status. their to initial at million, the June from increase monthly months, which of of non-performing forbearance status of million downgrade the loans forbearance a in up increased is $XX.X The downgraded to to

a reversal receivable during downgrades quarter. of non-performing in interest the December Additionally, approximately resulted XXXX of $XXX,XXX accrued

event the sooner that and borrowers to provide experienced be and earlier full and balloon forbearance amount due for loan term date. the June but has payable payment payable in end loan at as the to or months at will if in the granted, declined six of full due becomes forbearance the an a for to levels We our continue March, payment forbearance is in XXXX. from note forbearance May In with work up requests significantly new April,

Exchange Accounting Standards Commission. criteria interagency, guidance from Securities and regulatory Act, plan and the and CARES clarifying the statements were promulgated forbearance Financial Our the pursuant to Board

that result, favorable the cited majority qualify the forbearance a in a we loans. As of we our on believe vast provision guidance for

family under six balances XX, for December of were in investment in loans of of with multi-family held X.XX% or forbearance for there of loans loans outstanding forbearance and balances $X.X XXXX, investment. two approximately gross outstanding As X.XX% gross held single $XXX,XXX million of or loans approximately

note after forbearance XX, in routine result will that You to December that in extension. resumed these to as decline comparison of the balance a monthly loans were in significant migrated of of receiving number balances on a loans XX TDR September forbearance payments XXXX

$X.X classified an relief. combined XX as of approximately approximately $X.X payments just December their and months were to during restructured XX of loans XX balance million were status forbearance, to XX, downgraded as to monthly non-performing principal three a granted the the loans loans additional scheduled quarter. reassume Additionally, initial with million of subsequent forbearance their of or

held points One basis a the has to in XXXX XX losses from September for to provision increased of the downgraded XX XX on previously loans December classified. The We and on loans loan basis for recorded allowance XX for investment losses $XX,XXX loan points December gross XX. quarter.

and You compared CECL. loss the be on have CECL adopters. to will model that This methodology we means reasonably adopted note cannot that not incurred remain our allowance

at bearing interest basis stemming in and from of rise The deposits interest XX net yields. point primarily margin by the decline result a result sharp significant of X total average was average decrease the basis XXXX sequential cost offset XX earning point quarter the to the XX, in for Our loan bearing the in yield compared total by assets, interest increase ended the assets compressed liquidity, quarter prepayments points a as basis the XX partly and total in December yield reinvested decrease on lower September of in a liabilities. and interest

December of by basis likely Loan interest margin quarter. quarter. newly to basis loan that this points as in of current impacted X by cost a accrued The described X Bank of with points quarter on balances further increase basis the rate approximately in basis amortization Home to declines in deferred of by the the previous the And comparison for to to December X.X% previously X quarter sequential net approximately costs out stemming the average non-performing XX, late point five believe cost the points the loan Federal XXXX associated XX decreased quarters are the was ended off environment. also reducing quarter deposits we of approximately I the as basis average points loan begin from would December also receivable paid $XX in interest XX reversal we the loans. by negatively the we like our borrowing the interest the the result March quarter classified cost deferred of amortization Our XX that payoffs and given compared September points, XXXX million net net

throughout the year, for operating Notably, FTE decline. same the operating count company last to look to our We XXX lower December date XX, on FTE compared expenses. XXX continue to a to on XXXX efficiencies decreased XX%

a compared fewer cost the year, $X.X approximately quarter As approximately savings, to current $X.X a million declined the other million of employees result in expenses approximately quarter of and in our operating X%. to same decline last

by expenses quarter, on approximately Additionally, sequential X%. declined operating a

action, In cash stock executing loan lives interim, the capital mortgage for four and that excess leveraging our without of portfolio allowing unchanged believe strategy sheet redeploying believe significant on of We but current maintaining that from balance prudent we’re estimated ratios plan environment liquidity We that quarter. business with on very and in best We course a Our with strategy so backed the government growth securities us buyback priority goals sheet is prove short-term and approximately execute over is difficult. sponsored by exceed capital important the average complications. the dividend last doing management margin years. takes well balance to capitalized our activity. management may is

in we any December not the that and has stock in become shares capital result, wish did increasingly to a repurchase current environment. As common safeguarding XXXX quarter emphasize of the important

that However, to shareholders through returned a valid prudent we stock recognize programs is tool. capital buyback also management capital

March We current review buybacks XX will the encourage to on presentation site. quarter. everyone our our posted We December on our reviewing investor XXXX Web be in position

financial slides of particular, balances that the December the commercial contains metrics, quality XXXX will additional of financial the regarding our believe our real XX you XX, table and footnote growth strong asset give considered of and portfolio supporting future In with be You capital we the loan will as insight the foundation on which describing X risk management, table that find and composition Slide we environment. secured may estate in forbearance commercial current company. the higher real include estate the the

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

Operator

Instructions]. [Operator

Tim We ahead, Go have a Coffey. from question sir.

Timothy Coffey

gentlemen. morning, Good

Craig Blunden

morning. Good

Donavon Ternes

Good morning.

Timothy Coffey

items Can the go that the you over quick real quarter? income flowed or this nonrecurring extraordinary through the interest just

Craig Blunden

Tim. Yes, I'll that, take

quarter a we result costs proximately basis downgrading the the that the impact a net we all, basis a prepaid interest point acceptable to forbearance interest that the margin. forbearance impact our the non-performing about on the the net them interest net of net margin as loans interest of about had basis deferred first coming reverse and the receivable is to X negative had was So out we And as accrued impact point had loans to quarter. was result which accelerated margin about from where then of secondarily, those. compression particular extended, category, during X loan into for of the status migrating $XXX,XXX points we interest X That accrued

Timothy Coffey

was that in basis X much In the points, dollars? how

Craig Blunden

handy. Actually, what, don't about you I quarter. dollars, In $XXX,XXX that or I grabbed know It's handable the it. readily have just for

interest it's on So basis points about net annualized margin. on the an X basis,

Timothy Coffey

obviously, totally a during X way different. function quarter? the Okay, that's is during that helpful. the a the just quarter, points, right? of X the interest But Is one, moved that of rates the way points rates basis the the That's function the basis just moved not

Craig Blunden

are the or to over attached loans loan of the have the to the deferred No. the prepayment loan net loan. or life specifically net amortized The loans specific accreted either them deferred life either fees It's of that of over during loan the tied quarter. costs

costs paid off, from paid loan absolute quarter. be fees, net in the amount the can depending December in that which payoffs. number And the to of net upon deferred was of total deferred quarter next; costs had quarter one, deviate accelerated occurred dollar the And to one that deferred the With net in the off. or

depending costs there's deferred accelerated. net deferred to which be deferred individual off loans. accelerate, fees secondarily, deferred fees loan will come net opportunity net And costs through for to that respect with more to statement. payoffs upon determine pay deferred loan costs attached But As in or occurs income what loans net the are or net

Timothy Coffey

it a not kind of new extent, also the payoffs. of loan going of pace to seen before there's be payoffs? a to new to certainly right the kind It's headwinds phenomenon, And the of Is in cycles. not that guess to this previous where downgrade we’ve your phenomenon certain because is new challenges sit And of reasonable expect I now because net finding a so loans. you growth

Craig Blunden

family in been I but the a ending portfolios put And about think accelerated single loan single that's the we category, portfolio that see balances think and during starting Multi-family you to the I fair, of quarter, actually during payoffs will look a the occurring, quarter. kind the construction loan loan to commercial just at and down. loan you context. Yes, portfolio If real the such quarter. December by that payoffs came it in came have down want increased bit degree family and estate

we well. underwriting could or competition payoffs do it payoffs in market, respect relates December then as commercial of with as in the to are to criteria underwriting. elevated. not to because that as quarter given would we're where a key the the fixed and rates how area. is primarily those did respect our phenomenon there what generating to quarter, about in obviously component And with loans think estate secondarily, see with remain through family, are same And although originating COVID-XX quarter, and that's occur real was COVID-XX. to the in December our responded multi-family to single to function And in well looking the any We as with we respect with the elevation we expect during I family rate single So are the

more standards XX becomes our except the where tightened were March frankly, year. of last bit back fact, bit to still you family underwriting get March a perhaps in to underwriting again portfolio held more the in November to well, tighter bit year. single them probably And category type are will. or but pre-COVID. in of loosen has COVID for pre-COVID as we we XX if loans. we that loosened quarter in May a loosened than year, looking of In We them we where up transparent, of last impact last a We them downgraded pretty And

Timothy Coffey

at that, if XXXX again, your second of provision to Okay. you forward kind that could sit expenses, half closer half right be now calendar first of of to it it going calendar look XXXX? where you much the Is expectation of relative kind

Craig Blunden

Yes.

December gone largest up. non-performing second non-performing and as done to declined six think March with loans just lo with that increase and at and suggest, actually of And look June look you how quarters eight following allowance the allowance that calendar family in quarter provision, September March our source in the we beyond directly than even the the XXXX, are our those where had then you two loans, were we we're in the during provision, But loans obviously as extended September forbearance though I largest the deterioration the so was and months. single the And non-performing those came portfolio, they in grouping the smaller was loans loans if from quarter. respect provision. provision, in period, at what the multifamily, behold, actually in starting the then far then the we had additionally, we the forbearance forbearance loan saw six grew

portfolio So if be at go again significant at would does given or and we dependent portfolio non-performing see rise as economic frankly, level, the position determinant as what in general the it see upon conditions. future forward. what see appear XX, the current provision, at of XX, improving I if think December based December non-performing it we we the And in upon about not loans a somewhat would we

Timothy Coffey

I’ll there. right. gentlemen. All very stop Okay. Thank you much,

Operator

question go Bob Please next is from [ph]. And ahead. Shone our

Unidentified Analyst

went debt loans? weighted Hi. average ratios? of Can start It’s Thanks. classified. to we just with morning. those XX restructuring, Good Just trying loans? Clark. the Maybe some for those give Shone what LTVs coverage understanding get restructuring if maybe color downgrades and Bob of of into and could better Matthew you Maybe a around kind those service

Craig Blunden

Sure.

then LTVs tacked of to So payment have respect months, I as the with than back notes the to for the to with the specifics other three the to respect changed a weighted the and respect the the another repayment forbearance terms restructuring end relates none with to portfolio. don't three terms, were of on were extending in it balloon. months average that

the get can they September investor of XX. by You where were on sense XX Slide looking presentation at a

of of to earnings it with payments know significance, the evaluated allowance will. making see With the I that further I a You'll I XX that there provisions Overall, loans were around the associated allowances significant while real content, by were just those or we with believe the will release, California LTV see loans And borrowers it the their loans. the with that, the you portion Form about XX-Q. LTVs. weighted our very specific protected in we the lower those if average in estate or content against individually if so secondarily, XX specifically are moved markets previously, unable form path, see well because $XXX,XXX. the strong, begin in the believe was LTVs don't the such then down we them of ultimately don't loss respect any because you'll those associated of loss to deteriorated we very, earmarked took the where up $XXX,XXX $XX,XXX that foreclosure $XXX,XXX SFR again, you And have were extended. associated at those that from that monthly don't time and loans think see or loans that, is

Unidentified Analyst

can in price know share maybe up going change then any repurchases? those that's is available about about a it's we've if that talk value. regarding I full of can remarks, got Awesome. to in just I your That's willingness repurchases. the run authorization great I kind And the to reevaluated. sneak be start book more one in you still in tangible you and just talked prepared color. that towards know something Maybe

So on great. be that any you. color Thank would maybe

Craig Blunden

Sure.

positions where exceeded to our lies, where understand capital are, growth obviously respect our that been volume constrained fact has opportunity payoff volume. little where we in we've not with bit the a origination So,

And we’re something perspective capital thinking our we so to in because from should of or are COVID as And our calendar not repurchases through economic about go if because through be should is form economy, has be the improve returns out but the situation, secondarily, rolled it does that we now. been the will, appear vaccine people inoculated, 'XX. you getting and something

involves tangible consideration. could because it I time. that. book discussions that's hindrance a on regulators. XXX% with our bit ongoing. That little price value the are obviously to near Those a table this is right guess we And not same than So is provide for around I consideration, franchise back above level maybe is the color tangible book The our or discussions the se greater obviously being or per think at

have suppose. would been sure it I yes, repurchase months nice to ago Although, six

Unidentified Analyst

Thank you for back. that. I'll step

Operator

no And questions we other at time. this have

continue. may You

Craig Blunden

Thank I are to Well, our to again everyone call there forward you. no conference if quarter. speaking all want and questions, you next thank for look of other with quarterly attending

Operator

Ladies XX AM today available February Standard Time X replay at and midnight. this digitized gentlemen, for is Pacific through after conference

And time and for XXXXXXX. is Again, by may for the code calling today. that code the conclude you does Thank conference You at access access access AT&T with teleconference. the replay XXXXXXX. participation enter number X-XXX-XXX-XXXX for using phone the X-XXX-XXX-XXXX your service any and of of your

disconnect. now may You

Provident Financial (PROV) 28 Jan 212021 Q2 Earnings call transcript