PROV - Earnings call transcript Q4 2022 | Provident Financial Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Provident Financial Holdings Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later there will be an opportunity for questions and answers with instructions given at that time. [Operator Instructions] As a reminder, your call today is being recorded. conference Blunden. to the and host, turn Craig CEO, now call your over Chairman I'll ahead. go Please

Craig Blunden

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

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

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

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

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

of recent that multifamily borrowers at completing from quarter, the $XX.X million most end experienced quarter the real the $XX.X we which and down and million loan the loan Currently, originations, elevated are competition is principal many March seems commercial remains and XXXX it again lower payments also transactions. for pay-offs quarterly once During range. in of the but estate

seeing rates. straight adjust demand result mortgage a fixed interest mortgage of a for more Additionally, higher we're to products single-family as

For the pre-pandemic to such loan criteria, have retail our for CRE, a underwriting requirements and part, most returned bit products, except office which remained as tighter. certain

a to our mid were fall bit to recent of quarter million quarters, to range which smaller 'XX been originations the million. has prior comparison [ph] quarter, purchases Additionally, suggesting last and multifamily $XX in the the lower of single-family in between and our $XX September pipelines wealth end and

approximately XX, March is For with and an estate the up held $X,XXX early-stage And commercial as the more investment XX, at X real than increase very Current months family to categories. in setting ended delinquency multifamily increased was for small credit just note you'll well. XXXX by starting declines June X% loans single June holding balances of loan XXXX. construction XXXX, XX, in that balances compared there

status with March on which the to to nonaccrual $X.X is the the status TDR assets were in compliance million decline note to down result in nonperforming decreased assets the nonperforming million, that forbearance XXXX. XX, from premium upgraded Additionally, $X just downgraded previously their forbearance. of Please terms subsequently loans is that satisfactory performance performing primarily given of

on XXXX, new XXXX, ended in forbearance. Previously, there requests XX, forbearance no XX, March June of pursuant program. to our we were As loans

points reported negative agreements now a performing TDR forbearance forbearance June XXXX $XXX,XXX June result, on and XX, course investment March in nonperforming basis ran their a gross as individual classified for decreased status. XX provided a to losses a held loans for loans loan in with The their on XX in basis loan primarily are losses few allowance the XX. loans As for points as provision quarter. XXXX, remaining to We from

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

Our quarter of point cost average Notably, point by to basis prior sequential decrease points June the basis quarter a the expanded for total of by XX for our point XX, XXXX, in March increase the compared the XX points XX in XXXX, a compared and points as to to ended basis assets one margin one sequential deposits quarter, the XX declined total the in a cost basis net interest XXXX yield liabilities. average result ended of in June basis XX, basis interest-bearing interest-earning quarter.

this the borrowing fee approximately five XXXX loan loan June our previous $XX,XXX of a by associated restructured in the the amortization The compared quarters this a XXXX and net deferred to 'XX June the the net from Additionally, with fewer deferred quarter net costs paid in XX margin quarter X.XX% in was deferred loan cost interest as impacted points result - were quarter basis loan payoffs recovery legacy costs in loan positively comparison that lower March cost average the quarter. off of quarter. unchanged to

near-term will also benefit higher future quarters from of result that fewer interest mortgage as rates. a expect loan We payoffs

rates. higher higher adjusted adjusting at In our comparison portfolio to loans, and to in is rates loan part existing [ph] its will our near-term interest addition, interest production in recent plate margin their the that being rates rates. mortgage Also, factors interest These interest and floor quarters our the loans expansion. now commercial existing are mulifamily are loans originated continue net in suggest above for estate adjusting real

operating We to continue through expenses. efficiencies lower operating look the company for to

last to calendar increased XX, compared very small FTE increase. XXXX on day XXX year, to FTE XXX the June same Our

were $XXX,XXX paid expenses declined million refund a from from overstated on per previously $XXX,XX billed on refund other $X.X the declined from retirement runoff TO higher a recovery employment paid in on employee the adjustments. the note $XX,XXX $X.X that operating of previously rate quarter Operating XXXX a You'll stable calculate and June a of that benefits, result expenses as plan from service a discount to quarter. supplemental taxes, among stemming roughly million the invoices rate vendor used network

We return rate pressure we pressure increased our to operating as other inflationary of expenses. on result fiscal expect wages run expenses and operating in anticipate of on XXXX bit a a and stable

in in and the also deposits, receivable securities increase average exceed We maintaining is interest by lower-yielding allowing business the of improved in short-term action. margin our on Our quarter management average - of capital significant liabilities strategy ROEs. increase end improved from leveraging last decreases with the an quarter. for for with The which were average balance sheet the prudent end range. total assets quarterly dividend very loans balance us average bearing of that of balance volumes case with the best investment loan increase higher very origination the important. is interest-earning that management and lower of complications. our and the in - execute payoffs of well-capitalized in The is balances believe balance the outweighed interest purchase composition in the portfolio during balance We of deposits. this We at plan quarter the earning to sheet growth in unchanged range a slight course the successful the goals capital interest believe and earning composition loan the and ratios execution quarterly without We and loan total

prudent to stock XXXX tool that through XX,XXX is also and common of a We returns valid we June stock a approximately recognized capital in capital quarter. program shareholders buyback repurchased management shares the

to cash quarter, and the million. dividends approximately shareholders paid we for of shares XXX,XXX fiscal $X.X For stock of common approximately $X.X repurchased

resulted activities XX presentation XXXX review our XX% in management a We encourage on website. of fiscal everyone investor net income. capital Our our distribution to June posted

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

have will Go Thank regarding now questions you Go We'll first line ahead. ahead. financial the entertain results. Piper of We with Cucharale [Operator Instructions] Sandler. our go Alan? Nick to you. any

Nick Cucharale

are day, and how Craig Good Donavon, you?

Craig Blunden

Good morning. Very good.

Donavon Ternes

Good morning.

Nick Cucharale

what It remain originations linked to in towards were tilted in the originations prepared expect near the in the half looks quarter. and term? purchases in commentary you on the space, in Based of of they conditions the tightening of single-family remarks were would multifamily your segment and that purchases composition like about

Craig Blunden

yes, a I of contrast an towards production single-family multifamily think here swinging is little volume is bit commercial there in origination Nick, real expectation and that to the estate.

fact, I rates. volume. think, though payoff Although in range significantly quarters right in of over down the are past of to channels bit would what I single-family higher the were six range would seeing to we're origination payoff a for percentage sequential we've see four, rising a why a we've comparison that four, past suggested six payoff in total quarters. volume result all That's is core also origination or out the would where we've volumes, that with five, volumes in done that in five, probably a percentage even point interest primarily, seen total now the as just are so. payoff both quarter respect and from down of they products as in And we volume multifamily mid tighter

Nick Cucharale

for I April. your If on Thank like on demand? increased to buyback? slowdown more That's [ph] purchasing is you us in off dry the you by desire the it share ceased thoughts color. understand great powder with correctly, release save the you. And looks Can driven a shares

Craig Blunden

it's mind our saving to net respect cash approximately powder stock XX% in not prepared is dry function ability and repurchases. way with sheet. year balance that income the dividends of described we fiscal to for of But Well, of se, per that necessarily grow remarks, a by of we our top although distributed potentially our

forecast being extent the any that fiscal net of to we to with around that’s year. get respect distributed XXX% we for activity income So

Nick Cucharale

Thank my questions. taking you for

Operator

to And Tim ahead of next, with Go go the please. we'll Janney. Coffey line

Tim Coffey

Morning, Thanks. gentlemen.

Craig Blunden

Morning.

Donavon Ternes

Morning.

Tim Coffey

drag start as there of way impact been quantify kind the any impact there is because previous because you can to payoff is of in on it's slow, benefit? quarters, slower the a way But any from payoffs have So NIM on so loan the they to that been big. the quantify kind

Donavon Ternes

sharply, which with Sure. so total came see in the net in is describe declining what increase quarter. additionally. what that you or by And that the down I driven deferred net decrease quarter, any amortization And volume cost volume given we the largely loan for is payoff volume. additionally, describe mean is payoff payoff amortization cost then for loan we

cost cost was quarter, $XXX,XXX. So deferred loan June net deferred March In for net the the amortization quarter, amortization was $XXX,XXX. loan

amortization. of net lower respect margin a well by cost will So see lower net interest that as deferred do, loan that’s will do. And large what we nature will net the as interest income driver to payoff with volume, what

rate mortgages. I loan Tim, portfolio, The other is about comprised add, adjustable thing our would we think of it primarily when

in We prepared described are estate floors, in multifamily are which through that we commercial also the primarily the and text real busting products.

bit December based upward that be $X another upward readjusting So upon approximately repricing And basis as are have be had points. loans data indices they the and upward. million we for that give will XX these are a million our on June have color have quarter, data quarter, that modeled approximately we $XX come approximately at $XXX have be just we of adjustment. $XXX by XX approximately will that. modeled, will XX And based adjusting portfolio basis upon again, – by to the and have In that, adjusting modeled million loans that have slated for for you million our risen points. of June September the up loan we adjustment, of adjusting upward, XX In

in So and that real effort estate. adjusting and through rate margin, multifamily portfolio interest the busting net we commercial mortgage adjustable the when think we contained is about floors have

costs occurring loan new, impact then have of essentially portfolio to that or also of which balance yields cash portfolio the yields. and We our using rates, the margin. a higher higher to And flat. remixing moving additionally, have and are this growing net for funding sheet flows interest at the positive at adds And investment is we're out and securities the those time cash loan same

basis quarter X in down they're the comparison think to point I in quarter. the March June fact, In

quarter the don't of what's term to margin. as rise we about near-term expect though future it higher expect margin that our relative quarters, XX in really expand, the points net I quarter near even XX seen supporting the near-term we interest or we we basis though would growth March future quarters interest an that's surprise that - points wouldn't would me historically. the June what quarters that basis think of expect to we've in even is also future know increase So the another than And I the increase suggest net in

Tim Coffey

other are Donavon. That's the of Okay. expectations great Thank is, deposit color. that beta? then for your what side you, And

Donavon Ternes

respect an increase our raise the experience. we've to going increasing have date, future every holding deposit pressure others, obviously deposit going been institution But many other not costs. to think We, Well, about as seen quarters, in deposit we're with we to more as to is rates near-term financial out to as experience rates.

costs And for December the quarters, we as to so expect September increase we out and would deposit to instance. look

we are basis weighted I cost Although think September we costs the as type to there's if will probably are overall costs matures funding borrowings, gets as If that million quarter the double have be $XX seen And going points. deposit of million other to into, Federal But well replaced. perhaps. increase. again, and see doing, which advances that XXX Home probably costs think to advances, it, not points those of of those in call in XXX beta advances are expect those some on deposit basis Bank no I it Loan in we've for going denying $XX advanced institutions that primarily maturing replace I we average and

think to which So deposits will about may about pressure consumer, than funding pressure think pressure as composition, don't yes, see on everybody. beta we others deposit other have deposits, think we we feel. But and or or institutional many more much deposit business we feel our retail costs, primarily like going we're as from see I our will when deposit

Tim Coffey

there just final feel question. with then upper ratio? you do And Is comfortable the Okay. one an loan-to-deposit bound? Where

Donavon Ternes

your rather, Well, [indiscernible] what is

Craig Blunden

C&I Loan the generally historically, close within to uncomfortable to we've of we're XXX%. in like meaning that use looking balance rate We're deposits. interest nature on, Yes. not which Home contrast that. our longer-term context fact, provide at us we I than We're loans management. to will to mortgage above given composition of mean, of loans mechanism markets Federal most able access of had and funding ratios We're from loan-to-deposit in types risk to the getting the rather funding of mark that the lending And it sheet a being again. in or exceed advances, type Bank a products

going a we're So the and that ratio term recognizes loan funding for not a us, the provided is XXX% it in really such characteristics of above assets. deposit significant way concern repricing characteristics

Tim Coffey

Those right. Okay. are Great. Well, thank very my questions. much. All you

Operator

Instructions] questions have no [Operator gentlemen, speakers, And other no we have we other in queue.

Craig Blunden

next questions. All right. everyone look I Thank to quarter. Well, forward again there's with no other you speaking

Operator

this Ladies XXXX, into and today, and available X, is August for replay at gentlemen, beginning lasting conference midnight. X:XX at p.m. July XXXX XX,

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Provident Financial (PROV) 31 Jul 222022 Q4 Earnings call transcript