PROV - Earnings call transcript Q3 2024 | Provident Financial Holdings, Inc.

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Operator

Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Provident Financial Holdings Third Quarter for Year 2024 Earnings Call. [Operator Instructions] I would now like to turn the call over to Donavon Ternes, President and CEO. Please go ahead.

Donavon Ternes

morning. Good Financial Ternes, call of Nguyen, with Vice and Donavon and Financial our and President the on me Chief President is Provident CEO Holdings; Senior This Officer. is Tam

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

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

payments result higher still that investors of which we $XX.X interest the as million seems a and their and lower up have the of mortgage quarter $XX.X December many of most also from at other range. Currently, real recent quarterly it reduced rates. loan quarter, During activity in million payoffs, end the the XXXX is had and principal estate

a we higher Additionally, rate single-family interest for as mortgage result of consumer mortgage products more seeing fixed are demand adjustable rate rates.

requirements tighter across product tightened We and costs, of economic underwriting current condition. environment, result lines have the higher our increased of generally liquidity all funding our as our and a pricing

single-family which comparison Additionally, last quarter million. this at originations quarter, and $XX and loan will lower similar range to pipelines are similar has our the multifamily $XX between in our to loan XXXX the million been June recent end in quarters, suggesting the of of be quarter and

loans. held investment $XX loan For estate the offset balances XX, X loans quality $X.X assets for and that in multifamily, which to at XX, is XXXX, to by approximately partly million Credit categories business decreased XXXX, when will December in XXXX. increases by March commercial the increased months and very December with XX, you nonperforming real compared ended $X.X holding note commercial XX, up March and ending is from well, construction on up decreases million single-family, million XXXX,

delinquency is XXXX. at XX, there of $XXX,XXX early-stage just Additionally, balances March

will are and confident perform regarding aware the characteristics estate loans, borrowers that mounting our of commercial office, but We are continue real underwriting concerns collateral the of particularly well. to

$XX.X portfolio. We presentation, loans investor our of quarterly that XX exposure on have characteristics of shows types various for investment to of outlined held these which Slide is office or our million X.X%

billion life losses loans from provision portfolio declined of loan X% recorded at the loan for $XXX,XXX of XX, December for held March quarter for of XXXX from on $X.XX from the single-family loans note balance estimates, for The loans increased $X.X gross longer XXXX. We credit at XX, for outstanding $X.XX quarter. in credit The December XXXX, points lower basis held third to investment and also at a for XX the million the XXXX. have to remainder prepayment basis investment losses recorded rates maturing fiscal XX, just 'XX XXXX. points a that XX, March the increased primarily resulting March credit of allowance XXXX, provision in for interest losses billion was market should You to attributable while we to CRE X estimated XX

loan deferred payoffs increase December by basis for Our impacted a cost March XX X our net as to with deferred points previous March interest sequential points quarter net comparison of points an the our and by the Notably, basis margin loan XXXX, the of cost assets, to compared as net the average X ended to the cost interest XXX the this increased XX, approximately XX, margin basis quarter XXXX interest-earning interest-bearing basis by of March quarter. And basis to The XXXX total increase points sequential declined December result X.XX% in compared the for XX point March the cost costs of basis liabilities. to borrowing average deposits quarter in a net by points quarter the result was X total ended quarters. the in XX XXXX, average X loan in compared higher in the quarter XXXX, point of on the yield associated net in amortization prior basis point XXXX to of negatively XX basis increased quarter. XX, quarter

being in higher rates existing interest their quarters, is prior rates comparison in interest are originated to mortgage portfolio recent production our loan higher interest rates. than rate to New adjustable adjusting and at loans

X.XX% at average X.XX% rate approximately a $XXX.X $XX.X September estimated currently in a approximately June quarter XXXX points XXXX rate in loans points a the million loans to the basis of from upward quarter XX repricing estimated of repricing currently upward average and X.XX%. million have We X.XX%, a to at basis from weighted of weighted XX of

wholesale to where their have loans categories interest lower that downward caps. I an of in periodic maturing by all adjustment result out many terms. in adjustable reprice rate rates currently in funding are rate their is moved a XX-month-and-longer also current interest market as However, limited point would conditions current there upward opportunity

subside. All the pressure may interest current suggests of this the that net on margin soon

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

FTE count XXX the to Our FTE same to compared March date XX, on XXX XXXX, last increased year. at

that to decreased will stable consistent with the rate approximately expenses XXXX is $X.X quarter. operating which the in $X.X million run You of March quarter, note per million

a For of approximately fiscal to XXXX, we continue $X.X run expect per rate quarter. million

run lower In fact, the somewhat the X per first quarters been actual though, $X.X rate fiscal year-to-date for at quarter. million has

best and management of inverted this more sheet balance time curve. for the loans as loan this slowing the a yield small and of this action decrease securities. fiscal lower-yielding a of in We in loan end strategy last loan also the execution origination balance low of the end the of liquidity were decrease quarterly payoffs of short-term believe low conditions in quarter range. the average We with the somewhat range at conservative composition quarterly than the is The year. is total portfolio receivable course the at growth result tighter volumes investment successful the interest-earning strategy a reflected of at balance assets that Our and average

that borrowings. with very management execute margin, is without goals interest-bearing of decrease decrease the the improved maintaining balance larger capital our We to believe significant our In dividend of complications. exceed important. but allowing average We a and deposits somewhat composition in by cash liabilities in well-capitalized ratios a us addition, on capital balance average the business total a plan

We through March we responsible also programs capital capital in buyback quarter. of recognize stock is management returns XXXX and prudent XX,XXX approximately that the to shares shareholders tool, a stock repurchased common

common $X.X stock. distributed million approximately we For the shareholders of approximately year-to-date, fiscal repurchased and dividends worth to million of cash $X

result, on fiscal activities investor our to As website. everyone our year-to-date income. resulted in a posted capital review a XX% We distribution management net presentation encourage March XX our of

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

now any questions Kathleen? financial may entertain results. our regarding will that you We have

Operator

of Sandler. [Operator your of question Instructions] line from comes And Liesch Piper Andrew first the

Andrew Liesch

trying on 'XX? it? seems here. the of then to of way sounds it that pressure in just It said maybe Is mean will the quarter pressure it the in guess everything, quarter, triangulate first could subside stabilize that trend bit looking soon. like more little current and right like margin -- at Does this fiscal you a Donavon, I maybe the

Donavon Ternes

our we and portfolio, which the X.XX%. the loan maturing to described rates. described But prepared weighted production approximately doesn't obviously volume, in $XX.X in advances repricing that that are with current those Andrew, remarks our payoffs for So respect what of quarter. that million average in earnings which coming in any FHLB at we or account we have interest the see new rate advances is higher additionally, It's release, is you'll occur the might

so lower, current maybe replace FHLB where advances, were advances. given term same approximately at those if rate, respect the the depending can upon So we with rates we today, bit little we those think to choose replacing do we advance to are, a

at the X.XX%. quarter. can this brokered we downward, the don't And of are replacement Additionally, those it while we those we maturing average reprice remarks, term CDs have weighted below again depending CDs approximately of the brokered are $XX we brokered upon prepared cost a that have million for CDs We in choose maturing X.XX%. think

close opportunity wholesale respect to to or we thinking to with funding costs. addition rate in with to the adjustable our repricing upward have the downward to sheet balance loans, So remain respect about neutral also reprice

we opportunity quarter. as decline carving basis through points again fiscal down we think quarter the of margin, interest It So quarter. last in an which we this or quarter, the net from go this was to have fourth X in went

June the points very June of the we on X being interest even a in April, to just in May, for have good me, flat full sheet the seems it quarter, basis of kind depends to repricing up June, months, the get of maybe certainly, because until everything or reprices. quarter impact the picking the September in this the and X net when all margin We shot, don't it quarter, June quarter. But at and balance occurs

Andrew Liesch

replace $XX.X pricing CDs rate right, get a not if it. of million lower helpful. pretty you that's with FHLB, the those? brokered Got is Why on similar. All The just those

Donavon Ternes

Well, and want we we're and Loan and measure Federal We the we we form, our like. we CDs that Bank's particular when also brokered basis. in And if may could, be line. will, can advances and both is form what but on occur of brokered CDs to go-forward an game advances, Home to option, do is that don't we time any with sensitive a you funding in FHLB the out that on repricing the ladder dependent it down plan wholesale so

the to chosen composition from current of we the sheet. yes, so that at this risk could. answer funding standpoint with think a And not respect about because to do we've so wholesale balance the right is But we is point

Andrew Liesch

Then the Got it. helpful. $X.X hear run I'm I step-up just here rate. million the quarter? to would into. Does item All right, out you that's a on on just figure trying what that fourth line in imply expenses, go that

Your costs continue controlled here. pretty to be well

Donavon Ternes

expect we're little fourth $X.X million. in end bit come that Yes. the looks X great what end the $X.X gets a completed that fiscal entering run the also items better at wouldn't There quarter. and fiscal the at the described than of of like. true-up a of But year. the I analysis quarters the that through year deviation are at first rate done million we've deal We've versus from what many

from So wouldn't or way one another million. deviation expect large the I a $X.X

Operator

from the from Janney. And Instructions] comes [Operator question line Coffey of next Timothy your

Timothy Coffey

I of question, in the the next you deck. the -- balance so have that color XX the borrowings months? have over the XX on that's deposits slide brokered much on appreciate I'm on of in months brokered that matures a sheet, how I the wondering, next the

Donavon Ternes

of a months. over the that significant So portion balance XX next matures

kind As we is out given looking maturing respect and what to terms new I've the at months. described, that with in been XX-month, look given of CDs, out. replacing XX-month we've Historically, we effectively ladders CDs, ladder and maturities at everything

over primarily release months, called weighted I earnings as will as next those coming too. cost, brokered are CDs, also, in think, balance the out So and the be far XX average due which

Timothy Coffey

Okay, okay.

demand loan and are real costs I kind do funding And side. there sense are say imagine any pent-up But that is so rate the down. to like cuts be that of the would little get you'd a your on estate investors? you more let's there from coming competitive

Donavon Ternes

by we're at And doing, margin Tim, uncomfortable them the with spread to conserved curve. margin ARMs, the in curve, we're with to loans balance negatively short the So the of the with and part with curve. board at sheet. we're impacted funding that essentially, what we're the is are at yield X-year at respect shape hybrid if inverted of And the which we're relatively of coming curve, growth the that respect making, that the end call on pure the

the year the course maturing there's portfolio what the to bumpiness So to what can, over And we've we replacing, last of extent been doing that. total is to the essentially is essentially keep flat.

For become instance, do with what most to it loan portfolio, more this recent for shrunk respect up to million so but quarter. by generating determined yield is, we we if curve. doing $XX we're fact that about wanted believe that in with could we we aggressive so the inverted uncomfortable the But

We much market. speaking, there how pent-up is know have the I -- generally don't demand, in

is loan so sheet rates. for for balance very do But could our on to we when right conditions. we own the grow sensitive and time believe balance current I respect based produce it's to interest sheet, think we with what portfolio us to could

Timothy Coffey

Okay, returns you're XX% aggressive buyback why are liquidity not aggressive volume know earnings. you're a buyback? getting on your of mentioned that to the But more general? constraints. appreciate kind close of that. on in the Is And reason capital obviously and getting have that Because is that then I you why just you'd not more

Donavon Ternes

been from I we Reserve goes to share notice with the to we know with se. to it's by what Federal both, that regulatory as aggressiveness business matter and When way, we may holding a expectation level cash Federal might is that those lay as the holding you year, that the with the OCC things And in documents level contained don't the respect a fiscal the at company is the is back filed cash in shareholders of the form our our plan dividend each the to company company. repurchase the it as out of and well believe speaking Reserve Form of at we September I what the it the about that dividend plan we of cash there to what XX where pointed dividend level, resides been has the the of business and have our foundation as from described Well, or the which has it and relates do of OCC, look Bank per cash relates it bank the at the authorities, we what get XX-Qs, prior if the the we year. company and at then the bank bank year to bank the same every amount do provision at out, holding generally activity. And generally at holding a build to one earnings

each look repurchase company a which money and regulators that company year. we're that then with position to transparent And that moving of plan, using level our for from so at at in a that and up business we always to is holding holding the money in dividend, consistent activity, bank cash for way

Operator

this are closing Donavon turn I conference remarks. the to time. Ternes no There will for further back question over at

Donavon Ternes

everyone, speaking next call quarter. We you, thank to with today. joining the you forward Well, look for

Operator

joining. and Thank today's Ladies concludes that you gentlemen, for call. all

You may disconnect. now

Provident Financial (PROV) 30 Apr 242024 Q3 Earnings call transcript