Provident Financial (US:PROV)2022-10-26 17:49Financial Data and Key Metrics Changes - In Q1 2023, the company originated $84.6 million in loans held for investment, a slight decline from $85.9 million in the previous quarter [6] - Loan principal payments and pay-offs were $31.7 million, down from $41.3 million in the June 2022 quarter [7] - Non-performing assets decreased to $964,000 from $1.4 million on June 30, 2022 [12] - The net interest margin expanded by 12 basis points to 3.05% for the quarter ended September 30, 2022 [13][15] - Operating expenses increased to $6.9 million, consistent with a stable run rate [17] Business Line Data and Key Metrics Changes - Loans held for investment increased by approximately 6% compared to June 30, 2022, with increases in single-family and multi-family loans offsetting declines in commercial real estate and construction loans [10] - The company is seeing more demand for single-family adjustable-rate mortgage products due to higher fixed mortgage interest rates [8] Market Data and Key Metrics Changes - Competition for loan originations remains elevated, with many borrowers reducing new activity due to rising mortgage interest rates [7] - The average cost of deposits increased by just 2 basis points to 13 basis points for the quarter ended September 30, 2022 [14] Company Strategy and Development Direction - The company aims to leverage its balance sheet with prudent loan portfolio growth, maintaining a stable cash dividend and engaging in stock buyback programs [20][21] - The company is cautious about expanding its commercial real estate portfolio, particularly in retail and office sectors, due to changing market dynamics [28][30] Management's Comments on Operating Environment and Future Outlook - Management noted that current credit quality is holding up well, with minimal early-stage loan balances [11] - The company expects net interest margin to continue its near-term expansion due to higher mortgage interest rates affecting new loan production [16] - There is an expectation of some pressure on operating expenses due to increased wages and inflation [17][41] Other Important Information - The company has not adopted CECL yet, with plans to do so on July 1, 2023 [32] - The company repurchased approximately 50,000 shares of common stock in the September 2022 quarter [21] Q&A Session Summary Question: Loan pricing for single-family and multi-family production - New loan originations are coming in at rates in the high fives to low sixes across all products [27] Question: Appetite for adding CRE credits - The company is cautious about growing the CRE category significantly, particularly in retail and office due to market conditions [28][30] Question: Plans to control deposit costs - The company plans to manage deposit costs by maintaining a stable retail deposit base and responding to competitive rates on CDs [35][36] Question: Active secondary market for mortgage loans - There is an active secondary market, but rising interest rates have led to price discovery challenges [38][39] Question: Non-interest expense growth expectations - The company expects a stable run rate of about $6.9 million for operating expenses, with potential low-single-digit pressure from inflation [41]