Provident Financial (US:PROV)2021-07-31 21:23Financial Data and Key Metrics Changes - In Q4 2021, the company originated and purchased $93.3 million of loans held for investment, an increase from $61 million in the prior sequential quarter [5] - Nonperforming assets decreased to $8.6 million from $9.8 million on March 31, 2021 [7] - The allowance for loan losses to gross loans held for investment decreased to 88 basis points from 98 basis points [8] - The net interest margin compressed by 6 basis points to 2.54% due to a decrease in the average yield on total interest-bearing assets [8][9] Business Line Data and Key Metrics Changes - Loans held for investment increased by approximately 1% compared to March 31, 2021, with increases in single-family and multifamily loan categories [6] - The company recorded a $767,000 negative provision for loan losses in the June 2021 quarter [8] - The average cost of deposits decreased by 2 basis points to 15 basis points [9] Market Data and Key Metrics Changes - The purchase market remains active but is constrained by low inventory, with demand for single-family products being robust [15] - Refinance activity began to slow in the June quarter but has since grown as mortgage rates have decreased [14] Company Strategy and Development Direction - The company aims to leverage its balance sheet with prudent loan portfolio growth while redeploying excess liquidity into government-sponsored mortgage-backed securities [11][12] - Maintaining cash dividends is prioritized over stock buyback activity, although stock repurchase remains a valid capital management tool [12][22] Management's Comments on Operating Environment and Future Outlook - Management expressed that current health protocols may have a minor impact on loan originations, but overall market activity remains strong [24][25] - The company believes that the lending environment is normalizing back to pre-pandemic levels, despite challenges in the purchase market [15][24] Other Important Information - The company recorded a $2.4 million credit for the employee retention tax credit in the June 2021 quarter [10] - The FTE count decreased to 161 from 178 year-over-year, indicating a 10% decline [10] Q&A Session Summary Question: Has refinance activity slowed or is it still elevated? - Management noted that refinance activity began to slow in the June quarter but has since grown as mortgage rates have decreased [14] Question: Can you describe the overall lending environment? - Management indicated that the purchase market is active but constrained by low inventory, with demand for single-family products remaining strong [15] Question: Was the current tax rate partly attributable to the employee retention tax credit? - Management confirmed that the employee retention credit provided a benefit, affecting the tax rate for the quarter [16] Question: Can you expand on the expense base and potential for branch consolidation? - Management stated that branch consolidation is reviewed as leases become due, and they have reduced FTE count significantly [20][21] Question: Is there a threshold where stock repurchase would become a priority? - Management emphasized that supporting the cash dividend is the priority, but stock repurchase remains part of their capital management strategy [22] Question: What is the concern level about future loan originations given health warnings? - Management believes there may be a minor impact from health conditions, but overall market activity remains strong [24][25]