Provident Financial (PROV) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2026, the company originated $42.1 million in loans held for investment, a 42% increase from $29.6 million in the previous quarter [4] - Loan principal payments and payoffs were $46.7 million, a 35% increase from $34.5 million in the prior quarter [4] - Non-performing assets decreased to $999,000, or 8 basis points of total assets, down from $1.9 million at the end of the previous quarter [5] - The net interest margin increased by 3 basis points to 3.03% compared to 3% in the previous quarter [8] - Operating expenses rose to $7.9 million from $7.6 million in the previous quarter [13] Business Line Data and Key Metrics Changes - Loans held for investment decreased by approximately $4.1 million, with declines in multifamily, commercial business, and commercial real estate loans, partially offset by increases in single-family and construction loans [5] - The weighted average rate of loans originated in Q2 2026 was 6.15%, compared to 5.22% for loans held for investment as of December 31, 2025 [10] Market Data and Key Metrics Changes - The company’s loan pipelines are moderately higher than last quarter, suggesting origination volume in Q3 2026 will be within the range of recent quarters [4] - The average cost of deposits decreased to 1.32%, down 2 basis points, while the cost of borrowing decreased by 20 basis points to 4.39% [9] Company Strategy and Development Direction - The company focuses on disciplined balance sheet growth by expanding its loan portfolio, which is deemed suitable for the stable economic environment and ongoing normalization of the yield curve [14] - The company aims to maintain its cash dividend and recognizes stock buybacks as a responsible capital management tool, having repurchased approximately $96,000 of common stock in the last quarter [14][15] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the current credit quality, noting no loans in early stages of delinquency and a strong performance of commercial real estate loans [6] - The company anticipates opportunities for net interest margin expansion in the upcoming quarters due to expected repricing of maturing wholesale funding at lower rates [12] Other Important Information - The allowance for credit losses to gross loans held for investment was 55 basis points, a slight decrease from 56 basis points in the previous quarter [8] - The company distributed $906,000 in cash dividends and repurchased approximately $1.5 million worth of common stock, representing a 170% distribution of the net income for the quarter [15] Q&A Session Summary Question: What is the probability that the loan portfolio will be flat in the next four quarters? - Management indicated that it is difficult to predict loan payoffs, but they have been focusing on increasing origination volume each quarter, suggesting a potential for higher origination in Q3 2026 [19] Question: Do loans repricing in the June quarter pose a potential headwind to loan growth? - Management does not foresee significant headwinds from repricing, as the rates are not substantially higher than new loan production [20] Question: Would government plans to make housing more affordable be a net positive for the business? - Management believes that increasing housing availability would be beneficial, especially in California where demand exceeds supply [23][24]