Provident Financial (US:PROV)2023-10-26 22:13Financial Data and Key Metrics Changes - In Q1 2024, the company originated $18.5 million in loans held for investment, a decline from $24.3 million in the prior quarter [6] - Loan principal payments and payoffs were $23 million, down from $25.1 million in the previous quarter [7] - Nonperforming assets increased slightly to $1.4 million from $1.3 million [11] - The allowance for credit losses to gross loans held for investment increased to 72 basis points from 55 basis points [12] - Net interest margin remained unchanged at 2.88% [13] Business Line Data and Key Metrics Changes - Loans held for investment declined by $5.5 million compared to the previous quarter, with declines in multifamily and commercial real estate, partially offset by growth in single-family and construction loans [10] - The average cost of deposits increased by 18 basis points to 80 basis points [14] - Operating expenses decreased to $6.9 million, lower than the stable run rate of $7.2 million due to no bonus expense accruals [17] Market Data and Key Metrics Changes - The company is experiencing more consumer demand for single-family adjustable-rate mortgage products due to higher fixed-rate mortgage interest rates [8] - The average yield on total interest-earning assets increased by 17 basis points [13] Company Strategy and Development Direction - The company plans to adopt a more conservative strategy for balance sheet management, slowing loan portfolio growth due to tighter liquidity conditions [18] - The company is focused on maintaining cash dividends and responsible capital management through stock buyback programs [20] Management's Comments on Operating Environment and Future Outlook - Management noted that current credit quality is holding up well despite concerns regarding commercial real estate loans [11] - The company expects loan origination volumes in the December 2023 quarter to be similar to the current quarter, at the lower end of the recent range [9] - Management indicated that the environment has stabilized, and there may be opportunities for muted growth in the loan portfolio [55] Other Important Information - The company adopted CECL on July 1, 2023, resulting in a $1.2 million increase in the allowance for credit losses [12] - The company repurchased approximately 36,000 shares of common stock in the September 2023 quarter [20] Q&A Session Summary Question: Impact of higher interest rates on provision - Management indicated that the provision increased due to the longer estimated life of the loan portfolio, with expectations of prepayment speeds declining [30][31] Question: Emerging credit quality trends - Management noted that they are not currently seeing lease-up issues in their commercial real estate portfolio, with a focus on suburban markets [42] Question: Future expense run rate - Management confirmed that the expected run rate for operating expenses is approximately $7.2 million per quarter, with no anticipated step-up [50][51] Question: Loan portfolio growth expectations - Management expects muted growth in the loan portfolio, with potential for some growth if the environment stabilizes further [54][55]