Provident Financial Holdings, Inc. (NASDAQ:PROV) Q4 2020 Earnings Conference Call - Final Transcript

Jul 29, 2020 • 12:00 pm ET


Provident Financial Holdings, Inc. (NASDAQ:PROV) Q4 2020 Earnings Conference Call - Final Transcript


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Q & A

[Operator Instructions]. We do have a question from the line of Matthew Clark.

Matthew Clark

Maybe we can start with the margin. The accelerated amortization sounds like it negatively impacted your loan yields there a little bit and the excess liquidity is significant. Can you just kind of talk through the puts and takes of the margin as it relates to the excess liquidity, new loan pricing, the funding is a little easier to kind of see. But just on the asset side, the -- what the outlook is there?

Donavon Ternes

Sure. I'll grab this. It's Donavon, Matthew. The largest impact in the June quarter was, as you described, the interest-earning deposits or the significant increase in liquid assets. For example, the March quarter, we had approximately $61.9 million of interest-earning deposits or overnight deposits, if you will as investments. And that was earning 120 basis points for the quarter. And then we move into the June quarter, and we see the large rise in deposits that came in during the June quarter, which were essentially invested in large part in overnight advances, and that -- overnight deposits and that was $135.1 million, but the yield dropped to 11 basis points. So through the June quarter, we were essentially repositioning that liquidity out of overnight advances into investment securities and obviously to the extent that there was loan growth -- in the loan growth, although that actually shrunk up a bit.

So as we think about the remainder of this calendar year and the beginning of our fiscal year, we're really going to need to redeploy those excess or that excess liquidity primarily into loans is the preference, but then secondarily into investment securities such that the yields we are earning on those investments are significantly larger than what we did in the June quarter. So that's the first thing.

And then secondarily, as we think about where loan yields are coming on to the balance sheet, single-family loans are coming on to the balance sheet in the low 3% range; multifamily and commercial real estate are in the mid- to high 3% range. So we are investing in the low 3s to the high 3s with respect to new single-family, multifamily and commercial real estate production. And obviously, to the extent that, that growth takes some of that excess liquidity off the books, there will be a nice spring with respect to the margin as we think about going forward.

And then secondarily, the liability side, as it relates to our cost of liabilities, will also get some helpful go-forward bounce, if you will. First of all, we have about $90.5 million of CDs that are maturing over the next year. Right now, those CDs are probably in the very high 90 to 110 basis point category, and those are being reinvested at maturity in the low 20 basis point category. So we'll get some bounce to margin as we go down the time line there.

And then secondarily, we have FHLB advances