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

Jul 29, 2020 • 12:00 pm ET

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

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Q & A
Executive
Donavon Ternes

that are maturing through the course of the year. There's about $30 million of FHLB advances. And those advances and their cost are in, call it, $257 million range. They will obviously either be paid off with excess liquidity or in the event we need the funding, we will replace those advances with significantly lower cost funds.

So if I think about our net interest margin, we were hit pretty significantly in the June quarter, primarily because of excess liquidity and our job during fiscal '21 is essentially to redeploy that excess liquidity into much higher yielding assets. And as a result of that, I think our net interest margin is probably closer to the bottom of our range than the top of our range on a current basis or at the June quarter, if you will.

Analyst
Matthew Clark

And on the security side, I guess, what are you buying with that excess liquidity to the extent you're redeploying it?

Executive
Donavon Ternes

Yes. It's primarily in the mortgage-backed securities, GSE types. And it can range from adjustable rate all the way to a fixed rate product, but we're keeping the average life relatively short. But ultimately, we want cash flow product such that we're getting cash flows back to either redeploy into loans or also potentially redeploy in this excess liquidity.

One thing to think about as it relates to the excess liquidity, much of that excess liquidity was the result of the significant increase in deposits. The significant increase in deposits in the June quarter was largely the result of the stimulus programs that were putting money in depositors' pockets, and they were then placing them into bank accounts, including PPP funds. Although we didn't make the loans, we were the recipient and beneficiary of some of the funding that some of our customers received in the form of deposits.

One would expect that as we go down the time line, that funding will be used by the various businesses and individuals and will then be depleting some of the excess deposits on our balance sheet as well. So we may wish to carry higher liquidity balances than we normally carry at least over the next quarter or so until we really understand where this excess liquidity coming from this -- these deposits may land or whether or not they're short term or longer term in nature.

Analyst
Matthew Clark

Understood. Okay. And then on the single-family resi loan portfolio and just loan growth overall, yes, the balances in terms of the rate of decline slowed, at least, on a sequential basis. I guess what are your thoughts about being able to maintain loan balances? Or should we continue to expect a little bit of shrinkage?

Executive
Donavon Ternes

Well, I think on a fiscal year basis, we ginned up about 3% annual growth in our loans receivable or loans held for investment. I would expect that we would also be in the low to mid-single digits with respect to growth over the course of the fiscal year, but