Ladies and gentlemen, thank you for standing by. And welcome to the Third Quarter Earnings Call. At this time, all lines are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. And as a reminder, we are recording today. I would now like to turn the conference over to Craig Blunden. Please go ahead.

Thank you. Good morning, everyone. This is Craig Blunden, Chairman and CEO of Provident Financial Holdings. And on the call with me is Donavon Ternes , our President, Chief Operating and Chief Financial Officer. Before we begin, I have a brief administrative item to address. Our presentation today discusses the company's business outlook and will include forward-looking statements. Those statements include descriptions of management's plans, objectives, or goals for future operations, products or services forecast of financial or other performance measures, and statements about the company's general outlook for economic and business conditions. We also may make forward-looking statements during the Q&A period following management's presentation. These forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ from any forward-looking statements is available from the earnings release that was distributed yesterday, from the Annual Report on Form 10-K for the year ended June 302021. And from the Form 10-K Qs and other SEC filings that are filed subsequent to the Form 10-K. Forward-looking statements are effective only out of date. They are made and the company assumes no obligation to update this information. To begin with. Thank you for participating in our call. I hope that each of you has had an opportunity to review our earnings release, which describes our third quarter results. In the most recent quarter we originated and purchased $94 million of loans held for investment. An increase from the $65.3 million in the prior sequential quarter. During the most recent quarter, we also experienced $53.6 million of loan principal payments and payoffs which is down from a $72.5 million in the December 2021 quarter, and at the lower end of the quarterly…

Ladies and gentlemen, . And we have Nick Cucharale with Piper Sandler. One moment.

how are you?

Good morning?

Good morning. Can you -- can you share with us loan pricing on new origination's in the single-family and multi-family books relative to the portfolio rate?

Yes. So new origination's in single-family are in the low to mid fours. Newer origination's in multi-family are in the mid fours. And new origination's in CRE are in the high fours to low fives.

Okay, and then with respect to operating expenses, that heard the commentary that you aren't expecting a meaningful change to the quarterly run rate. Are you seeing the effects of wage inflation? And if so, could you quantify the impact on the expense base.

We're not really seeing at this time wage inflation per say. We are seeing that we have more openings than what historically have occurred as staff or entertaining positions with other companies. But to the extent that we are looking at current salaries and employee benefits expense, it's relatively stable at this point, although I suppose if we were to experience more turnover, we would see larger impact with respect to wage inflation. But currently we're not seeing a significant component in operating expenses.

Thank you for taking my questions.

And then we have the line of Tim Coffey , you're open.

Thanks, morning, gentlemen. And thanks for taking my questions. Can you kind of describe the market dynamics that you're seeing right now that gives you confidence that the pace of kind of net loan growth we saw this quarter can continue?

Sure, Tim. I think the first thing move that I would describe is that our loan pipelines, particularly in single-family and multi-family, are very strong from a historical perspective. And in fact, look very similar to where we began the quarter or began the March quarter at the end of December, beginning of January. And frankly, it picked up steam as we went through the quarter and ended the quarter March 31st. In fact, with respect to our origination volume, as we think about the March quarter, $51 million approximately originated in March of the total $94 million that we did in the quarter. Of that $94 million as well, we had about $6.4 million that we purchased. So purchases were not a significant part of that volume. So from our perspective, when we think about what our origination volume may look like in the June quarter, I think Craig's comments suggested a range of $60 million to $94 million. That's what we've been able to do over the last four quarters. Our pipelines look strong enough to support a volume in that range. But maybe more importantly, and this has a couple of effects, because of the rise in mortgage interest rates, we're seeing a significant decline in payoffs volume. In the March quarter, it came down to $53 million which is at the lower end of the range that we've been experiencing over the last four or five quarters or so. And we would expect that that volume comes down again or those payoffs come down again in the June quarter. And to the extent than that we're able to originate and purchase that recent range of 60 to 94 million and pay off volume comes down, it once again suggests a positive dynamic with respect to growth of the loan portfolio in the June quarter. The second part of the consideration with respect to lower loan payoffs is that our net deferred loan cost amortization will decline as well because net deferred loan costs get accelerated when the loan pays off. So to the extent payoffs come down, the component in net interest income and net deferred loan cost amortization will also come down. And the meaningful impact of that is that net interest margin will improve as a result of that.

Right. Yeah, exactly. And then can you quantify the impact of net interest income on just the higher rates, not necessarily deferred amortization?

Well, we normally don't describe or quantify or provide guidance on that basis. What I would suggest as we think about the June quarter. There are a number of positive factors that will positively impact net interest income. And net interest margin. One of the things are the loans in our portfolio that are subject to re-pricing. In the June Quarter, we have approximately $67 million of loans that we'll re-price and they will re-price upward from their current interest rate. Additionally, in the September '22 quarter, there are approximately a $107 million of loans that are subject to re-pricing. They will also re-price upward based upon current interest rates and where the indices are supporting those loans. On top of that, with respect to positive factors, we have interest earning deposits that are going to be yielding higher interest rates. They're currently yielding higher rates than where they were in most of the March quarter. As a result of the Fed rise -- or Fed funds increase in March, we will have Fed action I expect in the main meeting and in the June meetings as well, that will suggest that what we're earning on interest earning deposits will increase. We also have the cash flows coming in from investment securities to those extent that we see those cash flows come in. We're not redeploying currently in investment securities. We are redeploying in loans. And those loan yields are far higher than where those investment security yields currently are. So those cash flows provide an impact with respect to a positive margin. I've already discussed lower net deferred loan costs. You can do the math on that. I think we had $496,000 of net deferred loan costs in the March quarter. If that number comes down, which I expect will occur in the June quarter because payoffs are going to come down, you can estimate what that will do with respect to margin, but it's meaningful. And then to the extent we have new loan production coming in and are growing the loan portfolio as I've already described that the yields in those loans are in the 4% buckets, call them mid-fours across all product lines. And that's a meaningful increase to where loans were coming on in the March and prior quarters.

Okay. That's great detailed, Donovan. I appreciate that. If you dig into the interest earning deposits, do you have any sense of what the total deposit beta might look like through this cycle?

Well, for us, I think if we think about our retail deposit franchise, we historically have had the lower end of the range with respect to deposit Beta on our retail deposits. We would expect that to continue. I'm not going to forecast what percentage of that might look like as it relates to the Fed funds rate. But we would expect as well that we would be at the lower end of the range with respect to retail deposit Beta. Where we might see some pressure with respect to our deposits are to the extent that we're growing total assets such that our retail deposit growth is not keeping up with that. We would be accessing the wholesale markets, either brokered CD's, federal home loan bank advances, perhaps to the extent we're interested in tamping down our interest rate risk sensitivity in a rising rate market. And at-the-margin than any growth with respect to any loan growth that is being funded with respect to wholesale funding, such as brokerage deposits in Federal Home Loan Bank advances would work to increase our overall cost of liabilities. But we don't think but that is going to be as meaningful. As the increase we're going to see in our interest-bearing assets.

Okay -- okay, that's helpful. And then what's the implication for the tax rate?

We guide our effective tax rate is 29.56%. And then there are every quarter -- every year some items that come in that were worked at or lower the effective rate or increase the effective rate a bit. But again, our combined effective tax rate is 29.56%.

Okay. Great. Those are my questions. Thank you very much.

Any speakers at this point? No one else has queued up. Please go ahead with any closing remarks.

All right. Well, I appreciate everyone joining us on our quarterly call and we look forward to talking to all of you again next quarter. Thanks for your participation.

And Ladies and gentlemen, that does conclude your call for today. Thank you for your participation and thank you for using AT&T event teleconference. You may now disconnect. One moment speakers.