Provident Financial Holdings in Riverside, Calif., will no longer originate and sell mortgages.
The $1.2 billion-asset company said in a press release Monday that it will shutter its Provident Bank Mortgage unit by June 30. About 120 full-time jobs will be cut.
The company said it expects to record charges of $3.6 million to $4 million over the rest of the fiscal year tied to the closure. Over time, the move should increase quarterly pretax income by $1.2 million.
The decision followed “an analysis of current economic conditions and the current operating environment for the highly competitive mortgage banking business, including the significant decline in loan origination volume,” Provident said.
Provident said it had been looking to improve the segment’s profitability by cutting costs to match a “significant decline in loan origination volume.”
“We no longer believe we can effectively compete in the business while still generating acceptable risk adjusted returns," Craig Blunden, Provident’s chairman and CEO, said in the release.
“The current poor operating environment is coupled with fundamental changes in the mortgage banking industry such as more burdensome regulations, required investments in expensive technology, fierce competition, and razor thin profitability,” Blunden added.
The company said it will continue to originate and hold mortgages in its market area and other locations in California. It said it could also buy mortgages to hold on its balance sheet.
Provident will shift its focus to originating more multifamily, commercial real estate, construction and commercial business loans, which tend to have higher yields.
