k63008.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported): July 28, 2008

PROVIDENT FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware
000-28304
33-0704889
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)

3756 Central Avenue, Riverside, California                    
92506
(Address of principal executive offices)                     
(Zip Code)

Registrant’s telephone number, including area code:  (951) 686-6060


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.
 
[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[  ]    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[  ]    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act       
        (17 CFR 240.14d-2(b))
 
[  ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act       
        (17 CFR 240.13e-4(c))




Item 2.02  Results of Operations and Financial Condition

On July 28, 2008, Provident Financial Holdings, Inc. issued its earnings release for the quarter ended June 30, 2008.   A copy of the earnings release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01  Financial Statements and Exhibits

(d)         Exhibits

99.1       Earnings Release of Provident Financial Holdings, Inc. dated July 28, 2008.
 
 
 
 

 



 
 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

 
Date:  July 28, 2008  PROVIDENT FINANCIAL HOLDINGS, INC. 
   
   
   
  /s/Craig G. Blunden                                                      
  Craig G. Blunden 
  Chairman, President and Chief Executive Officer 
  (Principal Executive Officer) 
   
   
  /s/Donavon P. Ternes                                                 
  Donavon P. Ternes 
  Chief Operating Officer and Chief Financial Officer
  (Principal Financial and Accounting Officer) 
 

 




 
 

 
 

 

 

EXHIBIT 99.1

 
 

 

 
 
   
 
3756 Central Avenue    Contacts: 
Riverside, CA 92506    Craig G. Blunden, CEO 
(951) 686 – 6060    Donavon P. Ternes, COO, CFO 
 
 
 
 


PROVIDENT FINANCIAL HOLDINGS
REPORTS FOURTH QUARTER RESULTS


Net Interest Margin Expands by 56 Basis Points

Operating Expenses Decline by 13%

Capital Ratios Improve (Sequential Quarter)

Bank Remains Significantly Above “Well-Capitalized” Regulatory Thresholds


Riverside, Calif. – July 28, 2008 – Provident Financial Holdings, Inc. (“Company”), NASDAQ GS: PROV, the holding company for Provident Savings Bank, F.S.B. (“Bank”), today announced fourth quarter earnings for the fiscal year ended June 30, 2008.
            For the quarter ended June 30, 2008, the Company reported a net loss of $(1.14) million, a loss of $(0.19) per diluted share (on 6.17 million weighted-average shares outstanding), compared to net income of $1.83 million, or $0.28 per diluted share (on 6.44 million weighted-average shares outstanding), in the comparable period a year ago.  The loss in the quarter ended June 30, 2008 was primarily attributable to an increase in the provision for loan losses and a decrease in non-interest income, partly offset by an increase in net interest income and a decrease in compensation expense.  The decrease in weighted-average shares outstanding primarily reflects prior period repurchases of common stock through the Company’s stock repurchase programs.
 

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            “The Company continues to take the necessary steps to withstand the current operating environment,” said Craig G. Blunden, Chairman, President and Chief Executive Officer of the Company.  “We will be well positioned to take advantage of more favorable business conditions once the current credit cycle runs its course.”
Return on average assets for the fourth quarter of fiscal 2008 was negative (0.28) percent, compared to 0.43 percent for the same period of fiscal 2007.  Return on average stockholders’ equity for the fourth quarter of fiscal 2008 was negative (3.62) percent, compared to 5.59 percent for the comparable period of fiscal 2007.
On a sequential quarter basis, net income for the fourth quarter of fiscal 2008 decreased by $2.10 million, or 219 percent, to a net loss of $(1.14) million from net income of $957,000 in the third quarter of fiscal 2008; and diluted earnings per share decreased $0.34, or 227 percent, to a loss of $(0.19) from a gain of $0.15 in the third quarter of fiscal 2008.  Return on average assets decreased 51 basis points to negative (0.28) percent for the fourth quarter of fiscal 2008 from 0.23 percent in the third quarter of fiscal 2008 and return on average equity for the fourth quarter of fiscal 2008 was negative (3.62) percent, compared to 2.99 percent for the third quarter of fiscal 2008.
For the fiscal year ended June 30, 2008, net income was $1.47 million, a decrease of 86 percent from net income of $10.45 million for the fiscal year ended June 30, 2007; and diluted earnings per share for the fiscal year ended June 30, 2008 decreased $1.33, or 85 percent, to $0.24 from $1.57 for the prior fiscal year.  Return on average assets for the fiscal year ended June 30, 2008 decreased 52 basis points to 0.09 percent from 0.61 percent for the prior fiscal year.  Return on average stockholders’ equity for the
 
 

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fiscal year ended June 30, 2008 was 1.15 percent, compared to 7.77 percent for the prior fiscal year.
Net interest income before provision for loan losses increased by $1.94 million, or 20 percent, to $11.78 million in the fourth quarter of fiscal 2008 from $9.84 million for the same period in fiscal 2007.  Non-interest income decreased $1.79 million, or 81 percent, to $427,000 in the fourth quarter of fiscal 2008 from $2.21 million in the comparable period of fiscal 2007.  Non-interest expense decreased $1.20 million, or 13 percent, to $7.74 million in the fourth quarter of fiscal 2008 from $8.94 million in the comparable period in fiscal 2007.
The average balance of loans outstanding decreased by $41.7 million to $1.41 billion in the fourth quarter of fiscal 2008 from $1.46 billion in the same quarter of fiscal 2007, and the average yield decreased by 20 basis points to 6.07 percent in the fourth quarter of fiscal 2008 from an average yield of 6.27 percent in the same quarter of fiscal 2007.  The decrease in the average loan yield was primarily attributable to accrued interest income reversals on non-accrual loans and loan payoffs which had a higher average yield than the average yield of loans held for investment, partly offset by higher interest rates on newly originated loans and the upwardly repricing adjustable rate loans in the loans held for investment portfolio.  Total loans originated for investment in the fourth quarter of fiscal 2008 were $30.1 million, which consisted primarily of single-family and multi-family loans.  This compares to total loans originated for investment of $56.3 million (including $2.1 million of loans purchased for investment) in the fourth quarter of fiscal 2007.  The outstanding balance of “preferred loans” (multi-family, commercial real estate, construction and commercial business loans) increased by $46.7
 

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million, or nine percent, to $569.6 million at June 30, 2008 from $522.9 million at June 30, 2007.  The ratio of preferred loans to total loans held for investment increased to 41 percent at June 30, 2008 compared to 38 percent at June 30, 2007.  Loan principal payments received in the fourth quarter of fiscal 2008 were $66.4 million, compared to $103.6 million in the same quarter of fiscal 2007.
Average deposits increased by $32.4 million to $1.02 billion while the average cost of deposits decreased by 57 basis points to 3.01 percent in the fourth quarter of fiscal 2008, compared to an average balance of $989.6 million and an average cost of 3.58 percent in the same quarter last year.  Transaction account balances (core deposits) decreased by $4.1 million, or one percent, to $348.7 million at June 30, 2008 from $352.8 million at June 30, 2007.  The decrease is primarily attributable to an $8.2 million, or five percent, decline in savings account balances.  Time deposits increased by $15.1 million, or two percent, to $663.7 million at June 30, 2008 compared to $648.6 million at June 30, 2007.  The increase in time deposits is primarily attributable to depositors switching from savings deposits to time deposits.  Also, it should be noted, that the Company does not have any brokered deposits.
The average balance of borrowings, which primarily consists of Federal Home Loan Bank (“FHLB”) of San Francisco advances, decreased $79.9 million to $478.7 million and the average cost of advances decreased 84 basis points to 3.80 percent in the fourth quarter of fiscal 2008, compared to an average balance of $558.6 million and an average cost of 4.64 percent in the same quarter of fiscal 2007.  The decrease in the average cost of borrowings was primarily the result of maturing long-term advances which had a higher average cost than the average cost of new advances. Additionally,
 

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short-term advance interest rates have fallen as a result of Federal Open Market Committee actions.
The net interest margin during the fourth quarter of fiscal 2008 increased 56 basis points to 2.93 percent from 2.37 percent during the same quarter last year.  On a sequential quarter basis, the net interest margin in the fourth quarter of fiscal 2008 increased 24 basis points from 2.69 percent in the third quarter of fiscal 2008.
During the fourth quarter of fiscal 2008, the Company recorded a loan loss provision of $5.80 million, compared to a loan loss recovery of $490,000 during the same period of fiscal 2007.  The loan loss provision in the fourth quarter of fiscal 2008 was primarily attributable to loan classification downgrades in the loans held for investment portfolio and deterioration in the real estate collateral values securing those loans.
Non-performing assets increased to $33.0 million, or 2.02 percent of total assets, at June 30, 2008, compared to $27.3 million, or 1.63 percent of total assets at March 31, 2008 and $19.7 million, or 1.20 percent of total assets, at June 30, 2007.  The non-performing assets at June 30, 2008 were primarily comprised of 52 single-family loans originated for investment ($15.7 million), 12 construction loans originated for investment ($4.7 million), 12 single-family loans repurchased from, or unable to sell to investors ($2.1 million) and real estate owned comprised of 30 single-family properties, one multi-family property and 14 lots acquired in the settlement of loans ($9.4 million).  Net charge-offs for the quarter ended June 30, 2008 were $3.14 million or 0.89 percent of average loans receivable, compared to $3.58 million or 1.02 percent of average loans receivable for the quarter ended March 31, 2008 and $402,000 or 0.11 percent of average loans receivable in the comparable quarter last year.
 
 

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                Classified loans at June 30, 2008 were $59.7 million, comprised of $29.4 million in the special mention category and $30.3 million in the substandard category.  Classified loans at June 30, 2007 were $32.3 million, consisting of $13.3 million in the special mention category and $19.0 million in the substandard category.
For the quarter ended June 30, 2008, six loans for $1.2 million were modified from their original terms, were re-underwritten at current market interest rates and were identified in our asset quality reports as Restructured Loans.  As of June 30, 2008, a total of $10.5 million of loans have been modified:  six are classified as pass ($2.3 million); 13 are classified as special mention and remain on accrual status ($4.0 million); eight are classified as substandard and remain on accrual status ($2.8 million); and five are classified as substandard on non-accrual status ($1.4 million).
The allowance for loan losses was $19.4 million at June 30, 2008, or 1.40 percent of gross loans held for investment, compared to $14.8 million, or 1.09 percent of gross loans held for investment at June 30, 2007.  The allowance for loan losses at June 30, 2008 includes $6.0 million of specific loan loss reserves, compared to $3.3 million of specific loan loss reserves at June 30, 2007.  Management believes that the allowance for loan losses is sufficient to absorb potential losses inherent in loans held for investment.
The decrease in non-interest income in the fourth quarter of fiscal 2008 compared to the same period of fiscal 2007 was primarily the result of a decrease in brokered and other loan fees, a net loss on sale of loans and net losses on the sale and operations of real estate owned properties acquired in the settlement of loans, partly offset by an increase in deposit account fees.
 

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The net loss on sale of loans was $(216,000) for the quarter ended June 30, 2008 as compared to a net gain of $601,000 in the comparable quarter last year.  The loss on sale of loans was primarily attributable to a $1.28 million recourse provision on loans sold that are subject to repurchase, resulting from early payment defaults or fraud.  Total loans sold for the quarter ended June 30, 2008 were $104.3 million, down 53 percent from $221.6 million for the same quarter last year.  The average loan sale margin for mortgage banking was negative (20) basis points for the quarter ended June 30, 2008, compared to positive 31 basis points in the comparable quarter last year.  The mortgage banking environment remains highly competitive and volatile as a result of the well-publicized deterioration of the single-family real estate market.
The volume of loans originated for sale decreased $74.5 million, or 40 percent, to $114.0 million in the fourth quarter of fiscal 2008 from $188.5 million during the same period last year.  Total loan originations (including loans originated for investment, loans purchased for investment and loans originated for sale) were $144.0 million in the fourth quarter of fiscal 2008, a decrease of $100.7 million, or 41 percent, from $244.7 million in the same quarter of fiscal 2007.  The decrease in loan originations was primarily attributable to the lack of liquidity in the secondary mortgage markets particularly for non-conforming mortgage loans and the unfavorable real estate environment.
Fifteen real estate owned properties were sold for a net loss of $(462,000) in the quarter ended June 30, 2008 as compared to two real estate owned properties sold for a net gain of $1,000 in the same quarter last year.  As of June 30, 2008, the real estate owned balance was $9.4 million (45 properties), compared to $3.8 million (10 properties) at June 30, 2007.
 

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The decrease in non-interest expense was primarily the result of decreases in compensation, premises and occupancy and marketing, partly offset by increases in equipment, professional expenses and other operating expenses. The decrease in compensation expense was the result of the fewer number of mortgage banking personnel in the fourth quarter of fiscal 2008 compared to the same quarter of fiscal 2007, lower incentive compensation expenses given the decline in loan origination volume and lower ESOP expenses compared to the same quarter of fiscal 2007.  Total ESOP expenses in the fourth quarter of fiscal 2008 decreased $314,000, or 57%, to $234,000 from $548,000 in the same period of fiscal 2007, resulting from a lower average stock price and fewer shares allocated.  The decrease in premises and occupancy expense was primarily related to the closure of six Provident Bank Mortgage loan production offices during the first half of fiscal 2008, while the increase in professional expenses was primarily related to higher legal expenses corresponding to the increase in delinquent loans.  The increase in other operating expenses was a result of an increase in FDIC deposit insurance premiums, partly offset by a decrease in workers’ compensation insurance premiums.
The Company’s efficiency ratio improved to 63 percent in the fourth quarter of fiscal 2008 from 74 percent in the fourth quarter of fiscal 2007.  The improvement was the net result of an increase in net interest income, a decrease in non-interest income and a decrease non-interest expense.
The effective income tax benefit for the fourth quarter of fiscal 2008 was 14.6 percent, compared to the effective income tax provision of 49.3 percent in the same quarter last year.  The lower tax benefit (as compared to the tax provision) was primarily the result of a higher percentage of permanent tax differences relative to income before
 

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taxes and an additional tax provision of $348,000 on a disallowed deduction in the fiscal 2006 tax return which was discovered during the ongoing examination by the Internal Revenue Service.  The Company believes that the effective income tax benefit applied in the fourth quarter of fiscal 2008 reflects its current income tax obligations.
The Company did not repurchase any of its common stock during the quarter ended June 30, 2008.  For fiscal 2008, the Company repurchased 187,081 shares (59 percent of the shares authorized by the June 2007 stock repurchase program) with an average cost of $21.78 per share and the June 2007 program expired on June 25, 2008.  The Corporation announced a new stock repurchase program of up to five percent of its common stock (approximately 310,385 shares) on June 26, 2008.
As of June 30, 2008 the Bank exceeded all regulatory capital requirements and is deemed “well-capitalized” with Tangible Capital, Core Capital, Total Risk-Based Capital and Tier 1 Risk-Based Capital ratios of 7.23 percent, 7.23 percent, 12.30 percent and 11.05 percent, respectively.  These ratios have improved from 7.09 percent, 7.09 percent, 11.98 percent and 10.80 percent, respectively, at March 31, 2008 and are well above the minimum ratios to be deemed “well-capitalized” (5.00 percent for Core Capital, 10.00 percent for Total Risk-Based Capital and 6.00 percent for Tier 1 Risk-Based Capital).
The Bank currently operates 13 retail/business banking offices in Riverside County and San Bernardino County (Inland Empire).  Provident Bank Mortgage operates wholesale loan production offices in Pleasanton and Rancho Cucamonga, California and retail loan production offices in Glendora and Riverside, California.
The Company will host a conference call for institutional investors and bank analysts on Tuesday, July 29, 2008 at 9:00 a.m. (Pacific Time) to discuss its financial
 

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results.  The conference call can be accessed by dialing (800) 230-1766 and requesting the Provident Financial Holdings Earnings Release Conference Call.  An audio replay of the conference call will be available through Wednesday, August 6, 2008 by dialing (800) 475-6701 and referencing access code number 952139.
For more financial information about the Company please visit the website at www.myprovident.com and click on the “Investor Relations” section.


Safe-Harbor Statement

This press release and the conference call noted above contain statements that the Company believes are “forward-looking statements.” These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make.  Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Office of Thrift Supervision and our bank subsidiary by the Federal Deposit Insurance Corporation, the Office of Thrift Supervision or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses or to write-down assets; our ability to control operating costs and expenses; our ability to implement our branch expansion strategy; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board; war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks detailed in the Company’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2007, as amended.


 
 
 

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PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Financial Condition
(Unaudited – Dollars In Thousands)
 
   
June 30,
2008
   
June 30,
2007
 
 
Assets
           
     Cash and due from banks
  $ 12,614     $ 11,024  
     Federal funds sold
    2,500       1,800  
                Cash and cash equivalents
    15,114       12,824  
                 
     Investment securities – held to maturity
               
          (fair value $ - and $18,837, respectively)
    -       19,001  
     Investment securities – available for sale at fair value
    153,102       131,842  
     Loans held for investment, net of allowance for loan losses of
               
          $19,402 and $14,845, respectively
    1,368,633       1,350,696  
     Loans held for sale, at lower of cost or market
    28,461       1,337  
     Receivable from sale of loans
    -       60,513  
     Accrued interest receivable
    7,273       7,235  
     Real estate owned, net
    9,355       3,804  
     FHLB – San Francisco stock
    32,125       43,832  
     Premises and equipment, net
    6,513       7,123  
     Prepaid expenses and other assets
    12,095       10,716  
                 
               Total assets
  $ 1,632,671     $ 1,648,923  
                 
Liabilities and Stockholders’ Equity
               
Liabilities:
               
     Non interest-bearing deposits
  $ 48,056     $ 45,112  
     Interest-bearing deposits
    964,354       956,285  
               Total deposits
    1,012,410       1,001,397  
                 
     Borrowings
    479,335       502,774  
     Accounts payable, accrued interest and other liabilities
    16,336       15,955  
               Total liabilities
    1,508,081       1,520,126  
                 
Stockholders’ equity:
               
     Preferred stock, $.01 par value (2,000,000 shares authorized;
          none issued and outstanding)
               
    -       -  
     Common stock, $.01 par value (15,000,000 shares authorized;
          12,435,865 and 12,428,365 shares issued, respectively;
          6,207,719 and 6,376,945 shares outstanding, respectively) ….
               
               
    124       124  
     Additional paid-in capital
    75,164       72,935  
     Retained earnings
    143,663       146,194  
     Treasury stock at cost (6,228,146 and 6,051,420 shares,
          respectively)
               
    (94,798 )     (90,694 )
     Unearned stock compensation
    (102 )     (455 )
     Accumulated other comprehensive income, net of tax
    539       693  
                 
               Total stockholders’ equity
    124,590       128,797  
                 
               Total liabilities and stockholders’ equity
  $ 1,632,671     $ 1,648,923  


 
 
 

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PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations
(Unaudited - In Thousands, Except Earnings Per Share)
 
   
Quarter Ended
June 30,
   
Twelve Months Ended
June 30,
 
 
   
2008
   
2007
   
2008
   
2007
 
Interest income:
                       
     Loans receivable, net
  $ 21,481     $ 22,841     $ 86,340     $ 91,525  
     Investment securities
    1,962       1,767       7,567       7,149  
     FHLB – San Francisco stock
    502       521       1,822       2,225  
     Interest-earning deposits
    2       19       20       69  
     Total interest income
    23,947       25,148       95,749       100,968  
                                 
Interest expense:
                               
     Checking and money market deposits
    332       413       1,607       1,524  
     Savings deposits
    580       784       2,896       2,823  
     Time deposits
    6,734       7,640       30,073       26,867  
     Borrowings
    4,525       6,469       19,737       28,031  
     Total interest expense
    12,171       15,306       54,313       59,245  
                                 
    Net interest income, before provision (recovery) for loan losses
    11,776       9,842       41,436       41,723  
Provision (recovery) for loan losses
    5,803       (490 )     12,612       5,078  
    Net interest income, after provision (recovery) for loan losses
    5,973       10,332       28,824       36,645  
                                 
Non-interest income:
                               
     Loan servicing and other fees
    422       706       1,776       2,132  
     (Loss) gain on sale of loans, net
    (216 )     601       1,146       9,318  
     Deposit account fees
    743       530       2,954       2,087  
     Net (loss) gain on sale of real estate
    (462 )     1       (932 )     2,359  
     Other
    (60 )     376       409       1,665  
     Total non-interest income
    427       2,214       5,353       17,561  
                                 
Non-interest expense:
                               
     Salaries and employee benefits
    4,491       5,780       18,953       22,867  
     Premises and occupancy
    647       984       2,830       3,314  
     Equipment
    382       349       1,552       1,570  
     Professional expenses
    457       346       1,573       1,193  
     Sales and marketing expenses
    109       221       524       945  
     Other
    1,652       1,258       4,693       4,742  
     Total non-interest expense
    7,738       8,938       30,125       34,631  
                                 
(Loss) income before taxes
    (1,338 )     3,608       4,052       19,575  
(Benefit) provision for income taxes
    (195 )     1,777       2,582       9,124  
     Net (loss) income
  $ (1,143 )   $ 1,831     $ 1,470     $ 10,451  
                                 
Basic (loss) earnings per share
  $ (0.19 )   $ 0.29     $ 0.24     $ 1.59  
Diluted (loss) earnings per share
  $ (0.19 )   $ 0.28     $ 0.24     $ 1.57  
Cash dividends per share
  $ 0.10     $ 0.18     $ 0.64     $ 0.69  



 
 
 

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PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Financial Condition – Sequential Quarter
(Unaudited – Dollars In Thousands)
 
   
June 30,
2008
   
March 31,
2008
 
 
Assets
           
     Cash and due from banks
  $ 12,614     $ 12,807  
     Federal funds sold
    2,500       4,625  
                Cash and cash equivalents
    15,114       17,432  
                 
     Investment securities – available for sale at fair value
    153,102       168,588  
     Loans held for investment, net of allowance for loan losses of
               
          $19,402 and $16,742, respectively
    1,368,633       1,406,785  
     Loans held for sale, at lower of cost or market
    28,461       18,841  
     Accrued interest receivable
    7,273       7,336  
     Real estate owned, net
    9,355       7,717  
     FHLB – San Francisco stock
    32,125       31,680  
     Premises and equipment, net
    6,513       6,585  
     Prepaid expenses and other assets
    12,095       9,335  
                 
               Total assets
  $ 1,632,671     $ 1,674,299  
                 
Liabilities and Stockholders’ Equity
               
Liabilities:
               
     Non interest-bearing deposits
  $ 48,056     $ 46,884  
     Interest-bearing deposits
    964,354       985,283  
               Total deposits
    1,012,410       1,032,167  
                 
     Borrowings
    479,335       499,744  
     Accounts payable, accrued interest and other liabilities
    16,336       15,215  
               Total liabilities
    1,508,081       1,547,126  
                 
Stockholders’ equity:
               
     Preferred stock, $.01 par value (2,000,000 shares authorized;
          none issued and outstanding)
               
    -       -  
     Common stock, $.01 par value (15,000,000 shares authorized;
          12,435,865 and 12,435,865 shares issued, respectively;
          6,207,719 and 6,207,719 shares outstanding, respectively)
               
               
    124       124  
     Additional paid-in capital
    75,164       74,763  
     Retained earnings
    143,663       145,427  
     Treasury stock at cost (6,228,146 and 6,228,146 shares,
          respectively)
               
    (94,798 )     (94,798 )
     Unearned stock compensation
    (102 )     (181 )
     Accumulated other comprehensive income, net of tax
    539       1,838  
                 
               Total stockholders’ equity
    124,590       127,173  
                 
               Total liabilities and stockholders’ equity
  $ 1,632,671     $ 1,674,299  



 
 
 

Page 13 of 17
 
 
   


PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations – Sequential Quarter
(Unaudited – In Thousands, Except Earnings Per Share)
 
   
Quarter Ended
 
   
June 30,
   
March 31,
 
   
2008
   
2008
 
Interest income:
           
     Loans receivable, net
  $ 21,481     $ 21,645  
     Investment securities
    1,962       1,959  
     FHLB – San Francisco stock
    502       419  
     Interest-earning deposits
    2       4  
     Total interest income
    23,947       24,027  
                 
Interest expense:
               
     Checking and money market deposits
    332       351  
     Savings deposits
    580       725  
     Time deposits
    6,734       7,393  
     Borrowings
    4,525       4,839  
     Total interest expense
    12,171       13,308  
                 
Net interest income, before provision for loan losses
    11,776       10,719  
Provision for loan losses
    5,803       3,150  
Net interest income, after provision for loan losses
    5,973       7,569  
                 
Non-interest income:
               
     Loan servicing and other fees
    422       350  
     (Loss) gain on sale of loans, net
    (216 )     306  
     Deposit account fees
    743       768  
     Net loss on sale of real estate
    (462 )     (302 )
     Other
    (60 )     482  
     Total non-interest income
    427       1,604  
                 
Non-interest expense:
               
     Salaries and employee benefits
    4,491       4,816  
     Premises and occupancy
    647       645  
     Equipment
    382       379  
     Professional expenses
    457       323  
     Sales and marketing expenses
    109       112  
     Other
    1,652       1,024  
     Total non-interest expense
    7,738       7,299  
                 
(Loss) income before taxes
    (1,338 )     1,874  
(Benefit) provision for income taxes
    (195 )     917  
     Net (loss) income
  $ (1,143 )   $ 957  
                 
Basic (loss) earnings per share
  $ (0.19 )   $ 0.16  
Diluted (loss) earnings per share
  $ (0.19 )   $ 0.15  
Cash dividends per share
  $ 0.10     $ 0.18  



 
 
 

Page 14 of 17
 
 
   


PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited - Dollars in Thousands, Except Share Information )
 
   
Quarter Ended
June 30,
   
Twelve Months Ended
June 30,
 
   
2008
   
2007
   
2008
   
2007
 
SELECTED FINANCIAL RATIOS:
                       
Return on average assets
    (0.28 )%     0.43 %     0.09 %     0.61 %
Return on average stockholders’ equity
    (3.62 )%     5.59 %     1.15 %     7.77 %
Stockholders’ equity to total assets
    7.63 %     7.81 %     7.63 %     7.81 %
Net interest spread
    2.70 %     2.08 %     2.36 %     2.23 %
Net interest margin
    2.93 %     2.37 %     2.61 %     2.51 %
Efficiency ratio
    63.41 %     74.14 %     64.38 %     58.42 %
Average interest-earning assets to average
                               
   interest-bearing liabilities
    107.14 %     107.41 %     107.35 %     107.72 %
                                 
SELECTED FINANCIAL DATA:
                               
Basic (loss) earnings per share
  $ (0.19 )   $ 0.29     $ 0.24     $ 1.59  
Diluted (loss) earnings per share
  $ (0.19 )   $ 0.28     $ 0.24     $ 1.57  
Book value per share
  $ 20.07     $ 20.20     $ 20.07     $ 20.20  
Shares used for basic EPS computation
    6,167,125       6,341,326       6,171,480       6,557,550  
Shares used for diluted EPS computation
    6,167,125       6,436,816       6,214,425       6,675,717  
Total shares issued and outstanding
    6,207,719       6,376,945       6,207,719       6,376,945  
                                 
ASSET QUALITY RATIOS AND DELINQUENT LOANS:
               
Non-performing loans to loans held for investment, net
    1.73 %     1.18 %                
Non-performing assets to total assets
    2.02 %     1.20 %                
Allowance for loan losses to non-performing loans
    81.90 %     93.32 %                
Allowance for loan losses to gross loans held for
                               
   investment
    1.40 %     1.09 %                
Net charge-offs to average loans receivable
    0.89 %     0.11 %                
Non-performing loans
  $ 29,881     $ 19,417                  
Loans 30 to 89 days delinquent
  $ 7,367     $ 1,493                  
                                 
REGULATORY CAPITAL RATIOS:
                               
Tangible equity ratio
    7.23 %     7.62 %                
Core capital ratio
    7.23 %     7.62 %                
Total risk-based capital ratio
    12.30 %     12.49 %                
Tier 1 risk-based capital ratio
    11.05 %     11.39 %                
                                 
LOANS ORIGINATED FOR SALE:
                               
Retail originations
  $ 40,145     $ 59,254     $ 135,470     $ 296,356  
Wholesale originations
    73,809       129,239       263,256       830,260  
   Total loans originated for sale
  $ 113,954     $ 188,493     $ 398,726     $ 1,126,616  
                                 
LOANS SOLD:
                               
Servicing released
  $ 104,291     $ 220,077     $ 368,925     $ 1,119,330  
Servicing retained
    -       1,479       4,534       4,108  
   Total loans sold
  $ 104,291     $ 221,556     $ 373,459     $ 1,123,438  



 
 
 

Page 15 of 17
 

 
   

PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited)
(Dollars in Thousands)
             As of June 30,
 
                   2008   
 
          2007
INVESTMENT SECURITIES:
          Balance
 
         Rate
 
          Balance
 
          Rate
Held to maturity:
             
U.S. government sponsored enterprise debt securities
$            -
 
-
%
 
$   19,000
 
3.15
            %  
    U.S. government agency mortgage-backed securities (“MBS”)
-
 
-
   
1
 
8.81
 
   Total investment securities held to maturity
-
 
-
   
19,001
 
3.15
 
                   
Available for sale (at fair value):
                 
U.S. government sponsored enterprise debt securities
5,111
 
4.00
   
9,683
 
3.20
 
U.S. government agency MBS
90,938
 
5.09
   
57,539
 
4.99
 
U.S. government sponsored enterprise MBS
54,254
 
5.38
   
59,066
 
5.05
 
Private issue collateralized mortgage obligations
2,225
 
4.77
   
4,641
 
4.28
 
Freddie Mac common stock
98
       
364
     
Fannie Mae common stock
8
       
26
     
Other common stock
468
       
523
     
   Total investment securities available for sale
153,102
 
5.13
   
131,842
 
4.83
 
      Total investment securities
$ 153,102
 
5.13
         %
 
$ 150,843
 
4.61
          %
 
LOANS HELD FOR INVESTMENT:
             
Single-family (1 to 4 units)
$   808,836
 
5.95
%
 
$   827,656
 
5.89
%
Multi-family (5 or more units)
     399,733
 
6.45
   
     330,231
 
6.67
 
Commercial real estate
136,176
 
6.95
   
147,545
 
7.10
 
Construction
32,907
 
8.59
   
60,571
 
9.22
 
Commercial business
       8,633
 
6.87
   
       10,054
 
8.59
 
Consumer
       625
 
9.84
   
       509
 
12.15
 
Other
       3,728
 
8.67
   
       9,307
 
10.03
 
   Total loans held for investment
1,390,638
 
6.27
%
 
1,385,873
 
6.40
%
                   
Undisbursed loan funds
(7,864
)
     
(25,484
)
   
Deferred loan costs
         5,261
       
         5,152
     
Allowance for loan losses
     (19,402
)
     
     (14,845
)
   
   Total loans held for investment, net
$1,368,633
       
$1,350,696
     
                   
Purchased loans serviced by others included above
$   146,514
 
6.56
%
 
$   159,787
 
6.89
%
                   
DEPOSITS:
                 
Checking accounts – non interest-bearing
 $     48,056
 
-
%
 
 $     45,112
 
-
%
Checking accounts – interest-bearing
     122,065
 
0.63
   
     122,588
 
0.76
 
Savings accounts
     144,883
 
1.61
   
     153,036
 
2.04
 
Money market accounts
       33,675
 
1.93
   
       32,054
 
2.43
 
Time deposits
     663,731
 
3.93
   
     648,607
 
4.85
 
   Total deposits
$1,012,410
 
2.95
%
 
$1,001,397
 
3.62
%
               
Note:  The interest rate or yield/cost described in the rate or yield/cost column is the weighted-average interest rate or yield/cost of all instruments, which are included in the balance of the respective line item.
 



 
 
 

Page 16 of 17
 
 
 
   


PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited – Dollars in Thousands)
 
 
As of June 30,
 
2008
 
2007
 
Balance
 
Rate
 
Balance
 
Rate
BORROWINGS:
             
Overnight
$   32,600
 
3.12
%
 
$     1,000
 
5.48
%
Six months or less
95,000
 
2.55
   
173,000
 
4.81
 
Over six to twelve months
15,000
 
3.33
   
72,000
 
4.14
 
Over one to two years
112,000
 
3.87
   
30,000
 
3.45
 
Over two to three years
128,000
 
4.62
   
72,000
 
4.02
 
Over three to four years
65,000
 
4.41
   
88,000
 
5.23
 
Over four to five years
20,000
 
3.39
   
65,000
 
4.41
 
Over five years
11,735
 
4.64
   
1,774
 
6.37
 
   Total borrowings
$ 479,335
 
3.81
%
 
$ 502,774
 
4.55
%
               

 
Quarter Ended
 
Twelve Months Ended
 
 
June 30,
 
June 30,
 
 
2008
 
2007
 
2008
 
2007
 
SELECTED AVERAGE BALANCE SHEETS:
Balance
 
Balance
 
Balance
 
Balance
 
                 
Loans receivable, net (1)
$1,414,780
 
$1,456,518
 
$1,397,877
 
$1,446,781
 
Investment securities
160,612
 
161,421
 
155,509
 
175,439
 
FHLB – San Francisco stock
31,910
 
43,684
 
32,271
 
41,588
 
Interest-earning deposits
513
 
1,439
 
588
 
1,339
 
Total interest-earning assets
$1,607,815
 
$1,663,062
 
$1,586,245
 
$1,665,147
 
                 
Deposits
$1,022,007
 
$   989,641
 
$1,012,138
 
$   946,499
 
Borrowings
478,660
 
558,644
 
465,536
 
599,286
 
Total interest-bearing liabilities
$1,500,667
 
$1,548,285
 
$1,477,674
 
$1,545,785
 
                 
 
Quarter Ended
 
Twelve Months Ended
 
 
June 30,
 
June 30,
 
 
2008
 
2007
 
2008
 
2007
 
 
Yield/Cost
 
Yield/Cost
 
Yield/Cost
 
Yield/Cost
 
                 
Loans receivable, net (1)
6.07%
 
6.27%
 
6.18%
 
6.33%
 
Investment securities
4.89%
 
4.38%
 
4.87%
 
4.07%
 
FHLB – San Francisco stock
6.29%
 
4.77%
 
5.65%
 
5.35%
 
Interest-earning deposits
1.56%
 
5.28%
 
3.40%
 
5.15%
 
Total interest-earning assets
5.96%
 
6.05%
 
6.04%
 
6.06%
 
                 
Deposits
3.01%
 
3.58%
 
3.42%
 
3.30%
 
Borrowings
3.80%
 
4.64%
 
4.24%
 
4.68%
 
Total interest-bearing liabilities
3.26%
 
3.97%
 
3.68%
 
3.83%
 

(1)  
 Includes loans held for investment, loans held for sale and receivable from sale of loans.

Note: The interest rate or yield/cost described in the rate or yield/cost column is the weighted-average interest rate
            or yield/cost of all instruments, which are included in the balance of the respective line item.



 
 
 

Page 17 of 17