Provident Financial Holdings Reports Third Quarter Fiscal 2014 Earnings

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| Source: Provident Financial Holdings, Inc.

THIRD QUARTER HIGHLIGHTS INCLUDE:

Preferred Loans Increase by $39.5 Million or 11% since June 30, 2013

Core Deposits Increase by $9.1 Million since June 30, 2013

Non-Performing Assets Decline by 20% since June 30, 2013

Net Charge-Offs Decline 86% to $168,000 compared to the Same Quarter Last Year

Total Non-Interest Expense Declines 20% compared to the Same Quarter Last Year

Repurchased 194,888 Shares of Common Stock during the Current Quarter

RIVERSIDE, Calif., April 29, 2014 (GLOBE NEWSWIRE) -- Provident Financial Holdings, Inc. ("Company"), (Nasdaq:PROV), the holding company for Provident Savings Bank, F.S.B. ("Bank"), today announced third quarter earnings for the fiscal year ending June 30, 2014.

For the quarter ended March 31, 2014, the Company reported net income of $1.40 million, or $0.14 per diluted share (on 9.97 million average diluted shares outstanding), compared to net income of $4.87 million, or $0.45 per diluted share (on 10.83 million average diluted shares outstanding), in the comparable period a year ago. The decrease in net income for the third quarter of fiscal 2014 was primarily attributable to an $8.54 million decrease in the gain on sale of loans and a $616,000 decrease in net interest income, partly offset by a $2.71 million decrease in salaries and employee benefits expense and a decrease of $2.23 million in the provision for income taxes, compared to the same period one year ago.

"We are gaining traction with respect to our efforts to increase loans held for investment. We originated $120.1 million of loans held for investment, primarily preferred loans, during the first nine months of fiscal 2014 compared to $63.9 million during the same period in fiscal 2013. Additionally, we have recently implemented a broader array of single-family products to be originated for investment through our mortgage banking platform. We believe this will accelerate the pace of growth in loans held for investment. I am increasingly confident that general economic conditions have improved to the point where lending opportunities are expanding and that we are well positioned to capture those increased opportunities," said Craig G. Blunden, Chairman and Chief Executive Officer of the Company. "We continue to adjust our mortgage banking business model commensurate with the lower volume environment. We have made some progress; however, we are not satisfied with mortgage banking financial results and will continue to make adjustments based on economic conditions."

As of March 31, 2014, the Bank exceeded all regulatory capital requirements with Tier 1 Leverage, Tier 1 Risk-Based and Total Risk-Based capital ratios of 12.80 percent, 19.96 percent and 21.22 percent, respectively. As of June 30, 2013, these ratios were 13.12 percent, 21.36 percent and 22.64 percent, respectively.

Return on average assets for the third quarter of fiscal 2014 decreased to 0.50 percent from 1.59 percent for the same period of fiscal 2013, and return on average stockholders' equity for the third quarter of fiscal 2014 decreased to 3.70 percent from 12.48 percent for the comparable period of fiscal 2013.

On a sequential quarter basis, the third quarter net income of fiscal 2014 reflects a $204,000, or 13 percent, decrease from net income of $1.60 million in the second quarter of fiscal 2014. The decrease in net income in the third quarter of fiscal 2014 was primarily attributable to decreases of $441,000 in the gain on sale of loans and $205,000 in net interest income, partly offset by an improvement of $127,000 in gain on sale and operations of real estate owned acquired in the settlement of loans, a decrease of $101,000 in salaries and employee benefits expense and a decrease of $124,000 in professional expenses, compared to the second quarter of fiscal 2014. Diluted earnings per share for the third quarter of fiscal 2014 decreased by 10 percent to $0.14 per share from $0.16 per share in the second quarter of fiscal 2014. Return on average assets decreased to 0.50 percent for the third quarter of fiscal 2014 from 0.56 percent in the second quarter of fiscal 2014; and return on average stockholders' equity for the third quarter of fiscal 2014 was 3.70 percent, compared to 4.13 percent for the second quarter of fiscal 2014.

For the nine months ended March 31, 2014, net income decreased to $4.52 million from $20.54 million in the comparable period ended March 31, 2013; and diluted earnings per share for the nine months ended March 31, 2014 decreased to $0.44 from $1.88 for the comparable nine month period last year.

Net interest income decreased $616,000, or eight percent, to $7.45 million in the third quarter of fiscal 2014 from $8.07 million for the same quarter of fiscal 2013, attributable to a $78.4 million, or seven percent, decrease in average interest-earning assets and a two basis point decrease in the net interest margin. Non-interest income decreased $8.60 million, or 56 percent, to $6.79 million in the third quarter of fiscal 2014 from $15.39 million in the same quarter of fiscal 2013. Non-interest expense decreased $3.18 million, or 20 percent, to $12.55 million in the third quarter of fiscal 2014 from $15.73 million in the same quarter of fiscal 2013. The decreases in non-interest income and non-interest expense relate primarily to mortgage banking operations.

The average balance of loans outstanding, including loans held for sale, decreased by $121.5 million, or 13 percent, to $842.7 million in the third quarter of fiscal 2014 from $964.2 million in the same quarter of fiscal 2013, primarily due to the decrease in loans held for sale attributable to the decrease in mortgage banking activity and, to a lesser extent, a $37.6 million or nine percent decline in the average balance of single-family real estate loans held for investment. The average yield on loans receivable decreased by 13 basis points to 4.14 percent in the third quarter of fiscal 2014 from an average yield of 4.27 percent in the same quarter of fiscal 2013. The decrease in the average loan yield was primarily attributable to payoffs of loans which had a higher yield than the average yield of loans held for investment and adjustable rate loans repricing to lower current market interest rates, partly offset by a higher average yield on loans held for sale. The average balance of loans held for sale in the third quarter of fiscal 2014 was $81.8 million with the average yield of 4.09 percent as compared to $199.9 million with the average yield of 3.31 percent in the same quarter of fiscal 2013. Loans originated for investment in the third quarter of fiscal 2014 totaled $36.1 million, consisting primarily of multi-family, single-family and commercial real estate loans. The outstanding balance of "preferred loans" (multi-family, commercial real estate, construction and commercial business loans) increased by $39.5 million, or 11 percent, to $396.0 million at March 31, 2014 from $356.5 million at June 30, 2013. The percentage of preferred loans to total loans held for investment at March 31, 2014 increased to 51 percent from 47 percent at June 30, 2013. Loan principal payments received in the third quarter of fiscal 2014 were $25.3 million, compared to $36.8 million in the same quarter of fiscal 2013. In addition, real estate acquired in the settlement of loans (real estate owned), gross of any allowances, in the third quarter of fiscal 2014 declined to $206,000, compared to $2.5 million in the same quarter of fiscal 2013, due primarily to the improvement in the credit quality of the loan portfolio and stronger real estate markets.

The average balance of investment securities decreased by $3.3 million, or 16 percent, to $17.5 million in the third quarter of fiscal 2014 from $20.8 million in the same quarter of fiscal 2013. The decrease was attributable to principal payments received on mortgage-backed securities during the last 12 months. The average yield on investment securities decreased 14 basis points to 1.88 percent in the third quarter of fiscal 2014 from 2.02 percent for the same quarter of fiscal 2013. The decline in the average yield was primarily attributable to the downward repricing of adjustable rate mortgage-backed securities.

In the third quarter of fiscal 2014, the Federal Home Loan Bank ("FHLB") – San Francisco announced a partial redemption of excess capital stock held by member banks and a cash dividend. As a result, $2.2 million of excess capital stock was redeemed at par and a $203,000 cash dividend was received by the Bank in the third quarter of fiscal 2014. This is comparable to the same quarter last year when the Bank received a $1.9 million partial redemption and an $116,000 cash dividend.

The average balance of the Company's interest-earning deposits, primarily cash with the Federal Reserve Bank of San Francisco, increased $54.8 million, or 33 percent, to $218.7 million in the third quarter of fiscal 2014 from $163.9 million in the same quarter of fiscal 2013, reflecting the reduction in loans held for sale. The Bank maintains high levels of cash and cash equivalents in response to the uncertain interest rate environment and uses its available liquidity to fund its mortgage banking operations, to fund new loans held for investment, and to pay off borrowings as they mature. The average yield earned on interest-earning deposits was 0.25 percent in both the third quarters of fiscal 2014 and 2013 and lower than the yield that could have been earned if the excess liquidity was deployed in loans or investment securities.

Average deposits decreased $22.0 million, or two percent, to $909.7 million in the third quarter of fiscal 2014 from $931.7 million in the same quarter of fiscal 2013. The average cost of deposits decreased by 10 basis points to 0.58 percent in the third quarter of fiscal 2014 from 0.68 percent in the same quarter last year, primarily due to higher cost time deposits repricing to lower current market interest rates and a lower percentage of time deposits to the total deposit balance. Core deposits increased $9.1 million, or two percent, to $529.9 million at March 31, 2014 from $520.8 million at June 30, 2013, while time deposits decreased $24.6 million, or six percent, to $377.6 million at March 31, 2014 from $402.2 million at June 30, 2013, consistent with the Bank's strategy to decrease the percentage of time deposits in its deposit base and to increase the percentage of lower cost checking and savings accounts.

The average balance of borrowings, which consisted of FHLB – San Francisco advances, decreased $59.3 million, or 54 percent, to $51.4 million and the average cost of advances decreased 41 basis points to 3.18 percent in the third quarter of fiscal 2014, compared to an average balance of $110.7 million and an average cost of 3.59 percent in the same quarter of fiscal 2013. The decrease in borrowings was primarily attributable to scheduled maturities.

The net interest margin during the third quarter of fiscal 2014 decreased two basis points to 2.74 percent from 2.76 percent in the same quarter last year. The decrease was primarily due to the impact of the decline in the average yield of interest-earning assets outpacing the impact of the decline in the average cost of interest-bearing liabilities. The declining yield of interest-earning assets was attributable to lower average yields of loans receivable and investment securities and a higher level of excess liquidity invested at a nominal yield, partly offset by a higher average yield of FHLB – San Francisco stock. The decline in the average cost of liabilities was primarily due to the downward repricing of time deposits to current market interest rates and the decline in the average cost of borrowings as higher costing FHLB advances were repaid at maturity.

During the third quarter of fiscal 2014, the Company recorded a recovery from the allowance for loan losses of $(849,000), compared to the recovery of $(517,000) recorded during the same period of fiscal 2013 and the $(898,000) recovery recorded in the second quarter of fiscal 2014 (sequential quarter).

Non-performing assets, with underlying collateral primarily located in Southern California, decreased to $19.2 million, or 1.71 percent of total assets, at March 31, 2014, compared to $24.0 million, or 1.98 percent of total assets, at June 30, 2013. Non-performing loans at March 31, 2014 decreased $4.9 million or 23 percent since June 30, 2013 to $16.8 million and were primarily comprised of 34 single-family loans ($9.9 million); eight commercial real estate loans ($3.6 million); eight multi-family loans ($3.2 million) and four commercial business loans ($104,000).  Real estate owned acquired in the settlement of loans at March 31, 2014 was primarily comprised of two single-family properties ($423,000), two undeveloped lots ($9,000) and two commercial real estate properties ($2.0 million). 

Net charge-offs for the quarter ended March 31, 2014 were $168,000 or 0.08 percent (annualized) of average loans receivable, compared to $1.19 million or 0.49 percent (annualized) of average loans receivable for the quarter ended March 31, 2013 and $166,000 or 0.08 percent (annualized) of average loans receivable for the quarter ended December 31, 2013 (sequential quarter).

Classified assets at March 31, 2014 were $43.7 million, comprised of $13.2 million of loans in the special mention category, $28.1 million of loans in the substandard category and $2.4 million in real estate owned. Classified assets at June 30, 2013 were $47.0 million, comprised of $6.9 million of loans in the special mention category, $37.8 million of loans in the substandard category and $2.3 million in real estate owned. 

For the quarter ended March 31, 2014, one loan for $221,000 was restructured from its original terms and was not previously classified as a restructured loan. As of March 31, 2014, the outstanding balance of restructured loans was $7.1 million: four loans were classified as special mention ($1.6 million, on accrual status); and 17 loans were classified as substandard ($5.5 million, all of which were on non-accrual status).  As of March 31, 2014, $4.3 million, or 61 percent, of restructured loans were current with respect to their payment status.

The allowance for loan losses was $10.0 million at March 31, 2014, or 1.29 percent of gross loans held for investment, compared to $14.9 million at June 30, 2013, or 1.96 percent of gross loans held for investment. Management believes that, based on currently available information, the allowance for loan losses is sufficient to absorb potential losses inherent in loans held for investment at March 31, 2014.

Non-interest income decreased by $8.60 million, or 56 percent, to $6.79 million in the third quarter of fiscal 2014 from $15.39 million in the same period of fiscal 2013, primarily as a result of an $8.54 million decrease in the gain on sale of loans. On a sequential quarter basis, non-interest income decreased $353,000, or five percent, primarily as a result of a $441,000, or eight percent, decrease in the gain on sale of loans.

The gain on sale of loans decreased to $5.29 million for the quarter ended March 31, 2014 from $13.83 million in the comparable quarter last year, reflecting the impact of a significantly lower average loan sale margin and loan sale volume resulting from higher mortgage interest rates during the third quarter of fiscal 2014 as compared to the same period in fiscal 2013. The average loan sale margin for mortgage banking was 144 basis points for the quarter ended March 31, 2014, down 34 basis points from 178 basis points in the comparable quarter last year, however, up eight basis points from 136 basis points in the second quarter of fiscal 2014 (sequential quarter). Total loan sale volume, which includes the net change in commitments to extend credit on loans to be held for sale, was $363.3 million in the quarter ended March 31, 2014, down $416.6 million, or 53 percent, from $779.9 million in the comparable quarter last year. The gain on sale of loans includes a favorable fair-value adjustment on loans held for sale and derivative financial instruments (commitments to extend credit, commitments to sell loans, commitments to sell mortgage-backed securities, and option contracts) that amounted to a net gain of $718,000 in the third quarter of fiscal 2014, compared to an unfavorable fair-value adjustment that amounted to a net loss of $(5.96 million) in the same period last year. The gain on sale of loans for the third quarter of fiscal 2014 includes a $127,000 recovery from the recourse reserve for loans sold that are subject to repurchase, compared to a $(27,000) recourse provision for loans sold that are subject to repurchase in the comparable quarter of fiscal 2013. As of March 31, 2014, the recourse reserve for loans sold that are subject to repurchase was $1.1 million, a decrease of $1.0 million, or 48 percent, from $2.1 million at June 30, 2013.

In the third quarter of fiscal 2014, a total of $353.7 million of loans were originated and purchased for sale, 55 percent lower than the $790.1 million for the same period last year, and 22 percent lower than the $453.0 million during the second quarter of fiscal 2014 (sequential quarter). The loan origination volume has declined because the recent rise in mortgage interest rates has severely curtailed refinance activity. Total loans sold during the quarter ended March 31, 2014 were $380.2 million, 58 percent lower than the $908.1 million sold during the same quarter last year, and 24 percent lower than the $500.8 million sold during the second quarter of fiscal 2014 (sequential quarter). Total loan originations (including loans originated and purchased for investment and loans originated and purchased for sale) were $389.9 million in the third quarter of fiscal 2014, a decrease of 52 percent from $808.9 million in the same quarter of fiscal 2013, and 21 percent lower than the $496.1 million in the second quarter of fiscal 2014 (sequential quarter).

The sale and operations of real estate owned acquired in the settlement of loans resulted in a net gain of $45,000 in the third quarter of fiscal 2014, compared to a net gain of $218,000 in the comparable period last year. Two real estate owned properties were sold in the quarter ended March 31, 2014 compared to eight real estate owned properties sold in the same quarter last year. One real estate owned property was acquired in the settlement of loans during the third quarter of fiscal 2014, compared to six real estate owned properties acquired in the settlement of loans in the comparable period last year. As of March 31, 2014, the real estate owned balance was $2.4 million (six properties), compared to $2.3 million (10 properties) at June 30, 2013.

Non-interest expenses decreased $3.18 million, or 20 percent, to $12.55 million in the third quarter of fiscal 2014 from $15.73 million in the same quarter last year, primarily as a result of the decrease in salaries and employee benefits expense.  The decrease in salaries and employee benefits expense was primarily related to the decrease in mortgage banking loan production.

The Company's efficiency ratio increased to 88 percent in the third quarter of fiscal 2014 from 67 percent in the third quarter of fiscal 2013. The increase was the result of the decreases in non-interest income and net interest income, partly offset by the decrease in non-interest expense.

The Company's provision for income taxes was $1.14 million for the third quarter of fiscal 2014, a decrease of $2.23 million or 66 percent, from $3.37 million in the same quarter last year, as a result of the decline in income before taxes. The effective income tax rate for the quarter ended March 31, 2014 was 44.9 percent as compared to 40.9 percent in the same quarter last year. The Company believes that the tax provision recorded in the third quarter of fiscal 2014 reflects its current income tax obligations.

The Company repurchased 194,888 shares of its common stock during the quarter ended March 31, 2014 at an average cost of $15.31 per share.  As of March 31, 2014, a total of 370,230 shares or 74 percent of the shares authorized in the November 2013 stock repurchase plan have been purchased at an average cost of $15.09 per share, leaving 129,675 shares available for future purchases.

The Bank currently operates 15 retail/business banking offices in Riverside County and San Bernardino County (Inland Empire). Provident Bank Mortgage operates two wholesale loan production offices (Pleasanton and Rancho Cucamonga, California) and 14 retail loan production offices located in City of Industry, Elk Grove, Escondido, Glendora, Hermosa Beach, Livermore, Rancho Cucamonga, Riverside (3), Roseville, San Rafael, Santa Barbara and Westlake Village, California.

The Company will host a conference call for institutional investors and bank analysts on Wednesday, April 30, 2014 at 9:00 a.m. (Pacific) to discuss its financial results. The conference call can be accessed by dialing 1-800-611-1147 and requesting the Provident Financial Holdings Earnings Release Conference Call. An audio replay of the conference call will be available through Wednesday, May 7, 2014 by dialing 1-800-475-6701 and referencing access code number 325399.

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 charge-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the residential and commercial real estate markets and may lead to increased losses and non-performing assets and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our reserve; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of the Company by the Federal Reserve Board or of the Bank by the Office of Comptroller of the Currency or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to enter into a formal enforcement action or to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements and restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, including the interpretation of regulatory capital or other rules, including as a result of Basel III; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd Frank Act") and the implementing regulations; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; our ability to attract and retain deposits; increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; computer systems on which we depend could fail or experience a security breach; 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; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common stock;  adverse changes in the securities markets; the 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, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; war or terrorist activities; and 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 or furnished to the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2013.

PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Financial Condition
(Unaudited –In Thousands, Except Share Information)
 
  March 31, 2014 June 30, 2013
Assets    
Cash and cash equivalents $ 193,469 $ 193,839
Investment securities – available for sale at fair value 17,102 19,510
Loans held for investment, net of allowance for loan losses of $10,024 and $14,935, respectively 769,926 748,397
Loans held for sale, at fair value 104,262 188,050
Accrued interest receivable 2,502 2,992
Real estate owned, net 2,406 2,296
FHLB – San Francisco stock 8,680 15,273
Premises and equipment, net 6,499 6,691
Prepaid expenses and other assets 20,275 33,993
Total assets $ 1,125,121 $ 1,211,041
     
Liabilities and Stockholders' Equity    
Liabilities:    
Non interest-bearing deposits $ 56,432 $ 57,835
Interest-bearing deposits 851,074 865,175
Total deposits 907,506 923,010
     
Borrowings 51,447 106,491
Accounts payable, accrued interest and other liabilities 16,211 21,566
Total liabilities 975,164 1,051,067
     
Stockholders' equity:    
Preferred stock, $.01 par value (2,000,000 shares authorized; none issued and outstanding)  -- --
Common stock, $.01 par value (40,000,000 shares authorized; 17,711,365 and 17,661,865 shares issued, respectively; 9,665,877 and 10,386,399 shares outstanding, respectively) 177 177
Additional paid-in capital 88,290 87,742
Retained earnings 181,315 179,816
Treasury stock at cost (8,045,488 and 7,275,466 shares, respectively) (120,293) (108,315)
Accumulated other comprehensive income, net of tax 468 554
     
Total stockholders' equity 149,957 159,974
     
Total liabilities and stockholders' equity $ 1,125,121 $ 1,211,041
 
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Financial Condition – Sequential Quarter
(Unaudited –In Thousands, Except Share Information)
     
 
March 31,

2014
December 31,
2013
Assets    
Cash and cash equivalents $ 193,469 $ 181,792
Investment securities – available for sale at fair value 17,102 17,736
Loans held for investment, net of allowance for loan losses of $10,024 and $11,041, respectively  769,926  756,806
Loans held for sale, at fair value 104,262 130,821
Accrued interest receivable 2,502 2,580
Real estate owned, net 2,406 3,291
FHLB – San Francisco stock 8,680 10,905
Premises and equipment, net 6,499 6,667
Prepaid expenses and other assets 20,275 23,464
Total assets $ 1,125,121 $ 1,134,062
     
Liabilities and Stockholders' Equity    
Liabilities:    
Non interest-bearing deposits $ 56,432 $ 55,126
Interest-bearing deposits 851,074 858,630
Total deposits 907,506 913,756
     
Borrowings 51,447 51,462
Accounts payable, accrued interest and other liabilities 16,211 16,394
Total liabilities 975,164 981,612
     
Stockholders' equity:    
Preferred stock, $.01 par value (2,000,000 shares authorized; none issued and outstanding)  --  --
Common stock, $.01 par value (40,000,000 shares authorized; 17,711,365 and 17,702,365 shares issued, respectively; 9,665,877 and 9,851,765 shares outstanding, respectively)  177  177
Additional paid-in capital 88,290 88,358
Retained earnings 181,315 180,897
Treasury stock at cost (8,045,488 and 7,850,600 shares, respectively)  (120,293)  (117,440)
Accumulated other comprehensive income, net of tax 468 458
     
Total stockholders' equity 149,957 152,450
     
Total liabilities and stockholders' equity $ 1,125,121 $ 1,134,062
 
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Unaudited - In Thousands, Except Earnings Per Share)
 
  Quarter Ended
March 31,
 Nine Months Ended
March 31,
  2014 2013 2014 2013
Interest income:        
Loans receivable, net $ 8,731 $ 10,290 $ 27,522 $ 33,209
Investment securities 82 105 260 329
FHLB – San Francisco stock 203 116 615 280
Interest-earning deposits 142 101 390 258
Total interest income 9,158 10,612 28,787 34,076
         
Interest expense:        
Checking and money market deposits 94 97 292 307
Savings deposits 153 142 452 434
Time deposits 1,058 1,326 3,492 4,299
Borrowings 403 981 1,485 3,262
Total interest expense 1,708 2,546 5,721 8,302
         
Net interest income 7,450 8,066 23,066 25,774
(Recovery) provision for loan losses (849) (517) (2,689) 39
Net interest income, after (recovery) provision for loan losses  8,299 8,583 25,755 25,735
         
Non-interest income:        
Loan servicing and other fees 252 203 778 923
Gain on sale of loans, net 5,291 13,835 17,777 52,308
Deposit account fees 628 605 1,868 1,845
Gain on sale and operations of real estate owned acquired in the settlement of loans  45  218  15  886
Card and processing fees 336 308 997 944
Other 239 219 683 676
Total non-interest income 6,791 15,388 22,118 57,582
         
Non-interest expense:        
Salaries and employee benefits 8,811 11,519 28,175 37,375
Premises and occupancy 1,099 1,090 3,362 3,340
Equipment 435 482 1,389 1,345
Professional expenses 383 370 1,314 1,176
Sales and marketing expenses 418 513 1,224 1,349
Deposit insurance and regulatory assessments 251 241 694 883
Other 1,156 1,514 3,796 4,356
Total non-interest expense 12,553 15,729 39,954 49,824
         
Income before taxes 2,537 8,242 7,919 33,493
Provision for income taxes 1,138 3,372 3,404 12,953
Net income $ 1,399 $ 4,870 $   4,515 $ 20,540
         
Basic earnings per share $ 0.14 $ 0.46 $ 0.45 $ 1.93
Diluted earnings per share $ 0.14 $ 0.45 $ 0.44 $ 1.88
Cash dividends per share $ 0.10 $ 0.07 $ 0.30 $ 0.17
 
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations – Sequential Quarter
(Unaudited – In Thousands, Except Share Information)
 
  Quarter Ended
  March 31, December 31,
  2014 2013
Interest income:    
Loans receivable, net $ 8,731 $ 9,085
Investment securities 82 86
FHLB – San Francisco stock 203 204
Interest-earning deposits 142 138
Total interest income 9,158 9,513
     
Interest expense:    
Checking and money market deposits 94 96
Savings deposits 153 152
Time deposits 1,058 1,171
Borrowings 403 439
Total interest expense 1,708 1,858
     
Net interest income 7,450 7,655
Recovery for loan losses (849) (898)
Net interest income, after recovery for loan losses 8,299 8,553
     
Non-interest income:    
Loan servicing and other fees 252 331
Gain on sale of loans, net 5,291 5,732
Deposit account fees 628 619
Gain (loss) on sale and operations of real estate owned acquired in the settlement of loans, net  45  (82)
Card and processing fees 336 317
Other 239 227
Total non-interest income 6,791 7,144
     
Non-interest expense:    
Salaries and employee benefits 8,811 8,912
Premises and occupancy 1,099 1,104
Equipment 435 474
Professional expenses 383 507
Sales and marketing expenses 418 391
Deposit insurance premiums and regulatory assessments 251 229
Other 1,156 1,254
Total non-interest expense 12,553 12,871
     
Income before taxes 2,537 2,826
Provision for income taxes 1,138 1,223
Net income $ 1,399 $ 1,603
     
Basic earnings per share $ 0.14 $ 0.16
Diluted earnings per share $ 0.14 $ 0.16
Cash dividends per share $ 0.10 $ 0.10
 
 
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited -- Dollars in Thousands, Except Share Information )
 
  Quarter Ended
March 31,
Nine Months Ended
March 31,
 
  2014 2013 2014 2013  
SELECTED FINANCIAL RATIOS:          
Return on average assets 0.50% 1.59% 0.52% 2.20%  
Return on average stockholders' equity 3.70% 12.48% 3.89% 18.02%  
Stockholders' equity to total assets 13.33% 12.89% 13.33% 12.89%  
Net interest spread 2.64% 2.64% 2.67% 2.76%  
Net interest margin 2.74% 2.76% 2.76% 2.87%  
Efficiency ratio 88.15% 67.06% 88.43% 59.77%  
Average interest-earning assets to average interest-bearing liabilities 113.35% 112.04% 113.62% 112.07%  
           
SELECTED FINANCIAL DATA:          
Basic earnings per share  $ 0.14  $ 0.46  $ 0.45  $ 1.93  
Diluted earnings per share  $ 0.14  $ 0.45  $ 0.44  $ 1.88  
Book value per share  $ 15.51  $ 15.07  $ 15.51  $ 15.07  
Average shares used for basic EPS  9,792,560  10,548,566  10,060,730  10,668,165  
Average shares used for diluted EPS  9,972,165  10,826,948 10,253,778 10,903,766  
Total shares issued and outstanding 9,665,877 10,450,471 9,665,877 10,450,471  
           
LOANS ORIGINATED AND PURCHASED FOR SALE:          
Retail originations $ 179,913 $ 369,884 $ 736,842 $ 1,262,590  
Wholesale originations and purchases 173,805 420,198 753,560 1,396,782  
Total loans originated and purchased for sale $ 353,718 $ 790,082 $ 1,490,402 $ 2,659,372  
           
LOANS SOLD:          
Servicing released $ 377,860 $ 904,900 $ 1,566,205 $ 2,696,370  
Servicing retained 2,371 3,159 7,866 13,836  
Total loans sold $ 380,231 $ 908,059 $ 1,574,071 $ 2,710,206  
             
   As of  As of  As of  As of  As of   
  03/31/14 12/31/13 09/30/13 06/30/13 03/31/13  
ASSET QUALITY RATIOS AND DELINQUENT LOANS:            
Recourse reserve for loans sold $ 1,068 $ 1,202 $ 1,258 $ 2,111 $ 2,302  
Allowance for loan losses $ 10,024 $ 11,041 $ 12,105 $ 14,935 $ 16,826  
Non-performing loans to loans held for investment, net  2.18%  2.27%  2.48%  2.90% 2.68%  
Non-performing assets to total assets 1.71% 1.80% 1.88% 1.98% 1.84%  
Allowance for loan losses to gross non-performing loans  55.55%  57.17%  58.57%  58.77%  73.01%  
Allowance for loan losses to gross loans held for investment 1.29% 1.44% 1.59% 1.96% 2.18%  
Net charge-offs to average loans receivable (annualized) 0.08% 0.08% 0.82% 0.15%  0.49%  
Non-performing loans $ 16,807 $ 17,143 $ 18,552 $ 21,682 $ 20,195  
Loans 30 to 89 days delinquent $  1,036 $  -- $ 1,104 $  363 $ 2,519  
 
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited)
 
 
(Dollars in Thousands)
Quarter
Ended
Quarter
Ended
Quarter
Ended
Quarter
Ended
Quarter
Ended
  03/31/14 12/31/13 09/30/13 06/30/13 03/31/13
Recourse (recovery) provision for loans sold $ (127) $ (70) $ (186) $  (191) $  27
Recovery from allowance for loan losses $ (849) $ (898) $ (942) $ (1,538) $ (517)
Net charge-offs $ 168 $ 166 $ 1,888 $  353 $ 1,187
           
   As of  As of  As of  As of  As of
  03/31/14 12/31/13 09/30/13 06/30/13 03/31/13
REGULATORY CAPITAL RATIOS (BANK):        
Tier 1 leverage ratio 12.80% 12.56% 13.07% 13.12% 12.55%
Tier 1 risk-based capital ratio 19.96% 19.80% 20.82% 21.36% 20.76%
Total risk-based capital ratio 21.22% 21.06% 22.09% 22.64% 22.02%
           
  As of March 31,
  2014 2013
INVESTMENT SECURITIES: Balance Rate (1) Balance Rate (1)
Available for sale (at fair value):        
U.S. government agency MBS $ 9,543 1.66% $ 11,387 1.86%
U.S. government sponsored enterprise MBS 6,657 2.38 8,094 2.45
Private issue collateralized mortgage obligations 902 2.40 1,097 2.41
Total investment securities available for sale $ 17,102 1.98% $ 20,578 2.12%
         
LOANS HELD FOR INVESTMENT:        
Single-family (1 to 4 units) $ 381,267 3.24% $ 415,616 3.54%
Multi-family (5 or more units)  289,314 4.88  256,640 5.43
Commercial real estate 104,569 5.93 94,779 6.43
Construction 1,792 5.83 -- --
Commercial business  1,051 6.93  1,859 6.82
Consumer  324 9.17  448 8.42
Total loans held for investment 778,317 4.22% 769,342 4.53%
         
Undisbursed loan funds (757)   --  
Deferred loan costs, net  2,390    1,925  
Allowance for loan losses  (10,024)    (16,826)  
Total loans held for investment, net $ 769,926   $ 754,441  
         
Purchased loans serviced by others included above $ 12,590 4.39% $ 15,220 4.50%
         
DEPOSITS:        
Checking accounts – non interest-bearing  $ 56,432 --%  $ 55,927 --%
Checking accounts – interest-bearing  207,217 0.14  210,807 0.14
Savings accounts  241,028 0.26  227,793 0.26
Money market accounts  25,264 0.29  27,381 0.30
Time deposits  377,565 1.11  413,192 1.30
Total deposits $ 907,506 0.57% $ 935,100 0.68%
 
(1) 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.
 
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited)
 
  As of March 31,
(Dollars in Thousands) 2014 2013
  Balance Rate (1) Balance Rate (1)
BORROWINGS:        
Overnight $   --  --% $ --  --%
Three months or less 10,000 2.93 -- --
Over three to nine months -- -- 50,000 4.09
Over nine months to one year -- -- 5,000 2.51
Over one year to two years -- -- 10,000 2.93
Over two years to three years -- -- -- --
Over three years to four years -- -- -- --
Over four years to five years 10,086 3.04 10,106 3.04
Over five years 31,361 3.22 31,399 3.23
Total borrowings $ 51,447 3.13% $ 106,505 3.55%
     
  Quarter Ended Nine Months Ended
  March 31, March 31,
  2014 2013 2014 2013
SELECTED AVERAGE BALANCE SHEETS: Balance Balance Balance Balance
         
Loans receivable, net (2) $  842,714 $  964,154 $  876,708 $ 1,016,543
Investment securities 17,461 20,838 18,243 21,749
FHLB – San Francisco stock 10,633 19,020 12,347 20,270
Interest-earning deposits 218,711 163,911 205,386 137,585
Total interest-earning assets $ 1,089,519 $ 1,167,923 $ 1,112,684 $ 1,196,147
Total assets $ 1,129,132 $ 1,224,132 $ 1,150,523 $ 1,245,356
         
Deposits $  909,713 $ 931,715 $ 917,991 $ 945,971
Borrowings 51,452 110,733 61,284 121,342
Total interest-bearing liabilities $  961,165 $ 1,042,448 $  979,275 $ 1,067,313
Total stockholders' equity $ 151,176 $ 156,052 $ 154,947 $ 151,986
         
  Quarter Ended Nine Months Ended
  March 31, March 31,
  2014 2013 2014 2013
  Yield/Cost Yield/Cost Yield/Cost Yield/Cost
         
Loans receivable, net (2) 4.14% 4.27% 4.19% 4.36%
Investment securities 1.88% 2.02% 1.90% 2.02%
FHLB – San Francisco stock 7.64% 2.44% 6.64% 1.83%
Interest-earning deposits 0.25% 0.25% 0.25% 0.25%
Total interest-earning assets 3.36% 3.63% 3.45% 3.80%
         
Deposits 0.58% 0.68% 0.61% 0.71%
Borrowings 3.18% 3.59% 3.23% 3.58%
Total interest-bearing liabilities 0.72% 0.99% 0.78% 1.04%
 
(1) 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.
(2) Includes loans held for investment and loans held for sale at fair value, net of allowance for loan losses.
 
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Asset Quality (1)
(Unaudited – Dollars in Thousands)
 
    As of  As of  As of  As of  As of
  03/31/14 12/31/13 09/30/13 06/30/13 03/31/13
Loans on non-accrual status (excluding restructured loans):          
Mortgage loans:          
Single-family $ 7,664 $ 8,689 $ 6,771 $  8,129 $ 9,304
Multi-family 926 1,077 1,157 1,236 900
Commercial real estate 2,757 1,929 3,765 3,218 1,958
Commercial business loans 5 13 15 7 34
Total 11,352 11,708 11,708 12,590 12,196
           
Accruing loans past due 90 days or more: -- -- -- -- --
Total -- -- -- -- --
           
Restructured loans on non-accrual status:          
Mortgage loans:          
Single-family 2,304 2,419 3,740 5,094 5,850
Multi-family 2,247 2,099 2,109 2,521 759
Commercial real estate 805 810 880 1,354 1,227
Commercial business loans 99 107 115 123 163
Total 5,455 5,435 6,844 9,092 7,999
           
Total non-performing loans 16,807 17,143 18,552 21,682 20,195
           
Real estate owned, net 2,406 3,291 3,172 2,296 2,227
Total non-performing assets $ 19,213 $ 20,434 $ 21,724 $ 23,978 $ 22,422
           
Restructured loans on accrual status:          
Mortgage loans:          
Single-family $  1,630 $ 384 $  815 $   434 $ 2,575
Multi-family -- -- -- -- 2,755
Total $ 1,630 $ 384 $   815 $   434 $ 5,330
 
(1) The non-performing loan balances are net of individually evaluated or collectively evaluated allowances, specifically attached to the individual loans.
 
Craig G. Blunden
Chairman and
Chief Executive Officer

Donavon P. Ternes
President, Chief Operating Officer,
and Chief Financial Officer

(951) 686-6060