Provident Community Bancshares Reports Second Quarter Results

Provident Community Bancshares, Inc. (NASDAQ CM: PCBS) (the “Corporation”) recorded a net loss to common shareholders of $110,000 for the three months ended June 30, 2011 compared to a net loss to common shareholders of $414,000 for the same period in 2010. Operating results for the 2011 period were impacted by an increase of $492,000 in expenses primarily related to the disposition of foreclosed properties and a decrease in the net gain on the sale of investments, offset by lower provisions for loan losses due primarily to a net reduction in total loans of $28.8 million and an increase in net interest income due primarily to lower cost of funds. Net loss per common share was $0.06 (diluted) for the three months ended June 30, 2011, versus a net loss of $0.23 per common share (diluted) for the same period in 2010. The net loss to common shareholders for the six months ended June 30, 2011 was $116,000, or $0.06 per share (diluted), compared to a net loss to common shareholders of $514,000 or $0.29 per share (diluted), for the same period in 2010.

At June 30, 2011, assets totaled $386.9 million, a decrease of $21.8 million, or 5.3%, from $408.7 million at December 31, 2010. Starting in 2010 and, as part of its strategic plan, the Corporation implemented a program to shrink its balance sheet in order to increase its regulatory capital ratios. This shrinkage was accomplished with reductions in loans and was primarily funded with reductions in borrowings and higher cost deposits. Investment securities at June 30, 2011 increased $4.6 million, or 3.1%, to $153.1 million from $148.5 million at December 31, 2010. Fed funds sold at June 30, 2011 increased $6.0 million to $20.5 million from $14.5 million at December 31, 2010 as a result of sales and maturities of securities. Net loans receivable decreased $28.8 million, or 14.5%, to $170.1 million at June 30, 2011 as a result of lower demand and more stringent underwriting standards. Deposits decreased $17.6 million to $295.6 million at June 30, 2011 as a result of reductions in funding needs. FHLB advances and other borrowings decreased $5.0 million to $64.5 million at June 30, 2011 due primarily to the maturation of borrowings. Shareholders’ equity increased $458,000, or 4.5%, to $10.7 million at June 30, 2011 from $10.3 million at December 31, 2010 due primarily to net operating income of $119,000 and a $339,000 decrease in unrealized losses on securities available for sale.

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