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TheStreet Open House

Provident Financial Holdings Reports Second Quarter Fiscal 2013 Earnings

Stocks in this article: PROV

The Company will host a conference call for institutional investors and bank analysts on Friday, January 25, 2013 at 9:00 a.m. (Pacific) to discuss its financial results. The conference call can be accessed by dialing 1-800-288-8960 and requesting the Provident Financial Holdings Earnings Release Conference Call. An audio replay of the conference call will be available through Friday, February 1, 2013 by dialing 1-800-475-6701 and referencing access code number 279929.

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 and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing 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 us by the Board of Governors of the Federal Reserve System and our bank subsidiary 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 increase our reserve 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, or the interpretation of regulatory capital or other rules, including changes related to Basel III; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations; 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 retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; 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; 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; 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; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described 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, 2012 .

PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Financial Condition
(Unaudited –In Thousands, Except Share Information)
     
  December 31, June 30,
  2012 2012
Assets    
Cash and cash equivalents $99,634 $145,136
Investment securities – available for sale at fair value 21,184 22,898
Loans held for investment, net of allowance for loan losses of $18,530 and $21,483, respectively 772,057 796,836
Loans held for sale, at fair value 294,434 231,639
Accrued interest receivable 3,032 3,277
Real estate owned, net 2,435 5,489
FHLB – San Francisco stock 19,149 22,255
Premises and equipment, net 6,528 6,600
Prepaid expenses and other assets 29,877 26,787
     
Total assets $1,248,330 $1,260,917
     
Liabilities and Stockholders' Equity    
Liabilities:    
Non interest-bearing deposits $51,121 $55,688
Interest-bearing deposits 884,085 905,723
Total deposits 935,206 961,411
     
Borrowings 126,519 126,546
Accounts payable, accrued interest and other liabilities 30,749 28,183
Total liabilities 1,092,474 1,116,140
     
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; 17,647,865 and 17,619,865 shares issued, respectively; 10,597,005 and 10,856,027 shares outstanding, respectively)  176 176
Additional paid-in capital 87,278 86,758
Retained earnings 171,155 156,560
Treasury stock at cost (7,050,860 and 6,763,838 shares, respectively) (103,352) (99,343)
Accumulated other comprehensive income, net of tax 599 626
     
Total stockholders' equity 155,856 144,777
     
Total liabilities and stockholders' equity $1,248,330 $1,260,917
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Financial Condition – Sequential Quarter
(Unaudited –In Thousands, Except Share Information)
     
  December 31, September 30,
  2012 2012
Assets    
Cash and cash equivalents $99,634 $98,489
Investment securities – available for sale at fair value 21,184 22,149
Loans held for investment, net of allowance for loan losses of $18,530 and $20,118, respectively 772,057 776,844
Loans held for sale, at fair value 294,434 307,319
Accrued interest receivable 3,032 3,274
Real estate owned, net 2,435 5,189
FHLB – San Francisco stock 19,149 21,107
Premises and equipment, net 6,528 6,566
Prepaid expenses and other assets 29,877 30,547
     
Total assets $1,248,330 $1,271,484
     
Liabilities and Stockholders' Equity    
Liabilities:    
Non interest-bearing deposits $51,121 $54,653
Interest-bearing deposits 884,085 902,162
Total deposits 935,206 956,815
     
Borrowings 126,519 126,533
Accounts payable, accrued interest and other liabilities 30,749 37,318
Total liabilities 1,092,474 1,120,666
     
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; 17,647,865 and 17,647,865 shares issued, respectively; 10,597,005 and 10,690,585 shares outstanding, respectively) 176 176
Additional paid-in capital 87,278 87,173
Retained earnings 171,155 164,748
Treasury stock at cost (7,050,860 and 6,957,280 shares, respectively) (103,352) (101,904)
Accumulated other comprehensive income, net of tax 599 625
     
Total stockholders' equity 155,856 150,818
     
Total liabilities and stockholders' equity $1,248,330 $1,271,484
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Unaudited - In Thousands, Except Earnings Per Share)
         
  Quarter Ended Six Months Ended 
  December 31, December 31,
  2012 2011 2012 2011
Interest income:        
Loans receivable, net $11,286 $13,261 $22,919 $26,010
Investment securities 110 134 224 281
FHLB – San Francisco stock 137 20 164 38
Interest-earning deposits 84 37 157 134
Total interest income 11,617 13,452 23,464 26,463
         
Interest expense:        
Checking and money market deposits 112 176 210 376
Savings deposits 144 191 292 416
Time deposits 1,449 1,824 2,973 3,730
Borrowings 1,140 1,755 2,281 3,637
Total interest expense 2,845 3,946 5,756 8,159
         
Net interest income, before provision for loan losses 8,772 9,506 17,708 18,304
Provision for loan losses 23 1,132 556 2,104
Net interest income, after provision for loan losses 8,749 8,374 17,152 16,200
         
Non-interest income:        
Loan servicing and other fees 382 176 720 308
Gain on sale of loans, net 17,878 5,897 38,473 13,173
Deposit account fees 617 626 1,240 1,229
Gain on sale and operations of real estate owned acquired in the settlement of loans 595 77 668 109
Card and processing fees 315 309 636 640
Other 248 228 457 402
Total non-interest income 20,035 7,313 42,194 15,861
         
Non-interest expense:        
Salaries and employee benefits 12,671 8,380 25,856 17,234
Premises and occupancy 1,100 956 2,250 1,828
Equipment 422 410 863 724
Professional expenses 453 455 806 888
Sales and marketing expenses 416 178 836 377
Deposit insurance and regulatory assessments 303 461 642 632
Other 1,404 1,634 2,842 3,094
Total non-interest expense 16,769 12,474 34,095 24,777
         
Income before taxes 12,015 3,213 25,251 7,284
Provision for income taxes 5,075 1,359 9,581 3,112
Net income $6,940 $1,854 $15,670 $4,172
         
Basic earnings per share $0.65 $0.16 $1.46 $0.37
Diluted earnings per share $0.64 $0.16 $1.44 $0.36
Cash dividends per share $0.05 $0.03 $0.10 $0.06
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations – Sequential Quarter
(Unaudited – In Thousands, Except Share Information)
     
  Quarter Ended
  December 31, September 30,
  2012 2012
Interest income:    
Loans receivable, net $11,286 $11,633
Investment securities 110 114
FHLB – San Francisco stock 137 27
Interest-earning deposits 84 73
Total interest income 11,617 11,847
     
Interest expense:    
Checking and money market deposits 112 98
Savings deposits 144 148
Time deposits 1,449 1,524
Borrowings 1,140 1,141
Total interest expense 2,845 2,911
     
Net interest income, before provision for loan losses 8,772 8,936
Provision for loan losses 23 533
Net interest income, after provision for loan losses 8,749 8,403
     
Non-interest income:    
Loan servicing and other fees 382 338
Gain on sale of loans, net 17,878 20,595
Deposit account fees 617 623
Gain on sale and operations of real estate owned acquired in the settlement of loans, net 595 73
Card and processing fees 315 321
Other 248 209
 Total non-interest income 20,035 22,159
     
Non-interest expense:    
Salaries and employee benefits 12,671 13,185
Premises and occupancy 1,100 1,150
Equipment 422 441
Professional expenses 453 353
Sales and marketing expenses 416 420
Deposit insurance premiums and regulatory assessments 303 339
Other 1,404 1,438
Total non-interest expense 16,769 17,326
     
Income before taxes 12,015 13,236
Provision for income taxes 5,075 4,506
Net income $6,940 $8,730
     
Basic earnings per share $0.65 $0.81
Diluted earnings per share $0.64 $0.80
Cash dividends per share $0.05 $0.05
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited -- Dollars in Thousands, Except Share Information )
         
  Quarter Ended Six Months Ended
  December 31, December 31,
  2012 2011 2012 2011
SELECTED FINANCIAL RATIOS:        
Return on average assets 2.21% 0.57% 2.50% 0.64%
Return on average stockholders' equity 18.14% 5.19% 20.89% 5.87%
Stockholders' equity to total assets 12.49% 10.95% 12.49% 10.95%
Net interest spread 2.79% 2.90% 2.82% 2.79%
Net interest margin 2.90% 3.02% 2.93% 2.90%
Efficiency ratio 58.21% 74.17% 56.92% 72.52%
Average interest-earning assets to average interest-bearing liabilities 112.55% 110.52% 112.06% 110.03%
         
SELECTED FINANCIAL DATA:        
Basic earnings per share $0.65 $0.16 $1.46 $0.37
Diluted earnings per share $0.64 $0.16 $1.44 $0.36
Book value per share $14.71 $12.71 $14.71 $12.71
Shares used for basic EPS computation 10,654,044 11,352,954 10,726,665 11,410,403
Shares used for diluted EPS computation 10,865,407 11,383,737 10,917,585 11,449,321
Total shares issued and outstanding 10,597,005 11,175,761 10,597,005 11,175,761
         
LOANS ORIGINATED AND PURCHASED FOR SALE:        
Retail originations $474,152 $220,272 $892,706 $427,821
Wholesale originations and purchases 534,687 408,672 976,584 769,183
Total loans originated and purchased for sale $1,008,839 $628,944 $1,869,290 $1,197,004
         
LOANS SOLD:        
Servicing released $1,009,172 $670,753 $1,791,470 $1,152,146
Servicing retained 5,037 3,537 10,677 7,863
Total loans sold $1,014,209 $674,290 $1,802,147 $1,160,009
   As of  As of  As of  As of  As of 
  12/31/12 09/30/12 06/30/12 03/31/12 12/31/11
ASSET QUALITY RATIOS AND DELINQUENT LOANS:          
Recourse reserve for loans sold $7,776 $6,474 $6,183 $5,911 $5,301
Allowance for loan losses $18,530 $20,118 $21,483 $24,260 $26,901
Non-performing loans to loans held for investment, net   3.16% 3.72% 4.33% 3.89% 3.72%
Non-performing assets to total assets 2.15% 2.68% 3.17% 2.97% 3.03%
Allowance for loan losses to gross non-performing loans 64.40% 58.64% 52.45% 58.19% 62.71%
Allowance for loan losses to gross loans held for  investment 2.34% 2.52% 2.63% 2.86% 3.08%
Net charge-offs to average loans receivable (annualized) 0.62% 0.72% 1.84% 1.64% 1.02%
Non-performing loans $24,365 $28,894 $34,488 $32,141 $31,461
Loans 30 to 89 days delinquent $1,423 $5,870 $616 $1,274 $3,066
 
PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited)
           
  Quarter Quarter Quarter Quarter Quarter
(Dollars in Thousands) Ended Ended Ended Ended Ended
  12/31/12   09/30/12  06/30/12   03/31/12  12/31/11
Recourse provision for loans sold $1,285 $618 $241 $811 $672
Provision for loan losses $23 $533 $2,051 $1,622 $1,132
Net charge-offs $1,611 $1,898 $4,828 $4,263 $2,935
           
   As of  As of  As of  As of  As of
  12/31/12   09/30/12  06/30/12   03/31/12  12/31/11
REGULATORY CAPITAL RATIOS (BANK):        
Tier 1 leverage ratio 12.26% 11.47% 11.26% 10.68% 10.62%
Tier 1 risk-based capital ratio 18.79% 17.46% 17.53% 17.04% 16.87%
Total risk-based capital ratio 20.05% 18.72% 18.79% 18.31% 18.13%
           
    As of December 31,
    2012 2011
INVESTMENT SECURITIES:   Balance Rate (1) Balance Rate (1)
Available for sale (at fair value):          
U.S. government agency MBS $11,600 1.90% $13,083 2.12%
U.S. government sponsored enterprise MBS   8,428 2.44 9,779 2.44
Private issue collateralized mortgage obligations 1,156 2.40 1,244 2.53
Total investment securities available for sale $21,184 2.14% $24,106 2.27%
           
LOANS HELD FOR INVESTMENT:        
Single-family (1 to 4 units) $422,457 3.69% $465,606 3.89%
Multi-family (5 or more units) 261,580 5.51 298,285 5.84
Commercial real estate 101,621 6.44 99,718 6.84
Other mortgage 390 4.82 1,528 5.69
Commercial business 2,199 6.88 4,332 7.43
Consumer 383 9.33 604 8.02
Total loans held for investment 788,630 4.66% 870,073 4.92%
           
Deferred loan costs, net 1,957   2,304  
Allowance for loan losses  (18,530)    (26,901)  
Total loans held for investment, net $772,057   $845,476  
           
Purchased loans serviced by others included above $17,582 4.65% $19,701 4.72%
           
DEPOSITS:          
Checking accounts – non interest-bearing $51,121 --% $51,785 --%
Checking accounts – interest-bearing 204,954 0.14 198,683 0.26
Savings accounts 225,501 0.25 214,846 0.35
Money market accounts 27,599 0.37 30,275 0.57
Time deposits 426,031 1.32 458,267 1.51
Total deposits $935,206 0.70% $953,856 0.88%
           
(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 December 31,
(Dollars in Thousands) 2012 2011
  Balance Rate (1) Balance Rate (1)
BORROWINGS:        
Overnight $ --  --% $ --  --%
Three months or less 20,000 3.39 30,000 4.01
Over three to six months -- -- 30,000 3.70
Over six months to one year 55,000 3.95 -- --
Over one year to two years 10,000 2.93 75,000 3.80
Over two years to three years -- -- 10,000 2.93
Over three years to four years -- -- -- --
Over four years to five years 110 6.49 -- --
Over five years 41,409 3.18 31,573 3.71
Total borrowings $126,519 3.53% $176,573 3.75%
         
  Quarter Ended Six Months Ended
  December 31, December 31,
SELECTED AVERAGE BALANCE SHEETS: 2012 2011 2012 2011
  Balance Balance Balance Balance
         
Loans receivable, net (2) $1,036,682 $1,153,663 $1,042,167 $1,105,162
Investment securities 21,753 24,719 22,195 25,243
FHLB – San Francisco stock 20,107 25,155 20,881 25,759
Interest-earning deposits 132,413 57,201 124,421 104,765
Total interest-earning assets $1,210,955 $1,260,738 $1,209,664 $1,260,929
Total assets $1,256,688 $1,306,908 $1,255,738 $1,310,027
         
Deposits $949,412 $955,112 $952,945 $954,922
Borrowings 126,524 185,670 126,531 191,103
Total interest-bearing liabilities $1,075,936 $1,140,782 $1,079,476 $1,146,025
Total stockholders' equity $153,016 $142,774 $149,997 $142,235
         
  Quarter Ended Six Months Ended
  December 31, December 31,
  2012 2011 2012 2011
  Yield/Cost Yield/Cost Yield/Cost Yield/Cost
         
Loans receivable, net (2) 4.35% 4.60% 4.40% 4.71%
Investment securities 2.02% 2.17% 2.02% 2.23%
FHLB – San Francisco stock 2.73% 0.32% 1.56% 0.29%
Interest-earning deposits 0.25% 0.25% 0.25% 0.25%
Total interest-earning assets 3.84% 4.27% 3.88% 4.20%
         
Deposits 0.71% 0.91% 0.72% 0.94%
Borrowings 3.57% 3.75% 3.58% 3.78%
Total interest-bearing liabilities 1.05% 1.37% 1.06% 1.41%
         
(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
  12/31/12 09/30/12 06/30/12 03/31/12 12/31/11
Loans on non-accrual status (excluding restructured loans):          
Mortgage loans:          
Single-family $10,677 $11,832 $17,095 $16,608 $15,483
Multi-family 1,111 961 967 512 1,789
Commercial real estate 1,737 2,151 764 553 938
Commercial business loans 7 7 7 -- --
Total 13,532 14,951 18,833 17,673 18,210
           
Accruing loans past due 90 days or more: -- -- -- -- --
Total -- -- -- -- --
           
Restructured loans on non-accrual status:          
Mortgage loans:          
Single-family 7,708 10,662 11,995 10,213 11,424
Multi-family 480 485 490 776 490
Commercial real estate 2,477 2,477 2,483 2,739 365
Other -- 159 522 522 972
Commercial business loans 168 160 165 218 --
Total 10,833 13,943 15,655 14,468 13,251
           
Total non-performing loans 24,365 28,894 34,488 32,141 31,461
           
Real estate owned, net 2,435 5,189 5,489 6,084 7,853
Total non-performing assets $26,800 $34,083 $39,977 $38,225 $39,314
           
Restructured loans on accrual status:          
Mortgage loans:          
Single-family $4,252 $4,166 $6,148 $9,505 $10,092
Multi-family 2,755 2,755 3,266 3,653 4,168
Commercial real estate -- -- -- 880 2,772
 Other 232 -- -- -- --
Commercial business loans -- -- 33 35 219
Total $7,239 $6,921 $9,447 $14,073 $17,251
           
(1)   The non-performing loan balances are net of individually evaluated or collectively evaluated allowances, specifically attached to the individual loans.
CONTACT: Craig G. Blunden
         Chairman and Chief Executive Officer
         
         Donavon P. Ternes
         President, Chief Operating Officer,
         and Chief Financial Officer
         (951) 686-6060

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