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Provident Financial Holdings Reports First Quarter Fiscal 2014 Earnings

FIRST QUARTER HIGHLIGHTS INCLUDE:

  • Net Interest Margin Expands 23 Basis Points (Sequential Quarter)
  • Non-Performing Assets Decline by 36%
  • Repurchase of 190,051 Shares of Common Stock

RIVERSIDE, Calif., Oct. 29, 2013 (GLOBE NEWSWIRE) -- Provident Financial Holdings, Inc. ("Company"), (Nasdaq:PROV), the holding company for Provident Savings Bank, F.S.B. ("Bank"), today announced first quarter earnings for the fiscal year ending June 30, 2014.

For the quarter ended September 30, 2013, the Company reported net income of $1.51 million, or $0.14 per diluted share (on 10.53 million average shares outstanding), compared to net income of $8.73 million, or $0.80 per diluted share (on 10.97 million average shares outstanding), in the comparable period a year ago. The decrease in net income for the first quarter of fiscal 2014 was primarily attributable to a $13.85 million decrease in the gain on sale of loans, partly offset by a $2.74 million decrease in salaries and employee benefits expense, a $1.48 million improvement in the provision for loan losses, and a decrease of $3.47 million in the provision for income taxes, compared to the same period one year ago.

"I am encouraged by our preferred loan origination volume this quarter which is the highest quarterly volume since December 2007. I am increasingly confident that general economic conditions have improved by such a degree that we can take advantage of expanded lending opportunities that meet our investment and credit criteria and increase our preferred loan portfolio. Therefore, we will be allocating more capital to our community banking business and increase our focus on growing net interest income as non-interest income returns to more normalized levels. Of course, this will take some time so we will continue to prudently manage capital levels while maintaining our share repurchases and cash dividends to shareholders," said Craig G. Blunden, Chairman and Chief Executive Officer of the Company. "Regarding our mortgage banking business, it is clear that the environment has become much more difficult as a result of the recent rise in mortgage interest rates and decline in refinancing activity. Fiscal 2014 will be a year of transition for our mortgage banking business requiring us to make significant adjustments to our business model consistent with declining loan production."

As of September 30, 2013, the Bank exceeded all regulatory capital requirements with Tier 1 Leverage, Tier 1 Risk-Based and Total Risk-Based capital ratios of 13.07 percent, 20.82 percent and 22.09 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 first quarter of fiscal 2014 decreased to 0.52 percent from 2.78 percent for the same period of fiscal 2013, and return on average stockholders' equity for the first quarter of fiscal 2014 decreased to 3.82 percent from 23.76 percent for the comparable period of fiscal 2013.

On a sequential quarter basis, the first quarter net income of fiscal 2014 reflects a $3.75 million, or 71 percent, decrease from net income of $5.26 million in the fourth quarter of fiscal 2013. The decrease in net income in the first quarter of fiscal 2014 was primarily attributable to a decrease of $9.44 million in the gain on sale of loans, partly offset by a decrease of $2.63 million in salaries and employee benefits expense and a decrease of $2.92 million in the provision for income taxes, compared to the fourth quarter of fiscal 2013. Diluted earnings per share for the first quarter of fiscal 2014 decreased by 71 percent to $0.14 per share from $0.49 per share in the fourth quarter of fiscal 2013. Return on average assets decreased to 0.52 percent for the first quarter of fiscal 2014 from 1.73 percent in the fourth quarter of fiscal 2013; and return on average stockholders' equity for the first quarter of fiscal 2014 was 3.82 percent, compared to 13.29 percent for the fourth quarter of fiscal 2013.

Net interest income decreased $975,000, or 11 percent, to $7.96 million in the first quarter of fiscal 2014 from $8.94 million for the same quarter of fiscal 2013, attributable to a 14 basis point decrease in the net interest margin and a $77.5 million, or six percent, decrease in average interest-earning assets. Non-interest income decreased $13.98 million, or 63 percent, to $8.18 million in the first quarter of fiscal 2014 from $22.16 million in the same quarter of fiscal 2013. Non-interest expense decreased $2.80 million, or 16 percent, to $14.53 million in the first quarter of fiscal 2014 from $17.33 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 $122.6 million, or 12 percent, to $925.0 million in the first quarter of fiscal 2014 compared to $1.05 billion in the same quarter of fiscal 2013. The average yield on loans receivable decreased by 24 basis points to 4.20 percent in the first quarter of fiscal 2014 from an average yield of 4.44 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. Loans originated and purchased for investment in the first quarter of fiscal 2014 totaled $40.9 million, consisting primarily of multi-family loans. The outstanding balance of "preferred loans" (multi-family, commercial real estate, construction and commercial business loans) increased by $10.1 million, or three percent, to $366.9 million at September 30, 2013 from $356.8 million at June 30, 2013. The percentage of preferred loans to total loans held for investment at September 30, 2013 increased slightly to 48 percent from 47 percent at June 30, 2013. Loan principal payments received in the first quarter of fiscal 2014 were $41.7 million, compared to $37.9 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 first quarter of fiscal 2014 declined to $2.8 million, compared to $5.0 million in the same quarter of fiscal 2013, due primarily to the improvement in our loan quality and stronger real estate markets.

The average balance of investment securities decreased by $3.5 million, or 15 percent, to $19.1 million in the first quarter of fiscal 2014 from $22.6 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 eight basis points to 1.93 percent in the first quarter of fiscal 2014 from 2.01 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 first 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, $2.0 million of excess capital stock was redeemed at par and a $208,000 cash dividend was received by the Bank in the first quarter of fiscal 2014. This is comparable to the same quarter last year when the Bank received a $1.1 million partial redemption and a $27,000 cash dividend.

The average balance of the Company's interest-earning deposits, primarily cash with the Federal Reserve Bank of San Francisco, increased $56.1 million, or 48 percent, to $172.5 million in the first quarter of fiscal 2014 from $116.4 million in the same quarter of fiscal 2013. The Bank maintains high levels of cash and cash equivalents in response to the uncertain operating 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 first 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 $37.6 million, or four percent, to $918.9 million in the first quarter of fiscal 2014 from $956.5 million in the same quarter of fiscal 2013. The average cost of deposits decreased by nine basis points to 0.65 percent in the first quarter of fiscal 2014 from 0.74 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 decreased $1.5 million to $519.3 million at September 30, 2013 from $520.8 million at June 30, 2013, while time deposits decreased $2.4 million, or one percent, to $399.8 million at September 30, 2013 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 $50.1 million, or 40 percent, to $76.4 million and the average cost of advances decreased 25 basis points to 3.34 percent in the first quarter of fiscal 2014, compared to an average balance of $126.5 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 first quarter of fiscal 2014 decreased 14 basis points to 2.82 percent from 2.96 percent in the same quarter last year. The decrease was primarily due to the decline in the average yield of interest-earning assets outpacing the declining cost of liabilities. The declining yield of interest-earning assets was attributable to the downward repricing of loans and investment securities and a higher level of excess liquidity invested at a nominal yield. 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 first quarter of fiscal 2014, the Company recorded a recovery from the allowance for loan losses of $(942,000), compared to the $533,000 provision for loan losses recorded during the same period of fiscal 2013 and the $(1.54) million recovery recorded in the fourth quarter of fiscal 2013 (sequential quarter).

Non-performing assets, with underlying collateral primarily located in Southern California, decreased to $21.7 million, or 1.88 percent of total assets, at September 30, 2013, compared to $24.0 million, or 1.98 percent of total assets, at June 30, 2013. Non-performing loans at September 30, 2013 decreased $3.1 million or 14 percent since June 30, 2013 to $18.6 million and were primarily comprised of 40 single-family loans ($10.5 million); nine commercial real estate loans ($4.7 million); seven multi-family loans ($3.3 million) and six commercial business loans ($130,000). Real estate owned acquired in the settlement of loans at September 30, 2013 was primarily comprised of four single-family properties ($1.2 million), two undeveloped lots ($9,000) and two commercial real estate properties ($2.0 million).

Net charge-offs for the quarter ended September 30, 2013 were $1.89 million or 0.82 percent (annualized) of average loans receivable, compared to $1.90 million or 0.72 percent (annualized) of average loans receivable for the quarter ended September 30, 2012 and $353,000 or 0.15 percent (annualized) of average loans receivable for the quarter ended June 30, 2013 (sequential quarter).

Classified assets at September 30, 2013 were $45.8 million, comprised of loans of $9.0 million in the special mention category and $33.6 million in the substandard category and $3.2 million in real estate owned. Classified assets at June 30, 2013 were $47.0 million, comprised of loans of $6.9 million in the special mention category and $37.8 million in the substandard category and $2.3 million in real estate owned.

For the quarters ended September 30, 2013 and 2012, no loans were restructured from their original terms. As of September 30, 2013, the outstanding balance of restructured loans was $7.7 million: two loans were classified as special mention ($815,000, both on accrual status); and 21 loans were classified as substandard ($6.9 million, all of which were on non-accrual status). As of September 30, 2013, $5.2 million, or 69 percent, of our restructured loans were current with respect to their payment status.

The allowance for loan losses was $12.1 million at September 30, 2013, or 1.59 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 September 30, 2013.

Non-interest income decreased by $13.98 million, or 63 percent, to $8.18 million in the first quarter of fiscal 2014 from $22.16 million in the same period of fiscal 2013, primarily as a result of a $13.85 million decrease in the gain on sale of loans. On a sequential quarter basis, non-interest income decreased $9.44 million, or 54 percent, primarily as a result of a $9.44 million, or 58 percent, decrease in the gain on sale of loans.

The gain on sale of loans decreased to $6.75 million for the quarter ended September 30, 2013 from $20.60 million in the comparable quarter last year, reflecting the impact of a significantly lower average loan sale margin and loan sale volume resulting from the increase in mortgage interest rates during the first quarter of fiscal 2014. The average loan sale margin for mortgage banking was 116 basis points for the quarter ended September 30, 2013, down 103 basis points from 219 basis points in the comparable quarter last year. Total loan sale volume, which includes the net change in commitments to extend credit on loans to be held for sale, was $563.4 million in the quarter ended September 30, 2013, down 40 percent from $939.7 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 $976,000 in the first quarter of fiscal 2014, compared to a favorable fair-value adjustment that amounted to a net gain of $5.27 million in the same period last year. The gain on sale of loans for the first quarter of fiscal 2014 was enhanced by a $(186,000) recovery from the recourse reserve for loans sold that are subject to repurchase, compared to a $618,000 recourse provision for loans sold that are subject to repurchase in the comparable quarter of fiscal 2013. As of September 30, 2013, the recourse reserve for loans sold that are subject to repurchase was $1.3 million, a decrease of $853,000, or 40 percent, from $2.1 million at June 30, 2013.

In the first quarter of fiscal 2014, a total of $683.7 million of loans were originated and purchased for sale, 21 percent lower than the $860.5 million for the same period last year, and 18 percent lower than the $837.2 million during the fourth quarter of fiscal 2013 (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 September 30, 2013 were $693.0 million, 12 percent lower than the $787.9 million sold during the same quarter last year, and 15 percent lower than the $812.2 million sold during the fourth quarter of fiscal 2013 (sequential quarter). Total loan originations (including loans originated and purchased for investment and loans originated and purchased for sale) were $724.6 million in the first quarter of fiscal 2014, a decrease of 18 percent from $879.2 million in the same quarter of fiscal 2013, and 16 percent lower than the $867.4 million in the fourth quarter of fiscal 2013 (sequential quarter).

The sale and operations of real estate owned acquired in the settlement of loans resulted in a net gain of $52,000 in the first quarter of fiscal 2014, compared to a net gain of $73,000 in the comparable period last year. Five real estate owned properties were sold in the quarter ended September 30, 2013 compared to 17 real estate owned properties sold in the same quarter last year. Three real estate owned properties were acquired in the settlement of loans during the first quarter of fiscal 2014, compared to 11 real estate owned properties acquired in the settlement of loans in the comparable period last year. As of September 30, 2013, the real estate owned balance was $3.2 million (eight properties), compared to $2.3 million (10 properties) at June 30, 2013.

Non-interest expenses decreased $2.80 million, or 16 percent, to $14.53 million in the first quarter of fiscal 2014 from $17.33 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 90 percent in the first quarter of fiscal 2014 from 56 percent in the first 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 $1.04 million for the first quarter of fiscal 2014, a decrease of $3.47 million or 77 percent, from $4.51 million in the same quarter last year. The effective income tax rate for the quarter ended September 30, 2013 was 40.8 percent as compared to 34.0 percent in the same quarter last year. The increase in the effective income tax rate was due primarily to the reversal of an $825,000 tax liability in the first quarter of fiscal 2013, which was not replicated in the first quarter of fiscal 2014. The Company believes that the tax provision recorded in the first quarter of fiscal 2014 reflects its current income tax obligations.

The Company repurchased 190,051 shares of its common stock during the quarter ended September 30, 2013 at an average cost of $17.91 per share. As of September 30, 2013, a total of 312,782 shares, or 60%, of the shares authorized in the March 2013 stock repurchase plan have been purchased, leaving 209,741 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 17 retail loan production offices located in City of Industry, Escondido, Glendora, Hermosa Beach, Livermore, Rancho Cucamonga (2), Riverside (4), Roseville, San Diego, San Rafael, Santa Barbara, Stockton and Westlake Village, California.

The Company will host a conference call for institutional investors and bank analysts on Wednesday, October 30, 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 Thursday, November 7, 2013 by dialing 1-800-475-6701 and referencing access code number 306253.

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)
September 30, June 30,
2013 2013
Assets
Cash and cash equivalents $156,992 $193,839
Investment securities – available for sale at fair value 18,564 19,510
Loans held for investment, net of allowance for loan losses of $12,105 and $14,935, respectively 748,956 748,397
Loans held for sale, at fair value 183,765 188,050
Accrued interest receivable 2,630 2,992
Real estate owned, net 3,172 2,296
FHLB – San Francisco stock 13,308 15,273
Premises and equipment, net 6,701 6,691
Prepaid expenses and other assets 18,939 33,993
Total assets $1,153,027 $1,211,041
Liabilities and Stockholders' Equity
Liabilities:
Non interest-bearing deposits $57,502 $57,835
Interest-bearing deposits 861,593 865,175
Total deposits 919,095 923,010
Borrowings 56,476 106,491
Accounts payable, accrued interest and other liabilities 20,298 21,566
Total liabilities 995,869 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; 17,666,865 and 17,661,865 shares issued, respectively; 10,201,348 and 10,386,399 shares outstanding, respectively) 177 177
Additional paid-in capital 87,917 87,742
Retained earnings 180,299 179,816
Treasury stock at cost (7,465,517 and 7,275,466 shares, respectively) (111,719) (108,315)
Accumulated other comprehensive income, net of tax 484 554
Total stockholders' equity 157,158 159,974
Total liabilities and stockholders' equity $1,153,027 $1,211,041
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Unaudited – In Thousands, Except Share Information)
Quarter Ended
September 30, September 30,
2013 2012
Interest income:
Loans receivable, net $9,706 $11,633
Investment securities 92 114
FHLB – San Francisco stock 208 27
Interest-earning deposits 110 73
Total interest income 10,116 11,847
Interest expense:
Checking and money market deposits 102 98
Savings deposits 147 148
Time deposits 1,263 1,524
Borrowings 643 1,141
Total interest expense 2,155 2,911
Net interest income 7,961 8,936
(Recovery) provision for loan losses (942) 533
Net interest income, after (recovery) provision for loan losses 8,903 8,403
Non-interest income:
Loan servicing and other fees 195 338
Gain on sale of loans, net 6,754 20,595
Deposit account fees 621 623
Gain on sale and operations of real estate owned acquired in the settlement of loans, net 52 73
Card and processing fees 344 321
Other 217 209
Total non-interest income 8,183 22,159
Non-interest expense:
Salaries and employee benefits 10,452 13,185
Premises and occupancy 1,159 1,150
Equipment 480 441
Professional expenses 424 353
Sales and marketing expenses 415 420
Deposit insurance premiums and regulatory assessments 214 339
Other 1,386 1,438
Total non-interest expense 14,530 17,326
Income before taxes 2,556 13,236
Provision for income taxes 1,043 4,506
Net income $1,513 $8,730
Basic earnings per share $0.15 $0.81
Diluted earnings per share $0.14 $0.80
Cash dividends per share $0.10 $0.05
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations – Sequential Quarter
(Unaudited – In Thousands, Except Share Information)
Quarter Ended
September 30, June 30,
2013 2013
Interest income:
Loans receivable, net $9,706 $9,696
Investment securities 92 99
FHLB – San Francisco stock 208 158
Interest-earning deposits 110 132
Total interest income 10,116 10,085
Interest expense:
Checking and money market deposits 102 93
Savings deposits 147 144
Time deposits 1,263 1,308
Borrowings 643 957
Total interest expense 2,155 2,502
Net interest income 7,961 7,583
Recovery for loan losses (942) (1,538)
Net interest income, after recovery for loan losses 8,903 9,121
Non-interest income:
Loan servicing and other fees 195 170
Gain on sale of loans, net 6,754 16,185
Deposit account fees 621 604
Gain on sale and operations of real estate owned acquired in the settlement of loans, net 52 30
Card and processing fees 344 345
Other 217 284
Total non-interest income 8,183 17,618
Non-interest expense:
Salaries and employee benefits 10,452 13,075
Premises and occupancy 1,159 1,092
Equipment 480 485
Professional expenses 424 682
Sales and marketing expenses 415 510
Deposit insurance premiums and regulatory assessments 214 183
Other 1,386 1,492
Total non-interest expense 14,530 17,519
Income before taxes 2,556 9,220
Provision for income taxes 1,043 3,963
Net income $1,513 $5,257
Basic earnings per share $0.15 $0.51
Diluted earnings per share $0.14 $0.49
Cash dividends per share $0.10 $0.07
PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited -- Dollars in Thousands, Except Share Information)
Quarter Ended
(Dollars in Thousands, Except Share Information) September 30,
2013 2012
SELECTED FINANCIAL RATIOS:
Return on average assets 0.52% 2.78%
Return on average stockholders' equity 3.82% 23.76%
Stockholders' equity to total assets 13.63% 11.86%
Net interest spread 2.72% 2.85%
Net interest margin 2.82% 2.96%
Efficiency ratio 90.00% 55.72%
Average interest-earning assets to average interest-bearing liabilities 113.63% 111.57%
SELECTED FINANCIAL DATA:
Basic earnings per share $0.15 $0.81
Diluted earnings per share $0.14 $0.80
Book value per share $15.41 $14.11
Shares used for basic EPS computation 10,305,291 10,799,286
Shares used for diluted EPS computation 10,525,299 10,969,332
Total shares issued and outstanding 10,201,348 10,690,585
LOANS ORIGINATED AND PURCHASED FOR SALE:
Retail originations $327,748 $418,554
Wholesale originations and purchases 355,955 441,897
Total loans originated and purchased for sale $683,703 $860,451
LOANS SOLD:
Servicing released $692,377 $782,298
Servicing retained 640 5,640
Total loans sold $693,017 $787,938
As of As of As of As of As of
09/30/13 06/30/13 03/31/13 12/31/12 09/30/12
ASSET QUALITY RATIOS AND DELINQUENT LOANS:
Recourse reserve for loans sold $1,258 $2,111 $2,302 $7,776 $6,474
Allowance for loan losses $12,105 $14,935 $16,826 $18,530 $20,118
Non-performing loans to loans held for investment, net 2.48% 2.90% 2.68% 3.16% 3.72%
Non-performing assets to total assets 1.88% 1.98% 1.84% 2.15% 2.68%
Allowance for loan losses to gross non-- performing loans 58.57% 58.77% 73.01% 64.40% 58.64%
Allowance for loan losses to gross loans held for investment 1.59% 1.96% 2.18% 2.34% 2.52%
Net charge-offs to average loans receivable (annualized) 0.82% 0.15% 0.49% 0.62% 0.72%
Non-performing loans $18,552 $21,682 $20,195 $24,365 $28,894
Loans 30 to 89 days delinquent $1,104 $363 $2,519 $1,423 $5,870
PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited)
Quarter Quarter Quarter Quarter Quarter
(Dollars in Thousands) Ended Ended Ended Ended Ended
09/30/13 06/30/13 03/31/13 12/31/12 09/30/12
Recourse (recovery) provision for loans sold $ (186) $ (191) $ 27 $ 1,285 $ 618
(Recovery) provision for loan losses $ (942) $ (1,538) $ (517) $ 23 $ 533
Net charge-offs $1,888 $353 $1,187 $1,611 $1,898
As of As of As of As of As of
09/30/13 06/30/13 03/31/13 12/31/12 09/30/12
REGULATORY CAPITAL RATIOS (BANK):
Tier 1 leverage ratio 13.07% 13.12% 12.55% 12.26% 11.47%
Tier 1 risk-based capital ratio 20.82% 21.36% 20.76% 18.79% 17.46%
Total risk-based capital ratio 22.09% 22.64% 22.02% 20.05% 18.72%
As of September 30,
2013 2012
INVESTMENT SECURITIES: Balance Rate (1) Balance Rate (1)
Available for sale (at fair value):
U.S. government agency MBS $10,241 1.71% $11,939 1.86%
U.S. government sponsored enterprise MBS 7,370 2.40 9,012 2.43
Private issue collateralized mortgage obligations 953 2.41 1,198 2.40
Total investment securities available for sale $18,564 2.02% $22,149 2.12%
LOANS HELD FOR INVESTMENT:
Single-family (1 to 4 units $391,888 3.29 $431,373 3.80%
Multi-family (5 or more units) 273,847 5.08 266,398 5.65
Commercial real estate 91,417 6.44 94,172 6.69
Construction 292 6.25 -- --
Other mortgage -- -- 391 4.81
Commercial business 1,386 6.72 2,310 7.01
Consumer 423 8.58 378 9.37
Total loans held for investment 759,253 4.32% 795,022 4.77%
Undisbursed loan funds (271) --
Deferred loan costs, net 2,079 1,940
Allowance for loan losses (12,105) (20,118)
Total loans held for investment, net $748,956 $776,844
Purchased loans serviced by others included above $12,778 4.39% $17,720 4.65%
DEPOSITS:
Checking accounts – non interest-bearing $57,502 --% $54,653 --%
Checking accounts – interest-bearing 203,118 0.14 200,790 0.14
Savings accounts 231,134 0.25 230,139 0.25
Money market accounts 27,511 0.40 29,793 0.44
Time deposits 399,830 1.24 441,440 1.36
Total deposits $919,095 0.65% $956,815 0.74
(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 September 30,
(Dollars in Thousands) 2013 2012
Balance Rate (1) Balance Rate (1)
BORROWINGS:
Overnight $ -- --% $ -- --%
Three months or less 5,000 2.51 -- --
Over three to six months -- -- 20,000 3.39
Over six months to one year 10,000 2.93 50,000 4.09
Over one year to two years -- -- 15,000 2.79
Over two years to three years -- -- -- --
Over three years to four years -- -- -- --
Over four years to five years 10,096 3.04 -- --
Over five years 31,380 3.23 41,533 3.19
Total borrowings $56,476 3.08% $126,533 3.53%
Quarter Ended
September 30,
2013 2012
SELECTED AVERAGE BALANCE SHEETS: Balance Balance
Loans receivable, net (2) $925,036 $1,047,652
Investment securities 19,088 22,636
FHLB – San Francisco stock 14,290 21,656
Interest-earning deposits 172,499 116,429
Total interest-earning assets $1,130,913 $1,208,373
Total assets $1,168,331 $1,254,779
Deposits $918,865 $956,477
Borrowings 76,427 126,538
Total interest-bearing liabilities $995,292 $1,083,015
Total stockholders' equity $158,258 $146,978
Quarter Ended
September 30,
2013 2012
Yield/Cost Yield/Cost
Loans receivable, net (2) 4.20% 4.44%
Investment securities 1.93% 2.01%
FHLB – San Francisco stock 5.82% 0.50%
Interest-earning deposits 0.25% 0.25%
Total interest-earning assets 3.58% 3.92%
Deposits 0.65% 0.74%
Borrowings 3.34% 3.59%
Total interest-bearing liabilities 0.86% 1.07%
(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
09/30/13 06/30/13 03/31/13 12/31/12 09/30/12
Loans on non-accrual status (excluding restructured loans):
Mortgage loans:
Single-family $6,771 $8,129 $9,304 $10,677 $11,832
Multi-family 1,157 1,236 900 1,111 961
Commercial real estate 3,765 3,218 1,958 1,737 2,151
Commercial business loans 15 7 34 7 7
Total 11,708 12,590 12,196 13,532 14,951
Accruing loans past due 90 days or more: -- -- -- -- --
Total -- -- -- -- --
Restructured loans on non-accrual status:
Mortgage loans:
Single-family 3,740 5,094 5,850 7,708 10,662
Multi-family 2,109 2,521 759 480 485
Commercial real estate 880 1,354 1,227 2,477 2,477
Other -- -- -- -- 159
Commercial business loans 115 123 163 168 160
Total 6,844 9,092 7,999 10,833 13,943
Total non-performing loans 18,552 21,682 20,195 24,365 28,894
Real estate owned, net 3,172 2,296 2,227 2,435 5,189
Total non-performing assets $21,724 $23,978 $22,422 $26,800 $34,083
Restructured loans on accrual status:
Mortgage loans:
Single-family $815 $434 $2,575 $4,252 $4,166
Multi-family -- -- 2,755 2,755 2,755
Other -- -- -- 232 --
Total $815 $434 $5,330 $7,239 $6,921
(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) 686-6060Source:Provident Financial Holdings, Inc.