EX-99.1 2 prov-er72910.htm EXHIBIT 99.1

Unassociated Document

Exhibit 99.1

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

PROVIDENT FINANCIAL HOLDINGS REPORTS

FOURTH QUARTER EARNINGS

Non-Performing Assets Decline 27% from December 31, 2009 Peak Levels

Core Deposits (Transaction Accounts) Increase by 30%

Net Interest Margin Expands 25 Basis Points (Sequential Quarter)

 Riverside, Calif. – July 29, 2010 – Provident Financial Holdings, Inc. (“Company”), NASDAQ GS: PROV, the holding company for Provident Savings Bank, F.S.B. (“Bank”), today announced fourth quarter earnings for the fiscal year ended June 30, 2010.

            For the quarter ended June 30, 2010, the Company reported net income of $3.20 million, or $0.28 per diluted share (on 11.35 million average shares outstanding), compared to net income of $1.31 million, or $0.21 per diluted share (on 6.20 million average shares outstanding), in the comparable period a year ago.  The fourth quarter net income was primarily attributable to a decrease in the provision for loan losses, partly offset by a decrease in net interest income (before provision for loan losses), a decrease in non-interest income and an increase in operating expenses.

 “We are very pleased with our improving credit quality and believe the improving fundamentals of our businesses will begin to take center stage as we move through this difficult credit cycle.  However, it is too soon to suggest the end of the challenging environment and we must remain diligent in aggressively addressing new credit problems

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if they arise,” said Craig G. Blunden, Chairman, President and Chief Executive Officer of the Company.  “The current mortgage banking environment is favorable and, to date, recent actions by the U.S. Treasury and Federal Reserve to end their unprecedented support of the mortgage markets has not resulted in rising mortgage interest rates.  We continue to capture sizable mortgage banking loan origination volume.”

 As of June 30, 2010 the Bank exceeded all regulatory capital requirements and was deemed “well-capitalized” with Tangible Capital, Core Capital, Total Risk-Based Capital and Tier 1 Risk-Based Capital ratios of 8.82 percent, 8.82 percent, 13.17 percent and 11.91 percent, respectively.  As of June 30, 2009 these ratios were 6.88 percent, 6.88 percent, 13.05 percent and 11.78 percent, respectively.  For each period, the Bank’s capital ratios exceeded the minimum required ratios to be deemed “well-capitalized” (5.00 percent for Core Capital, 10.00 percent for Total Risk-Based Capital and 6.00 percent for Tier 1 Risk-Based Capital).  The Bank’s Total Risk-Based Capital and Tier 1 Risk-Based Capital ratios declined on June 30, 2010 to 13.17% and 11.91%, respectively from 15.53% and 14.25%, respectively on March 31, 2010.  During the current quarter, the Bank, in consultation with the Office of Thrift Supervision, increased the risk weightings of certain single-family residential mortgage loans that were underwritten to stated income or interest only loan programs.

Return on average assets for the fourth quarter of fiscal 2010 improved to 0.92 percent from 0.33 percent for the same period of fiscal 2009.  Return on average stockholders’ equity for the fourth quarter of fiscal 2010 improved to 10.16 percent from 4.51 percent for the comparable period of fiscal 2009.

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On a sequential quarter basis, fourth quarter results reflect net income of $3.20 million compared to net income of $371,000 in the third quarter of fiscal 2010.  The increase was primarily attributable to a $3.10 million increase in the gain on sale of loans and a $2.32 million decrease in the provision for loan losses.  Diluted earnings per share for the fourth quarter of fiscal 2010 increased to $0.28 per share from $0.03 per share in the third quarter of fiscal 2010.  Return on average assets increased to 0.92 percent for the fourth quarter of fiscal 2010 from 0.10 percent in the third quarter of fiscal 2010; and return on average equity for the fourth quarter of fiscal 2010 was 10.16 percent, compared to 1.20 percent for the third quarter of fiscal 2010.

For the fiscal year ended June 30, 2010, net income was $1.12 million, compared to a net loss of $(7.44) million for the fiscal year ended June 30, 2009; and the diluted earnings per share for the fiscal year ended June 30, 2010 improved to $0.13 from a loss of $(1.20) for the prior fiscal year.  Return on average assets for the fiscal year ended June 30, 2010 improved to 0.08 percent from a loss of (0.47) percent for the prior fiscal year.  Return on average stockholders’ equity for the fiscal year ended June 30, 2010 was 0.94 percent, compared to a loss of (6.20) percent for fiscal 2009.

Net interest income before provision for loan losses decreased $1.26 million, or 11 percent, to $10.30 million in the fourth quarter of fiscal 2010 from $11.56 million for the same period in fiscal 2009.  Non-interest income decreased $3.33 million, or 37 percent, to $5.69 million in the fourth quarter of fiscal 2010 from $9.02 million in the comparable period of fiscal 2009.  Operating expense increased $3.04 million, or 41 percent, to $10.47 million in the fourth quarter of fiscal 2010 from $7.43 million in the comparable period in fiscal 2009.  Operating expenses in the fourth quarter of fiscal 2009

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includes a $2.63 million net expense recovery attributable to the implementation of the Employee Stock Option Plan voluntary self-correction not replicated in the fourth quarter of fiscal 2010.

The average balance of loans outstanding decreased by $185.3 million, or 14 percent, to $1.18 billion in the fourth quarter of fiscal 2010 from $1.37 billion in the same quarter of fiscal 2009.  The managed decline in the loan balance is consistent with the Company’s short-term deleveraging strategy of curtailing loan portfolio growth to further its goals of maintaining prudent capital ratios and reducing its credit risk profile in response to unfavorable economic conditions.  The average yield on loans receivable decreased by 22 basis points to 5.52 percent in the fourth quarter of fiscal 2010 from an average yield of 5.74 percent in the same quarter of fiscal 2009.  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 re-pricing to lower interest rates.  Total loans originated for investment in the fourth quarter of fiscal 2010 were $1.8 million, consisting of single-family, multi-family and commercial real estate loans.  In the fourth quarter of fiscal 2009 total loans originated for investment were $8.7 million, which consisted primarily of commercial real estate loans.  The outstanding balance of “preferred loans” (multi-family, commercial real estate, construction and commercial business loans) decreased by $47.8 million, or nine percent, to $460.9 million at June 30, 2010 from $508.7 million at June 30, 2009.  Outstanding construction loans, net of undisbursed loan funds, declined $3.8 million, or 90 percent, to $400,000 at June 30, 2010 from $4.2 million at June 30, 2009.  The percentage of preferred loans to total loans held for investment at June 30, 2010 increased to 44 percent

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from 42 percent at June 30, 2009.  Loan principal payments received in the fourth quarter of fiscal 2010 were $26.5 million, compared to $40.6 million in the same quarter of fiscal 2009.

The average balance of investment securities decreased by $96.8 million, or 73 percent, to $35.8 million in the fourth quarter of fiscal 2010 from $132.6 million in the same quarter of fiscal 2009.  The decrease was attributable primarily to the sale of investment securities, principal paydowns of mortgage-backed securities and investment securities that were called by the issuer.  The average yield decreased 139 basis points to 3.07 percent in the fourth quarter of fiscal 2010 from 4.46 percent in the same quarter of fiscal 2009.  The decline in average yield was primarily attributable to the downward repricing of the adjustable rate mortgage-backed securities, principal paydowns of higher yielding mortgage-backed securities and the sale of higher yielding mortgage-backed securities.

In April 2010, the Federal Home Loan Bank (“FHLB”) – San Francisco announced a partial redemption of excess capital stock held by member banks.  As a result, a total of $1.2 million of excess capital stock was redeemed in May 2010.  Also in April 2010, the FHLB – San Francisco declared a cash dividend for the quarter ended March 31, 2010 at an annualized dividend rate of 0.26%.  The $21,000 cash dividend was received in the fourth quarter of fiscal 2010.  No cash dividend was received in the comparable quarter last year.

The average balance of excess liquidity, primarily cash with the Federal Reserve Bank of San Francisco, increased substantially to $82.5 million in the fourth quarter of fiscal 2010 from $15.5 million in the same quarter of fiscal 2009.  The Bank maintained

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higher levels of cash and cash equivalents in the fourth quarter of fiscal 2010 in response to the uncertain operating environment.  The average yield earned was 0.25% in the fourth quarter of fiscal 2010, much lower than the yield that could have been earned if the excess liquidity were deployed in loans or investment securities.

Average deposits decreased to $940.9 million in the fourth quarter of fiscal 2010 from $963.4 million in the same quarter of fiscal 2009.  The average cost of deposits decreased by 72 basis points to 1.32 percent in the fourth quarter of fiscal 2010 from 2.04 percent in the same quarter last year.  Transaction account balances (core deposits) increased by $105.6 million, or 30 percent, to $458.0 million at June 30, 2010 from $352.4 million at June 30, 2009, primarily attributable to an increase in interest-bearing checking and savings account balances.  Time deposits decreased by $162.0 million, or 25 percent, to $474.9 million at June 30, 2010 compared to $636.9 million at June 30, 2009.

The average balance of borrowings, which consisted of FHLB – San Francisco advances, decreased $191.8 million, or 38 percent, to $309.7 million in the fourth quarter of fiscal 2010 while the average cost of advances increased 50 basis points to 4.19 percent in the fourth quarter of fiscal 2010, compared to an average balance of $501.5 million and an average cost of 3.69 percent in the same quarter of fiscal 2009.  The decrease in borrowings was attributable to the scheduled maturities and $102.0 million of prepayments, with a net prepayment gain of $52,000, one of the results of the Bank’s efforts to deleverage its balance sheet during fiscal 2010.

The net interest margin during the fourth quarter of fiscal 2010 improved 11 basis points to 3.10 percent from 2.99 percent during the same quarter last year.  On a

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sequential quarter basis, the net interest margin in the fourth quarter of fiscal 2010 increased 25 basis points from 2.85 percent in the third quarter of fiscal 2010.  The increase in the net interest margin was primarily attributable to the decrease in deposit costs, particularly time deposit costs, partly offset by a lower average yield on loans and investment securities, a higher level of excess liquidity invested at a nominal yield and a higher average cost of borrowings.

During the fourth quarter of fiscal 2010, the Company did not record a provision for loan losses, as compared to the $12.86 million provision for loan losses recorded during the same period of fiscal 2009 and the $2.32 million provision recorded in the third quarter of fiscal 2010 (sequential quarter).  Improving asset quality trends accelerated during the fourth quarter of fiscal 2010 resulting in a significantly lower balance of non-performing and 30 to 89 days delinquent loans.

Non-performing assets, with underlying collateral primarily located in Southern California, decreased to $73.5 million, or 5.25 percent of total assets, at June 30, 2010, compared to $88.3 million, or 5.59 percent of total assets, at June 30, 2009 and $91.4 million, or 6.50 percent of total assets, at March 31, 2010 (sequential quarter).  The non-performing assets at June 30, 2010 were primarily comprised of 160 single-family loans ($48.8 million); six multi-family loans ($6.5 million); five commercial real estate loans ($1.7 million); one construction loan ($350,000); two commercial business loans ($567,000); one consumer loan ($1,000); six single-family loans repurchased from, or unable to sell to investors ($833,000); and real estate owned was comprised of 49 single-family properties ($13.6 million), one multi-family property ($193,000), one commercial real estate property ($424,000), one developed lot ($399,000) and 25 undeveloped lots

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acquired in the settlement of loans ($78,000).  Net charge-offs for the quarter ended June 30, 2010 were $7.35 million or 2.49 percent (annualized) of average loans receivable, compared to $9.60 million or 2.81 percent (annualized) of average loans receivable for the quarter ended June 30, 2009 and $6.84 million or 2.35 percent (annualized) of average loans receivable in the quarter ended March 31, 2010 (sequential quarter).

Classified assets at June 30, 2010 were $95.6 million, comprised of $20.5 million in the special mention category, $60.4 million in the substandard category and $14.7 million in real estate owned.  Classified assets at June 30, 2009 were $116.1 million, consisting of $24.3 million in the special mention category, $75.4 million in the substandard category and $16.4 million in real estate owned.

For the quarter ended June 30, 2010, 21 loans for $11.0 million were modified from their original terms, were re-underwritten and were identified in our asset quality reports as Restructured Loans.  As of June 30, 2010, the outstanding balance of restructured loans was $60.0 million:  71 loans are classified as pass, are not included in the classified asset totals described earlier and remain on accrual status ($32.3 million); six loans are classified as special mention and remain on accrual status ($4.0 million); 63 loans are classified as substandard on non-accrual status ($23.7 million); and two loans are classified as loss, fully reserved and on non-accrual status.  As of June 30, 2010, 81 percent, or $48.7 million of the restructured loans have a current payment status.

The allowance for loan losses was $43.5 million at June 30, 2010, or 4.14 percent of gross loans held for investment, compared to $45.4 million, or 3.75 percent of gross loans held for investment at June 30, 2009.  The allowance for loan losses at June 30, 2010 includes $17.8 million of specific loan loss reserves and $25.7 million of

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general loan loss reserves, compared to $25.3 million of specific loan loss reserves and $20.1 million of general loan loss reserves at June 30, 2009.  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.

Non-interest income decreased to $5.69 million in the fourth quarter of fiscal 2010 compared to $9.02 million in the same period of fiscal 2009, primarily the result of a $3.75 million decrease in the gain on sale of loans.

The gain on sale of loans decreased to $4.53 million for the quarter ended June 30, 2010 from $8.28 million in the comparable quarter last year, reflecting a lower average loan sale margin and lower loan sale volume.  The average loan sale margin for mortgage banking was 89 basis points for the quarter ended June 30, 2010, compared to 133 basis points in the comparable quarter last year.  The gain on sale of loans includes a favorable fair-value adjustment on derivative financial instruments (commitments to extend credit, commitments to sell loans, commitments to sell mortgage-backed securities and loans held for sale) pursuant to Accounting Standards Codification 815 and 825, a gain of $2.04 million, in the fourth quarter of fiscal 2010 as compared to a favorable fair-value adjustment, a gain of $1.09 million, in the same period last year.  The gain on sale of loans for the fourth quarter of fiscal 2010 was partially reduced by a $2.05 million recourse provision on loans sold that are subject to repurchase, compared to a $735,000 recourse provision in the comparable quarter last year.  As of June 30, 2010, the recourse reserve for loans sold that are subject to repurchase was $6.3 million, compared to $3.4 million at June 30, 2009 and $6.1 million at March 31, 2010 (sequential quarter).  The

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mortgage banking environment has shown improvement as a result of relatively low mortgage interest rates but remains volatile.

The volume of loans originated for sale was $485.0 million in the fourth quarter of fiscal 2010, a decrease of 21 percent from $616.6 million for the same period last year.  The loan origination volumes were the result of favorable liquidity in the secondary mortgage markets particularly in FHA/VA, Fannie Mae and Freddie Mac loan products and relatively low mortgage interest rates.  Total loans sold for the quarter ended June 30, 2010 were $474.7 million, a decrease of 19 percent from $587.9 million for the same quarter last year.  Total loan originations (including loans originated for investment and loans originated for sale) were $486.8 million in the fourth quarter of fiscal 2010, a decrease of 22 percent from $625.2 million in the same quarter of fiscal 2009.

The net loss on sale and operations of real estate owned acquired in the settlement of loans improved $400,000 to a net loss of $(231,000) in the fourth quarter of fiscal 2010 from a net loss of $(631,000) in the comparable period last year.  Forty real estate owned properties were sold for a net gain of $650,000 in the quarter ended June 30, 2010 compared to 47 real estate owned properties sold for a net loss of $(18,000) in the same quarter last year.  During the fourth quarter of fiscal 2010, 42 real estate owned properties were acquired in the settlement of loans, compared to 54 real estate owned properties acquired in the settlement of loans in the comparable period last year.  As of June 30, 2010, the real estate owned balance was $14.7 million (77 properties), compared to $16.4 million (80 properties) at June 30, 2009.

Operating expense increased to $10.47 million in the fourth quarter of fiscal 2010 from $7.43 million in the same quarter last year, primarily as a result of an increase in

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compensation, partly offset by a decrease in the FDIC insurance premium.  Additionally, in the fourth quarter of fiscal 2009, the Company recorded a $2.63 million non-recurring and non-taxable expense recovery attributable to the implementation of the Employee Stock Ownership Plan voluntary self-correction approved by the Internal Revenue Service; and also recorded a $734,000 FDIC special assessment expense, neither of which occurred in the fourth quarter of fiscal 2010.

The Company’s efficiency ratio increased to 65 percent in the fourth quarter of fiscal 2010 from 36 percent in the fourth quarter of fiscal 2009.  The increase was the result of a decrease in net interest income (before provision for loan losses), a decrease in non-interest income and an increase in non-interest expense.

The Company’s tax provision was $2.32 million for the fourth quarter of fiscal 2010 in comparison to a tax benefit of $(1.02) million in the same quarter last year.  The Company believes that the tax provision recorded in the fourth quarter of fiscal 2010 reflects its current income tax obligations.

The Bank currently operates 14 retail/business banking offices in Riverside County and San Bernardino County (Inland Empire).  Provident Bank Mortgage operates wholesale loan production offices in Pleasanton and Rancho Cucamonga, California and retail loan production offices in City of Industry, Escondido, Glendora, Rancho Cucamonga and Riverside (2), California.

The Company will host a conference call for institutional investors and bank analysts on Friday, July 30, 2010 at 9:00 a.m. (Pacific Time) to discuss its financial results.  The conference call can be accessed by dialing (800) 230-1096 and requesting the Provident Financial Holdings Earnings Release Conference Call.  An audio replay of

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the conference call will be available through Friday, August 6, 2010 by dialing (800) 475-6701 and referencing access code number 165776.

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; 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; the accuracy of the results of our stress test; results of examinations of us by the Office of Thrift Supervision or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, 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; our ability to attract and retain deposits; further 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 detailed in the Company’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2009.

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PROVIDENT FINANCIAL HOLDINGS, INC. Condensed Consolidated Statements of Financial Condition (Unaudited – Dollars In Thousands)
		June 30, 2010				June 30, 2009
Assets
Cash and cash equivalents		$	96,201			$	56,903
Investment securities – available for sale at fair value			35,003				125,279
Loans held for investment, net of allowance for loan losses of
$43,501 and $45,445, respectively			1,006,260				1,165,529
Loans held for sale, at fair value			170,255				135,490
Loans held for sale, at lower of cost or market			-				10,555
Accrued interest receivable			4,643				6,158
Real estate owned, net			14,667				16,439
FHLB – San Francisco stock			31,795				33,023
Premises and equipment, net			5,841				6,348
Prepaid expenses and other assets			34,736				23,889
Total assets		$	1,399,401			$	1,579,613
Liabilities and Stockholders’ Equity
Liabilities:
Non interest-bearing deposits		$	52,230			$	41,974
Interest-bearing deposits			880,703				947,271
Total deposits			932,933				989,245
Borrowings			309,647				456,692
Accounts payable, accrued interest and other liabilities			29,077				18,766
Total liabilities			1,271,657				1,464,703
Stockholders’ equity:
Preferred stock, $.01 par value (2,000,000 shares authorized;           none issued and outstanding)
			-				-
Common stock, $.01 par value (40,000,000 and 15,000,000 shares           authorized, respectively; 17,610,865 and 12,435,865 shares           issued, respectively; 11,406,654 and 6,219,654 shares           outstanding, respectively)			176				124
Additional paid-in capital			85,663				72,709
Retained earnings			135,383				134,620
Treasury stock at cost (6,204,211 and 6,216,211 shares,           respectively)
			(93,942	)			(93,942	)
Unearned stock compensation			(203	)			(473	)
Accumulated other comprehensive income, net of tax			667				1,872
Total stockholders’ equity			127,744				114,910
Total liabilities and stockholders’ equity		$	1,399,401			$	1,579,613

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PROVIDENT FINANCIAL HOLDINGS, INC. Condensed Consolidated Statements of Financial Condition – Sequential Quarter (Unaudited – Dollars In Thousands)
		June 30, 2010				March 31, 2010
Assets
Cash and cash equivalents		$	96,201			$	86,018
Investment securities – available for sale at fair value			35,003				36,406
Loans held for investment, net of allowance for loan losses of
$43,501 and $50,849, respectively			1,006,260				1,033,014
Loans held for sale, at fair value			170,255				155,800
Accrued interest receivable			4,643				4,540
Real estate owned, net			14,667				17,555
FHLB – San Francisco stock			31,795				33,023
Premises and equipment, net			5,841				5,952
Prepaid expenses and other assets			34,736				33,012
Total assets		$	1,399,401			$	1,405,320
Liabilities and Stockholders’ Equity
Liabilities:
Non interest-bearing deposits		$	52,230			$	47,773
Interest-bearing deposits			880,703				900,144
Total deposits			932,933				947,917
Borrowings			309,647				309,658
Accounts payable, accrued interest and other liabilities			29,077				23,375
Total liabilities			1,271,657				1,280,950
Stockholders’ equity:
Preferred stock, $.01 par value (2,000,000 shares authorized;           none issued and outstanding)
			-				-
Common stock, $.01 par value (40,000,000 and 40,000,000 shares          authorized, respectively; 17,610,865 and 17,610,865 shares          issued, respectively; 11,406,654 and 11,406,654 shares          outstanding, respectively)			176				176
Additional paid-in capital			85,663				85,488
Retained earnings			135,383				132,295
Treasury stock at cost (6,204,211 and 6,204,211 shares,           respectively)
			(93,942	)			(93,942	)
Unearned stock compensation			(203	)			(271	)
Accumulated other comprehensive income, net of tax			667				624
Total stockholders’ equity			127,744				124,370
Total liabilities and stockholders’ equity		$	1,399,401			$	1,405,320

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PROVIDENT FINANCIAL HOLDINGS, INC. Condensed Consolidated Statements of Operations (Unaudited - In Thousands, Except Earnings (Loss) Per Share)
		Quarter Ended June 30,								Fiscal Year Ended June 30,
																		2010				2009				2010				2009
Interest income:
Loans receivable, net		$	16,290			$	19,598			$	67,665			$	78,754
Investment securities			275				1,477				2,144				6,821
FHLB – San Francisco stock			21				-				112				324
Interest-earning deposits			51				9				242				25
Total interest income			16,637				21,084				70,163				85,924
Interest expense:
Checking and money market deposits			330				309				1,396				1,223
Savings deposits			399				508				1,891				2,096
Time deposits			2,375				4,085				12,213				20,132
Borrowings			3,231				4,619				15,085				18,705
Total interest expense			6,335				9,521				30,585				42,156
Net interest income, before provision for loan losses			10,302				11,563				39,578				43,768
Provision for loan losses			-				12,863				21,843				48,672
Net interest income (expense), after provision for      loan losses			10,302				(1,300	)			17,735				(4,904	)
Non-interest income:
Loan servicing and other fees			160				264				797				869
Gain on sale of loans, net			4,534				8,279				14,338				16,971
Deposit account fees			688				680				2,823				2,899
Gain on sale of investment securities			-				-				2,290				356
(Loss) gain on sale and operations of real estate          owned acquired in the settlement of loans			(231	)			(631	)			16				(2,469	)
Other			537				430				1,995				1,583
Total non-interest income			5,688				9,022				22,259				20,209
Non-interest expense:
Salaries and employee benefits			6,531				3,194				23,379				17,369
Premises and occupancy			766				749				3,048				2,878
Equipment			589				424				1,614				1,521
Professional expenses			340				379				1,517				1,365
Sales and marketing expenses			189				116				623				509
Deposit insurance and regulatory assessments			679				1,174				2,988				2,187
Other			1,375				1,393				4,970				4,151
Total non-interest expense			10,469				7,429				38,139				29,980
Income (loss) before taxes			5,521				293				1,855				(14,675	)
Provision (benefit) for income taxes			2,319				(1,020	)			740				(7,236	)
Net income (loss)		$	3,202			$	1,313			$	1,115			$	(7,439	)
Basic earnings (loss) per share		$	0.28			$	0.21			$	0.13			$	(1.20	)
Diluted earnings (loss) per share		$	0.28			$	0.21			$	0.13			$	(1.20	)
Cash dividends per share		$	0.01			$	0.03			$	0.04			$	0.16

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PROVIDENT FINANCIAL HOLDINGS, INC. Condensed Consolidated Statements of Operations – Sequential Quarter (Unaudited – In Thousands, Except Earnings Per Share)
		Quarter Ended
		June 30,				March 31,
		2010				2010
Interest income:
Loans receivable, net		$	16,290			$	16,101
Investment securities			275				311
FHLB – San Francisco stock			21				22
Interest-earning deposits			51				71
Total interest income			16,637				16,505
Interest expense:
Checking and money market deposits			330				376
Savings deposits			399				468
Time deposits			2,375				2,738
Borrowings			3,231				3,330
Total interest expense			6,335				6,912
Net interest income, before provision for loan losses			10,302				9,593
Provision for loan losses			-				2,322
Net interest income, after provision for loan losses			10,302				7,271
Non-interest income:
Loan servicing and other fees			160				219
Gain on sale of loans, net			4,534				1,431
Deposit account fees			688				667
(Loss) gain on sale and operations of real estate owned          acquired in the settlement of loans, net			(231	)			58
Other			537				502
Total non-interest income			5,688				2,877
Non-interest expense:
Salaries and employee benefits			6,531				6,065
Premises and occupancy			766				740
Equipment			589				334
Professional expenses			340				424
Sales and marketing expenses			189				174
Deposit insurance premiums and regulatory assessments			679				636
Other			1,375				1,175
Total non-interest expense			10,469				9,548
Income before taxes			5,521				600
Provision for income taxes			2,319				229
Net income		$	3,202			$	371
Basic earnings per share		$	0.28			$	0.03
Diluted earnings per share		$	0.28			$	0.03
Cash dividends per share		$	0.01			$	0.01

Page 16 of 20

 

PROVIDENT FINANCIAL HOLDINGS, INC. Financial Highlights (Unaudited - Dollars in Thousands, Except Share Information )
	Quarter Ended June 30,				Fiscal Year Ended June 30,
	2010		2009		2010		2009
SELECTED FINANCIAL RATIOS:
Return (loss) on average assets	0.92%		0.33%		0.08%		(0.47)%
Return (loss) on average stockholders’ equity	10.16%		4.51%		0.94%		(6.20)%
Stockholders’ equity to total assets	9.13%		7.27%		9.13%		7.27%
Net interest spread	2.97%		2.84%		2.71%		2.68%
Net interest margin	3.10%		2.99%		2.83%		2.86%
Efficiency ratio	65.47%		36.09%		61.68%		46.86%
Average interest-earning assets to average
interest-bearing liabilities	106.47%		105.61%		105.68%		106.62%
SELECTED FINANCIAL DATA:
Basic earnings (loss) per share	$   0.28		$   0.21		$   0.13		$  (1.20		)
Diluted earnings (loss) per share	$   0.28		$   0.21		$   0.13		$  (1.20		)
Book value per share	$ 11.20		$ 18.48		$ 11.20		$ 18.48
Shares used for basic EPS computation	11,345,955		6,203,769		8,920,775		6,201,978
Shares used for diluted EPS computation	11,345,955		6,203,769		8,920,775		6,201,978
Total shares issued and outstanding	11,406,654		6,219,654		11,406,654		6,219,654
LOANS ORIGINATED FOR SALE:
Retail originations	$ 159,735		$   92,556		$    464,145		$    259,348
Wholesale originations	325,297		524,023		1,336,686		1,058,275
Total loans originated for sale	$ 485,032		$ 616,579		$ 1,800,831		$ 1,317,623
LOANS SOLD:
Servicing released	$ 473,635		$ 587,932		$ 1,778,684		$ 1,204,492
Servicing retained	1,049		-		2,541		193
Total loans sold	$ 474,684		$ 587,932		$ 1,781,225		$ 1,204,685
	As of		As of		As of		As of
	06/30/10		03/31/10		12/31/09		09/30/09
ASSET QUALITY RATIOS AND DELINQUENT LOANS:
Recourse reserve for loans sold	$   6,335		$   6,073		$   5,103		$   4,456
Allowance for loan losses	$ 43,501		$ 50,849		$ 55,364		$ 58,013
Non-performing loans to loans held for investment, net	5.84%		7.15%		8.40%		7.72%
Non-performing assets to total assets	5.25%		6.50%		7.12%		6.64%
Allowance for loan losses to non-performing loans	74.00%		68.86%		61.63%		67.83%
Allowance for loan losses to gross loans held for
investment	4.14%		4.69%		4.92%		4.97%
Net charge-offs to average loans receivable (annualized)	2.49%		2.35%		1.63%		1.44%
Non-performing loans	$ 58,783		$ 73,839		$ 89,833		$ 85,529
Loans 30 to 89 days delinquent	$   5,849		$   6,937		$   6,686		$ 12,286
	Quarter Ended		Quarter Ended		Quarter Ended		Quarter Ended
	06/30/10		03/31/10		12/31/09		09/30/09
Recourse provision for loans sold	$ 2,051		$ 1,178		$ 1,865		$ 1,189
Provision for loan losses	$         -		$ 2,322		$ 2,315		$ 17,206

Page 17 of 20

 

PROVIDENT FINANCIAL HOLDINGS, INC.

Financial Highlights

(Unaudited - Dollars in Thousands)

	As of		As of		As of		As of
	06/30/10		03/31/10		12/31/09		09/30/09
REGULATORY CAPITAL RATIOS:
Tangible equity ratio	8.82%		8.53%		8.41%		7.03%
Core capital ratio	8.82%		8.53%		8.41%		7.03%
Total risk-based capital ratio	13.17%		15.53%		15.06%		13.16%
Tier 1 risk-based capital ratio	11.91%		14.25%		13.79%		11.89%

	As of June 30,
	2010					2009
INVESTMENT SECURITIES:	Balance		Rate			Balance		Rate
Available for sale (at fair value):
U.S. government sponsored enterprise debt securities	$   3,317		4.00	%		$     5,353		4.00	%
U.S. government agency mortgage-backed securities	17,715		3.31			74,064		4.84
U.S. government sponsored enterprise mortgage-backed    securities	12,456		2.73			44,436		4.88
Private issue collateralized mortgage obligations	1,515		2.65			1,426		3.05
Total investment securities available for sale	$ 35,003		3.14	%		$ 125,279		4.80	%
Total investment securities	$ 35,003		3.14	%		$ 125,279		4.80	%
LOANS HELD FOR INVESTMENT:
Single-family (1 to 4 units)	$   583,126		4.91	%		$   694,354		5.74	%
Multi-family (5 or more units)	343,551		6.19			372,623		6.23
Commercial real estate	110,310		6.84			122,697		6.90
Construction	400		5.25			4,513		7.47
Other	1,532		6.16			2,513		6.35
Commercial business	6,620		7.10			9,183		6.98
Consumer	857		7.65			1,151		7.27
Total loans held for investment	1,046,396		5.55	%		1,207,034		6.03	%
Undisbursed loan funds	-					(305	)
Deferred loan costs, net	3,365					4,245
Allowance for loan losses	(43,501	)				(45,445	)
Total loans held for investment, net	$1,006,260					$1,165,529
Purchased loans serviced by others included above	$     22,023		4.81	%		$   125,364		5.91	%
DEPOSITS:
Checking accounts – non interest-bearing	$   52,230		-	%		$   41,974		-	%
Checking accounts – interest-bearing	176,664		0.59			128,395		0.70
Savings accounts	204,402		0.75			156,307		1.30
Money market accounts	24,731		0.96			25,704		1.45
Time deposits	474,906		1.90			636,865		2.60
Total deposits	$ 932,933		1.27	%		$ 989,245		2.01	%
Brokered deposits included above	$   19,612		2.78	%		$   19,612		2.78	%
Note:  The interest rate or yield/cost described in the rate or yield/cost column is the weighted-average interest rate or yield/cost of all instruments, which are included in the balance of the respective line item.

Page 18 of 20

 

PROVIDENT FINANCIAL HOLDINGS, INC. Financial Highlights (Unaudited – Dollars in Thousands)
	As of June 30,
	2010					2009
	Balance		Rate			Balance		Rate
BORROWINGS:
Overnight	$             -		-	%		$             -		-	%
Six months or less	48,000		5.22			65,000		3.84
Over six to twelve months	85,000		4.20			47,000		3.38
Over one to two years	90,000		3.85			148,000		4.33
Over two to three years	20,000		3.39			90,000		3.85
Over three to four years	65,000		3.79			20,000		3.39
Over four to five years	-		-			70,000		3.69
Over five years	1,647		6.37			16,692		3.26
Total borrowings	$ 309,647		4.13	%		$ 456,692		3.89	%

	Quarter Ended				Fiscal Year Ended
	June 30,				June 30,
	2010		2009		2010		2009
SELECTED AVERAGE BALANCE SHEETS:	Balance		Balance		Balance		Balance
Loans receivable, net (1)	$ 1,180,708		$ 1,366,004		$ 1,211,600		$ 1,342,632
Investment securities	35,846		132,608		57,083		144,621
FHLB – San Francisco stock	32,375		32,985		32,861		32,765
Interest-earning deposits	82,483		15,491		96,421		9,998
Total interest-earning assets	$ 1,331,412		$ 1,547,088		$ 1,397,965		$ 1,530,016
Total assets	$ 1,397,156		$ 1,600,880		$ 1,462,279		$ 1,575,165
Deposits	$    940,909		$    963,377		$    949,316		$    955,731
Borrowings	309,651		501,522		373,458		479,275
Total interest-bearing liabilities	$ 1,250,560		$ 1,464,899		$ 1,322,774		$ 1,435,006
Total stockholders’ equity	$    126,016		$    116,366		$    119,250		$    120,053
	Quarter Ended				Fiscal Year Ended
	June 30,				June 30,
	2010		2009		2010		2009
	Yield/Cost		Yield/Cost		Yield/Cost		Yield/Cost
Loans receivable, net (1)	5.52%		5.74%		5.58%		5.87%
Investment securities	3.07%		4.46%		3.76%		4.72%
FHLB – San Francisco stock	0.26%		-		0.34%		0.99%
Interest-earning deposits	0.25%		0.23%		0.25%		0.25%
Total interest-earning assets	5.00%		5.45%		5.02%		5.62%
Deposits	1.32%		2.04%		1.63%		2.45%
Borrowings	4.19%		3.69%		4.04%		3.90%
Total interest-bearing liabilities	2.03%		2.61%		2.31%		2.94%

(1)   Includes loans held for investment, loans held for sale at fair value and loans held for sale at lower of cost or market, net of allowance for loan losses.

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

Page 19 of 20

 

PROVIDENT FINANCIAL HOLDINGS, INC. Asset Quality (Unaudited – Dollars in Thousands)
	As of		As of		As of		As of
	06/30/10		03/31/10		12/31/09		09/30/09
Loans on non-accrual status:
Mortgage loans:
Single-family	$ 30,129		$ 37,670		$   43,262		$ 41,921
Multi-family	3,945		4,016		5,909		4,791
Commercial real estate	725		1,571		2,500		1,688
Construction	350		373		374		650
Commercial business loans	-		-		-		198
Consumer loans	1		-		-		-
Total	35,150		43,630		52,045		49,248
Accruing loans past due 90 days or more:	-		-		-		-
Total	-		-		-		-

Restructured loans on non-accrual status:
Mortgage loans:
Single-family			19,522		25,982		33,626		31,205
Multi-family			2,541		2,540		1,992		-
Commercial real estate			1,003		1,224		1,044		1,410
Construction			-		319		918		1,479
Other			-		-		-		1,234
Commercial business loans			567		144		208		953
Total			23,633		30,209		37,788		36,281
		Total non-performing loans	58,783		73,839		89,833		85,529
Real estate owned, net			14,667		17,555		10,871		12,693
Total non-performing assets			$ 73,450		$ 91,394		$ 100,704		$ 98,222

Restructured loans on accrual status:
Mortgage loans:
Single-family	$ 33,212		$ 27,594		$ 22,315		$ 15,698
Commercial real estate	1,832		537		-		-
Other	1,292		1,292		1,292		-
Commercial business loans	-		750		750		-
Total	$ 36,336		$ 30,173		$ 24,357		$ 15,698

Page 20 of 20