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Operating Segment Reports

9 Months Ended

Mar. 31, 2019

Note 4: Operating Segment Reports

The Corporation operates in two business segments: community banking through the Bank and mortgage banking through Provident Bank Mortgage ("PBM"), a division of the Bank. The Corporation expects to discontinue the operations of PBM by June 30, 2019. The Corporation estimates that it will incur costs of approximately $3.6 million to $4.0 million to complete the exit during the remainder of fiscal 2019, which amounts include costs for severance, retention, personnel, premises, occupancy, depreciation, and costs related to termination of data processing and other contractual arrangements. As of March 31, 2019, the total costs incurred for both the quarter and nine months ended March 31 2019 were approximately $1.6 million, comprised of 1.5 million in salaries and employee benefits expenses, $81,000 in premises and occupancy expenses and $13,000 in equipment expenses. There were no costs incurred related to the exit prior to the quarter ended March 31, 2019.

The following tables set forth condensed consolidated statements of operations and total assets for the Corporation’s operating segments for the quarters and nine months ended March 31, 2019 and 2018, respectively.

	For the Quarter Ended March 31, 2019
(In Thousands)	Provident Bank			Provident Bank Mortgage			Consolidated Totals
Net interest income	$	9,431		$	181		$	9,612
Provision (recovery) for loan losses		74			(70	)		4
Net interest income, after provision (recovery) for loan losses		9,357			251			9,608

Non-interest income:
Loan servicing and other fees ⁽¹⁾		103			159			262
Gain (loss) on sale of loans, net ⁽²⁾		(1	)		1,720			1,719
Deposit account fees		471			—			471
Gain on sale and operations of real estate owned acquired in the settlement of loans, net		2			—			2
Card and processing fees		373			—			373
Other		223			2			225
Total non-interest income		1,171			1,881			3,052

Non-interest expense:
Salaries and employee benefits		5,002			4,290			9,292
Premises and occupancy		847			439			1,286
Operating and administrative expenses		1,314			1,108			2,422
Total non-interest expense		7,163			5,837			13,000
Income (loss) before income taxes		3,365			(3,705	)		(340	)
Provision (benefit) for income taxes		907			(1,096	)		(189	)
Net income (loss)	$	2,458		$	(2,609	)	$	(151	)
Total assets, end of period	$	1,088,716		$	30,679		$	1,119,395

⁽¹⁾

Includes an inter-company charge of $2 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.

⁽²⁾

Includes an inter-company charge of $17 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

	For the Quarter Ended March 31, 2018
(In Thousands)	Provident Bank			Provident Bank Mortgage			Consolidated Totals
Net interest income	$	8,750		$	374		$	9,124
Recovery from the allowance for loan losses		(505	)		—			(505	)
Net interest income, after recovery from the allowance for loan losses		9,255			374			9,629

Non-interest income:
Loan servicing and other fees ⁽¹⁾		313			180			493
Gain (loss) on sale of loans, net ⁽²⁾		(1	)		3,598			3,597
Deposit account fees		529			—			529
Loss on sale and operations of real estate owned acquired in the settlement of loans, net		(19	)		—			(19	)
Card and processing fees		372			—			372
Other		238			—			238
Total non-interest income		1,432			3,778			5,210

Non-interest expense:
Salaries and employee benefits		4,763			4,045			8,808
Premises and occupancy		842			413			1,255
Operating and administrative expenses		1,050			1,326			2,376
Total non-interest expense		6,655			5,784			12,439
Income (loss) before income taxes		4,032			(1,632	)		2,400
Provision (benefit) for income taxes		1,252			(585	)		667
Net income (loss)	$	2,780		$	(1,047	)	$	1,733
Total assets, end of period	$	1,086,437		$	90,165		$	1,176,602

⁽¹⁾

Includes an inter-company charge of $222 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.

⁽²⁾

Includes an inter-company charge of $44 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

	For the Nine Months Ended March 31, 2019
(In Thousands)	Provident Bank			Provident Bank Mortgage			Consolidated Totals
Net interest income	$	27,956		$	844		$	28,800
Provision (recovery) for loan losses		(475	)		25			(450	)
Net interest income, after provision (recovery) for loan losses		28,431			819			29,250

Non-interest income:
Loan servicing and other fees ⁽¹⁾		87			776			863
Gain on sale of loans, net ⁽²⁾		33			7,081			7,114
Deposit account fees		1,485			—			1,485
Loss on sale and operations of real estate owned acquired in the settlement of loans, net		(4	)		—			(4	)
Card and processing fees		1,163			—			1,163
Other		573			2			575
Total non-interest income		3,337			7,859			11,196

Non-interest expense:
Salaries and employee benefits		14,138			10,615			24,753
Premises and occupancy		2,652			1,253			3,905
Operating and administrative expenses		3,307			3,614			6,921
Total non-interest expense		20,097			15,482			35,579
Income (loss) before income taxes		11,671			(6,804	)		4,867
Provision (benefit) for income taxes		3,249			(2,012	)		1,237
Net income (loss)	$	8,422		$	(4,792	)	$	3,630
Total assets, end of period	$	1,088,716		$	30,679		$	1,119,395

⁽¹⁾

Includes an inter-company charge of $428 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.

⁽²⁾

Includes an inter-company charge of $37 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

	For the Nine Months Ended March 31, 2018
(In Thousands)	Provident Bank			Provident Bank Mortgage			Consolidated Totals
Net interest income	$	25,517		$	1,476		$	26,993
Recovery from the allowance for loan losses		(347	)		—			(347	)
Net interest income, after recovery from the allowance for loan losses		25,864			1,476			27,340

Non-interest income:
Loan servicing and other fees ⁽¹⁾		468			705			1,173
Gain on sale of loans, net ⁽²⁾		21			12,740			12,761
Deposit account fees		1,623			—			1,623
Loss on sale and operations of real estate owned acquired in the settlement of loans, net		(81	)		—			(81	)
Card and processing fees		1,126			—			1,126
Other		701			—			701
Total non-interest income		3,858			13,445			17,303

Non-interest expense:
Salaries and employee benefits		13,714			12,996			26,710
Premises and occupancy		2,491			1,338			3,829
Operating and administrative expenses ⁽³⁾		4,490			6,357			10,847
Total non-interest expense		20,695			20,691			41,386
Income (loss) before income taxes		9,027			(5,770	)		3,257
Provision (benefit) for income taxes ⁽⁴⁾		4,595			(2,069	)		2,526
Net income (loss)	$	4,432		$	(3,701	)	$	731
Total assets, end of period	$	1,086,437		$	90,165		$	1,176,602

⁽¹⁾

Includes an inter-company charge of $561 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.

⁽²⁾

Includes an inter-company charge of $182 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

⁽³⁾

Includes $3.4 million of litigation settlement expense for the first nine months of fiscal 2018, of which $2.1 million was allocated to PBM.

⁽⁴⁾

Includes a net tax charge of $1.9 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for the nine months ended December 31, 2017.