Provident Financial Holdings Reports First Quarter of Fiscal 2019 Results

Net Income Increases by 30% in the September 2018 Quarter in Comparison to the June 2018 Quarter (Sequential Quarter)

Pre-Provision, Pre-Tax Earnings Increase by 7% in Comparison to the Prior Sequential Quarter

Net Interest Margin Expands 13 Basis Points to 3.30% in the September 2018 Quarter in Comparison to the September 2017 Quarter and by Two Basis Points in Comparison to the Prior Sequential Quarter

Classified Assets Decrease 12% to $13.9 Million at September 30, 2018 in Comparison to $15.8 Million at June 30, 2018

RIVERSIDE, Calif., Oct. 29, 2018 (GLOBE NEWSWIRE) — Provident Financial Holdings, Inc. (“Company”), NASDAQ GS: PROV, the holding company for Provident Savings Bank, F.S.B. (“Bank”), today announced first quarter earnings results for the fiscal year ending June 30, 2019.

For the quarter ended September 30, 2018, the Company reported net income of $1.82 million, or $0.24 per diluted share (on 7.56 million average diluted shares outstanding), a significant improvement from the net loss of $225,000, or $(0.03) per diluted share (on 7.69 million average diluted shares outstanding), in the comparable period a year ago. Compared to the same quarter last year, the increase in earnings was primarily attributable to the $2.75 million litigation settlement expense recorded in other non-interest expense in the first quarter of fiscal 2018 (not replicated this quarter), a $1.02 million decrease in salaries and employee benefits expense, a $406,000 improvement in the provision for loan losses to a $237,000 recovery, and a $239,000 increase in net interest income; partly offset by a $1.72 million decrease in the gain on sale of loans and an $824,000 increase in the provision for income taxes.

“Pre-provision, pre-tax earnings continue to improve on the strength of our community banking business.  Additionally, the September 2018 quarter marks the first quarter where Provident has realized the full benefit of lower corporate tax rates due to the previously enacted Tax Cuts and Jobs Act.  As a result of these developments, net income has increased from the prior sequential quarter and from the same quarter last year,” said Craig G. Blunden, Chairman and Chief Executive Officer of the Company.  “Unfortunately, our mortgage banking business continues to suffer from weaker mortgage banking fundamentals most recently demonstrated by a modest home buying season in the markets we serve.  Consequently, we have more work to do to adjust our mortgage banking business model to the current operating environment,” Mr. Blunden concluded.

Return on average assets for the first quarter of fiscal 2019 increased to 0.63 percent from (0.08) percent for the same period of fiscal 2018; and return on average stockholders’ equity for the first quarter of fiscal 2019 increased to 6.03 percent from (0.70) percent for the comparable period of fiscal 2018.

On a sequential quarter basis, the $1.82 million net income for the first quarter of fiscal 2019 reflects a $423,000, or 30 percent improvement from the net income of $1.40 million in the fourth quarter of fiscal 2018.  The increase in earnings for the first quarter of fiscal 2019 compared to the fourth quarter of fiscal 2018 was primarily attributable to a $50,000 increase in net interest income, a $48,000 increase in the recovery from the allowance for loan losses, a $114,000 decrease in non-interest expenses and a $254,000 decrease in the provision for income taxes (attributable primarily to a lower federal income tax rate), partly offset by a $43,000 decrease in non-interest income.  Diluted earnings per share for the first quarter of fiscal 2019 were $0.24 per share, up 33 percent from the $0.18 per share during the fourth quarter of fiscal 2018.  Return on average assets increased to 0.63 percent for the first quarter of fiscal 2019 from 0.48 percent in the fourth quarter of fiscal 2018; and return on average stockholders’ equity for the first quarter of fiscal 2019 was 6.03 percent, compared to 4.65 percent for the fourth quarter of fiscal 2018.

Net interest income increased $239,000, or three percent, to $9.36 million in the first quarter of fiscal 2019 from $9.12 million for the same quarter of fiscal 2018, attributable to an increase in the net interest margin, partly offset by a lower average interest-earning assets balance.  The net interest margin during the first quarter of fiscal 2019 increased 13 basis points to 3.30 percent from 3.17 percent in the same quarter last year, primarily due to an increase in the average yield of interest-earning assets, partly offset by a small increase in the average cost of interest-bearing liabilities.  The average yield on interest-earning assets increased by 14 basis points to 3.88 percent in the first quarter of fiscal 2019 from 3.74 percent in the same quarter last year and the average cost of interest-bearing liabilities increased by two basis points to 0.64 percent in the first quarter of fiscal 2019 from 0.62 percent in the same quarter last year. The average balance of interest-earning assets decreased by $16.7 million, or one percent, to $1.13 billion in the first quarter of fiscal 2019 from $1.15 billion in the same quarter last year.

The average balance of loans receivable, including loans held for sale, decreased by $40.5 million, or four percent, to $967.1 million in the first quarter of fiscal 2019 from $1.01 billion in the same quarter of fiscal 2018, primarily due to decreases in both the average balance of loans held for sale (attributable to a decrease in mortgage banking activity, primarily as a result of higher mortgage interest rates and lower refinance volume) and loans held for investment. The average yield on loans receivable increased by 18 basis points to 4.21 percent in the first quarter of fiscal 2019 from an average yield of 4.03 percent in the same quarter of fiscal 2018. The increase in the average loan yield was primarily attributable to increases in both the average yield of loans held for investment and loans held for sale.  The average balance of loans held for sale in the first quarter of fiscal 2019 was $74.2 million with an average yield of 4.59 percent, down from $99.7 million with an average yield of 3.93 percent in the same quarter of fiscal 2018. The average balance of loans held for investment in the first quarter of fiscal 2019 was $892.9 million with an average yield of 4.18 percent, down from $907.9 million with an average yield of 4.04 percent in the same quarter of fiscal 2018. Loan principal payments received in the first quarter of fiscal 2019 were $62.9 million, compared to $43.4 million in the same quarter of fiscal 2018.

The average balance of investment securities increased by $15.8 million, or 21 percent, to $91.3 million in the first quarter of fiscal 2019 from $75.5 million in the same quarter of fiscal 2018. The increase was primarily attributable to mortgage-backed securities purchases, partly offset by principal payments received on mortgage-backed securities.  The average yield on investment securities increased 15 basis points to 1.51 percent in the first quarter of fiscal 2019 from 1.36 percent for the same quarter of fiscal 2018. The increase in the average yield was primarily attributable to mortgage-backed securities purchases which had higher average yields than the existing portfolio and the repricing of variable rate investment securities to higher market interest rates.

In the first quarter of fiscal 2019, the Federal Home Loan Bank (“FHLB”) – San Francisco distributed $143,000 of quarterly cash dividends to the Bank, slightly higher than the $141,000 received in the same quarter last year.

The average balance of the Company’s interest-earning deposits, primarily cash with the Federal Reserve Bank of San Francisco, increased $7.9 million, or 13 percent, to $67.3 million in the first quarter of fiscal 2019 from $59.4 million in the same quarter of fiscal 2018. The increase in interest-earning deposits was primarily due to the decrease in the loans receivable balance, partly offset by purchases of investment securities. The average yield earned on interest-earning deposits in the first quarter of fiscal 2019 was 1.96 percent, up 71 basis points from 1.25 percent in the same quarter of fiscal 2018 as a result of the impact of the increases in the targeted federal funds rate over the last year.

Average deposits decreased $20.1 million, or two percent, to $902.9 million in the first quarter of fiscal 2019 from $923.0 million in the same quarter of fiscal 2018.  The average cost of deposits remained relatively stable, increasing by one basis point to 0.39 percent in the first quarter of fiscal 2019 from 0.38 percent in the same quarter last year. Transaction account balances or “core deposits” decreased slightly to $669.5 million at September 30, 2018 from $670.0 million at June 30, 2018, while time deposits decreased $5.0 million, or two percent, to $232.6 million at September 30, 2018 from $237.6 million at June 30, 2018, consistent with the Bank’s strategy to decrease the percentage of time deposits in its deposit base and to increase the percentage of checking and savings accounts.

The average balance of borrowings, which consisted of FHLB – San Francisco advances, increased $5.9 million, or five percent, to $120.0 million, and the average cost of FHLB advances decreased four basis points to 2.52 percent in the first quarter of fiscal 2019, compared to an average balance of $114.1 million with an average cost of 2.56 percent in the same quarter of fiscal 2018. The decrease in the average cost of advances was primarily due to the utilization of lower-rate short-term borrowings and the maturity of a long-term advance which was renewed at a lower interest rate in the third quarter of fiscal 2018.

During the first quarter of fiscal 2019, the Company recorded a recovery from the allowance for loan losses of $237,000, in contrast to a provision for loan losses of $169,000 recorded during the same period of fiscal 2018 and a recovery from the allowance for loan losses of $189,000 recorded in the fourth quarter of fiscal 2018 (sequential quarter). The recovery from the allowance for loan losses was primarily attributable to the decline in loans held for investment.

Non-performing assets, with underlying collateral located in California, increased $423,000, or six percent, to $7.4 million, or 0.64 percent of total assets, at September 30, 2018, compared to $7.0 million, or 0.59 percent of total assets, at June 30, 2018.  Non-performing loans increased $805,000, or 13 percent, to $6.9 million at September 30, 2018 from $6.1 million at June 30, 2018. The non-performing loans at September 30, 2018 are comprised of 22 single-family loans ($6.1 million), one construction loan ($745,000) and one commercial business loan ($64,000).  At September 30, 2018, real estate owned was $524,000, a decline of $382,000, or 42%, from $906,000 at June 30, 2018 and was comprised of one single-family property acquired through foreclosure during the fourth quarter of fiscal 2018.

Net loan recoveries for the quarter ended September 30, 2018 were $7,000 or zero percent (annualized) of average loans receivable, compared to net loan charge-offs of $145,000 or 0.06 percent (annualized) of average loans receivable for the quarter ended September 30, 2017 and net loan recoveries of $43,000 or (0.02) percent (annualized) of average loans receivable for the quarter ended June 30, 2018 (sequential quarter).

Classified assets at September 30, 2018 were $13.9 million, comprised of $5.1 million of loans in the special mention category, $8.3 million of loans in the substandard category and $524,000 in real estate owned; while classified assets at June 30, 2018 were $15.8 million, comprised of $7.5 million of loans in the special mention category, $7.4 million of loans in the substandard category and $906,000 in real estate owned.

For the quarter ended September 30, 2018, no new loans were restructured from their original terms and classified as restructured loans, while one restructured loan was upgraded to the “pass” category. The outstanding balance of restructured loans at September 30, 2018 was $4.8 million, down eight percent from $5.2 million at June 30, 2018.  At September 30, 2018, $3.1 million or 66 percent of restructured loans were current with respect to their modified payment terms.

The allowance for loan losses was $7.2 million at September 30, 2018, or 0.81 percent of gross loans held for investment, compared to $7.4 million at June 30, 2018, or 0.81 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, 2018.

Non-interest income decreased by $1.80 million, or 28 percent, to $4.55 million in the first quarter of fiscal 2019 from $6.35 million in the same period of fiscal 2018, primarily as a result of a decrease in the gain on sale of loans during the current quarter as compared to the comparable period last year.  On a sequential quarter basis, non-interest income decreased $43,000, or one percent, primarily as a result of a decline in loan servicing and other fees and other non-interest income, partly offset by an increase in the gain on sale of loans.

The gain on sale of loans decreased $1.72 million, or 35 percent, to $3.13 million for the quarter ended September 30, 2018 from $4.85 million in the comparable quarter last year (reflecting the impact of a lower loan sale volume, partly offset by a higher average loan sale margin) but increased $91,000 or three percent from the quarter ended June 30, 2018 (sequential quarter). Total loan sale volume, which includes the net change in commitments to extend credit on loans to be held for sale, was $181.8 million in the quarter ended September 30, 2018, down $210.4 million or 54 percent, from $392.2 million in the comparable quarter last year and decreased $54.5 million or 23 percent from $236.3 million in the quarter ended June 30, 2018 (sequential quarter). The average loan sale margin from mortgage banking was 170 basis points for the quarter ended September 30, 2018, an increase of 46 basis points from 124 basis points in the same quarter last year, and 41 basis points higher than the 129 basis points in the fourth quarter of fiscal 2018 (sequential quarter).  The increase in the average loan sale margin was the result of a higher percentage of retail loan production (which generally has higher loan sale margins) versus wholesale loan production and maintaining pricing discipline throughout the quarter. The gain on sale of loans includes an unfavorable 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 loss of $489,000 in the first quarter of fiscal 2019, compared to an unfavorable fair-value adjustment that amounted to a net loss of $94,000 in the same period last year and a favorable fair-value adjustment that amounted to a net gain of $85,000 in the fourth quarter of fiscal 2018 (sequential quarter).

In the first quarter of fiscal 2019, $196.3 million of loans were originated for sale, 50 percent lower than the $392.3 million for the same period last year, and 19 percent lower than the $241.6 million during the fourth quarter of fiscal 2018 (sequential quarter). The loan origination volume has decreased from the previous year as a result of higher mortgage interest rates which has reduced mortgage banking volume.  Total loans sold during the quarter ended September 30, 2018 were $211.8 million, 44 percent lower than the $381.1 million sold during the same quarter last year, and nine percent lower than the $233.9 million sold during the fourth quarter of fiscal 2018 (sequential quarter).  Total loan originations (including loans originated and purchased for investment and loans originated for sale) were $233.0 million in the first quarter of fiscal 2019, a decrease of 47 percent from $437.2 million in the same quarter of fiscal 2018, and 25 percent lower than the $312.4 million in the fourth quarter of fiscal 2018 (sequential quarter).

Non-interest expenses decreased $4.03 million, or 26 percent, to $11.70 million in the first quarter of fiscal 2019 from $15.73 million in the same quarter last year.  The decrease was primarily due to a $2.98 million decrease in other non-interest expense (attributable primarily to the $2.75 million litigation settlement expense recorded in the first quarter of fiscal 2018 and not replicated this quarter) and a $1.02 million decrease in salaries and employee benefits expense.  The decrease in salaries and employee benefits expense was primarily related to lower variable compensation resulting from lower mortgage banking loan originations and staff reductions in mortgage banking. On a sequential quarter basis, non-interest expenses decreased $114,000 or one percent from $11.82 million, primarily as a result of a $153,000 decrease in sales and marketing expense and a $147,000 decrease in other non-interest expenses, partly offset by a $139,000 increase in salaries and employment benefits expense (attributable primarily to the vesting of certain stock options and restricted stock awards).  As a result of the vesting of these stock options and restricted stock awards, future salaries and employee benefits expense related to stock-based compensation is expected to decline by approximately $640,000 per quarter in comparison to the current quarter.

The Company’s efficiency ratio in the first quarter of fiscal 2019 was 84 percent, an improvement from 102 percent in the same quarter last year and 85 percent in the fourth quarter of fiscal 2018 (sequential quarter).

The Company’s income tax provision was $616,000 for the first quarter of fiscal 2019 as compared to a $208,000 income tax benefit in the same quarter last year. The increase was primarily attributable to the higher income before taxes, partly offset by the reduction of the federal corporate tax rate resulting from the Tax Cuts and Jobs Act (“Tax Act”). Since the Company has a fiscal year-end of June 30th, the reduced federal corporate income tax rate from the Tax Act for fiscal 2018 was the result of the application of a blended federal statutory tax rate of 28.06%, and is now a flat 21% federal corporate income tax rate for fiscal 2019 and thereafter.  As a result, the effective federal and state income tax rate in the first quarter of fiscal 2019 was 25.26%, much lower than the 48.04% in the same quarter last year.  The Company believes that the tax provision recorded in the first quarter of fiscal 2019 reflects its current income tax obligations.

The Company did not repurchase any shares of its common stock under the existing stock repurchase plan during the quarter ended September 30, 2018. As of September 30, 2018, a total of 373,000 shares under the April 2018 stock repurchase plan remain available for future purchase.  During the quarter, the Company issued 15,000 shares of common stock upon the exercise of stock options and distributed 85,000 shares of restricted stock upon vesting.  The Company purchased 20,566 shares at an average price of $18.31 per share from recipients to fund their withholding tax obligations in the first quarter of fiscal 2019.

The Bank currently operates 14 retail/business banking offices in Riverside County and San Bernardino County (Inland Empire).  Provident Bank Mortgage operates two wholesale loan production offices and nine retail loan production offices located throughout California.

The Company will host a conference call for institutional investors and bank analysts on Tuesday, October 30, 2018 at 9:00 a.m. (Pacific) to discuss its financial results.  The conference call can be accessed by dialing 1-800-230-1074 and requesting the Provident Financial Holdings Earnings Release Conference Call.  An audio replay of the conference call will be available through Tuesday, November 6, 2018 by dialing 1-800-475-6701 and referencing access code number 455871.

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 contains statements that the Company believes are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements relate to the Company’s financial condition, liquidity, 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 from the results anticipated or implied by our forward-looking statements include, but are not limited  to increased competitive pressures; changes in the interest rate environment; secondary market conditions for loans and our ability to sell loans in the secondary market; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission (“SEC”) – which are available on our website at www.myprovident.com and on the SEC’s website at www.sec.gov. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements whether as a result of new information, future events or otherwise. These risks could cause our actual results for fiscal 2019 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us and could negatively affect our operating and stock price performance.

Contacts:  Craig G. Blunden
Chairman and
Chief Executive Officer
        Donavon P. Ternes
President, Chief Operating Officer,
and Chief Financial Officer 
           
                   

3756 Central Avenue
Riverside, CA 92506
(951) 686-6060

PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Financial Condition
(Unaudited –In Thousands, Except Share Information)

  September 30, June 30,   March 31,   December 31, September 30,
  2018
2018   2018   2017
2017
Assets                    
Cash and cash equivalents $ 78,928   $ 43,301   $ 50,574   $ 47,173   $ 49,217  
Investment securities – held to maturity, at cost   79,611     87,813     95,724     87,626     64,751  
Investment securities – available for sale, at fair value   7,033     7,496     8,002     8,405     8,940  
Loans held for investment, net of allowance for loan losses of $7,155; $7,385; $7,531; $8,075 and $8,063, respectively; includes $4,945; $5,234; $4,996; $5,157 and $6,924 at fair value, respectively   877,091     902,685     894,167     885,976     908,060  
Loans held for sale, at fair value    78,794     96,298     89,823     96,589     127,234  
Accrued interest receivable    3,350     3,212     3,100     3,147     2,989  
Real estate owned, net    524     906     787     621      
FHLB – San Francisco stock    8,199     8,199     8,108     8,108     8,108  
Premises and equipment, net    8,779     8,696     8,734     7,816     7,333  
Prepaid expenses and other assets    15,171     16,943     17,583     16,670     17,154  
                     
Total assets  $ 1,157,480   $ 1,175,549   $ 1,176,602   $ 1,162,131   $ 1,193,786  
                     
Liabilities and Stockholders’ Equity                    
Liabilities:                    
Non interest-bearing deposits  $ 87,250   $ 86,174   $ 87,520   $ 77,144   $ 82,415  
Interest-bearing deposits    814,862     821,424     834,979     830,644     844,601  
Total deposits   902,112     907,598     922,499     907,788     927,016  
                     
Borrowings   111,149     126,163     111,176     111,189     121,206  
Accounts payable, accrued interest and other liabilities   22,539     21,331     22,327     22,454     20,643  
Total liabilities   1,035,800     1,055,092     1,056,002     1,041,431     1,068,865  
                     
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; 18,048,115; 18,033,115; 18,033,115; 17,976, 615 and 17,970,865 shares issued, respectively; 7,500,860; 7,421,426; 7,460,804; 7,474,776 and 7,609,552 shares outstanding, respectively)   181     181     180     180     180  
Additional paid-in capital   95,795     94,957     94,719     94,011     93,669  
Retained earnings   191,399     190,616     190,301     189,610     191,451  
Treasury stock at cost (10,547,255; 10,611,689; 10,572,311; 10,501,839 and 10,361,313 shares, respectively)   (165,884 )   (165,507 )   (164,786 )   (163,311 )   (160,609 )
Accumulated other comprehensive income, net of tax   189     210     186     210     230  
                     
Total stockholders’ equity   121,680     120,457     120,600     120,700     124,921  
                     
Total liabilities and stockholders’ equity $ 1,157,480   $ 1,175,549   $ 1,176,602   $ 1,162,131   $ 1,193,786  
                               

PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations – Sequential Quarters
(Unaudited – In Thousands, Except Share Information)

  Quarter Ended
  September 30,
2018
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
Interest income:                    
Loans receivable, net $ 10,174   $ 10,191   $ 9,933   $ 9,735   $ 10,157  
Investment securities   345     386     382     319     257  
FHLB – San Francisco stock   143     140     144     143     141  
Interest-earning deposits   338     193     233     168     190  
Total interest income   11,000     10,910     10,692     10,365     10,745  
                     
Interest expense:                    
Checking and money market deposits   108     96     96     112     103  
Savings deposits   151     150     147     149     149  
Time deposits   621     616     613     625     639  
Borrowings   763     741     712     728     736  
Total interest expense   1,643     1,603     1,568     1,614     1,627  
                     
Net interest income   9,357     9,307     9,124     8,751     9,118  
(Recovery) provision for loan losses   (237 )   (189 )   (505 )   (11 )   169  
Net interest income, after (recovery) provision for loan losses   9,594     9,496     9,629     8,762     8,949  
                     
Non-interest income:                    
Loan servicing and other fees   324     402     493     317     363  
Gain on sale of loans, net   3,132     3,041     3,597     4,317     4,847  
Deposit account fees   505     496     529     536     558  
Gain (loss) on sale and operations of real estate owned acquired in the settlement of loans, net   1     (5 )   (19 )   (22 )   (40 )
Card and processing fees   398     415     372     373     381  
Other   189     243     238     220     243  
Total non-interest income   4,549     4,592     5,210     5,741     6,352  
                     
Non-interest expense:                    
Salaries and employee benefits   8,250     8,111     8,808     8,633     9,269  
Premises and occupancy   1,345     1,305     1,255     1,260     1,314  
Equipment   421     397     442     375     362  
Professional expenses   447     471     400     521     520  
Sales and marketing expenses   169     322     213     301     203  
Deposit insurance premiums and regulatory assessments   165     158     189     218     184  
Other   907     1,054     1,132     1,905     3,882  
Total non-interest expense   11,704     11,818     12,439     13,213     15,734  
                     
Income (loss) before taxes   2,439     2,270     2,400     1,290     (433 )
Provision (benefit) for income taxes   616     870     667     2,067     (208 )
Net income (loss) $   1,823   $   1,400   $   1,733   $   (777 ) $   (225 )
                               
Basic earnings (loss) per share $ 0.25   $ 0.19   $ 0.23   $ (0.10 ) $ (0.03 )
Diluted earnings (loss) per share $ 0.24   $ 0.18   $ 0.23   $ (0.10 ) $ (0.03 )
Cash dividends per share $ 0.14   $ 0.14   $ 0.14   $ 0.14   $ 0.14  
                               

PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited – Dollars in Thousands, Except Share Information )

  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  09/30/18   06/30/18   03/31/18   12/31/17   09/30/17
SELECTED FINANCIAL RATIOS:                  
Return (loss) on average assets   0.63 %     0.48 %     0.59 %     (0.27 )%     (0.08 )%
Return (loss) on average stockholders’ equity   6.03 %     4.65 %     5.76 %     (2.50 )%     (0.70 )%
Stockholders’ equity to total assets   10.51 %     10.25 %     10.25 %     10.39 %     10.46 %
Net interest spread   3.24 %     3.21 %     3.16 %     3.02 %     3.12 %
Net interest margin   3.30 %     3.28 %     3.23 %     3.08 %     3.17 %
Efficiency ratio   84.17 %     85.03 %     86.78 %     91.17 %     101.71 %
Average interest-earning assets to average interest-bearing liabilities   110.86 %     110.53 %     110.37 %     110.76 %     110.93 %
                   
SELECTED FINANCIAL DATA:                  
Basic earnings (loss) per share $   0.25     $   0.19     $   0.23     $   (0.10 )   $   (0.03 )
Diluted earnings (loss) per share $   0.24     $   0.18     $   0.23     $   (0.10 )   $   (0.03 )
Book value per share $   16.22     $   16.23     $   16.16     $    16.15     $    16.42  
Average shares used for basic EPS   7,430,967       7,448,037       7,457,275       7,565,950       7,694,157  
Average shares used for diluted EPS   7,557,068       7,594,698       7,616,255       7,565,950       7,694,157  
Total shares issued and outstanding   7,500,860       7,421,426       7,460,804       7,474,776       7,609,552  
                   
LOANS ORIGINATED FOR SALE:                  
Retail originations $ 127,133     $ 152,600     $ 129,816     $ 183,787     $ 213,301  
Wholesale originations   69,188       89,047       90,377       148,077       178,991  
Total loans originated for sale $ 196,321     $ 241,647     $ 220,193     $ 331,864     $ 392,292  
                   
LOANS SOLD:                  
Servicing released $ 211,050     $ 228,903     $ 220,532     $ 351,720     $ 373,463  
Servicing retained   758       4,992       5,326       9,660       7,588  
Total loans sold $ 211,808     $ 233,895     $ 225,858     $ 361,380     $ 381,051  
                   
  As of   As of   As of   As of   As of 
  09/30/18   06/30/18   03/31/18   12/31/17   09/30/17
ASSET QUALITY RATIOS AND DELINQUENT LOANS:                  
Recourse reserve for loans sold $   250     $   283     $   283     $   283     $   305  
Allowance for loan losses $ 7,155     $ 7,385     $   7,531     $ 8,075     $ 8,063  
Non-performing loans to loans held for investment, net   0.78 %     0.67 %     0.76 %     0.90 %     0.88 %
Non-performing assets to total assets   0.64 %     0.59 %     0.64 %     0.74 %     0.67 %
Allowance for loan losses to gross loans held for investment   0.81 %     0.81 %     0.84 %     0.90 %     0.88 %
Net loan (recoveries) charge-offs to average loans receivable (annualized)   %     (0.02 )%     0.02 %     (0.01 )%     0.06 %
Non-performing loans $ 6,862     $ 6,057     $   6,766     $ 7,985     $ 7,991  
Loans 30 to 89 days delinquent $    –     $    805     $    160     $ 1,537     $ 1,512  
                                       

PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited – Dollars in Thousands)

    Quarter
Ended
09/30/18
    Quarter
Ended
06/30/18
    Quarter
Ended
03/31/18
    Quarter
Ended
12/31/17
    Quarter
Ended
09/30/17
 
Recourse recovery for loans sold $   (33 ) $   –   $   –   $ (22 ) $
(Recovery) provision for loan losses $  (237 $  (189 ) $ (550 ) $ (11 $ 169
Net loan (recoveries) charge-offs $    (7 $    (43 $    39   $ (23   $ 145
           
    As of
09/30/18
    As of
06/30/18
    As of
03/31/18
    As of
12/31/17
    As of
09/30/17
 
REGULATORY CAPITAL RATIOS (BANK):                              
Tier 1 leverage ratio   9.59 %   9.96 %   9.83 %   9.59 %   9.54 %
Common equity tier 1 capital ratio   16.62 %   16.81 %   16.72 %   16.44 %   15.79 %
Tier 1 risk-based capital ratio   16.62 %   16.81 %   16.72 %   16.44 %   15.79 %
Total risk-based capital ratio   17.71 %   17.90 %   17.84 %   17.65 %   16.95 %
           
REGULATORY CAPITAL RATIOS (COMPANY):                              
Tier 1 leverage ratio   10.44 %   10.29 %   10.33 %   10.28 %   10.55 %
Common equity tier 1 capital ratio   18.09 %   17.37 %   17.56 %   17.62 %   17.46 %
Tier 1 risk-based capital ratio   18.09 %   17.37 %   17.56 %   17.62 %   17.46 %
Total risk-based capital ratio   19.18 %   18.46 %   18.68 %   18.83 %   18.62 %
                               

  As of September 30,
  2018
   2017
  Balance   Rate(1)   Balance   Rate(1)
INVESTMENT SECURITIES:                  
Held to maturity:                  
Certificates of deposit $  600   2.23 %   $   600   1.35 %
U.S. SBA securities   2,960   2.35          
U.S. government sponsored enterprise MBS   76,051   2.30       64,151   1.93  
Total investment securities held to maturity $ 79,611   2.30 %   $ 64,751   1.92 %
                   
Available for sale (at fair value):                  
U.S. government agency MBS $   4,156   3.19 %   $   5,142   2.34 %
U.S. government sponsored enterprise MBS   2,561   3.96       3,350   3.08  
Private issue collateralized mortgage obligations   316   3.95       448   3.00  
Total investment securities available for sale $  7,033   3.50 %   $  8,940   2.65 %
                       
Total investment securities $ 86,644   2.39 %   $ 73,691   2.01 %
               

 

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

PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited – Dollars in Thousands)

  As of September 30,
  2018
  2017
  Balance   Rate(1)   Balance   Rate(1)
LOANS HELD FOR INVESTMENT:                  
Held to maturity:                  
Single-family (1 to 4 units) $ 307,480   4.45 %   $ 322,363   4.07 %
Multi-family (5 or more units)     454,821   4.23         482,617   4.06  
Commercial real estate   112,026   4.79       96,863   4.65  
Construction   8,956   6.68       16,290   6.30  
Other   167   6.50          
Commercial business     416   6.44         466   6.52  
Consumer     104   14.76         131   13.63  
Total loans held for investment   883,970   4.40 %     918,730   4.17 %
                   
Undisbursed loan funds   (5,110 )         (8,189 )    
Advance payments of escrows   3           24      
Deferred loan costs, net     5,383             5,558      
Allowance for loan losses     (7,155 )           (8,063 )    
Total loans held for investment, net $ 877,091         $ 908,060      
                   
Purchased loans serviced by others included above $   17,363   3.36 %   $   22,932   3.35 %
                       
  1. The interest rate described in the rate column is the weighted-average interest rate or yield of all instruments, which are included in the balance of the respective line item.
  As of September 30,
  2018   2017
  Balance   Rate(1)     Balance   Rate(1)  
                   
DEPOSITS:                  
Checking accounts – non interest-bearing $   87,250   %   $   82,415   %
Checking accounts – interest-bearing    261,295   0.12        260,969   0.11  
Savings accounts    284,705   0.21        288,358   0.20  
Money market accounts    36,213   0.37        37,015   0.34  
Time deposits    232,649   1.10        258,259   0.99  
Total deposits $ 902,112   0.40 %   $ 927,016   0.38 %
               
BORROWINGS:              
Overnight $   –   %   $   –    %
Three months or less           10,004   1.20  
Over three to six months           10,000   3.01  
Over six months to one year   10,000   1.53          
Over one year to two years           10,000   1.53  
Over two years to three years   31,149   3.17          
Over three years to four years   10,000   2.20       31,202   3.18  
Over four years to five years   20,000   2.00       10,000   2.20  
Over five years   40,000   2.60       50,000   2.36  
Total borrowings $ 111,149   2.52 %   $ 121,206   2.45 %
                       
  1. The interest rate described in the rate column is the weighted-average interest rate or cost of all instruments, which are included in the balance of the respective line item.

PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited – Dollars in Thousands)

  Quarter Ended   Quarter Ended
  September 30, 2018   September 30, 2017
  Balance   Rate(1)   Balance   Rate(1)
               
SELECTED AVERAGE BALANCE SHEETS:              
Loans receivable, net (2) $ 967,104   4.21 %   $ 1,007,579   4.03 %
Investment securities   91,301   1.51 %     75,470   1.36 %
FHLB – San Francisco stock   8,199   6.98 %     8,108   6.96 %
Interest-earning deposits   67,344   1.96 %     59,445   1.25 %
Total interest-earning assets $ 1,133,948   3.88 %   $ 1,150,602   3.74 %
Total assets $ 1,164,228       $ 1,182,130    
               
Deposits $   902,877   0.39 %   $   923,045   0.38 %
Borrowings   120,013   2.52 %     114,148   2.56 %
Total interest-bearing liabilities $ 1,022,890   0.64 %   $ 1,037,193   0.62 %
Total stockholders’ equity $   121,005       $   128,054    
                   
  1. The interest rate described in the rate 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 the 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
  09/30/18   06/30/18   03/31/18   12/31/17   09/30/17
Loans on non-accrual status (excluding restructured loans):                  
Mortgage loans:                  
Single-family $ 2,773   $ 2,665   $ 3,616   $ 4,508   $ 4,534
Construction   745                
Total   3,518     2,665     3,616     4,508     4,534
                   
Accruing loans past due 90 days or more:                  
Total                  
                   
Restructured loans on non-accrual status:                  
Mortgage loans:                  
Single-family   3,280     3,328     3,092     3,416     3,393
Commercial business loans   64     64     58     61     64
Total   3,344     3,392     3,150     3,477     3,457
                   
Total non-performing loans   6,862     6,057     6,766     7,985     7,991
                   
Real estate owned, net   524     906     787     621    
Total non-performing assets $ 7,386   $ 6,963   $ 7,553   $ 8,606   $ 7,991
                             
  1. The non-performing loans balances are net of individually evaluated or collectively evaluated allowances, specifically attached to the individual loans and include fair value credit adjustments.

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