Press Release

Provident Financial Holdings Reports Second Quarter of Fiscal 2019 Results

Company Release - 1/28/2019 6:00 AM ET

Pre-Tax Earnings Increase by 13% in Comparison to the Prior Sequential Quarter

Net Interest Margin Expands 46 Basis Points to 3.54% in the December 2018 Quarter in Comparison to the December 2017 Quarter and by 24 Basis Points in Comparison to the Prior Sequential Quarter

Classified Assets Decrease 19% to $12.8 Million at December 31, 2018 in Comparison to $15.8 Million at June 30, 2018

RIVERSIDE, Calif., Jan. 28, 2019 (GLOBE NEWSWIRE) -- Provident Financial Holdings, Inc. (“Company”), (NASDAQ GS: PROV), the holding company for Provident Savings Bank, F.S.B. (“Bank”), today announced second quarter earnings results for the fiscal year ending June 30, 2019.

For the quarter ended December 31, 2018, the Company reported net income of $1.96 million, or $0.26 per diluted share (on 7.60 million average diluted shares outstanding), a significant improvement from the net loss of $777,000, or $(0.10) per diluted share (on 7.57 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 (a) the one-time, non-cash, net tax charge of $1.84 million, or $(0.24) per diluted share, from the net deferred tax assets revaluation required by the Tax Cuts and Jobs Act enacted in December 2017 which lowered the federal corporate income tax rate (not replicated this quarter), (b) the $650,000 litigation reserve which, net of tax benefit, reduced net results by approximately $(0.06) per diluted share in the second quarter of fiscal 2018 (not replicated this quarter), (c) a $1.08 million increase in net interest income, a $1.42 million decrease in salaries and employee benefits expense and the application of the lower statutory income tax rate (blended federal and state) of 29.56% this quarter as compared to the blended tax rate of 35.86% the same quarter last year; partly offset by a $2.06 million decrease in the gain on sale of loans.

“Pre-tax earnings continue to improve on the strength of our community banking business and our outlook for the business remains favorable.  Our net interest margin continues to expand, credit quality in our loan portfolios is strong, and we are well-capitalized to support our growth goals and capital initiatives,” said Craig G. Blunden, Chairman and Chief Executive Officer of the Company.  “However, ongoing deterioration in mortgage banking fundamentals, attributable to a decrease in volume primarily as a result of higher mortgage interest rates and lower refinance activity, and more recently, lower home purchase volume, has resulted in unprofitable mortgage banking operations.  Consequently, we are evaluating the changes we need to make to our mortgage banking business model,” Mr. Blunden concluded.

Return (loss) on average assets for the second quarter of fiscal 2019 increased to 0.69 percent from (0.27) percent for the same period of fiscal 2018; and return (loss) on average stockholders’ equity for the second quarter of fiscal 2019 increased to 6.42 percent from (2.50) percent for the comparable period of fiscal 2018.

On a sequential quarter basis, the $1.96 million net income for the second quarter of fiscal 2019 reflects a $135,000, or seven percent improvement from the net income of $1.82 million in the first quarter of fiscal 2019. The increase in earnings for the second quarter of fiscal 2019 compared to the first quarter of fiscal 2019 was primarily attributable to a $474,000 increase in net interest income and a $1.04 million decrease in salaries and employee benefits expenses, partly offset by an $869,000 decrease in the gain on sale of loans and a $194,000 increase in income tax expense resulting from higher net income before taxes. Diluted earnings per share for the second quarter of fiscal 2019 were $0.26 per share, up eight percent from the $0.24 per share during the first quarter of fiscal 2019.  Return on average assets increased to 0.69 percent for the second quarter of fiscal 2019 from 0.63 percent in the first quarter of fiscal 2019; and return on average stockholders’ equity for the second quarter of fiscal 2019 was 6.42 percent, compared to 6.03 percent for the first quarter of fiscal 2019.

For the six months ended December 31, 2018 net income increased $4.78 million, or 478 percent, to $3.78 million from a net loss of $1.00 million in the comparable period ended December 31, 2017; and diluted earnings (loss) per share for the six months ended December 31, 2018 increased 485 percent to $0.50 per share (on 7.58 million average diluted shares outstanding) from $(0.13) per share (on 7.63 million average diluted shares outstanding) for the comparable six month period last year. Compared to the same period last year, the increase in earnings was primarily attributable to (a) the one-time, non-cash, net tax charge of $1.84 million, or $(0.24) per diluted share, from the net deferred tax assets revaluation required by the Tax Cuts and Jobs Act consistent with the lower corporate federal income tax rate applied in the second quarter of fiscal 2018 (not replicated this quarter), (b) the $3.4 million litigation reserve which, net of tax benefit, reduced net results by approximately $(0.29) per diluted share in the first six months of fiscal 2018 (not replicated this current period), (c) a $1.32 million increase in net interest income, a $2.44 million decrease in salaries and employee benefits expense and the application of the lower statutory blended income tax rate of 29.56% this current period as compared to the blended tax rate of 35.86% the same period last year; partly offset by a $3.77 million decrease in the gain on sale of loans.

Net interest income increased $1.08 million, or 12 percent, to $9.83 million in the second quarter of fiscal 2019 from $8.75 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 second quarter of fiscal 2019 increased 46 basis points to 3.54 percent from 3.08 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 net interest margin in the second quarter of fiscal 2019 was augmented by $159,000 of previously unrecognized loan interest income resulting from the payoff of two non-performing loans and the $133,000 special cash dividend received on FHLB San Francisco stock, which increased the net interest margin by approximately 10 basis points for the quarter. The average yield on interest-earning assets increased by 48 basis points to 4.12 percent in the second quarter of fiscal 2019 from 3.64 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 second quarter of fiscal 2019 from 0.62 percent in the same quarter last year. The average balance of interest-earning assets decreased by $27.7 million, or two percent, to $1.11 billion in the second quarter of fiscal 2019 from $1.14 billion in the same quarter last year. The average balance of interest-bearing liabilities decreased by $27.0 million, or three percent, to $1.00 billion in the second quarter of fiscal 2019 from $1.03 billion in the same quarter last year.

The average balance of loans receivable, including loans held for sale, decreased by $49.7 million, or five percent, to $941.2 million in the second quarter of fiscal 2019 from $990.9 million 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 more recently, home purchase volume) and loans held for investment. The average yield on loans receivable increased by 46 basis points to 4.39 percent in the second quarter of fiscal 2019 from an average yield of 3.93 percent in the same quarter of fiscal 2018 reflecting the rise in interest rates over the last year. The average yield on loans receivable in the second quarter of fiscal 2019 includes $159,000 of previously unrecognized interest income resulting from the payoff of two non-performing loans, which increased the yield by approximately seven basis points for the quarter. Also, the increase in the average loan yield was 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 second quarter of fiscal 2019 was $63.0 million with an average yield of 4.86 percent, down from $100.7 million with an average yield of 3.91 percent in the same quarter of fiscal 2018. The average balance of loans held for investment in the second quarter of fiscal 2019 was $878.2 million with an average yield of 4.36 percent, down from $890.2 million with an average yield of 3.93 percent in the same quarter of fiscal 2018. Loan principal payments received in the second quarter of fiscal 2019 were $41.2 million, compared to $57.4 million in the same quarter of fiscal 2018.

The average balance of investment securities increased by $4.9 million, or six percent, to $93.5 million in the second quarter of fiscal 2019 from $88.6 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 46 basis points to 1.90 percent in the second quarter of fiscal 2019 from 1.44 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 second quarter of fiscal 2019, the Federal Home Loan Bank (“FHLB”) – San Francisco distributed $278,000 of quarterly cash dividends to the Bank, 94 percent higher than the $143,000 received in the same quarter last year, primarily attributable to a special cash dividend of $133,000 received in December 2018.

The average balance of the Company’s interest-earning deposits, primarily cash with the Federal Reserve Bank of San Francisco, increased $17.1 million, or 34 percent, to $67.8 million in the second quarter of fiscal 2019 from $50.7 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 second quarter of fiscal 2019 was 2.23 percent, up 93 basis points from 1.30 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 $26.6 million, or three percent, to $889.6 million in the second quarter of fiscal 2019 from $916.2 million in the same quarter of fiscal 2018.  The average cost of deposits remained relatively stable, increasing by two basis points to 0.40 percent in the second quarter of fiscal 2019 from 0.38 percent in the same quarter last year. Transaction account balances or “core deposits” decreased $20.8 million, or three percent, to $649.2 million at December 31, 2018 from $670.0 million at June 30, 2018, while time deposits decreased $13.9 million, or six percent, to $223.7 million at December 31, 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.

The average balance of borrowings, which consisted of FHLB – San Francisco advances, decreased slightly to $111.1 million and the average cost of FHLB advances decreased four basis points to 2.55 percent in the second quarter of fiscal 2019, compared to an average balance of $111.5 million with an average cost of 2.59 percent in the same quarter of fiscal 2018. The decrease in the average cost of advances was primarily due to the maturity of a long-term advance which was renewed at a lower interest rate in the third quarter of fiscal 2018.

During the second quarter of fiscal 2019, the Company recorded a recovery from the allowance for loan losses of $217,000, as compared to a recovery of $11,000 recorded during the same period of fiscal 2018 and a recovery of $237,000 recorded in the first quarter of fiscal 2019 (sequential quarter). The recovery from the allowance for loan losses in the second quarter of fiscal 2019 was primarily attributable to recoveries related to the payoff of two non-performing loans totaling $97,000.

Non-performing assets, with underlying collateral located in California, decreased $901,000, or 13 percent, to $6.1 million, or 0.54 percent of total assets, at December 31, 2018, compared to $7.0 million, or 0.59 percent of total assets, at June 30, 2018. Non-performing loans remained relatively unchanged at $6.1 million at both December 31, 2018 and June 30, 2018. The non-performing loans at December 31, 2018 are comprised of 20 single-family loans ($5.3 million), one construction loan ($745,000) and one commercial business loan ($47,000).  At December 31, 2018, there was no outstanding real estate owned as compared to $906,000 at June 30, 2018.

Net loan recoveries for the quarter ended December 31, 2018 were $123,000 or 0.05 percent (annualized) of average loans receivable, compared to net loan recoveries of $23,000 or 0.01 percent (annualized) of average loans receivable for the quarter ended December 31, 2017 and net loan recoveries of $7,000 or zero percent (annualized) of average loans receivable for the quarter ended September 30, 2018 (sequential quarter).

Classified assets at December 31, 2018 were $12.8 million, comprised of $5.3 million of loans in the special mention category, $7.5 million of loans in the substandard category and no 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 December 31, 2018, no new loans were restructured from their original terms and classified as restructured loans, while one restructured loan was paid off and one restructured loan was renewed. The outstanding balance of restructured loans at December 31, 2018 was $4.2 million (nine loans), down 19 percent from $5.2 million (11 loans) at June 30, 2018, and down 13 percent from $4.8 million (10 loans) at September 30, 2018 (sequential quarter).  As of December 31, 2018, one restructured loan was classified as substandard accrual ($1.4 million) and eight loans were classified as substandard non-accrual ($2.8 million).

The allowance for loan losses was $7.1 million at December 31, 2018, or 0.80 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 December 31, 2018.

Non-interest income decreased by $2.14 million, or 37 percent, to $3.60 million in the second quarter of fiscal 2019 from $5.74 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 $954,000, or 21 percent, primarily as a result of a decline in the gain on sale of loans.

The gain on sale of loans decreased $2.06 million, or 48 percent, to $2.26 million for the quarter ended December 31, 2018 from $4.32 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) and decreased $869,000 or 28 percent from the quarter ended September 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 $131.3 million in the quarter ended December 31, 2018, down $156.5 million or 54 percent, from $287.8 million in the comparable quarter last year and decreased $50.5 million or 28 percent from $181.8 million in the quarter ended September 30, 2018 (sequential quarter). The average loan sale margin from mortgage banking was 172 basis points for the quarter ended December 31, 2018, an increase of 23 basis points from 149 basis points in the same quarter last year, and two basis points higher than the 170 basis points in the first quarter of fiscal 2019 (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 $674,000 in the second quarter of fiscal 2019, compared to an unfavorable fair-value adjustment that amounted to a net loss of $1.30 million in the same period last year and an unfavorable fair-value adjustment that amounted to a net loss of $489,000 in the first quarter of fiscal 2019 (sequential quarter).

In the second quarter of fiscal 2019, $146.4 million of loans were originated for sale, 56 percent lower than the $331.9 million for the same period last year, and 25 percent lower than the $196.3 million during the first quarter of fiscal 2019 (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 December 31, 2018 were $167.5 million, 54 percent lower than the $361.4 million sold during the same quarter last year, and 21 percent lower than the $211.8 million sold during the first quarter of fiscal 2019 (sequential quarter).  Total loan originations (including loans originated and purchased for investment and loans originated for sale) were $185.7 million in the second quarter of fiscal 2019, a decrease of 49 percent from $366.8 million in the same quarter of fiscal 2018, and 20 percent lower than the $233.0 million in the first quarter of fiscal 2019 (sequential quarter).

Non-interest expenses decreased $2.33 million, or 18 percent, to $10.88 million in the second quarter of fiscal 2019 from $13.21 million in the same quarter last year.  The decrease was primarily due to a $1.42 million decrease in salaries and employee benefits expense and an $846,000 decrease in other non-interest expense (primarily due to the $650,000 litigation settlement expense recorded in the second quarter of fiscal 2018 and not replicated this quarter). 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 operations. On a sequential quarter basis, non-interest expenses decreased $829,000 or seven percent from $11.70 million, primarily as a result of a $1.04 million decrease in salaries and employment benefits expense (attributable primarily to the vesting of certain stock options and restricted stock awards in the first quarter of fiscal 2019, not replicated this quarter and the lower variable compensation resulting from lower mortgage banking loan originations and staff reductions in mortgage banking operations), partly offset by a $152,000 increase in other non-interest expenses.

The Company’s efficiency ratio in the second quarter of fiscal 2019 was 81 percent, an improvement from 91 percent in the same quarter last year and 84 percent in the first quarter of fiscal 2019 (sequential quarter).

The Company’s income tax provision was $810,000 for the second quarter of fiscal 2019, down $1.26 million, or 61 percent, from $2.07 million in the same quarter last year. The decrease was primarily attributable to the one-time, non-cash, net tax charge of $1.84 million from the net deferred tax assets revaluation required by the Tax Cuts and Jobs Act consistent with the lower federal corporate income tax rate which was first applied in the second quarter of fiscal 2018.  The Company believes that the tax provision recorded in the second 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 December 31, 2018. As of December 31, 2018, a total of 373,000 shares under the April 2018 stock repurchase plan remain available for future purchase.

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, January 29, 2019 at 9:00 a.m. (Pacific) to discuss its financial results.  The conference call can be accessed by dialing 1-800-230-1092 and requesting the Provident Financial Holdings Earnings Release Conference Call.  An audio replay of the conference call will be available through Tuesday, February 5, 2019 by dialing 1-800-475-6701 and referencing access code number 463054.

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 originate for sale and 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. BlundenDonavon P. Ternes
 Chairman andPresident, Chief Operating Officer,
 Chief Executive Officerand 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)
 
 December 31,
 September 30,
 June 30,
 March 31,
 December 31,
 
 2018 2018 2018 2018 2017 
Assets               
Cash and cash equivalents$67,359 $78,928 $43,301 $50,574 $47,173 
Investment securities – held to maturity, at cost 84,990  79,611  87,813  95,724  87,626 
Investment securities - available for sale, at fair value 6,563  7,033  7,496  8,002  8,405 
Loans held for investment, net of allowance for loan losses of $7,061; $7,155; $7,385; $7,531 and $8,075 respectively; includes $4,995; $4,945; $5,234; $4,996 and $5,157 at fair value, respectively 875,413  877,091  902,685  894,167  885,976 
Loans held for sale, at fair value 57,562  78,794  96,298  89,823  96,589 
Accrued interest receivable 3,156  3,350  3,212  3,100  3,147 
Real estate owned, net -  524  906  787  621 
FHLB – San Francisco stock 8,199  8,199  8,199  8,108  8,108 
Premises and equipment, net 8,601  8,779  8,696  8,734  7,816 
Prepaid expenses and other assets 15,327  15,171  16,943  17,583  16,670 
                
Total assets$1,127,170 $1,157,480 $1,175,549 $1,176,602 $1,162,131 
                
Liabilities and Stockholders’ Equity               
Liabilities:               
Non interest-bearing deposits$78,866 $87,250 $86,174 $87,520 $77,144 
Interest-bearing deposits 794,018  814,862  821,424  834,979  830,644 
Total deposits 872,884  902,112  907,598  922,499  907,788 
                
Borrowings 111,135  111,149  126,163  111,176  111,189 
Accounts payable, accrued interest and other liabilities 20,474  22,539  21,331  22,327  22,454 
Total liabilities 1,004,493  1,035,800  1,055,092  1,056,002  1,041,431 
                
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; 18,053,115; 18,048,115; 18,033,115; 18,033,115 and 17,976, 615 shares issued, respectively; 7,506,855; 7,500,860; 7,421,426; 7,460,804 and 7,474,776 shares outstanding, respectively) 181  181  181  180  180 
Additional paid-in capital 95,913  95,795  94,957  94,719  94,011  
Retained earnings 192,306  191,399  190,616  190,301  189,610  
Treasury stock at cost (10,546,260; 10,547,255; 10,611,689; 10,572,311 and 10,501,839 shares, respectively) (165,892) (165,884
) 165,507) (164,786) (163,311)
Accumulated other comprehensive income, net of tax 169  189  210  186  210  
                 
Total stockholders’ equity 122,677  121,680  120,457  120,600  120,700  
                 
Total liabilities and stockholders’ equity$1,127,170 $1,157,480 $1,175,549 $1,176,602 $1,162,131  
                


PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Unaudited - In Thousands, Except Earnings Per Share)
                 
  Quarter Ended
December 31,
 Six Months Ended
December 31,
  2018
 2017
 2018
 2017
Interest income:                
Loans receivable, net $10,331  $9,735  $20,505  $19,892 
Investment securities  444   319   789   576 
FHLB – San Francisco stock  278   143   421   284 
Interest-earning deposits  387   168   725   358 
Total interest income  11,440   10,365   22,440   21,110 
                 
Interest expense:                
Checking and money market deposits  117   112   225   215 
Savings deposits  147   149   298   298 
Time deposits  630   625   1,251   1,264 
Borrowings  715   728   1,478   1,464 
Total interest expense  1,609   1,614   3,252   3,241 
                 
Net interest income  9,831   8,751   19,188   17,869 
(Recovery) provision for loan losses  (217   (11)  (454)  158 
Net interest income, after (recovery) provision for loan losses  10,048   8,762   19,642   17,711 
                 
Non-interest income:                
Loan servicing and other fees  277   317   601   680 
Gain on sale of loans, net  2,263   4,317   5,395   9,164 
Deposit account fees  509   536   1,014   1,094 
Loss on sale and operations of real estate owned acquired in the settlement of loans  (7)  (22)  (6)  (62)
Card and processing fees  392   373   790   754 
Other  161   220   350   463 
Total non-interest income  3,595   5,741   8,144   12,093 
                 
Non-interest expense:                
Salaries and employee benefits  7,211   8,633   15,461   17,902 
Premises and occupancy  1,274   1,260   2,619   2,574 
Equipment  495   375   916   737 
Professional expenses  411   521   858   1,041 
Sales and marketing expenses  253   301   422   504 
Deposit insurance premiums and regulatory assessments  172   218   337   402 
Other  1,059   1,905   1,966   5,787 
Total non-interest expense  10,875   13,213   22,579   28,947 
                 
Income before taxes  2,768   1,290   5,207   857 
Provision for income taxes  810   2,067   1,426   1,859 
Net income (loss) $1,958  $(777) $3,781  $(1,002)
                 
Basic earnings (loss) per share  $  0.26  $ (0.10) $ 0.51  $ (0.13)
Diluted earnings (loss) per share  $  0.26  $ (0.10) $ 0.50  $ (0.13)
Cash dividends per share  $  0.14  $  0.14  $ 0.28  $  0.28 
 


PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations – Sequential Quarters
(Unaudited – In Thousands, Except Share Information)
 
  Quarter Ended  
 December 31, September 30, June 30, March 31, December 31, 
 2018 2018 2018 2018 2017 
Interest income:                   
Loans receivable, net$10,331  $10,174  $10,191  $9,933  $9,735 
Investment securities 444   345   386   382   319 
FHLB – San Francisco stock 278   143   140   144   143 
Interest-earning deposits 387   338   193   233   168 
Total interest income 11,440   11,000   10,910   10,692   10,365 
                    
Interest expense:                   
Checking and money market deposits 117   108   96   96   112 
Savings deposits 147   151   150   147   149 
Time deposits 630   621   616   613   625 
Borrowings 715   763   741   712   728 
Total interest expense 1,609   1,643   1,603   1,568   1,614 
                    
Net interest income 9,831   9,357   9,307   9,124   8,751 
Recovery from the allowance for loan losses (217)  (237  (189  (505  (11)
Net interest income, after recovery from the allowance for loan losses 10,048   9,594   9,496   9,629   8,762 
                    
Non-interest income:                   
Loan servicing and other fees 277   324   402   493   317 
Gain on sale of loans, net 2,263   3,132   3,041   3,597   4,317 
Deposit account fees 509   505   496   529   536 
(Loss) gain on sale and operations of real estate owned  acquired in the settlement of loans, net (7)  1   (5  (19  (22)
Card and processing fees 392   398   415   372   373 
Other 161   189   243   238   220 
Total non-interest income 3,595   4,549   4,592   5,210   5,741 
                    
Non-interest expense:                   
Salaries and employee benefits 7,211   8,250   8,111   8,808   8,633 
Premises and occupancy 1,274   1,345   1,305   1,255   1,260 
Equipment 495   421   397   442   375 
Professional expenses 411   447   471   400   521 
Sales and marketing expenses 253   169   322   213   301 
Deposit insurance premiums and regulatory assessments 172   165   158   189   218 
Other 1,059   907   1,054   1,132   1,905 
Total non-interest expense 10,875   11,704   11,818   12,439   13,213 
                    
Income before taxes 2,768   2,439   2,270   2,400   1,290 
Provision for income taxes 810   616   870   667   2,067 
Net income (loss)$  1,958  $  1,823  $  1,400  $  1,733  $  (777)
                    
Basic earnings (loss) per share $ 0.26  $ 0.25  $ 0.19  $0.23  $(0.10)
Diluted earnings (loss) per share $ 0.26  $ 0.24  $ 0.18  $ 0.23  $(0.10)
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
December 31,
 Six Months Ended
December 31,
 2018 2017 2018 2017
SELECTED FINANCIAL RATIOS:       
Return (loss) on average assets 0.69%  (0.27)%  0.66%  (0.17)%
Return (loss) on average stockholders’ equity 6.42%  (2.50)%  6.22%  (1.59)%
Stockholders’ equity to total assets 10.88%  10.39%  10.88%  10.39%
Net interest spread 3.48%  3.02%  3.36%  3.07%
Net interest margin 3.54%  3.08%  3.42%  3.12%
Efficiency ratio 81.00%  91.17%  82.61%  96.61%
Average interest-earning assets to average interest-bearing liabilities 110.98%  110.76%  110.92%  110.85%
        
SELECTED FINANCIAL DATA:       
Basic earnings per share$0.26  $(0.10) $0.51  $(0.13)
Diluted earnings per share$0.26  $(0.10) $0.50  $(0.13)
Book value per share$16.34  $16.15  $16.34  $16.15 
Shares used for basic EPS computation 7,506,106   7,565,950   7,468,537   7,630,054 
Shares used for diluted EPS computation 7,601,759   7,565,950   7,579,414   7,630,054 
Total shares issued and outstanding 7,506,855   7,474,776   7,506,855   7,474,776 
        
LOANS ORIGINATED FOR SALE:         
Retail originations$87,913  $183,787  $215,046  $397,088 
Wholesale originations 58,504   148,077   127,692   327,068 
Total loans originated for sale$146,417  $331,864  $342,738  $724,156 
        
LOANS SOLD:       
Servicing released$165,484  $351,720  $376,534  $725,183 
Servicing retained 2,026   9,660   2,784   17,248 
Total loans sold$167,510  $361,380  $379,318  $742,431 
                

  

PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited - Dollars in Thousands, Except Share Information )
          
 Quarter Quarter Quarter Quarter Quarter
 Ended Ended Ended Ended Ended
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
SELECTED FINANCIAL RATIOS:         
Return (loss) on average assets 0.69%  0.63%  0.48%  0.59%  (0.27)%
Return (loss) on average stockholders’ equity 6.42%  6.03%  4.65%  5.76%  (2.50)%
Stockholders’ equity to total assets 10.88%  10.51%  10.25%  10.25%  10.39%
Net interest spread 3.48%  3.24%  3.21%  3.16%  3.02%
Net interest margin 3.54%  3.30%  3.28%  3.23%  3.08%
Efficiency ratio 81.00%  84.17%  85.03%  86.78%  91.17%
Average interest-earning assets to average interest-bearing liabilities         
  110.98%  110.86%  110.53%  110.37%  110.76%
          
SELECTED FINANCIAL DATA:         
Basic earnings (loss) per share$0.26  $0.25  $0.19  $0.23  $  (0.10)
Diluted earnings (loss) per share$0.26  $0.24  $0.18  $0.23  $  (0.10
Book value per share$16.34  $16.22  $16.23  $16.16  $16.15 
Average shares used for basic EPS 7,506,106   7,430,967   7,448,037   7,457,275   7,565,950 
Average shares used for diluted EPS 7,601,759   7,557,068   7,594,698   7,616,255   7,565,950 
Total shares issued and outstanding 7,506,855   7,500,860   7,421,426   7,460,804   7,474,776 
          
LOANS ORIGINATED FOR SALE:         
Retail originations$87,913  $127,133  $152,600  $129,816  $183,787 
Wholesale originations 58,504   69,188   89,047   90,377   148,077 
Total loans originated for sale$146,417  $196,321  $241,647  $220,193  $331,864 
          
LOANS SOLD:         
Servicing released$165,484  $211,050  $228,903  $220,532  $351,720 
Servicing retained 2,026   758   4,992   5,326   9,660 
Total loans sold$167,510  $211,808  $233,895  $225,858  $361,380 
          
   As of   As of   As of   As of   As of 
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
ASSET QUALITY RATIOS AND         
  DELINQUENT LOANS:         
Recourse reserve for loans sold$250  $250  $283  $283  $283 
Allowance for loan losses$7,061  $7,155  $7,385  $7,531  $8,075 
Non-performing loans to loans held for investment, net 0.69%  0.78%  0.67%  0.76%  0.90%
Non-performing assets to total assets 0.54%  0.64%  0.59%  0.64%  0.74%
Allowance for loan losses to gross loans held for investment 0.80%  0.81%  0.81%  0.84%  0.90%
Net loan (recoveries) charge-offs to average loans receivable (annualized) (0.05)%  -%  (0.02)%  0.02%  (0.01)%
Non-performing loans$6,062  $6,862  $6,057  $6,766  $7,985 
Loans 30 to 89 days delinquent$2  $  -  $805  $160  $1,537 
                    

 

PROVIDENT FINANCIAL HOLDINGS, INC.
Financial Highlights
(Unaudited - Dollars in Thousands) 
 
 Quarter
Ended
 Quarter
Ended
 Quarter
Ended
 Quarter
Ended
 Quarter
Ended
 12/31/18
 09/30/18
 06/30/18
 03/31/18
 12/31/17
Recourse recovery for loans sold$-  $(33) $-  $-  $(22)
Recovery from the allowance for loan losses$(217) $(237) $(189) $(550) $(11)
Net loan (recoveries) charge-offs$(123  $(7) $(43) $39  $(23)
                    
  As of
  As of
  As of
  As of
  As of
 12/31/18
 09/30/18
 06/30/18
 03/31/18
 12/31/17
REGULATORY CAPITAL RATIOS (BANK):                   
Tier 1 leverage ratio 9.96%  9.59%  9.96%  9.83%  9.59%
Common equity tier 1 capital ratio 17.17%  16.62%  16.81%  16.72%  16.44%
Tier 1 risk-based capital ratio 17.17%  16.62%  16.81%  16.72%  16.44%
Total risk-based capital ratio 18.26%  17.71%  17.90%  17.84%  17.65%
                    
REGULATORY CAPITAL RATIOS (COMPANY):                   
Tier 1 leverage ratio 10.72%  10.44%  10.29%  10.33%  10.28%
Common equity tier 1 capital ratio 18.48%  18.09%  17.37%  17.56%  17.62%
Tier 1 risk-based capital ratio 18.48%  18.09%  17.37%  17.56%  17.62%
Total risk-based capital ratio 19.57%  19.18%  18.46%  18.68%  18.83%


  As of December 31, 
   2018   2017 
  Balance  Rate(1)  Balance Rate(1) 
INVESTMENT SECURITIES:             
Held to maturity:             
Certificates of deposit $ 600  2.32 $  600 1.42%
U.S. SBA securities  2,939  2.60   - - 
U.S. government sponsored enterprise MBS  81,451  2.51   87,026 2.00 
   Total investment securities held to maturity $84,990  2.51% $87,626 2.00%
              
Available for sale (at fair value):             
U.S. government agency MBS $  3,942  3.49% $  4,859 2.52%
U.S. government sponsored enterprise MBS  2,311  4.28   3,127 3.27 
Private issue collateralized mortgage obligations  310  3.95   419 3.00 
   Total investment securities available for sale $ 6,563  3.79% $ 8,405 2.82%
              
   Total investment securities $91,553  2.60% $96,031 2.07%
              
(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 December 31,
  2018
  2017
 Balance Rate(1) Balance Rate(1)
LOANS HELD FOR INVESTMENT:         
Held to maturity:         
Single-family (1 to 4 units$312,499 4.48% $313,837 4.11%
Multi-family (5 or more units   447,033 4.29     463,786 4.10 
Commercial real estate 112,830 4.83   103,366 4.64 
Construction 3,986 7.37   7,072 6.42 
Other 167 6.50   - - 
Commercial business   455 6.45     478 6.10 
Consumer   103 15.05     144 13.82 
  Total loans held for investment 877,073 4.44%  888,683 4.18%
          
Advance payments of escrows 95     46   
Deferred loan costs, net   5,306       5,322   
Allowance for loan losses   (7,061)      (8,075)  
  Total loans held for investment, net$875,413    $885,976   
          
Purchased loans serviced by others included above$  17,247 3.36% $  21,129 3.32%
        
(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 December 31,
  2018
   2017
 Balance Rate(1)  Balance Rate(1) 
       
DEPOSITS:      
Checking accounts – non interest-bearing         
Checking accounts – interest-bearing$78,866 -% $77,144 -%
Savings accounts 256,549 0.12   256,363 0.11 
Money market accounts 277,145 0.21   292,420 0.20 
Time deposits 36,627 0.28   34,724 0.27 
Total deposits 223,697 1.12   247,137 1.00 
 $872,884 0.40% $907,788 0.38%
BORROWINGS:         
Overnight         
Three months or less$  -  -% $  -  -%
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 - -   - - 
Over two years to three years 10,000 3.92   10,000 1.53 
Over three years to four years 21,135 2.81   10,000 3.92 
Over four years to five years 10,000 2.20   21,189 2.82 
Over five years 20,000 2.00   10,000 2.20 
Total borrowings 40,000 2.60   50,000 2.36 
 $111,135 2.52% $111,189 2.56%
          
(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
 December 31, 2018 December 31, 2017
 Balance Rate(1) Balance Rate(1)
        
SELECTED AVERAGE BALANCE SHEETS:       
Loans receivable, net (2)$ 941,192 4.39% $ 990,906 3.93%
Investment securities 93,468 1.90%  88,588 1.44%
FHLB – San Francisco stock 8,199 13.56%  8,108 7.05%
Interest-earning deposits 67,760 2.23%  50,725 1.30%
Total interest-earning assets$1,110,619 4.12% $1,138,327 3.64%
Total assets$1,142,302   $1,171,825  
        
Deposits$  889,557 0.40% $  916,210 0.38%
Borrowings 111,141 2.55%  111,521 2.59%
Total interest-bearing liabilities$1,000,698 0.64% $1,027,731 0.62%
Total stockholders’ equity$  122,017   $  124,162  
        
(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.
 


 Six Months Ended Six Months Ended
 December 31, 2018 December 31, 2017
 Balance Rate(1) Balance Rate(1)
        
SELECTED AVERAGE BALANCE SHEETS:       
Loans receivable, net (2)$954,148 4.30% $999,242 3.98%
Investment securities 92,384
 1.71%  82,029
 1.40%
FHLB – San Francisco stock 8,199 10.27
%  8,108 7.01%
Interest-earning deposits 67,552
 2.10
%  55,085 1.27%
Total interest-earning assets$1,122,283
 4.00% $1,144,464
 3.69%
Total assets$1,153,265
   $1,176,978
  
        
Deposits$896,217
 0.39% $919,628 0.38%
Borrowings 115,577
 2.54%  112,834 2.57%
Total interest-bearing liabilities$1,011,794
 0.64% $1,032,462 0.62%
Total stockholders’ equity$121,511
   $126,108  
        
(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
 12/31/18 09/30/18 06/30/18 03/31/18 12/31/17
Loans on non-accrual status (excluding restructured loans):         
 Mortgage loans:         
  Single-family$2,572 $2,773 $2,665 $3,616 $4,508
  Construction 745  745  -  -  -
  Total 3,317  3,518  2,665  3,616  4,508
           
Accruing loans past due 90 days or more: -  -  -  -  -
  Total -  -  -  -  -
           
Restructured loans on non-accrual status:         
 Mortgage loans:         
  Single-family 2,698  3,280  3,328  3,092  3,416
 Commercial business loans 47  64  64  58  61
  Total 2,745  3,344  3,392  3,150  3,477
             
   Total non-performing loans 6,062  6,862  6,057  6,766  7,985
          
Real estate owned, net -  524  906  787  621
Total non-performing assets$6,062 $7,386 $6,963 $7,553 $8,606
          
           
(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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Source: Provident Financial Holdings, Inc.