FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended........................ March 31, 1999
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission File Number 0-28304
PROVIDENT FINANCIAL HOLDINGS, INC.
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0704889
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3756 Central Avenue, Riverside, California 92506
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(Address of principal executive offices and Zip code)
(909) 686-6060
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes x . No .
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of class: As of May 7, 1999
--------------- -----------------
Common stock, $ 0.01 par value 4,385,785 shares *
* Includes 331,387 shares held by employee stock ownership plan that have
not been released, committed to be released, or allocated to participant
accounts; and 147,928 shares held by management recognition plan which
have been committed to be released and allocated to participant accounts.
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PROVIDENT FINANCIAL HOLDINGS, INC.
Table of Contents
PART 1 - FINANCIAL INFORMATION
ITEM 1 - Financial Statements. The Consolidated Financial Statements of
Provident Financial Holdings, Inc. filed as a part of the report are
as follows :
Consolidated Statements of Financial Condition
as of March 31, 1999 and June 30, 1998......................... 1
Consolidated Statements of Operations
for the quarter and nine months ended March 31, 1999 and 1998.. 2
Consolidated Statements of Changes in Stockholders' Equity
for the nine months ended March 31, 1999 and 1998.............. 3
Consolidated Statements of Cash Flows
for the quarter and nine months ended March 31, 1999 and 1998.. 4
Selected Notes to Consolidated Financial Statements............ 5-6
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General........................................................ 6
Comparison of Financial Condition at March 31, 1999 and
June 30, 1998.................................................. 7
Comparison of Operating Results for the quarter and nine
months ended March 31,1999 and 1998............................ 7-15
Loan Volume Activities ........................................ 15-16
Liquidity and Capital Resources ............................... 17
Year 2000 Readiness............................................ 18
Supplemental Information....................................... 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................... 19
Item 2. Changes in Securities................................. 19
Item 3. Defaults upon Senior Securities....................... 19
Item 4. Submission of Matters to Vote of Stockholders......... 19
Item 5. Other Information..................................... 19-20
Item 6. Exhibits and Reports on Form 8-K...................... 20
SIGNATURES.............................................................. 21
EXHIBIT 27 - FINANCIAL DATA SCHEDULE.................................... 22-23
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PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Financial Condition
(Unaudited)
Dollars in Thousands
March 31, June 30,
1999 1998
---------- ---------
ASSETS
Cash $ 22,407 $ 20,933
Overnight deposits - 2,500
Investment securities - held to maturity
(market value $137,151 and $73,948, respectively) 137,843 74,028
Investment securities - available for sale at
fair market value 2,627 1,526
Loans held for investment, net 641,984 620,128
Loans available for sale, net 49,515 67,248
Accrued interest receivable 5,194 4,940
Real estate available for sale, net 4,577 6,922
Federal Home Loan Bank stock 7,430 6,606
Premises and equipment, net 8,372 7,429
Prepaid expenses and other assets 4,210 3,945
--------- ---------
TOTAL ASSETS $ 884,159 $ 816,205
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits $ 16,025 $ 10,768
Interest bearing deposits 614,257 572,257
--------- ---------
Total deposits 630,282 583,025
Borrowings 147,908 132,114
Accounts payable and other liabilities 21,925 14,416
--------- ---------
TOTAL LIABILITIES 800,115 729,555
Preferred stock, $.01 par value; (2,000,000
shares authorized; none issued and outstanding)
Common stock, $.01 par value; (15,000,000 shares
authorized; 5,125,215 shares issued; 4,385,785
and 4,854,125 outstanding at March 31, 1999 and
June 30, 1998, respectively) 51 51
Additional paid-in capital 51,016 50,875
Retained earnings 52,239 47,090
Treasury stock at cost (739,430 and 251,000
shares, respectively) (14,089) (5,305)
Unearned stock compensation (5,896) (6,654)
Accumulated other comprehensive income 723 593
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 84,044 86,650
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 884,159 $ 816,205
========= =========
1
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PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations
(Unaudited)
Dollars in Thousands, Except Earnings Per Share
Quarter ended Nine Months ended
March 31, March 31,
1999 1998 1999 1998
------------------ -------------------
Interest income
Loans receivable, net $ 13,106 $ 11,947 $ 39,315 $ 34,066
Investment securities 1,728 1,014 4,295 2,360
Interest bearing deposits 44 43 258 208
-------- -------- -------- --------
Total interest income 14,878 13,004 43,868 36,634
Interest expense
Savings accounts 602 264 1,801 936
Demand and NOW accounts 800 851 2,712 2,644
Certificates of deposit 5,261 5,246 16,027 15,506
FHLB advances 1,632 1,267 5,189 2,178
-------- -------- -------- --------
Total interest expense 8,295 7,628 25,729 21,264
-------- -------- -------- --------
Net interest income 6,583 5,376 18,139 15,370
Provision for loan losses 75 300 450 1,050
-------- -------- -------- --------
Net interest income after
provision for loan losses 6,508 5,076 17,689 14,320
Non-interest income
Loan servicing and other fees 648 660 2,119 2,271
Gain on sale of loans 1,495 958 5,109 3,076
Other 542 392 1,510 1,042
-------- -------- -------- --------
Total non-interest income 2,685 2,010 8,738 6,389
Non-interest expenses
Salaries and employee benefits 4,026 3,049 11,276 8,975
Premises and occupancy 458 523 1,501 1,580
Telephone 158 82 459 285
Other 1,451 1,310 4,923 3,559
-------- -------- -------- --------
Total operating & admin. expenses 6,093 4,964 18,159 14,399
Real estate operations, net (291) 35 (653) (311)
-------- -------- -------- --------
Total non-interest expense 5,802 4,999 17,506 14,088
Income before taxes 3,391 2,087 8,921 6,621
Provision for income taxes 1,431 886 3,772 2,800
-------- -------- -------- --------
Net income $ 1,960 $ 1,201 $ 5,149 $ 3,821
======== ======== ======== ========
Basic earnings per share $ 0.48 $ 0.28 $ 1.25 $ 0.87
Diluted earnings per share $ 0.48 $ 0.27 $ 1.23 $ 0.85
2
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PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
Dollars in Thousands, Except Shares
For the Nine Months Ended March 31, 1999 and 1998
Accum-
ulated
Common Addi- Unearned Other
Stock tional Stock Com-
--------------- Paid-in Retained Treasury Compen- hensive
Shares Amount Capital Earnings Stock sation Income Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 4,920,215 $51 $49,842 $42,070 $ (3,291) $(3,720) $495 $85,447
Comprehensive income:
Net income 3,821 3,821
Unrealized gain on
securities avail. for
sale, net of tax of $73. 105 105
------
Total comprehensive income 3,926
Purchase of treasury stock (246,000) (4,984) (4,984)
Release of shares under stock-
based compensation plans 217 203 420
- --------------------------------------------------------------------------------------------------------
Balance at March 31, 1998 4,674,215 $51 $50,059 $45,891 $ (8,275) $(3,517) $600 $84,809
========================================================================================================
</TABLE>
<TABLE>
Accum-
ulated
Common Addi- Unearned Other
Stock tional Stock Com-
--------------- Paid-in Retained Treasury Compen- hensive
Shares Amount Capital Earnings Stock sation Income Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1998 4,854,125 $51 $50,875 $47,090 $ (5,305) $(6,654) $593 $86,650
Comprehensive income:
Net income 5,149 5,149
Unrealized gain on securities
Avail. for sale, net of tax
of $90. 130 130
-------
Total comprehensive income 5,279
Purchase of treasury stock (468,340) (8,784) (8,784)
Release of shares under stock-
based compensation plans 141 758 899
- --------------------------------------------------------------------------------------------------------
Balance at March 31, 1999 4,385,785 $51 $51,016 $52,239 $(14,089) $(5,896) $723 $84,044
========================================================================================================
</TABLE>
3
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PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flow
(Unaudited)
Dollars in Thousands
Quarter ended Nine Months ended
March 31, March 31,
1999 1998 1999 1998
-------------------- ---------------------
Interest income
Cash flows from operating
activities
Net Income $ 1,960 $ 1,201 $ 5,149 $ 3,821
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 204 53 804 563
Amortization of loan fees (69) (238) (543) (520)
Provision for losses 75 300 450 1,050
Provision for losses on real
estate 0 8 0 26
Gain on sale of loans (1,495) (958) (5,109) (3,076)
Increase in accts payable &
other liab. 3,646 3,446 7,509 2,419
(Increase) decrease in prepaid
exp & other assets (2,536) 499 13,229 (2,348)
Loans originated for sale (148,425) (117,910) (514,728) (328,413)
Proceeds from sale of loans 193,936 105,007 523,753 305,226
Stock compensation 666 150 899 420
--------- --------- --------- --------
Net cash used for operating
activities 47,962 (8,442) 31,483 (20,832)
Cash flows from investing
activities:
Net increase in loans held
for investment (2,570) (13,820) (22,924) (89,888)
Maturity of invest.
securities held-to-maturity 25,585 18,368 75,872 49,008
Purchases of invest. securities
held-to-maturity (76,238) (21,478) (140,763) (78,943)
Purchase of Federal Home Loan
Bank Stock (100) 0 (824) 0
Proceeds from disposal of
real estate 241 1,352 3,474 4,063
Purchases of premises and
equipment, net (72) (726) (1,716) (1,519)
Amort. of premium (discounts)
on securities, net 48 (48) (25) (162)
Other (130) 69 130 104
--------- --------- --------- --------
Net cash used for investing
activities (53,236) (16,283) (86,776) (117,337)
Cash flows from financing
activities:
Net increase in deposits 8,006 29,381 47,257 54,491
Repayment - Federal Home Loan
Bank Adv. (184,802) 0 (805,006) 0
Proceeds - Federal Home Loan
Bank Adv. 188,600 6,993 820,800 92,778
Treasury stock purchases (4,028) (386) (8,784) (4,983)
--------- --------- --------- --------
Net cash provided by
financing activities 7,776 35,988 54,267 142,286
--------- --------- --------- --------
Net decrease in cash and
cash equivalents 2,502 11,263 (1,026) 4,117
Cash and cash equivalents at
beginning of period 19,905 12,965 23,433 20,111
--------- --------- --------- --------
Cash and cash equivalents at
end of period $ 22,407 $ 24,228 $ 22,407 $ 24,228
========= ========= ========= ========
Supplemental Information:
Cash paid for interest $ 8,317 $ 7,870 $ 26,484 $ 21,850
Cash paid for income taxes 2,334 1,131 5,119 3,609
Real estate acquired in
settlement of loans 229 1,096 1,130 4,688
4
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PROVIDENT FINANCIAL HOLDINGS, INC.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
Note 1 : Basis of Presentation
The unaudited consolidated financial statements included herein reflect all
adjustments which are, in the opinion of management, necessary to present a
fair statement of the results for the interim period presented. All such
adjustments are of a normal recurring nature. The balance sheet data at June
30, 1998 is derived from audited financial statements of Provident Financial
Holdings, Inc. (The Company). Certain information and note disclosures
normally included in financial statements prepared in accordance with
generally accepted principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. It is suggested that
these consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Annual
Report on Form 10-K for the year ended June 30, 1998 (File No. 0-28304) of the
Company. Certain amounts in the prior period's financial statements may have
been reclassified to conform to the current period's presentation.
Note 2: Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share:
For the Quarter ended For the Nine Months ended
March 31, March 31,
1999 1998 1999 1998
--------------------- -------------------------
Numerator:
Net income numerator
for basic earnings
per share and diluted
earnings per share-
income available to
common stockholders $1,960,169 $1,201,000 $5,149,347 $3,821,000
========== ========== ========== ==========
Denominator:
Denominator for basic
earnings per share:
Weighted-average
shares 4,084,949 4,317,635 4,135,502 4,411,497
Effect of dilutive
securities:
Employee stock
benefit plans 23,847 132,563 51,281 97,644
---------- ---------- ---------- ----------
Denominator for
diluted earnings per
share :
Adjusted weighted-
average shares and
assumed conversions 4,108,796 4,450,198 4,186,783 4,509,141
========== ========== ========== ==========
Basic earnings per share $ 0.48 $ 0.28 $ 1.25 $ 0.87
Diluted earnings per share $ 0.48 $ 0.27 $ 1.23 $ 0.85
Note 3 : SFAS No. 131, "Segments of an Enterprise and Related Information"
This statement requires public companies to report certain information about
operating segments as well as certain information about products, services and
major customers in their financial statements. The Company will adopt this
statement in the year ended June 30, 1999. Management does not believe that
the adoption of this statement will have material impact on the financial
position or results of operations of the Company.
5
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Note 3: SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities"
This statement establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognizes all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement becomes
effective for fiscal years beginning after June 15, 1999. The adoption of this
statement is not expected to have any material impact on the financial
statements of the Company.
Note 4: SFAS No. 134, "Accounting for Mortgage-Backed Securities after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise"
This statement is an amendment of FASB Statement No. 65, "Accounting for
Certain Mortgage Banking Activities", and shall be effective for the first
fiscal quarter beginning after December 15, 1998. This statement requires
that, after the securitization of mortgage loans held for sale, any retained
mortgage-backed securities shall be classified in accordance with the
provisions of Statement No. 115. However, a mortgage banking enterprise must
classify as trading any retained mortgage-backed securities that it commits to
sell before or during the securitization process. The adoption of this
statement is not expected to have any material impact on the financial
statements of the Company.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Provident Financial Holdings, Inc. (the Company) is a Delaware corporation
which was organized in January 1996 for the purpose of becoming the holding
company for Provident Savings Bank, F.S.B. (the Savings Bank) upon the
latter's conversion from a federal mutual to a federal stock savings bank
("the Conversion"). The Conversion was completed on June 27, 1996. The Company
operates primarily in the business of attracting customer deposits to
originate loans secured primarily by mortgages on residential real estate.
Business operations also include ancillary activities related to real estate
lending such as mortgage banking and real estate development. The Savings Bank
is a federally chartered savings bank founded in 1956 whose deposits are
insured by the FDIC under the Savings Association Insurance Fund (SAIF). The
Savings Bank conducts business from its main office in Riverside, California
and its nine branch offices. Through the operations of its Mortgage Banking
Division (Profed), the Savings Bank has expanded its retail lending market to
include a larger portion of Southern California and Southern Nevada. Profed
operates three offices within the Savings Bank's retail branch facilities and
seven free-standing loan production offices, one of which includes a wholesale
loan department.
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company. The information contained in this
section should be read in conjunction with the Consolidated Financial
Statements and accompanying Selected Notes to Consolidated Financial
Statements.
The operating results of the Company depend primarily on its net interest
income, its non-interest income (principally from mortgage banking activities)
and its non-interest expense. Net interest income is the difference between
the income the Company receives on its loan and investment portfolios and its
cost of funds, which consists of interest paid on deposits and borrowings.
Non-interest income is comprised of income from mortgage banking activities,
gains on the occasional sale of assets and miscellaneous fees and income. The
contribution of mortgage banking activities to the Company's results of
operations is highly dependent on the demand for loans by borrowers and
investors, and therefore the amount of gain on sale of loans may vary
significantly from period to period as a result of changes in the market
interest rates and the local and national economy. The Company's profitability
is also affected by the level of non-interest expense. Non-interest expenses
include compensation and benefits, occupancy and equipment
6
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expenses, deposit insurance premiums, data servicing expenses and other
operating costs. Non-interest expenses related to mortgage banking activities
include compensation and benefits, occupancy and equipment expenses, telephone
and other operating costs, all of which are related to the volume of loans
originated. The Company's results of operations may be adversely affected
during periods of reduced loan demand to the extent that non-interest expenses
associated with mortgage banking activities are not reduced commensurate with
the decrease in loan originations.
Comparison of Financial Condition at March 31, 1999 and June 30, 1998
Total assets increased by $68.0 million, or 8.3%, to $884.2 million at March
31, 1999 from $816.2 million at June 30, 1998. This increase was mainly the
result of a $4.1 million, or 0.6%, increase in loans, including those held for
sale, to $691.5 million at March 31, 1999 from $687.4 million at June 30, 1998
and an $64.9 million, or 85.8%, increase in investment securities to $140.5
million at March 31, 1999 from $75.6 million at June 30, 1998. This growth was
funded primarily by an increase in deposits, which rose $47.3 million, or
8.1%, to $630.3 million at March 31, 1999 from $583.0 million at June 30,
1998. Federal Home Loan Bank (FHLB) advances provided the remaining funding
sources. FHLB advances increased by $15.8 million, or 12.0%, to $147.9 million
at March 31, 1999 from $132.1 million at June 30, 1998.
The total stockholders' equity decreased by $2.6 million which was mainly due
to the combined effects of $5.2 million in net income for the first nine
months and the repurchase of 10% of the Company's common stock. The Company
completed a 5% repurchase program in August 1998 covering 228,711 shares for a
total of $4.7 million and another 5% repurchase program in March 1999
covering 232,700 shares for a total of $4.0 million.
Comparison of Operating Results for the Quarter and Nine Months ended March
31, 1999 and 1998
The Company's net income for the quarters ended March 31, 1999 and 1998 was
$1.96 million and $1.20 million, respectively. An increase of $1.21 million on
net interest income plus an increase of $537,000 in gain on sale of loans was
recorded in the third quarter 1999, while an increase of $803,000 in overhead
expenses was incurred. Increased overhead was attributable mainly to higher
mortgage production expenses, non-recurring costs associated with a data
processing conversion completed in third quarter of fiscal 1999 and expenses
related to the Company's Year 2000 remediation efforts. For the nine months
ended March 31, 1999 and 1998, the Company recorded net earnings of $5.15
million and $3.82 million, respectively.
The Company's net interest margin increased to 3.15% for the quarter ended
March 31, 1999 as compared to 3.06% for the quarter ended March 31, 1998. The
increase of the interest margin in the third quarter resulted from the
reduction in the cost of deposits and borrowings (down by 50 basis points) was
greater than the reduction on loan and investment yields (down by only 27
basis points). For the nine months ended March 31, 1999 the net interest
margin, however, decreased to 2.96% as compared to 3.14% for the same period
last year.
The Company's return on assets for the quarters ended March 31, 1999 and 1998
was 0.90% and 0.66%, respectively; while for the nine months ended March 31,
1999 and 1998, the return on assets was 0.81% and 0.75%, respectively. Return
on equity for the quarters ended March 31, 1999 and 1998 was 9.24% and 5.78%,
respectively; while for the nine months ended March 31, 1999 and 1998, the
return on equity was 8.14% and 6.05%, respectively.
Diluted earnings per share for the quarter ended March 31, 1999 was $0.48, an
increase of 77.8% from $0.27 recorded in the quarter ended March 31, 1998. For
the nine months ended March 31, 1999 the Company recorded diluted earnings per
share of $1.23, an increase of 44.7% from $0.85 recorded during the same
period of the prior fiscal year.
7
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Interest Income. Interest income increased by $1.9 million, or 14.4%, to $14.9
million for the quarter ended March 31, 1999 from $13.0 million during the
same quarter last year. This was the result of an increased average
interest-earning-asset base which rose from $703.3 million to $835.0 million.
Loan interest income increased by $1.2 million, or 9.7%, to $13.1 million in
the quarter ended March 1999 as compared to $11.9 million for the same period
last year. This increase was attributable to a higher level of average loans,
including those held for sale, from $633.9 million in the third quarter 1998
to $716.0 million in the same quarter 1999, and despite a 22 basis-point
reduction of the loan yield.
The interest income from investment securities, including FHLB stock,
increased by $714,000, or 67.8% to $1.8 million for the quarter ended March
31, 1999 from $1.1 million for the same quarter last year. This was a result
of an increase in the amount of average investment securities from $69.3
million during the third quarter 1998 to $119.0 million in the same quarter of
fiscal 1999.
For the nine months ended March 31, 1999, interest income rose by $7.2
million, or 19.7%, to $43.9 million from $36.6 million for the nine months
ended March 31, 1998. Average loans receivable, including those held for sale,
increased to $715.0 million for the nine months ended March 31, 1999 as
compared to $595.6 million for the nine months ended March 31, 1998, while the
yield declined to 7.33% from 7.63%, respectively. The average balance of
investment securities, including FHLB stock, increased to $94.1 million for
the nine months ended March 31, 1999 as compared to $51.0 million for the nine
months ended March 31, 1998, while the yield declined to 6.08% from 6.19%. The
yield on overnight deposits also declined to 4.71% during the nine-month
period in fiscal 1999 from 5.20% in the same period in fiscal 1998.
Interest Expense. Interest expense for the quarter ended March 31, 1999 was
$8.3 million as compared to $7.6 million for the same period last year, an
increase of $667,000 or 8.7%. This increase was attributable to increases in
average FHLB advances and deposits. Average deposits increased by $88.4
million, or 16.5%, during the quarter as compared to the same period in the
prior year; and the average rate paid on deposits decreased to 4.32% during
the quarter ended March 31, 1999 from 4.80% during the same quarter last year.
FHLB advances averaged $131.8 million during the quarter ended March 31, 1999
compared to $88.5 million for the same quarter last year. In accordance with
decreasing interest rates in the market, the average rate paid on FHLB
advances decreased to 5.01% for the quarter ended March 31, 1999 from 5.80% in
the same quarter last year.
For the nine months ended March 31, 1999, interest expenses rose by $4.5
million, or 21.0%, to $25.7 million from $21.2 million for the nine months
ended March 31, 1998. Average deposits increased by $83.7 million, or 15.87%,
to $610.9 million during the nine months of fiscal 1999 from $527.2 million
during the same period of fiscal 1998, while the average cost of the deposits
decreased to 4.48% from 4.82% in the same period of fiscal 1998. Average FHLB
advances during the nine-month period in fiscal 1999 also increased by $79.4
million, or 159.0%, to $129.4 million from $50.0 million during the same
period in fiscal 1998. The cost of FHLB advances decreased to 5.33% from
5.78%, respectively.
The following tables depict the average balance sheets for the quarters and
nine months ended March 31, 1999 and 1998:
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Average balance sheets
(dollars in thousands)
Quarter Ended Quarter Ended
March 31, 1999 March 31, 1998
----------------------- -----------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
Interest -earning assets:
Loans receivable, net (1) $716,010 $13,106 7.32% $633,902 $11,947 7.54%
Investment securities 115,033 1,728 6.01% 65,605 1,014 6.18%
Interest-earning deposits 3,984 44 4.42% 3,743 43 4.64%
-------- ------- ---- -------- ------- ----
Total interest-earning
assets 835,027 14,878 7.13% 703,250 13,004 7.40%
Non-interest earning assets 35,297 27,990
-------- --------
Total assets $870,324 $731,240
======== ========
Interest-bearing liabilities:
Savings accounts $ 77,945 602 3.13% $ 49,546 264 2.16%
Demand and NOW accounts 144,452 800 2.25% 117,654 851 2.93%
Certificate accounts 403,594 5,261 5.29% 370,352 5,246 5.75%
-------- ------- ---- -------- ------- ----
Total deposits 625,991 6,663 4.32% 537,552 6,361 4.83%
FHLB advances 131,841 1,630 5.01% 88,452 1,265 5.80%
Other borrowings 162 2 5.01% 205 2 5.14%
-------- ------- ---- -------- ------- ----
Total Interest-bearing
liabilities 757,994 8,295 4.44% 626,209 7,628 4.94%
Non-interest-bearing
liabilities 27,507 21,908
-------- --------
Total liabilities 785,501 648,117
Retained earnings 84,823 83,123
Total liabilities and -------- --------
retained earnings $870,324 $731,240
======== ------- ======== -------
Net interest income $ 6,583 $ 5,376
======= =======
Interest rate spread (2) 2.69% 2.46%
Net interest margin (3) 3.15% 3.06%
Ratio of average interest-
earning assets to
average interest-bearing
liabilities 110.16% 112.30%
Return on Assets 0.90% 0.66%
Return on Equity 9.24% 5.78%
(1) Includes loans available for sale
(2) Represents the difference between weighted average yield on all interest-
earning assets and weighted average rate on all interest-bearing
liabilities
(3) Represents net interest income before provision for loan losses as a
percentage of average interest-earning assets.
9
<PAGE>
<PAGE>
Average balance sheets
(dollars in thousands)
Nine Months Ended Nine Months Ended
March 31, 1999 March 31, 1998
----------------------- -----------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
Interest-earning assets:
Loans receivable, net (1) $715,018 $39,315 7.33% $595,623 $34,066 7.63%
Investment securities 94,112 4,295 6.08% 51,032 2,368 6.19%
Interest-earning deposits 7,309 258 4.71% 5,132 200 5.21%
-------- ------- ---- -------- ------- ----
Total interest-earning
assets 816,439 43,868 7.16% 651,787 36,634 7.49%
Non-interest earning assets 34,355 25,958
-------- --------
Total assets $850,794 $677,745
======== ========
Interest-bearing liabilities:
Savings accounts $ 72,160 1,801 3.32% $ 46,818 936 2.66%
Demand and NOW accounts 138,044 2,712 2.62% 115,935 2,643 3.04%
Certificate accounts 400,685 16,027 5.33% 364,470 15,506 5.67%
-------- ------- ---- -------- ------- ----
Total deposits 610,889 20,540 4.48% 527,223 19,085 4.82%
FHLB advances 129,445 5,182 5.33% 49,987 2,173 5.78%
Other borrowings 173 7 5.39% 141 6 5.14%
-------- ------- ---- -------- ------- ----
Total Interest-bearing
liabilities 740,507 25,729 4.63% 577,351 21,264 4.91%
Non-interest-bearing
liabilities 25,960 16,234
-------- --------
Total liabilities 766,467 593,585
Retained earnings 84,327 84,160
-------- --------
Total liabilities and
retained earnings $850,794 $677,745
======== ------- ======== -------
Net interest income $18,139 $15,370
======= =======
Interest rate spread (2) 2.54% 2.59%
Net interest margin (3) 2.96% 3.14%
Ratio of average interest-
earning assets to
average interest-bearing
liabilities 110.25% 112.89%
Return on Assets 0.81% 0.75%
Return on Equity 8.14% 6.05%
(1) Includes loans available for sale
(2) Represents the difference between weighted average yield on all interest-
earning assets and weighted average rate on all interest-bearing
liabilities
(3) Represents net interest income before provision for loan losses as a
percentage of average interest-earning assets.
10
<PAGE>
<PAGE>
The following tables provide the rate/volume variances for the quarter and
nine months ended March 31, 1999 and 1998:
Rate/Volume Variance
(dollars in thousands)
Quarter ended March 31,1999
Compared to Quarter ended March 31, 1998
Increase (Decrease) Due to
- ------------------------------------------------------------------------------
Rate/
Rate Volume Volume Net
------ ------- ------ -------
Interest income
Loans receivable (1) $ (344) $ 1,547 $ (45) $ 1,158
Investment securities (29) 766 (21) 716
Interest-bearing deposits (2) 3 0 1
------ ------- ----- -------
Total net change in income
on interest-earning assets (375) 2,316 (66) 1,875
Interest-bearing liabilities:
Savings accounts 119 151 68 338
Demand and NOW accounts (199) 194 (45) (50)
Certificate accounts (418) 471 (38) 15
FHLB advances (172) 621 (84) 365
Other borrowings 0 (1) 0 (1)
------ ------- ----- -------
Total net change in expense on
interest-bearing liabilities (670) 1,436 (99) 667
------ ------- ----- -------
Net change in net interest
income $ 295 $ 880 $ 33 $ 1,208
====== ======= ===== =======
(1) Includes loans available for sale. For purposes of calculating volume,
rate and rate/volume variances, non-accrual loans were included in the
weighted average balance outstanding.
11
<PAGE>
<PAGE>
Rate/Volume Variance
(dollars in thousands)
Nine Months ended March 31,1999
Compared to Nine Months ended March 31, 1998
Increase (Decrease) Due to
- ------------------------------------------------------------------------------
Rate/
Rate Volume Volume Net
------ ------- ------ -------
Interest income
Loans receivable (1) $ (1,315) $ 6,829 $ (264) $ 5,250
Investment securities (46) 2,001 (28) 1,927
Interest-bearing deposits (19) 85 (8) 58
-------- ------- ------ -------
Total net change in income
on interest-earning assets (1,380) 8,915 (300) 7,235
Interest-bearing liabilities:
Savings accounts 233 507 126 866
Demand and NOW accounts (365) 504 (70) 69
Certificate accounts (928) 1,541 (92) 521
FHLB advances (172) 3,454 (273) 3,009
Other borrowings 0 1 0 1
-------- ------- ------ -------
Total net change in expense on
interest-bearing liabilities (1,232) 6,007 (309) 4,466
-------- ------- ------ -------
Net change in net interest
income $ (148) $ 2,908 $ 9 $ 2,769
======== ======= ====== =======
(1) Includes loans available for sale. For purposes of calculating volume,
rate and rate/volume variances, non-accrual loans were included in the
weighted average balance outstanding.
Provision for Loan Losses. The provision for loan losses was $75,000 for the
quarter ended March 31, 1999 as compared to $300,000 for the same period last
year. For the nine months ended March 31, 1999, the provision for loan losses
was $450,000 as compared to $1,050,000 for the same period last year. The
decrease in both the quarter and nine month provisions reflects general
improvement in the asset quality of the loan portfolio and relative strength
in the economic condition of the Company's primary lending area. As of March
31, 1999, loan loss reserves as a percent of gross loans receivable were 0.96%
as compared to 1.02% as of March 31, 1998. Net charge-offs as a percentage of
average loans outstanding fell 1 basis point to 4 basis points during the
nine-month period in fiscal 1999.
The allowance for loan losses is maintained at a level sufficient to provide
for estimated losses based on evaluating known and inherent risks in the loan
portfolio and upon Management's continuing analysis of the factors underlying
the quality of loan portfolio. These factors include changes in the size and
composition of the loan portfolio, actual loan loss experience, current and
anticipated economic conditions, detailed analysis of individual loans for
which full collectibility may not be assured, and determination of the
realizable value of the collateral securing the loans. Provisions for losses
are charged against operations on a monthly basis as necessary to maintain the
allowance at appropriate levels. Management believes that the amount
maintained in the allowance will be adequate to absorb losses inherent in the
portfolio. Although Management believes it uses the best information available
to make such determinations, there can be no assurance that regulators, in
reviewing the Company's loan portfolio, will not request the Company to
increase significantly its allowance for loan losses. Future adjustments to
the allowance for
12
<PAGE>
<PAGE>
loan losses may be necessary and results of operations could be significantly
and adversely affected due to economic, operating, regulatory, and other
conditions beyond the control of the Company.
The following tables are provided to disclose additional details on the
Company's allowance for loan losses and asset quality (dollars in thousands):
Allowance for loan losses
For the Nine Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
Allowance at beginning of period $ 6,186 $ 5,465
Provision for loan losses 450 1,050
Recoveries:
Mortgage loans:
One-to-four family 17 11
Multifamily 0 191
Commercial 0 0
Construction 0 0
Consumer loans 35 19
Commercial business lending 0 0
------- -------
Total recoveries 52 221
Charge-offs:
Mortgage loans:
One-to-four family (201) (85)
Multifamily 0 (2)
Commercial 0 (253)
Construction 0 0
Consumer loans (56) (85)
Commercial business lending 0 0
------- -------
Total charge-offs (257) (425)
------- -------
Net charge-offs (205) (204)
------- -------
Balance at end of period $ 6,431 $ 6,311
======= =======
Allowance for loan losses as a
percentage of gross loans
receivable 0.96% 1.02%
Net charge-offs as a percentage
of average loans outstanding
during the period 0.04% 0.05%
Allowance for loan losses as a
percentage of Non-performing
loans at the end of the period 233.35% 130.99%
13
<PAGE>
<PAGE>
Asset Quality. The following tables are provided to disclose additional
details on asset quality (dollars in thousands):
At March 31, At June 30,
1999 1998
------------ -----------
Loans accounted for on a non-accrual basis:
Mortgage loans:
One-to-four family $ 2,337 $ 1,669
Multifamily 413 0
Commercial 0 245
Construction 0 0
Consumer loans 0 18
Commercial business lending 0 0
Other loans 0 0
------- -------
Total 2,750 1,932
Accruing loans which are contractually
past due 90 days or more:
Mortgage loans:
One-to-four family 0 0
Multifamily 0 0
Commercial 0 0
Construction 0 0
Consumer loans 0 0
Commercial business lending 0 0
Other loans 0 0
------- -------
Total 0 0
Total of non-accrual and 90 days past
due loans 2,750 1,932
Real estate owned 1,801 4,447
------- -------
Total non-performing assets $ 4,551 $ 6,379
======= =======
Restructured loans $ 1,564 $ 2,074
Non-accrual and 90 days or more past
due loans as a percentage of portfolio
loans receivable, net 0.43% 0.31%
Non-accrual and 90 days or more past due
loans as a percentage of total assets 0.31% 0.24%
Non-performing assets as a percentage of
total assets 0.51% 0.78%
The Company addresses loans individually and identifies impairment when the
accrual of interest has been discontinued, loans have been restructured or
Management has serious doubts about the future collectibility of principal and
interest, even though the loans are currently performing. Factors considered
in determining impairment include, but are not limited to, expected future
cash flows, financial condition of the borrower and the current economic
conditions. The Company measures each impaired loan based on the fair value of
its collateral and charges off those loans or portions of loans deemed
uncollectible.
14
<PAGE>
<PAGE>
Non-interest Income. Non-interest income increased by $675,000, or 33.6%, to
$2.7 million during the quarter ended March 31, 1999 from $2.0 million during
the same period last year. For the nine months ended March 31, 1999, the
non-interest income rose by $2.3 million, or 36.8%, to $8.7 million from $6.4
million during the same period last year.
The major contributor to the increase of non-interest income was the gain on
sale of loans which increased by $537,000, or 56.1%, to $1.5 million during
the quarter ended March 31, 1999. For the nine months ended March 31, 1999,
the gain on sale of loans increased by $2.0 million, or 66.1%, to $5.1 million
from $3.1 million from the same period last year. The increase in the gain on
sale of loans was the result of the sale of loans totaling $193.9 million
during the third quarter 1999 and $523.8 million during the nine-month period
in fiscal 1999 as compared to $105.1 million during the third quarter 1998 and
$305.6 million during the nine-month period in fiscal 1998.
Loan servicing and other fees decreased by $12,000 during the third quarter to
$648,000 from $660,000 in the same period last year. For the nine-month
period, the loan servicing and other fees decreased by $152,000 to $2.1
million from $2.3 million during the same period last year. This decrease was
due mainly to the decrease in the volume of loans serviced for others from
$465.9 million at the end of March 31, 1998 to $353.1 million at the end of
March 31, 1999 as the decline of the existing loans for is more than the new
loans added. Most newly originated loans are sold servicing released.
Non-interest Expenses. Non-interest expenses increased by $803,000 during the
third quarter to $5.8 million from $5.0 million in the same period last year.
For the nine months ended March 31, 1999, non-interest expense increased by
$3.4 million to $17.5 million from $14.1 million during the same period last
year. The increase in the third quarter 1999 was due to non-recurring costs
associated with a data processing conversion completed in the third quarter of
fiscal 1999 and the Company's Year 2000 remediation efforts, in addition to
higher mortgage production expenses. The increase in the nine-month period in
fiscal 1999 was attributable mainly to expenses recorded in relation to the
Company's stock-based compensation programs and higher mortgage production
related expenses as well as the items recorded during the third quarter as
previously explained.
Real estate operations resulted a net gain of $291,000 during the quarter
ended March 31, 1999 as compared to a net loss of $35,000 during the same
quarter last year. The net gains in real estate operations during the third
quarter fiscal 1999 were mainly due to higher rent income from a ground lease
in Westwood, California, including $144,000 of rent overage in March 1999 and
no additional provision for losses on real estate owned. In comparison,
during the third quarter fiscal 1998, additional provisions of $208,000 for
losses on real estate owned was added. For the nine months ended March 31,
1999, the net gains on real estate owned were $653,000 as compared to $311,000
during the same period of fiscal 1998.
Income taxes. Income tax expense was $1.4 million for the third quarter
versus $0.9 million for the same quarter last year. The resulting effective
tax rate for the quarter ended March 31, 1999 was 42.2% compared to 42.5% for
the same period last year. For the nine-month period, income tax expense was
$3.8 million as compared to $2.8 million during the same period last year; and
the effective tax rate for both periods was 42.3%.
Loan Volume Activities. The following table is provided to disclose additional
details related to the volume of loans originated, purchased and sold (dollars
in thousands):
15
<PAGE>
<PAGE>
Loan Volume Activities
For the Quarter ended For the Nine Months ended
March 31, March 31,
--------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
Loans originated for sale:
Retail originations $ 65,055 $ 46,917 $229,518 $130,070
Wholesale originations 83,370 74,756 285,212 208,124
-------- -------- -------- --------
Total loans originated
for sale 148,425 121,673 514,730 338,194
Loans sold:
Servicing released 193,501 105,007 505,399 305,226
Servicing retained 435 127 18,354 365
-------- -------- -------- --------
Total loans sold 193,936 105,134 523,753 305,591
Loans originated for
portfolio:
Mortgage loans:
One-to-four family 40,872 40,655 123,730 138,147
Multifamily 0 500 0 920
Commercial 2,093 0 4,168 250
Construction loans 5,526 3,404 20,275 11,554
Consumer 8,164 1,465 21,009 4,106
Commercial business
lending 1,887 1,434 10,172 2,474
Other loans 59 0 169 78
-------- -------- -------- ----------
Total loans originated
for portfolio 58,601 47,458 179,523 157,529
Loans purchased:
Mortgage loans:
One-to-four family 0 162 0 19,000
Commercial 0 0 1,010 0
-------- -------- -------- ----------
Total loans purchased 0 162 1,010 19,000
Mortgage loan principal
repayments 55,055 34,622 170,571 90,539
Real estate acquired in
settlement of loans 229 1,155 1,130 6,021
Increase (decrease) in
other items, net (1) 2,630 (1,650) 4,314 (1,423)
-------- -------- -------- ---------
Net increase in loans
receivable, net $ (39,564) $ 26,732 $ 4,123 $ 111,149
========== ======== ======== =========
(1) Includes changes in accrued interest, loans in process, discounts and loan
loss reserves.
-16-
<PAGE>
<PAGE>
Liquidity and Capital Resources. The Company's primary sources of funding
include deposits, proceeds from loan principal and interest payments, sales of
loans, the maturity of and interest income on investment securities, and FHLB
advances. The Savings Bank has a credit line available with Federal Home Loan
Bank of San Francisco of 30% of total assets, which, on March 31, 1999
permitted additional advances up to $111.0 million, in addition to having
unsecured lines with its correspondent banks. While maturities and scheduled
amortization of loans are predictable sources of funds, deposit flows, loan
sales, and mortgage prepayments are greatly influenced by general interest
rates, economic conditions, and competition.
The primary investing activity of the Company is the origination of mortgage
loans through the Savings Bank. For the quarter ended March 31, 1999, the
Savings Bank originated a total of $207.0 million and $694.3 million for
fiscal year to date. This activity was funded primarily by loan sales, loan
principal payments, deposits and FHLB advances. For the quarter ended March
31, 1999, loan sales aggregated $193.9 million and loan principal payments
totaled $55.1 million; and for the fiscal period to date, loan sales
aggregated $523.8 million and loan principal payments totaled $170.6 million.
By regulation, the Savings Bank must maintain a minimum liquidity equal to 4%
of deposits and short-term borrowings. Liquidity is measured by cash and
readily marketable securities which are not committed, pledged, or required as
collateral for specific liabilities. The Savings Bank's average liquidity
ratios for the third quarter 1999 and 1998 were 16.91% and 10.41%,
respectively.
The Savings Bank is subject to various regulatory capital requirements
administered by federal banking agencies. Failure to meet minimum requirements
can initiate certain mandatory actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective actions, the Savings Bank must meet certain specific capital
guidelines that involve quantitative measures of the Savings Bank's assets,
liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Savings Bank's capital amounts and
classifications are also subject to qualitative judgements by the regulators
about components, risk-weightings, and other factors. The Savings Bank's
actual and required capital amounts and ratios as of March 31, 1999 are as
follows (dollars in thousands):
Amount Percent
--------- -------
Tangible capital $ 70,109 8.01%
Requirement to be "Well Capitalized" 17,509 2.00%
--------- -------
Excess over requirement $ 52,600 6.01%
========= =======
Tier 1 (core) capital $ 70,109 8.01%
Requirement to be "Well Capitalized" 43,773 5.00%
--------- -------
Excess over requirement $ 26,336 3.01%
========= =======
Total risk-based capital $ 76,181 17.28%
Requirement to be "Well Capitalized" 44,089 10.00%
--------- -------
Excess over requirement $ 32,092 7.28%
========= =======
Tier 1 risk-based capital $ 70,109 15.90%
Requirement to be "Well Capitalized" 26,453 6.00%
--------- -------
Excess over requirement $ 43,656 9.90%
========= =======
Management believes that under current regulations, the Company will continue
to meet its minimum capital requirements in the foreseeable future.
-17-
<PAGE>
<PAGE>
Year 2000 Readiness.
General
- -------
Year 2000 issues relate to the possibility of computer programs and hardware
not being able to distinguish between the year 1900 and the year 2000. If it
is not corrected, some, if not all, systems used by the Company might be at
risk of not being able to function properly. To prevent this from happening
during the turn of the century and beyond, the Company has undertaken a major
project to ensure that its internal operating systems, as well as those of its
customers and suppliers, will be fully capable of processing transactions in
the Year 2000 and beyond. Testing and implementation is planned to be
completed by June 30, 1999.
Project
- -------
The Company formed a Year 2000 Committee in July 1997 which consists of the
Chief Information Officer and senior management staff from all levels. The
committee reports the progress of the Year 2000 project to the Board of
Directors on a monthly basis. Regular review is also done by the Internal
Audit department. In addition, the Company engaged an IT consultant to
strengthen the Year 2000 project team.
The Company has completed the replacement of its core processing systems in
March 1999 and has completed Year 2000 testing subsequent to its installation.
The Company has also reviewed its critical non-information technology systems
to assess the risk of Year 2000 failure. Critical systems that pose risk of
Year 2000 failure have detailed contingency plans, which were developed to
ensure uninterrupted services.
The Company, as part of its Year 2000 remediation plan, continues to monitor
the progress of critical third party vendors as they implement corrective
actions to ensure an uninterrupted flow of goods and services. For both
systems and vendors that are classified as critical, contingency plans have
been developed which include, among other things, alternate processing
methods, steps for transitioning to manual processes, and alternate vendors or
sources of goods and services.
The Company has contacted its commercial borrowers to assess their Year 2000
exposure and continues to monitor their remediation progress. The Company has
also distributed a Year 2000 Readiness Statement to all depositors, borrowers,
and vendors. The Company continues to have its Year 2000 progress monitored by
the Office of Thrift Supervision.
Costs
- -----
The estimated cost of the project is $3.5 million, which includes
approximately $2.5 million in replacement equipment and software, $400,000 in
equipment write-down, and $200,000 in external project management expenses. In
addition, the estimated value of internal resources allocated to the Year 2000
project is $400,000. Implementation of the new loan and deposit system which
is already year 2000 compliant will be able to enhance the overall banking
system. A total of $3.1 million or 90.0% of the total costs has been spent for
the project as of March 31, 1999. The replacement equipment and software will
be capitalized and depreciated in accordance with the Company's normal
accounting policies.
Risks
- -----
The failure of not being able to completely detect potential problems related
to Year 2000 could result in an interruption of normal business
activities/operations, which may materially and adversely affect the Company's
results of operations. As a participant in domestic payment systems, the
Company's Year 2000 preparedness is largely dependent upon the readiness of
other participants in the system including the United States government. The
Company relies largely on third-party software vendors and service providers
for many critical functions in the conduct of its businesses. The focus of the
Company has been to monitor and test the Year 2000 compliance progress of its
critical vendors. The year 2000 project is expected to significantly reduce
the risk inherent in the year 2000 problem.
-18-
<PAGE>
<PAGE>
Supplemental Information
March 31, 1999 June 30, 1998 March 31, 1998
-------------- ------------- --------------
Loans serviced for others
(in thousands) $ 353,139 $ 434,710 $ 465,928
Book value per share $ 19.16 $ 17.85 $ 17.47
Forward-looking Statement
Certain matters discussed in this Form 10-Q may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward looking statements relate to, among other things,
expectations of the business environment in which the Company operates,
projections of future performance, perceived opportunities in the market, and
statements regarding the Company's mission and vision. These forward-looking
statements are based upon current management expectations, and may therefore
involve risks and uncertainties. The Company's actual results, performance, or
achievements may differ materially from those suggested, expressed, or implied
by forward looking statements due to a wide range of factors including, but
not limited to, non-bank financial services providers, regulatory changes,
Year 2000 issues and other risks detailed in the Company's reports filed with
the Securities and Exchange Commission, including the Annual Report on Form
10-K for the fiscal year ended June 30, 1998.
PART II OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
From time to time the Company or its subsidiaries are engaged in legal
proceedings in the ordinary course of business, none of which are considered
to have a material impact on the Company's financial position or results of
operations.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Shareholders
Not applicable.
Item 5. Other Information
a) Completion of 5% stock purchase program:
- ------------------------------------------
On March 8, 1999, the Company announced that the Office of Thrift Supervision
(OTS) has approved an application granting PROV authority to repurchase 5% of
its outstanding shares.
-19-
<PAGE>
<PAGE>
On March 11, 1999, the Company announced the completion of the stock
repurchase program. The Company repurchased 232,700 shares at an average share
price of $17.31 for an aggregate total of $4.0 million. The repurchase shares
will be held in the Company's treasury for general corporate uses, including
issuance under stock benefit program.
b) Branch expansion to Corona, California:
- -----------------------------------------
The Company announced on April 23, 1999 that Provident Savings Bank will file
an application with the Office of Thrift supervision (OTS) for a new branch
site located in Corona, California. The proposed branch will be located in the
Corona Village Shopping Center at the intersection of Ontario and Magnolia
Avenues near a 12,000 home master planned community. Provident expects to open
this branch by November 1999, subject to receiving approval from the OTS and
completion of shopping center construction.
The Company believes that the Corona market represents an exceptional
opportunity for growth. This particular site is strategically located within
the heart of rapidly growing community, adjacent to the booming Orange County
area and is a cornerstone city in the Inland Empire.
c) Ground lease buyout:
- ----------------------
On March 8, 1999, the Company announced that a ground lease tenant has
provided notice of its intent to exercise a purchase option under a lease
contract on one of PROV's real estate holdings.
On April 27, 1999, the Company confirmed that one of the ground lease tenants
has elected to exercise a purchase option under its lease contract. The fair
market value of this property is $8.1 million as determined by the purchase
option valuation process. The Company currently carries the property on its
books for $1.9 million. After transaction costs and a provision for income
taxes, the Company expects to record a net gain of $3.6 million, or $0.87 per
diluted share. The transaction is expected to close by June 30, 1999.
Once this transaction is complete, the Company will no longer receive annual
rents from the ground lease. The Company receives approximately $600,000 in
pre-tax operating income from this lease per year. When this income ceases,
the Company estimates that dilutive earnings per share will be reduced by
approximately $0.05 per year in future periods.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits :
None.
b) Reports on form 8-K
None.
-20-
<PAGE>
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Provident Financial Holdings, Inc.
May 7, 1999 /s/ Craig G. Blunden
--------------------
Craig G. Blunden
President and Chief Executive Officer
(Principal Executive Officer)
May 7, 1999 /s/ Brian M. Riley
------------------
Brian M. Riley
Chief Financial Officer
(Principal Financial and Accounting Officer)
-21-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1999
<CASH> 22407
<INT-BEARING-DEPOSITS> 614257
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 137843
<INVESTMENTS-MARKET> 137151
<LOANS> 697930
<ALLOWANCE> 6431
<TOTAL-ASSETS> 884159
<DEPOSITS> 630282
<SHORT-TERM> 99560
<LIABILITIES-OTHER> 21925
<LONG-TERM> 48348
0
0
<COMMON> 51
<OTHER-SE> 83993
<TOTAL-LIABILITIES-AND-EQUITY> 884159
<INTEREST-LOAN> 39315
<INTEREST-INVEST> 4553
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 43868
<INTEREST-DEPOSIT> 20540
<INTEREST-EXPENSE> 25729
<INTEREST-INCOME-NET> 18139
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 85
<EXPENSE-OTHER> 17506
<INCOME-PRETAX> 8921
<INCOME-PRE-EXTRAORDINARY> 8921
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5149
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.23
<YIELD-ACTUAL> 2.96
<LOANS-NON> 2750
<LOANS-PAST> 0
<LOANS-TROUBLED> 1564
<LOANS-PROBLEM> 4945
<ALLOWANCE-OPEN> 6186
<CHARGE-OFFS> 257
<RECOVERIES> 52
<ALLOWANCE-CLOSE> 6431
<ALLOWANCE-DOMESTIC> 6431
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
