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, 2000
[ X ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
------------------------------------------------
(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 .
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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 8, 2000
-------------- -----------------
Common stock, $ 0.01 par value 3,943,066 shares *
* Includes 297,571 shares held by the employee stock ownership plan that
have not been released, committed to be released, or allocated to participant
accounts; and 110,946 shares held by the management recognition plan which
have been committed to be released and allocated to participant accounts.
<PAGE>
PROVIDENT FINANCIAL HOLDINGS, INC.
Table of Contents
PART 1 FINANCIAL INFORMATION
ITEM 1 Financial Statements. The Unaudited Interim 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, 2000 and June 30, 1999......................... 1
Consolidated Statements of Operations
for the quarter and nine months ended March 31, 2000 and 1999.. 2
Consolidated Statements of Changes in Stockholders' Equity
for the quarter and nine months ended March 31, 2000 and 1999.. 3
Consolidated Statements of Cash Flows
for the quarter and nine months ended March 31, 2000 and 1999.. 5
Selected Notes to Unaudited Interim Consolidated Financial
Statements..................................................... 6
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
General......................................................... 9
Comparison of Financial Condition at March 31, 2000 and
June 30, 1999................................................... 9
Comparison of Operating Results for the quarter and
nine months ended March 31, 2000 and 1999....................... 10
Loan Volume Activities.......................................... 19
Liquidity and Capital Resources................................. 20
Year 2000 Project............................................... 21
Supplemental Information........................................ 22
PART II OTHER INFORMATION
Item 1. Legal Proceedings...................................... 22
Item 2. Changes in Securities.................................. 22
Item 3. Defaults upon Senior Securities........................ 22
Item 4. Submission of Matters to Vote of Stockholders.......... 22
Item 5. Other Information...................................... 23
Item 6. Exhibits and Reports on Form 8-K....................... 23
SIGNATURES............................................................. 24
EXHIBIT 27 FINANCIAL DATA SCHEDULE................................... 25
<PAGE>
PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Financial Condition
(Unaudited)
Dollars in Thousands
March 31, June 30,
2000 1999
-------- --------
ASSETS
Cash............................................ $ 14,195 $ 19,729
Overnight deposits.............................. 3,000 --
Investment securities - held to maturity (market
value $166,788 and $176,033, respectively)..... 175,230 179,834
Investment securities - available for sale at
fair market value.............................. 25,250 7,344
Loans held for investment, net................. 840,461 669,386
Loans available for sale, net.................. 51,275 37,667
Accrued interest receivable.................... 7,364 5,984
Real estate available for sale, net............ 1,734 1,775
Real estate held for investment, net........... 12,516 1,018
Federal Home Loan Bank stock................... 20,595 10,725
Premises and equipment, net.................... 7,770 8,422
Prepaid expenses and other assets.............. 6,436 15,547
---------- ---------
TOTAL ASSETS................................... $1,165,826 $ 957,431
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits................ $ 18,763 $ 14,764
Interest bearing deposits.................. 689,730 618,117
----------- ---------
Total deposits ................................. 708,493 632,881
Borrowings .................................... 351,800 214,506
Accounts payable and other liabilities......... 18,807 20,358
----------- -------
TOTAL LIABILITIES........................... 1,079,100 867,745
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; 3,943,066
and 4,385,785 outstanding at March 31, 2000
and June 30, 1999, respectively)............. 51 51
Additional paid-in capital..................... 51,220 51,069
Retained earnings.............................. 62,595 57,555
Treasury stock at cost
(1,182,149 and 739,430 shares, respectively)... (22,387) (14,089)
Unearned stock compensation ................... (4,886) (5,644)
Accumulated other comprehensive income......... 133 744
----------- ---------
TOTAL STOCKHOLDERS' EQUITY..................... 86,726 89,686
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $1,165,826 $ 957,431
========== =========
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
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,
2000 1999 2000 1999
------------------ -----------------
Interest income :
Loans....................... $ 17,266 $ 13,106 $ 47,068 $ 39,315
Investment securities....... 3,437 1,772 10,073 4,553
-------- -------- -------- --------
Total interest income...... 20,703 14,878 57,141 43,868
Interest expense :
Deposits................... 7,784 6,663 22,395 20,540
Borrowings................. 5,579 1,632 12,975 5,189
-------- -------- -------- --------
Total interest expense... 13,363 8,295 35,370 25,729
-------- -------- -------- --------
Net interest income.......... 7,340 6,583 21,771 18,139
Provision for loan losses.... 175 75 175 450
-------- -------- -------- --------
Net interest income
after provision for
loan losses ............... 7,165 6,508 21,596 17,689
Non-interest income :
Loan servicing and other
fees...................... 588 648 1,928 2,119
Gain on sale of loans, net.. 268 1,495 1,714 5,109
Real estate operations, net. 192 285 253 641
Other ...................... 521 542 1,744 1,510
--------- -------- --------- -------
Total non-interest income.. 1,569 2,970 5,639 9,379
Non-interest expenses :
Salaries and employee
benefits.................. 3,580 4,026 10,944 11,276
Premises and occupancy...... 524 452 1,524 1,489
SAIF insurance premiums..... 37 92 211 265
Equipment................... 596 424 1,674 1,064
Professional expenses....... 107 214 589 683
Sales and marketing
expenses.................. 237 130 863 608
Other....................... 943 749 2,729 2,762
-------- -------- --------- -------
Total non-interest expense. 6,024 6,087 18,534 18,147
-------- -------- --------- -------
Income before income taxes... 2,710 3,391 8,701 8,921
Provision for income taxes... 1,128 1,431 3,661 3,772
-------- -------- ---------- -------
Net income................... $ 1,582 $ 1,960 $ 5,040 $ 5,149
======== ======== ========== =======
Basic earnings per share..... $ 0.45 $ 0.48 $ 1.37 $ 1.25
Diluted earnings per share... $ 0.45 $ 0.48 $ 1.35 $ 1.23
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
Dollars in Thousands, Except Shares
For the Quarters Ended March 31, 2000 and 1999
Accumulated
Common Additional Unearned Other
Stock Paid-in Retained Treasury Stock Comprehensive
Shares Amount Capital Earnings Stock Compensation Income Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999...3,988,566 $ 51 $ 51,187 $ 61,013 $ (21,699) $ (5,139) $ 263 $85,676
Comprehensive income:
Net income.................... 1,582 1,582
Other comprehensive income,
net of tax:
Unrealized gains (losses) on
securities available for sale
arising during the quarter. (130) (130)
Reclassification adjustment for
(gains) losses on securities
available for sale included in
net income................. - -
-------
Total comprehensive income..... 1,452
Purchase of treasury stock..... (45,500) (688) (688)
Release of shares under stock-
based compensation plans....... 33 253 286
- ---------------------------------------------------------------------------------------------------------
Balance at March 31, 2000 3,943,066 $ 51 $ 51,220 $ 62,595 $ (22,387) $ (4,886) $133 $86,726
=========================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
Accumulated
Common Additional Unearned Other
Stock Paid-in Retained Treasury Stock Comprehensive
Shares Amount Capital Earnings Stock Compensation Income Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998...4,618,485 $ 51 $ 50,973 $ 50,279 $ (10,061) $ (6,519) $853 $ 85,576
Comprehensive income:
Net income.................... 1,960 1,960
Other comprehensive income,
net of tax :
Unrealized gains (losses) on
securities available for
sale arising during the
nine months................ (129) (129)
Reclassification adjustment
for (gains) losses on
securities available for
sale included in net
income..................... (1) (1)
------
Total comprehensive income..... 1,830
Purchase of treasury stock..... (232,700) (4,028) (4,028)
Release of shares under stock-
based compensation plans....... 43 623 666
- ---------------------------------------------------------------------------------------------------------
Balance at March 31, 1999......4,385,785 $ 51 $ 51,016 $ 52,239 $ (14,089) $ (5,896) $723 $ 84,044
=========================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
<TABLE>
PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
Dollars in Thousands, Except Shares
For the Nine Months Ended March 31, 2000 and 1999
Accumulated
Common Additional Unearned Other
Stock Paid-in Retained Treasury Stock Comprehensive
Shares Amount Capital Earnings Stock Compensation Income Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1999.......4,385,785 $ 51 $ 51,069 $ 57,555 $ (14,089) $ (5,644) $ 744 $ 89,686
Comprehensive income:
Net income.................... 5,040 5,040
Other comprehensive income,
net of tax :
Unrealized gains (losses) on
securities available for
sale arising during the
nine months................ (589) (589)
Reclassification adjustment
for (gains) losses on
securities available for
sale included in
net income................. (22) (22)
-------
Total comprehensive income..... 4,429
Purchase of treasury stock..... (442,719) (8,298) (8,298)
Release of shares under stock-
based compensation plans....... 151 758 909
- ---------------------------------------------------------------------------------------------------------
Balance at March 31, 2000......3,943,066 $ 51 $ 51,220 $ 62,595 $ (22,387) $ (4,886) $ 133 $ 86,726
=========================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
Accumulated
Common Additional Unearned Other
Stock Paid-in Retained Treasury Stock Comprehensive
Shares Amount Capital Earnings Stock Compensation 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
Other comprehensive income,
net of tax:
Unrealized gains (losses)
on securities available
for sale arising during
the nine months.......... 181 181
Reclassification adjustment
for (gains) losses on
securities available for
sale included in net
income................... (51) (51)
-------
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
=========================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE>
PROVIDENT FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flow
(Unaudited)
Dollars in Thousands
Quarter Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------------- -----------------
Cash flows from operating activities:
Net Income......................... $ 1,582 $ 1,960 $ 5,040 $ 5,149
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization..... 708 98 1,627 145
Provision for loan losses......... - 75 - 450
Provision for losses on real
estate.......................... 115 - 125 -
Gain on sale of loans............. (334) (1,495) (1,780) (5,109)
Net (gains) losses on sale of
investment securities............. - (47) (38) (10)
Increase in accounts payable and
other liabilities................. (5,450) 3,827 (1,123) 7,509
Decrease in prepaid expense
and other assets.................. 86 (2,622) 7,731 13,213
Loans originated for sale.......... (92,112)(148,425) (293,138) (514,728)
Proceeds from sale of loans........ 130,656 193,936 281,310 523,753
Stock compensation ................ 286 666 909 899
---------- -------- ----------- --------
Net cash used for
operating activities............. 35,537 47,973 663 31,271
Cash flows from investing activities:
Net increase in loan receivables.. (16,905) (2,570) (170,266) (22,924)
Maturity of investment securities
held-to-maturity.................. 2,600 22,765 6,650 70,847
Purchases of investment
securities held-to-maturity ...... (3,000) (76,108) (3,000)(140,631)
Purchases of investment securities
available for sale................ - (204) (23,280) (1,454)
Sales of investment securities
available for sale................ - 2,801 2,292 6,664
Purchase of Federal Home Loan
Bank stock........................ (238) (100) (9,870) (824)
Net sales (purchase) of
real estate ...................... 148 241 (12,601) 3,474
Purchases of premises and
equipment, net.................... (126) (72) (730) (1,716)
---------- -------- ----------- --------
Net cash used for
investing activities ........... (17,521) (53,247) (210,805) (86,564)
Cash flows from financing activities:
Net increase in deposits ......... 2,255 8,006 75,613 47,257
Repayment - Federal Home Loan
Bank advances ....................(2,334,102)(184,802) (10,315,129)(805,006)
Proceeds - Federal Home Loan
Bank advances..................... 2,297,099 188,600 10,448,963 820,800
Proceeds other borrowings....... 3,459 - 3,459 -
Treasury stock purchases.......... (688) (4,028) (8,298) (8,784)
---------- -------- ----------- --------
Net cash provided
by financing activities........... (31,977) 7,776 204,608 54,267
---------- -------- ----------- --------
Net increase (decrease) in cash
and cash equivalents............. (13,961) 2,502 (5,534) (1,026)
Cash and cash equivalents
at beginning of period............ 28,156 19,905 19,729 23,433
---------- -------- ----------- --------
Cash and cash equivalents
at end of period................. $ 14,195 $ 22,407 $ 14,195 $ 22,407
========== ======== =========== ========
Supplemental Information:
Cash paid for interest........... $ 13,047 $ 8,317 $ 36,690 $ 26,484
Cash paid for income taxes....... 537 2,334 2,521 5,119
Real estate acquired in
settlement of loans................. 111 229 1,144 1,130
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PROVIDENT FINANCIAL HOLDINGS, INC.
SELECTED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
Note 1 : Basis of Presentation
The unaudited interim 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, 1999 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 unaudited interim consolidated financial statements be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Annual Report on Form 10-K for the year ended June 30,
1999 (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
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
would then share in the earnings of the entity. The following tables provide
the basic and diluted EPS computations for the quarter and nine months ended
March 31, 2000 and 1999, respectively.
For the Quarter Ended For the Nine Months Ended
March 31, March 31,
--------------------- --------------------------
2000 1999 2000 1999
------ ------ ------- -------
Numerator:
Net income - numerator
for basic earnings
per share and diluted
earnings per share-
income available to
common stockholders.... $ 1,582,107 $ 1,960,169 $ 5,040,312 $ 5,149,347
=========== =========== =========== ===========
Denominator:
Denominator for basic
earnings per share:
Weighted-average
shares................ 3,551,289 4,084,949 3,682,328 4,135,502
Effect of dilutive
securities:
Employee stock benefit
plans.................. - 23,847 62,168 51,281
----------- ----------- ----------- -----------
Denominator for diluted
earnings per share :
Adjusted weighted-
average shares
and assumed
conversions............ 3,551,289 4,108,796 3,744,496 4,186,783
============ =========== =========== ===========
Basic earnings per share. $ 0.45 $ 0.48 $ 1.37 $ 1.25
Diluted earnings per
share................. $ 0.45 $ 0.48 $ 1.35 $ 1.23
Note 3 : Operating Segment Reports
The Company has determined that its reportable segments are the operations
pertaining to mortgage banking and the operations pertaining to consumer and
commercial banking ("Savings Bank"). The
6
<PAGE>
following tables set forth condensed income statements and total assets for
the Company's operating segments for the quarter and nine months ended March
31, 2000 and 1999, respectively.
For the Quarter Ended March 31, 2000
------------------------------------
Savings Mortgage Consolidated
Bank Banking Total
- -----------------------------------------------------------------------------
Net interest income .................$ 6,958 $ 207 $ 7,165
Non-interest income:
Loan servicing and other fees...... (116) 704 588
Gain on sale of loans, net......... 84 184 268
Real estate operations, net........ 188 4 192
Other.............................. 519 2 521
- -----------------------------------------------------------------------------
Total non-interest income......... 675 894 1,569
Non-interest expense:
Salaries and employee benefits..... 2,806 774 3,580
Premises and occupancy............. 337 187 524
Operating and administrative
expenses......................... 1,464 456 1,920
- -----------------------------------------------------------------------------
Total non-interest expense........ 4,607 1,417 6,024
- -----------------------------------------------------------------------------
Operating income before income taxes.$ 3,026 $ (316) $ 2,710
=============================================================================
Total assets, end of period ........ $1,094,638 $ 71,188 $1,165,826
=============================================================================
For the Quarter Ended March 31, 1999
------------------------------------
Savings Mortgage Consolidated
Bank Banking Total
- -----------------------------------------------------------------------------
Net interest income .............. $ 6,163 $ 345 $ 6,508
Non-interest income:
Loan servicing and other fees.... (36) 684 648
Gain on sale of loans, net....... (158) 1,653 1,495
Real estate operations, net...... 255 30 285
Other ........................... 528 14 542
- -----------------------------------------------------------------------------
Total non-interest income....... 589 2,381 2,970
Non-interest expense:
Salaries and employee benefits... 2,887 1,139 4,026
Premises and occupancy .......... 298 154 452
Operating and administrative
expenses ........................ 1,347 262 1,609
- -----------------------------------------------------------------------------
Total non-interest expense...... 4,532 1,555 6,087
- -----------------------------------------------------------------------------
Operating income before
income taxes ..................... $ 2,220 $ 1,171 $ 3,391
=============================================================================
Total assets, end of period..... $ 832,672 $ 51,487 $ 884,159
=============================================================================
7
<PAGE>
For the Nine Months Ended March 31, 2000
----------------------------------------
Savings Mortgage Consolidated
Bank Banking Total
- -----------------------------------------------------------------------------
Net interest income................ $ 21,110 $ 486 $ 21,596
Non-interest income:
Loan servicing and other fees.... (1,649) 3,577 1,928
Gain on sale of loans, net....... 46 1,668 1,714
Real estate operations, net...... 244 9 253
Other ........................... 1,742 2 1,744
- -----------------------------------------------------------------------------
Total non-interest income....... 383 5,256 5,639
Non-interest expense:
Salaries and employee benefits... 8,107 2,837 10,944
Premises and occupancy .......... 992 532 1,524
Operating and administrative
expenses....................... 4,039 2,027 6,066
- -----------------------------------------------------------------------------
Total non-interest expense...... 13,138 5,396 18,534
- -----------------------------------------------------------------------------
Operating income before income
taxes........................... $ 8,355 $ 346 $ 8,701
=============================================================================
Total assets, end of period........ $1,094,638 $ 71,188 $1,165,826
=============================================================================
For the Nine Months Ended March 31, 1999
----------------------------------------
Savings Mortgage Consolidated
Bank Banking Total
- -----------------------------------------------------------------------------
Net interest income................. $ 16,881 $ 808 $ 17,689
Non-interest income:
Loan servicing and other fees..... (636) 2,755 2,119
Gain on sale of loans, net ....... (158) 5,267 5,109
Real estate operations, net....... 552 89 641
Other............................. 1,471 39 1,510
- -----------------------------------------------------------------------------
Total non-interest income........ 1,229 8,150 9,379
Non-interest expense:
Salaries and employee benefits.... 7,929 3,347 11,276
Premises and occupancy............ 1,006 483 1,489
Operating and administrative
expenses ....................... 3,686 1,696 5,382
- -----------------------------------------------------------------------------
Total non-interest expense....... 12,621 5,526 18,147
- -----------------------------------------------------------------------------
Operating income before income
taxes............................. $ 5,489 $ 3,432 $ 8,921
=============================================================================
Total assets, end of period......... $ 832,672 $ 51,487 $ 884,159
=============================================================================
8
<PAGE>
Note 4 : SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities"
This statement establishes new accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. This Statement of Financial Accounting Standards ("SFAS") No. 133
was amended by SFAS No. 137 to extend the implementation date for one year.
SFAS No. 133 will become effective for fiscal quarters beginning after June
15, 2000. Management is assessing the impact of SFAS No. 133, if any, and will
adopt this statement in the first quarter of the fiscal year ending June 30,
2001.
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Provident Financial Holdings, Inc. ("Provident Financial" or the "Company"), a
Delaware corporation, was organized in January 1996 for the purpose of
becoming the holding company for Provident Savings Bank, F.S.B. ("Savings
Bank") upon the Savings Bank's conversion from a federal mutual to a federal
stock savings bank ("Conversion"). The Conversion was completed on June 27,
1996. At March 31, 2000, the Company had total assets of $1.2 billion, total
deposits of $708.5 million and stockholders' equity of $86.7 million.
Provident Financial has not engaged in any significant activity other than
holding the stock of the Savings Bank. Accordingly, the information set forth
in this report, including financial statements and related data, relates
primarily to the Savings Bank and its subsidiaries.
The Savings Bank, founded in 1956, is a federally chartered savings bank
headquartered in Riverside, California. The Savings Bank is regulated by the
Office of Thrift Supervision ("OTS"), its primary federal regulator, and the
Federal Deposit Insurance Corporation ("FDIC"), the insurer of its deposits.
The Savings Bank's deposits are federally insured up to applicable limits by
FDIC (under the Savings Association Insurance Fund ("SAIF")). The Savings Bank
has been a member of the Federal Home Loan Bank ("FHLB") system since 1956.
The Savings Bank's business consists of traditional savings and loan
operations and mortgage banking activities. The savings and loan operations
primarily consist of accepting deposits from customers within the communities
surrounding the Savings Bank's full service offices and investing these funds
in one-to-four-family mortgage loans and, to a lesser extent, in multi-family,
commercial real estate, construction, business, consumer and other loans.
Mortgage banking activities consist of the origination and sale of mortgage
loans secured by one-to-four-family residences and the servicing of such loans
for others. In addition, the Savings Bank also facilitates business loans,
business checking accounts and other business banking services. The Savings
Bank's revenues are derived principally from interest on its loan and
investment portfolio and fees generated through its mortgage banking
activities.
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 Unaudited Interim Consolidated
Financial Statements and accompanying Selected Notes to Unaudited Interim
Consolidated Financial Statements.
Comparison of Financial Condition at March 31, 2000 and June 30, 1999
Total assets increased by $208.4 million, or 22 percent, to $1.2 billion at
March 31, 2000 from $957.4 million at June 30, 1999. This increase was
primarily the result of an increase of $184.6 million, or 26 percent, in total
net loans receivable to $891.7 million at March 31, 2000 from $707.1 million
at June 30, 1999. The rapid growth in portfolio loans was primarily
attributable to a shift in borrower preference toward adjustable rate loans,
which are typically held in portfolio, from fixed rate mortgages, which are
typically sold; and the economic characteristics of the Company's market area.
Funding for this growth was provided by an increase of $75.6 million in
deposits and an increase of $137.3 million in Federal Home Loan Bank advances.
9
<PAGE>
With the current interest rate environment, the Company adopted measures to
control its exposure to interest rate risk. One such measure is the sale of
the current production of all single family, first trust deed, residential
mortgage loans. As a result of this strategy, total loans decreased by $21.5
million to $891.7 million from $913.2 million at the end of the second
quarter. The proceeds of the loan sales were used to pay down FHLB advances.
In addition, the Company began in January 2000 to lengthen the average
maturity of its existing FHLB advances in anticipation of additional rate
increases. These measures, along with others, are intended to raise the
Company's current capital position through reducing the amount of leverage and
thus seeking to mitigate the impact of future interest rate hikes.
Total stockholders' equity decreased by $3.0 million during the period ended
March 31, 2000, which resulted from the completion of the Company's 10 percent
common stock repurchase program announced in July 1999, totaling 439,000
shares or $8.2 million. On March 8, 2000, the Company announced another 5
percent stock repurchase program. No shares have been repurchased under this
program.
Comparison of Operating Results for the Quarter and Nine Months Ended March
31, 2000 and 1999
The Company's net income for the quarter ended March 31, 2000 was $1.6
million, a decrease of $378,000, or 19 percent, from $2.0 million during the
same quarter in 1999. This decrease was primarily attributable to a decrease
in the gain on sale of loans, which was due to the recent increase in interest
rates and lower loan production and sales (please refer to the discussion
below on Non-interest income). For the nine months ended March 31, 2000 and
1999, the Company's net income was $5.0 million and $5.1 million,
respectively.
The Company's net interest income increased by 11 percent to $7.3 million for
the quarter ended March 31, 2000 from $6.6 million during the comparable
period of 1999. The increase in net interest income reflects growth in average
earning assets. The average earning assets during the third quarter 2000 were
$1.1 billion, an increase of $307.4 million, or 37 percent, as compared to
$835.0 million during the same quarter last year. The effect of earning asset
growth was partially offset by a lower net interest margin. The net interest
margin narrowed to 2.57 percent in the third quarter from 3.15 percent during
the same period of 1999. For the nine months ended March 31, 2000 and 1999,
net interest income was $21.8 million and $18.1 million, respectively.
The Company's efficiency ratio increased to 69 percent in the third quarter
from 64 percent in the same period of 1999. This increase was attributable to
the decrease in mortgage banking revenue. For the nine months ended March 31,
2000 and 1999, the efficiency ratio was 68 percent and 67 percent,
respectively.
Return on average assets for the quarter ended March 31, 2000 and 1999 was
0.53 percent and 0.90 percent, respectively. For the nine months ended March
31, 2000 and 1999, the return on average assets was 0.61 percent and 0.81
percent, respectively.
Return on average equity for the quarter ended March 31, 2000 and 1999 was
7.38 percent and 9.24 percent, respectively. For the nine months ended March
31, 2000 and 1999, the return on average equity was 7.77 percent and 8.14
percent, respectively.
Diluted earnings per share for the quarter ended March 31, 2000 was $0.45, a
decrease of 6 percent from $0.48 in the quarter ended March 31, 1999. For nine
months ended March 31, 2000 and 1999, the diluted earnings per share were
$1.35 and $1.23, respectively. The increase in the net earnings per share
reflects the Company's stock repurchase programs during fiscal years 1999 and
2000.
Interest Income. Interest income increased by $5.8 million, or 39 percent, to
$20.7 million for the quarter ended March 31, 2000 from $14.9 million during
the same quarter in 1999. This increase was the result of growth in average
earning assets and higher overall market rates. The average earnings assets
during the third quarter 2000 were $1.1 billion as compared to $835.0 million
during the same period last year. The average yield on earning assets during
the third quarter of fiscal 2000 was 7.25%, 12 basis points higher than the
average yield of 7.13 percent during the same period last year.
10
<PAGE>
Loan interest income increased by $4.2 million, or 32 percent, to $17.3
million in the quarter ended March 31, 2000 as compared to $13.1 million for
the same period in 1999. This increase was attributable to growth in average
loans, including those available for sale, from $716.0 million during the
third quarter of fiscal 1999 to $916.8 million during the same quarter of
fiscal 2000. The average loan yield during the third quarter of fiscal 2000
was 7.53 percent as compared to 7.32 percent during the same quarter last
year.
The interest income from investment securities, including Federal Home Loan
Bank ("FHLB") stock, increased by $1.7 million, or 94 percent to $3.4 million
during the quarter ended March 31, 2000 from $1.8 million during the same
quarter in 1999. This increase was primarily a result of an increase in the
amount of average investment securities and an increase in the average yield.
The average investment securities increased by $106.6 million, or 90 percent,
to $225.6 million during the third quarter of 2000 from $119.0 million in the
same quarter last year. The average yield on investment securities increased
by 13 basis points to 6.09% during the third quarter fiscal 2000 from 5.96%
during the same period last year.
For the nine months ended March 31, 2000, the interest income increased by
$13.3 million, or 30 percent, to $57.1 million as compared to $43.8 million
for the same period in 1999. This increase was attributable to an increase in
average earnings assets from $816.4 million during the nine months of fiscal
1999 to $1.1 billion during the same period of fiscal 2000. The interest
income on loans increased by $7.8 million, or 20 percent, to $47.1 million
during the nine months of fiscal 2000 from $39.3 million during the same
period of fiscal 1999. The average loans increased from $715.0 million to
$838.8 million during the nine months in fiscal 1999 and 2000, respectively.
The average yield on loans increased by 15 basis points to 7.48 percent during
the nine months of fiscal 2000 as compared to 7.33 percent during the same
period in fiscal 1999. The interest income on investments also increased by
$5.5 million, or 121 percent, to $10.0 million during the nine months of
fiscal 2000 from $4.6 million during the same period of fiscal 1999. The
average investments increased from $101.4 million to $220.3 million during the
nine months in fiscal 1999 and 2000, respectively. The average yield on
investments increased by 11 basis points to 6.10 percent during the nine-month
period in fiscal 2000 as compared to 5.99 percent during the same period last
year. As a result, the overall average yield on earning assets increased by 3
basis points to 7.19 percent during the nine months of fiscal 2000 as compared
7.16 percent during to the same period in fiscal 1999.
Interest Expense. Interest expense for the quarter ended March 31, 2000 was
$13.4 million as compared to $8.3 million for the same period in 1999, an
increase of $5.1 million, or 61 percent. This increase was primarily
attributable to increases in average FHLB advances and deposits as well as the
cost of both. The average cost of liabilities was 4.98 percent during the
quarter ended March 31, 2000, up 54 basis points as compared to 4.44 percent
from the same period in 1999. Average deposits increased by $76.9 million, or
13 percent, to $702.9 million during the quarter ended March 31, 2000 as
compared to $626.0 million during the same period in 1999. The average rate
paid on deposits increased to 4.45 percent during the quarter ended March 31,
2000 from 4.32 percent during the same quarter in 1999. The increase in the
average rate on deposits was due to higher market rates and the Company's
efforts to extend the deposit maturities. Borrowings, which are mainly FHLB
advances, averaged $375.7 million during the quarter ended March 31, 2000 as
compared to $132.0 million for the same quarter in 1999. The average rate paid
on the borrowings increased to 5.97 percent for the quarter ended March 31,
2000 from 5.01 percent in the same quarter in 1999. This increase resulted
from the lengthening of short-term borrowings to mitigate the future impact of
rising rates.
For the nine months ended March 31, 2000, total interest expense increased by
$9.7 million, or 38 percent, to $35.4 million as compared to $25.7 million for
the same period in 1999. The average cost of liabilities increased by 9 basis
points to 4.72 percent during the nine months of fiscal 2000 as compared to
4.63 percent during the same period in fiscal 1999. Average deposits increased
by $75.7 million, or 12 percent, to $686.6 million as compared to $610.9
million during the same period in fiscal 1999. The average cost of deposits
decreased by 15 basis points to 4.33 percent during the nine months of fiscal
2000 as compared to 4.48 percent during the same period in fiscal 1999.
Average borrowings increased by $178.1 million, or 137 percent, to $307.7
million as compared to $129.6 million during the same period in fiscal 1999.
The average cost of borrowings increased by 28 basis points to 5.61 percent
during the nine months of fiscal 2000 as compared to 5.33 percent during the
same period in fiscal 1999.
11
<PAGE>
<TABLE>
The following table depicts the average balance sheets for the quarter and nine months ended March 31, 2000
and 1999, respectively:
Average Balance Sheets
(dollars in thousands)
Quarter Ended Quarter Ended
March 31, 2000 March 31, 1999
-------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (1).................... $ 916,825 $ 17,266 7.53% $ 716,010 $ 13,106 7.32%
Investment securities........ 225,629 3,437 6.09% 119,017 1,772 5.96%
---------- -------- ---- --------- -------- ----
Total interest earning
assets..................... 1,142,454 20,703 7.25% 835,027 14,878 7.13%
Non-interest earning assets.. 47,424 35,297
---------- ---------
Total assets................. $1,189,878 $ 870,324
========== =========
Interest-bearing liabilities:
Deposits .................... $ 702,926 7,784 4.45% $ 625,991 6,663 4.32%
Borrowings................... 375,678 5,579 5.97% 132,003 1,632 5.01%
---------- -------- ---- --------- -------- ----
Total interest-bearing
liabilities................ 1,078,604 13,363 4.98% 757,994 8,295 4.44%
Non-interest-bearing
liabilities ............... 25,572 27,507
---------- ---------
Total liabilities............ 1,104,176 785,501
Retained earnings............ 85,702 84,823
---------- ---------
Total liabilities and retained
earnings................... $1,189,878 $ 870,324
========== =========
-------- --------
Net interest income.......... $ 7,340 $ 6,583
======== ========
Interest rate spread (2)...... 2.27% 2.69%
Net interest margin (3)....... 2.57% 3.15%
Ratio of average interest
earning assets to average
interest-bearing
liabilities................. 105.92% 110.16%
Return on average assets...... 0.53% 0.90%
Return on average equity...... 7.38% 9.24%
(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.
</TABLE>
12
<PAGE>
<TABLE>
Average Balance Sheets
(dollars in thousands)
Nine Months Ended Nine Months Ended
March 31, 2000 March 31, 1999
-------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (1)....................$ 838,786 $ 47,068 7.48% $ 715,018 $ 39,315 7.33%
Investment securities ....... 220,338 10,073 6.10% 101,421 4,553 5.99%
---------- -------- ---- --------- -------- ----
Total interest earning
assets..................... 1,059,124 57,141 7.19% 816,439 43,868 7.16%
Non-interest earning assets.. 46,715 34,355
---------- ---------
Total assets.................$1,105,839 $ 850,794
========== =========
Interest-bearing liabilities:
Deposits.....................$ 686,604 22,395 4.33% $ 610,889 20,540 4.48%
Borrowings................... 307,716 12,975 5.61% 129,618 5,189 5.33%
---------- -------- ---- --------- -------- ----
Total interest-bearing
liabilities................ 994,320 35,370 4.72% 740,507 25,729 4.63%
Non-interest-bearing
liabilities................ 25,010 26,960
---------- ---------
Total liabilities............ 1,019,330 766,467
Retained earnings............ 86,509 84,327
---------- ---------
Total liabilities and
retained earnings..........$1,105,839 $ 850,794
========== -------- ========= --------
Net interest income.......... $ 21,771 $ 18,139
======== ========
Interest rate spread (2)..... 2.47% 2.54%
Net interest margin (3)...... 2.74% 2.96%
Ratio of average interest
earning assets to
average interest-
bearing liabilities ....... 106.52% 110.25%
Return on average assets..... 0.61% 0.81%
Return on average equity..... 7.77% 8.14%
(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.
</TABLE>
13
<PAGE>
The following table provides the rate/volume variances for the quarter and
nine months ended March 31, 2000 and 1999, respectively:
Rate/Volume Variance
(dollars in thousands)
Quarter Ended March 31, 2000
Compared to Quarter Ended March 31, 1999
Increase (Decrease) Due to
- ------------------------------------------------------------------------------
Rate/
Rate Volume Volume Net
---- ------ ------ ---
Interest income
Loans (1).......................... $ 378 $ 3,676 $ 106 $ 4,160
Investment securities.............. 48 1,600 17 1,665
------ -------- ------ --------
Total net change in income
on interest-earning assets........ 426 5,276 123 5,825
Interest-bearing liabilities:
Deposits........................... 159 943 19 1,121
Borrowings......................... 311 3,047 589 3,947
------ -------- ------ --------
Total net change in expense on
interest-bearing liabilities...... 470 3,990 608 5,068
------ -------- ------ --------
Net change in net interest income... $ (44) $ 1,286 $ (485) $ 757
====== ======== ====== =======
(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.
14
<PAGE>
Rate/Volume Variance
(dollars in thousands)
Nine months Ended March 31, 2000
Compared to Nine months Ended March 31, 1999
Increase (Decrease) Due to
- ------------------------------------------------------------------------------
Rate/
Rate Volume Volume Net
---- ------ ------ ---
Interest income
Loans (1).......................... $ 808 $ 6,805 $ 140 $ 7,753
Investment securities.............. 35 5,494 (9) 5,520
------ -------- ------ --------
Total net change in income
on interest-earning assets......... 843 12,299 131 13,273
Interest-bearing liabilities:
Deposits........................... (690) 2,644 (99) 1,855
Borrowings ........................ 258 7,156 372 7,786
------ -------- ------ --------
Total net change in expense on
interest-bearing liabilities....... (432) 9,800 273 9,641
------ -------- ------ --------
Net change in net interest income .. $1,275 $ 2,499 $ (142) $ 3,632
====== ======== ====== ========
(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 Company increased its provision for loan
losses by $100,000 during the third quarter of fiscal 2000 to $175,000 as
compared to $75,000 for the same period in fiscal 1999. This measure was taken
because of substantial growth in the loan portfolio during the prior two
quarters. The allowance for loan losses was $6.9 million at March 31, 2000, an
increase from $6.4 million a year earlier. The allowance as a percent of gross
loans held for investment at March 31, 2000 was 0.81 percent as compared to
1.00 percent at March 31, 1999. Net charge offs were $10,000 during the nine
months of fiscal 2000 as compared to net charge offs of $205,000 during the
same period of 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 the 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 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.
15
<PAGE>
The following table is 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, 2000 March 31, 1999
-------------- --------------
Allowance at beginning of period ........ $ 6,727 $ 6,186
Provision for loan losses................ 175 450
Recoveries:
Mortgage loans:
One-to-four family...................... - 17
Multifamily............................. - -
Commercial.............................. - -
Construction............................ - -
Consumer loans.......................... - 35
Commercial business lending............. - -
-------- --------
Total recoveries.................... - 52
Charge-offs:
Mortgage loans:
One-to-four family...................... - (201)
Multifamily............................. (5) -
Commercial.............................. - -
Construction............................ - -
Consumer loans.......................... - (56)
Commercial business lending............. (5) -
-------- --------
Total charge-offs................... (10) (257)
-------- --------
Net recoveries (charge-offs)........ - (205)
-------- --------
Balance at end of period.......... $ 6,892 $ 6,431
======== ========
Allowance for loan losses as a percentage
of gross loans held for investment...... 0.81% 0.96%
Net recovery (charge offs) as a percentage
of average loans outstanding during
the period.............................. - (0.04%)
Allowance for loan losses as a percentage
of non-performing loans at the end
of the period........................... 357.47% 233.35%
16
<PAGE>
Asset Quality. The following table is provided to disclose additional details
on asset quality (dollars in thousands) :
At March 31, At March 31,
2000 1999
---- ----
Loans accounted for on a non-accrual basis:
Mortgage loans:
One-to-four family........................... $ 1,759 $ 2,337
Multifamily.................................. - 413
Commercial................................... 63 -
Construction................................. - -
Consumer loans............................... 104 -
Commercial business lending.................. - -
Other loans.................................. - -
-------- --------
Total..................................... 1,926 2,750
Accruing loans which are contractually
past due 90 days or more:
Mortgage loans:
One-to-four family........................... - -
Multifamily.................................. - -
Commercial................................... - -
Construction................................. - -
Consumer loans............................... - -
Commercial business lending.................. - -
Other loans ................................. - -
-------- --------
Total..................................... - -
Total of non-accrual and 90 days
past due loans................................. 1,926 2,750
Real estate owned.............................. 1,734 1,801
-------- --------
Total non-performing assets............... $ 3,660 $ 4,551
======== ========
Restructured loans............................. $ 1,487 $ 1,564
Non-accrual and 90 days or more past due loans
as a percentage of loans held for
investment, net............................... 0.23% 0.43%
Non-accrual and 90 days or more past due loans
as a percentage of total assets............... 0.17% 0.31%
Non-performing assets as a percentage of
total assets.................................. 0.31% 0.51%
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.
17
<PAGE>
Non-Interest Income. Non-interest income decreased by $1.4 million, or 47
percent, to $1.6 million during the quarter ended March 31, 2000 from $3.0
million during the same period in 1999. The decrease in non-interest income
was primarily attributable to a decrease in gains from the sale of loans.
Total loans sold during the third quarter of fiscal 2000 decreased by $63.3
million, or 33 percent, to $130.7 million as compared to $193.9 million in the
same period in fiscal 1999. The ratio of gains to loans sold was 0.21 percent
in the third quarter 2000, down from 1.0 percent a year earlier.
For the nine months ended March 31, 2000, the non-interest income decreased by
$3.5 million, or 37 percent, to $5.6 million as compared to $9.4 million for
the same period in 1999. Total loans sold during the nine months of fiscal
2000 decreased by $242.4 million, or 46 percent, to $281.3 million as compared
to $523.8 million in the same period in fiscal 1999. The ratio of gains to
loans sold was 0.61 percent during the nine months ended March 31, 2000, down
from 1.0 percent a year earlier.
Non-Interest Expenses. Non-interest expenses decreased by $63,000 to $6.0
million during the quarter ended March 31, 2000 from $6.1 million in the same
period in 1999. This decrease was primarily attributable to (a) a decrease in
the incentive based compensation related to the loan production/mortgage
banking division and (b) a decrease in professional expenses associated with
last year's Y2K consultant costs. These decreases were partially offset by (a)
an increase in equipment expenses as a result of the computer system
renovation/ Y2K project, (b) an increase in depreciation and office rentals as
a result of additional offices for the banking and mortgage operations, and
(c) an increase in sales and marketing expenses as a result of the Company's
general image advertising and deposit campaigns. Non-interest expenses as
percentage of average assets improved to 2.03 percent during the third quarter
of fiscal 2000 from 2.80 percent during the same period in fiscal 1999.
For the nine months ended March 31, 2000, the non-interest expenses increased
by $387,000 to $18.5 million as compared to $18.1 million for the same period
in 1999. This increase was due primarily because the increases in equipment
and marketing expenses were greater than the decrease in the incentive based
compensation. Non-interest expenses as percentage of average assets also
improved to 2.23 percent during the nine months of fiscal 2000 from 2.84
percent during the same period in fiscal 1999.
Income taxes. Income tax expense was $1.1 million for the quarter ended March
31, 2000 as compared to $1.4 million during the same period in 1999. For the
nine months ended March 31, 2000, the income tax expense was $3.7 million as
compared to $3.8 million during the same period in 1999. The effective tax
rate for the third quarter and for nine months ended March 31, 2000 and 1999
was 42 percent.
18
<PAGE>
The following table is provided to disclose additional details related to the
volume of loans originated, purchased and sold (dollars in thousands):
Loan Volume Activities
For the For the Nine
Quarter Ended Months Ended
March 31, March 31,
-------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
Loans originated for sale :
Retail originations............... $ 49,874 $ 65,055 $173,590 $229,518
Wholesale originations............ 42,238 83,370 119,548 285,212
-------- -------- -------- --------
Total loans originated for sale.. 92,112 148,425 293,138 514,730
Loans sold:
Servicing released................ 130,656 193,501 280,035 522,328
Servicing retained................ - 435 1,275 1,425
-------- -------- -------- --------
Total loans sold................. 130,656 193,936 281,310 523,753
Loans originated for portfolio:
Mortgage loans:
One-to-four family.............. 17,947 40,872 193,873 123,730
Multifamily..................... - - 2,100 -
Commercial...................... 450 2,093 3,063 4,168
Construction loans.............. 11,477 5,526 38,292 20,275
Consumer........................ 4,791 8,164 13,209 21,009
Commercial business lending..... 624 1,887 6,441 10,172
Other loans..................... 203 59 875 169
-------- -------- -------- --------
Total loans originated for
portfolio...................... 35,492 58,601 257,853 179,523
Loans purchased:
Mortgage loans:
One-to-four family.............. 703 - 703 -
Commercial...................... 789 - 5,915 1,010
-------- -------- -------- --------
Total loans purchased............ 1,492 - 6,618 1,010
Mortgage loan principal
repayments........................ 22,663 55,055 95,618 170,571
Real estate acquired in
settlement of loans............... 111 229 1,144 1,130
Increase in other items, net (1)... 3,271 2,630 5,596 4,314
-------- -------- -------- --------
Net increase in loans receivable,
net............................... $(21,063) $(39,564) $185,133 $ 4,123
======== ======== ======== ========
(1) Includes changes in loans in process, discounts, deferred fees and costs
and loan loss reserves.
19
<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 the FHLB of San
Francisco equal to 40 percent of total assets, which, on March 31, 2000
permitted additional advances of $131.8 million, in addition to having
unsecured lines of $74 million 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, 2000, the
Savings Bank originated $127.6 million of loans as compared to $207.0 million
during the same period in 1999. For nine months ended March 31, 2000, the Bank
originated $551.0 million of loans as compared to $694.3 million during the
same period in 1999. This activity was funded primarily by loan sales, loan
principal payments, deposits and FHLB advances. For the quarter ended March
31, 2000, loan sales aggregated $130.7 million and loan principal payments
totaled $22.7 million. For nine months ended March 31, 2000, loans sales
aggregated $281.3 million and loan principal payments totaled $95.6 million.
By regulation, the Savings Bank must maintain a minimum liquidity equal to 4
percent 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 of fiscal 2000 and 1999 were 9.5
percent and 16.9 percent, 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 judgments 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, 2000 are as
follows (dollars in thousands):
Amount Percent
------ -------
Tangible capital...................... $ 72,020 6.26%
Requirement to be "Well Capitalized".. 23,027 2.00%
--------- -----
Excess over requirement............... $ 48,993 4.26%
========= =====
Tier 1 (core) capital.................. $ 72,020 6.26%
Requirement to be "Well Capitalized"... 57,568 5.00%
--------- -----
Excess over requirement................ $ 14,452 1.26%
========= =====
Total risk-based capital............... $ 79,180 12.66%
Requirement to be "Well Capitalized"... 62,533 10.00%
--------- -----
Excess over requirement................ $ 16,647 2.66%
========= =====
Tier 1 risk-based capital.............. $ 72,020 11.52%
Requirement to be "Well Capitalized"... 37,520 6.00%
--------- -----
Excess over requirement................ $ 34,500 5.52%
========= =====
Year 2000 Project
Conclusion:
- -----------
The Company successfully managed to pass through the critical rollover date
for the year 2000 and continues to monitor the overall systems and critical
vendors. The overall Year 2000 project is within the
20
<PAGE>
budget of $3.5 million, which was allocated at the beginning of the project.
As of the end of the third quarter, the Year 2000 project is in compliance
with FFIEC dates.
Supplemental Information
March 31, 2000 June 30, 1999 March 31, 1999
-------------- ------------- --------------
Loans serviced for
others (in thousands)... $ 286,708 $ 315,028 $ 353,139
Book value per share...... $ 21.99 $ 20.45 $ 19.16
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, 1999.
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.
21
<PAGE>
Item 5. Other Information
a) Stock repurchase programs:
- ----------------------------
On March 8, 2000, the Company announced the completion of the 10 percent of
the stock repurchased program of which 439,000 shares had been repurchased
with an average price of $18.74. The Company also announced another repurchase
of up to 5 percent of its common stock, or approximately 197,000 shares, over
a one-year period. This repurchase represents the fifth buyback through which
the Company has previously retired approximately 1.2 million shares.
b) Status on Branch Expansion to Corona, California:
- ---------------------------------------------------
As a result of continued construction delays by the developer, the Company had
decided to seek another suitable site in Corona. The revised expected opening
of the Corona branch will be announced later.
c) Status on Branch Expansion to Temecula, California:
- -----------------------------------------------------
The negotiations with the proposed site owner are in progress and the revised
expected opening of the Temecula branch will be announced later.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
None.
b) Reports on Form 8-K
None.
22
<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 9, 2000 /s/ Craig G. Blunden
--------------------------------------
Craig G. Blunden
President and Chief Executive Officer
(Principal Executive Officer)
May 8, 2000 /s/ Brian M. Riley
--------------------------------------
Brian M. Riley
Chief Financial Officer
(Principal Financial and Accounting Officer)
23
<PAGE>
Exhibit 27
Financial Data Schedule
This schedule contains financial information extracted from the unaudited
interim consolidated financial statements of Provident Financial Holdings for
the nine months ended March 31, 2000 and is qualified in its entirety by
reference to such financial statements.
Financial Data
As of or for the Nine Months
Item Number Ended March 31, 2000 Item Description
- ----------- -------------------- ----------------
9-03 (1) 14,195 Cash and due from Banks
9-03 (2) 689,957 Interest-bearing deposits
9-03 (3) 3,000 Federal funds sold purchased securities
for resale
9-03 (4) - Trading account assets
9-03 (6) 25,250 Investment and mortgage backed
securities held for sale.
9-03 (6) 175,230 Investment and mortgage backed
securities held to maturity carrying
value
9-03 (6) 166,788 Investment and mortgage backed
securities held to maturity market
value
9-03 (7) 898,628 Loans
9-03 (7) (2) 6,892 Allowance for losses
9-03 (11) 1,165,826 Total assets
9-03 (12) 708,493 Deposits
9-03 (13) 203,000 Short-term borrowings
9-03 (15) 18,807 Other liabilities
9-03 (16) 148,800 Long-term debt
9-03 (19) - Preferred stock - mandatory redemption
9-03 (20) - Preferred stock - no mandatory
redemption
9-03 (21) 51 Common stock
9-03 (22) 86,675 Other stockholders' equity
9-03 (23) 1,165,826 Total liabilities and stockholders'
equity
9-04 (1) 48,996 Interest and fees on loans
9-04 (2) 10,073 Interest and dividends on investment
securities
9-04 (4) - Other interest income
9-04 (5) 57,141 Total interest income
9-04 (6) 22,395 Interest on deposits
9-04 (9) 35,370 Total interest expense
9-04 (10) 21,771 Net interest income
9-04 (11) 175 Provision for loan losses
9-04 (13) (h) 38 Investment securities gains/ (losses)
9-04 (14) 18,534 Other expenses
9-04 (15) 8,701 Income/loss before income tax
9-04 (17) 8,701 Income/loss before extraordinary items
9-04 (18) - Extraordinary items, loss tax
9-04 (19) - Cumulative change in accounting
principles
9-04 (20) 5,040 Net income or loss
9-04 (21) 1.37 Earnings per share - basic
9-04 (21) 1.35 Earnings per share - fully diluted
I.B.5 2.74 Net yield - interest earning assets
actual
III.C.1.(a) 1,926 Loans on non-accrual
III.C.1.(b) - Accruing loans past due 90 days or more
III.C.2.(c) 1,487 Troubled debt restructuring
III.C.2 8,576 Potential problem loans
IV.A.1 6,727 Allowance for loan losses - beginning
of period
<PAGE>
(Continued)
Financial Data
As of or for the Nine Months
Item Number Ended March 31, 2000 Item Description
- ----------- -------------------- ----------------
IV.A.2 0 Total charge-offs
IV.A.3 10 Total recoveries
IV.A.4 6,892 Allowance for loan losses - end of
period
IV.B.1 6,892 Loan loss allowance allocated to
domestic loans
IV.B.2 - Loan loss allowance allocated to foreign
loans
IV.B.3 - Loan loss allowance - unallocated
<PAGE>
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<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
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0
0
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<NET-INCOME> 5040
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<LOANS-PAST> 0
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