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Provident Financial Holdings Inc. Reports Operating Results (10-Q)

November 13, 2009 | About:
10qk

10qk

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Provident Financial Holdings Inc. (PROV) filed Quarterly Report for the period ended 2009-09-30.

Provident Financial Holdings, Inc. is the holding company for Provident Savings Bank, F.S.B. Provident Financial Holdings Inc. has a market cap of $29.9 million; its shares were traded at around $4.81 with and P/S ratio of 0.3. The dividend yield of Provident Financial Holdings Inc. stocks is 0.8%. Provident Financial Holdings Inc. had an annual average earning growth of 14.1% over the past 10 years.

Highlight of Business Operations:

Loans held for investment decreased $57.0 million, or five percent, to $1.11 billion at September 30, 2009 from $1.17 billion at June 30, 2009. Total loan principal payments during the first three months of fiscal 2010 were $37.6 million, compared to $50.9 million during the comparable period in fiscal 2009. During the first three months of fiscal 2010, the Bank originated $105,000 of loans held for investment, all of which were single-family loans. The Bank did not purchase any loans for investment in the first three months of fiscal 2010 and 2009, given the economic uncertainty of the current banking environment. The balance of preferred loans decreased to $491.2 million, or 42 percent of loans held for investment at September 30, 2009, as compared to $508.7 million, or 42 percent of loans held for investment at June 30, 2009. Purchased loans serviced by others at September 30, 2009 were $24.0 million, or two percent of loans held for investment, compared to $125.4 million, or 11 percent of loans held for investment at June 30, 2009. The decrease in the purchased loans serviced by others was primarily attributable to the Bank s decision to acquire approximately $95.3 million of loan servicing from one of its loan servicers who no longer meets its contractual loan servicing covenants, resulting in a 25 basis point increase to the loan yield of the impacted loans.

Net interest income (before the provision for loan losses) decreased $1.2 million, or 11 percent, to $10.1 million for the quarter ended September 30, 2009 from $11.3 million in the comparable period in fiscal 2009 due primarily to declines in the net interest margin and average earning assets. The net interest margin was 2.69 percent in the first quarter of fiscal 2010, down 20 basis points from 2.89 percent for the same period of fiscal 2009. The decrease in the net interest margin during the first quarter of fiscal 2010 was primarily attributable to a decrease in the average yield on earning assets which declined more than the average cost of funds. The average balance of earning assets decreased $58.3 million to $1.51 billion in the first quarter of fiscal 2010 from $1.56 billion in the comparable period of fiscal 2009.

Loans receivable interest income decreased $2.6 million, or 13 percent, to $18.1 million in the quarter ended September 30, 2009 from $20.7 million for the same quarter of fiscal 2009. This decrease was attributable to a lower average loan yield and a lower average loan balance. The average loan yield during the first quarter of fiscal 2010 decreased 36 basis points to 5.65 percent from 6.01 percent during the same quarter last year. The decrease in the average loan yield was primarily attributable to accrued interest income reversals from newly classified non-accrual loans, the repricing of adjustable rate loans to lower interest rates and loan payoffs on loans which carried a higher average yield than the average yield of loans receivable. The average balance of loans outstanding, including loans held for sale, decreased $90.5 million, or seven percent, to $1.28 billion during the first quarter of fiscal 2010 from $1.38 billion in the same quarter of fiscal 2009.

Interest income from investment securities decreased $810,000, or 43 percent, to $1.1 million during the quarter ended September 30, 2009 from $1.9 million in the same quarter of fiscal 2009. This decrease was primarily a result of a decrease in the average balance and a decrease in average yield. The average balance of investment securities decreased $51.8 million, or 33 percent, to $103.0 million in the first quarter of fiscal 2010 from $154.8 million in the same quarter of fiscal 2009. The decrease in the average balance was primarily due to the sale of investment securities as well as the scheduled and accelerated principal payments on mortgage-backed securities. The average yield on investment securities decreased 67 basis points to 4.25 percent during the quarter ended September 30, 2009 from 4.92 percent during the quarter ended September 30, 2008. The decrease in the average yield of investment securities was primarily attributable to the sale of investment securities with a higher average yield, the repricing of mortgage-backed securities to lower interest rates and a higher net premium amortization ($58,000 in the first quarter of fiscal 2010 as compared to $23,000 in the comparable quarter of fiscal 2009). During the first quarter of fiscal 2010, the Bank did not purchase any investment securities, while $13.4 million of principal payments were received on mortgage-backed securities.

Interest expense on deposits for the quarter ended September 30, 2009 was $4.8 million as compared to $7.0 million for the same period of fiscal 2009, a decrease of $2.2 million, or 31 percent. The decrease in interest expense on deposits was primarily attributable to a lower average cost and a slightly lower average balance. The average cost of deposits decreased to 1.93 percent during the quarter ended September 30, 2009 from 2.85 percent during the same quarter of fiscal 2009, a decrease of 92 basis points. The decrease in the average cost of deposits was attributable primarily to new time deposits with a lower average cost replacing maturing time deposits with a higher average cost, consistent with declining short-term interest rates. The average balance of deposits decreased $3.5 million to $977.5 million during the quarter ended September 30, 2009 from $981.0 million during the same period of fiscal 2009. The decline in the average balance was primarily in time deposits, the result of the Bank s strategic decision to compete less aggressively for this product, partly offset by an increase in transaction (core) deposits. The average balance of transaction deposits to total deposits in the first quarter of fiscal 2010 was 38 percent, compared to 35 percent in the same period of fiscal 2009.

Interest expense on borrowings, consisting of FHLB – San Francisco advances, for the quarter ended September 30, 2009 decreased $185,000, or four percent, to $4.5 million from $4.7 million for the same period of fiscal 2009. The decrease in interest expense on borrowings was primarily a result of a lower average balance, partly offset by a higher average cost. The average balance of borrowings decreased $24.6 million, or five percent, to $454.3 million during the quarter ended September 30, 2009 from $478.9 million during the same period of fiscal 2009, consistent with the Corporation s short-term deleveraging strategy. The average cost of borrowings increased to 3.94 percent for the quarter ended September 30, 2009 from 3.90 percent in the same quarter of fiscal 2009, an increase of four basis points. The increase in the average cost of borrowings was primarily the result of a lower average balance of short-term advances. Short-term advance interest rates remained at relatively low levels as a result of U.S. Treasury and Federal Reserve Board actions.

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