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

September 13, 2012 | About:

Provident Financial Holdings, Inc. (NASDAQ:PROV) filed Annual Report for the period ended 2012-06-30.

Provident Financial Holdings, Inc. has a market cap of $145.3 million; its shares were traded at around $13.61 with a P/E ratio of 13.7 and P/S ratio of 1.5. The dividend yield of Provident Financial Holdings, Inc. stocks is 1.5%.

Highlight of Business Operations:

respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, recourse obligations, residual interests and direct credit substitutes, are multiplied by a risk-weight factor of 0% to 100%, assigned by the OCC capital regulation based on the risks believed inherent in the type of asset. Tier 1 leverage capital is defined as common stockholders equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. At June 30, 2012, the Bank met each of these capital requirements. For additional information, including the capital levels of the Bank, see Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Delaware. As a Delaware holding company not earning income in Delaware, the Corporation is exempted from Delaware corporate income tax, but is required to file an annual report with and pay an annual franchise tax to the State of Delaware. In fiscal 2012, 2011 and 2010, the Corporation paid the annual franchise tax of $180,000, $180,000 and $135,000, respectively.

For the fiscal years ended June 30, 2012 and 2011 we recorded a provision for loan losses of $5.8 million and $5.5 million, respectively. We also recorded net loan charge-offs of $14.8 million and $18.5 million for the fiscal years ended June 30, 2012 and 2011, respectively. Adverse conditions in the general economy and our markets have been a significant contributing factor to increased levels of loan delinquencies and non-performing assets during the past two fiscal years. General economic conditions, decreased home prices, slower sales and excess inventory in the housing market have caused delinquencies and foreclosures of our single-family residential loans to remain high during the past two fiscal years. Single-family residential loans and properties represented 85.0% of our non-performing assets at June 30, 2012. At June 30, 2012, our total non-performing assets had decreased to $40.0 million compared to $45.5 million at June 30, 2011 and $73.5 million at June 30, 2010. Our allowance for loan losses was 2.63% of gross loans held for investment and 52.45% of non-performing loans at June 30, 2012.

We reported net income of $10.8 million, $13.2 million and $1.1 million for the fiscal years ended June 30, 2012, 2011 and 2010, respectively. The meager net income in fiscal 2010 primarily resulted from our high level of non-performing assets and the resultant increased provision for loan losses. Although net income has improved in fiscal 2012 and 2011 and our non-performing assets have declined, we continue to monitor the levels of non-performing assets and provision for loan losses, as significant increases in our non-performing assets and provision for loan losses could cause us to incur net losses in future quarterly or annual periods. In addition, several factors affecting our business can cause significant variations in our quarterly and annual results of operations. In particular, variations in the volume of our loan originations and sales, the differences between our costs of funds and the average interest rates of originated or purchased loans, our inability to complete significant loan sale transactions in a particular quarter and problems generally affecting the mortgage loan industry can result in significant increases or decreases in our revenues from quarter to quarter. A delay in closing a particular loan sale transaction during a quarter or year could postpone recognition of the gain on sale of loans. If we were unable to sell a sufficient number of loans at a premium in a particular reporting period, our revenues for such period would decline, resulting in lower net income and possibly a net loss for such period, which could have a material adverse effect on our results of operations and financial condition.

Provision for Loan Losses. During fiscal 2011, the Corporation recorded a provision for loan losses of $5.5 million, compared to a provision for loan losses of $21.8 million during fiscal 2010. The decrease in the provision for loan losses reflects reductions in non-performing and classified assets and net charge-offs. The provision for loan losses in fiscal 2011 was primarily attributable to loan classification downgrades, including non-performing loans (which resulted in a $14.6 million loan loss provision), partly offset by the general loan loss allowance for loans held for investment (which resulted in a $7.1 million loan loss recovery) and a decline in loans held for investment (which resulted in a $2.0 million loan loss recovery). The general loan loss allowance was adjusted to reflect an improved quality of loans held for investment as described below, despite persistently weak general economic conditions in the U.S. and Southern California, in particular, high unemployment rates, low gross domestic product, weak real estate markets and lower retail sales.

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