Company Quick10K Filing
Quick10K
Provident Financial
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$19.70 8 $148
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-K 2018-06-30 Annual: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-K 2017-06-30 Annual: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-K 2016-06-30 Annual: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
8-K 2019-01-30 Other Events
8-K 2019-01-29 Exit Costs, Other Events, Exhibits
8-K 2019-01-29 Other Events, Exhibits
8-K 2019-01-28 Earnings, Regulation FD, Exhibits
8-K 2019-01-28 Earnings, Regulation FD, Exhibits
8-K 2018-11-27 Shareholder Vote
8-K 2018-10-29 Earnings, Regulation FD, Exhibits
8-K 2018-10-25 Other Events, Exhibits
8-K 2018-07-31 Other Events, Exhibits
8-K 2018-07-30 Earnings, Regulation FD, Exhibits
8-K 2018-04-26 Other Events, Exhibits
8-K 2018-01-30 Other Events, Exhibits
8-K 2018-01-29 Earnings, Regulation FD, Exhibits
8-K 2018-01-09 Other Events
TFSL TFS Financial
PFS Provident Financial Services
FDEF First Defiance Financial
FMAO Farmers & Merchants Bancorp
FCAP First Capital
SFBC Sound Financial Bancorp
KFFB Kentucky First Federal Bancorp
CBMB CBM Bancorp
FSBC FSB Bancorp
EFBI Eagle Financial Bancorp
PROV 2018-12-31
Note 1: Basis of Presentation
Note 2: Accounting Standard Updates ("Asu")
Note 3: Earnings (Loss) per Share
Note 4: Operating Segment Reports
Note 5: Investment Securities
Note 6: Loans Held for Investment
Note 7: Derivative and Other Financial Instruments with Off-Balance Sheet Risks
Note 8: Fair Value of Financial Instruments
Note 9: Incentive Plans
Note 10: Reclassification Adjustment of Accumulated Other Comprehensive Income ("Aoci")
Note 11: Offsetting Derivative and Other Financial Instruments
Note 12: Revenue From Contracts with Customers
Note 13: Income Taxes
Note 14: Subsequent Events
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.
Item 4 - Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex311123118q.htm
EX-31.2 ex312123118q.htm
EX-32.1 ex3212318q.htm
EX-32.2 ex322123118.htm

Provident Financial Earnings 2018-12-31

PROV 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 prov10q123118.htm FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the quarterly period ended
December 31, 2018

[   ]
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 000-28304

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)

(951) 686-6060
(Registrant's telephone number, including area code)

_________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark 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.  Yes  X     No      .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  X     No      .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [   ]     Accelerated filer  [X]     Non-accelerated filer  [   ]     Smaller reporting company  [X]     Emerging growth company [   ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes            No   X  .

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 February 4, 2019
Common stock, $ 0.01 par value, per share
 
7,509,855 shares

PROVIDENT FINANCIAL HOLDINGS, INC.
Table of Contents
PART 1  -
FINANCIAL INFORMATION
Page
       
ITEM 1  -
Financial Statements.  The Unaudited Interim Condensed Consolidated Financial Statements of
Provident Financial Holdings, Inc. filed as a part of the report are as follows:
 
       
 
Condensed Consolidated Statements of Financial Condition
 
   
as of December 31, 2018 and June 30, 2018
1
 
Condensed Consolidated Statements of Operations
 
   
for the Quarters and Six Months Ended December 31, 2018 and 2017
2
 
Condensed Consolidated Statements of Comprehensive Income
 
   
for the Quarters and Six Months Ended December 31, 2018 and 2017
3
 
Condensed Consolidated Statements of Stockholders' Equity
 
   
for the Quarters and Six Months Ended December 31, 2018 and 2017
4
 
Condensed Consolidated Statements of Cash Flows
 
   
for the Six Months Ended December 31, 2018 and 2017
6
 
Notes to Unaudited Interim Condensed Consolidated Financial Statements
 7
       
ITEM 2  -
Management's Discussion and Analysis of Financial Condition and Results of Operations:
 
       
 
General
51
 
Safe-Harbor Statement
52
 
Critical Accounting Policies
53
 
Executive Summary and Operating Strategy
53
 
Off-Balance Sheet Financing Arrangements and Contractual Obligations
54
 
Comparison of Financial Condition at December 31, 2018 and June 30, 2018
55
 
Comparison of Operating Results
 
   
for the Quarters and Six Months Ended December 31, 2018 and 2017
57
 
Asset Quality
68
 
Loan Volume Activities
76
 
Liquidity and Capital Resources
77
 
Supplemental Information
80
       
ITEM 3  -
Quantitative and Qualitative Disclosures about Market Risk
80
       
ITEM 4  -
Controls and Procedures
84
       
PART II  -
OTHER INFORMATION
 
       
ITEM 1  -
Legal Proceedings
85
ITEM 1A -
Risk Factors
85
ITEM 2  -
Unregistered Sales of Equity Securities and Use of Proceeds
86
ITEM 3  -
Defaults Upon Senior Securities
86
ITEM 4  -
Mine Safety Disclosures
86
ITEM 5  -
Other Information
86
ITEM 6  -
Exhibits
86
       
SIGNATURES
89
 

.
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Financial Condition
(Unaudited)
In Thousands, Except Share Information
 
   December 31,
2018
   
June 30,
2018
 
Assets
           
  Cash and cash equivalents
 
$
67,359
   
$
43,301
 
  Investment securities – held to maturity, at cost
   
84,990
     
87,813
 
  Investment securities – available for sale, at fair value
   
6,563
     
7,496
 
  Loans held for investment, net of allowance for loan losses of
  $7,061 and $7,385, respectively; includes $4,995 and $5,234 at fair value, respectively
   
875,413
     
902,685
 
  Loans held for sale, at fair value
   
57,562
     
96,298
 
  Accrued interest receivable
   
3,156
     
3,212
 
  Real estate owned, net
   
     
906
 
  Federal Home Loan Bank ("FHLB") – San Francisco stock
   
8,199
     
8,199
 
  Premises and equipment, net
   
8,601
     
8,696
 
  Prepaid expenses and other assets
   
15,327
     
16,943
 
                 
        Total assets
 
$
1,127,170
   
$
1,175,549
 
                 
Liabilities and Stockholders' Equity
               
                 
Liabilities:
               
  Non interest-bearing deposits
 
$
78,866
   
$
86,174
 
  Interest-bearing deposits
   
794,018
     
821,424
 
          Total deposits
   
872,884
     
907,598
 
                 
  Borrowings
   
111,135
     
126,163
 
  Accounts payable, accrued interest and other liabilities
   
20,474
     
21,331
 
          Total liabilities
   
1,004,493
     
1,055,092
 
                 
Commitments and Contingencies  (Notes 7 and 11)
               
                 
Stockholders' equity:
               
  Preferred stock, $.01 par value (2,000,000 shares authorized;
  none issued and outstanding)
   
     
 
  Common stock, $.01 par value (40,000,000 shares authorized;
  18,053,115 and 18,033,115 shares issued; 7,506,855 and
  7,421,426 shares outstanding, respectively)
   
181
     
181
 
  Additional paid-in capital
   
95,913
     
94,957
 
  Retained earnings
   
192,306
     
190,616
 
  Treasury stock at cost (10,546,260 and 10,611,689 shares, respectively)
   
(165,892
)
   
(165,507
)
  Accumulated other comprehensive income, net of tax
   
169
     
210
 
                 
          Total stockholders' equity
   
122,677
     
120,457
 
                 
          Total liabilities and stockholders' equity
 
$
1,127,170
   
$
1,175,549
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
1


 
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
In Thousands, Except Per Share Information
 
   
Quarter Ended
December 31,
   
Six Months Ended
December 31,
 
   
2018
   
2017
   
2018
   
2017
 
Interest income:
                       
   Loans receivable, net
 
$
10,331
   
$
9,735
   
$
20,505
   
$
19,892
 
   Investment securities
   
444
     
319
     
789
     
576
 
   FHLB – San Francisco stock
   
278
     
143
     
421
     
284
 
   Interest-earning deposits
   
387
     
168
     
725
     
358
 
   Total interest income
   
11,440
     
10,365
     
22,440
     
21,110
 
                                 
Interest expense:
                               
   Checking and money market deposits
   
117
     
112
     
225
     
215
 
   Savings deposits
   
147
     
149
     
298
     
298
 
   Time deposits
   
630
     
625
     
1,251
     
1,264
 
   Borrowings
   
715
     
728
     
1,478
     
1,464
 
   Total interest expense
   
1,609
     
1,614
     
3,252
     
3,241
 
                                 
Net interest income
   
9,831
     
8,751
     
19,188
     
17,869
 
(Recovery) provision for loan losses
   
(217
)
   
(11
)
   
(454
)
   
158
 
Net interest income, after (recovery) provision for loan losses
   
10,048
     
8,762
     
19,642
     
17,711
 
                                 
Non-interest income:
                               
   Loan servicing and other fees
   
277
     
317
     
601
     
680
 
   Gain on sale of loans, net
   
2,263
     
4,317
     
5,395
     
9,164
 
   Deposit account fees
   
509
     
536
     
1,014
     
1,094
 
   Loss on sale and operations of real estate owned acquired in the
      settlement of loans, net
   
(7
)
   
(22
)
   
(6
)
   
(62
)
   Card and processing fees
   
392
     
373
     
790
     
754
 
   Other
   
161
     
220
     
350
     
463
 
   Total non-interest income
   
3,595
     
5,741
     
8,144
     
12,093
 
                                 
Non-interest expense:
                               
   Salaries and employee benefits
   
7,211
     
8,633
     
15,461
     
17,902
 
   Premises and occupancy
   
1,274
     
1,260
     
2,619
     
2,574
 
   Equipment
   
495
     
375
     
916
     
737
 
   Professional expenses
   
411
     
521
     
858
     
1,041
 
   Sales and marketing expenses
   
253
     
301
     
422
     
504
 
   Deposit insurance premiums and regulatory assessments
   
172
     
218
     
337
     
402
 
   Other (1)
   
1,059
     
1,905
     
1,966
     
5,787
 
   Total non-interest expense
   
10,875
     
13,213
     
22,579
     
28,947
 
Income before income taxes
   
2,768
     
1,290
     
5,207
     
857
 
Provision for income taxes (2)
   
810
     
2,067
     
1,426
     
1,859
 
   Net income (loss)
 
$
1,958
   
$
(777
)
 
$
3,781
   
$
(1,002
)
                                 
Basic earnings (loss) per share
 
$
0.26
   
$
(0.10
)
 
$
0.51
   
$
(0.13
)
Diluted earnings (loss) per share
 
$
0.26
   
$
(0.10
)
 
$
0.50
   
$
(0.13
)
Cash dividends per share
 
$
0.14
   
$
0.14
   
$
0.28
   
$
0.28
 
.
(1) Includes $650,000 and $3.4 million of litigation settlement expense for the quarter and six months ended December 31, 2017, respectively.
(2) Includes a net tax charge of $1.8 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for both the quarter and six months ended December 31, 2017.
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
2

PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
In Thousands
 
   
For the Quarters Ended
December 31,
   
For the Six Months Ended
December 31,
 
   
2018
   
2017
   
2018
   
2017
 
Net income (loss)
 
$
1,958
   
$
(777
)
 
$
3,781
   
$
(1,002
)
                                 
Change in unrealized holding loss on securities available for sale
   
(28
)
   
(80
)
   
(58
)
   
(78
)
Reclassification adjustment for net loss on securities available
  for sale included in net loss
   
     
45
     
     
45
 
Other comprehensive loss, before income taxes
   
(28
)
   
(35
)
   
(58
)
   
(33
)
                                 
Income tax benefit
   
(8
)
   
(15
)
   
(17
)
   
(14
)
Other comprehensive loss
   
(20
)
   
(20
)
   
(41
)
   
(19
)
                                 
Total comprehensive income (loss)
 
$
1,938
   
$
(797
)
 
$
3,740
   
$
(1,021
)
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
3

 
PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
In Thousands, Except Share Information

For the Quarters Ended December 31, 2018 and 2017:
   
Common
Stock
    Additional                  
Accumulated
Other
Comprehensive
       
   
Shares
   
Amount
   
 Paid-In
Capital
   
Retained
Earnings
   
Treasury
Stock
   
Income (Loss),
Net of Tax
   
Total
 
Balance at September 30, 2018 
7,500,860
   
$
181
   
$
95,795
   
$
191,399
   
$
(165,884
)
 
$
189
   
$
121,680
 
                                                         
Net income
                           
1,958
                     
1,958
 
Other comprehensive loss
                                           
(20
)
   
(20
)
Purchase of treasury stock (1)
(505
)
                           
(8
)
           
(8
)
Exercise of stock options
   
5,000
             
73
                             
73
 
Distribution of restricted stock 
1,500
                                             
 
Amortization of restricted stock 
               
33
                             
33
 
Stock options expense
                   
12
                             
12
 
Cash dividends (2)
                           
(1,051
)
                   
(1,051
)
                                                         
Balance at December 31, 2018
7,506,855
   
$
181
   
$
95,913
   
$
192,306
   
$
(165,892
)
 
$
169
   
$
122,677
 
 
(1)
Includes the repurchase of 505 shares of distributed restricted stock in settlement of employee withholding tax obligations.
(2)
Cash dividends of $0.14 per share were paid in the quarter ended December 31, 2018.
 
   
Common
Stock
    Additional                  
Accumulated
Other
Comprehensive
       
   
Shares
   
Amount
   
Paid-In
Capital
   
Retained
Earnings
   
Treasury
Stock
   
Income (Loss),
Net of Tax
   
Total
 
Balance at September 30, 2017
7,609,552
   
$
180
   
$
93,669
   
$
191,451
   
$
(160,609
)
 
$
230
   
$
124,921
 
                                                         
Net loss
                           
(777
)
                   
(777
)
Other comprehensive loss
                                           
(20
)
   
(20
)
Purchase of treasury stock
 
(140,526
)
                           
(2,702
)
           
(2,702
)
Exercise of stock options
   
5,750
             
84
                             
84
 
Amortization of restricted stock
               
142
                             
142
 
Stock options expense
                   
116
                             
116
 
Cash dividends (1)
                           
(1,064
)
                   
(1,064
)
                                                         
Balance at December 31, 2017 
7,474,776
   
$
180
   
$
94,011
   
$
189,610
   
$
(163,311
)
 
$
210
   
$
120,700
 
 
(1)
Cash dividends of $0.14 per share were paid in the quarter ended December 31, 2017.
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
4


For the Six Months Ended December 31, 2018 and 2017:
 
   
Common
Stock
    Additional                  
Accumulated
Other
Comprehensive
       
   
Shares
   
Amount
   
Paid-In
Capital
   
Retained
Earnings
   
Treasury
Stock
   
Income (Loss),
Net of Tax
   
Total
 
Balance at June 30, 2018
   
7,421,426
   
$
181
   
$
94,957
   
$
190,616
   
$
(165,507
)
 
$
210
   
$
120,457
 
                                                         
Net income
                           
3,781
                     
3,781
 
Other comprehensive loss
                                           
(41
)
   
(41
)
Purchase of treasury stock (1)  
(21,071
)
                           
(385
)
           
(385
)
Exercise of stock options
   
20,000
             
226
                             
226
 
Distribution of restricted stock 
86,500
                                             
 
Amortization of restricted stock 
               
397
                             
397
 
Stock options expense
                   
333
                             
333
 
Cash dividends (2)
                           
(2,091
)
                   
(2,091
)
                                                         
Balance at December 31, 2018 
7,506,855
   
$
181
   
$
95,913
   
$
192,306
   
$
(165,892
)
 
$
169
   
$
122,677
 

 
(1)   Includes the repurchase of 21,071 shares of distributed restricted stock in settlement of employee withholding tax obligations.
(2)   Cash dividends of $0.28 per share were paid in the six months ended December 31, 2018.

 
   
Common
Stock
    Additional                  
Accumulated
Other
Comprehensive
       
   
Shares
   
Amount
   
Paid-In
Capital
   
Retained
Earnings
   
Treasury
Stock
   
Income (Loss),
Net of Tax
   
Total
 
Balance at June 30, 2017
   
7,714,052
   
$
180
   
$
93,209
   
$
192,754
   
$
(158,142
)
 
$
229
   
$
128,230
 
                                                         
Net loss
                           
(1,002
)
                   
(1,002
)
Other comprehensive loss
                                           
(19
)
   
(19
)
Purchase of treasury stock 
(266,526
)
                           
(5,152
)
           
(5,152
)
Exercise of stock options
   
27,250
             
261
                             
261
 
Amortization of restricted stock 
               
291
                             
291
 
Forfeitures of restricted stock 
               
17
             
(17
)
           
 
Stock options expense
                   
233
                             
233
 
Cash dividends (1)
                           
(2,142
)
                   
(2,142
)
                                                         
Balance at December 31, 2017 
7,474,776
   
$
180
   
$
94,011
   
$
189,610
   
$
(163,311
)
 
$
210
   
$
120,700
 

 (1)   Cash dividends of $0.28 per share were paid in the six months ended December 31, 2017.
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 
5

PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited - In Thousands)
 
   
Six Months Ended
 December 31,
 
   
2018
   
2017
 
Cash flows from operating activities:
           
   Net income (loss)
 
$
3,781
   
$
(1,002
)
   Adjustments to reconcile net income (loss) to net cash provided by operating activities:
               
      Depreciation and amortization
   
1,664
     
1,582
 
      (Recovery) provision for loan losses
   
(454
)
   
158
 
      Recovery of losses on real estate owned
   
     
(552
)
      Gain on sale of loans, net
   
(5,395
)
   
(9,164
)
      (Gain) loss on sale of real estate owned, net
   
(9
)
   
580
 
      Stock-based compensation
   
730
     
524
 
      Provision (benefit) for deferred income taxes
   
733
     
(79
)
   (Decrease) increase in accounts payable, accrued interest and other liabilities
   
(482
)
   
3,278
 
   Decrease (increase) in prepaid expenses and other assets
   
546
     
(306
)
   Loans originated for sale
   
(342,738
)
   
(724,156
)
   Proceeds from sale of loans
   
386,778
     
753,571
 
      Net cash provided by operating activities
   
45,154
     
24,434
 
                 
Cash flows from investing activities:
               
   Decrease in loans held for investment, net
   
27,554
     
17,548
 
   Maturity of investment securities held to maturity
   
200
     
 
   Principal payments from investment securities held to maturity
   
15,782
     
10,837
 
   Principal payments from investment securities available for sale
   
875
     
885
 
   Purchase of investment securities held to maturity
   
(13,669
)
   
(38,511
)
   Proceeds from sale of real estate owned
   
915
     
1,587
 
   Purchase of premises and equipment
   
(348
)
   
(1,589
)
      Net cash provided by (used for) investing activities
   
31,309
     
(9,243
)
                 
Cash flows from financing activities:
               
   Decrease in deposits, net
   
(34,714
)
   
(18,733
)
   Repayments of short-term borrowings, net
   
(15,000
)
   
(15,000
)
   Repayments of long-term borrowings
   
(28
)
   
(37
)
   Exercise of stock options
   
226
     
261
 
   Withholding taxes on stock based compensation
   
(413
)
   
(41
)
   Cash dividends
   
(2,091
)
   
(2,142
)
   Treasury stock purchases
   
(385
)
   
(5,152
)
      Net cash used for financing activities
   
(52,405
)
   
(40,844
)
                 
Net increase (decrease) in cash and cash equivalents
   
24,058
     
(25,653
)
Cash and cash equivalents at beginning of period
   
43,301
     
72,826
 
Cash and cash equivalents at end of period
 
$
67,359
   
$
47,173
 
Supplemental information:
               
   Cash paid for interest
 
$
3,263
   
$
3,252
 
   Cash paid for income taxes
 
$
1,525
   
$
2,350
 
   Transfer of loans held for sale to held for investment
 
$
724
   
$
521
 
   Real estate acquired in the settlement of loans
 
$
   
$
700
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
6

PROVIDENT FINANCIAL HOLDINGS, INC.
Notes to Unaudited Interim Condensed Consolidated Financial Statements

December 31, 2018

Note 1: Basis of Presentation

The unaudited interim condensed consolidated financial statements included herein reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations for the interim periods presented.  All such adjustments are of a normal, recurring nature.  The condensed consolidated statement of financial condition at June 30, 2018 is derived from the audited consolidated financial statements of Provident Financial Holdings, Inc. and its wholly-owned subsidiary, Provident Savings Bank, F.S.B. (the "Bank") (collectively, the "Corporation").  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") with respect to interim financial reporting.  It is recommended that these unaudited interim condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended June 30, 2018.  The results of operations for the quarter and six months ended December 31, 2018 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2019.
 
Note 2: Accounting Standard Updates ("ASU")

There have been no accounting standard updates or changes in the status of their adoption that are significant to the Corporation as previously disclosed in Note 1 of the Corporation's Annual Report on Form 10-K for the year ended June 30, 2018, other than:

ASU 2014-09:
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, "Revenue from Contracts with Customers," which created FASB Accounting Standards Codification (ASC) Topic 606 ("ASC 606"). ASC 606 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASC 606 was effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. The Corporation adopted ASC 606 on July 1, 2018 using the modified retrospective approach. Therefore, the comparative information has not been adjusted and continues to be reported under superseded ASC 605. There was no cumulative effect adjustment as of July 1, 2018, and there were no material changes to the timing or amount of revenue recognized for the six months ended December 31, 2018; however, additional disclosures were incorporated in the footnotes upon adoption. The majority of the Company's revenue is comprised of interest income from financial assets, which is explicitly excluded from the scope of ASC 606. The Corporation elected to apply the practical expedient pursuant to ASC 606 and therefore does not disclose information about remaining performance obligations that have an original expected term of one year or less and allows the Corporation to expense costs related to obtaining a contract as incurred when the original amortization period would have been one year or less. See Note 12 for additional discussion.

7


ASU 2018-11
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." This ASU introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard, ASC 606, Revenue From Contracts With Customers. The new leases standard represents a wholesale change to lease accounting and will most likely result in significant implementation challenges during the transition period and beyond. This ASU will be effective for annual periods beginning after December 15, 2018 (i.e., calendar periods beginning on January 1, 2019), and interim periods therein, early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which allows entities the option of initially applying the new leases standard at the adoption date (such as January 1, 2019, for calendar year- end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Corporation plans to adopt ASU 2018-11 on July 1, 2019. Management is currently assessing the impact of ASU 2016-02 on the Corporation's financial position and results of operations but does not believe that adoption of ASU 2018-11 will have a material impact on its consolidated financial statements.

ASU 2018-13
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies disclosure requirements on fair value measurements to improve their effectiveness. The guidance permits entities to consider materiality when evaluating fair value measurement disclosures and, among other modifications, requires certain new disclosures related to Level 3 fair value measurements. The guidance will be effective beginning January 1, 2020, with early adoption permitted. The guidance only affects disclosures in the notes to the consolidated financial statements and will not affect the Corporation's financial position or results of operations.

Note 3: Earnings (Loss) Per Share
 
Basic earnings (loss) per share ("EPS") excludes dilution and is computed by dividing income available to common shareholders 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.

As of December 31, 2018 and 2017, there were outstanding options to purchase 509,000 shares and 585,500 shares of the Corporation's common stock, respectively. Of those shares, as of December 31, 2018 and 2017, there were 45,000 shares and 585,500 shares, respectively, which were excluded from the diluted EPS computation as their effect was anti-dilutive. As of December 31, 2018, there were outstanding restricted stock awards of 12,000 shares which have a dilutive effect; and as of December 31, 2017, there were outstanding restricted stock awards of 109,000 shares with no dilutive effect.
8

The following table provides the basic and diluted EPS computations for the quarters and six months ended December 31, 2018 and 2017, respectively.
(In Thousands, Except Earnings Per Share)
 
For the Quarters Ended
December 31,
   
For the Six Months Ended
December 31,
 
   
2018
   
2017
   
2018
   
2017
 
Numerator:
                       
   Net income (loss) – numerator for basic earnings per share
     and diluted earnings per share - available to common 
     stockholders
 
$
1,958
   
$
(777
)
 
$
3,781
   
$
(1,002
)
                                 
Denominator:
                               
   Denominator for basic earnings per share:
                               
     Weighted-average shares
   
7,506
     
7,566
     
7,468
     
7,630
 
                                 
     Effect of dilutive shares:
                               
Stock options
   
89
     
     
90
     
 
Restricted stock
   
7
     
     
21
     
 
                                 
   Denominator for diluted earnings per share:
                               
     Adjusted weighted-average shares and assumed
       conversions
   
7,602
     
7,566
     
7,579
     
7,630
 
                                 
Basic (loss) earnings per share
 
$
0.26
   
$
(0.10
)
 
$
0.51
   
$
(0.13
)
Diluted (loss) earnings per share
 
$
0.26
   
$
(0.10
)
 
$
0.50
   
$
(0.13
)
 
9

Note 4: Operating Segment Reports

The Corporation operates in two business segments: community banking through the Bank and mortgage banking through Provident Bank Mortgage ("PBM"), a division of the Bank.
 
The following tables set forth condensed consolidated statements of operations and total assets for the Corporation's operating segments for the quarters and six months ended December 31, 2018 and 2017, respectively.
   
For the Quarter Ended December 31, 2018
 
(In Thousands)
 
Provident
Bank
   
Provident
Bank
Mortgage
   
Consolidated
Totals
 
Net interest income
 
$
9,525
   
$
306
   
$
9,831
 
Recovery from the allowance for loan losses
   
(217
)
   
     
(217
)
Net interest income, after recovery from the allowance for loan losses
   
9,742
     
306
     
10,048
 
                         
Non-interest income:
                       
     Loan servicing and other fees (1)
   
(149
)
   
426
     
277
 
     Gain on sale of loans, net (2)
   
     
2,263
     
2,263
 
     Deposit account fees
   
509
     
     
509
 
     Loss on sale and operations of real estate owned
        acquired in the settlement of loans, net
   
(7
)
   
     
(7
)
     Card and processing fees
   
392
     
     
392
 
     Other
   
161
     
     
161
 
          Total non-interest income
   
906
     
2,689
     
3,595
 
                         
Non-interest expense:
                       
     Salaries and employee benefits
   
4,300
     
2,911
     
7,211
 
     Premises and occupancy
   
897
     
377
     
1,274
 
     Operating and administrative expenses
   
1,067
     
1,323
     
2,390
 
          Total non-interest expense
   
6,264
     
4,611
     
10,875
 
Income (loss) before income taxes
   
4,384
     
(1,616
)
   
2,768
 
Provision (benefit) for income taxes
   
1,287
     
(477
)
   
810
 
Net income (loss)
 
$
3,097
   
$
(1,139
)
 
$
1,958
 
Total assets, end of period
 
$
1,069,379
   
$
57,791
   
$
1,127,170
 
 
(1)
Includes an inter-company charge of $258 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.
(2)
Includes an inter-company charge of $14 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.
 
10

   
For the Quarter Ended December 31, 2017
 
(In Thousands)
 
Provident
Bank
   
Provident
Bank
Mortgage
   
Consolidated
Totals
 
Net interest income
 
$
8,217
   
$
534
   
$
8,751
 
Recovery from the allowance for loan losses
   
(11
)
   
     
(11
)
Net interest income, after recovery from the allowance for loan losses
   
8,228
     
534
     
8,762
 
                         
Non-interest income:
                       
     Loan servicing and other fees (1)
   
108
     
209
     
317
 
     Gain on sale of loans, net (2)
   
22
     
4,295
     
4,317
 
     Deposit account fees
   
536
     
     
536
 
     Loss on sale and operations of real estate owned
        acquired in the settlement of loans, net
   
(22
)
   
     
(22
)
     Card and processing fees
   
373
     
     
373
 
     Other
   
220
     
     
220
 
          Total non-interest income
   
1,237
     
4,504
     
5,741
 
                         
Non-interest expense:
                       
     Salaries and employee benefits
   
4,449
     
4,184
     
8,633
 
     Premises and occupancy
   
822
     
438
     
1,260
 
     Operating and administrative expenses (3)
   
1,189
     
2,131
     
3,320
 
          Total non-interest expense
   
6,460
     
6,753
     
13,213
 
Income (loss) before income taxes
   
3,005
     
(1,715
)
   
1,290
 
Provision (benefit) for income taxes (4)
   
2,532
     
(465
)
   
2,067
 
Net income (loss)
 
$
473
   
$
(1,250
)
 
$
(777
)
Total assets, end of period
 
$
1,065,204
   
$
96,927
   
$
1,162,131
 
 
(1)
Includes an inter-company charge of $99 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.
(2)
Includes an inter-company charge of $79 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.
(3)
Includes $650,000 of litigation settlement expense for the second quarter of fiscal 2018, all of which was allocated to PBM.
(4)
Includes a net tax charge of $1.8 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for the quarter ended December 31, 2017.
 
11


   
For the Six Months Ended December 31, 2018
(In Thousands)
 
Provident
Bank
   
Provident
Bank
Mortgage
   
Consolidated
Totals
 
Net interest income
 
$
18,525
   
$
663
   
$
19,188
 
(Recovery) provision for loan losses
   
(549
)
   
95
     
(454
)
Net interest income, after (recovery) provision for loan losses
   
19,074
     
568
     
19,642
 
                         
Non-interest income:
                       
     Loan servicing and other fees (1)
   
(16
)
   
617
     
601
 
     Gain on sale of loans, net (2)
   
34
     
5,361
     
5,395
 
     Deposit account fees
   
1,014
     
     
1,014
 
     Loss on sale and operations of real estate owned
        acquired in the settlement of loans, net
   
(6
)
   
     
(6
)
     Card and processing fees
   
790
     
     
790
 
     Other
   
350
     
     
350
 
          Total non-interest income
   
2,166
     
5,978
     
8,144
 
                         
Non-interest expense:
                       
     Salaries and employee benefits
   
9,136
     
6,325
     
15,461
 
     Premises and occupancy
   
1,805
     
814
     
2,619
 
     Operating and administrative expenses
   
1,993
     
2,506
     
4,499
 
          Total non-interest expense
   
12,934
     
9,645
     
22,579
 
Income (loss) before income taxes
   
8,306
     
(3,099
)
   
5,207
 
Provision (benefit) for income taxes
   
2,342
     
(916
)
   
1,426
 
Net income (loss)
 
$
5,964
   
$
(2,183
)
 
$
3,781
 
Total assets, end of period
 
$
1,069,379
   
$
57,791
   
$
1,127,170
 

(1)
Includes an inter-company charge of $426 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.
(2)
Includes an inter-company charge of $20 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.
 
12

 
   
For the Six Months Ended December 31, 2017
(In Thousands)
 
Provident
Bank
   
Provident
Bank
Mortgage
   
Consolidated
Totals
 
Net interest income
 
$
16,767
   
$
1,102
   
$
17,869
 
Provision for loan losses
   
158
     
     
158
 
Net interest income, after provision for loan losses
   
16,609
     
1,102
     
17,711
 
                         
Non-interest income:
                       
     Loan servicing and other fees (1)
   
155
     
525
     
680
 
     Gain on sale of loans, net (2)
   
22
     
9,142
     
9,164
 
     Deposit account fees
   
1,094
     
     
1,094
 
     Loss on sale and operations of real estate owned
        acquired in the settlement of loans, net
   
(62
)
   
     
(62
)
     Card and processing fees
   
754
     
     
754
 
     Other
   
463
     
     
463
 
          Total non-interest income
   
2,426
     
9,667
     
12,093
 
                         
Non-interest expense:
                       
     Salaries and employee benefits
   
8,951
     
8,951
     
17,902
 
     Premises and occupancy
   
1,649
     
925
     
2,574
 
     Operating and administrative expenses (3)
   
3,440
     
5,031
     
8,471
 
          Total non-interest expense
   
14,040
     
14,907
     
28,947
 
Income (loss) before income taxes
   
4,995
     
(4,138
)
   
857
 
Provision (benefit) for income taxes (4)
   
3,343
     
(1,484
)
   
1,859
 
Net income (loss)
 
$
1,652
   
$
(2,654
)
 
$
(1,002
)
Total assets, end of period
 
$
1,065,204
   
$
96,927
   
$
1,162,131
 

(1)
Includes an inter-company charge of $339 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.
(2)
Includes an inter-company charge of $138 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.
(3)
Includes $3.4 million of litigation settlement expense for the first six months of fiscal 2018, of which $2.1 million was allocated to PBM.
(4)
Includes a net tax charge of $1.8 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for the six months ended December 31, 2017.

13

Note 5: Investment Securities

The amortized cost and estimated fair value of investment securities as of December 31, 2018 and June 30, 2018 were as follows:
December 31, 2018
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
(Losses)
   
Estimated
Fair
Value
   
Carrying
Value
 
(In Thousands)
                             
Held to maturity:
                             
   U.S. government sponsored enterprise MBS (1)
 
$
81,451
   
$
369
   
$
(285
)
 
$
81,535
   
$
81,451
 
   U.S. SBA securities (2)
   
2,939
     
     
(18
)
   
2,921
     
2,939
 
   Certificate of deposits
   
600
     
     
     
600
     
600
 
Total investment securities - held to maturity
 
$
84,990
   
$
369
   
$
(303
)
 
$
85,056
   
$
84,990
 
                                         
Available for sale:
                                       
   U.S. government agency MBS
 
$
3,824
   
$
118
   
$
   
$
3,942
   
$
3,942
 
   U.S. government sponsored enterprise MBS
   
2,213
     
98
     
     
2,311
     
2,311
 
   Private issue CMO (3)
   
307
     
3
     
     
310
     
310
 
Total investment securities - available for sale
 
$
6,344
   
$
219
   
$
   
$
6,563
   
$
6,563
 
Total investment securities
 
$
91,334
   
$
588
   
$
(303
)
 
$
91,619
   
$
91,553
 
 
(1)
Mortgage-Backed Securities ("MBS").
(2)
Small Business Administration ("SBA").
(3)
Collateralized Mortgage Obligations ("CMO").
 
June 30, 2018
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
(Losses)
   
Estimated
Fair
Value
   
Carrying
Value
 
(In Thousands)
                             
Held to maturity:
                             
   U.S. government sponsored enterprise MBS
 
$
84,227
   
$
203
   
$
(762
)
 
$
83,668
   
$
84,227
 
   U.S. SBA securities
   
2,986
     
     
(15
)
   
2,971
     
2,986
 
   Certificate of deposits
   
600
     
     
     
600
     
600
 
Total investment securities - held to maturity
 
$
87,813
   
$
203
   
$
(777
)
 
$
87,239
   
$
87,813
 
                                         
Available for sale:
                                       
   U.S. government agency MBS
 
$
4,234
   
$
150
   
$
   
$
4,384
   
$
4,384
 
   U.S. government sponsored enterprise MBS
   
2,640
     
122
     
     
2,762
     
2,762
 
   Private issue CMO
   
346
     
4
     
     
350
     
350
 
Total investment securities - available for sale
 
$
7,220
   
$
276
   
$
   
$
7,496
   
$
7,496
 
Total investment securities
 
$
95,033
   
$
479
   
$
(777
)
 
$
94,735
   
$
95,309
 

In the second quarters of fiscal 2019 and 2018, the Corporation received MBS principal payments of $8.3 million and $5.8 million, respectively, and there were no sales of investment securities during these periods.  The Corporation purchased U.S. government sponsored enterprise MBS totaling $13.5 million and $28.4 million, to be held to maturity, respectively. For the first six months of fiscal 2019 and 2018, the Corporation received MBS principal payments of $16.7 million and $11.7 million,
14

respectively, and there were no sales of investment securities during these periods.  In the first six months of fiscal 2019 and 2018, the Corporation purchased U.S. government sponsored enterprise MBS totaling $13.5 million and $38.5 million, to be held to maturity, respectively.

The Corporation held investments with an unrealized loss position of $303,000 at December 31, 2018 and $777,000 at June 30, 2018.
As of December 31, 2018
Unrealized Holding
Losses
 
Unrealized Holding
Losses
 
Unrealized Holding
Losses
 
(In Thousands)
Less Than 12 Months
 
12 Months or More
 
Total
 
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Description  of Securities
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
 
Held to maturity:
                       
   U.S. government sponsored enterprise MBS
 
$
   
$
   
$
37,363
   
$
285
   
$
37,363
   
$
285
 
   U.S. SBA securities
   
2,914
     
18
     
     
     
2,914
     
18
 
Total investment securities
 
$
2,914
   
$
18
   
$
37,363
   
$
285
   
$
40,277
   
$
303
 

As of June 30, 2018
Unrealized Holding
Losses
 
Unrealized Holding
Losses
 
Unrealized Holding
Losses
 
(In Thousands)
Less Than 12 Months
 
12 Months or More
 
Total
 
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Description  of Securities
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
 
Held to maturity:
                       
   U.S. government sponsored enterprise MBS
 
$
47,045
   
$
762
   
$
   
$
   
$
47,045
   
$
762
 
   U.S. SBA securities
   
2,964
     
15
     
     
     
2,964
     
15
 
Total investment securities
 
$
50,009
   
$
777
   
$
   
$
   
$
50,009
   
$
777
 

The Corporation evaluates individual investment securities quarterly for other-than-temporary declines in market value. At December 31, 2018, $285,000 of the total $303,000 unrealized holding losses were 12 months or more; while at June 30, 2018, all of the unrealized holding loss was less than 12 months. The Corporation does not believe that there were any other-than-temporary impairments on the investment securities at December 31, 2018 and 2017; therefore, no impairment losses were recorded for the quarters and six months ended December 31, 2018 and 2017.
15

Contractual maturities of investment securities as of December 31, 2018 and June 30, 2018 were as follows:
   
December 31, 2018
   
June 30, 2018
 
(In Thousands)
 
Amortized
Cost
   
Estimated
Fair
Value
   
Amortized
Cost
   
Estimated
Fair
Value
 
                         
Held to maturity:
                       
Due in one year or less
 
$
600
   
$
600
   
$
600
   
$
600
 
Due after one through five years
   
35,169
     
34,918
     
24,961
     
24,569
 
Due after five through ten years
   
17,537
     
17,689
     
22,847
     
22,477
 
Due after ten years
   
31,684
     
31,849
     
39,405
     
39,593
 
Total investment securities - held to maturity