EXHIBIT 13
2021 Annual Report to Stockholders
2021 Annual Report
Message From the Chairman
Dear Shareholders:
I am pleased to forward our Annual Report for fiscal 2021. Last year at this time, I wrote in the Chairman’s Message that “I was confident our strong financial foundation will weather the current economic weakness” and I went on to describe that the significant economic slump resulting from the COVID-19 pandemic made it very difficult to forecast what the immediate future may hold for financial institutions and the country at large. Now, a year later, I am happy to report that the Company has weathered the significant economic disruption and a prolonged recession seems to be less likely than once thought. The current economic environment is much improved from this time last year. That is not to say however, that general economic conditions are back to pre-pandemic levels or that we will not face further economic disruption as the country recovers from the pandemic. As a result, our robust capital levels, conservative credit culture, and strong liquidity position will continue to support the Company through any future uncertainty.
Fiscal 2021
Overall, our fiscal 2021 financial results, described on the following Financial Highlights pages, are similar to those during the prior fiscal year. However, it should be noted that our business operations, like many of our peers, were significantly impacted by the federal, state, and local restrictions implemented to combat the pandemic. Nonetheless, all of our locations were open and we are proud of our efforts to serve our customers and communities in an extraordinary business environment. As a designated essential business under the pandemic protocol, we take our responsibilities seriously.
Last year, I described that our fiscal 2021 Business Plan forecast disciplined growth in loans held for investment, growth in retail deposits (primarily core deposits), control of operating expenses, and sound capital management decisions.
We experienced mixed results regarding these initiatives. Loan originations and purchases for the held for investment portfolio were $231.9 million in fiscal 2021, a seven percent decline from fiscal 2020. Additionally, an increase in loan prepayments resulted in a decline in the loans held for investment balance. On the other hand, core deposits, one of the most valuable assets of a banking franchise, increased by $74.5 million or 10 percent at June 30, 2021 from the same date last year; operating expenses for fiscal 2021 decreased by approximately four percent from the prior year (after adjusting for the Employee Retention Tax Credit in fiscal 2021 and the reversion of non-recurring litigation settlement expenses in fiscal 2020); and, we paid a quarterly cash dividend of $0.14 per share in fiscal 2021 while repurchasing approximately 105,000 shares of our common stock under the April 2020 stock repurchase plan.
Fiscal 2022
Similar to fiscal 2021, we plan to emphasize disciplined growth in loans held for investment and are encouraged by the origination volume generated in the last six months of fiscal 2021 suggesting loan demand has greatly improved; the continued growth of core deposits which has been remarkable during the past two fiscal years; disciplined control of operating expenses where we continue to improve operating efficiencies; and sound capital management decisions. We currently plan to return capital to shareholders in the form of cash dividends and believe that maintaining our cash dividend is very important to shareholders. Doing so takes priority over common stock repurchases, however, we also recognize that prudent capital returns through stock repurchase programs is a valid capital management tool that we will continue to use as a component of our capital management strategy. We are committed to single-family, multi-family, and commercial real estate mortgage lending as our primary sources of asset growth, however, in response to the uncertain economic environment, we may also deploy excess liquidity by investing in lower-risk investment securities and paying off borrowings as they mature. Similarly, we intend to increase the percentage of lower cost checking and savings accounts and decrease the percentage of time deposits in our deposit base while still growing total deposits. This strategy is intended to improve core revenue, over time, through a higher net interest margin and ultimately, coupled with the growth of the Company, an increase in net interest income.
A Final Word
I am pleased with our progress in navigating the pandemic and am confident that our strong financial foundation positions us well to face future challenges and to capitalize on opportunities as they develop.
In closing, I would like to recognize and thank our staff of banking professionals and Directors for their dedication to Provident. They are working diligently to support our customers and communities under unprecedented circumstances.
I would also like to express my appreciation for the support we receive from our customers and shareholders. We recognize that our long-term success is conditioned upon your ongoing goodwill. Thank you.
Sincerely,
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/s/ Craig G. Blunden | |
Craig G. Blunden | |
Chairman and Chief Executive Officer | |
Financial Highlights
The following tables set forth information concerning the consolidated financial position and results of operations of the Corporation and its subsidiary at the dates and for the periods indicated.
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| | At or For The Year Ended June 30, | |||||||||||||
(In Thousands, Except Per Share Information) |
| 2021 |
| 2020 | | 2019 |
| 2018 |
| 2017 | |||||
FINANCIAL CONDITION DATA: |
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Total assets | | $ | 1,183,596 | | $ | 1,176,837 | | $ | 1,084,850 | | $ | 1,175,549 | | $ | 1,200,633 |
Loans held for investment, net | | | 850,960 | | | 902,796 | | | 879,925 | | | 902,685 | | | 904,919 |
Loans held for sale, at fair value | | | — | | | — | | | — | | | 96,298 | | | 116,548 |
Cash and cash equivalents | | | 70,270 | | | 116,034 | | | 70,632 | | | 43,301 | | | 72,826 |
Investment securities | | | 226,893 | | | 123,344 | | | 100,059 | | | 95,309 | | | 69,759 |
Deposits | | | 937,973 | | | 892,969 | | | 841,271 | | | 907,598 | | | 926,521 |
Borrowings | | | 100,983 | | | 141,047 | | | 101,107 | | | 126,163 | | | 126,226 |
Stockholders’ equity | | | 127,280 | | | 123,976 | | | 120,641 | | | 120,457 | | | 128,230 |
Book value per share | | | 16.88 | | | 16.67 | | | 16.12 | | | 16.23 | | | 16.62 |
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OPERATING DATA: | | |
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Interest income | | $ | 35,201 | | $ | 42,456 | | $ | 44,378 | | $ | 42,712 | | $ | 42,417 |
Interest expense | | | 4,562 | | | 6,055 | | | 6,208 | | | 6,412 | | | 6,679 |
Net interest income | | | 30,639 | | | 36,401 | | | 38,170 | | | 36,300 | | | 35,738 |
(Recovery) provision for loan losses | | | (708) | | | 1,119 | | | (475) | | | (536) | | | (1,042) |
Net interest income after provision (recovery) for loan losses | | | 31,347 | | | 35,282 | | | 38,645 | | | 36,836 | | | 36,780 |
Loan servicing and other fees | | | 1,170 | | | 819 | | | 1,051 | | | 1,575 | | | 1,251 |
(Loss) gain on sale of loans, net | | | (103) | | | (132) | | | 7,135 | | | 15,802 | | | 25,680 |
Deposit account fees | | | 1,247 | | | 1,610 | | | 1,928 | | | 2,119 | | | 2,194 |
Loss on sale and operations of real estate owned acquired in the settlement of loans, net | | | — | | | — | | | (4) | | | (86) | | | (557) |
Card and processing fees | | | 1,605 | | | 1,454 | | | 1,568 | | | 1,541 | | | 1,451 |
Other non-interest income | | | 654 | | | 769 | | | 833 | | | 944 | | | 802 |
Operating expenses | | | 25,733 | | | 28,900 | | | 45,236 | | | 53,204 | | | 58,785 |
Income before income taxes | | | 10,187 | | | 10,902 | | | 5,920 | | | 5,527 | | | 8,816 |
Provision for income taxes | | | 2,626 | | | 3,213 | | | 1,503 | | | 3,396 | | | 3,609 |
Net income | | $ | 7,561 | | $ | 7,689 | | $ | 4,417 | | $ | 2,131 | | $ | 5,207 |
Basic earnings per share | | $ | 1.01 | | $ | 1.03 | | $ | 0.59 | | $ | 0.28 | | $ | 0.66 |
Diluted earnings per share | | $ | 1.00 | | $ | 1.01 | | $ | 0.58 | | $ | 0.28 | | $ | 0.64 |
Cash dividend per share | | $ | 0.56 | | $ | 0.56 | | $ | 0.56 | | $ | 0.56 | | $ | 0.52 |
Financial Highlights
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| | At or For The Year Ended June 30, | | ||||||||
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| 2021 |
| 2020 |
| 2019 |
| 2018 |
| 2017 | |
KEY OPERATING RATIOS: |
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Performance Ratios | | | | | | | | | | | |
Return on average assets | | 0.64 | % | 0.69 | % | 0.39 | % | 0.18 | % | 0.43 | % |
Return on average stockholders’ equity | | 6.05 | | 6.26 | | 3.63 | | 1.73 | | 3.94 | |
Interest rate spread | | 2.62 | | 3.30 | | 3.40 | | 3.13 | | 3.00 | |
Net interest margin | | 2.66 | | 3.36 | | 3.47 | | 3.19 | | 3.06 | |
Average interest-earning assets to average interest- bearing liabilities | | 110.78 | | 111.32 | | 111.14 | | 110.66 | | 111.16 | |
Operating and administrative expenses as a percentage of average total assets | | 2.18 | | 2.59 | | 4.00 | | 4.54 | | 4.90 | |
Efficiency ratio(1) | | 73.08 | | 70.62 | | 89.26 | | 91.42 | | 88.32 | |
Stockholders’ equity to total assets ratio | | 10.75 | | 10.53 | | 11.12 | | 10.25 | | 10.68 | |
Dividend payout ratio | | 55.83 | | 55.45 | | 96.55 | | 200.00 | | 81.25 | |
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The Bank's Regulatory Capital Ratios | |
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Tier 1 leverage capital (to adjusted average assets) | | 10.19 | % | 10.13 | % | 10.50 | % | 9.96 | % | 9.90 | % |
CET1 capital (to risk-weighted assets) | | 18.58 | | 17.51 | | 18.00 | | 16.81 | | 16.14 | |
Tier 1 capital (to risk-weighted assets) | | 18.58 | | 17.51 | | 18.00 | | 16.81 | | 16.14 | |
Total capital (to risk-weighted assets) | | 19.76 | | 18.76 | | 19.13 | | 17.90 | | 17.28 | |
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Asset Quality Ratios | |
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Non-performing loans as a percentage of loans held for investment, net | | 1.02 | %�� | 0.55 | % | 0.71 | % | 0.67 | % | 0.88 | % |
Non-performing assets as a percentage of total assets | | 0.73 | | 0.42 | | 0.57 | | 0.59 | | 0.80 | |
Allowance for loan losses as a percentage of gross loans held for investment | | 0.88 | | 0.91 | | 0.80 | | 0.81 | | 0.88 | |
Net (recoveries) charge-offs to average loans receivable, net | | (0.00) | | (0.01) | | (0.02) | | 0.01 | | (0.04) | |
(1) | Non-interest expense as a percentage of net interest income and non-interest income. |
Shareholder Information
ANNUAL MEETING
The annual meeting of shareholders will be held virtually by means of remote communication on Tuesday, November 30, 2021 at 11:00 a.m. (Pacific). A formal notice of the meeting, together with a proxy statement and proxy form, will be mailed to shareholders.
CORPORATE OFFICE
Provident Financial Holdings, Inc.
3756 Central Avenue
Riverside, CA 92506
(951) 686-6060
INTERNET ADDRESS
www.myprovident.com
SPECIAL COUNSEL
Breyer & Associates PC
8180 Greensboro Drive, Suite 785
McLean, VA 22102
(703) 883-1100
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
695 Town Center Drive, Suite 1000
Costa Mesa, CA 92626-7188
(714) 436-7100
TRANSFER AGENT
Computershare, Inc.
P.O. Box 43078
Providence, RI 02940
(800) 942-5909
MARKET INFORMATION
Provident Financial Holdings, Inc. is traded on the NASDAQ Global Select Market under the symbol PROV.
FINANCIAL INFORMATION
Requests for copies of the Form 10-K and Forms 10-Q filed with the Securities and Exchange Commission should be directed in writing to:
Donavon P. Ternes
President, COO and CFO
Provident Financial Holdings, Inc.
3756 Central Avenue
Riverside, CA 92506
CORPORATE PROFILE
Provident Financial Holdings, Inc. (the “Corporation”), a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company for Provident Savings Bank, F.S.B. (the “Bank”) upon the Bank’s conversion from a federal mutual to a federal stock savings bank (“Conversion”). The Conversion was completed on June 27, 1996. The Corporation does not engage in any significant activity other than holding the stock of the Bank. The Bank serves the banking needs of select communities in Riverside and San Bernardino Counties and has mortgage lending operations in California.
Board of Directors and Senior Officers
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Board of Directors |
| Senior Officers |
| | |
Joseph P. Barr, CPA | | Provident Financial Holdings, Inc. |
Retired Partner | | |
Ernst & Young, LLP | | Craig G. Blunden |
| | Chairman and Chief Executive Officer |
Bruce W. Bennett | | |
Retired Health Care Executive | | Donavon P. Ternes |
Private Investor | | President, Chief Operating Officer, |
| | Chief Financial Officer, and |
Craig G. Blunden | | Corporate Secretary |
Chairman and Chief Executive Officer | | |
Provident Financial Holdings, Inc. | | Provident Bank |
Provident Bank | | |
| | Craig G. Blunden |
Judy A. Carpenter | | Chairman and Chief Executive Officer |
President and Chief Operating Officer | | |
Riverside Medical Clinic | | Deborah L. Hill |
| | Senior Vice President |
Debbi H. Guthrie | | Chief Human Resources and |
Retired Executive | | Administrative Officer |
Raincross Hospitality Corporation | | |
| | Robert “Scott” Ritter |
Roy H. Taylor | | Senior Vice President |
Retired Executive | | Single-Family Division |
Hub International of California, Inc. | | |
| | Lilian Salter |
William E. Thomas, Esq. | | Senior Vice President |
Executive Vice President and General Counsel | | Chief Information Officer |
The KPC Group | | |
| | Donavon P. Ternes |
| | President, Chief Operating Officer, |
| | Chief Financial Officer, and |
| | Corporate Secretary |
| | |
| | David S. Weiant |
| | Senior Vice President |
| | Chief Lending Officer |
| | |
| | Gwendolyn L. Wertz |
| | Senior Vice President |
| | Retail Banking Division |
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Provident Locations
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RETAIL BANKING CENTERS | | |
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Blythe | | Moreno Valley |
350 E. Hobson Way | | 12460 Heacock Street |
Blythe, CA 92225 | | Moreno Valley, CA 92553 |
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Canyon Crest | | Orangecrest |
5225 Canyon Crest Drive, Suite 86 | | 19348 Van Buren Boulevard, Suite 119 |
Riverside, CA 92507 | | Riverside, CA 92508 |
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Corona | | Rancho Mirage |
487 Magnolia Avenue, Suite 101 | | 71991 Highway 111 |
Corona, CA 92879 | | Ranch Mirage, CA 92270 |
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Downtown Business Center | | Redlands |
4001 Main Street | | 125 E. Citrus Avenue |
Riverside, CA 92501 | | Redlands, CA 92373 |
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Hemet | | Sun City |
1690 E. Florida Avenue | | 27010 Sun City Boulevard |
Hemet, CA 92544 | | Sun City, CA 92586 |
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Home Office | | Temecula |
6570 Magnolia Avenue | | 40705 Winchester Road, Suite 6 |
Riverside, CA 92506 | | Temecula, CA 92591 |
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La Sierra | | |
3312 La Sierra Avenue, Suite 105 | | |
Riverside, CA 92503 | | |
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Customer Information 1-800-442-5201 or www.myprovident.com
Corporate Office
3756 Central Avenue, Riverside, CA 92506
(951) 686-6060
www.myprovident.com
NASDAQ Global Select Market - PROV