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Provident Financial Holdings, Inc.

Provident Financial Holdings, Inc. Covering analyst: Christian Meunier Email: Meunier@uoregon.edu. Business Overview. Founded in 1956 Headquartered in Riverside, California 5 th largest deposit market share in Riverside County. $1.5 Billion in assets, $971.4 million in deposits

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Provident Financial Holdings, Inc.

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  1. Provident Financial Holdings, Inc. Covering analyst: Christian Meunier Email: Meunier@uoregon.edu

  2. Business Overview • Founded in 1956 • Headquartered in Riverside, California • 5th largest deposit market share in Riverside County. • $1.5 Billion in assets, $971.4 million in deposits • Community Savings and Loan bank

  3. Products and Offerings • Community Banking • Single-Family Mortgages • Multi-Family Mortgages • Commercial Real Estate Mortgages • Commercial and Consumer Loans • Mortgage Banking - Origination for sale of Single-Family Mortgages • Volume of loan origination has gone up last 3 years.

  4. Loans held for investment analysis

  5. Market/Location • 15 banking offices in Riverside County • Inland Empire • 18 mortgage offices in California

  6. Operations

  7. Loans Originated, Sold, and Purchased ($thousand)

  8. Revenue

  9. Savings and Loans • Struggling Industry. • Expected to see an annual growth percentage of -1.8% • Regulation • Commercial Banks • Still seeing impact of housing collapse • Low interest rates

  10. Prime Rates • Current Prime Rate is 3.25% (record low) • Available to most credit worthy customers • “Operation Twist” will keep rates low till 2015 • Growth will come

  11. Housing Price Index • Captures trends in the national housing market • Peaked in 2006 • Growth is forecasted until 2018

  12. Local Economy • Riverside hurt by housing collapse • 3.1% drop in average wages • Housing prices fell 55% • Currently fastest growing recovery • Housing prices increased 10.9% • Housing inventory down 32.3% • 65% decrease in foreclosures • 8 months of home sale improvement • 10.5% unemployment • Still poor compared to national economy

  13. Comparable • PACW -35% • PPBI -35% • BOFI -15% • HMST -15% • SMPL -0%

  14. Valuation

  15. Beta • Regressions came out to around 0.44 • High standard deviation • Used Hamada to get 0.96 • Closer to industry beta • More reasonable

  16. Excess Return • Used Excess Return Model • Pin-pointing debt is difficult in banks • Does not use WACC • Depreciation and Amortization • Capital Expenditure • Only take into account equity • Trust Book Value (financials more likely to be at market value)

  17. Valuation

  18. Final Valuation

  19. QUESTIONS?

  20. Recommendation • Buy for Svigal and Tall Fir portfolios

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