Provident Financial Holdings, Inc.

Covering analyst: Christian MeunierEmail: Meunier@uoregon.edu

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

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.

Loans held for investment analysis

Market/Location

› 15 banking offices in Riverside County

› Inland Empire

› 18 mortgage offices in California

Operations

Loans Originated, Sold, and Purchased ($thousand)

Revenue

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

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

Housing Price Index

› Captures trends in the national housing market

› Peaked in 2006

› Growth is forecasted until 2018

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

Comparable

› PACW -35%

› PPBI -35%

› BOFI -15%

› HMST -15%

› SMPL -0%

Valuation

Beta

› Regressions came out to around 0.44 – High standard deviation

› Used Hamada to get 0.96– Closer to industry beta– More reasonable

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)

Valuation

Final Valuation

QUESTIONS?

Recommendation

› Buy for Svigal and Tall Fir portfolios