Provident Financial Holdings, Inc. Covering analyst: Christian Meunier

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 ›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