Provident Financial Holdings,
Inc.
Covering analyst: Christian Meunier
Email: 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, $971.4 million in deposits
› Community Savings and Loan bank
Products and Offerings
› Community Banking
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Single-Family Mortgages
Multi-Family Mortgages
Commercial Real Estate Mortgages
Commercial and Consumer Loans
› Mortgage Banking
- Origination for sale of Single-Family Mortgages
› Volume of loan origination has gone up last 3 years.
Loans held for investment analysis
Market/Location
› 15 banking offices in Riverside County
› Inland Empire
› 18 mortgage offices in California
Operations
Loans Originated, Sold, and Purchased
($thousand)
Revenue
Savings and Loans
› Struggling Industry.
› Expected to see an annual growth percentage of -1.8%
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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
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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
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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