Reportable Segments

12 Months Ended

Jun. 30, 2012

Reportable Segments:

Reportable Segments

17.   Reportable Segments:

The segment reporting is organized consistent with the Corporation’s executive summary and operating strategy. The business activities of the Corporation consist primarily of Provident Bank and Provident Bank Mortgage, a division of the Bank.  Provident Bank operations primarily consist of accepting deposits from customers within the communities surrounding the Bank’s full service offices and investing those funds in single-family, multi-family, commercial real estate, construction, commercial business, consumer and other mortgage loans.  Provident Bank Mortgage operations primarily consist of the origination and sale of mortgage loans secured by single-family residences.  The following table and discussion explain the results of the Corporation’s two major reportable segments, Provident Bank and Provident Bank Mortgage.

The following tables illustrate the Corporation’s operating segments for the years ended June 30, 2012, 2011 and 2010, respectively.

(In Thousands)			Year Ended June 30, 2012
			Provident Bank		Provident Bank Mortgage		Consolidated Total
Net interest income, before provision for loan losses			$      30,514		$     6,216		$      36,730
Provision (recovery) for loan losses			5,932		(155	)	5,777
Net interest income, after provision for loan losses			24,582		6,371		30,953
Non-interest income:
	Loan servicing and other fees		627		106		733
	(Loss) gain on sale of loans, net		(1,057	)	39,074		38,017
	Deposit account fees		2,438		-		2,438
	(Loss) gain on sale and operations of real estate owned acquired in the settlement of loans, net		(191	)	71		(120	)
	Card and processing fees		1,282		-		1,282
	Other		800		-		800
		Total non-interest income	3,899		39,251		43,150
Non-interest expense:
	Salaries and employee benefits		15,756		23,527		39,283
	Premises and occupancy		2,449		1,314		3,763
	Operating and administrative expenses		4,903		7,416		12,319
		Total non-interest expenses	23,108		32,257		55,365
Income before income taxes			5,373		13,365		18,738
Provision for income taxes			2,309		5,619		7,928
Net income			$        3,064		$     7,746		$      10,810
Total assets, end of fiscal year			$ 1,036,138		$ 224,779		$ 1,260,917

(In Thousands)			Year Ended June 30, 2011
			Provident Bank		Provident Bank Mortgage	Consolidated Total
Net interest income, before provision for loan losses			$      33,512		$     4,237	$      37,749
Provision for loan losses			2,552		2,913	5,465
Net interest income, after provision for loan losses			30,960		1,324	32,284
Non-interest income:
	Loan servicing and other fees		832		60	892
	(Loss) gain on sale of loans, net		(113	)	31,307	31,194
	Deposit account fees		2,504		-	2,504
	(Loss) gain on sale and operations of real estate owned acquired in the settlement of loans, net		(1,364	)	13	(1,351	)
	Gain on sale of premises and equipment		1,089		-	1,089
	Card and processing fees		1,274		-	1,274
	Other		753		2	755
		Total non-interest income	4,975		31,382	36,357
Non-interest expense:
	Salaries and employee benefits		13,828		16,138	29,966
	Premises and occupancy		2,289		981	3,270
	Operating and administrative expenses		6,347		5,789	12,136
		Total non-interest expenses	22,464		22,908	45,372
Income before income taxes			13,471		9,798	23,269
Provision for income taxes			5,929		4,120	10,049
Net income			$        7,542		$     5,678	$      13,220
Total assets, end of fiscal year			$ 1,125,453		$ 188,271	$ 1,313,724

(In Thousands)			Year Ended June 30, 2010
			Provident Bank	Provident Bank Mortgage		Consolidated Total
Net interest income, before provision for loan losses			$      36,134	$     3,444		$      39,578
Provision for loan losses			21,145	698		21,843
Net interest income, after provision for loan losses			14,989	2,746		17,735
Non-interest income:
	Loan servicing and other fees		728	69		797
	Gain on sale of loans, net		2	14,336		14,338
	Deposit account fees		2,823	-		2,823
	Gain on sale of investment securities		2,290	-		2,290
	Gain (loss) on sale and operations of real estate owned acquired in the settlement of loans, net		111	(95	)	16
	Card and processing fees		1,110	-		1,110
	Other		878	7		885
		Total non-interest income	7,942	14,317		22,259
Non-interest expense:
	Salaries and employee benefits		12,892	10,487		23,379
	Premises and occupancy		2,342	706		3,048
	Operating and administrative expenses		7,188	4,524		11,712
		Total non-interest expenses	22,422	15,717		38,139
Income before income taxes			509	1,346		1,855
Provision for income taxes			174	566		740
Net income			$           335	$        780		$        1,115
Total assets, end of fiscal year			$ 1,232,072	$ 166,504		$ 1,398,576

The information above was derived from the internal management reporting system used by management to measure performance of the segments.

The Corporation’s internal transfer pricing arrangements determined by management primarily consist of the following:

1.	Borrowings for PBM are indexed monthly to the higher of the three-month FHLB – San Francisco advance rate on the first Friday of the month plus 50 basis points or the Bank’s cost of funds for the prior month.
2.	PBM receives servicing released premiums for new loans transferred to the Bank’s loans held for investment.  The servicing released premiums in the years ended June 30, 2012, 2011 and 2010 were $3,000, $14,000 and $9,000, respectively.
3.	PBM receives a premium (gain on sale of loans) or a discount (loss on sale of loans) for the new loans transferred to the Bank’s loans held for investment.  The (loss) gain on sale of loans in the years ended June 30, 2012, 2011 and 2010 was $(2,000), $(1,000) and $7,000, respectively.
4.	Loan servicing costs are charged to PBM by the Bank based on the number of loans held for sale at fair value multiplied by a fixed fee which is subject to management’s review.  The loan servicing costs in the years ended June 30, 2012, 2011 and 2010 were $81,000, $72,000 and $64,000, respectively.
5.	The Bank allocates quality assurance costs to PBM for its loan production, subject to management’s review.  Quality assurance costs allocated to PBM in the years ended June 30, 2012, 2011 and 2010 were $240,000, $213,000 and $182,000, respectively.
6.	The Bank allocates loan vault service costs to PBM for its loan production, subject to management’s review.  The loan vault service costs allocated to PBM in the years ended June 30, 2012, 2011 and 2010 were $88,000, $71,000 and $59,000, respectively.
7.	Office rents for PBM offices located in the Bank branches or offices are internally charged based on the square footage used.  Office rents allocated to PBM in the years ended June 30, 2012, 2011 and 2010 were $169,000, $146,000 and $138,000, respectively.
8.	A management fee, which is subject to regular review, is charged to PBM for services provided by the Bank.  The management fee in the years ended June 30, 2012, 2011 and 2010 was $1.5 million, $1.3 million and $1.2 million, respectively.