UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

|FORM 10-K                                                         
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|Commission File Number: 000-28304                                 
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|PROVIDENT FINANCIAL HOLDINGS, INC.                                
|(Exact name of registrant as specified in its
    charter)        
|Delaware                                                          
|(State or other jurisdiction of incorporation
    or organization)
|                                                                  
|                                                                  
|3756 Central Avenue, Riverside, California                        
|(Address of principal executive offices)                          

Registrant's telephone number, including area code:   (909) 686-6060



Securities registered pursuant to Section 12(b) of the Act:   None



Securities registered pursuant to Section 12(g) of the Act:



Common Stock, par value $.01 per share
(Title of Class)



Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES X     NO .



Indicate by check mark whether disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or other information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [  ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
YES X     NO .



As of September 19, 2003, there were issued and outstanding
4,771,535 shares of the Registrant's common stock. The Registrant's common stock is listed on the Nasdaq Stock Market under the symbol "PROV."  The aggregate market value of the common stock held by nonaffiliates of the Registrant, based on the closing sales price of the Registrant's common stock as quoted on the Nasdaq Stock Market on September
19, 2003, was $144.7 million.

DOCUMENTS INCORPORATED BY REFERENCE



Portions of the definitive Proxy Statement for the fiscal
2003 Annual Meeting of Shareholders ("Proxy Statement") are incorporated by reference
into Part III.

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PROVIDENT FINANCIAL HOLDINGS, INC.
Table of Contents

PagePART IItem  1.
Business
1General
1Subsequent events
1Market Area
2Item  2.
Properties
35Item  3.
Legal Proceedings
35Item  4.
Submission of Matters to a Vote of Security Holders
36PART IIItem  5.
Market for Registrant's Common Equity and Related Stockholders Matters
36Item  6.
Selected Financial Data
37Item  7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
37Item  7A.
Quantitative and Qualitative Disclosures About Market Risk
47Item  8.
Financial Statements and Supplementary Data
49Item  9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
49Item 9A.
Control and Procedures
49PART IIIItem 10.
Directors and Executive Officers of the Registrant
50Item 11.
Executive Compensation
51Item 12.
Security Ownership of Certain Beneficial Owners and Management
51Item 13.
Certain Relationships and Related Transactions
51Item 14.
Principal Accountant Fees and Services
51PART IVItem 15.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
52Signatures

54


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PART I



Item 1.  Business



General



Provident Financial Holdings, Inc. (the "Corporation"), a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company for Provident Savings Bank, F.S.B. (the "Bank") upon the Bank's conversion from a federal mutual to a federal stock savings bank ("Conversion").  The Conversion was completed on June 27, 1996.  At June 30, 2003, the Corporation had total assets of $1.3 billion, total deposits of $754.1 million and stockholders' equity of $106.9 million.  The Corporation has not engaged in any significant activity other than holding the stock of the Bank.  Accordingly, the information set forth in this report, including financial statements and related data, relates primarily to the Bank and its subsidiaries.



The Corporation, from time to time, may repurchase its common stock as a way to enhance the Corporation's earnings per share.  The Corporation considers the repurchase of its common stock if the market value of the stock is lower than its book value and/or the Corporation believes that the current stock price is under valued as compared to its current and future income projections.  Consideration is also given to the Corporation's liquidity and capital requirements and its future capital needs based on the Corporation's current business plans.  The Corporation's Board of Directors authorizes each stock repurchase program, the duration of which is normally one year.  Once the stock repurchase program is authorized, Management may repurchase its common stock from time to time in the open market, depending upon market conditions and the factors described above.



The Bank, founded in 1956, is a federally chartered stock savings bank headquartered in Riverside, California.  The Bank is regulated by the Office of Thrift Supervision ("OTS"), its primary federal regulator, and the Federal Deposit Insurance Corporation ("FDIC"), the insurer of its deposits.  The Bank's deposits are federally insured up to applicable limits by the FDIC under the Savings Association Insurance Fund ("SAIF"). The Bank has been a member of the Federal Home Loan Bank ("FHLB") System since 1956.



The Bank is a financial services company committed to serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California.  The Bank conducts its business operations as Provident Bank, Provident Bank Mortgage and through its subsidiary, Provident Financial Corp.  The business activities of the Corporation consist of community banking, mortgage banking, investment services and real estate operations.



The Bank's operations primarily consist of accepting deposits from customers within the communities surrounding its full service offices and investing those funds in single-family, multi-family, commercial real estate, construction, commercial business, consumer and other loans.  Mortgage banking activities consist of the origination and sale of mortgage loans secured by single-family residences and consumer loans.  Through its subsidiary (Provident Financial Corp), the Bank offers investment services and conducts real estate operations.  The Bank's revenues are derived principally from interest on its loan and investment portfolios and fees generated through its community banking activities and its mortgage banking activities.

Subsequent Events:



Membership in the Russell 3000 Index.

Appointment of the Bank's Senior Vice President and Chief Lending Officer.  On July 31, 2003, the Corporation announced the appointment of the Bank's Senior Vice President and Chief Lending Officer, Thomas "Lee" Fenn.  For further information regarding Mr. Fenn, see "Directors and Executive Officers of the Registrant - Biographical Information" on page 50.

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Cash Dividends.  On July 31, 2003, the Board of Directors of the Bank declared a $2.0 million cash dividend to the Corporation, payable on August 8, 2003.  On August 1, 2003, the Corporation announced a cash dividend of $0.10 per share on the Corporation's outstanding shares of common stock for shareholders of record at the close of business on August 20, 2003, payable on September 12, 2003.



Stock Repurchase Program.  On August 5, 2003, the Corporation announced its intention to repurchase up to 5% of its common stock, or approximately 246,046 shares.



Opening of Retail Banking Center in Riverside, California.



Market Area



The Bank is headquartered in Riverside, California and operates 12 full-service banking offices in Riverside County and one banking office in San Bernardino County.  Management considers Riverside and Western San Bernardino Counties to be the Bank's primary market for deposits.  Through the operations of Provident Bank Mortgage ("PBM"), the Bank has expanded its retail lending market to include a larger portion of Southern California. Currently, there are nine stand-alone PBM loan production offices located in Los Angeles, Orange, Riverside and San Bernardino counties.  PBM's loan production offices include a wholesale loan department through which the Bank maintains a network of loan correspondents.  Most of the Bank's business is conducted in the communities surrounding its full-service branches and loan production offices.



The large geographic area encompassing Riverside and San Bernardino Counties is referred to as the "Inland Empire."  According to 2000 Census Bureau population statistics, Riverside and San Bernardino Counties have the sixth and fifth largest county populations in California, respectively.  The Bank's market area consists primarily of suburban and urban communities.  Western Riverside and San Bernardino Counties are relatively densely populated and are within the greater Los Angeles metropolitan area.  The Inland Empire has enjoyed economic strength over the past several years.  Many corporations are moving their offices and warehouses to the Inland Empire which offers more affordable sites and more affordable housing for their employees.  This trend has resulted in a significant improvement in real estate property values.  The recent downturn in the national economy has had the effect of slowing the economy in the Inland Empire but has not resulted in the downturn seen in many parts of the country.  The unemployment rate in the Inland Empire in June 2003 was at 6.1%, compared to 6.7% in California and 6.2% nationwide.

Competition



The Bank faces significant competition in its market area in originating real estate loans and attracting deposits.  The rapid population growth in Riverside County has attracted numerous financial institutions to the Bank's market area.  The Bank's primary competitors are large regional and super-regional commercial banks as well as other community-oriented banks and savings institutions.  The Bank also faces competition from credit unions and a large number of mortgage companies that operate within its market area.  Many of these institutions are significantly larger than the Bank and therefore have greater financial and marketing resources than the Bank.  The Bank's mortgage banking operations also face strong competition from other mortgage bankers and brokers as well as other financial institutions.  This competition may limit the Bank's growth and profitability in the future.



Personnel



As of June 30, 2003, the Bank had 329 full-time equivalent employees, which consisted of 264 full-time, 58 prime-time, 28 part-time, and seven temporary employees.  The employees are not represented by a collective bargaining unit and the Bank believes that its relationship with employees is good.

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Lending Activities



General.  The lending activity of the Bank is predominately comprised of the origination of conventional mortgage loans secured by single-family residential properties.  The Bank also originates multi-family, commercial real estate, construction, commercial business, consumer and other loans for its portfolio.  The Bank's net loans held for investment were approximately $744.2 million at June 30, 2003, representing approximately 59.0% of consolidated total assets.  This compares to $593.6 million, or 59.0% of consolidated total assets, at June 30, 2002.

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Loan Portfolio Analysis.  The following table sets forth the composition of the Bank's loan portfolio at the dates indicated.



|                           |                        |             | At June 30,
|-------------------------- | ---------------------- | ----------- | -----------
|                           |                        |             | 2003       
|                           |                        |             | Amount     
|(Dollars In Thousands)     |                        |            
|                           |                        |             |            
|Mortgage loans:            |                        |             |            
|                           | Single-family          |             | $ 522,765  
|                           | Multi-family           |             | 49,699     
|                           | Commercial real estate |             | 89,666     
|                           | Construction.          |             | 118,784    
|                           | Total mortgage loans   |             | 780,914    
|                           |                        |             |            
|Commercial business loans  |                        | 22,489      |            
|Consumer loans             |                        | 9,576       |            
|Other loans                |                        | 5,724       |            
|                           | Total loans held for   |             |            
|                           | investment             |             | 818,703    
|                           |                        |             |            
|Undisbursed loan funds     |                        | (67,868     | )          
|Deferred loan costs (fees) |                        | 602         |            
|Unearned discounts         |                        | -           |            
|Allowance for loan losses  |                        | (7,218      | )          
|                           | Total loans held for   |             |            
|                           | investment, net        |             | $ 744,219  
|Loans held for sale        |                        | $     4,247 |            

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Maturity of Loans Held for Investment.  The following table sets forth information at June 30, 2003, regarding the dollar amount of principal payments becoming contractually due during the periods indicated for loans held for investment.  Demand loans, loans having no stated schedule of principal payments and no stated maturity, and overdrafts are reported as becoming due within one year.  The table does not include any estimate of prepayments, which significantly shorten the average life of loans held for investment and may cause the Bank's actual principal payment experience to differ from that shown below.



|                          |                        |        |           |       | After           |       | After    |       | After       |       |           |        |          
|------------------------- | ---------------------- | ------ | --------- | ----- | --------------- | ----- | -------- | ----- | ----------- | ----- | --------- | ------ | ---------
|                          |                        |        |           |       | One Year        |       | 3 Years  |       | 5 Years     |       |           |        |          
|                          |                        |        | Within    |       | Through         |       | Through  |       | Through     |       | Beyond    |        |          
|                          |                        |        | One Year  |       | 3 Years         |       | 5 Years  |       | 10 Years    |       | 10 Years  |        | Total    
|(In Thousands)            |                        |       
|                          |                        |        |           |       |                 |       |          |       |             |       |           |       
|Mortgage loans:           |                        |        |           |       |                 |       |          |       |             |       |           |       
|                          | Single-family          |        | $     255 |       | $           531 |       | $  1,154 |       | $     3,702 |       | $ 517,123 |        | $ 522,765
|                          | Multi-family           |        | 4,465     |       | 6,268           |       | 4,707    |       | 2,649       |       | 31,610    |        | 49,699   
|                          | Commercial real estate |        | 1,087     |       | 4,803           |       | 2,616    |       | 66,271      |       | 14,889    |        | 89,666   
|                          | Construction           |        | 77,983    |       | 16,065          |       | 488      |       | -           |       | 24,248    |        | 118,784  
|Commercial business loans |                        | 12,209 |           | 3,319 |                 | 2,760 |          | 4,201 |             | -     |           | 22,489
|Consumer loans            |                        | 61     |           | 200   |                 | 1,003 |          | 1,633 |             | 6,679 |           | 9,576 
|Other loans               |                        | 1,254  |           | 4,134 |                 | 336   |          | -     |             | -     |           | 5,724 
|                          | Total loans held for   |        |           |       |                 |       |          |       |             |       |           |        |          
|                          | investment             |        | $ 97,314  |       | $ 35,320        |       | $ 13,064 |       | $ 78,456    |       | $ 594,549 |        | $ 818,703



The following table sets forth the dollar amount of all loans held for investment due after June 30, 2004 which have fixed interest rates and have floating or adjustable interest rates.



|                          |                                 |       |             |       | Floating or
|------------------------- | ------------------------------- | ----- | ----------- | ----- | -----------
|                          |                                 |       |             |       | Adjustable 
|                          |                                 |       | Fixed-Rates |       | Rates      
|(In Thousands)            |                                 |      
|                          |                                 |       |             |      
|Mortgage loans:           |                                 |       |             |      
|                          | Single-family                   |       | $    8,473  |       | $ 515,701  
|                          | Multi-family                    |       | 2,373       |       | 42,862     
|                          | Commercial real estate          |       | 2,383       |       | 86,196     
|                          | Construction                    |       | 24,248      |       | 16,553     
|Commercial business loans |                                 | 4,993 |             | 5,287
|Consumer loans            |                                 | 3,512 |             | 6,002
|Other loans               |                                 | 4,470 |             | -    
|                          | Total loans held for investment |       | $ 50,452    |       | $ 672,601  



Scheduled contractual principal payments of loans do not reflect the actual life of such assets.  The average life of loans is substantially less than their contractual terms because of prepayments.  In addition, due-on-sale clauses on loans generally give the Bank the right to declare loans immediately due and payable in the event, among other things, the borrower sells the real property subject to the mortgage.  The average life of mortgage loans tends to increase, however, when current interest rates are substantially higher than interest rates on existing loans held for investment and, conversely, decrease when interest rates on existing loans held for investment are substantially higher than current interest rates.



Single-Family Mortgage Loans. The Bank's predominant
lending activity is the origination of loans secured by first mortgages on
owner-occupied, single-family (one to four units) residences in the communities
where the Bank has established full service branches and loan production
offices. At June 30, 2003, total single-family loans held

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for investment increased to $522.8 million, or 63.9% of the
total loans held for investment from $413.7 million, or 63.0% of the total loans
held for investment at June 30, 2002. The increase in the single-family loans
was due primarily to $360.8 million of new loan originations, partly offset by
loan prepayments.



The Bank's residential mortgage loans are generally underwritten and documented in accordance with the guidelines established by the Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association ("FNMA").  All government insured loans are generally underwritten and documented in accordance with the guidelines established by the Department of Housing and Urban Development ("HUD") and the Veteran Administration ("VA").  The Bank's loan underwriters are approved as underwriters under HUD's delegated underwriter program.



The Bank offers adjustable rate mortgage ("ARM") loans at rates and terms competitive with market conditions.  Substantially all of the ARM loans originated by the Bank meet the underwriting standards of the secondary market.  The Bank offers several ARM products which adjust semi-annually or annually after an initial fixed period ranging from six months to five years subject to a limitation on the annual increase of 1.0 to 2.0 percentage points and an overall limitation of 3.0 to 6.0 percentage points.  The ARM loans in the Bank's loans held for investment utilize the FHLB eleventh district cost of funds index ("COFI"), the London interbank offered rates index ("LIBOR"), the 12-month average Treasury index ("12 MAT") or the weekly average yield on one-year U.S. Treasury securities adjusted to a constant maturity of one year ("CMT"), plus a margin of 2.00% to 3.25%.  Loans based on the LIBOR constitute a majority of the Bank's loans held for investment.  Currently, the Bank does not originate COFI indexed loans but emphasizes products based on the one-year CMT and LIBOR, which respond more quickly to immediate changes in interest rates.  The majority of the ARM loans held for investment, at the present time, have three or five-year fixed periods prior to the first adjustment period.  Loans of this type have embedded interest rate risk if interest rates should rise during the initial fixed rate period.



As of June 30, 2003, the Bank had $91.9 million in mortgage loans that may be subject to negative amortization, compared to $60.5 million at June 30, 2002.  Negative amortization involves a greater risk to the Bank because during a period of high interest rates the loan principal balance may increase by up to 115% of the original loan amount.  However, the Bank believes that the risk of default is reduced by the stability provided by payment schedules and has historically found that its origination of negative amortization loans has not resulted in higher amounts of non-performing loans.  Borrower demand for ARM loans versus fixed-rate mortgage loans is a function of the level of interest rates, the expectations of changes in the level of interest rates and the difference between the initial interest rates and fees charged for each type of loan.  The relative amount of fixed-rate mortgage loans and ARM loans that can be originated at any time is largely determined by the demand for each in a given interest rate and competitive environment.



The retention of ARM loans, rather than fixed rate loans, helps to reduce exposure to changes in interest rates.  There are, however, unquantifiable credit risks resulting from the potential of increased interest charges to be paid by the customer due to increases in interest rates.  It is possible that, during periods of rising interest rates, the risk of default on ARM loans may increase as a result of the increase in the required payment from the borrower.  Furthermore, the risk of default may increase because ARM loans originated by the Bank generally provide, as a marketing incentive, for initial rates of interest below those rates that would apply if the adjustment index plus the applicable margin were initially used for pricing. Such loans are subject to increased risks of default or delinquency.  Another consideration is that although ARM loans allow the Bank to increase the sensitivity of its asset due to changes in the interest rates, the extent of this interest sensitivity is limited by the periodic and lifetime interest rate adjustment limits.  In addition, because the COFI is a lagging market index, upward adjustments on these loans may occur more slowly than increases in the Bank's cost of interest-bearing liabilities, especially during periods of rapidly increasing interest rates.  Because of these characteristics, the Bank has no assurance that yields on ARM loans will be sufficient to offset increases in the Bank's cost of funds.



The Bank's present lending policy generally limits loan amounts for conventional first trust deed loans to 97% of the appraised value or purchase price of a property, whichever is lower.  Higher loan-to-value ratios are available on certain government-insured programs.  The Bank generally requires private mortgage insurance on first trust deed residential loans with loan-to-value ratios exceeding 80% at the time of origination.

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Multi-Family and Commercial Real Estate Mortgage Loans.  At June 30, 2003, multi-family mortgage loans were $49.7 million and commercial real estate loans were $89.7 million, or 6.1% and 10.9%, respectively, of the loans held for investment.  Consistent with its strategy to diversify the composition of loans held for investment, the Bank has made the origination of multi-family and commercial real estate loans a priority.  At June 30, 2003, the Bank had 76 multi-family and 120 commercial real estate loans in loans held for investment.  The largest of these was a commercial real estate loan with a balance of $3.7 million, secured by 852 storage units in Moreno Valley, California which was performing in accordance with its terms.  During fiscal 2003, the Bank increased its lending resources with the intent of increasing the amount of originations in multi-family, commercial real estate and construction loans.



Multi-family mortgage loans originated by the Bank are predominately adjustable rate loans with a term to maturity of 10 years based on a 25-year amortization schedule.  Commercial real estate loans originated by the Bank are also predominately adjustable rate loans with a term to maturity of ten years based on a 25-year amortization schedule.   Rates on multi-family and commercial real estate ARM loans generally adjust monthly, semi-annually or annually at a specific margin over the 12 MAT, subject to annual payment caps and life-of-loan interest rate caps.  At June 30, 2003, $30.3 million, or 61.0%, of the Bank's multi-family loans were secured by five to 36 unit projects, of which $12.2 million, or 24.5 %, were located in Riverside or San Bernardino Counties.  The Bank's commercial real estate loan portfolio generally consists of loans secured by small office buildings, light industrial centers, mini warehouses and small retail centers, substantially all of which are located in Southern California.  The Bank originates multi-family and commercial real estate loans in amounts ranging from $200,000 to $3.0 million.  At June 30, 2003, the Bank had 19 commercial real estate and multi-family loans with principal balances greater than $1.5 million totaling $40.6 million.  Independent appraisers, engaged by the Bank, perform appraisals on properties that secure multi-family and commercial real estate loans.  Underwriting of multi-family and commercial real estate loans includes a thorough analysis of the cash flows generated by the property to support the debt service and the financial resources, experience, and income level of the borrowers.



Multi-family and commercial real estate loans afford the Bank an opportunity to receive higher interest rates than those generally available from single-family mortgage loans.  However, loans secured by such properties are generally greater in amount, more difficult to evaluate and monitor and are more susceptible to default as a result of general economic conditions and, therefore, involve a greater degree of risk than single-family residential mortgage loans.  Because payments on loans secured by multi-family and commercial properties are often dependent on the successful operation and management of the properties, repayment of such loans may be impacted by adverse conditions in the real estate market or the economy.  At June 30, 2003, approximately $24.7 million, or 49.7%, of the Bank's multi-family loans and approximately $51.8 million, or 57.8%, of the Bank's commercial real estate loans were secured by properties located in Riverside or San Bernardino Counties.  Although there has been continued improvement in the real estate market, there is no assurance that the current market value of the properties securing these loans equals or exceeds the outstanding loan balance.  At June 30, 2003, the Bank had no non-accrual multi-family or commercial real estate loans and no multi-family or commercial real estate loans that were 60 days or more past due.  See also "REGULATION - Federal Regulation of Savings Institutions - Loans to One Borrower" on page 31.



Construction Mortgage Loans.  Given favorable economic conditions and increased residential housing demand in its primary market area, the Bank actively originates two types of residential construction loans: short-term construction loans and construction/permanent loans.  At June 30, 2003, the Bank's construction loans were $118.8 million, or 14.5% of loans held for investment, an increase of $20.9 million, or 21.3%, during fiscal 2003, which reflects the Bank's emphasis on this loan product.  Undisbursed loan funds at June 30, 2003 and 2002 were $67.9 million and $56.2 million, respectively.

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The composition of the Bank's construction loan portfolio is as follows:





|                        | At June 30,
|----------------------- | -----------
|                        | 2003       
|                        | Amount     
|(Dollars In Thousands)  |            
|                        |            
|Short-term construction | $    94,536
|Construction/permanent  | 24,248     
|                        | $ 118,784  



Short-term construction loans include three types of loans: custom construction, tract construction, and speculative construction. Additionally, the bank makes short term (18 to 36 month) lot loans to facilitate land acquisition prior to the start of construction.



Custom construction loans are made to individuals who, at the time of construction, have a contract executed with a builder to construct their residence.  Custom construction loans are generally originated for a term of 12 months, with adjustable interest rates at the prime lending rate plus a possible spread and with loan-to-value ratios of up to 80% of the appraised value of the completed property.  The owner secures long-term permanent financing at the completion of construction.  At June 30, 2003, custom construction loans were $36.4 million, with undisbursed loan funds of $18.6 million.



The Bank makes short-term tract construction loans to subdivision builders.  These subdivisions are usually financed and built in phases.  A thorough analysis of market trends and demand within the area are reviewed for feasibility.  The Bank prefers affordable and median-priced housing.  Generally, significant presales are required prior to commencement of construction.  Tract lending may include the building and financing of model homes under a separate loan.  The terms for tract loans range from 12 to 18 months with interest rates floating from 1.0% to 2.0% above the prime-lending rate.



Speculative construction loans are made to home builders and are termed "speculative" because the home builder does not have, at the time of loan origination, a signed contract with a home buyer who has a commitment for permanent financing with either the Bank or another lender for the finished home.  The home buyer may be identified either during or after the construction period, with the risk that the builder will have to debt service the speculative construction loan for a significant period of time after the completion of construction until the home buyer is identified.  At June 30, 2003, speculative construction loans were $60.1 million, with undisbursed loan funds of $29.4 million.



Construction/permanent loans automatically roll from the construction to the permanent phase.  The construction phase of a construction/permanent loan generally lasts nine to 12 months and the interest rate charged is generally floating at prime or above and with a loan-to-value ratio of up to 80% of the appraised value of the completed property.



Construction loans under $1,000,000 are
approved by bank personnel specifically designated to approve construction
loans. Members of the Bank's Loan Committee approve all construction loans over
$1,000,000. Prior to approval of any construction loan, an independent fee
appraiser inspects the site and the Bank reviews the existing or proposed
improvements, identifies the market for the proposed project, and analyzes the
pro forma data and assumptions on the project. In the case of a speculative,
tract or custom construction loan, the Bank reviews the experience and expertise
of the builder. After the Bank expresses an interest in the project, the
application is processed, which includes obtaining credit reports, financial
statements and tax returns on the borrowers and guarantors, an independent
appraisal of the project is completed, and any other expert report necessary to
evaluate the proposed project. In the event of cost overruns, the Bank requires
the borrower to deposit their own funds into a loans-in-process account, which
the Bank disburses consistent with the completion of the subject property
pursuant

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to a revised disbursement schedule.



The construction loan documents require that construction loan proceeds be disbursed in increments as construction progresses.  Disbursements are based on periodic on-site inspections by independent fee inspectors and Bank personnel.  At inception, the Bank also requires borrowers to deposit funds into the loans-in-process account covering the difference between the actual cost of construction and the loan amount.  The Bank regularly monitors the construction loan portfolio, economic conditions and housing inventory.  The Bank's property inspector performs periodic property inspections.  The Bank believes that the internal monitoring system helps reduce many of the risks inherent in its construction loans.



Construction loans afford the Bank the opportunity to achieve higher interest rates and fees with shorter terms to maturity than its single-family mortgage loans.  Construction loans, however, are generally considered to involve a higher degree of risk than single-family mortgage loans because of the inherent difficulty in estimating both a property's value at completion of the project and the estimated cost of the project.  The nature of these loans is such that they are generally more difficult to evaluate and monitor.  If the estimate of construction cost proves to be inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the project.  If the estimate of value upon completion proves to be inaccurate, the Bank may be confronted with a project whose value is insufficient to assure full repayment.  Projects may also be jeopardized by disagreements between borrowers and builders and by the failure of builders to pay subcontractors.  Loans to builders to construct homes for which no purchaser has been identified carry more risk because the payoff for the loan depends on the builder's ability to sell the property prior to the time that the construction loan matures.  The Bank has sought to address these risks by adhering to strict underwriting policies, disbursement procedures and monitoring practices.  In addition, because the Bank's construction lending is in its primary market area, changes in the local economy and real estate market could adversely affect the Bank's construction loan portfolio.



Participation loan purchases and sales.



The Bank also sells participating interests in loans when it has been determined that it is beneficial to diversify the risk.  Participation sales enable the Bank to maintain acceptable loan concentrations and comply with the Bank's loans to one borrower policy.  Generally, selling a participating interest in a loan increases the yield to the Bank on the portion of the loan that is retained.



Commercial Business Loans.  The Bank has a business banking department that primarily serves businesses located within the Inland Empire.  Commercial business loans allow the Bank to diversify its lending and increase the average loan portfolio yield.  As of June 30, 2003, commercial business loans were $22.5 million, or 2.8% of loans held for investment.  These loans represent unsecured lines of credit and term loans secured by business assets.



Commercial business loans are generally made to customers who are well known to the Bank and are generally secured by accounts receivable, inventory, business equipment and/or other assets.  Lines of credit are made at variable rates of interest equal to a negotiated margin above the prime rate and term loans are at a fixed or variable rate.  The Bank may also obtain personal guarantees from financially capable parties based on a review of personal financial statements.  The Bank's commercial loans may be structured as term loans or as lines of credit.  Commercial business term loans are generally made to finance the purchase of assets and have maturities of five years or less.  Commercial lines of credit are typically made for the purpose of providing working capital and usually approved with a term of one year or less.

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Commercial business loans involve greater risk than residential mortgage loans and involve risks that are different from those associated with residential and commercial real estate loans.  Real estate loans are generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default.  Although commercial business loans are often collateralized by equipment, inventory, accounts receivable or other business assets including real estate, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories and equipment may be obsolete or of limited use, among other things.  Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is secondary and often times an insufficient source of repayment.  During fiscal 2003, the Bank recognized $436,000 in charge-offs on three commercial business loans to two borrowers.  At June 30, 2003, the Bank had a $32,000 non-accrual commercial business loan to a single borrower.



Consumer and Other Loans.  At June 30, 2003, the Bank's consumer loans were $9.6 million, or 1.2%, of the Bank's loans held for investment, a decrease of $9.8 million, or 50.6%, during fiscal 2003.  In prior periods, the Bank has originated consumer loans, and, in particular, home equity lines of credit and equity loans, as a result of the higher yields that are available on these loans compared to residential mortgage loans.  The decrease in consumer loans was primarily attributable to loan payoffs resulting from a strong refinance market which started in January 2001 as interest rates declined.  The Bank anticipates that it will continue to be an active originator of home equity loans, subject to market conditions.  At June 30, 2003, home equity loans amounted to $7.3 million or 76.7% of consumer loans as compared to $18.9 million or 97.5% of consumer loans at June 30, 2002.



The Bank offers open-ended lines of credit on either a secured or unsecured basis.  Secured lines of credit are generally secured by a second mortgage on the borrower's primary residence.  Secured lines of credit have an interest rate that is typically one to two percentage points above the prime lending rate, as published in The Wall Street Journal, while the rate on unsecured lines of credit (overdraft protection) is ten percentage points above the prime lending rate.  Additionally, the Bank offers secured savings lines of credit which have an interest rate that is four percentage points above the FHLB eleventh district COFI.  In all cases, the rate adjusts monthly.



The Bank offers closed-end, fixed-rate home equity loans that are secured by the borrower's primary residence.  These loans do not exceed 100% of the appraised value of the residence and have terms of up to 15 years requiring monthly payments of principal and interest.



Consumer loans potentially have a greater risk than residential mortgage loans, particularly in the case of loans that are unsecured.  Consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be adversely affected by job loss, illness or personal bankruptcy.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.  At June 30, 2003, the Bank had $161,000 in consumer loans accounted for on a non-accrual basis.



Mortgage Banking Activities



General.  The Bank's mortgage banking activities primarily consists of mortgage loans secured by single-family properties.  Mortgage banking involves the origination and sale of mortgage and consumer loans for the purpose of generating gains on sale of loans and fee income on the origination of loans, in addition to loan interest income. Given current pricing in the mortgage markets, the Bank generally sells the majority of its loans on a servicing-released basis. Generally, the level of loan sale activity and, therefore, its contribution to the Bank's profitability depends on maintaining a sufficient volume of loan originations.  Changes in the level of interest rates and the local economy affect the number of loans originated by the Bank and, thus, the amount of loan sales, net interest income and loan fees earned.  Total loan originations during fiscal 2003, 2002 and 2001 were $1.63 billion, $1.26 billion and $774.0 million, respectively.  Loan originations held for investment were $360.8 million, $159.3 million and $1.8 million in fiscal 2003, 2002 and 2001, respectively.

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Loan Solicitation and Processing.  The Bank's mortgage banking operations consist of both wholesale and retail loan originations. The Bank's wholesale loan production utilizes a network of approximately 850 loan brokers approved by the Bank who originate and submit loans at a mark-up over the Bank's daily published price.  Wholesale loans originated for sale in fiscal 2003, 2002 and 2001 were $736.8 million, $672.1 million and $461.9 million, respectively.  The Bank maintains a regional wholesale lending office in Rancho Cucamonga, California.



The Bank's retail loan production utilizes loan officers and processors employed by PBM (Provident Bank Mortgage, a division of the Bank).  The Bank's loan officers generate retail loan originations primarily through referrals from realtors, builders, employees and customers.  As of June 30, 2003, PBM operated two retail offices within the Bank's facilities located in Riverside and Rancho Mirage and six separate retail loan production offices located in Glendora, Riverside, City of Industry, La Quinta, Torrance and Fullerton, all in Southern California.  Generally, the cost of retail operations exceeds the cost of wholesale operations as a result of additional employees needed for retail operations.  However, the revenue per mortgage for retail originations is generally higher since the origination fees are retained by the Bank.  Because wholesale loan production tends to decrease more dramatically than retail loan production during periods of higher interest rates, the Bank is seeking to originate a greater proportion of its loans through its retail operations.  Retail loans originated for sale in fiscal 2003, 2002 and 2001 were $533.5 million, $431.4 million and $310.2 million, respectively.  Further, the Bank believes in its ability to attract repeat business and cross-sell other banking services to borrowers acquired through its retail loan production.



The Bank requires evidence of marketable title, lien position, loan to value, a title insurance policy and appraisals on all properties.  The Bank also requires evidence of fire and casualty insurance on the value of improvements.  As stipulated by federal regulations, the Bank requires flood insurance to protect the property securing its interest if such property is located in a designated flood area.



Loan Commitments and Rate Locks.  The Bank issues commitments for residential mortgage loans conditioned upon the occurrence of certain events.  Such commitments are made with specified terms and conditions.  Interest rate locks are generally offered to prospective borrowers for up to a 60-day period.  The borrower may lock in the rate at any time from application until the time they wish to close the loan.  Occasionally, borrowers obtaining financing on new home developments are offered rate locks up to 120 days from application.  The Bank's outstanding commitments to originate loans were $121.4 million at June 30, 2003 (see Note 15 of the Notes to Consolidated Financial Statements contained in Item 8 of this report).  When the Bank issues a commitment to a borrower, there is a risk to the Bank that a rise in interest rates will reduce the value of the mortgage before it can be closed and sold.  To control the interest rate risk caused by mortgage banking activities, the Bank uses forward loan sale agreements and over-the-counter put options related to mortgage-backed securities as a hedge (see "Derivative Activities" on page 13).



Loan Origination and Other Fees.  The Bank generally receives origination points and loan fees.  Origination points are a percentage of the principal amount of the mortgage loan which is charged to a borrower for funding a loan.  The amount of points charged by the Bank is generally 1% to 2%.  Current accounting standards require points and fees received for originating loans (net of certain loan origination costs) to be deferred and amortized into interest income over the contractual life of the loan.  Net deferred fees or costs associated with loans that are prepaid or sold are recognized as income at the time of prepayment or sale.  The Bank had $602,000 of net unamortized deferred loan origination costs at June 30, 2003.



Loan Originations, Sales and Purchases.   The Bank's mortgage originations include conventional loans as well as loans insured by the FHA and VA.  Except for loans originated as held for investment, loans originated through mortgage banking activities are intended for eventual sale into the secondary market.  As such, these loans must meet the origination and underwriting criteria established by the final investors.  The Bank sells a large percentage of the mortgage loans that it originates as whole loans to private investors.  The Bank also sells conventional whole loans to FNMA, FHLMC and FHLB through their purchase programs. Conventional mortgage loans originated by the Bank that do not meet FNMA or FHLMC guidelines may be sold to private institutional investors (see "Derivative Activities" on page 13).

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The following table shows the Bank's loan originations, purchases, sales and principal repayments during the periods indicated.



|                                                     |                           |                                       |             | Year Ended June 30,
|---------------------------------------------------- | ------------------------- | ------------------------------------- | ----------- | -------------------
|                                                     |                           |                                       |             | 2003               
|(In Thousands)                                       |                           |                                      
|                                                     |                           |                                       |             |                    
|Loans originated for sale:                           |                           |                                       |             |                    
|                                                     | Retail originations       |                                       | $   533,523 |                    
|                                                     | Wholesale originations    |                                       | 736,769     |                    
|                                                     |                           | Total loans originated for sale       |             | 1,270,292          
|                                                     |                           |                                       |             |                    
|Loans sold and settled:                              |                           |                                       |             |                    
|                                                     | Servicing released        |                                       | (1,190,347  | )                  
|                                                     | Servicing retained        |                                       | (52,828     | )                  
|                                                     |                           | Total loans sold                      |             | (1,243,175         
|                                                     |                           |                                       |             |                    
|Loans originated for investment:                     |                           |                                       |             |                    
|                                                     | Mortgage loans:           |                                       |             |                    
|                                                     |                           | Single-family                         |             | 360,796            
|                                                     |                           | Multi-family                          |             | 1,725              
|                                                     |                           | Commercial real estate                |             | 55,419             
|                                                     |                           | Construction                          |             | 94,201             
|                                                     | Commercial business loans |                                       | 6,356       |                    
|                                                     | Consumer loan             |                                       | 50          |                    
|                                                     | Other loans               |                                       | 4,008       |                    
|                                                     |                           | Total loans originated for investment |             | 522,555            
|                                                     |                           |                                       |             |                    
|Loans purchased for investment:                      |                           |                                       |             |                    
|                                                     | Mortgage loans:           |                                       |             |                    
|                                                     |                           | Multi-family                          |             | 6,945              
|                                                     |                           | Commercial real estate                |             | 12,251             
|                                                     |                           | Construction                          |             | 20,268             
|                                                     | Other loans               |                                       | -           |                    
|Total loans purchased for investment                 |                           | 39,464                                |             | 38,592             
|                                                     |                           |                                       |             |                    
|Mortgage loan principal repayments                   |                           | (359,044                              | )           | (385,261           
|Real estate acquired in settlement of loans          |                           | (1,172                                | )           | (1,348             
|(Increase) decrease in receivable from sale of loans |                           | (47,661                               | )           | 70,045             
|Decrease in other items, net (1)                     |                           | (28,094                               | )           | (909               
|Net increase (decrease) in loans held for investment |                           |                                       |             |                    
|and loans held for sale                              |                           | $     153,165                         |             | $  (104,065        



|(1) | Includes net changes in undisbursed loan funds, deferred loan fees or costs, discounts on loans and allowance for loan losses.
|--- | ------------------------------------------------------------------------------------------------------------------------------



Mortgage loans sold to private investors generally are sold without recourse other than standard representations and warranties.  Most mortgage loans sold to FHLMC and FNMA are sold on a non-recourse basis whereby foreclosure losses are generally the responsibility of the purchasing agency and not the Bank, except in the case of VA loans used to form Government National Mortgage Association ("GNMA") pools, which are subject to limitations on the VA's loan guarantees.



The Bank has one commitment to sell loans to FHLMC, which has
a recourse provision requiring the Bank to be responsible for losses on these
loans. As of June 30, 2003, there were 21 loans sold to FHLMC under this

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commitment with an outstanding balance of $4.2 million. The
Bank has established a recourse provision of $13,000 for potential losses on
these loans. To date, no losses have been experienced.



Loans sold to the FHLB under its Mortgage Partnership Finance ("MPF") program also have a recourse provision.  The FHLB absorbs the first four basis points of loss and a credit scoring process is used to calculate the recourse amount for the Bank.  All losses above this amount are taken by the FHLB.  As of June 30, 2003, the Bank has sold $32.8 million to FHLB under this program and established a recourse loss provision of $31,000.  To date, no losses have been experienced.



Occasionally, the Bank is required to repurchase loans sold to FHLMC, FNMA, FHLB or private investors if it is determined that such loans do not meet the credit requirements of the investor, or if one of the parties involved in the loan misrepresented pertinent facts, committed fraud, or if such loans were 90-days past due within 120 days of the loan funding date.  During the year ended June 30, 2003, the Bank repurchased $835,000 of single-family mortgage loans as compared to $1.1 million in fiscal 2002 and $757,000 in fiscal 2001.



Loan Servicing.  The Bank receives fees from a variety of institutional investors in return for performing the traditional services of collecting individual payments.  At June 30, 2003, the Bank was servicing $114.1 million of loans for others.  The Bank's loan servicing portfolio has decreased in recent years because the Bank has sold a larger portion of its loans on a servicing-released basis and the increase in loan prepayments resulting from declining interest rates.   As long as the Bank continues to sell most mortgage loans on a servicing released basis, the size of the mortgage servicing portfolio is expected to decrease.  Loan servicing includes processing payments, accounting for loan funds and collecting and paying real estate taxes, hazard insurance and other loan-related items such as private mortgage insurance. When the Bank receives the gross mortgage payment from individual borrowers, it remits to the investor a predetermined net amount based on the loan sale agreement for that mortgage.



Derivative Activities.  Mortgage banking involves the risk that a rise in interest rates will reduce the value of a mortgage before it can be sold.  This type of risk occurs when the Bank commits to an interest rate lock on a borrower's application during the origination process and interest rates increase before the loan can be sold.  Such interest rate risk also arises when mortgages are placed in the warehouse (i.e., held for sale) without locking in an interest rate for their eventual sale in the secondary market.  The Bank seeks to control or limit the interest rate risk caused by mortgage banking activities.  The two methods used by the Bank to help reduce interest rate risk from its mortgage banking activities are forward loan sale agreements and the purchase of over-the-counter put option contracts related to mortgage-backed securities.  At various times, depending on loan origination volume, management's assessment of interest rate movements and other economic conditions, the Bank may reduce or increase its derivative positions.



Under forward loan sale agreements, usually with FNMA, FHLMC, FHLB
or private investors, the Bank is obligated to sell certain dollar amounts of
mortgage loans that meet specific underwriting and legal criteria before the
expiration of the commitment period. These terms include the maturity of the
individual loans, the yield to the purchaser, the servicing spread to the Bank
(if servicing is retained) and the maximum principal amount of the individual
loans. Forward loan sales protect loan sale prices from interest rate
fluctuations that may occur from the time the interest rate of the loan is fixed
to the time of its sale. The amount of and delivery date of the forward sale
commitments is based upon management's estimates as to the volume of loans that
will close and the length of the origination commitment. Forward loan sales do
not provide complete interest-rate protection, however, because of the
possibility of fallout (i.e., the failure to close) during the origination
process. Differences between the estimated volume and timing of loan
originations and the actual volume and timing of loan originations can expose
the Bank to significant losses. If the Bank is not able to deliver the mortgage
loans during the appropriate delivery period, the Bank may be required to pay a
non-delivery fee or repurchase the delivery commitments at current market
prices. Similarly, if the Bank has too many loans to deliver, the Bank must
execute additional forward sale commitments at current market prices which may
be unfavorable to the Bank. Generally, the Bank seeks to maintain forward loan
sale agreements equal to the closed loans held for sale plus those applications
that the Bank has rate locked and/or committed to close, adjusted by the
projected fallout. The ultimate accuracy of such projections will directly bear
upon the amount of interest rate risk incurred by the Bank. For the year ended
June 30, 2003, the Bank had net gains of $360,000 attributable to the underlying
derivative financial instruments. At June 30, 2003, the Bank had

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<PAGE>

outstanding commitments to sell loans of $109.7 million and
commitments to originate loans of $121.4 million (see Note 15 of the Notes to
Consolidated Financial Statements contained in Item 8 of this report).



In order to reduce the interest rate risk associated with commitments to originate loans that are in excess of forward loan sale commitments, the Bank purchases over-the-counter put or call options on government agency mortgage-backed securities.  At June 30, 2003, the Bank had $45.0 million in put-option contracts outstanding, which provided $16.0 million of coverage.



The activities described above are managed continually as markets change, however, there can be no assurance that the Bank will be successful in its effort to eliminate the risk of interest rate fluctuations between the time origination commitments are issued and the ultimate sale of the loan.  The Bank employs a risk management firm to conduct daily analysis, report the Bank's interest rate risk position with respect to its loan origination and sale activities and to advise the Bank on interest rate movements and interest rate risk management strategies.  The Bank's interest rate risk management activities are conducted in accordance with a written policy that has been approved by the Bank's Board of Directors which covers objectives, functions, instruments to be used, monitoring and internal controls.  The Bank does not enter into option positions for trading or speculative purposes and does not enter into options that could generate a financial obligation beyond the initial premium paid.  The Bank does not apply hedge accounting to its derivative financial instruments, therefore all changes in fair value are recorded in earnings.



Delinquencies and Classified Assets



Delinquent Loans.  When a mortgage loan borrower fails to make a required payment when due, the Bank institutes collection procedures.  If the Bank is unsuccessful at curing the delinquency, a property inspection is performed between the 45th day and 60th day of delinquency.  In most cases, delinquencies are cured promptly; however, if by the 90th day of delinquency, or sooner if the borrower is chronically delinquent, and all reasonable means of obtaining the payment have been exhausted, foreclosure proceedings, according to the terms of the security instrument and applicable law, is initiated.  Interest income is reduced by the full amount of accrued and uncollected interest on such loans.

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The following table sets forth delinquencies in the Bank's loans held for investment as of the dates indicated.



|                            | At June 30,  
|--------------------------- | -------------
|                            | 2003         
|                            | 60 - 89 Days 
|                            | NumberofLoans
|(Dollars In Thousands)      |              
|Mortgage loans:             |              
|Single-family               | -            
|Construction                | -            
|Commercial business   loans | 2            
|Consumer loans              | 3            
|Other loans                 | -            
|Total                       | 5            

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The following table sets forth information with respect to the Bank's non-performing assets and restructured loans within the meaning of Statement of Financial Accounting Standard ("SFAS") No. 15 at the dates indicated.



|                                            |                  |         | At June 30,
|------------------------------------------- | ---------------- | ------- | -----------
|                                            |                  |         | 2003       
|(Dollars In Thousands)                      |                 
|                                            |                  |         |            
|Loans accounted for on a non-accrual basis: |                  |         |            
|Mortgage loans:                             |                  |         |            
|                                            | Single-family    | $ 1,309 |            
|Commercial business loans                   | 32               |         | -          
|Consumer loans                              | 161              |         | 156        
|                                            | Total            | 1,502   |            
|                                            |                  |         |            
|Accruing loans which are contractually      |                  |         |            
|past due 90 days or more:                   |                  |         |            
|Mortgage loans:                             |                  |         |            
|                                            | Single-family    | -       |            
|                                            | Total            | -       |            
|                                            |                  |         |            
|Total of non-accrual and 90 days past       |                  |         |            
|due loans                                   | 1,502            |         | 1,319      
|                                            |                  |         |            
|Foreclosed real estate, net                 | 523              |         | 313        
|Total non-performing assets                 | $ 2,025          |         | $ 1,632    
|                                            |                  |         |            
|Restructured loans                          | $              - |         | $ 1,401    
|                                            |                  |         |            
|Non-accrual and 90 days or more             |                  |         |            
|past due loans as a percentage of           |                  |         |            
|loans held for investment, net              | 0.20%            |         | 0.22%      
|                                            |                  |         |            
|Non-accrual and 90 days or more             |                  |         |            
|past due loans as a percentage of           |                  |         |            
|total assets                                | 0.12%            |         | 0.13%      
|                                            |                  |         |            
|Non-performing assets as a percentage       |                  |         |            
|of total assets                             | 0.16%            |         | 0.16%      



The Bank assesses loans individually and identifies impairment when the accrual of interest has been discontinued, loans have been restructured or management has serious doubts about the future collectibility of principal and interest, even though the loans are currently performing.  Factors considered in determining impairment include, but are not limited to, expected future cash flows, the financial condition of the borrower and current economic conditions. The Bank measures each impaired loan based on the fair value of its collateral and charges off those loans or portions of loans deemed uncollectible.



Foregone interest income, which would have been recorded for the year ended June 30, 2003 had the impaired loans been current in accordance with their original terms, amounted to $266,000.  The amount of interest income included in the results of operations on such loans for the year ended June 30, 2003 amounted to $319,000.  Interest income foregone on restructured loans for such periods was not material.

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<PAGE>



Foreclosed and Investment Real Estate.  Real estate acquired by the Bank as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until it is sold.  When property is acquired it is recorded at the lower of its cost, which is the unpaid principal balance of the related loan plus foreclosure costs, or market value less cost of sale.  Subsequent declines in value are charged to operations.  At June 30, 2003, the Bank had $523,000 of foreclosed real estate with no allowance for losses.



Investment real estate is carried at the lower of cost or fair market value.  All costs associated with disposition are considered in the determination of fair value.  The Bank owned two properties, totaling $10.6 million, at June 30, 2003, which were held by a wholly owned subsidiary.



Asset Classification.  The OTS has adopted various regulations regarding problem assets of savings institutions.  The regulations require that each insured institution review and classify its assets on a regular basis.  In addition, in connection with examinations of insured institutions, OTS examiners have the authority to identify problem assets and, if appropriate, require them to be classified.  There are three classifications for problem assets: substandard, doubtful and loss.  Substandard assets have one or more defined weakness and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected.  Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss.  An asset classified as a loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted.  If an asset or portion thereof is classified as loss, the insured institution establishes a specific loss allowance for the full amount or for the portion of the asset classified as loss.  All or a portion of allowances for loan losses established to cover probable losses related to assets classified substandard or doubtful may be included in determining an institution's regulatory capital, while specific valuation allowances for loan losses generally do not qualify as regulatory capital.  Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as special mention and monitored by the Bank.



The aggregate amounts of the Bank's classified assets, including assets designated as special mention, were as follows at the dates indicated:



|                             |       |           | At June 30,
|---------------------------- | ----- | --------- | -----------
|                             |       |           | 2003       
|(Dollars In Thousands)       |       |          
|                             |       |           |            
|Special mention assets       |       | $   5,870 |            
|Substandard assets           |       | 5,983     |            
|                             | Total |           | $ 11,853   
|                             |       |           |            
|Total classified assets as a |       |           |            
|percentage of total assets   |       | 0.94%     |            



The Bank's classified assets decreased $6.0 million, or 33.5%, to $11.9 million at June 30, 2003 from $17.9 million at June 30, 2002.  This decrease was primarily attributable to general improvements in the real estate market and business conditions in the Bank's primary market area.

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As set forth below, assets classified as special mention and substandard as of June 30, 2003 included 55 loans and properties totaling approximately $11.9 million.

|                          |               |    | Number of |       |                 |       |             |       |          
|------------------------- | ------------- | -- | --------- | ----- | --------------- | ----- | ----------- | ----- | ---------
|                          |               |    | Items     |       | Special Mention |       | Substandard |       | Total    
|(Dollars In Thousands)    |               |    |           |      
|                          |               |    |           |       |                 |       |             |      
|Mortgage loans:           |               |    |           |       |                 |       |             |      
|                          | Single-family | 24 |           |       | $       673     |       | $ 2,330     |       | $   3,003
|                          | Construction  | 5  |           |       | 1,085           |       | 1,040       |       | 2,125    
|Commercial business loans | 19            |    |           | 1,350 |                 | 1,925 |             | 3,275
|Consumer loans            | 3             |    |           | -     |                 | 166   |             | 166  
|Real estate owned         | 2             |    |           | -     |                 | 522   |             | 522  
|Other assets              | 2             |    |           | 2,762 |                 | -     |             | 2,762
|                          | Total         | 55 |           |       | $ 5,870         |       | $ 5,983     |       | $ 11,853 



Not all of the Bank's classified assets are delinquent or non-performing.  In determining whether the Bank's assets expose the Bank to sufficient risk to warrant classification, the Bank may consider various factors, including the payment history of the borrower, the loan-to-value ratio, and the debt coverage ratio of the property securing the loan.  After consideration of these factors, the Bank may determine that the asset in question, though not currently delinquent, presents a risk of loss that requires it to be classified or designated as special mention.  In addition, the Bank's loans held for investment may include commercial and multi-family real estate loans with a balance exceeding the current market value of the collateral which are not classified because they are performing and have borrowers who have sufficient resources to support the repayment of the loan.



Allowance for Loan Losses. The allowance for loan losses is maintained to cover losses inherent in the loans held for investment.  In originating loans, the Bank recognizes that losses will be experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the collateral securing the loan. The responsibility for the review of the Bank's assets and the determination of the adequacy of the allowance lies with the Internal Asset Review Committee ("IAR Committee").   The Bank increases its allowance for loan losses by charging provisions for loan losses against the Bank's operations.



The Bank has established a methodology for the determination of provisions for loan losses.  The methodology is set forth in a formal policy and takes into consideration the need for an overall allowance for loan losses as well as specific allowances that are tied to individual loans.  The Bank's methodology for assessing the appropriateness of the allowance consists of several key elements, which include the formula allowance, specific allowance for identified problem loans and unallocated allowance.



The formula allowance is calculated by applying loss factors to the loans held for investment. The loss factors are applied according to loan program type and loan classification.  The loss factors for each program type and loan classification are established based on an evaluation of the historical loss experience, prevailing market conditions, concentration in loan types and other relevant factors.  Loans that are homogeneous in nature, such as residential mortgage, home equity and consumer installment loans are considered on a pooled loan basis.  A factor is assigned to each pool based upon expected charge-offs for one year.   The factors for larger, less homogeneous loans, such as construction, multifamily and commercial real estate loans, are based upon loss experience tracked over business cycles considered appropriate for the loan type.



Specific valuation allowances are established to absorb losses on loans for which full collectibility may not be reasonably assured as prescribed in SFAS No. 114 (as amended by SFAS
No. 118). The amount of the specific allowance is based on the estimated value
of the collateral securing the loan and other analyses pertinent to each
situation. Estimates of identifiable losses are reviewed continually and,
generally, a provision for losses is charged

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against operations on a monthly basis as necessary to
maintain the allowance at an appropriate level. Management presents an analysis
of the allowance for loan losses to the Bank's board of directors on a quarterly
basis.



The unallocated allowance is based upon management's evaluation of various conditions, the effect of which are not directly measured in the determination of the formula and specific allowance.  The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem credits or portfolio segments.  The conditions evaluated in connection with the unallocated allowance include the following conditions that existed as of the balance sheet date: (1) then-existing general economic and business conditions affecting the key lending areas of the Bank, (2) credit quality trends, (3) loan volumes and concentrations, (4) recent loss experience in particular segments of the portfolio, and (5) regulatory examination results.



The IAR Committee meets quarterly to review and monitor conditions in the portfolio and to determine the appropriate allowance for loan losses.  To the extent that any of these conditions are apparent by identifiable problem credit or portfolio segment as of the evaluation date, the IAR Committee's estimate of the effect of such conditions may be reflected as a specific allowance applicable to such credit or portfolio segment.  Where any of these conditions is not apparent by specifically identifiable problem credits or portfolio segments as of the evaluation date, the IAR Committee's evaluation of the probable loss related to such condition is reflected in the unallocated allowance.  The intent of the Committee is to reduce the differences between estimated and actual losses.  Pooled loan factors are adjusted to reflect current estimates of charge-offs during the next twelve months.  Loss activity is reviewed for non-pooled loans and the loss factors adjusted, if necessary.   By assessing the probable estimated losses inherent in the loans held for investment on a quarterly basis, the Bank is able to adjust specific and inherent loss estimates based upon the most recent information that has become available.



At June 30, 2003, the Bank had an allowance for loan losses of $7.2 million or 0.96% of gross loans held for investment compared to an allowance for loan losses at June 30, 2002 of $6.6 million, or 1.10% of gross loans held for investment.  A $1.1 million provision for loan losses was recorded in fiscal 2003, compared to $525,000 in fiscal 2002.  The Bank's intent to expand its investment in multi-family, commercial real estate, construction and commercial business loans may lead to increased levels of charge-offs.  However, management believes that the amount maintained in the allowance will be adequate, but not excessive, to absorb losses inherent in the loans held for investment.  Although management believes that they use the best information available to make such determinations, future adjustments to the allowance for loan losses may be necessary and results of operations could be significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations.



As a result of past declines in local and regional real estate values and the significant losses experienced by many financial institutions, there has been a greater level of scrutiny by regulatory authorities of the loan portfolios of financial institutions undertaken as a part of the examinations of such institutions by banking regulators.  While the Bank believes that it has established its existing allowance for loan losses in accordance with accounting principles generally accepted in the United States of America, there can be no assurance that regulators, in reviewing the Bank's loan portfolio, will not request the Bank to increase significantly its allowance for loan losses.  In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that substantial increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above.  Any material increase in the allowance for loan losses may adversely affect the Bank's financial condition and results of operations.

19

<PAGE>



The following table sets forth an analysis of the Bank's allowance for loan losses for the periods indicated.  Where specific loan loss reserves have been established, any differences between the loss allowances and the amount of loss realized has been charged or credited to current operations.



|                                              | Year Ended June 30,   
|--------------------------------------------- | ----------------------
|                                              | 2003                  
|(Dollars In Thousands)                        |                       
|                                              |                       
|Allowance at beginning of period              | $ 6,579               
|Provision for loan losses                     | 1,055                 
|Recoveries:                                   |                       
|Mortgage loans:                               |                       
|                                              | Single-family         
|                                              | Multi-family          
|Consumer loans                                | 45                    
|Other loans                                   | -                     
|                                              |                       
|                                              |                       
|Charge-offs:                                  |                       
|Mortgage loans:                               |                       
|                                              | Single-family         
|                                              | Commercial real estate
|Commercial business loans                     | 436                   
|Consumer loans                                | 9                     
|                                              |                       
|Net charge-offs                               | 416                   
|Balance at end of period                      | $ 7,218               
|                                              |                       
|Allowance for loan losses as a percentage of  |                       
|gross loans held for investment               | 0.96%                 
|                                              |                       
|Net charge-offs as a percentage of average    |                       
|loans receivable, net, during the period      | 0.06%                 
|                                              |                       
|Allowance for loan losses as a percentage of  |                       
|non-performing loans at the end of the period | 480.56%               



20

<PAGE>

The following table sets forth the breakdown of the allowance for loan losses by loan category for the periods indicated.  Management believes that the allowance can be allocated by category only on an approximate basis.  The allocation of the allowance is based upon an asset classification matrix. The allocation of the allowance to each category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any other categories.





|                                      | At June 30,
|------------------------------------- | -----------
|                                      | 2003       
|                                      | Amount     
|(Dollars In Thousands)                |            
|                                      |            
|Mortgage loans:                       |            
|Single-family                         | $ 1,291    
|Multi-family                          | 818        
|Commercial real estate                | 2,684      
|Construction                          | 558        
|Commercial business loans             | 1,601      
|Consumer loans                        | 99         
|Other loans                           | 114        
|Unallocated                           | 53         
|Total allowance for loan       losses | $ 7,218    

21

<PAGE>

Investment Securities Activities



Federally chartered savings institutions are permitted under federal and state laws to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, deposits at the FHLB, certificates of deposit of federally insured institutions, certain bankers' acceptances, mortgage-backed securities and federal funds.  Subject to various restrictions, federally chartered savings institutions may also invest a portion of their assets in commercial paper and corporate debt securities.  Savings institutions such as the Bank are also required to maintain an investment in FHLB stock.  In addition, the Bank is required to maintain minimum levels of investments that qualify as liquid assets under OTS regulations (see "REGULATION" on page 28 and "Liquidity and Capital Resources" on page 46).  In March 2001, the OTS removed the specific liquidity requirement and now requires institutions to maintain the appropriate liquidity specific to their operations.



The investment policy of the Bank, established by the Board of Directors and implemented by the Bank's asset-liability committee ("ALCO"), seeks to provide and maintain adequate liquidity, complement the Bank's lending activities, and generate a favorable return on investments without incurring undue interest rate risk and credit risk.  Investments are made based on certain considerations, such as yield, quality, maturity and marketability. The Bank also considers the effect that the proposed investment would have on the Bank's risk-based capital and interest rate sensitivity.



At June 30, 2003, the Corporation's investment securities portfolio was $297.1 million, which primarily consisted of federal agency obligations.  A total of $220.3 million of the Corporation's investment securities was classified as available for sale.  All other securities were classified as held to maturity.  The private issue Collateralized Mortgage Obligations ("CMO") held by the Bank are considered to be "plain vanilla" CMO.





The following table sets forth the composition of the Bank's investment portfolio at the dates indicated.



|                               |                                   |                          |         |           |         |         | At June 30,
|------------------------------ | --------------------------------- | ------------------------ | ------- | --------- | ------- | ------- | -----------
|                               |                                   |                          |         |           |         |         |            
|                               |                                   |                          |         |           |         |         |            
|                               |                                   |                          |         |           |         |         | Amortized  
|                               |                                   |                          |         |           |         |         | Cost       
|(Dollars In Thousands)         |                                  
|                               |                                   |                          |         |           |         |         |            
|Held to maturity securities:   |                                   |                          |         |           |         |         |            
|                               | U.S. government agency securities | $  73,851                |         | $  74,196 |         | 24.95%  |            
|                               | U.S. government MBS               | 8                        |         | 12        |         | 0.00    |            
|                               | Corporate bonds                   | 2,779                    |         | 2,802     |         | 0.94    |            
|                               | Certificates of deposit           | 200                      |         | 200       |         | 0.07    |            
|                               |                                   |                          |         |           |         |         |            
|                               |                                   | Total held to maturity   | 76,838  |           | 77,210  |         | 25.96      
|                               |                                   |                          |         |           |         |         |            
|Available for sale securities: |                                   |                          |         |           |         |         |            
|                               | U.S. government agency securities | 38,608                   |         | 38,775    |         | 13.03   |            
|                               | U.S. government agency MBS        | 170,891                  |         | 172,794   |         | 58.09   |            
|                               | Private issue CMO                 | 7,949                    |         | 8,069     |         | 2.71    |            
|                               | FHLMC common stock                | 12                       |         | 609       |         | 0.20    |            
|                               | FNMA common stock                 | 1                        |         | 26        |         | 0.01    |            
|                               |                                   |                          |         |           |         |         |            
|                               |                                   | Total available for sale | 217,461 |           | 220,273 |         | 74.04      
|                               |                                   |                          |         |           |         |         |            
|                               | Total investment securities       | $294,299                 |         | $ 297,483 |         | 100.00% |            

22

<PAGE>



The following table sets forth the outstanding balance, maturity and weighted average yield of the investment securities at June 30, 2003:



|                       |  |         | Due in   |       | Due          |         | Due           | Due           |       |       
|---------------------- |  | ------- | -------- | ----- | ------------ | ------- | ------------- | ------------- | ----- | ------
|                       |  |         | One Year |       | After One to |         | After Five to | After         |       |       
|                       |  |         | or Less  |       | Five Years   |         | Ten Years     | Ten Years (1) | Total
|                       |  |         | Amount   |       | Yield        |         | Amount        |               | Yield |       
|(Dollars In Thousands) |  |        
|                       |  |         |          |       |              |         |               |               |       |       
|Held to maturity       |  | $43,021 |          | 2.71% |              | $30,809 |               | 3.47%         |       | $3,008
|Available for sale (1) |  | 29,837  |          | 2.73% |              | 21,851  |               | 3.55%         |       | -     
|Total                  |  | $72,858 |          | 2.72% |              | $52,660 |               | 3.50%         |       | $3,008



(1)    Includes common stock investments which do not have a stated maturity.



Deposit Activities and Other Sources of Funds



General.  Deposits, the proceeds from loan sales and loan repayments are the major sources of the Bank's funds for lending and other investment purposes.  Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows are influenced significantly by general interest rates and money market conditions.  Loan sales are also influenced significantly by general interest rates. Borrowings through the FHLB-San Francisco and repurchase agreements may be used to compensate for declines in the availability of funds from other sources.



Deposit Accounts.  Substantially all of the Bank's depositors are residents of the State of California. Deposits are attracted from within the Bank's market area by offering a broad selection of deposit instruments, including checking, savings, money market and time deposits.  Deposit account terms vary, differentiated by the minimum balance required, the time periods that the funds must remain on deposit and the interest rate, among other factors. In determining the terms of its deposit accounts, the Bank considers current interest rates, profitability to the Bank, interest rate risk characteristics, competition and its customer preferences and concerns.  Generally, the Bank's deposit rates are close to the median rates of its competitors within a given market.  The Bank may occasionally pay above-market interest rates to attract or retain deposits when less expensive sources of funds are not available.  The Bank may also pay above-market interest rates in specific markets in order to increase the deposit base of a particular office or group of offices.  The Bank does not generally accept brokered deposits.  The Bank reviews its deposit composition and pricing weekly.



The Bank currently offers time deposits for terms not exceeding five years.  As illustrated in the following table, time deposits accounted for 38.6% of the Bank's deposit portfolio at June 30, 2003, compared to 49.7% at June 30, 2002.  The Bank will attempt to reduce the overall cost of its deposit portfolio by increasing its transaction accounts (see "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 37).

23

<PAGE>



The following table sets forth information concerning the Bank's weighted-average interest rate of deposits at June 30, 2003.



|Weighted      |      |                       |                                          |                    |                | Percentage
|------------- | ---- | --------------------- | ---------------------------------------- | ------------------ | -------------- | ----------
|Average       |      |                       | Minimum                                  |                    | Balance        | of Total  
|Interest Rate | Term | Deposit  Account Type | Amount                                   |                    | (In Thousands) | Deposits  
|              |      |                       |                                          |                   
|0.00%         |      | N/A                   | Checking accounts - non-interest bearing | $                - |                | $   43,840
|              |      |                       |                                          |                    |                |           
|0.77          |      | N/A                   | Checking accounts - interest bearing     | -                  |                | 98,899    
|              |      |                       |                                          |                    |                |           
|1.68          |      | N/A                   | Savings accounts                         | 10                 |                | 272,715   
|              |      |                       |                                          |                    |                |           
|1.39          |      | N/A                   | Money market accounts                    | -                  |                | 47,900    
|              |      |                       |                                          |                    |                |           
|              |      |                       | Time deposits:                           |                    |                |           
|2.09          |      | 18 to 36 months       | Fixed-term, variable rate                | 1,000              |                | 2,232     
|1.20          |      | 30 days or less       | Fixed-term, fixed rate                   | 1,000              |                | 147       
|2.08          |      | 31 to 90 days         | Fixed-term, fixed rate                   | 1,000              |                | 81        
|1.09          |      | 91 to 180 days        | Fixed-term, fixed rate                   | 1,000              |                | 51,542    
|1.44          |      | 181 to 365 days       | Fixed-term, fixed rate                   | 1,000              |                | 59,786    
|2.35          |      | Over 1 to 2 years     | Fixed-term, fixed rate                   | 1,000              |                | 36,897    
|3.37          |      | Over 2 to 3 years     | Fixed-term, fixed rate                   | 1,000              |                | 58,023    
|4.07          |      | Over 3 to 5 years     | Fixed-term, fixed rate                   | 1,000              |                | 32,422    
|4.49          |      | Over 5 to 10 years    | Fixed-term, fixed rate                   | 1,000              |                | 48,476    
|5.17          |      | Over 10 years         | Fixed-term, fixed rate                   | 1,000              |                | 1,146     
|1.83%         |      |                       |                                          |                    |                | $ 754,106 



The following table indicates the aggregate dollar amount of the Bank's time deposits with balances of $100,000 or more differentiated by time remaining until maturity as of June 30, 2003.



|                          | Maturity Period |            | Amount   
|------------------------- | --------------- | ---------- | ---------
|(In Thousands)            |                 |           
|                          |                 |           
|Three months or less      |                 | $   38,647
|Over three to six months  |                 | 15,990    
|Over six to twelve months |                 | 7,574     
|Over twelve months        |                 | 38,011    
|                          | Total           |            | $ 100,222

24

<PAGE>

Deposit Flows. The following table sets forth the balances (inclusive of interest credited) and changes in dollar amount of deposits in the various types of accounts offered by the Bank at and between the dates indicated.



|                                         |                                      |                        | At June 30,
|---------------------------------------- | ------------------------------------ | ---------------------- | -----------
|                                         |                                      |                        | 2003       
|                                         |                                      |                        |            
|                                         |                                      |                        |            
|                                         |                                      |                        | Amount     
|(Dollars In Thousands)                   |                                      |                        |            
|                                         |                                      |                        |            
|Checking accounts - non-interest bearing |                                      | $    43,840            |            
|Checking accounts - interest bearing     |                                      | 98,899                 |            
|Savings accounts                         |                                      | 272,715                |            
|Money market accounts                    |                                      | 47,900                 |            
|Time deposits:                           |                                      |                        |            
|                                         | Fixed-term, fixed rate which mature: |                        |            
|                                         |                                      | Within one year        |            
|                                         |                                      | Over one to two years  |            
|                                         |                                      | Over two to five years |            
|                                         |                                      | Over five years        |            
|                                         | Fixed-term, variable rate            |                        | 2,232      
|                                         | Total                                |                        | $ 754,106  



Time Deposits by Rates.  The following table sets forth the aggregate balance of time deposits categorized by interest rates at the dates indicated.



|               |       |             |           |             |           | At June 30,            |           |     
|-------------- | ----- | ----------- | --------- | ----------- | --------- | ---------------------- | --------- | ----
|               |       |             |           | 2003        |           | 2002                   |           | 2001
|(In Thousands) |       |            
|               |       |             |           |             |           |                        |           |     
|Below 1.00%    |       | $    30,972 |           | $        84 |           | $                   12
|1.00 to 1.99%  |       | 92,474      |           | 62,051      |           | 8                     
|2.00 to 2.99%  |       | 38,404      |           | 42,385      |           | 185                   
|3.00 to 3.99%  |       | 66,111      |           | 74,298      |           | 19,547                
|4.00 to 4.99%  |       | 40,831      |           | 79,399      |           | 95,229                
|5.00 to 5.99%  |       | 11,548      |           | 19,807      |           | 116,627               
|6.00 to 6.99%  |       | 9,504       |           | 57,001      |           | 215,168               
|7.00 to 7.99%  |       | 908         |           | 1,390       |           | 9,090                 
|8.00% and over |       | -           |           | 182         |           | 167                   
|               | Total |             | $ 290,752 |             | $ 336,597 |                        | $ 456,033

25

<PAGE>

Time Deposits by Maturities.  The following table sets forth the aggregate dollar amount of time deposits at June 30, 2003 differentiated by interest rates and maturity.





|               |       |           |  |                   |  |                        |  |                        |  |                     |  |             | 
|-------------- | ----- | --------- |  | ----------------- |  | ---------------------- |  | ---------------------- |  | ------------------- |  | ----------- | 
|               |       |           |  |                   |  | One to                 |  | Two to                 |  | Three to            |  | After       | 
|               |       |           |  | Less Than         |  | Two                    |  | Three                  |  | Four                |  | Four        | 
|               |       |           |  | One Year          |  | Years                  |  | Years                  |  | Years               |  | Years       | 
|(In Thousands) |      
|               |       |           |  |                   |  |                        |  |                        |  |                     |  |             | 
|Below 1.00%    |       | $  30,800 |  | $             163 |  | $                    - |  | $                    - |  | $                10 |  | $    30,973
|1.00 to 1.99%  |       | 85,003    |  | 6,867             |  | 572                    |  | -                      |  | 32                  |  | 92,474     
|2.00 to 2.99%  |       | 18,558    |  | 8,726             |  | 9,311                  |  | 132                    |  | 1,676               |  | 38,403     
|3.00 to 3.99%  |       | 38,715    |  | 7,752             |  | 3,772                  |  | 790                    |  | 15,082              |  | 66,111     
|4.00 to 4.99%  |       | 14,505    |  | 6,555             |  | 1,242                  |  | 13,063                 |  | 5,466               |  | 40,831     
|5.00 to 5.99%  |       | 1,347     |  | 1,608             |  | 1,270                  |  | 5,398                  |  | 1,924               |  | 11,547     
|6.00 to 6.99%  |       | 4,819     |  | 2,015             |  | 2,521                  |  | 150                    |  | -                   |  | 9,505      
|7.00 to 7.99%  |       | 609       |  | 299               |  | -                      |  | -                      |  | -                   |  | 908        
|8.00% and over |       | -         |  | -                 |  | -                      |  | -                      |  | -                   |  | -          
|               |       |           |  |                   |  |                        |  |                        |  |                     |  |             | 
|               | Total | $ 194,356 |  | $ 33,985          |  | $ 18,688               |  | $ 19,533               |  | $ 24,190            |  | $ 290,752  







Deposit Activity.  The following table sets forth the deposit activity of the Bank for the periods indicated.



|                                                    |                |           |           | At or For the Year Ended June 30,
|--------------------------------------------------- | -------------- | --------- | --------- | ---------------------------------
|                                                    |                |           |           | 2003                             
|(In Thousands)                                      |                |          
|                                                    |                |           |           |                                  
|Beginning balance                                   |                | $ 677,448 |           | $ 730,041                        
|                                                    |                |           |           |                                  
|Net deposits (withdrawals) before interest credited |                | 60,377    |           | (76,786                          
|Interest credited                                   |                | 16,281    |           | 24,193                           
|Net increase (decrease) in deposits                 |                | 76,658    |           | (52,593                          
|                                                    |                |           |           |                                  
|                                                    | Ending balance |           | $ 754,106 |                                  

Borrowings.  The FHLB-San Francisco functions as a central reserve bank providing credit for member financial institutions.  As a member, the Bank is required to own capital stock in the FHLB-San Francisco and is authorized to apply for advances using such stock and certain of its mortgage loans and other assets (principally investment securities which are obligations of, or guaranteed by, the U.S. government) as collateral, provided certain creditworthiness standards have been met.  Advances are made pursuant to several different credit programs.  Each credit program has its own interest rate, maturity, terms and conditions.  Depending on the program, limitations on the amount of advances are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit.  The Bank utilizes advances from the FHLB-San Francisco as an alternative to deposits, to supplement its supply of lendable funds, to meet deposit withdrawal requirements and to help manage interest rate risk.  The FHLB-San Francisco has, from time to time, served as the Bank's primary borrowing source.  Advances from the FHLB-San Francisco are typically secured by the Bank's first mortgage loans.  In addition, the Bank pledged investment securities totaling $242.2 million at June 30, 2003 as compared to $119.7 million at June 30, 2002 to collateralize its FHLB advances under the Securities-Backed Credit ("SBC") facility.  At June 30, 2003, the Bank had $367.9 million of borrowings from the FHLB-San Francisco with a weighted-average rate of 3.50%, of which $166.0 million was under the SBC facility.  Such borrowings mature between 2003 and 2021.

26

<PAGE>

The following table sets forth certain information regarding borrowings by the Bank at the dates and for the periods indicated:





|                                                             |                                                           |           | At or For the Year Ended June 30,
|------------------------------------------------------------ | --------------------------------------------------------- | --------- | ---------------------------------
|                                                             |                                                           |           | 2003                             
|(Dollars In Thousands)                                       |                                                          
|                                                             |                                                           |           |                                  
|Balance outstanding at the end of period:                    |                                                           |           |                                  
|                                                             | FHLB advances                                             | $ 367,938 |                                  
|                                                             |                                                           |           |                                  
|Weighted average rate at the end of period:                  |                                                           |           |                                  
|                                                             | FHLB advances                                             | 3.50%     |                                  
|                                                             |                                                           |           |                                  
|Maximum amount of borrowings outstanding at any month end:   |                                                           |           |                                  
|                                                             | FHLB advances                                             | $ 367,938 |                                  
|                                                             | Loan to facilitate the purchase of an investment property | -         |                                  
|                                                             |                                                           |           |                                  
|Average short-term borrowings (1)                            |                                                           |           |                                  
|with respect to:                                             |                                                           |           |                                  
|                                                             | FHLB advances                                             | $ 124,226 |                                  
|                                                             |                                                           |           |                                  
|Weighted average short-term borrowing rate during the period |                                                           |           |                                  
|with respect to:                                             |                                                           |           |                                  
|                                                             | FHLB advances                                             | 2.49%     |                                  



(1)    Borrowings with a remaining term of 12 months or less.



In addition, the Bank has a borrowing arrangement in the form of a federal funds facility with its correspondent bank in the amount of  $45 million, none of which was outstanding at June 30, 2003 and 2002.



Subsidiary Activities



Federal savings institutions generally may invest up to 3% of their assets in service corporations, provided that at least one-half of any amount in excess of 1% is used primarily for community, inner-city and community development projects.  The Bank's investment in its service corporations did not exceed these limits at June 30, 2003.



The Bank has three wholly owned subsidiaries: Provident Financial Corp ("PFC"), Profed Mortgage, Inc., and First Service Corporation.  PFC's current activities include: (i) acting as trustee for the Bank's real estate transactions, (ii) engaging in annuity sales and providing brokerage services at branch offices of the Bank, (iii) selling property insurance and life insurance, primarily to the Bank's customers, and (iv) holding real estate for investment.  The largest real estate investment of PFC is an office building in downtown Riverside, California with a book value of  $10.0 million as of June 30, 2003.  Other real estate held for investment by PFC at June 30, 2003 was $653,000.  As of June 30, 2003, PFC had a loan from the Bank of $344,000 with an annual interest rate of 8.25% and a monthly installment of $70,305.63 through November 1, 2003 (proceeds were used to repay the loan that was assumed from the seller when PFC purchased the downtown office building).  Profed Mortgage, Inc., which formerly conducted the Bank's mortgage banking activities, and First Service Corporation are currently inactive.  At June 30, 2003, the Bank's investment in its subsidiaries was $8.9 million.

27

<PAGE>



REGULATION



General



The Bank is subject to extensive regulation, examination and supervision by the OTS as its chartering agency, and the FDIC, as the insurer of its deposits.  The activities of federal savings institutions are governed by the Home Owners' Loan Act ("HOLA") and, in certain respects, the Federal Deposit Insurance Act ("FDIA"), and the regulations issued by the OTS and the FDIC to implement these statutes.  These laws and regulations delineate the nature and extent of the activities in which federal savings institutions may engage.  Lending activities and other investments must comply with various statutory and regulatory capital requirements.  In addition, the Bank's relationship with its depositors and borrowers is also regulated to a great extent, especially in such matters as the ownership of deposit accounts and the form and content of the Bank's mortgage documents.  The Bank is required to file reports with the OTS and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other financial institutions.  There are periodic examinations by the OTS and the FDIC to review the Bank's compliance with various regulatory requirements.  The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.  Any change in such policies, whether by the OTS, the FDIC or Congress, could have a material adverse impact on the Corporation, the Bank and their operations.



Federal Regulation of Savings Institutions



Office of Thrift Supervision.  The OTS is a Bureau of the Department of the Treasury subject to the general oversight of the Secretary of the Treasury.  The OTS has extensive authority over the operations of savings institution.  Among other functions, the OTS issues and enforces regulations affecting federally insured savings institutions and regularly examines these institutions.



All savings institutions are required to pay assessments to the OTS to fund the agency's operations.  The general assessments, paid on a semi-annual basis, are determined based on the savings institution's total assets, including consolidated subsidiaries.  The Bank's OTS assessment for the fiscal year ended June 30, 2003 was $205,000.



Federal Home Loan Bank System.  The FHLB System, consisting of 12 FHLBs, is under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The designated duties of the FHFB are to supervise the FHLBs, to ensure that the FHLBs carry out their housing finance mission, to ensure that the FHLBs remain adequately capitalized, able to raise funds in the capital markets, and to ensure that the FHLBs operate in a safe and sound manner.



The Bank, as a member of the FHLB-San Francisco, is required to acquire and hold shares of capital stock in the FHLB-San Francisco in an amount equal to the greater of (i) 1.0% of the aggregate outstanding principal amount of residential mortgage loans, home purchase contracts and similar obligations at the beginning of each year, or (ii) 5% of its advances (i.e., borrowings) from the FHLB-San Francisco.  The Bank was in compliance with this requirement, with an investment in FHLB-San Francisco stock of $21.0 million at June 30, 2003.



Among other benefits, the FHLB provides a central credit facility primarily for member institutions.  It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System.  It makes advances to members in accordance with policies and procedures established by the FHFB and the Board of Directors of the FHLB-San Francisco.



The FHLBs are required to provide funds for the resolution of troubled savings institutions and to contribute to affordable housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions also could have an adverse effect on the value of FHLB stock in the future.

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Federal Deposit Insurance Corporation.  The FDIC is an independent federal agency established originally to insure the deposits, up to prescribed statutory limits, of federally insured banks and to preserve the safety and soundness of the banking industry.  The FDIC maintains two separate insurance funds: the Bank Insurance Fund ("BIF") and the SAIF.  The Bank's deposit accounts are insured by the FDIC under the SAIF to the maximum extent permitted by law.  As insurer of the Bank's deposits, the FDIC has examination, supervisory and enforcement authority over the Bank.



As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions.  It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the SAIF or the BIF. The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the OTS an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in unsafe or unsound condition.



The FDIC's deposit insurance premiums are assessed through a risk-based system under which all insured depository institutions are placed into one of nine categories and assessed insurance premiums based upon their level of capital and supervisory evaluation.  Under the system, institutions classified as well capitalized (i.e., a Core Capital ratio of least 5%, a ratio of Tier 1, or Core Capital, to Risk-Weighted Assets (("Tier 1 Risk-Based Capital")) of at least 6% and a Risk-Based Capital ratio of at least 10%) and considered healthy, pay the lowest premium while institutions that are less than adequately capitalized (i.e., Core or Tier 1 Risk-Based Capital ratio of less than 4% or a Risk-Based Capital ratio of less than 8%) and considered of substantial supervisory concern, pay the highest premium.  Risk classification of all insured institutions is made by the FDIC for each semi-annual assessment period.



The FDIC is authorized to increase assessment rates, on a semi-annual basis, if it determines that the reserve ratio of the SAIF will be less than the designated reserve ratio of 1.25% of the SAIF insured deposits.  In setting these increased assessments, the FDIC must seek to restore the reserve ratio to that designated reserve level, or such higher reserve ratio as established by the FDIC.  The FDIC may also impose special assessments on SAIF members to repay amounts borrowed from the United States Treasury or for any other reasons deemed necessary by the FDIC.



The premium schedule for BIF and SAIF insured institutions ranges from 0 to 27 basis points.  However, SAIF insured institutions and BIF insured institutions are required to pay a Financing Corporation assessment in order to fund the interest on bonds issued to resolve thrift failures in the 1980s.  This amount is currently equal to approximately 1.6 basis points for each $100 in domestic deposits for SAIF and BIF insured members.  These assessments, which may be revised based upon the level of BIF and SAIF deposits, will continue until the bonds mature in the years 2017 through 2019.



Under the FDIA, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS.  Management of the Bank does not know of any practice, condition or violation that might lead to termination of deposit insurance.



Liquidity Requirements.  The OTS repealed its liquidity regulation in April 2001. Although the percentage liquidity requirement of 4% has been eliminated, the interim rule still requires thrifts to maintain adequate liquidity to assure safe and sound operation.  The Bank's average liquidity ratio for the quarter ended June 30, 2003 was 20.3%.



Prompt Corrective Action.  The OTS is required to take certain supervisory actions against undercapitalized savings institutions, the severity of which depends upon the institution's degree of undercapitalization.  Generally, an institution that has a ratio of Total Capital to Risk-Weighted Assets of less than 8%, a ratio of Tier I (Core) Capital to Risk-Weighted Assets of less than 4%, or a ratio of Core Capital to total assets of less than 4% (3% or less for institutions with the highest examination rating) is considered to be "undercapitalized."  An institution that has a total risk-based capital ratio less than 6%, a Tier I Capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be "significantly undercapitalized" and an institution that has a Tangible Capital to Total Assets ratio equal to or less than 2% is deemed to be "critically undercapitalized."  Subject to a narrow exception, the OTS is required to appoint a receiver or conservator for a savings institution that is "critically undercapitalized."

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At June 30, 2003, the Bank was categorized as "well capitalized" under the prompt corrective action regulations of the OTS.



Standards for Safety and Soundness.  The federal banking regulatory agencies have prescribed, by regulation, standards for all insured depository institutions relating to: (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii) earnings; and (viii) compensation, fees and benefits ("Guidelines").  The Guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.  If the OTS determines that the Bank fails to meet any standard prescribed by the Guidelines, it may require the Bank to submit an acceptable plan to achieve compliance with the standard.  Management is aware of no conditions relating to these safety and soundness standards which would require the submission of a plan of compliance.



Qualified Thrift Lender Test.  All savings institutions, including the Bank, are required to meet a qualified thrift lender ("QTL") test to avoid certain restrictions on their operations.  This test requires a savings institution to have at least 65% of its assets (as defined by regulation) in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis.  As an alternative, the savings institution may maintain 60% of its assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code ("Code").  Under either test, such assets primarily consist of residential housing related loans and investments.  At June 30, 2003, the Bank met the test and its QTL percentage was 84.15%.



Any savings institution that fails to meet the QTL test must convert to a national bank charter, unless it requalifies as a QTL and thereafter remains a QTL.  If an association does not requalify and converts to a national bank charter, it must remain SAIF-insured until the FDIC permits it to transfer to the BIF.   If such an association has not yet requalified or converted to a national bank, its new investments and activities are limited to those permissible for both a savings institution and a national bank, and it is limited to national bank branching rights in its home state.  In addition, the association is immediately ineligible to receive any new FHLB borrowings and is subject to national bank limits for the payment of dividends.  If such association has not requalified or converted to a national bank within three years after the failure, it must divest of all investments and cease all activities not permissible for a national bank.  In addition, it must repay promptly any outstanding FHLB borrowings, which may result in prepayment penalties.  If any association that fails the QTL test is controlled by a holding company, then within one year after the failure, the holding company must register as a bank holding company and become subject to all restrictions on bank holding companies (see "Savings and Loan Holding Company Regulations" on page 32).



Capital Requirements. Federally insured savings institutions, such as the Bank, are required to maintain a minimum level of regulatory capital. The OTS has established capital standards, including a Tangible Capital requirement, a Leverage Ratio (or Core Capital) requirement and a Risk-Based Capital requirement applicable to such savings institutions.



The capital regulations require Tangible Capital of at least 1.5% of Adjusted Total Assets (as defined by regulation). At June 30, 2003, the Bank had Tangible Capital of $81.2 million, or 6.50% of Adjusted Total Assets, which is approximately $62.5 million above the minimum requirement of 1.5% of Adjusted Total Assets on that date.



The capital standards also require Core Capital equal to at least 3% or 4% of adjusted total assets, depending on an institution's supervisory rating. Core Capital generally consists of Tangible Capital.  At June 30, 2003, the Bank had Core Capital equal to $81.2 million, or 6.50% of Adjusted Tangible Assets, which is $31.3 million above the 4% requirement of Adjusted Tangible Assets on that date.



The OTS risk-based capital requirement requires savings institutions to have Total Capital of at least 8% of Risk-Weighted Assets. Total Capital consists of Core Capital, as defined above, and supplementary capital.  Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as Core Capital and general loan loss allowances up to a maximum of 1.25% of Risk-Weighted Assets. Supplementary capital may be used to satisfy the risk-based requirement only to the extent of Core Capital.

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In determining the amount of Risk-Weighted Assets, all assets, including certain off-balance sheet items, are multiplied by a risk weight, ranging from 0% to 200%, based on the risk inherent in the type of asset.  For example, the OTS has assigned a risk weighting of 50% for prudently underwritten permanent single-family first lien mortgage loans not more than 90 days delinquent and having a loan-to-value ratio of not more than 80% at the time of origination unless insured to such ratio by an insurer approved by FNMA or FHLMC.



On June 30, 2003, the Bank had Total Risk-Based Capital of approximately $88.3 million, including $81.2 million in Core Capital and $7.1 million in qualifying supplementary capital, and Risk-Weighted Assets of $678.8 million, or a Total Capital ratio of 13.01% to Risk-Weighted Assets. This amount was $34.0 million above the 8% requirement on that date.



The OTS is authorized to impose capital requirements in excess of these standards on individual associations on a case-by-case basis.  The OTS and the FDIC are authorized and, under certain circumstances required, to take certain actions against savings institutions that fail to meet their capital requirements.  The OTS is generally required to take action to restrict the activities of an "undercapitalized association" (generally defined to be one with less than either a 4% Core Capital ratio, a 4% Tier 1 Capital ratio or an 8% Risk-Based Capital ratio).  Any such association must submit a capital restoration plan and until such plan is approved by the OTS may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions.  The OTS is authorized to impose the additional restrictions that are applicable to significantly undercapitalized associations.



The OTS is also generally authorized to reclassify an association into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.



The imposition by the OTS or the FDIC of any of these measures on the Corporation or the Bank may have a substantial adverse effect on their operations and profitability.



Limitations on Capital Distributions.  The OTS imposes various restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account.



Generally, savings institutions, such as the Bank, that before and after the proposed distribution remain well-capitalized, may make capital distributions during any calendar year equal to the greater of 100% of net income for the year-to-date or retained net income for the two preceding years. However, an institution deemed to be in need of more than normal supervision by the OTS may have its dividend authority restricted by the OTS.  The Bank may pay dividends in accordance with this general authority.



Savings institutions proposing to make any capital distribution need only submit written notice to the OTS 30 days prior to such distribution. Savings institutions that do not, or would not meet their current minimum capital requirements following a proposed capital distribution, however, must obtain OTS approval prior to making such distribution.  The OTS may object to the distribution during that 30-day period based on safety and soundness concerns (see "Capital Requirements" on page 30)



Loans to One Borrower.  Federal law provides that savings institutions are generally subject to the national bank limit on loans to one borrower.  A savings institution may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus.  An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral.  At June 30, 2003, the Bank's limit on loans to one borrower was $14.9 million.  At June 30, 2003, the Bank's largest loan commitment to a related group of borrowers was $13.3 million.  $ 6.2 million of this commitment has been disbursed in the form of six loans, which are performing according to their original terms.



Activities of Associations and Their Subsidiaries.  When a savings institution establishes or acquires a subsidiary or elects to conduct any new activity through a subsidiary that the association controls, the savings institution must notify the FDIC and the OTS
30 days in advance and provide the information each agency may, by regulation,
require. Savings institutions also must conduct the activities of subsidiaries
in accordance with existing regulations

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and orders.



The OTS may determine that the savings institution's ownership, control of, or its relationship to, the subsidiary constitutes a serious risk to the safety, soundness or stability of the savings institution or is inconsistent with sound banking practices or with the purposes of the FDIA.  Based upon that determination, the FDIC or the OTS has the authority to order the savings institution to divest itself of control of the subsidiary.  The FDIC also may determine by regulation or order that any specific activity poses a serious threat to the SAIF.  If so, it may require that no SAIF member engage in that activity directly.



Transactions with Affiliates.  Savings institutions must comply with Sections 23A and 23B of the Federal Reserve Act relative to transactions with affiliates in the same manner and to the same extent as if the savings institution were a Federal Reserve member Savings Bank.  Generally, transactions between a savings institution or its subsidiaries and its affiliates are required to be on terms as favorable to the association as transactions with non-affiliates.  In addition, certain of these transactions, such as loans to an affiliate, are restricted to a percentage of the association's capital.  Affiliates of the Bank include the Corporation and any company which is under common control with the Bank.  In addition, a savings institution may not lend to any affiliate engaged in activities not permissible for a savings and loan holding company or acquire the securities of most affiliates.  The OTS has the discretion to treat subsidiaries of savings institutions as affiliates on a case by case basis.



Certain transactions with directors, officers or controlling persons are also subject to conflict of interest regulations enforced by the OTS.  These conflict of interest regulations and other statutes also impose restrictions on loans to such persons and their related interests.  Among other things, such loans must be made on terms substantially similar to transactions with unaffiliated individuals.



Community Reinvestment Act.  Under the federal Community Reinvestment Act ("CRA"), all federally-insured financial institutions have a continuing and affirmative obligation consistent with safe and sound operations to help meet all the credit needs of its delineated community.  The CRA does not establish specific lending requirements or programs nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to meet all the credit needs of its delineated community.  The CRA requires the federal banking supervisory agencies, in connection with regulatory examinations, to assess an institution's record of meeting the credit needs of its delineated community and to take such record into account in evaluating regulatory applications to establish a new branch office that will accept deposits, relocate an existing office, or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution, among others.  The CRA requires public disclosure of an institution's CRA rating.  The Bank received a "satisfactory" rating as a result of its latest evaluation.



Regulatory and Criminal Enforcement Provisions.  The OTS has primary enforcement responsibility over savings institutions and has the authority to bring action against all "institution-affiliated parties," including stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution.  Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers or directors, receivership, conservatorship or termination of deposit insurance.  Civil penalties cover a wide range of violations and can amount to $27,500 per day, or $1.1 million per day in particularly egregious cases.  Under the FDIA, the FDIC has the authority to recommend to the Director of the OTS that enforcement action be taken with respect to a particular savings institution.  If action is not taken by the Director, the FDIC has authority to take such action under certain circumstances.  Federal law also establishes criminal penalties for certain violations.



Savings and Loan Holding Company Regulations



General.  The Corporation is a unitary savings and loan holding company subject to the regulatory oversight of the OTS.  Accordingly, the Corporation is required to register and file reports with the OTS and is subject to regulation and examination by the OTS.  In addition, the OTS has enforcement authority over the Corporation and its non-savings institution subsidiaries which also permits the OTS to restrict or prohibit activities that are determined to present a serious risk to the subsidiary savings institution.

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The Gramm-Leach-Bliley Financial Services Modernization Act of 1999.  On November 12, 1999, the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 was signed into law.  The purpose of this legislation was to modernize the financial services industry by establishing a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers.  Generally, the Act:



|(a) | repealed the historical restrictions and eliminated many federal and state law barriers to affiliations among banks, securities firms, insurance companies and other financial service providers;
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | broadened the activities that may be conducted by national banks, banking subsidiaries of bank holding companies and their financial subsidiaries;                                               
|(c) | provided an enhanced framework for protecting the privacy of consumer information;  and                                                                                                          
|(d) | addressed a variety of other legal and regulatory issues affecting day-to-day operations and long-term activities of financial institutions.                                                     



The USA Patriot Act.

Among other requirements, Title III of the USA PATRIOT Act imposes the following requirements:

























The Federal Crimes Enforcement Network (FinCEN), a bureau of the Department of Treasury, has issued proposed and interim regulations to implement the provisions of Sections 312 and 352 of the USA Patriot Act.



Sarbanes-Oxley Act of 2002.  The Sarbanes-Oxley Act of 2002 was signed into law by the President of the United States of America on July 30, 2002 in response to public concerns regarding corporate accountability in connection with recent accounting scandals.  The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.  The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the Securities and Exchange Commission ("SEC"), under the Securities Exchange Act of 1934, including the Corporation.

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The Sarbanes-Oxley Act includes very specific additional disclosure requirements and new corporate governance rules, requires the SEC and securities exchanges to adopt extensive additional disclosures, corporate governance and other related rules and mandates further studies of certain issues by the SEC and the Comptroller General.  The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.



Acquisitions.



Activities.  As a unitary savings and loan holding company, the Corporation generally is not subject to activity restrictions.  If the Corporation acquires control of another savings institution as a separate subsidiary other than in a supervisory acquisition, it would become a multiple savings and loan holding company and the activities of the Bank and any other subsidiaries (other than the Bank or any other SAIF insured savings institution) would generally become subject to additional restrictions.  There generally are more restrictions on the activities of a multiple savings and loan holding company than on those of a unitary savings and loan holding company.  Federal law provides that, among other things, no multiple savings and loan holding company or subsidiary thereof which is not an insured association shall commence or continue for more than two years after becoming a multiple savings and loan holding company or subsidiary thereof, any business activity other than:  (i) furnishing or performing management services for a subsidiary insured institution, (ii) conducting an insurance agency or escrow business, (iii) holding, managing, or liquidating assets owned by or acquired from a subsidiary insured institution, (iv) holding or managing properties used or occupied by a subsidiary insured institution, (v) acting as trustee under deeds of trust, (vi) those activities previously directly authorized by regulation as of March 5, 1987 to be engaged in by multiple savings and loan holding companies or (vii) those activities authorized by the Federal Reserve Board as permissible for savings and loan holding companies, unless the OTS by regulation, prohibits or limits such activities for savings and loan holding companies.  Those activities described in (vii) above also must be approved by the OTS prior to being engaged in by a multiple savings and loan holding company.



Qualified Thrift Lender Test.  If the Bank fails the qualified thrift lender test, within one year the Corporation must register as, and will become subject to, the significant activity restrictions applicable to savings and loan holding companies (see "Qualified Thrift Lender Test" on page 30).



TAXATION



Federal Taxation



General.  The Corporation and the Bank report their income on a fiscal year basis using the accrual method of accounting and will be subject to federal income taxation in the same manner as other corporations with some exceptions, including particularly the Bank's reserve for bad debts discussed below.  The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Corporation.



Tax Bad Debt Reserves.  As a result of legislation enacted in 1996, the reserve method of accounting for bad debt reserves was repealed for tax years beginning after December 31, 1995.  Due to such repeal, the Bank is no longer able to calculate its deduction for bad debts using the percentage-of-taxable-income or the experience method.  Instead, the Bank will be permitted to deduct as bad debt expense its specific charge-offs during the taxable year.  In addition, the legislation required savings institutions to recapture into taxable income, over a six-year period, their post-1987 additions to their bad debt tax reserves.  As of the effective date of the legislation, the Bank had no post-1987 additions to its bad debt tax reserves.  As of June 30, 2003, the Bank's total pre-1988 bad debt reserve for tax purposes was approximately $9.0 million.  Under current law, a savings institution will not be required to recapture its pre-1988 bad debt reserve unless the Bank makes a "non-dividend distribution" as defined below.

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Distributions.  To the extent that the Bank makes "non-dividend distributions" to the Corporation that are considered as made from the reserve for losses on qualifying real property loans, to the extent the reserve for such losses exceeds the amount that would have been allowed under the experience method; or from the supplemental reserve for losses on loans ("Excess Distributions"), then an amount based on the amount distributed, will be included in the Bank's taxable income. Non-dividend distributions include distributions in excess of the Bank's current and accumulated earnings and profits, distributions in redemption of stock, and distributions in partial or complete liquidation.  However, dividends paid out of the Bank's current or accumulated earnings and profits, as calculated for federal income tax purposes, will not be considered to result in a distribution from the Bank's bad debt reserve.  Thus, any dividends to the Corporation that would reduce amounts appropriated to the Bank's bad debt reserve and deducted for federal income tax purposes would create a tax liability for the Bank.  The amount of additional taxable income attributable to an Excess Distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution.  Thus, if the Bank makes a "non-dividend distribution," then approximately one and one-half times the amount distributed will be included in taxable income for federal income tax purposes, assuming a 35% corporate income tax rate (exclusive of state and local taxes).  See "Limitation on Capital Distributions" on page 31 for limits on the payment of dividends by the Bank.  The Bank does not intend to pay dividends that would result in a recapture of any portion of its tax bad debt reserve.  During fiscal 2003, the Bank declared and paid cash dividends to the Corporation of $26.4 million; while the Corporation declared and paid cash dividends to the shareholders of $1.0 million.



Corporate Alternative Minimum Tax.  The Code imposes a tax on alternative minimum taxable income ("AMTI") at a rate of 20%. In addition, only 90% of AMTI can be offset by net operating loss carryovers.  AMTI is increased by an amount equal to 75% of the amount by which the Bank's adjusted current earnings exceeds its AMTI (determined without regard to this preference and prior toreduction for net operating losses).



Non-qualified compensation tax benefits.  During fiscal 2003, 9,814 shares of stock under the MRP were distributed to non-employee members of the Corporation's Board of Directors in accordance with previous awards and consistent with the vesting schedule. Also, 30,750 stock options to purchase shares of the Corporation's stock were exercised by one non-employee member of the Corporation's Board of Directors during fiscal 2003.  The federal tax benefits from the non-qualified compensation in fiscal 2003 was $222,000.



Other Matters.   The Internal Revenue Service has audited the Bank's income tax returns through 1996 and the California Franchise Tax Board has audited the Bank through 1990.



State Taxation



California.  The California franchise tax rate applicable to the Bank equals the franchise tax rate applicable to corporations generally, plus an "in lieu" rate of 2%, which is approximately equal to personal property taxes and business license taxes paid by such corporations (but not generally paid by banks or financial corporations such as the Bank).  At June 30, 2003, the total net state tax rate was 7.0%.  Bad debt deductions are available in computing California franchise taxes using the specific charge-off method.  The Bank and its California subsidiaries file California franchise tax returns on a combined basis.  The Corporation will be treated as a general corporation subject to the general corporate tax rate.  The state tax benefits from the non-qualified compensation in fiscal 2003, as described under the Federal Taxation section, was $86,000.  In December 2002, the Corporation filed an amended state tax return for fiscal 2000 resulting in a $78,000 refund.



Delaware.  As a Delaware holding company not earning income in Delaware, the Corporation is exempted from Delaware corporate income tax, but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.



Item 2. Properties



At June 30, 2003, the net book value of the Bank's property (including land and buildings) and its furniture, fixtures and equipment was $8.0 million.  The Bank's home office, which is owned by the Bank, is located in Riverside,

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California.  Including the home office, the Bank has 11 banking offices, ten of which are located in Riverside County in the cities of Riverside (3), Moreno Valley, Hemet, Sun City, Rancho Mirage, Corona, Temecula and Blythe and one is located in Redlands, San Bernardino County, California.  Eight of the banking offices are owned by the Bank and three are leased.  The leases expire from 2005 to 2010.  The Bank also has seven separate loan production offices, which are located in City of Industry, Fullerton, Glendora, La Quinta, Rancho Cucamonga, Riverside, and Torrance, California.  All of these offices are leased.  The leases expire from 2003 to 2006.  A new banking office in Riverside, California was opened in August 2003 and is a leased property.



Item 3.  Legal Proceedings



Periodically, there have been various claims and lawsuits involving the Bank, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the making and servicing of real property loans and other issues in the ordinary course of and incident to the Banks' business.  The Bank is not a party to any pending legal proceedings that it believes would have a material adverse effect on the financial condition or operations of the Bank.

Item 4.  Submission of Matters to a Vote of Security Holders



No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended June 30, 2003.





PART II



Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters



The common stock of Provident Financial Holdings, Inc. is listed on the Nasdaq Stock Market under the symbol PROV.  The following table provides the high and low stock prices for PROV during the last two fiscal years.  As of June 30, 2003, there were approximately 353 registered stockholders of record.



|               |       |  | First                |  | Second              |  | Third            |  | Fourth         
|-------------- | ----- |  | -------------------- |  | ------------------- |  | ---------------- |  | ---------------
|               |       |  | (Ended September 30) |  | (Ended December 31) |  | (Ended March 31) |  | (Ended June 30)
|               |       |  |                      |  |                     |  |                  |  |                
|2003 Quarters: |       |  |                      |  |                     |  |                  | 
|               | High  |  | $ 24.94              |  | $ 26.80             |  | $ 28.81          |  | $ 31.50        
|               | Low . |  | $ 20.50              |  | $ 22.60             |  | $ 26.40          |  | $ 28.01        
|               |       |  |                      |  |                     |  |                  |  |                
|2002 Quarters: |       |  |                      |  |                     |  |                  | 
|               | High  |  | $ 17.20              |  | $ 17.33             |  | $ 19.73          |  | $ 22.53        
|               | Low . |  | $ 14.63              |  | $ 14.47             |  | $ 17.27          |  | $ 19.60        
|               |       |  |                      |  |                     |  |                  |  |                



On July 24, 2002, the Corporation announced a quarterly cash dividend policy, with the first quarterly cash dividend of $0.05 per share paid in the quarter ended September 30, 2003.  Quarterly dividends of $0.05 per share were also paid for the quarters ended December 31, 2002, March 31, 2003 and June 30, 2003.  On August 1, 2003, the Corporation increased its quarterly dividend to $0.10 per share.  Future declarations or payments of dividends will be subject to determination by the Corporation's Board of Directors, which will take into account the Corporation's financial condition, results of operations, tax considerations, capital requirements, industry standards, economic conditions and other factors, including the regulatory restrictions which affect the payment of dividends by the Bank to the Corporation.  Under Delaware law, dividends may be paid either out of surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

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The Corporation continues to repurchase its stock consistent with the Board approved stock repurchase plan.  On September 17, 2002, the Corporation announced a plan regarding the repurchase of 10% of its common stock or approximately 529,600 shares.  As of June 30, 2003, 433,800 shares or 82% of the September 2002 program were purchased with an average cost of $26.77 per share.  During fiscal 2003, a total of 613,500 shares were repurchased with an average cost of $25.72 per share.



Item 6.  Selected Financial Data



The information required herein is incorporated by reference under the heading "Financial Highlights."



Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations



The following discussion and analysis should be read in conjunction with the Corporation's Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in Item 8 of this report.



General



Management's discussion and analysis of financial condition and results of operations are intended to assist in understanding the financial condition and results of operations of the Corporation.  The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying notes thereto included in Item 8 of this report.  Provident Savings Bank, F.S.B., is a wholly owned subsidiary of Provident Financial Holdings, Inc. and as such, comprises substantially all of the activity for Provident Financial Holdings, Inc.



Certain matters in this annual report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements relate to, among others, expectations of the business environment in which the Corporation operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Corporation's mission and vision.  These forward-looking statements are based upon current management expectations, and may, therefore, involve risks and uncertainties.  The Corporation's actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements due to a wide range of factors including, but not limited to, the general business environment, the direction of future interest rates, the California real estate market, competitive conditions between banks and non-bank financial services providers, regulatory changes, labor market competitiveness, and other risks detailed in the Corporation's reports filed with the Securities and Exchange Commission.



Critical Accounting Policies



The discussion and analysis of the Corporation's financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the financial statements.  Actual results may differ from these estimates under different assumptions or conditions.



Accounting for the allowance for loan losses involves significant judgments and assumptions by management, which have a material impact on the carrying value of net loans.  Management considers this accounting policy to be a critical accounting policy.  The judgments and assumptions used by management are based on historical data and management's view of the current economic environment as described in each comparative period's operating results under the heading "Provision for Loan Losses."



Interest is generally not accrued on any loan when its
contractual payments are more than 90 days delinquent. In addition, interest is
not recognized on any loan which management has determined that collection is
not reasonably assured. A non-accrual loan may be restored to accrual status
when delinquent principal and interest payments are

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brought current, the loan is paying in accordance with its
payment terms for a minimum six-month period, and future monthly principal and
interest payments are expected to be collected.



Properties acquired through foreclosure or deed in lieu of foreclosure, are transferred to the real estate owned portfolio and carried at the lower of cost or estimated fair value less the estimated costs to sell the property.  The fair values of the properties are based upon current appraisals.  The difference between the fair value of the real estate collateral and the loan balance at the time of the transfer, is recorded as a loan charge-off if fair value is lower.  Subsequent to foreclosure, management periodically performs additional valuations and the properties are adjusted, if necessary, to the lower of carrying value or fair value, less estimated selling costs.  The determination of a property's estimated fair value includes revenues projected to be realized from disposal of the property, construction and renovation costs.



SFAS No. 133, "Accounting for Derivative Financial Instruments and Hedging Activities" requires that derivatives of the Corporation be recorded in the Consolidated Financial Statements at fair value.  The Bank's derivatives are primarily the result of its mortgage banking activities in the form of commitments to extend credit (including servicing released premiums), commitments to sell loans and option contracts to hedge the risk of the commitments. Management considers this accounting policy to be a critical accounting policy.  Estimates of the percentage of commitments to extend credit on loans to be held for sale that will not fund are based upon historical data and current market trends.  The fair value adjustments of the derivatives are recorded in the Consolidated Statements of Operations with offsets to other assets or other liabilities in the Consolidated Statements of Financial Condition.



Operating Strategy



Provident Savings Bank, FSB, established in 1956, is a financial services company committed to serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California.  The Bank conducts its business operations as Provident Bank, PBM and through its subsidiary, PFC.  Thus, the business activities of the Corporation consist of community banking, mortgage banking, investment services and real estate operations.



The Corporation has established strategies for the next three years, which will change the composition and diversify its balance sheet.  These strategies include: diversifying its revenue sources; creating operating efficiencies; and deploying more aggressive capital management techniques.



The Corporation intends to restructure its balance sheet by decreasing the percentage of investment securities and increasing the percentage of loans held for investment to total assets. Additionally, the Corporation intends to decrease the concentration of single-family mortgage loans within its loans held for investment and increase the concentration of multi-family, commercial real estate, construction and commercial business loans.  The Corporation also intends to decrease the percentage of time deposits in its deposit base and to increase the percentage of checking and savings accounts.  This strategy is intended to improve core revenue through a higher net interest margin.



The Corporation also intends to diversify revenue sources through continued growth of non-interest income, which is primarily income from mortgage banking, fees from banking products and services, revenue from investment sales, and revenue from real estate operations.



The Corporation intends to create operating efficiencies by streamlining processes and procedures, deploying technology solutions to improve productivity, leveraging its infrastructure to support revenue growth and conducting benchmark studies which will determine opportunities to reduce operating expenses.



The Corporation intends to deploy more aggressive capital management techniques such as share repurchases and a cash dividend policy, among others, resulting in higher earnings per share.

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Commitments and Derivative Financial Instruments



The Corporation conducts a portion of its operations in leased facilities under non-cancelable agreements classified as operating leases (see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this report for a schedule of minimum rental payments and lease expenses under such operation leases).  For information regarding the Corporation's commitments and derivative financial instruments, see Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this report.

Off-Balance Sheet Financing Arrangements and Contractual Obligations

The following table summarizes the Corporation's contractual obligations at June 30, 2003 and the effect such obligations are expected to have on the Corporation's liquidity and cash flows in future periods (in thousands):



|                            | Payments Due by Period
|--------------------------- | ----------------------
|                            | Less than             
|                            | 1 year                
|Operating lease obligations | $       555           
|Time deposits               | 194,356               
|FHLB borrowings             | 152,031               
|Total                       | $ 346,942             



The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit, in the form of originating loans or providing funds under existing lines of credit, forward loan sale agreements to third parties and commitments to purchase investment securities. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying consolidated balance sheet.  The Corporation's exposure to credit loss, in the event of non-performance by the other party to these financial instruments, is represented by the contractual amount of these instruments.  The Corporation uses the same credit policies in making commitments to extend credit as it does for on-balance sheet instruments.



Comparison of Financial Condition at June 30, 2003 and June 30, 2002



Total assets increased $256.2 million, or 25%, to $1.26 billion at June 30, 2003 from $1.01 billion at June 30, 2002 primarily as a result of increases in loans held for investment and receivable from sale of loans.  The loans held for investment increased $150.6 million, or 25%, to $744.2 million at June 30, 2003 from $593.6 million at June 30, 2002 primarily as a result of originating $562.0 million of loans held for investment, which was partly offset by $359.0 million of loan prepayments.  These prepayments were attributable to the extraordinarily high volume of refinance activity during fiscal 2003 in connection with the low interest rate environment.  The receivable from sale of loans increased $47.7 million, or 71%, to $114.9 million at June 30, 2003 from $67.2 million at June 30, 2002, resulting from the timing difference between loan sales and loan sale settlements.



The Bank originated approximately $1.79 billion in new loans, primarily through its mortgage division, and purchased $39.5 million in loans from other financial institutions.  The PBM loan production is sold primarily servicing released; a total of $1.24 billion was sold during fiscal 2003.  The outstanding balance of loans held for sale increased to $4.2 million at June 30, 2003 from $1.7 million at June 30, 2002.  The outstanding balance of loans held for sale is largely dependent on the timing of loan fundings and loan sales.



Total liabilities increased $252.3 million, or 28%, to $1.15 billion at June 30, 2003 from $902.3 million at June 30, 2002 as a result of the increase in FHLB advances and customer deposits.  Total deposits increased $76.7 million, or 11%, to $754.1 million at June 30, 2003 from $677.4 million at June 30, 2002.  Included in this increase was the purchase of $7.6 million deposits from Valley Bank - Sun City branch, which was completed in December 2002.  During fiscal 2003, the Bank continued its emphasis on expanding customer relationships, particularly with low cost

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<PAGE>

checking accounts and savings accounts.  Checking accounts increased $17.5 million, or 14%, to $142.7 million at June 30, 2003 from $125.2 million at June 30, 2002.  Money market accounts decreased $1.8 million, or 4%, to $47.9 million at June 30, 2003 from $49.7 million at June 30, 2002.  Savings accounts increased $106.7 million, or 64%, to $272.7 million at June 30, 2003 from $166.0 million at June 30, 2002. FHLB advances increased $165.4 million, or 82%, to $367.9 million at June 30, 2003 from $202.5 million at June 30, 2002.  The increase of the FHLB advances was primarily used to supplement the funding needs resulting from the increases in the loans held for investment and receivable from sale of loans.



Total stockholders' equity was $106.9 million at June 30, 2003, as compared to $103.0 million at June 30, 2002.  The $3.9 million increase in stockholders' equity during fiscal 2003 was primarily attributable to earnings in fiscal 2003, partly offset by share repurchases.  The Corporation repurchased 623,388 shares, or approximately 11% of outstanding shares, at an average price of $25.72 per share, totaling $16.0 million during fiscal 2003.  The Corporation's book value per share increased to $21.43 at June 30, 2003 from $18.86 at June 30, 2002.



Comparison of Operating Results for the Years Ended June 30, 2003 and 2002



General.  The Corporation had net earnings of $16.9 million, or $3.30 per diluted share, for the year ended June 30, 2003, as compared to $9.1 million, or $1.68 per diluted share, for the year ended June 30, 2002.  The increase in operating earnings in fiscal 2003 was primarily attributable to an improvement in non-interest income.



Net Interest Income.  Net interest income before provision for loan losses increased $4.9 million, or 18.5%, to $31.4 million in fiscal 2003 from $26.5 million in fiscal 2002.  This increase resulted principally from an increase in net interest margin.  The net interest margin increased to an average of 2.94% in fiscal 2003 from an average of 2.62% in fiscal 2002.  The increase in the net interest margin was primarily attributable to a decrease in short-term interest rates during fiscal 2003 where the decrease in the costs of interest bearing liabilities was greater than that of the decrease in interest income from earning assets.



Interest Income.  Interest income decreased $5.8 million, or 8.8%, to $59.9 million in fiscal 2003 from $65.7 million in fiscal 2002 as the average yield on assets decreased 90 basis points to 5.59% in fiscal 2003 from 6.49% in fiscal 2002.  The decrease in the average yield was partly offset by the increase in the average earning assets from $1.01 billion in fiscal 2002 to $1.07 billion in fiscal 2003.  The decrease in the yields was the result of the decline in interest rates during fiscal 2003.  Average yield on loans decreased 87 basis points to 6.53% in fiscal 2003 from 7.40% in fiscal 2002, while the average balance increased $62.1 million, or 9.0%, to $754.9 million during fiscal 2003 from $692.8 million during fiscal 2002.  The decrease in the average loan yield was primarily a result of the impact of higher yielding loans held for investment prepaying which were replaced with new lower yielding loans.  Average yield on investment securities decreased 196 basis points to 3.25% in fiscal 2003 from 5.21% in fiscal 2002, while the average balance increased $65.0 million, or 27.9%, to $297.8 million in fiscal 2003 from $232.8 million in fiscal 2002.  The decrease in the average yield was primarily a result of $284.0 million of investment higher yielding securities called by the issuer, $25.4 million of investment securities that were sold for gains and a larger composition of short-term investments.  The average maturity/call of investment securities was 2.19 years at June 30, 2003 as compared to 2.38 years at June 30, 2002.



Interest Expense.  Interest expense decreased $10.8 million, or 27.6%, to $28.4 million in fiscal 2003 from $39.2 million in fiscal 2002.  The average cost of deposits decreased 117 basis points to 2.26% during fiscal 2003 from 3.43% during fiscal 2002.  The decrease in the average cost of deposits was the result of the decline in interest rates during fiscal 2003, maturities of higher costing time deposits and the change in the deposit mix toward lower costing transaction accounts.  The average balance of deposits increased $16.6 million, or 2.4%, to $718.4 million during fiscal 2003 from $701.8 million during fiscal 2002.  The average cost of FHLB advances decreased 204 basis points to 4.35% in fiscal 2003 from 6.39% in fiscal 2002.  The decrease in the average cost of FHLB advances was primarily attributable to the decline in interest rates, $46.5 million of maturities with an average cost of 6.41%, $101.0 million of new advances with an average cost of 3.35% and the utilization of overnight borrowings with an average balance of $74.2 million at an average cost of 1.42% during fiscal 2003. The average maturity of FHLB advances decreased to 36 months at June 30, 2003 from 48 months at June 30, 2002.  The average balance of FHLB advances increased $42.4 million, or 17.9%, to $279.4 million during fiscal 2003 from $237.0 million during fiscal 2002.  In fiscal 2003, the Bank prepaid $20.0 million of FHLB advances with prepayment penalties of $298,000 as

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compared to the prepayment of $37.0 million of FHLB advances with prepayment penalties of $365,000 in fiscal 2002.



Provision for Loan Losses.  Loan loss provisions in fiscal 2003 were $1.1 million as compared to $525,000 in fiscal 2002.  The increase in loss provisions in fiscal 2003 was primarily a result of the increase in the loans held for investment and $436,000 charge-offs of three commercial business loans to two borrowers.  The allowance for loan losses was $7.2 million, or 0.96% of gross loans held for investment, at June 30, 2003, as compared to $6.6 million, or 1.10% of gross loans held for investment, at June 30, 2002.  The allowance for loan losses as a percentage of non-performing loans at the end of fiscal 2003 was 480.6%, as compared to 498.8% at the end of fiscal 2002.



In accordance with the current operating strategy, the fastest growing segments of the loans held for investment are commercial real estate and construction loans.  These loans generally have greater risk than single-family mortgage loans.  Management believes that the current provision for loan losses is prudent based upon the loans held for investment composition, historic loss experience and current economic conditions.



Non-interest Income.  Total non-interest income increased $9.4 million, or 57.3%, to $25.8 million in fiscal 2003 from $16.4 million in fiscal 2002.  The increase in non-interest income was primarily attributable to an increase in gain on the sale of loans, along with increases in deposit account fees, gain on sale of investment securities and other income, partly offset by a decline in loan servicing and other fees.



Total gain from sale of loans increased $9.1 million, or 90.1%, to $19.2 million in fiscal 2003 from $10.1 million in fiscal 2002, and was the result of higher loan origination volume, a favorable SFAS No. 133 adjustment and a higher average loan sale margin.  The increase on the gain on sale of loans was primarily a result of a strong refinance market as interest rates declined during fiscal 2003.  Total loans originated for sale increased $166.7 million, or 15.1%, to $1.27 billion in fiscal 2003 from $1.10 billion in fiscal 2002.



The net impact of derivative financial instruments (SFAS No. 133) was a favorable adjustment of $360,000 as compared to a favorable adjustment of $3,000 in the same period last year.  The fair value of the derivative financial instruments outstanding at June 30, 2003 was $1.6 million in comparison to $559,000 at June 30, 2002.  The fair value adjustment for SFAS No. 133 is determined from the Bank's commitments to extend credit on loans to be held for sale, including servicing released premiums (net of commitments which may not fund), forward loan sale agreements, put option contracts, interest rate conditions and other related factors.  This SFAS No. 133 adjustment is relatively volatile and may have an adverse impact on future earnings.



The average loan sale margin increased 57 basis points to 1.43% during fiscal 2003 from 0.86% during fiscal 2002.   The higher loan sale margin was primarily due to the high demand for mortgage loans, an improved product mix (a larger percentage of loans sold with a higher loan sale margin) and better execution in the sale of loans.



The average profit margin for PBM in fiscal 2003 and 2002 was 100 basis points and 56 basis points, respectively.  The average profit margin is defined as income before taxes divided by total loans funded during the period (including brokered loans) adjusted for the change in commitments to extend credit.  The three principle reasons for the increase of the profit margin was the emphasis on originating the most profitable mortgage loan products, the economies of scale realized by producing larger loan volumes with relatively fixed operating expenses and the extraordinary pricing opportunities given the consumer demand for mortgage loan products during the period.



Deposit account fees increased $93,000, or 5.7%, to $1.7 million in fiscal 2003 from $1.6 million in fiscal 2002.  The increase in deposit account fees was the direct result of the Bank's deposit strategy which emphasizes transaction account growth.



The increase in gain on sale of investment securities was the result of the sale of $25.4 million of investment securities for a $694,000 gain during fiscal 2003 as compared to the sale of $21.3 million of investment securities for a $544,000 gain during fiscal 2002.



Other non-interest income increased $320,000 to $1.6 million in fiscal 2003, primarily attributable to $283,000 of partial recoveries from two loans.

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<PAGE>



Loan servicing and other fees decreased $333,000 to $1.8 million in fiscal 2003 from $2.2 million in fiscal 2002, resulting primarily from decreases in loan prepayment fees and loan servicing fees. The decline in the loan servicing fees was a result of a lower volume of loans serviced for others, $114.1 million as of June 30, 2003 as compared to $136.1 million as of June 30, 2002.

Non-interest Expense.



Income Taxes.



Comparison of Operating Results for the Years Ended June 30, 2002 and 2001



General.  The Corporation had net earnings of $9.1 million, or $1.68 per diluted share, for the year ended June 30, 2002, as compared to $8.9 million, or $1.65 per diluted share, for the year ended June 30, 2001.  The increase in operating earnings in fiscal 2002 was primarily attributable to an improvement in non-interest income.



Net Interest Income.  Net interest income before provision for loan losses increased $139,000, or 0.5%, from $26.3 million in fiscal 2001 to $26.5 million in fiscal 2002.  This increase resulted principally from an increase in net interest margin.  The net interest margin increased from an average of 2.43% in fiscal 2001 to an average of 2.62% in fiscal 2002.  The increase in the net interest margin was primarily attributable to a decrease in short-term interest rates during fiscal 2002 where the decrease in the costs of interest bearing liabilities was greater than that of the decrease in income from earning assets.



Interest Income.  Interest income decreased $15.1 million, or 18.7%, from $80.8 million in fiscal 2001 to $65.7 million in fiscal 2002 as the average earning assets decreased $73.7 million, or 6.8%, to $1.01 billion in fiscal 2002 from $1.09 billion in fiscal 2001.  The average yield on assets also decreased 95 basis points from 7.44% in fiscal 2001 to 6.49% in fiscal 2002.  Average loan balances decreased $170.7 million, or 19.8%, from $863.5 million during fiscal 2001 to $692.8 million during fiscal 2002 and the average yield decreased 31 basis points from 7.71% to 7.40%, respectively.  The average balance of investment securities increased $31.3 million, or 15.5%, from $201.5 million during fiscal 2001 to $232.8 million during fiscal 2002 while the average yield decreased 105 basis points from 6.26% to 5.21%, respectively.  The decrease in yields was the result of the decline in interest rates during fiscal 2002.



Interest Expense.  Interest expense decreased $15.3 million, or 28.0%, from $54.5 million in fiscal 2001 to $39.2 million in fiscal 2002.  The average balance of deposits decreased $4.8 million, or 0.7%, from $706.6 million during fiscal 2001 to $701.8 million during fiscal 2002 and the average cost of the deposits decreased 145 basis points from 4.88% during fiscal 2001 to 3.43% during fiscal 2002.  The average balance of FHLB advances decreased $67.6 million, or 22.2%, from $304.6 million during fiscal 2001 to $237.0 million during fiscal 2002 while the average cost decreased nine basis points from 6.48% to 6.39%, respectively.  In fiscal 2002, the Bank prepaid $37.0 million of FHLB advances with prepayment penalties of $365,000 as compared to the prepayment of $20.0 million of FHLB advances with prepayment penalties of $63,000 in fiscal 2001.



Provision for Loan Losses.  Loan loss provisions in fiscal 2002 were $525,000 as compared to no provision in fiscal 2001. The allowance for loan losses was $6.6 million, or 1.10% of gross loans held for investment, at June 30, 2002, as compared to $6.1 million, or 0.86% of gross loans held for investment, at June 30, 2001.  The allowance for loan losses as a percentage of non-performing loans at the end of fiscal 2002 was 498.8%, as compared to 402.7% at the end of fiscal 2001.



In accordance with the current operating strategy, the
fastest growing segments of the loans held for investment are commercial real
estate and construction loans. These loans generally have greater risk than
single-family mortgage

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loans. Management believes that the current provision for
loan losses is prudent and based upon the loans held for investment composition,
historic loss experience and current economic conditions.



Non-interest Income.  Total non-interest income increased $2.4 million, or 17.1%, to $16.4 million in fiscal 2002 from $14.0 million in fiscal 2001. The increase in non-interest income was primarily attributable to an increase in gain on sale of loans, along with increases in loan servicing and other fees, deposit account fees and gain on sale of investment securities.



Total gain on sale of loans increased $2.1 million, or 26.3%, from $8.0 million in fiscal 2001 to $10.1 million in fiscal 2002, and was the result of higher loan origination volume, partially offset by a lower average loan sale margin.  Total loans originated for sale increased $331.5 million, or 42.9%, from $772.1 million in fiscal 2001 to $1.10 billion in fiscal 2002.  The average loan sale margin decreased 18 basis points to 0.86% during fiscal 2002 from 1.04% during fiscal 2001.  The increase on the gain on sale of loans was primarily due to a strong refinance market as interest rates declined during fiscal 2002.



Loan servicing and other fees increased from $2.1 million in fiscal 2001 to $2.2 million in fiscal 2002, resulting primarily from an increase in loan prepayment fees, which was partially offset by lower loan servicing fees.  The decline in the loan servicing fees was a result of a lower volume of loans serviced for others, $136.1 million as of June 30, 2002 as compared to $203.8 million as of June 30, 2001.



Deposit account fees increased $311,000, or 23.4%, to $1.6 million in fiscal 2002 from $1.3 million in fiscal 2001. The increase in deposit account fees was the direct result of the Bank's deposit strategy which emphasizes transaction account growth.



The increase in gain on sale of investment securities was the result of the sale of $21.3 million of investment securities for a $544,000 gain during fiscal 2002 as compared to the sale of $7.7 million of investment securities for a $248,000 gain during fiscal 2001.

Non-interest Expense.  Total non-interest expense increased $1.7 million, or 6.8%, to $26.8 million in fiscal 2002 as compared to $25.1 million in fiscal 2001.  This increase was attributable primarily to increases in compensation expenses, occupancy, equipment and professional expenses, and was partially offset by lower marketing and other operating expenses.  The increase in the non-interest expense was due primarily to the opening of the two new banking offices in Temecula and Corona, California, both of which were opened in August 2001.



Income Taxes.  The provision for income taxes was $6.5 million for fiscal 2002, representing an effective tax rate of 41.6%, as compared to $6.4 million in fiscal 2001, representing an effective tax rate of 41.7%.



Average Balances, Interest and Average Yields/Cost. The following table sets forth certain information for the periods regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities and average yields and costs thereof.   Such yields and costs for the periods indicated are derived by dividing income or expense by the average monthly balance of assets or liabilities, respectively, for the periods presented.

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|                            |                                        |                                     |             |          |        |          |         |              |             |          |        | Year Ended June 30, |         |               |             |          |        |         
|--------------------------- | -------------------------------------- | ----------------------------------- | ----------- | -------- | ------ | -------- | ------- | ------------ | ----------- | -------- | ------ | ------------------- | ------- | ------------- | ----------- | -------- | ------ | --------
|                            |                                        |                                     |             |          |        | 2003     |         |              |             |          |        | 2002                |         |               |             |          |        | 2001    
|                            |                                        |                                     |             |          |        |          |         | Average      |             |          |        |                     |         | Average       |             |          |        |         
|                            |                                        |                                     |             | Average  |        |          |         | Yield/       |             | Average  |        |                     |         | Yield/        |             | Average  |        |         
|                            |                                        |                                     |             | Balance  |        | Interest |         | Cost         |             | Balance  |        | Interest            |         | Cost          |             | Balance  |        | Interest
|(Dollars In Thousands)      |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |        
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |         
|Interest-earning assets:    |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |       
|                            | Loans receivable, net (1) (2)          | $       754,886                     |             | $ 49,328 |        | 6.53%    |         | $    692,761 |             | $ 51,247 |        | 7.40%               |         | $   863,479   |             | $ 66,561 |        | 7.71%   
|                            | Investment securities                  | 297,760                             |             | 9,668    |        | 3.25%    |         | 232,781      |             | 12,122   |        | 5.21%               |         | 201,479       |             | 12,603   |        | 6.26%   
|                            | FHLB stock (3)                         | 16,776                              |             | 843      |        | 5.03%    |         | 15,006       |             | 779      |        | 5.19%               |         | 17,046        |             | 1,449    |        | 8.50%   
|                            | Interest-earning deposits              | 1,318                               |             | 17       |        | 1.29%    |         | 71,484       |             | 1,520    |        | 2.13%               |         | 3,703         |             | 184      |        | 4.97%   
|                            |                                        | Total interest-earning assets       | 1,070,740   |          | 59,856 |          | 5.59%   |              | 1,012,032   |          | 65,668 |                     | 6.49%   |               | 1,085,707   |          | 80,797 |         
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|Non-interest earning assets | 74,740                                 |                                     |             |          |        |          | 50,114  |              |             |          |        |                     | 54,322  |               |             |          |       
|                            |                                        | Total assets                        | $ 1,145,480 |          |        |          |         |              | $ 1,062,146 |          |        |                     |         |               | $ 1,140,029 |          |        |         
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|Deposits and borrowings:    |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |       
|                            | Checking and money market accounts (4) | $    191,997                        |             | 1,560    |        | 0.81%    |         | $   172,293  |             | 2,410    |        | 1.40%               |         | $     152,906 |             | 3,710    |        | 2.43%   
|                            | Savings accounts                       | 203,977                             |             | 4,161    |        | 2.04%    |         | 135,621      |             | 3,170    |        | 2.34%               |         | 96,812        |             | 3,350    |        | 3.46%   
|                            | Time deposits                          | 322,410                             |             | 10,531   |        | 3.27%    |         | 393,857      |             | 18,474   |        | 4.69%               |         | 456,881       |             | 27,435   |        | 6.00%   
|                            |                                        | Total deposits                      | 718,384     |          | 16,252 |          | 2.26%   |              | 701,771     |          | 24,054 |                     | 3.43%   |               | 706,599     |          | 34,495 |         
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|FHLB advances (5)           | 279,422                                |                                     | 12,161      |          | 4.35%  |          | 236,967 |              | 15,134      |          | 6.39%  |                     | 304,631 |               | 19,749      |          | 6.48% 
|Other borrowings            | -                                      |                                     | -           |          | -      |          | -       |              | -           |          | -      |                     | 2,916   |               | 212         |          | 7.27% 
|                            |                                        | Total borrowings                    | 279,422     |          | 12,161 |          | 4.35%   |              | 236,967     |          | 15,134 |                     | 6.39%   |               | 307,547     |          | 19,961 |         
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|                            |                                        | Total deposits and borrowings       | 997,806     |          | 28,413 |          | 2.85%   |              | 938,738     |          | 39,188 |                     | 4.17%   |               | 1,014,146   |          | 54,456 |         
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|                            | Non-interest-bearing liabilities       | 45,378                              |             |          |        |          |         | 22,705       |             |          |        |                     |         | 32,498        |             |          |        |         
|                            |                                        | Total liabilities                   | 1,043,184   |          |        |          |         |              | 961,443     |          |        |                     |         |               | 1,046,644   |          |        |         
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|                            | Stockholders' equity                   | 102,296                             |             |          |        |          |         | 100,703      |             |          |        |                     |         | 93,385        |             |          |        |         
|                            |                                        | Total liabilities and stockholders' |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|                            |                                        | equity                              | $ 1,145,480 |          |        |          |         |              | $ 1,062,146 |          |        |                     |         |               | $ 1,140,029 |          |        |         
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|                            | Net interest income                    |                                     |             | $ 31,443 |        |          |         |              |             | $ 26,480 |        |                     |         |               |             | $ 26,341 |        |         
|                            |                                        |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|                            | Interest rate spread (6)               |                                     |             |          |        | 2.74%    |         |              |             |          |        | 2.32%               |         |               |             |          |        | 2.07%   
|                            | Net interest margin (7)                |                                     |             |          |        | 2.94%    |         |              |             |          |        | 2.62%               |         |               |             |          |        | 2.43%   
|                            | Ratio of average interest-earning      |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|                            | assets to average interest-bearing     |                                     |             |          |        |          |         |              |             |          |        |                     |         |               |             |          |        |         
|                            | liabilities                            | 107.31%                             |             |          |        |          |         | 107.81%      |             |          |        |                     |         | 107.06%       |             |          |        |         

|(1) | Includes loans available for sale and non-accrual loans.                                                                                                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes net deferred loan fees (costs) amortization of $574, $247 and ($366) for the years ended June 30, 2003, 2002 and 2001, respectively.                     
|(3) | Includes dividend accruals of $246 in fiscal 2001, which in prior years were not recognized until received.                                                       
|(4) | Includes average balance of non-interest bearing checking accounts of  $43.8 million, $31.1 million and $25.0 million in fiscal 2003, 2002 and 2001, respectively.
|(5) | Includes interest prepayment penalty of $298, $365 and $63 for the years ended June 30, 2003, 2002 and 2001, respectively.                                        
|(6) | Represents difference between weighted average yield on all interest-earning assets and weighted average rate on all interest-bearing liabilities.                
|(7) | Represents net income before provision for loan losses as a percentage of average interest-earning assets.                                                        







44

<PAGE>

Yields Earned and Rates Paid. The following table sets forth (on a consolidated basis), for the periods and at the dates indicated, the weighted average yields earned on the Bank's assets and the weighted average interest rates paid on the Bank's liabilities, together with the net yield on interest-earning assets.



|                                       |       |  | Quarter  |  |                    
|-------------------------------------- | ----- |  | -------- |  | -------------------
|                                       |       |  | Ended    |  |                    
|                                       |       |  | June 30, |  | Year Ended June 30,
|                                       |       |  | 2003     |  | 2003               
|                                       |       |  |          |  |                    
|Weighted average yield on:             |       |  |          |  |                    
|                                       |       |  |          |  |                    
|Loans receivable (1) (2)               | 6.11% |  | 6.53%    |  | 7.40%              
|                                       |       |  |          |  |                    
|Investment securities                  | 2.92% |  | 3.25%    |  | 5.21%              
|                                       |       |  |          |  |                    
|FHLB stock (3)                         | 4.22% |  | 5.03%    |  | 5.19%              
|                                       |       |  |          |  |                    
|Interest-earning deposits              | 1.13% |  | 1.29%    |  | 2.13%              
|                                       |       |  |          |  |                    
|All interest-earning assets            | 5.24% |  | 5.59%    |  | 6.49%              
|                                       |       |  |          |  |                    
|Weighted average rate paid on:         |       |  |          |  |                    
|                                       |       |  |          |  |                    
|Checking and money market accounts (4) | 0.75% |  | 0.81%    |  | 1.40%              
|                                       |       |  |          |  |                    
|Savings accounts                       | 1.86% |  | 2.04%    |  | 2.34%              
|                                       |       |  |          |  |                    
|Time deposits                          | 2.83% |  | 3.27%    |  | 4.69%              
|                                       |       |  |          |  |                    
|FHLB advances (5)                      | 3.78% |  | 4.35%    |  | 6.39%              
|                                       |       |  |          |  |                    
|Other borrowings                       | -     |  | -        |  | -                  
|                                       |       |  |          |  |                    
|All interest-bearing liabilities       | 2.50% |  | 2.85%    |  | 4.17%              
|                                       |       |  |          |  |                    
|Interest rate spread (6)               | 2.74% |  | 2.74%    |  | 2.32%              
|                                       |       |  |          |  |                    
|Net interest margin (7)                | 2.91% |  | 2.94%    |  | 2.62%              

|(1) | Includes loans available for sale and non-accrual loans.                                                                                                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes net deferred loan fees (costs) amortization of $574, $247 and ($366) for the years ended June 30, 2003, 2002 and 2001, respectively.                     
|(3) | Includes dividend accruals of $246 in fiscal 2001, which in prior years were not recognized until received.                                                       
|(4) | Includes average balance of non-interest bearing checking accounts of  $43.8 million, $31.1 million and $25.0 million in fiscal 2003, 2002 and 2001, respectively.
|(5) | Includes interest prepayment penalty of $298, $365 and $63 for the years ended June 30, 2003, 2002 and 2001, respectively.                                        
|(6) | Represents difference between weighted average yield on all interest-earning assets and weighted average rate on all interest-bearing liabilities.                
|(7) | Represents net income before provision for loan losses as a percentage of average interest-earning assets.                                                        



45

<PAGE>

Rate/Volume Table. 
The following table sets forth the effects of changing rates and volumes on interest income and expense of the Bank.  Information is provided with respect to the effects attributable to changes in volume (changes in volume multiplied by prior rate), the effects attributable to changes in rate (changes in rate multiplied by prior volume) and changes that cannot be allocated between rate and volume.



|                               |                                | Year Ended June 30, 2003   |        | Year Ended June 30, 2002   |    
|------------------------------ | ------------------------------ | -------------------------- | ------ | -------------------------- | ---
|                               |                                | Compared to Year           |        | Compared to Year           |    
|                               |                                | Ended June 30, 2002        |        | Ended June 30, 2001        |    
|                               |                                | Increase (Decrease) Due to |        | Increase (Decrease) Due to |    
|                               |                                |                            |        |                            |    
|                               |                                | Rate                       |        | Volume                     |    
|(In Thousands)                 |                               
|                               |                                |                            |        |                            |    
|Interest income:               |                                |                            |        |                            |    
|                               | Loans receivable (1)           | $  (5,976                  | )      | $  4,597                   |    
|                               | Investment securities          | (4,565                     | )      | 3,385                      |    
|                               | FHLB stock                     | (25                        | )      | 92                         |    
|                               | Interest-bearing deposits      | (597                       | )      | (1,495                     | )  
|                               | Total net change in income     |                            |        |                            |    
|                               | on interest-earning assets     | (11,163                    | )      | 6,579                      |    
|                               |                                |                            |        |                            |    
|Interest-bearing liabilities : |                                |                            |        |                            |    
|                               | Checking and money market      |                            |        |                            |    
|                               |                                | accounts                   | (1,010 | )                          | 276
|                               | Savings accounts               | (404                       | )      | 1,600                      |    
|                               | Time deposits                  | (5,607                     | )      | (3,351                     | )  
|                               | FHLB advances                  | (4,820                     | )      | 2,713                      |    
|                               | Other borrowings               | -                          |        | -                          |    
|                               | Total net change in expense on |                            |        |                            |    
|                               | interest bearing liabilities   | (11,841                    | )      | 1,238                      |    
|                               |                                |                            |        |                            |    
|                               | Net change in  net             |                            |        |                            |    
|                               | interest income                | $            678           |        | $  5,341                   |    



(1)    Includes loans available for sale,



Liquidity and Capital Resources



The Corporation's primary sources of funds are deposits, proceeds from the sale of loans originated for sale, proceeds from principal and interest payments on loans, proceeds from the maturity of investment securities and FHLB advances. While maturities and scheduled amortization of loans and investment securities are a predictable source of funds, deposit flows, mortgage prepayments and loan sales are greatly influenced by general interest rates, economic conditions and competition.



The Bank must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. The Bank generally maintains sufficient cash to meet short-term liquidity needs.  At June 30, 2003, total cash was $48.9 million, or 3.9% of total assets.  Depending on market conditions and the pricing of deposit products and FHLB advances, the Bank may continue to rely on FHLB advances for part of its liquidity needs.



Although the OTS eliminated the minimum liquidity requirement for savings institutions in April 2001, the regulation still requires thrifts to maintain adequate liquidity to assure safe and sound operations. The Bank's average liquidity ratio for the quarter ended June 30, 2003 decreased to 20.3% from 33.2% during the same period ending June 30, 2002.  This decrease was primarily due to the utilization of investment securities as collateral under the FHLB's SBC facility for overnight borrowings.



The primary investing activity of the Bank is the origination of single-family, multi-family, commercial real estate, construction, and commercial business loans.  Most mortgage and consumer loans originated by PBM were sold including servicing rights.  During the years ended June 30, 2003, 2002 and 2001, the Bank originated loans in the amounts of $1.79 billion, $1.35 billion and $833.4 million, respectively.  In addition, the Bank purchased loans from

46

<PAGE>

other financial institutions in fiscal 2003, 2002 and 2001 in the amounts of $39.5 million, $38.6 million and $29.6 million, respectively.  Total loans sold by PBM in fiscal 2003, 2002 and 2001 were $1.24 billion, $1.17 billion and $678.4 million, respectively.  At June 30, 2003, the Bank had loan origination commitments totaling $157.2 million and undisbursed loans in process totaling $67.9 million.  The Bank anticipates that it will have sufficient funds available to meet its current loan origination commitments.  Time deposits that are scheduled to mature in one year or less from June 30, 2003 were $194.4 million.  Historically, the Bank has been able to retain a significant amount of its time deposits as they mature.  Management of the Bank believes it has adequate resources to fund all loan commitments with deposits and FHLB advances, and that it can adjust deposit rates to retain deposits in changing interest rate environments.



The Bank is required to maintain specific amounts of capital pursuant to OTS requirements.  Under OTS's current prompt corrective action provisions, a minimum ratio of 2% for the Tangible Capital ratio is required to be deemed other than "critically undercapitalized," while a minimum of 5% for Tier 1 (Core) capital, 10% for Total Risk-Based Capital and 6% for Tier 1 Risk-Based Capital ratios are required to be deemed "well capitalized."  As of June 30, 2003, the Bank was well in excess of all regulatory capital requirements with Tangible Capital, Core Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios of 6.50%, 6.50%, 11.97% and 13.01%, respectively.

Impact of Inflation and Changing Prices



The Corporation's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation.  The impact of inflation is reflected in the increasing cost of the Corporation's operations.  Unlike most industrial companies, nearly all assets and liabilities of the Corporation are monetary.  As a result, interest rates have a greater impact on the Corporation's performance than do the effects of general levels of inflation.  In addition, interest rates do not necessarily move in the direction, or to the same extent, as the prices of goods and services.



Impact of New Accounting Pronouncements.

For discussion of new accounting pronouncements and their impact on the Corporation, see Note 1 of the Notes to the Consolidated Financial Statements included in Item 8 of this report.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk



Quantitative Aspects of Market Risk.  The Bank does not maintain a trading account for any class of financial instrument nor does it purchase high-risk derivative financial instruments.  Furthermore, the Bank is not subject to foreign currency exchange rate risk or commodity price risk.  For information regarding the sensitivity to interest rate risk of the Bank's interest-earning assets and interest-bearing liabilities, see "Maturity of Loans Held for Investment" on page 5, "Investment Securities Activities" on page 22 through 23 and "Time Deposits by Maturities" on page 26.



Qualitative Aspects of Market Risk.  The Bank's principal financial objective is to achieve long-term profitability while reducing its exposure to fluctuating interest rates.  The Bank has sought to reduce the exposure of its earnings to changes in interest rates by attempting to manage the mismatch between asset and liability maturities and interest rates.  The principal element in achieving this objective is to decrease the interest-rate sensitivity of the Bank's interest-earning assets by retaining for its portfolio new loan originations with interest rates subject to periodic adjustment to market conditions and by selling fixed-rate, single-family mortgage loans.  In addition, the Bank maintains an investment portfolio which is largely in U.S. government agency securities and U.S. government agency MBS
with contractual maturities of up to 30 years. The Bank relies on retail
deposits as its primary source of funds. Management believes retail deposits,
compared to brokered deposits, reduce the effects of interest rate fluctuations
because they generally represent a more stable source of funds. As part of its
interest rate risk management strategy, the Bank promotes transaction accounts
and time deposits with terms up to five years. For

47

<PAGE>

additional information, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page 37.



Interest Rate Risk.  The principal financial objective of the Corporation's interest rate risk management function is to achieve long-term profitability while limiting its exposure to the fluctuation of interest rates.  The Corporation, through its ALCO, has sought to reduce the exposure of its earnings to changes in interest rates by managing the mismatch between asset and liability maturities and interest rates.  The principal element in achieving this objective is to manage the interest-rate sensitivity of the Corporation's assets by retaining loans with interest rates subject to periodic market adjustments.  In addition, the Bank maintains a liquid investment portfolio comprised of government agency securities and MBS.  The Bank relies on retail deposits as its primary source of funding while utilizing FHLB advances as a secondary source of funding.  As part of its interest rate risk management strategy, the Bank promotes transaction accounts.



Using data from the Bank's quarterly report to the OTS, the OTS produces a report for the Bank that measures interest rate risk by modeling the change in Net Portfolio Value ("NPV") over a variety of interest rate scenarios.  The interest rate analysis received from the OTS is similar to the Bank's own interest rate risk model.  NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts.  The calculation is intended to illustrate the change in NPV that would occur in the event of an immediate change in interest rates of      -100, +100, +200 and +300 basis points with no effect given to any steps which management might take to counter the effect of that interest rate movement.



The following table is provided by the OTS and sets forth as of June 30, 2003 the estimated changes in NPV based on the indicated interest rate environments.  The Bank's balance sheet position as of June 30, 2003 can be summarized as follows: if interest rates decrease 100 basis points, increase 200 basis points or increase 300 basis points, the NPV of the Bank is expected to decrease; conversely, if interest rates increase 100 basis points, the NPV of the Bank is expected to increase.



|                       |  |            |  |           |   |            |  | NPV as Percentage  |            
|---------------------- |  | ---------- |  | --------- | - | ---------- |  | ------------------ | -----------
|                       |  | Net        |  | NPV       |   | Portfolio  |  | of Portfolio Value | Sensitivity
|Basis Points (bp)      |  | Portfolio  |  | Change    |   | Value      |  | Assets             | Measure    
|Change in Rates        |  | Value      |  | (1)       |   | Assets     |  | (2)                | (3)        
|(Dollars In Thousands) |  |            |  |           |   |           
|                       |  |            |  |           |   |           
|+300 bp                |  | $  106,015 |  | $ (14,656 | ) | $1,242,043 |  | 8.54%              | -63        
|+200 bp                |  | 116,043    |  | (4,628    | ) | 1,269,490  |  | 9.14%              | -3         
|+100 bp                |  | 121,201    |  | 531       |   | 1,294,268  |  | 9.36%              | +19        
|0 bp                   |  | 120,671    |  | -         |   | 1,315,885  |  | 9.17%              | 0          
|-100 bp                |  | 119,208    |  | (1,463    | ) | 1,329,888  |  | 8.96%              | -21        
|                       |  |            |  |           |   |            |  |                    |            

|(1) | Represents the decrease of the estimated NPV at the indicated change in interest rates compared to the NPV calculated at June 30, 2003 ("base case").
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Calculated as the estimated NPV divided by the portfolio value of total assets.                                                                      
|(3) | Calculated as the change in the NPV ratio from the base case at the indicated change in interest rates.                                              





48

<PAGE>

The following table provided by the OTS, is based on the calculations contained in the previous table, and sets forth the change in the NPV at a -100 bp rate shock at June 30, 2003 and at a +200 bp at June 30, 2002.

|                                         |  | At June 30, 2003 |    | At June 30, 2002 |   
|---------------------------------------- |  | ---------------- | -- | ---------------- | --
|Risk Measure: -100 bp/+200 bp Rate Shock |  | (-100 bp)        |    | (+200 bp)        |   
|                                         |  |                  |    |                  |   
|Pre-Shock NPV Ratio ..                   |  | 9.17             | %  | 13.08            | % 
|Post-Shock NPV Ratio                     |  | 8.96             | %  | 12.42            | % 
|Sensitivity Measure .                    |  | 21               | bp | 65               | bp
|                                         |  |                  |    |                  |   



As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table.  For example, although certain assets and liabilities may have similar maturities or repricing characteristics, they may react in different degrees to changes in interest rates.  Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market.  Additionally, certain assets, such as ARM loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset.  Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from time deposits could likely deviate significantly from those assumed in calculating the table.  It is also possible that, as a result of an interest rate increase, the increased mortgage payments required of ARM borrowers could result in an increase in delinquencies and defaults.  Changes in interest rates could also affect the volume and profitability of the Bank's mortgage banking operations.  Accordingly, the data presented in the tables above should not be relied upon as indicative of actual results in the event of changes in interest rates.  Furthermore, the NPV presented in the foregoing tables is not intended to present the fair market value of the Bank, nor does it represent amounts that would be available for distribution to stockholders in the event of the liquidation of the Corporation.

Item 8.  Financial Statements and Supplementary Data



Please refer to the index on page 55 for Consolidated Financial Statements and Notes to Consolidated Financial Statements.



Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



None.



Item 9A.   Controls and Procedures

Within the 90-day period prior to the filing date of this report, the Corporation carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to the Exchange Act Rule 13a-14(c). The Corporation's Disclosure Committee, under the supervision of the Chief Executive Officer and Chief Financial Officer, and with the participation of the Internal Auditor Manager, conducted surveys and interviews with a selected group of management comprised of the critical operational personnel, on the effectiveness of the disclosure controls and procedures.  Based on the results of the surveys and interviews, the Disclosure Committee completed a report to the Audit Committee of the Board of Directors and a recommendation to the Corporation's Chief Executive Officer and Chief Financial Officer.  The Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the evaluation date.



There were no significant changes in the Corporation's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation.

49

<PAGE>





PART III



Item 10.  Directors and Executive Officers of the Registrant



For information regarding the Corporation's Board of Directors, see the section captioned "Proposal I - Election of Directors" included in the Proxy Statement and which is incorporated herein by reference.



The executive officers of the Corporation and the Bank are elected annually and hold office until their respective successors have been elected and qualified or until death, resignation or removal by the Board of Directors. The following tables set forth information with respect to the executive officers of the Corporation and the Bank.

|                      |         | Position               
|--------------------- | ------- | -----------------------
|Name                  | Age (1) | Corporation            
|Craig G. Blunden      | 55      | Chairman, President and
|                      |         | Chief Executive Officer
|                      |         |                        
|Donald L. Blanchard   | 53      | -                      
|                      |         |                        
|                      |         |                        
|Lilian Brunner        | 48      | -                      
|                      |         |                        
|                      |         |                        
|Thomas "Lee" Fenn (2) | 54      | -                      
|                      |         |                        
|                      |         |                        
|Richard L. Gale       | 52      | -                      
|                      |         |                        
|                      |         |                        
|Donavon P. Ternes (3) | 43      | Chief Financial Officer
|                      |         | Corporate Secretary    





---

|(1) | As of June 30, 2003.                                                                   
|--- | ---------------------------------------------------------------------------------------
|(2) | Appointed on July 31, 2003.                                                            
|(3) | Appointed Corporate Secretary by the Corporation's Board of Directors on April 1, 2003.

Biographical Information



Set forth below is certain information regarding the executive officers of the Corporation and the Bank.  There are no family relationships among or between the executive officers.



Executive Officers

Craig G. Blunden has been associated with the Bank since 1974 and has held his current positions at the Bank since 1991 and as President and Chief Executive Officer of the Corporation since its formation in 1996.  Mr. Blunden also serves on the Board of Directors of the Federal Home Loan Bank of San Francisco and the Greater Riverside Chambers of Commerce.



Donald L. Blanchard, who joined the Bank in 1989, has held his current position with the Bank since 1989.



Lilian Brunner, whojoined the Bank in 1993, was general auditor prior to being promoted to Chief Information Officer in 1997.



Thomas "Lee" Fenn joined the Bank as Senior Vice President and Chief Lending Officer on July 31, 2003. Prior to joining the Bank, Mr. Fenn was a Senior Vice President and Regional Manager of a commercial bank in California serving 50 retail banking offices.

50

<PAGE>



Richard L. Gale, who joined the Bank in 1988, has served as President of the Provident Bank Mortgage division since 1989.  Mr. Gale has held his current position with the Bank since 1993.



Donavon P. Ternes joined the Bank as Senior Vice President and Chief Financial Officer on November 1, 2000. Prior to joining the Bank, Mr. Ternes spent 11 years as the President, Chief Executive Officer, Chief Financial Officer and Director of a financial institution located in Riverside, California.



Compliance with Section 16(a) of the Exchange Act



The information contained under the section captioned "Compliance with Section 16(a) of the Exchange Act" is included in the Corporation's Proxy Statement and is incorporated herein by reference.

Item 11.  Executive Compensation



The information contained under the section captioned "Executive Compensation" and "Directors' Compensation" are included in the Proxy Statement and incorporated herein by reference.



Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



(a)        Security Ownership of Certain Beneficial Owners.



The information contained under the section captioned "Security Ownership of Certain Beneficial Owners and Management" is included in the Corporation's Proxy Statement and is incorporated herein by reference.



(b)        Security Ownership of Management.



The information contained under the sections captioned "Security Ownership of Certain Beneficial Owners and Management" and "Proposal I -- Election of Directors" is included in the Corporation's Proxy Statement and are incorporated herein by reference.



(c)        Changes In Control.



The Corporation is not aware of any arrangements, including any pledge by any person of securities of the Corporation, the operation of which may at a subsequent date result in a change in control of the Corporation.





Item 13.  Certain Relationships and Related Transactions



The information contained under the section captioned "Transaction with Management" is included in the Proxy Statement and incorporated herein by reference.



Item 14.  Principal Accountant Fees and Services



The information contained under the section captioned "Proposal II - Approval of Appointment of Independent Auditors" is included in the Corporation's Proxy Statement and is incorporated herein by reference.

51

<PAGE>



PART IV



Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K



(a)  1. Financial Statements
         
See Index to Consolidated Financial Statements on page 55.



2. Financial Statement Schedules          Schedules to the Consolidated Financial Statements have been omitted as the required information is inapplicable.

(b) Reports on Form 8-K filed during the last quarter of the Registrant's fiscal year ended June 30, 2003

|(1) | The Registrant's Form 8-K dated April 24, 2003 regarding the Corporation's news release on the third quarter's results.                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The Registrant's Form 8-K dated April 28, 2003 regarding a quarterly cash dividend of $0.05 per share on the Corporation's outstanding shares of common stock.   
|(3) | The Registrant's Form 8-K dated June 16, 2003 regarding the preliminary members list of the Russell 3000 Index which becomes effective July 1, 2003 for one year.



(c) Exhibits
     
Exhibits are available from the Corporation by written request

|3.1  | Certificate of Incorporation of Provident Financial Holdings, Inc.
(Incorporated by reference to Exhibit 3.1 to the Corporation's Registration Statement on Form
S-1 (File No. 333-2230))
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2  | Bylaws of Provident Financial Holdings, Inc.
(Incorporated by reference to Exhibit 3.2 to the Corporation's Registration Statement on
Form S-1 (File No. 333-2230))                      
|10.1 | Employment Agreement with Craig G. Blunden
(Incorporated by reference to Exhibit 10.1 to the Corporation's Annual Report on
Form 10-K for the Year Ended June 30, 1997)                  
|10.2 | Post-Retirement Compensation Agreement with Craig G. Blunden
(Incorporated by reference to Exhibit 10.2 to the Corporation's Annual Report on Form
10-K for the Year Ended June 30, 1997)
|10.3 | Severance Agreement with Robert G. Schrader (Incorporated by reference to Exhibit 10.3
to the Corporation's Annual Report on Form 10-K for the Year Ended June 30, 1996)                 
|10.4 | 1996 Stock Option Plan (incorporated by reference to Exhibit A to the Corporation's
proxy statement dated December 12, 1996)                                                             
|10.5 | 1996 Management Recognition Plan (incorporated by reference to Exhibit B to the
Corporation's proxy statement dated December 12, 1996)                                                   
|10.6 | Severance Agreement with Richard Gale (incorporated by reference to Exhibit 10.6 in the
Corporation's Annual Report on Form 10-K for the year ended June 30, 1998)                       
|10.8 | Severance Agreement with Donald Blanchard (incorporated by reference to Exhibit 10.8
in the Corporation's Annual Report on Form 10-K for the year ended June 30, 1998)                   
|10.9 | Severance Agreement with Donavon P. Ternes (incorporated by reference to Exhibit 10.9
in the Corporation's Annual Report on Form 10-K for the year ended June 30, 2001)                  

52

<PAGE>



|10.10 | Severance Agreement with Lilian Brunner                                                                                         
|----- | --------------------------------------------------------------------------------------------------------------------------------
|10.11 | Severance Agreement with Thomas "Lee" Fenn                                                                                      
|21.1  | Subsidiaries of Registrant                                                                                                      
|23.1  | Consent of Deloitte & Touche LLP                                                                                                
|31.1  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                              
|31.2  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                              
|32    | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section  906 of the Sarbanes-Oxley Act of 2002.



53

<PAGE>



SIGNATURES



Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Provident Financial Holdings, Inc.





/s/Craig G. Blunden
Date:  September 24, 2003                                                                Craig G. Blunden
                                                                                                               Chairman, President and Chief Executive Officer





Pursuant to the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



SIGNATURES

TITLE

DATE/s/Craig G. BlundenCraig G. Blunden

Chairman, President and

September 24, 2003Chief Executive Officer(Principal Executive Officer)/s/Donavon P. TernesDonavon P. Ternes

Chief Financial Officer

September 24, 2003(Principal Financialand Accounting Officer)/s/Joseph
P. BarrJoseph P. Barr

Director

September 24, 2003/s/Bruce W. BennettBruce W. Bennett

Director

September 24, 2003/s/Debbi H. GuthrieDebbi H. Guthrie

Director

September 24, 2003/s/Seymour
M. JacobsSeymour M. Jacobs

Director

September 24, 2003/s/Robert
G. SchraderRobert G. Schrader

Director

September 24, 2003/s/Roy
H. TaylorRoy H. Taylor

Director

September 24, 2003/s/William
E. ThomasWilliam E. Thomas

Director

September 24, 2003




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|                                                                                                     |   
|---------------------------------------------------------------------------------------------------- | --
|Independent Auditors' Report
...                                         | 56
|Consolidated Statements of Financial Condition as of June 30, 2003 and 2002                          | 57
|Consolidated Statements of Operations for the years ended June 30, 2003, 2002 and 2001.           | 58
|Consolidated Statements of Stockholders' Equity for the years ended June 30, 2003, 2002 and 2001.. | 59
|Consolidated Statements of Cash Flows for the years ended June 30, 2003, 2002 and 2001...       | 60
|Notes to Consolidated Financial Statements                                                           | 62

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To the Board of Directors and Stockholders of
Provident Financial Holdings, Inc.
We have audited the accompanying consolidated statements of financial condition of Provident Financial Holdings, Inc. and subsidiary (the Corporation) as of June 30, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended June 30, 2003.  These financial statements are the responsibility of the Corporation's management.  Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Provident Financial Holdings, Inc. and subsidiary as of June 30, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2003 in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Costa Mesa, California
August 14, 2003

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(In thousands, except share information)

---

|                                                                                                                                                                                      |                  |  |                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- |  | ----------------
|                                                                                                                                                                                      | June 30,        
|                                                                                                                                                                                      | 2003             |  | 2002            
|                                                                                                                                                                                     
|Assets                                                                                                                                                                                |                  |  |                 
|Cash                                                                                                                                                                                  | $        48,851  |  | $        27,700 
|Investment securities - held to maturity   (fair value $77,210 and $157,705, respectively)                                                                                            | 76,838           |  | 157,122         
|Investment securities - available for sale at fair value                                                                                                                              | 220,273          |  | 114,826         
|Loans held for investment, net of allowance for loan losses of $7,218 and
   $6,579, respectively                                                                                     | 744,219          |  | 593,554         
|Loans held for sale, at lower of cost or market                                                                                                                                       | 4,247            |  | 1,747           
|Receivable from sale of loans                                                                                                                                                         | 114,902          |  | 67,241          
|Accrued interest receivable                                                                                                                                                           | 4,934            |  | 5,591           
|Real estate held for investment, net                                                                                                                                                  | 10,643           |  | 11,150          
|Other real estate owned, net                                                                                                                                                          | 523              |  | 313             
|Federal Home Loan Bank stock                                                                                                                                                          | 20,974           |  | 13,000          
|Premises and equipment, net                                                                                                                                                           | 8,045            |  | 8,119           
|Prepaid expenses and other assets                                                                                                                                                     | 7,057            |  | 4,955           
|Total assets                                                                                                                                                                          | $    1,261,506   |  | $    1,005,318  
|Liabilities and Stockholders' Equity                                                                                                                                                  |                  |  |                 
|Liabilities:                                                                                                                                                                          |                  |  |                 
|Non-interest-bearing deposits                                                                                                                                                         | $        43,840  |  | $        31,076 
|Interest-bearing deposits                                                                                                                                                             | 710,266          |  | 646,372         
|Total deposits                                                                                                                                                                        | 754,106          |  | 677,448         
|                                                                                                                                                                                      |                  |  |                 
|Borrowings                                                                                                                                                                            | 367,938          |  | 202,466         
|Accounts payable, accrued interest and other liabilities                                                                                                                              | 32,584           |  | 22,373          
|Total liabilities                                                                                                                                                                     | 1,154,628        |  | 902,287         
|                                                                                                                                                                                      |                  |  |                 
|Commitments and contingencies (Note 14)                                                                                                                                               |                  |  |                 
|                                                                                                                                                                                      |                  |  |                 
|Stockholders' equity:                                                                                                                                                                 |                  |  |                 
|Preferred stock, $0.01 par value; (2,000,000 shares authorized;      none issued and outstanding)                                                                                     | -                |  | -               
|Common stock, $0.01 par value; (15,000,000 shares authorized;      7,846,665 and 7,712,515 shares issued, respectively; 4,986,519 and     5,463,199 shares outstanding, respectively) | 78               |  | 77              
|Additional paid-in capital                                                                                                                                                            | 54,731           |  | 52,178          
|Retained earnings                                                                                                                                                                     | 98,660           |  | 82,805          
|Treasury stock at cost (2,860,146 and 2,249,316 shares, respectively)                                                                                                                 | (45,801)         |  | (30,027)        
|Unearned stock compensation                                                                                                                                                           | (2,450)          |  | (2,866)         
|Accumulated other comprehensive income, net of tax                                                                                                                                    | 1,660            |  | 864             
|Total stockholders' equity                                                                                                                                                            | 106,878          |  | 103,031         
|Total liabilities and stockholders' equity                                                                                                                                            | $      1,261,506 |  | $      1,005,318
|                                                                                                                                                                                     
|The accompanying notes are an integral part of these consolidated financial statements.                                                                                              

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(Dollars in thousands, except per share information)

---

|                                                                                        | Year Ended June 30,                      
|--------------------------------------------------------------------------------------- | -----------------------------------------
|                                                                                        | 2003                                     
|Interest income:                                                                        |                                          
|                                                                                        | Loans receivable, net                    
|                                                                                        | Investment securities                    
|                                                                                        | Federal Home Loan Bank stock             
|                                                                                        | Interest-earning deposits                
|                                                                                        | Total interest income                    
|                                                                                        |                                          
|Interest expense:                                                                       |                                          
|                                                                                        | Deposits                                 
|                                                                                        | Borrowings                               
|Total interest expense                                                                  | 28,413                                   
|Net interest income, before provision for loan losses                                   | 31,443                                   
|Provision for loan losses                                                               | 1,055                                    
|Net interest income, after provision for loan losses                                    | 30,388                                   
|                                                                                        |                                          
|Non-interest income:                                                                    |                                          
|                                                                                        | Loan servicing and other fees            
|                                                                                        | Gain on sale of loans, net               
|                                                                                        | Real estate operations, net              
|                                                                                        | Deposit account fees                     
|                                                                                        | Net gain on sale of investment securities
|                                                                                        | Other                                    
|Total non-interest income                                                               | 25,771                                   
|                                                                                        |                                          
|Non-interest expense:                                                                   |                                          
|                                                                                        | Salaries and employee benefits           
|                                                                                        | Premises and occupancy                   
|                                                                                        | Equipment expense                        
|                                                                                        | Professional expense                     
|                                                                                        | Sales and marketing expense              
|                                                                                        | Other                                    
|Total non-interest expense                                                              | 27,913                                   
|Income before income taxes                                                              | 28,246                                   
|Provision for income taxes                                                              | 11,357                                   
|                                                                                        | Net income                               
|Basic earnings per share                                                                | $          3.56                          
|Diluted earnings per share                                                              | $          3.30                          
|Cash dividends per share                                                                | $          0.20                          
|                                                                                       
|The accompanying notes are an integral part of these consolidated financial statements.

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(In thousands, except shares)

---

|                                                                         | Common Stock | Addi-tionalPaid-in | Retained  | Treasury  | UnearnedStock | Accumulat-ed Other Comprehen-sive Income |           
|------------------------------------------------------------------------ | ------------ | ------------------ | --------- | --------- | ------------- | ---------------------------------------- | ----------
|                                                                         | Shares       | Amount             | Capital   | Earnings  | Stock         | Compensation                             | net of tax
|Balance at June 30, 2000                                                 | 5,883,042    | $   77             | $  51,223 | $  64,811 | $  (22,696)   | $  (4,634)                               | $   186   
|                                                                         |              |                    |           |           |               |                                          |           
|Comprehensive income:                                                    |              |                    |           |           |               |                                          |           
|Net income                                                               |              |                    |           | 8,886     |               |                                          |           
|Unrealized holding gain on securities     available for sale, net of tax |              |                    |           |           |               |                                          | 539       
|Total comprehensive income                                               |              |                    |           |           |               |                                          |           
|Purchase of treasury stock                                               | (181,976)    |                    |           |           | (2,417)       |                                          |           
|Exercise of stock options                                                | 4,500        |                    | 46        |           |               |                                          |           
|Amortization and awards for Management   Recognition Plan                | 10,740       |                    |           |           | 120           | 597                                      |           
|Allocation of contributions to ESOP (1)                                  |              |                    | 249       |           |               | 271                                      |           
|Balance at June 30, 2001                                                 | 5,716,306    | 77                 | 51,518    | 73,697    | (24,993)      | (3,766)                                  | 725       
|                                                                         |              |                    |           |           |               |                                          |           
|Comprehensive income:                                                    |              |                    |           |           |               |                                          |           
|Net income                                                               |              |                    |           | 9,109     |               |                                          |           
|Unrealized holding gain on securities     available for sale, net of tax |              |                    |           |           |               |                                          | 139       
|Total comprehensive income                                               |              |                    |           |           |               |                                          |           
|Purchase of treasury stock                                               | (280,194)    |                    |           |           | (5,133)       |                                          |           
|Exercise of stock options                                                | 20,250       |                    | 206       |           |               |                                          |           
|Amortization and awards for Management   Recognition Plan                | 6,837        |                    |           |           | 99            | 629                                      |           
|Allocation of contributions to ESOP                                      |              |                    | 454       |           |               | 271                                      |           
|Cash dividends in lieu of fractional shares   from stock split           |              |                    |           | (1)       |               |                                          |           
|Balance at June 30, 2002                                                 | 5,463,199    | 77                 | 52,178    | 82,805    | (30,027)      | (2,866)                                  | 864       
|                                                                         |              |                    |           |           |               |                                          |           
|Comprehensive income:                                                    |              |                    |           |           |               |                                          |           
|Net income                                                               |              |                    |           | 16,889    |               |                                          |           
|Unrealized holding gain on securities     available for sale, net of tax |              |                    |           |           |               |                                          | 796       
|Total comprehensive income                                               |              |                    |           |           |               |                                          |           
|Purchase of treasury stock                                               | (623,388)    |                    |           |           | (16,031)      |                                          |           
|Exercise of stock options                                                | 134,150      | 1                  | 1,422     |           |               |                                          |           
|Amortization and awards for Management   Recognition Plan                | 12,558       |                    |           |           | 257           | 74                                       |           
|Tax benefits from non-qualified equity   compensation                    |              |                    | 308       |           |               |                                          |           
|Allocation of contributions to ESOP                                      |              |                    | 823       |           |               | 270                                      |           
|Prepayment of ESOP loans                                                 |              |                    |           |           |               | 72                                       |           
|Cash dividends                                                           |              |                    |           | (1,034)   |               |                                          |           
|Balance at June 30, 2003                                                 | 4,986,519    | $   78             | $  54,731 | $  98,660 | $ (45,801)    | $  (2,450)                               | $  1,660  

(1) Employee Stock Ownership Plan ("ESOP").

The accompanying notes are an integral part of these consolidated financial statements.

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(In thousands)

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|                                      | Year Ended June 30,                                                                             
|------------------------------------- | ------------------------------------------------------------------------------------------------
|2003                                  |                                                                                                 
|Cash flows from operating activities: |                                                                                                 
|                                      | Net income                                                                                      
|                                      | Adjustments to reconcile net income to net   cash (used for) provided by   operating activities:
|                                      | Depreciation and amortization                                                                   
|                                      | Provision for loan losses                                                                       
|                                      | Provision for losses on real estate                                                             
|                                      | Gain on sale of loans                                                                           
|                                      | Net gain on sale of investment securities                                                       
|                                      | Deferred income taxes                                                                           
|                                      | Increase (decrease) in accounts payable, accrued   interest and other liabilities               
|                                      | (Increase) decrease in prepaid expenses and   other assets                                      
|                                      | Loans originated for sale                                                                       
|                                      | Proceeds from sale of loans                                                                     
|                                      | Stock compensation                                                                              
|                                      | Net cash (used for) provided by operating   activities                                          
|                                      |                                                                                                 
|Cash flows from investing activities: |                                                                                                 
|                                      | Net (increase) decrease in loans held for   investment                                          
|                                      | Maturity and call of investment securities held   to maturity                                   
|                                      | Maturity and call of investment securities   available for sale                                 
|                                      | Principal payments from mortgage backed   securities                                            
|                                      | Purchase of investment securities held   to maturity                                            
|                                      | Purchase of investment securities available   for sale                                          
|                                      | Proceeds from sale of investment securities   available for sale                                
|                                      | (Purchase) sale of Federal Home Loan   Bank stock                                               
|                                      | Net sales of real estate                                                                        
|                                      | Purchase of premises and equipment                                                              
|                                      |                                                                                                 

(continued)
The accompanying notes are an integral part of these consolidated financial statements.

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(In thousands)

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|                                               | Year Ended June 30,                                                
|---------------------------------------------- | -------------------------------------------------------------------
|2003                                           |                                                                    
|Cash flows from financing activities:          |                                                                    
|                                               | Net increase (decrease) in deposits                                
|                                               | Proceeds from (repayment of) Federal Home   Loan Bank advances, net
|                                               | Repayment of other borrowings                                      
|                                               | Treasury stock purchases                                           
|                                               | Exercise of stock options                                          
|                                               | Cash dividends                                                     
|                                               | Net cash provided by (used for) financingactivities                
|                                               |                                                                    
|                                               | Net increase in cash and cash equivalents                          
|Cash and cash equivalents at beginning of year | 27,700                                                             
|Cash and cash equivalents at end of year       | $      48,851                                                      
|                                               |                                                                    
|Supplemental information:                      |                                                                    
|                                               | Cash paid for interest                                             
|                                               | Cash paid for income taxes                                         
|                                               | Real estate acquired in settlement of loans                        

The accompanying notes are an integral part of these consolidated financial statements.

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|                           | 2003     | 2002 | 2001
|-------------------------- | -------- | ---- | ----
|Balance, beginning of year | $      - |      | -   
|Provision                  | 44       |      | -   
|Charge offs, net           | -        |      | -   
|Balance, end of the year   | $    44  |      | -   

The Bank is obligated to refund loan sale premiums to investors when loans pay off within a specific time period following the loan sale; the time period ranges from three months to one year, depending upon the sale agreement.  Total early payoff premiums refunded to investors in fiscal 2003, 2002 and 2001 were $681, $347 and $16, respectively.  As of June 30, 2003, the Bank has an outstanding early payoff premium refund accrual of $59.

Gains or losses on sales of loans, including fees received or paid, are recognized at the time of sale and are determined by the difference between the net sales proceeds and the book value of the loans sold.  When loans are sold with servicing retained, the carrying value is allocated between the assets transferred and the fair value of the retained servicing in determining the amount of gain.  Servicing assets and liabilities are amortized over the estimated life and are assessed for subsequent impairment.  Servicing assets were not significant at June 30, 2003 and 2002.

During the fiscal years ended June 30, 2003 and 2002, the Corporation sold 64% and 74%, respectively, of its loans originated for sale to a single primary buyer.  If the Corporation is unable to sell loans to the primary buyer, management believes the availability of other qualified buyers would mitigate any significant risk to the Corporation's operations.Allowance for loan losses
It is the policy of the Corporation to provide an allowance for loan losses inherent in the loans held for investment as of the balance sheet date when any significant and permanent decline in the borrower's ability to pay has occurred or when a decline in the value of the underlying collateral occurs.  Periodic reviews are made in an attempt to identify potential problems at an early stage. Individual loans are periodically reviewed and are classified according to their inherent risk.  The internal asset review policy used by the Corporation is the primary basis by which the Corporation evaluates the probable loss exposure.  Management's determination of the adequacy of the allowance for loan losses is based on an evaluation of the loans held for investment, past experience, prevailing market conditions, and other relevant factors.  The determination of the allowance for loan losses is based on estimates that are particularly

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|                       |               
|---------------------- | --------------
|Buildings              | 10 to 40 years
|Furniture and fixtures | 3 to 10 years 
|Automobiles            | 3 years       
|Computer equipment     | 3 to 5 years  

Leasehold improvements are amortized over the shorter of the respective lease terms or the lives of the improvements.  Maintenance and repair costs are charged to operations as incurred.Income taxes
Taxes are provided for on substantially all income and expense items included in earnings, regardless of the period in which such items are recognized for tax purposes.  Taxes on income are determined by using the liability method.  This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Corporation's financial statements or tax returns.  In estimating future tax consequences, all expected future events other than enactments of changes in the tax law or rates are considered.

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|                                                   | Year Ended June 30,
|-------------------------------------------------- | -------------------
|                                                   | 2003               
|Net income, as reported                            | $      16,889      
|Deduct:                                            |                    
|Total stock-based compensation expense, net of tax | (156               
|Pro forma net income                               | $      16,733      
|                                                   |                    
|Earnings per share:                                |                    
|Basic - as reported                                | $    3.56          
|Basic - pro forma                                  | $    3.52          
|                                                   |                    
|Diluted - as reported                              | $    3.30          
|Diluted - pro forma                                | $    3.27          
|                                                  

The Corporation has calculated the fair value of stock option grants to employees using the Black-Scholes option-pricing model with the following assumptions: 10-year expected life, stock volatility for the past 30 months (26% for grants in fiscal 2003, 27% for grants in fiscal 2002 and 35% for grants in fiscal 2001), risk-free rate of the 10-year Treasury Note (4.50% for grants in fiscal 2003, 4.42% for grants in fiscal 2002 and 5.73% for grants in fiscal 2001) and dividend payments ($0.20 for grants in fiscal 2003, and no dividend for grants in fiscal 2002 and 2001).  In fiscal 2003, 5,000 stock options were granted.  The Corporation calculates the fair value only at the time of the stock option grant and no additional computations are performed during the life of the options.  Any forfeitures are recognized as they occur.Employee Stock Ownership Plan (ESOP)
The Corporation recognizes compensation expense when shares are committed to be released to employees in an amount equal to the fair value of the shares so committed.  The difference between the amount of compensation expense and the cost of the shares released is recorded as additional paid-in capital.  Therefore, total stockholders' equity is not affected.Management Recognition Plan (MRP)
The Corporation recognizes compensation expense over the vesting period of the shares awarded, equal to the fair value of the shares at the date of the award.Post retirement benefits
The estimated obligation for post retirement health care and life insurance benefits is determined based on an actuarial computation of the cost of current and future benefits for employees and retirees.  Such costs are charged to expense during the years that the employees provide service to the Corporation.

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|                                      |                                    | For the Year Ended June 30,
|------------------------------------- | ---------------------------------- | ---------------------------
|                                      |                                    | 2003                       
|Unrealized holding gains on           |                                    |                            
|                                      | available-for-sale securities, net | $      2,043               
|Reclassification adjustment for gains |                                    |                            
|                                      | realized in income                 | (694                       
|Net unrealized gains                  | 1,349                              |                            
|Tax effect                            | (553                               | )                          
|Net-of-tax amount                     | $        796                       |                            

Recent accounting pronouncements

SFAS No. 141:
SFAS No. 141, "Business Combinations," requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001; the use of the pooling-of-interest method is no longer allowed.  The adoption of this statement had no material impact on the Corporation's financial position, results of operations or cash flows.SFAS No. 142:
SFAS No. 142, "Goodwill and Other Intangible Assets," requires that amortization of goodwill ceases and as an alternative, the carrying value of goodwill be evaluated for impairment on at least an annual basis.   Intangible assets will continue to be amortized over their useful lives and reviewed for impairment.  SFAS No. 142 is effective for fiscal years beginning after December 15, 2001.  The adoption of this statement did not have a material impact on the Corporation's financial position, results of operations or cash flows.SFAS No. 144:
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," replaces SFAS No. 121.  SFAS No. 144 requires that long-lived assets be measured at the lower of the carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations.  It also expands the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction.  SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001.  The adoption of this statement did not have a material impact on the Corporation's financial position, results of operations or cash flows.SFAS No. 146:
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes Emerging Issues Task Force ("EITF") Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)."  SFAS No. 146 requires that a liability for a cost

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|June 30, 2003               | AmortizedCost                     | GrossUnrealizedGains | GrossUnrealized(Losses) | EstimatedFairValue | CarryingValue
|--------------------------- | --------------------------------- | -------------------- | ----------------------- | ------------------ | -------------
|                           
|Held to maturity            |                                   |                      |                         |                    |              
|                            | U.S. government agency securities | $      73,851        |                         | $        345       |              
|                            | U.S. government MBS (1)           | 8                    |                         | 4                  |              
|                            | Corporate bonds                   | 2,779                |                         | 28                 |              
|                            | Certificates of deposit           | 200                  |                         | -                  |              
|                            | Total held to maturity            | 76,838               |                         | 377                |              
|                            |                                   |                      |                         |                    |              
|Available for sale          |                                   |                      |                         |                    |              
|                            | U.S. government agency securities | 38,608               |                         | 176                |              
|                            | U.S. government agency MBS        | 170,891              |                         | 1,951              |              
|                            | Private issue CMO (2)             | 7,949                |                         | 120                |              
|                            | FHLMC common stock                | 12                   |                         | 597                |              
|                            | FNMA common stock                 | 1                    |                         | 25                 |              
|                            | Total available for sale          | 217,461              |                         | 2,869              |              
|Total investment securities | $    294,299                      |                      | $        3,246          |                    | $        (62 

(1)     Mortgage Backed Securities ("MBS").
  (2)     Collateralized Mortgage Obligations ("CMO").

|June 30, 2002               | AmortizedCost                     | GrossUnrealizedGains | GrossUnrealized(Losses) | EstimatedFairValue | CarryingValue
|--------------------------- | --------------------------------- | -------------------- | ----------------------- | ------------------ | -------------
|                           
|Held to maturity            |                                   |                      |                         |                    |              
|                            | U.S. government agency securities | $    154,351         |                         | $        685       |              
|                            | U.S. government MBS               | 9                    |                         | 6                  |              
|                            | Corporate bonds                   | 2,762                |                         | -                  |              
|                            | Total held to maturity            | 157,122              |                         | 691                |              
|                            |                                   |                      |                         |                    |              
|Available for sale          |                                   |                      |                         |                    |              
|                            | U.S. government agency securities | 38,316               |                         | 181                |              
|                            | U.S. government agency MBS        | 75,034               |                         | 737                |              
|                            | FHLMC common stock                | 11                   |                         | 723                |              
|                            | FNMA common stock                 | 1                    |                         | 28                 |              
|                            | Total available for sale          | 113,362              |                         | 1,669              |              
|Total investment securities | $    270,484                      |                      | $        2,360          |                    | $        (313

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|                                  | June 30, 2003 | June 30, 2002
|--------------------------------- | ------------- | -------------
|
|                                  | AmortizedCost |              
|Held to maturity                  |               |              
|Due in one year or less           | $      43,021 |              
|Due after one through five years  | 30,809        |              
|Due after five through ten years  | 3,008         |              
|                                  | 76,838        |              
|Available for sale                |               |              
|Due in one year or less           | 29,695        |              
|Due after one through five years  | 21,472        |              
|Due after five through ten years  | -             |              
|Due after ten years               | 166,281       |              
|No stated maturity (common stock) | 13            |              
|                                  | 217,461       |              
|Total investment securities       | $    294,299  |              

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|                                | June 30,                  
|------------------------------- | --------------------------
|2003                            |                           
|                                |                           
|Mortgage loans:                 |                           
|                                | Single-family             
|                                | Multi-family              
|                                | Commercial real estate    
|                                | Construction              
|Commercial business loans       | 22,489                    
|Consumer loans                  | 9,576                     
|Other                           | 5,724                     
|                                | 818,703                   
|Less:                           |                           
|                                | Undisbursed loan funds    
|                                | Deferred loan costs (fees)
|                                | Unearned discounts        
|                                | Allowance for loan losses 
|Total loans held for investment | $    744,219              

Fixed-rate loans comprised 6% and 12% of loans held for investment at June 30, 2003 and 2002, respectively.

The following summarizes the components of the net change in the allowance for loan losses:

|                             | Year Ended June 30,
|---------------------------- | -------------------
|2003                         |                    
|                             |                    
|Balance, beginning of period | $        6,579     
|Provision for losses         | 1,055              
|Recoveries                   | 45                 
|Charge-offs                  | (461               
|Balance, end of period       | $        7,218     

The effect of non-accrual and restructured loans on interest income for the years ended June 30, 2003, 2002 and 2001 is presented below:

|                         | Year Ended June 30,
|------------------------ | -------------------
|2003                     |                    
|                         |                    
|Contractual interest due | $        113       
|Interest recognized      | (10                
|Net interest foregone    | $        103       

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|                           | June 30, 2003                     
|-------------------------- | ----------------------------------
|RecordedInvestment         | AllowanceFor LoanLosses           
|                           |                                   
|Mortgage loans:            |                                   
|                           | Single-family:                    
|                           |                                   
|                           | Total single-family loans         
|                           |                                   
|                           | Commercial real estate:           
|                           |                                   
|                           | Total commercial real estate loans
|                           |                                   
|Commercial business loans: |                                   
|                           |                                   
|                           |                                   
|                           | Total commercial business loans   
|                           |                                   
|Consumer loans:            |                                   
|                           |                                   
|                           | Total consumer loans              
|Total impaired loans       | $      2,728                      

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|                           | June 30, 2002                     
|-------------------------- | ----------------------------------
|RecordedInvestment         | AllowanceFor LoanLosses           
|                           |                                   
|Mortgage loans:            |                                   
|                           | Single-family:                    
|                           |                                   
|                           | Total single-family loans         
|                           |                                   
|                           | Commercial real estate:           
|                           |                                   
|                           | Total commercial real estate loans
|                           |                                   
|Commercial business loans: |                                   
|                           |                                   
|                           |                                   
|                           | Total commercial business loans   
|                           |                                   
|Consumer loans:            |                                   
|                           |                                   
|                           | Total consumer loans              
|Total impaired loans       | $      3,851                      

During the years ended June 30, 2003, 2002 and 2001, the Corporation's average investment in impaired loans was $2.4 million, $4.4 million and $4.2 million, respectively; the imputed interest income during these periods was $266, $480 and $352, respectively; while the interest income recognized on a cash basis was $327, $674 and $296, respectively.  The Corporation records interest on non-accrual loans utilizing the cash basis method of accounting during periods when the loans are on non-accrual status.

In the ordinary course of business, the Bank makes loans to its directors, officers and employees at substantially the same terms prevailing at the time of origination for comparable transactions with unaffiliated borrowers.  The following is a summary of related-party loan activity:

|                             | Year Ended June 30,
|---------------------------- | -------------------
|2003                         |                    
|                             |                    
|Balance, beginning of period | $        917       
|Originations                 | 18,222             
|Sales/payments               | (13,583            
|Balance, end of period       | $      5,556       

Related-party loan originations increased $6.7 million, or 58%, from $11.5 million in fiscal 2002 to $18.2 million in fiscal 2003, due primarily to refinancing activity resulting from the decline in interest rates during fiscal 2003. The total sales/payments increased $168, or 1%, from $13.4 million in fiscal 2002 to $13.6 million in fiscal 2003.

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|                                          | Year Ended June 30, 
|----------------------------------------- | --------------------
|2003                                      |                     
|                                          |                     
|Loans serviced for Federal Home Loan      |                     
|                                          | Mortgage Corporation
|Loans serviced for Federal National       |                     
|                                          | Mortgage Association
|Loans serviced for Federal Home Loan Bank | 32,763              
|Loans serviced for other investors        | 13,123              
|Total loans serviced for others           | $    114,146        

Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing.  Loan servicing income includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees.  The Corporation held borrowers' escrow balances related to loans serviced for others of $279, $267 and $379 as of June 30, 2003, 2002 and 2001, respectively.  These escrow balances are included in deposits in the accompanying consolidated statements of financial condition.

Loans sold consisted of the following:

|                 | Year Ended June 30, 
|---------------- | --------------------
|2003             |                     
|                 |                     
|Loans sold:      |                     
|                 | Servicing - released
|                 | Servicing - retained
|Total loans sold | $  1,243,175        

Loans held for sale consisted of the following:

|                          | June 30,      
|------------------------- | --------------
|2003                      | 2002          
|                          |               
|Fixed rate                | $        3,475
|Adjustable rate           | 772           
|Total loans held for sale | $      4,247  

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|                                           | June 30,     
|------------------------------------------ | -------------
|2003                                       |              
|                                           |              
|Real estate held for investment            | $      12,530
|Less accumulated depreciation              | (1,887       
|Total real estate held for investment, net | $      10,643

Other real estate owned consisted of the following:

|                                      | June 30,    
|------------------------------------- | ------------
|2003                                  |             
|                                      |             
|Other real estate owned               | $        523
|Less allowance for real estate losses | -           
|Total real estate owned, net          | $        523

The following summarizes the components of the net change in the allowance for losses on real estate:

|                             | Year Ended June 30,
|---------------------------- | -------------------
|2003                         |                    
|                             |                    
|Balance, beginning of period | $         23       
|Provisions for losses        | -                  
|Charge-offs                  | (23                
|Balance, end of period       | $          -       

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|                                               | June 30,      
|---------------------------------------------- | --------------
|2003                                           |               
|                                               |               
|Land                                           | $        3,051
|Buildings                                      | 7,873         
|Leasehold improvements                         | 978           
|Furniture and equipment                        | 9,891         
|Automobiles                                    | 94            
|                                               | 21,887        
|Less accumulated depreciation and amortization | (13,842       
|Total premises and equipment, net              | $        8,045

Depreciation and amortization expense for the years ended June 30, 2003, 2002 and 2001 amounted to $1.4 million, $1.7 million and $1.5 million, respectively.

|                                           | June 30, 2003 |               | June 30, 2002
|------------------------------------------ | ------------- | ------------- | -------------
|Interest Rate(1)                           |               | Amount        |              
|                                           |               |               |              
|Checking accounts - non-interest bearing   | -             |               | $      43,840
|Checking accounts - interest bearing (1)   | 0% - 1.24%    |               | 98,899       
|Savings accounts (1)                       | 0% - 2.47%    |               | 272,715      
|Money market accounts (1)                  | 0% - 1.59%    |               | 47,900       
|Time deposits                              |               |               |              
|                                           | Under $100    | 0.36% - 7.23% |              
|                                           | $100 and over | 0.80% - 7.10% |              
|Total deposits                             |               |               | $    754,106 
|Weighted average interest rate on deposits |               |               | 1.83%        

(1)  Certain interest-bearing checking, savings and money market accounts require a minimum balance       to earn interest.

On December 16, 2002, the Corporation completed the acquisition of $7.6 million in deposits from Valley Bank's Sun City branch.

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|                         | June 30,    
|------------------------ | ------------
|2003                     |             
|                         |             
|One year or less         | $    194,356
|Over one to two years    | 33,985      
|Over two to three years  | 18,688      
|Over three to four years | 19,533      
|Over four years          | 24,190      
|Total time deposits      | $    290,752

Interest expense on deposits is summarized as follows:

|                                     | Year Ended June 30,
|------------------------------------ | -------------------
|2003                                 |                    
|                                     |                    
|Checking accounts - interest bearing | $        801       
|Savings accounts                     | 4,161              
|Money market accounts                | 759                
|Time deposits                        | 10,531             
|Total interest expense on deposits   | $      16,252      

The Corporation is required to maintain cash and reserve balances with the Federal Reserve Bank.  Such reserves are calculated based on deposit balances and are offset by the cash balances maintained by the Bank.  The cash balances maintained by the Bank at June 30, 2003 and 2002 were sufficient to cover the reserve requirements.

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|                      | June 30,      
|--------------------- | --------------
|2003                  |               
|                      |               
|Regular FHLB advances | $      201,938
|SBC FHLB advances     | 166,000       
|Total borrowings      | $      367,938

As a member of the FHLB system, the Bank is required to maintain a minimum investment in FHLB stock.  The Bank held the required investment of $21.0 million with an excess of $8.1 million at June 30, 2003, as compared to $13.0 million with an excess of $1.2 million at June 30, 2002.  Any excess may be redeemed by the Bank or called by FHLB at par.

The following tables set forth certain information regarding borrowings by the Bank at the dates and for the periods indicated:

|                                                             |                                                           |                | At or For the Year Ended June 30,
|------------------------------------------------------------ | --------------------------------------------------------- | -------------- | ---------------------------------
|                                                             |                                                           |                | 2003                             
|                                                             |                                                           |                |                                  
|Balance outstanding at the end of period:                    |                                                           |                |                                  
|                                                             | FHLB advances                                             | $      367,938 |                                  
|                                                             |                                                           |                |                                  
|Weighted average rate at the end of period:                  |                                                           |                |                                  
|                                                             | FHLB advances                                             | 3.50%          |                                  
|                                                             |                                                           |                |                                  
|Maximum amount of borrowings outstanding at any month end:   |                                                           |                |                                  
|                                                             | FHLB advances                                             | $      367,938 |                                  
|                                                             | Loan to facilitate the purchase of an investment property | -              |                                  
|                                                             |                                                           |                |                                  
|Average short-term borrowings (1)                            |                                                           |                |                                  
|with respect to:                                             |                                                           |                |                                  
|                                                             | FHLB advances                                             | $      124,226 |                                  
|                                                             |                                                           |                |                                  
|Weighted average short-term borrowing rate during the period |                                                           |                |                                  
|with respect to:                                             |                                                           |                |                                  
|                                                             | FHLB advances                                             | 2.49%          |                                  

(1) Borrowings with a remaining term of 12 months or less.

In April 2001, the Bank, through its subsidiary, paid off the loan which was assumed as a condition of the purchase of an investment property in downtown Riverside.

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|                               | June 30,      
|------------------------------ | --------------
|2003                           |               
|                               |               
|Within one year                | $      152,031
|Over one to two years          | 30,000        
|Over two to three years        | 27,000        
|Over three to four years       | -             
|Over four to five years        | 72,000        
|Over five years                | 86,907        
|Total borrowings               | $      367,938
|Weighted average interest rate | 3.50%         

9.  Income Taxes (Dollars in Thousands):

The provision for income taxes consisted of the following:

|                           | Year Ended June 30,
|-------------------------- | -------------------
|2003                       |                    
|                           |                    
|Current:                   |                    
|                           | Federal            
|                           | State              
|                           | 10,807             
|Deferred:                  |                    
|                           | Federal            
|                           | State              
|                           | 550                
|Provision for income taxes | $        11,357    

In fiscal 2003, the Corporation's tax benefit from non-qualified equity compensation was approximately $308.

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|                                       | Year Ended June 30,
|-------------------------------------- | -------------------
|2003                                   |                    
|                                       |                    
|Federal statutory income tax rate      | 35.0               
|State taxes, net of federal tax effect | 7.0                
|Other                                  | (1.8               
|Effective income tax rate              | 40.2               

Deferred tax (assets) liabilities by jurisdiction were as follows:

|                                     | June 30,      
|------------------------------------ | --------------
|2003                                 |               
|                                     |               
|Deferred taxes - federal             | $          668
|Deferred taxes - state               | 286           
|Total deferred tax liability (asset) | $          954

Deferred tax liabilities (assets) were comprised of the following:

|                                                            | June 30,                          
|----------------------------------------------------------- | ----------------------------------
|2003                                                        |                                   
|                                                            |                                   
|Depreciation                                                | $      3,469                      
|FHLB dividends                                              | 2,434                             
|Unrealized gain on investment securities                    | 1,152                             
|Market value adjustments - derivative financial instruments | -                                 
|                                                            | Total deferred tax liabilities    
|                                                            |                                   
|State taxes                                                 | (1,024                            
|Market value adjustments - loans held for sale              | (50                               
|Loss reserves                                               | (3,392                            
|Deferred compensation                                       | (1,035                            
|ESOP contribution                                           | (422                              
|Accrued vacation                                            | (122                              
|Other                                                       | (56                               
|                                                            | Total deferred tax assets         
|                                                            | Net deferred tax liability (asset)

The net deferred tax asset is included in other assets and the net deferred tax liability is included in other liabilities in the accompanying consolidated statements of financial condition.

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|                                | Actual      | For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Provisions
|------------------------------- | ----------- | ----------------------------- | ----------------------------------------------------------------
|Amount                          |             | Ratio                         |                                                                 
|                                |             |                               |                                                                 
|As of June 30, 2003             |             |                               |                                                                 
|Total Capital to Risk-Weighted  |             |                               |                                                                 
|Assets                          | $    88,315 |                               | 13.01%                                                          
|Core Capital to Adjusted        |             |                               |                                                                 
|Tangible Assets                 | 81,246      |                               | 6.50%                                                           
|Tier 1 Capital to Risk-Weighted |             |                               |                                                                 
|Assets                          | 81,246      |                               | 11.97%                                                          
|Tangible Capital                | 81,246      |                               | 6.50%                                                           
|                                |             |                               |                                                                 
|As of June 30, 2002             |             |                               |                                                                 
|Total Capital to Risk-Weighted  |             |                               |                                                                 
|Assets                          | $    95,349 |                               | 18.01%                                                          
|Core Capital to Adjusted        |             |                               |                                                                 
|Tangible Assets                 | 88,806      |                               | 8.92%                                                           
|Tier 1 Capital to Risk-Weighted |             |                               |                                                                 
|Assets                          | 88,806      |                               | 16.78%                                                          
|Tangible Capital                | 88,806      |                               | 8.92%                                                           
|                               

11.  Benefit Plans (Dollars in Thousands, Except Share Information):

The Corporation has a 401(k) defined-contribution plan covering all employees meeting specific age and service requirements.  Under the plan, employees may contribute up to 10% of their pretax compensation.  The Corporation makes matching contributions up to 3% of participants' pretax compensation.  Participants vest immediately in their own contributions with 100% vesting in the Corporation's contributions occurring after six years of credited service.  The Corporation's expense for the plan was approximately $333, $323 and $254 for the years ended June 30, 2003, 2002 and 2001, respectively.

The Corporation has a multi-year employment agreement with one executive officer, which requires payments of certain benefits upon retirement.  The obligation was fully funded at June 30, 2003 and actuarially determined retirement costs are being accrued and expensed annually.Employee Stock Ownership Plan (ESOP)

An ESOP was established for all employees who are age 21 or older and have completed one year of service with the Corporation during which they have served a minimum of 1,000 hours.  The ESOP borrowed $4.1 million from the Corporation to purchase 615,026 shares of the common stock issued in the conversion.  The loan will be repaid principally from the Corporation's contributions to the ESOP over a period of 15 years.  At June 30, 2003, the

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|                                          | June 30,
|----------------------------------------- | --------
|                                          | 2003    
|Unallocated shares at beginning of period | 355,057 
|Allocated                                 | (40,578 
|Unallocated shares at end of period       | 314,479 

The fair value of unallocated ESOP shares was $9.2 million, $8.0 million and $6.1 million at June 30, 2003, 2002 and 2001, respectively.12.  Incentive Plans (in Thousands, Except Share Information):Management Recognition Plan (MRP)

The Corporation has established the 1996 MRP to provide key employees and eligible directors with a proprietary interest in the growth, development and financial success of the Corporation through the award of restricted stock.  The Corporation acquired 307,500 shares of its common stock in the open market to fund the MRP in 1997.  In fiscal 2003, 12,558 shares were awarded with a fair value of $20.50 per share at the award date; as a result, all of the 1996 MRP shares have been awarded.  Awarded shares vest over a five-year period as long as the employee or director remains an employee or director of the Corporation.  The Corporation recognizes compensation expense for the MRP based on the fair value of the shares at the award date.  MRP compensation expense was $332, $728 and $718 for the years ended June 30, 2003, 2002 and 2001, respectively.  At June 30, 2003 and 2002, the value of the unearned MRP shares account, $424 and $499, respectively, was reported as a reduction to stockholders' equity.Stock Option Plan

The Corporation has established the 1996 Stock Option Plan ("Plan") for certain of its directors and key employees under which options to acquire up to 768,750 shares of common stock have been granted.  Under the Plan, options may not be granted at a price less than the fair market value at the date of grant.  Options are vested over a five-year period as long as the employee or director remains an employee or director of the Corporation.  The options are exercisable after vesting for up to the remaining term of the original grant.  The maximum term of the options granted is 10 years.

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|                             | Number ofShares                     |          | WeightedAverageStrike Price
|---------------------------- | ----------------------------------- | -------- | ---------------------------
|Outstanding at June 30, 2000 | 556,500                             |          | $      10.80               
|                             | Granted (fair value of $7.19/share) | 45,000   |                            
|                             | Exercised                           | (4,500   | )                          
|                             | Canceled                            | (48,000  | )                          
|Outstanding at June 30, 2001 | 549,000                             |          | $      10.70               
|                             | Granted (fair value of $6.93/share) | 128,250  |                            
|                             | Exercised                           | (20,250  | )                          
|                             | Canceled                            | (7,500   | )                          
|Outstanding at June 30, 2002 | 649,500                             |          | $      11.47               
|                             | Granted (fair value of $8.17/share) | 5,000    |                            
|                             | Exercised                           | (134,150 | )                          
|Outstanding at June 30, 2003 | 520,350                             |          | $      11.78               

The following table summarizes the outstanding stock options and the exercisable portion of the stock options as of June 30, 2003, 2002 and 2001:

|                     |  | Options Outstanding |  | Options Exercisable
|-------------------- |  | ------------------- |  | -------------------
|                     |  |                     |  | Weighted           
|                     |  | Number              |  | Average            
|                     |  | Of                  |  | Remaining          
|Exercise Prices      |  | Options             |  | Option Life        
|At June 30, 2003     |  |                     |  |                    
|$    20.50           |  | 5,000               |  | 9.06               
|$    14.50           |  | 114,750             |  | 8.34               
|$    12.42           |  | 45,000              |  | 7.35               
|$    13.73           |  | 53,250              |  | 4.56               
|$    10.17           |  | 302,350             |  | 3.57               
|$  10.17 to $  20.50 |  | 520,350             |  | 5.10               
|                     |  |                     |  |                    
|At June 30, 2002     |  |                     |  |                    
|$    14.50           |  | 128,250             |  | 9.34               
|$    12.42           |  | 45,000              |  | 8.35               
|$    13.73           |  | 53,250              |  | 5.56               
|$    10.17           |  | 423,000             |  | 4.57               
|$  10.17 to $  14.50 |  | 649,500             |  | 5.85               
|                     |  |                     |  |                    
|At June 30, 2001     |  |                     |  |                    
|$    12.42           |  | 45,000              |  | 9.35               
|$    13.73           |  | 53,250              |  | 6.56               
|$    10.17           |  | 450,750             |  | 5.57               
|$  10.17 to $  13.73 |  | 549,000             |  | 5.98               

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|                           | For the Year Ended June 30, 2003      
|-------------------------- | --------------------------------------
|Income(numerator)          | Shares(denominator)                   
|                           |                                       
|Basic EPS                  | $      16,889                         
|Effect of dilutive shares: |                                       
|                           | Stock options (1996 Stock Option Plan)
|                           | Restricted stock awards (MRP)         
|Diluted EPS                | $      16,889                         

|                           | For the Year Ended June 30, 2002      
|-------------------------- | --------------------------------------
|Income(numerator)          | Shares(denominator)                   
|                           |                                       
|Basic EPS                  | $      9,109                          
|Effect of dilutive shares: |                                       
|                           | Stock options (1996 Stock Option Plan)
|                           | Restricted stock awards (MRP)         
|Diluted EPS                | $      9,109                          

|                           | For the Year Ended June 30, 2001      
|-------------------------- | --------------------------------------
|Income(numerator)          | Shares(denominator)                   
|                           |                                       
|Basic EPS                  | $      8,886                          
|Effect of dilutive shares: |                                       
|                           | Stock options (1996 Stock Option Plan)
|                           | Restricted stock awards (MRP)         
|Diluted EPS                | $      8,886                          

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|Year Ended June 30,             | Amount      
|------------------------------- | ------------
|                                |             
|                                | 2004        
|                                | 2005        
|                                | 2006        
|                                | 2007        
|                                | 2008        
|                                | Thereafter  
|Total minimum payments required | $      1,807

Lease expense under operating leases was approximately $622, $553 and $569 for the years ended June 30, 2003, 2002 and 2001, respectively.15.  Derivative and Other Financial Instruments With Off-Balance Sheet Risk (In  Thousands):

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit, in the form of originating loans or providing funds under existing lines of credit, forward loan sale agreements to third parties and commitments to purchase investment securities. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying consolidated balance sheet.  The Corporation's exposure to credit loss, in the event of non-performance by the other party to these financial instruments, is represented by the contractual amount of these instruments.  The Corporation uses the same credit policies in making commitments to extend credit as it does for on-balance sheet instruments.

|                                                          | June 30,   
|--------------------------------------------------------- | -----------
|Commitments                                               | 2003       
|                                                          |            
|Undisbursed loan funds - Construction loans               | $    67,868
|Undisbursed lines of credit - Commercial business loans   | 8,527      
|Undisbursed lines of credit - Consumer loans              | 9,020      
|Commitments to extend credit on loans held for investment | 35,820     
|                                                          | $  121,235 

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|                                                       | June 30, 2003 |  | June 30, 2002  | 
|------------------------------------------------------ | ------------- |  | -------------- | 
|                                                       |               |  | Fair           | 
|Derivative Financial Instruments                       | Amount        |  | Value          | 
|                                                       |               |  |                | 
|Commitments to extend credit on loans to be held       |               |  |                | 
|for sale, including servicing released premiums (1)(2) | $    121,422  |  | $        1,099 | 
|Forward loan sale agreements                           | 109,734       |  | 306            | 
|Put option contracts                                   | 45,000        |  | 235            | 
|Total                                                  | $    276,156  |  | $        1,640 | 

|    |                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------
|(1) | Net of estimated commitments, which may not fund, at June 30, 2003 and 2002 of 29.45% and 26.71%, respectively.   
|(2) | The fair value of servicing released premiums at June 31, 2003 and 2002 were $1.81 million and $702, respectively.

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|                                                      | June 30, 2003 |        | June 30, 2002
|----------------------------------------------------- | ------------- | ------ | -------------
|Carrying                                              |               | Market |              
|Amount                                                |               | Value  |              
|Financial assets:                                     |               |        |              
|Cash and cash equivalents                             | $      48,851 |        | $      48,851
|Investment securities                                 | 297,111       |        | 297,483      
|Loans held for investment                             | 744,219       |        | 772,629      
|Loans held for sale                                   | 4,247         |        | 4,345        
|Receivable from sale of loans                         | 114,902       |        | 114,902      
|Accrued interest receivable                           | 4,934         |        | 4,934        
|FHLB stock                                            | 20,974        |        | 20,974       
|                                                      |               |        |              
|Financial liabilities:                                |               |        |              
|Deposits                                              | 754,106       |        | 761,632      
|Borrowings                                            | 367,938       |        | 385,903      
|Accrued interest payable                              | 652           |        | 652          
|                                                      |               |        |              
|Derivative Financial Instruments:                     |               |        |              
|Commitments to extend credit on loans to be           |               |        |              
|held for sale, including servicing released  premiums | 1,099         |        | 1,099        
|Forward loan sale agreements                          | 306           |        | 306          
|Put option contracts                                  | 235           |        | 235          
|                                                     

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|                            | Year Ended June 30, 2003                 
|--------------------------- | -----------------------------------------
|ProvidentBank               | ProvidentBankMortgage                    
|                            |                                          
|Net interest income         | $      27,293                            
|Non-interest income:        |                                          
|                            | Loan servicing and other fees            
|                            | (Loss) gain on sale of loans, net        
|                            | Real estate operations, net              
|                            | Deposit account fees                     
|                            | Net gain on sale of investment securities
|                            | Other                                    
|                            | Total non-interest income                
|                            |                                          
|Non-interest expense:       |                                          
|                            | Salaries and employee benefits           
|                            | Premises and occupancy                   
|                            | Operating and administrative expenses    
|                            | Total non-interest expenses              
|Income before income taxes  | 10,854                                   
|Provision for income taxes  | 4,112                                    
|Net income                  | $          6,742                         
|Total assets, end of period | $  1,174,955                             

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|                            | Year Ended June 30, 2002             
|--------------------------- | -------------------------------------
|ProvidentBank               | ProvidentBankMortgage                
|                            |                                      
|Net interest income         | $      23,614                        
|Non-interest income:        |                                      
|                            | Loan servicing and other fees        
|                            | Gain on sale of loans, net           
|                            | Real estate operations, net          
|                            | Deposit account fees                 
|                            | Gain on sale of investment securities
|                            | Other                                
|                            | Total non-interest income            
|                            |                                      
|Non-interest expense:       |                                      
|                            | Salaries and employee benefits       
|                            | Premises and occupancy               
|                            | Operating and administrative expenses
|                            | Total non-interest expenses          
|Income before income taxes  | 8,005                                
|Provision for income taxes  | 3,326                                
|Net income                  | $        4,679                       
|Total assets, end of period | $    937,313                         

|                            | Year Ended June 30, 2001             
|--------------------------- | -------------------------------------
|ProvidentBank               | ProvidentBankMortgage                
|                            |                                      
|Net interest income         | $      25,082                        
|Non-interest income:        |                                      
|                            | Loan servicing and other fees        
|                            | (Loss) gain on sale of loans, net    
|                            | Real estate operations, net          
|                            | Deposit account fees                 
|                            | Gain on sale of investment securities
|                            | Other                                
|                            | Total non-interest income            
|                            |                                      
|Non-interest expense:       |                                      
|                            | Salaries and employee benefits       
|                            | Premises and occupancy               
|                            | Operating and administrative expenses
|                            | Total non-interest expenses          
|Income before income taxes  | 11,542                               
|Provision for income taxes  | 4,812                                
|Net income                  | $          6,730                     
|Total assets, end of period | $    975,044                         

93

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---



---

|   |                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | Borrowings for Provident Bank Mortgage ("PBM") are indexed monthly to the higher of the three-month FHLB advance rate, on the first day 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 the loans transferred to the Bank's loans held for investment.  The servicing-released premiums in the years ended June 30, 2003, 2002 and 2001 were $3.6 million, $1.6 million and $136, respectively.                             
|3. | PBM receives a premium for the loans transferred to the Bank's loans held for investment.  The gain on sale of loans in the years ended June 30, 2003, 2002 and 2001 were $365, $482 and $77, respectively.                                                                      
|4. | Loan servicing fees are charged to PBM by the Bank based on the number of loans held for sale multiplied by a fixed fee which is subject to management's review.  The loan servicing fees in the years ended June 30, 2003, 2002 and 2001 were $125, $163 and $216, respectively.
|5. | The Bank allocates 75% of the Quality Assurance Department costs to PBM based on loan production, subject to management's review.  Quality assurance costs allocated to PBM in the years ended June 30, 2003, 2002 and 2001 was $202, $197 and $129, respectively.               
|6. | Office rents for PBM offices, which are located at the Bank offices, are internally charged based on the square footage used.  Office rents allocated to PBM in the years ended June 30, 2003, 2002 and 2001 was $142, $93 and $93, respectively.                                
|7. | 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, 2003, 2002 and 2001 was $480, $360 and $240, respectively.                                                            

18.  Holding Company Condensed Financial Information (in Thousands):

This information should be read in conjunction with the other notes to the consolidated financial statements. The following is the condensed balance sheet for Provident Financial Holdings, Inc. (Holding Company only) as of    June 30, 2003 and 2002 and condensed statements of operations and cash flows for each of the three years in the period ended June 30, 2003, 2002 and 2001.Condensed Balance Sheets

|                                     | June 30,       
|------------------------------------ | ---------------
|                                     | 2003           
|                                     |                
|Assets                               |                
|Cash                                 | $      11,207  
|Investment in subsidiary             | 92,010         
|Other assets                         | 3,703          
|                                     | $    106,920   
|                                     |                
|Liabilities and Stockholders' Equity |                
|Other liabilities                    | $            42
|Stockholders' equity                 | 106,878        
|                                     | $    106,920   

94

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---



---

|                                         | Year Ended June 30,                                          
|---------------------------------------- | -------------------------------------------------------------
|                                         | 2003                                                         
|                                         |                                                              
|Interest and other income                | $        356                                                 
|General and administrative expenses      | 505                                                          
|                                         | (Loss) income before equity in net earnings of the subsidiary
|Equity in net earnings of the subsidiary | 17,055                                                       
|                                         | Income before income taxes                                   
|                                         | Income taxes                                                 
|                                         | Net income                                                   

Condensed Statements of Cash Flows

|                                                            | Year Ended June 30,                                 
|----------------------------------------------------------- | ----------------------------------------------------
|                                                            | 2003                                                
|                                                            |                                                     
|Cash flows from operating activities:                       |                                                     
|                                                            | Net income                                          
|Adjustments to reconcile net income to net cash provided by |                                                     
|                                                            | (used for) operating activities:                    
|                                                            | Equity in net earnings of the subsidiary            
|                                                            | Tax benefit from nonqualified equity compensation   
|                                                            | Net loss on sale of investment securities           
|                                                            | Decrease (increase) in other assets                 
|                                                            | Increase (decrease) in other liabilities            
|                                                            | Net cash provided by (used for) operating activities
|                                                            |                                                     
|Cash flow from investing activities:                        |                                                     
|                                                            | Sale of investment securities available for sale    
|                                                            | Cash dividend received from the Bank                
|                                                            | Net cash provided by investing activities           
|                                                            |                                                     
|Cash flow from financing activities:                        |                                                     
|                                                            | Exercise of stock options                           
|                                                            | Treasury stock purchases                            
|                                                            | Cash dividend                                       
|                                                            | Net cash used for financing activities              
|Net increase (decrease) in cash during the year             | 10,950                                              
|Cash and cash equivalents, beginning of year                | 257                                                 
|Cash and cash equivalents, end of year                      | $      11,207                                       

95

<PAGE>

---



---

|                                         | For Fiscal Year 2003
|---------------------------------------- | --------------------
|                                         | For the             
|                                         | Year Ended          
|                                         | June 30,            
|                                         | 2003                
|                                         |                     
|Interest income                          | $      59,856       
|Interest expense                         | 28,413              
|Net interest income                      | 31,443              
|                                         |                     
|Provision for loan losses                | 1,055               
|Net interest income, after provision for |                     
|loan losses                              | 30,388              
|                                         |                     
|Non-interest income                      | 25,771              
|Non-interest expense                     | 27,913              
|Income before income taxes               | 28,246              
|                                         |                     
|Provision for income taxes               | 11,357              
|Net income                               | $    16,889         
|                                         |                     
|Basic earnings per share                 | $          3.56     
|Diluted earnings per share               | $          3.30     

96

<PAGE>

---



---

|                                         | For Fiscal Year 2002
|---------------------------------------- | --------------------
|                                         | For the             
|                                         | Year Ended          
|                                         | June 30,            
|                                         | 2002                
|                                         |                     
|Interest income                          | $      65,668       
|Interest expense                         | 39,188              
|Net interest income                      | 26,480              
|                                         |                     
|Provision for loan losses                | 525                 
|Net interest income, after provision for |                     
|loan losses                              | 25,955              
|                                         |                     
|Non-interest income                      | 16,442              
|Non-interest expense                     | 26,806              
|Income before income taxes               | 15,591              
|                                         |                     
|Provision for income taxes               | 6,482               
|Net income                               | $        9,109      
|                                         |                     
|Basic earnings per share                 | $          1.77     
|Diluted earnings per share               | $          1.68     

20.  Subsequent Events:

Cash Dividend

On August 1, 2003, the Corporation announced a cash dividend of $0.10 per share on the Corporation's outstanding shares of common stock for shareholders of record at the close of business on August 20, 2003, payable on September 12, 2003.Stock Repurchase Program

On August 5, 2003, the Corporation announced its intention to repurchase up to 5% of its common stock, or approximately 246,046 shares.

97

<PAGE>

---

EXHIBIT 10.10

Severance Agreement with Lilian Brunner

<PAGE>

Agreement

THIS AGREEMENT is made effective as of June 26, 1998 by and between PROVIDENT SAVINGS BANK, F.S.B. (the "Bank");  PROVIDENT FINANCIAL HOLDINGS, INC. ("Company");  and  Lilian Brunner (the "Executive").



WHEREAS, the Bank recognizes the substantial contribution Executive has made to the Bank and wishes to protect his position therewith for a period provided in this Agreement;  and



WHEREAS, Executive serves in the position of Senior Vice President, a position of substantial responsibility.



NOW, THEREFORE, in consideration of the foregoing and upon the other terms and conditions hereinafter provided, the parties hereto agree as follows:



1.     Terms of Agreement



The term of this Agreement shall be deemed to have commenced as of the date first above written and shall continue for a period of twelve (12) full calendar months thereafter.  Commencing on the first anniversary date of this Agreement and continuing at each anniversary date thereafter, the Board of Directors of the Bank ("Board") may extend the Agreement for an additional year.  The Board will conduct a performance evaluation of the Executive for the purposes of determining whether to extend the Agreement, and the results thereof shall be included in the minutes of the Board's meeting.



2.      Payments to Executive Upon Change in Control



(a)    Upon the occurrence of a Change in Control (as herein defined) followed with twelve (12) months of the effective date of a Change in Control by the voluntary or involuntary termination of the Executive's employment, other than for Cause, as defined in Section 2(c) hereof, the provisions of Section 3 shall apply.  For purposes of this Agreement, "voluntary termination" shall be limited to the circumstances in which the Executive elects to voluntarily terminate his employment within twelve (12) months of the effective date of a Change in Control following any demotion, loss of title, office or significant authority, reduction in his annual compensation or benefits (other than a reduction affecting the Bank's personnel generally), or relocation of his principal place of employment more than thirty-five (35) miles from its location immediately prior to the Change in Control.



(b)    A "Change in Control" of the Company or the Bank shall be deemed to occur if and when (a) an offer other than the Company purchases shares of the common stock of the Company or the Bank pursuant to a tender or exchange offer for such shares, (b) any person (as such term is used in Sections 13(d) and 14 (d)(2) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company or the Bank representing 25% or more of the combined voting power of the Company's then outstanding securities, (c) the membership of the board of directors of the Company or the Bank changes as a result of a contested election, such that individuals who were directors at the beginning of any twenty-four (24) month period (whether commencing before or after the date of adoption of this Plan) do not constitute a majority of the Board at the end of such period, or (d) shareholders of the Company or the Bank approve a merger, consolidation, sale or disposition of all or substantially all of the Company's or the Bank's assets, or a plan or partial or complete liquidation.

<PAGE>





(c)    Executive shall not have the right to receive termination benefits pursuant to Section 3 hereof upon Termination for Cause.  The term "Termination for Cause" shall mean termination because of the Executive's intentional failure to perform stated duties, personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, willful violation of any law, rule, regulation (other than traffic violations or similar offenses) or final cease and desist order, or any material breach of any material provision of this Agreement.  In determining incompetence, the acts or omissions shall be measured against standards generally prevailing in the savings institution industry.  Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three-fourths of the members of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to Executive and an opportunity for him, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board, Executive was guilty of conduct justifying Termination for Cause and specifying the particulars thereof in detail.  The Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause.



3.     Termination



(a)    Upon the occurrence of a Change in Control during the term of this Agreement, followed within twelve (12) months of the effective date of a Change in Control by the voluntary or involuntary termination of the Executive's employment, other than for Termination for Cause, the Bank shall be obligated to pay the Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay, a sum equal to two (2) times Executive's then current base annual salary in a lump sum of no later than thirty (30) days after the date of his termination.



(b)    Upon the occurrence of a Change in Control during the term of this Agreement, followed within twelve (12) months of the effective date of a Change in Control by the Executive's voluntary or involuntary termination of employment, other than for Termination for Cause, the Bank shall cause to be continued life, medical, dental and disability coverage substantially identical to the coverage maintained by the Bank for the Executive prior to his severance.  Such coverage shall cease upon expiration of twelve (12) months from the date of the Executive's termination.



(c)    Notwithstanding the preceding paragraphs of this Section 3, in the event that the aggregate payments or benefits to be made or afforded to the Executive under this Section would be deemed to include an "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, such payments or benefits shall be payable or provided to Executive over the minimum period necessary to reduce the present value of such payments or benefits to an amount which is one dollar ($1.00) less than three (3) times the Executive's "base amount" under Section 280G(b)(3) of the Code.



(d)    Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.



(e)    As a condition of the receipt of any payments or benefits under this Section 3, Executive shall in writing release the Bank, the Company and any successors thereto from any or all claims or causes of action relating to the Executive's termination of employment.



4.     Effect on Prior Agreements and Existing Benefit Plans



This Agreement contains the entire understanding between the parties hereto and supersedes any prior agreement between the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided.  No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

<PAGE>



5.     No Attachment



(a)    Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.



(b)    This Agreement shall be binding upon, and inure to the benefit of, Executive, the Company, the Bank and their respective successors and assigns.



6.     Modification and Waiver



(a)    This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.



(b)    No term or condition of this Agreement shall be deemed to have been waived, not shall there be an estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel.  No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.



7.     Required Provisions



(a)    The Bank may terminate the Executive's employment at any time, but any termination by the Bank, other than Termination for Cause, shall not prejudice Executive's right to compensation or other benefits under this Agreement.  Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause as defined in Section 2(c) herein.



(b)    If the Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Bank may, in its discretion (i) pay the Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations that were suspended.



(c)    If the Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under the Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.



(d)    If the Bank is in default (as defined in Section 3 (x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the parties.



(e)    All obligations under this Agreement may be terminated:  (i) by the Director of the Office of Thrift Supervision (the "Director") or his or her designee at the time of the Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the FDIA and (ii) by the Director, or his or her designee at the time the Director or such designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition.  Any rights of the parties that have already vested, however, shall not be affected by such action.



<PAGE>

8.     Severability



If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.



9.     Headings for Reference Only



The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretations of any of the provisions of this Agreement.



10.     Governing Law



The validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California, unless preempted by Federal law as now or hereafter in effect.



Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the employee within fifty (50) miles from the location of the Bank, in accordance with the rules of the American Arbitration Bank then in effect.



11.     Source of Payments



All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank.  The Company, however, guarantees all payments and the provision of all amounts and benefits due hereunder to Executive and, if such payments are not timely paid or provided by the Bank, such amounts and benefits shall be paid or provided by the Company.



12.     Payment of Legal Fees



All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank if Executive is successful on the merits pursuant to a legal judgment, arbitration or settlement.



13.     Successor to the Bank or the Company



The Bank and the Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank or the Company, expressly and unconditionally to assume and agree to perform the Bank's or the Company's obligations under this Agreement, in the same manner and to the same extent that the Bank or the Company would be required to perform if no such succession or assignment had taken place.

<PAGE>



14.    Signature



IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed by a duly authorized officer, and Executive has signed this Agreement, on the day and date first written above.





ATTEST:                                                                                   PROVIDENT SAVINGS BANK, F.S.B.











ATTEST:                                                                                   PROVIDENT
FINANCIAL HOLDINGS, INC.





/s/ Craig G. Blunden
                                                                                                    Craig G. Blunden





WITNESS:





/s/
Lilian Brunner
                                                                                                   
Lilian Brunner
                                                                                                    Executive



<PAGE>EXHIBIT 10.11

Severance Agreement with Thomas "Lee" Fenn


<PAGE>AgreementTHIS AGREEMENT is made effective as of July 31, 2003 by and between PROVIDENT SAVINGS BANK, F.S.B. (the "Bank");  PROVIDENT FINANCIAL HOLDINGS, INC. ("Company");  and  Thomas Lee Fenn (the "Executive").

WHEREAS, the Bank recognizes the substantial contribution Executive has made to the Bank and wishes to protect his position therewith for a period provided in this Agreement;  and

WHEREAS, Executive serves in the position of Senior Vice President, Chief Lending Officer, a position of substantial responsibility.

NOW, THEREFORE, in consideration of the foregoing and upon the other terms and conditions hereinafter provided, the parties hereto agree as follows:

1.        Terms of Agreement



The term of this Agreement shall be deemed to have commenced as of the date first above written and shall continue for a period of twelve (12) full calendar months thereafter.  Commencing on the first anniversary date of this Agreement and continuing at each anniversary date thereafter, the Board of Directors of the Bank ("Board") may extend the Agreement for an additional year.  The Board will conduct a performance evaluation of the Executive for the purposes of determining whether to extend the Agreement, and the results thereof shall be included in the minutes of the Board's meeting.



2.        Payments to Executive Upon Change in Control



(a)        Upon the occurrence of a Change in Control (as herein defined) followed with twelve (12) months of the effective date of a Change in Control by the voluntary or involuntary termination of the Executive's employment, other than for Cause, as defined in Section 2(c) hereof, the provisions of Section 3 shall apply.  For purposes of this Agreement, "voluntary termination" shall be limited to the circumstances in which the Executive elects to voluntarily terminate his employment within twelve (12) months of the effective date of a Change in Control following any demotion, loss of title, office or significant authority, reduction in his annual compensation or benefits (other than a reduction affecting the Bank's personnel generally), or relocation of his principal place of employment more than thirty-five (35) miles from its location immediately prior to the Change in Control.



(b)        A "Change in Control" of the Company or the Bank shall be deemed to occur if and when (a) an offer other than the Company purchases shares of the common stock of the Company or the Bank pursuant to a tender or exchange offer for such shares, (b) any person (as such term is used in Sections 13(d) and 14 (d)(2) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company or the Bank representing 25% or more of the combined voting power of the Company's then outstanding securities, (c) the membership of the board of directors of the Company or the Bank changes as a result of a contested election, such that individuals who were directors at the beginning of any twenty-four (24) month period (whether commencing before or after the date of adoption of this Plan) do not constitute a majority of the Board at the end of such period, or (d) shareholders of the Company or the Bank approve a merger, consolidation, sale or disposition of all or substantially all of the Company's or the Bank's assets, or a plan or partial or complete liquidation.

<PAGE>

(c)        Executive shall not have the right to receive termination benefits pursuant to Section 3 hereof upon Termination for Cause.  The term "Termination for Cause" shall mean termination because of the Executive's intentional failure to perform stated duties, personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, willful violation of any law, rule, regulation (other than traffic violations or similar offenses) or final cease and desist order, or any material breach of any material provision of this Agreement.  In determining incompetence, the acts or omissions shall be measured against standards generally prevailing in the savings institution industry.  Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three-fourths of the members of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to Executive and an opportunity for him, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board, Executive was guilty of conduct justifying Termination for Cause and specifying the particulars thereof in detail.  The Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause.



3.        Termination



(a)    Upon the occurrence of a Change in Control during the term of this Agreement, followed within twelve (12) months of the effective date of a Change in Control by the voluntary or involuntary termination of the Executive's employment, other than for Termination for Cause, the Bank shall be obligated to pay the Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay, a sum equal to two (2) times Executive's then current base annual salary in a lump sum of no later than thirty (30) days after the date of his termination.



(b)    Upon the occurrence of a Change in Control during the term of this Agreement, followed within twelve (12) months of the effective date of a Change in Control by the Executive's voluntary or involuntary termination of employment, other than for Termination for Cause, the Bank shall cause to be continued life, medical, dental and disability coverage substantially identical to the coverage maintained by the Bank for the Executive prior to his severance.  Such coverage shall cease upon expiration of twelve (12) months from the date of the Executive's termination.



(c)    Notwithstanding the preceding paragraphs of this Section 3, in the event that the aggregate payments or benefits to be made or afforded to the Executive under this Section would be deemed to include an "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, such payments or benefits shall be payable or provided to Executive over the minimum period necessary to reduce the present value of such payments or benefits to an amount which is one dollar ($1.00) less than three (3) times the Executive's "base amount" under Section 280G(b)(3) of the Code.



(d)    Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.



(e)    As a condition of the receipt of any payments or benefits under this Section 3, Executive shall in writing release the Bank, the Company and any successors thereto from any or all claims or causes of action relating to the Executive's termination of employment.



4.        Effect on Prior Agreements and Existing Benefit Plans



This Agreement contains the entire understanding between the parties hereto and supersedes any prior agreement between the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided.  No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

<PAGE>



5.        No Attachment



(a)    Except as required by law, no right to receive payments under this agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.



(b)    This Agreement shall be binding upon, and inure to the benefit of, Executive, the Company, the Bank and their respective successors and assigns.



6.        Modification and Waiver



(a)    This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.



(b)    No term or condition of this Agreement shall be deemed to have been waived, not shall there be an estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel.  No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.



7.        Required Provisions



(a)    The Bank may terminate the Executive's employment at any time, but any termination by the Bank, other than Termination for Cause, shall not prejudice Executive's right to compensation or other benefits under this Agreement.  Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause as defined in Section 2(c) herein.



(b)    If the Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Bank may, at its discretion (i) pay the Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations that were suspended.



(c)    If the Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but the vested rights of the contracting parties shall not be affected.



(d)    If the Bank is in default (as defined in Section 3 (x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the parties.



(e)    All obligations under this Agreement may be terminated:  (i) by the Director of the Office of Thrift Supervision (the "Director") or his or her designee at the time of the Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the FDIA and (ii) by the Director, or his or her designee at the time the Director or such designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition.  Any rights of the parties that have already vested, however, shall not be affected by such action.



<PAGE>

8.        Severability



If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with the law continue in full force and effect.



9.        Headings for Reference Only



The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretations of any of the provisions of this Agreement.



10.        Governing Law



The validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California, unless preempted by Federal law as now or hereafter in effect.



Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the employee within fifty (50) miles from the location of the Bank, in accordance with the rules of the American Arbitration Bank then in effect.



11.        Source of Payments



All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank.  The Company, however, guarantees all payments and the provision of all amounts and benefits due hereunder to Executive and, if such payments are not timely paid or provided by the Bank, such amounts and benefits shall be paid or provided by the Company.



12.        Payment of Legal Fees



All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank if Executive is successful on the merits pursuant to a legal judgment, arbitration or settlement.



13.        Successor to the Bank or the Company



The Bank and the Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank or the Company, expressly and unconditionally to assume and agree to perform the Bank's or the Company's obligations under this Agreement, in the same manner and to the same extent that the Bank or the Company would be required to perform if no such succession or assignment had taken place.



<PAGE>

14.        Signature



IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed by a duly authorized officer, and Executive has signed this Agreement, on the day and date first written above.





ATTEST:                                                                                   PROVIDENT SAVINGS BANK, F.S.B.





/s/ Craig G. Blunden
                                                                                                    Craig G. Blunden





ATTEST:                                                                                   PROVIDENT
FINANCIAL HOLDINGS, INC.





/s/
Donavon P. Ternes
                                                                                                   
Donavon P. Ternes





WITNESS:





/s/
Thomas Lee Fenn
                                                                                                   
Thomas Lee Fenn
                                                                                                    Executive<PAGE>


EXHIBIT 21.1

Subsidiaries of the Registrant

<PAGE>

|Parent Company:                                                                   |                         |                                       
|--------------------------------------------------------------------------------- | ----------------------- | --------------------------------------
|Provident Financial Holdings, Inc.                                                |                         |                                       
|                                                                                  |                         |                                       
|                                                                                  |                         |                                       
|Subsidiaries:                                                                     | Percentage of ownership | Jurisdiction or State of Incorporation
|Provident Savings Bank, F.S.B.                                                    | 100%                    | United States of America              
|Provident Financial Corp (1)                                                      | 100%                    | California                            
|Profed Mortgage, Inc. (1) (2)                                                     | 100%                    | California                            
|First Service Corporation (1) (2)                                                 | 100%                    | California                            
|_____________________________                                                     |                         |                                       
|(1) This corporation is wholly owned subsidiary of Provident Savings Bank, F.S.B.
|(2) Currently inactive.                                                          



<PAGE>



EXHIBIT 23.1



Independent Auditors' Consent

<PAGE>





INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No. 333-30935 of Provident Financial Holdings, Inc. on Form S-8 of our report dated August
14, 2003, appearing in this Annual Report on Form 10-K of Provident Financial Holdings, Inc. for the year ended June 30, 2003.

/s/ Deloitte & Touche LLP
Costa Mesa, California
September 25, 2003

<PAGE>



EXHIBIT 31.1



Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





<PAGE>

**Certification**

I, Craig G. Blunden, certify that:

|1. | I have reviewed this
annual report on Form 10-K of Provident Financial Holdings, Inc.;                                                                                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
|  
|3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;                   
|  
|4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:                                                                               
|  
|   | (a)                                                                                                                                                                                                                                                                                                       
|  
|   | (b)                                                                                                                                                                                                                                                                                                       
|  
|   | (c)                                                                                                                                                                                                                                                                                                       
|  
|5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):           
|  
|   | (a)                                                                                                                                                                                                                                                                                                       
|  
|   | (b)                                                                                                                                                                                                                                                                                                       

Date: September 24, 2003                                                               
/s/ Craig G. BlundenCraig G. BlundenChairman, President and Chief Executive Officer



<PAGE>



EXHIBIT 31.2



Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





<PAGE>

**Certification**

I, Donavon P. Ternes, certify that:

|1. | I have reviewed this
annual report on Form 10-K of Provident Financial Holdings, Inc.;                                                                                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
|  
|3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;                   
|  
|4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:                                                                               
|  
|   | (a)                                                                                                                                                                                                                                                                                                       
|  
|   | (b)                                                                                                                                                                                                                                                                                                       
|  
|   | (c)                                                                                                                                                                                                                                                                                                       
|  
|5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):           
|  
|   | (a)                                                                                                                                                                                                                                                                                                       
|  
|   | (b)                                                                                                                                                                                                                                                                                                       

Date: September 24, 2003                                                               
/s/ Donavon P. TernesDonavon P. TernesChief
Financial Officer



<PAGE>



EXHIBIT 32



Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





<PAGE>



CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the accompanying Annual Report on Form 10-K of Provident Financial Holdings, Inc. ("the Company") for the period ending June 30, 2003 (the "Report"), I, Craig G. Blunden, Chairman, President and Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



|1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 24, 2003                                                               
/s/ Craig G. BlundenCraig G. BlundenChairman, President and Chief Executive Officer

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the accompanying Annual Report on Form 10-K of Provident Financial Holdings, Inc. ("the Company") for the period ending June 30, 2003 (the "Report"), I, Donavon P. Ternes, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



|1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: September 24, 2003                                                               
/s/ Donavon P. TernesDonavon P. TernesChief Financial Officer

<PAGE>