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



(Mark one)                                                                                 FORM 10-K



|[X]                                                                | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|------------------------------------------------------------------ | --------------------------------------------------------------------------------------------
|                                                                  
|                                                                   | For the fiscal year ended
    June 30, 2004                                                 
|                                                                  
|[  ]                                                               | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                                                                  
|                                                                   |                                                                                             
|Commission File Number: 000-28304                                 
|                                                                  
|                                                                  
|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:   (951) 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 3, 2004, there were 6,981,029 shares of the Registrant's common stock issued and outstanding.  The Registrant's common stock is listed on the National Market System of 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 December 31, 2003, was $174.7 million.  On December 19, 2003, the Corporation declared a 3-for-2 stock split distributed in the form of a 50% stock dividend paid on February 2, 2004 to shareholders of record on January 15, 2004.  All share and per share information in the accompanying consolidated financial statements and related discussion have been restated to reflect the stock split.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of the definitive Proxy Statement for the fiscal 2004 Annual Meeting of Shareholders ("Proxy Statement") are incorporated by reference into Part III.

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PROVIDENT FINANCIAL HOLDINGS, INC.
Table of Contents



Page

PART IItem  1. Business                                                                                                                                                                 1
Item  2. Properties                                                                                                                                                             37
Item  3. Legal Proceedings                                                                                                                                              37
Item  4. Submission of Matters to a Vote of Security Holders                                                                                  37PART IIItem  5. Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of 
            
Equity Securities                                                                                                                                                38
Item  6. Selected Financial Data                                                                                                                                     39
Item  7. Management's Discussion and Analysis of Financial Condition and Results of Operations              39
Item  7A. Quantitative and Qualitative Disclosures about Market Risk                                                                 51
Item  8. Financial Statements and Supplementary Data                                                                                            54
Item  9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure             54
Item 9A. Control and Procedures                                                                                                                                54
Item 9B. Other Information                                                                                                                                           54PART IIIItem 10. Directors and Executive Officers of the Registrant                                                                                    54
Item 11. Executive Compensation                                                                                                                                55
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 
              
Matters                                                                                                                                                             55
Item 13. Certain Relationships and Related Transactions                                                                                       56
Item 14. Principal Accountant Fees and Services                                                                                                     56PART IVItem 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                                       56

Signatures                                                                                                                                                                        59

<PAGE>

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, 2004, the Corporation had total assets of $1.3 billion, total deposits of $851.0 million and stockholders' equity of $110.0 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, 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 typically one year.  Once the stock repurchase program is authorized, management may repurchase the 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 and, Provident Bank Mortgage, and through its subsidiary, Provident Financial Corp.  The business activities of the Bank 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 conducts real estate operations and previously offered investment and insurance services.  Effective September 1, 2003, the Bank began offering investment and insurance services directly, instead of through its subsidiary.  The Bank's revenues are derived principally from interest earned on its loan and investment portfolios, and fees generated through its community banking and mortgage banking activities.



Subsequent Events:



Cash Dividends.  On July 22, 2004, 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 17, 2004, payable on September 10, 2004.  The Board of Directors of the Bank declared a $2.75 million cash dividend to the Corporation, which was paid on August 23, 2004.

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Market Area



The Bank is headquartered in Riverside, California and operates 11 full-service banking offices in Riverside County and one full-service 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 slowdown 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 2004 was at 5.8%, compared to 6.2% in California and 5.6% 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, 2004, the Bank had 328 full-time equivalent employees, which consisted of 264 full-time, 59 prime-time, 30 part-time and five temporary employees.  The employees are not represented by a collective bargaining unit and the Bank believes that its relationship with employees is good.

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 $862.5 million at June 30, 2004, representing approximately 65.4% of consolidated total assets.  This compares to $744.2 million, or 59.0% of consolidated total assets, at June 30, 2003.

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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,
|-------------------------------- | ---------------------- | ------------ | -----------
|                                 |                        |              | 2004       
|                                 |                        |              | Amount     
|(Dollars In Thousands)           |                        |             
|                                 |                        |              |            
|Mortgage loans:                  |                        |              |            
|                                 | Single-family          |              | $ 620,087  
|                                 | Multi-family           |              | 68,804     
|                                 | Commercial real estate |              | 99,919     
|                                 | Construction           |              | 136,265    
|                                 | Total mortgage loans   |              | 925,075    
|                                 |                        |              |            
|Commercial business loans        |                        | 13,770       |            
|Consumer loans                   |                        | 730          |            
|Other loans                      |                        | 7,371        |            
|                                 | Total loans held for   |              |            
|                                 | investment             |              | 946,946    
|                                 |                        |              |            
|Undisbursed loan funds           |                        | (78,137      | )          
|Deferred loan costs (fees)       |                        | 1,340        |            
|Unearned discounts               |                        | -            |            
|Allowance for loan losses        |                        | (7,614       | )          
|                                 | Total loans held for   |              |            
|                                 | investment, net        |              | $ 862,535  
|Loans held for sale, at lower of |                        |              |            
|cost or market                   |                        | $     20,127 |            

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Maturity of Loans Held for Investment.  The following table sets forth information at June 30, 2004 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          |       | $              33 |       | $    1,113 |       | $   6,769 |       | $     2,959 |     | $ 609,213 |        | $ 620,087
|                          | Multi-family           |       | -                 |       | 3,883      |       | 4,541     |       | 3,020       |     | 57,360    |        | 68,804   
|                          | Commercial real estate |       | 2,075             |       | 3,139      |       | 3,988     |       | 77,601      |     | 13,116    |        | 99,919   
|                          | Construction           |       | 83,927            |       | 13,223     |       | -         |       | -           |     | 39,115    |        | 136,265  
|Commercial business loans |                        | 5,917 |                   | 1,869 |            | 2,054 |           | 3,930 |             | -   |           | 13,770
|Consumer loans            |                        | -     |                   | -     |            | -     |           | -     |             | 730 |           | 730   
|Other loans               |                        | 4,115 |                   | 3,093 |            | 163   |           | -     |             | -   |           | 7,371 
|                          | Total loans held for   |       |                   |       |            |       |           |       |             |     |           |        |          
|                          | investment             |       | $ 96,067          |       | $ 26,320   |       | $ 17,515  |       | $ 87,510    |     | $ 719,534 |        | $ 946,946



The following table sets forth the dollar amount of all loans held for investment due after June 30, 2005 which have fixed and have floating or adjustable interest rates.



|                          |                                 |       |            |       | Floating or
|------------------------- | ------------------------------- | ----- | ---------- | ----- | -----------
|                          |                                 |       |            |       | Adjustable 
|                          |                                 |       | Fixed-Rate |       | Rate       
|(In Thousands)            |                                 |      
|                          |                                 |       |            |      
|Mortgage loans:           |                                 |       |            |      
|                          | Single-family                   |       | $    5,748 |       | $ 614,307  
|                          | Multi-family                    |       | 2,339      |       | 66,465     
|                          | Commercial real estate          |       | 871        |       | 96,973     
|                          | Construction                    |       | 37,305     |       | 15,033     
|Commercial business loans |                                 | 3,947 |            | 3,905
|Consumer loans            |                                 | -     |            | 730  
|Other loans               |                                 | 3,256 |            | -    
|                          | Total loans held for investment |       | $ 53,466   |       | $ 797,413  



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 the interest rates on existing loans held for investment and, conversely, decrease when the 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, 2004, total single-family loans held for investment
increased to $620.1 million, or 65.5% of the total loans held for investment
from $531.3 million, or

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64.9% of the total loans held for investment at June 30,
2003. The increase in the single-family loans in fiscal 2004 was primarily
attributable to $409.4 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 Veterans' Administration ("VA").  The Bank's loan underwriters are approved as underwriters under HUD's delegated underwriter program.



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.  The Bank also offers secured lines of credit, which 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.  At June 30, 2004, home equity loans amounted to $5.0 million or 0.8% of single-family loans as compared to $8.5 million or 1.6% of single-family loans at June 30, 2003.



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 three months to five years subject to a limitation on the annual increase of one to two percentage points and an overall limitation of three to six percentage points.  The ARM loans in the Bank's loans held for investment utilize the London Interbank Offered Rate index ("LIBOR"), the FHLB eleventh district cost of funds index ("COFI"), 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 index ("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.  Loans of this type have embedded interest rate risk if interest rates should rise during the initial fixed rate period.



As of June 30, 2004, the Bank had $107.1 million in mortgage loans that may be subject to negative amortization, compared to $91.9 million at June 30, 2003.  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 as a result of 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 occasionally 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 decrease 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 to fully amortizing ARM loans, the Bank has interest-only ARM loans, which typically have a fixed interest rate for the first two to five years followed by an adjustable interest rate and full

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amortization for the remaining term.  As of June 30, 2004 and 2003, the interest-only ARM loans were $399.2 million and $169.8 million, or 42.2% and 20.7% of the loans held for investment, respectively.  Furthermore, 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 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.



Multi-Family and Commercial Real Estate Mortgage Loans.  At June 30, 2004, multi-family mortgage loans were $68.8 million and commercial real estate loans were $99.9 million, or 7.3% and 10.6%, 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, 2004, the Bank had 87 multi-family and 125 commercial real estate loans in loans held for investment.  During fiscal 2004, 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, including 3/1 and 5/1 hybrids, with a term to maturity of 10 to 30 years based on a 25- to 30-year amortization schedule.  Commercial real estate loans originated by the Bank are also predominately adjustable rate, including 3/1 and 5/1 hybrids, loans with a term to maturity of 10 years based on a 25-year amortization schedule.   Rates on multi-family and commercial real estate ARM loans generally adjust monthly, quarterly, semi-annually or annually at a specific margin over the respective interest rate index, subject to annual payment caps and life-of-loan interest rate caps.  At June 30, 2004, $47.6 million, or 69.2%, of the Bank's multi-family loans were secured by five to 36 unit projects, of which $14.3 million, or 20.8%, 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 typically ranging from $200,000 to $4.0 million.  At June 30, 2004, the Bank had 23 commercial real estate and multi-family loans with principal balances greater than $1.5 million totaling $61.1 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, 2004, approximately $21.2 million, or 34.5%, of the Bank's multi-family loans and approximately $45.1 million, or 45.1%, 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, 2004, 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, 2004, the Bank's construction loans (including

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undisbursed loan funds) were $136.3 million, or 14.4% of loans held for investment, an increase of $17.5 million, or 14.7%, during fiscal 2004, which reflects the Bank's emphasis on this loan product.  Undisbursed loan funds at June 30, 2004 and 2003 were $78.1 million and $67.9 million, respectively.  The largest single borrower has four tract construction loans with a total outstanding balance of $5.4 million, secured by 175 units of single-family homes under construction in Coachella Valley, California, which were performing in accordance with their terms.



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





|                        | At June 30,
|----------------------- | -----------
|                        | 2004       
|                        | Amount     
|(Dollars In Thousands)  |            
|                        |            
|Short-term construction | $   97,317 
|Construction/permanent  | 38,948     
|                        | $ 136,265  



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 margin 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, 2004, custom construction loans were $51.5 million, with undisbursed loan funds of $30.3 million.



The Bank makes 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 construction 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 homebuyer 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 homebuyer is identified.  At June 30, 2004, speculative construction loans were $69.6 million, with undisbursed loan funds of $34.9 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 $1.0 million are approved by Bank personnel specifically designated to approve construction loans.  Members of the Bank's Loan Committee, comprised of the Chief Executive Officer, Chief Lending Officer, Chief Financial Officer, Senior Vice President - PBM
and Vice President - Commercial Real Estate Loans, approve all construction
loans over $1.0 million. Prior to approval of any construction loan, an

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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 tract or speculative 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 its own funds into a
loans-in-process account, which the Bank disburses consistent with the
completion of the subject property pursuant 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 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 additional 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 primarily 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 Bank's 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, 2004, commercial business loans were $13.8 million, or 1.5% 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. The Bank's commercial
business loans may be structured as term loans or as lines of credit. Lines of
credit are made at variable rates of interest equal

8

<PAGE>



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. 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.



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 oftentimes an insufficient source of repayment.  During fiscal 2004, the Bank recognized $415,000 in charge-offs on two commercial business loans to one borrower.  At June 30, 2004, the Bank had a $41,000 non-accrual commercial business loan to a single borrower.



Consumer and Other Loans.  At June 30, 2004, the Bank's consumer loans were $730,000, or 0.1%, of the Bank's loans held for investment, a decrease of $356,000, or 32.8%, during fiscal 2004.  The decrease in consumer loans was primarily attributable to loan payoffs resulting from lower interest rates.



The Bank offers open-ended lines of credit on either a secured or unsecured basis.  The Bank offers secured savings lines of credit which have an interest rate that is four percentage points above the FHLB Eleventh District COFI, which adjusts monthly.



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, 2004, the Bank had no consumer loans accounted for on a non-accrual basis.



Other loans, which primarily consist of land loans, were $7.4 million, or 0.8%, of the Bank's loans held for investment, an increase of $1.7 million, or 29.8%, during fiscal 2004.  The bank makes land loans, primarily lot loans, to accommodate borrowers who intend to build on the land within a specified period of time.  The majority of these land loans are for the construction of single family residences; however, the Bank may make short-term loans on a limited basis for the construction of commercial properties.  The terms are generally fixed rate with maturity between 18 to 36 months.

Mortgage Banking Activities



General.  The Bank's mortgage banking activities primarily consist 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.  Originations of loans during fiscal 2004, 2003 and 2002 were $1.50 billion, $1.63 billion and $1.26 billion, respectively.  Provident Bank Mortgage, a division of the Bank ("PBM"), held for investment loan originations were $409.4 million, $360.8 million and $159.3 million in fiscal 2004, 2003 and 2002, respectively.

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<PAGE>





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 962 loan brokers approved by the Bank who originate and submit loans at a markup over the Bank's daily published price.  Wholesale loans originated for sale in fiscal 2004, 2003 and 2002 were $617.5 million, $736.8 million and $672.1 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.  The Bank's loan officers generate retail loan originations primarily through referrals from realtors, builders, employees and customers.  As of June 30, 2004, PBM operated two retail offices within the Bank's facilities located in Riverside and Rancho Mirage and seven separate retail loan production offices located in Glendora, Riverside, City of Industry, Corona, 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 the 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 be more price sensitive than retail loan production, the Bank is seeking to originate a greater proportion of its loans through its retail operations.  Retail loans originated for sale in fiscal 2004, 2003 and 2002 were $475.2 million, $533.5 million and $431.4 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 to be held for sale were $63.8 million at June 30, 2004 (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 option contracts related to mortgage-backed securities as a hedge (see "Derivative Activities" on page 12).



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 held for investment (net of certain loan origination costs) to be deferred and amortized into interest income over the contractual life of the loan.  Origination fees and costs for loans originated for sale are deferred until the related loans are sold.  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 $1.3 million of net unamortized deferred loan origination costs at June 30, 2004.



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 12).

10

<PAGE>





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



|                                                     |                           |                                       |             | Year Ended June 30,
|---------------------------------------------------- | ------------------------- | ------------------------------------- | ----------- | -------------------
|                                                     |                           |                                       |             | 2004               
|(In Thousands)                                       |                           |                                      
|                                                     |                           |                                       |             |                    
|Loans originated for sale:                           |                           |                                       |             |                    
|                                                     | Retail originations       |                                       | $   484,411 |                    
|                                                     | Wholesale originations    |                                       | 626,988     |                    
|                                                     |                           | Total loans originated for sale (1)   |             | 1,111,399          
|                                                     |                           |                                       |             |                    
|Loans sold and settled:                              |                           |                                       |             |                    
|                                                     | Servicing released        |                                       | (930,235    | )                  
|                                                     | Servicing retained        |                                       | (224,998    | )                  
|                                                     |                           | Total loans sold (2)                  |             | (1,155,233         
|                                                     |                           |                                       |             |                    
|Loans originated for investment:                     |                           |                                       |             |                    
|                                                     | Mortgage loans:           |                                       |             |                    
|                                                     |                           | Single-family                         |             | 409,373            
|                                                     |                           | Multi-family (3)                      |             | 24,592             
|                                                     |                           | Commercial real estate (3)            |             | 32,044             
|                                                     |                           | Construction                          |             | 125,779            
|                                                     | Commercial business loans |                                       | 2,229       |                    
|                                                     | Consumer loan             |                                       | -           |                    
|                                                     | Other loans               |                                       | 5,241       |                    
|                                                     |                           | Total loans originated for investment |             | 599,258            
|                                                     |                           |                                       |             |                    
|Loans purchased for investment:                      |                           |                                       |             |                    
|                                                     | Mortgage loans:           |                                       |             |                    
|                                                     |                           | Multi-family                          |             | 8,000              
|                                                     |                           | Commercial real estate                |             | 3,698              
|                                                     |                           | Construction                          |             | 26,028             
|                                                     | Other loans               |                                       | -           |                    
|                                                     |                           | Total loans purchased for investment  |             | 37,726             
|                                                     |                           |                                       |             |                    
|Mortgage loan principal repayments                   |                           | (477,654                              | )           | (359,044           
|Real estate acquired in settlement of loans          |                           | -                                     |             | (1,172             
|Decrease (increase) in receivable from sale of loans |                           | 28,422                                |             | (47,661            
|Decrease in other items, net (4)                     |                           | (9,722                                | )           | (28,094            
|Net increase (decrease) in loans held for investment |                           |                                       |             |                    
|and loans held for sale                              |                           | $   134,196                           |             | $       153,165    

|(1) | Primarily comprised of PBM loans originated for sale, totaling $1.09 billion, $1.27 billion and $1.10 billion, respectively.                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Primarily comprised of PBM loans sold, totaling $1.12 billion, $1.24 billion and $1.17 billion, respectively.                                                           
|(3) | Reclassification of $18.5 million and $992,000 from commercial real estate loans to multi-family loans for the year ended June 30, 2003 and June 30, 2002, respectively.
|(4) | Includes net changes in undisbursed loan funds, deferred loan fees or costs, discounts or premiums 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 and foreclosure losses are generally the responsibility of the purchasing agency and not the Bank, except in the case of VA loans

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<PAGE>

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, 2004, there were seven loans sold to FHLMC under this commitment with an outstanding balance of $1.4 million.  The Bank has established a recourse reserve of $4,000 for potential losses on these loans.  To date, no losses have been experienced.



Loans sold by the Bank to the FHLB San Francisco under its MPF (Mortgage Partnership Finance) program



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, 2004, the Bank repurchased $79,000 of single-family mortgage loans as compared to $835,000 in fiscal 2003 and $1.1 million in fiscal 2002.



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 and management's assessment of projected loan fallout, 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 loan sale commitments are 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 loan 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, 2004, the Bank had a net loss of $859,000 attributable to the underlying derivative financial instruments.  At June 30, 2004, the Bank had outstanding commitments to sell loans of $37.5 million and commitments to originate loans of $63.8 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 option contracts on
government agency

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<PAGE>



mortgage-backed securities. At June 30, 2004, the Bank had
$10.0 million in put-option contracts outstanding, which provided $3.4 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 option contracts 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.

Loan Servicing



The Bank receives fees from a variety of institutional investors in return for performing the traditional services of collecting individual loan payments.  At June 30, 2004, the Bank was servicing $269.4 million of loans for others.  The Bank's loan servicing portfolio has increased this past year because the Bank has sold a portion of its loans on a servicing-retained basis, although the Bank still sells the majority of its loans originated for sale on a servicing- released basis.  To the extent loans were sold on a servicing-retained basis, the majority were sold to the FHLB San Francisco under the MPF program.  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.



Servicing assets are amortized in proportion to and over the period of the estimated net servicing income and are carried at the lower cost or fair value.  The fair value of servicing assets is determined based on the present value of estimated net future cash flows related to contractually specified servicing fees.  The Corporation periodically evaluates servicing assets for impairment, which is measured as the excess of cost over fair value.  This review is performed on a disaggregated basis, based on loan type and interest rate.  Generally, loan servicing becomes more valuable when interest rates increase and less valuable when interest rates decline.  In estimating fair values at June 30, 2004 and 2003, the Corporation used a weighted-average prepayment speed of 6.82% and 25.79%, respectively, and a weighted-average discount rate of 9.09% and 9.39%, respectively.  No impairment was identified as of June 30, 2004 and 2003.  Servicing assets had a carrying value of $1.6 million and a fair value of $2.6 million at June 30, 2004.  Servicing assets at June 30, 2003 had a carrying value of $289 and a fair value of $356.



Rights to future income from serviced loans that exceed contractually specified servicing fees are recorded as interest-only strips.  Interest-only strips are carried at fair value, utilizing the same assumptions as used to value the related servicing assets, with any unrealized gain or loss, net of tax, recorded as a component of accumulated other comprehensive income (loss).  Interest-only strips had a fair value of $500, gross unrealized gains of $193, and amortized cost of $307 at June 30, 2004.   Interest-only strips were not significant at June 30, 2003.

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, are initiated.  Interest income is reduced by the full amount of accrued and uncollected interest on such loans.

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<PAGE>



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



|                            | At June 30,   
|--------------------------- | --------------
|                            | 2004          
|                            | 60 - 89 Days  
|                            | Numberof
Loans
|(Dollars In Thousands)      |               
|Mortgage loans:             |               
|Single-family               | -             
|Construction                | -             
|Commercial business
 
loans | -             
|Consumer loans              | 1             
|Total                       | 1             





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<PAGE>



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 Standards ("SFAS") No. 15 at the dates indicated.



|                                            |               |         | At June 30, 
|------------------------------------------- | ------------- | ------- | ------------
|                                            |               |         | 2004        
|(Dollars In Thousands)                      |              
|                                            |               |         |             
|Loans accounted for on a non-accrual basis: |               |         |             
|Mortgage loans:                             |               |         |             
|                                            | Single-family | $ 1,044 |             
|Commercial business loans                   | 41            |         | 32          
|Consumer loans                              | -             |         | 161         
|                                            | Total         | 1,085   |             
|                                            |               |         |             
|Accruing loans which are contractually      |               |         |             
|past due 90 days or more                    | -             |         | -           
|                                            |               |         |             
|Total of non-accrual and 90 days past       |               |         |             
|due loans                                   | 1,085         |         | 1,502       
|                                            |               |         |             
|Foreclosed real estate, net                 | -             |         | 523         
|Total non-performing assets                 | $ 1,085       |         | $ 2,025     
|                                            |               |         |             
|Restructured loans                          | $          -  |         | $          -
|                                            |               |         |             
|Non-accrual and 90 days or more             |               |         |             
|past due loans as a percentage of           |               |         |             
|loans held for investment, net              | 0.13%         |         | 0.20%       
|                                            |               |         |             
|Non-accrual and 90 days or more             |               |         |             
|past due loans as a percentage of           |               |         |             
|total assets                                | 0.08%         |         | 0.12%       
|                                            |               |         |             
|Non-performing assets as a percentage       |               |         |             
|of total assets                             | 0.08%         |         | 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, 2004 had the impaired loans been current in accordance with their original terms, amounted to $101,000.  The amount of interest income included in the results of operations on such loans for the year ended June 30, 2004 amounted to $58,000.  Interest income foregone on restructured loans for such periods was not material.



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

15

<PAGE>



less cost of sale. Subsequent declines in value are charged
to operations. At June 30, 2004, the Bank had no foreclosed real estate.



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 $10.2 million, at June 30, 2004, 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 institution review and classify its assets on a regular basis.  In addition, in connection with examinations of 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 weaknesses and are characterized by the distinct possibility that the 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 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 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,
|---------------------------- | ----- | ------- | -----------
|                             |       |         | 2004       
|(Dollars In Thousands)       |       |        
|                             |       |         |            
|Special mention assets       |       | $ 2,195 |            
|Substandard assets           |       | 4,880   |            
|                             | Total |         | $ 7,075    
|                             |       |         |            
|Total classified assets as a |       |         |            
|percentage of total assets   |       | 0.54%   |            



The Bank's classified assets decreased $4.8 million, or 40.3%, to $7.1 million at June 30, 2004 from $11.9 million at June 30, 2003.  This decrease was primarily attributable to general improvements in the real estate market and business conditions in the Bank's primary market area.



As set forth below, assets classified as special mention and substandard as of June 30, 2004 included 52 loans and properties totaling approximately $7.1 million.



|                          |               |    | Number of |     |                 |       |             |       |        
|------------------------- | ------------- | -- | --------- | --- | --------------- | ----- | ----------- | ----- | -------
|                          |               |    | Loans     |     | Special Mention |       | Substandard |       | Total  
|(Dollars In Thousands)    |               |    |           |    
|                          |               |    |           |     |                 |       |             |      
|Mortgage loans:           |               |    |           |     |                 |       |             |      
|                          | Single-family | 20 |           |     | $    398        |       | $ 3,090     |       | $ 3,488
|                          | Construction  | 8  |           |     | 1,642           |       | -           |       | 1,642  
|Commercial business loans | 24            |    |           | 155 |                 | 1,790 |             | 1,945
|                          | Total         | 52 |           |     | $ 2,195         |       | $ 4,880     |       | $ 7,075



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<PAGE>



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 a provision for loan losses against the Bank's operations.



The Bank has established a methodology for the determination of provision 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.  Homogeneous loans, 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, multi-family 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 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

17

<PAGE>



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, 2004, the Bank had an allowance for loan losses of $7.6 million, or 0.88% of gross loans held for investment compared to an allowance for loan losses at June 30, 2003 of $7.2 million, or 0.96% of gross loans held for investment.  An $819,000 provision for loan losses was recorded in fiscal 2004, compared to $1.1 million in fiscal 2003.  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 recommend 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.

18

<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,   
|--------------------------------------------- | ----------------------
|2004                                          |                       
|(Dollars In Thousands)                        |                       
|                                              |                       
|Allowance at beginning of period              | $ 7,218               
|Provision for loan losses                     | 819                   
|Recoveries:                                   |                       
|Mortgage loans:                               |                       
|                                              | Single-family         
|                                              | Multi-family          
|Consumer loans                                | 1                     
|                                              |                       
|                                              |                       
|Charge-offs:                                  |                       
|Mortgage loans:                               |                       
|                                              | Single-family         
|                                              | Commercial real estate
|Commercial business loans                     | 415                   
|Consumer loans                                | 9                     
|Other loans                                   | -                     
|                                              |                       
|Net charge-offs                               | 423                   
|Balance at end of period                      | $ 7,614               
|                                              |                       
|Allowance for loan losses as a percentage of  |                       
|gross loans held for investment               | 0.88%                 
|                                              |                       
|Net charge-offs as a percentage of average    |                       
|loans receivable, net, during the period      | 0.05%                 
|                                              |                       
|Allowance for loan losses as a percentage of  |                       
|non-performing loans at the end of the period | 701.75%               





19

<PAGE>



The following table sets forth the breakdown of the allowance for loan losses by loan category at 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,
|------------------------------------ | -----------
|                                     | 2004       
|                                     | Amount     
|(Dollars In Thousands)               |            
|                                     |            
|Mortgage loans:                      |            
|Single-family                        | $ 1,561    
|Multi-family                         | 1,177      
|Commercial real estate               | 3,095      
|Construction                         | 421        
|Commercial business loans            | 1,197      
|Consumer loans                       | 16         
|Other loans                          | 147        
|Unallocated                          | -          
|Total allowance for
    
loan losses | $ 7,614    



20

<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 27 and "Liquidity and Capital Resources" on page 50).  In April 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, 2004, the Corporation's investment securities portfolio was $252.6 million, which primarily consisted of federal agency obligations.  A total of $190.4 million of the Corporation's investment securities was classified as available for sale.  All other securities were classified as held to maturity.



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 | $   59,199               |         | $   58,211 |         | 23.13  | %          
|                               | U.S. government MBS               | 5                        |         | 7          |         | -      |            
|                               | Corporate bonds                   | 2,796                    |         | 2,832      |         | 1.13   |            
|                               | Certificates of deposit           | 200                      |         | 200        |         | 0.08   |            
|                               |                                   |                          |         |            |         |        |            
|                               |                                   | Total held to maturity   | 62,200  |            | 61,250  |        | 24.34      
|                               |                                   |                          |         |            |         |        |            
|Available for sale securities: |                                   |                          |         |            |         |        |            
|                               | U.S. government agency securities | 24,831                   |         | 24,315     |         | 9.66   |            
|                               | U.S. government MBS               | 17,723                   |         | 17,533     |         | 6.97   |            
|                               | U.S. government agency MBS        | 137,517                  |         | 137,329    |         | 54.58  |            
|                               | Private issue CMO                 | 10,507                   |         | 10,416     |         | 4.14   |            
|                               | FHLMC common stock                | 12                       |         | 759        |         | 0.30   |            
|                               | FNMA common stock                 | 1                        |         | 28         |         | 0.01   |            
|                               |                                   |                          |         |            |         |        |            
|                               |                                   | Total available for sale | 190,591 |            | 190,380 |        | 75.66      
|                               |                                   |                          |         |            |         |        |            
|                               | Total investment securities       | $ 252,791                |         | $ 251,630  |         | 100.00 | %          



21

<PAGE>



As of June 30, 2004, the Corporation held investments with unrealized holding losses totaling $2.5 million, consisting of the following:





|                                   | Less than 12 months    |               | 12 months or more |          | Total               
|---------------------------------- | ---------------------- | ------------- | ----------------- | -------- | --------------------
|                                   | Fair                   | Unrealized    |                   | Fair     | Unrealized          
|Description  of Securities         | Value                  | Losses        |                   | Value    | Losses              
|U.S. government agency securities: |                        |               |                   |          |                     
|                                   | FNMA                   | $       6,833 | $      156        |          | $                  -
|                                   | FHLMC                  | 9,911         | 97                |          | 3,809               
|                                   | FHLB                   | 48,040        | 828               |          | 2,881               
|                                   | FFCB (1)               | 5,872         | 128               |          | -                   
|U.S. government securities:        |                        |               |                   |          |                     
|                                   | GNMA (2)               | 17,533        | 190               |          | -                   
|U.S. government agency MBS:        |                        |               |                   |          |                     
|                                   | FNMA                   | 42,455        | 308               |          | 5,376               
|                                   | FHLMC                  | 16,530        | 190               |          | -                   
|Private issue CMO:                 |                        |               |                   |          |                     
|                                   | Washington
Mutual, Inc | 10,416        | 91                |          | -                   
|Total                              | $ 157,590              | $ 1,988       |                   | $ 12,066 | $ 528               



(1)   Federal Farm Credit Banks ("FFCB")
(2)   Government National Mortgage Association ("GNMA")



As of June 30, 2004, the unrealized holding losses relate to a total of 47 investment securities, which consist of 14 adjustable rate MBS, three adjustable CMO and 30 fixed rate government agency debt obligations, which have been in an unrealized loss position (ranging from



The following table sets forth the outstanding balance, maturity and weighted average yield of the investment securities at June 30, 2004:



|                       |  |        | 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       |  | $7,174 |          | 4.59% |              | $55,026 |               | 2.85%         |       | -
|Available for sale (1) |  | -      |          | -     |              | 29,452  |               | 3.18%         |       | -
|Total                  |  | $7,174 |          | 4.59% |              | $84,478 |               | 2.96%         |       | -



(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.

22

<PAGE>



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 34.1% of the Bank's deposit portfolio at June 30, 2004, compared to 38.6% at June 30, 2003.  The Bank attempts 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 39).



The following table sets forth information concerning the Bank's weighted-average interest rate of deposits at June 30, 2004.



|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 | $                - |                | $     41,551
|              |      |                       |                                          |                    |                |             
|0.52          |      | N/A                   | Checking accounts - interest bearing .   | -                  |                | 123,621     
|              |      |                       |                                          |                    |                |             
|1.46          |      | N/A                   | Savings accounts..                       | 10                 |                | 348,911     
|              |      |                       |                                          |                    |                |             
|1.06          |      | N/A                   | Money market accounts ..                 | -                  |                | 46,858      
|              |      |                       |                                          |                    |                |             
|              |      |                       | Time deposits:                           |                    |                |             
|1.77          |      | 18 to 36 months       | Fixed-term, variable rate                | 1,000              |                | 2,103       
|1.26          |      | 30 days or less       | Fixed-term, fixed rate .                 | 1,000              |                | 126         
|-             |      | 31 to 90 days         | Fixed-term, fixed rate .                 | 1,000              |                | -           
|0.92          |      | 91 to 180 days        | Fixed-term, fixed rate .                 | 1,000              |                | 45,635      
|0.99          |      | 181 to 365 days       | Fixed-term, fixed rate .                 | 1,000              |                | 39,215      
|1.88          |      | Over 1 to 2 years     | Fixed-term, fixed rate .                 | 1,000              |                | 47,412      
|2.33          |      | Over 2 to 3 years     | Fixed-term, fixed rate .                 | 1,000              |                | 50,012      
|3.51          |      | Over 3 to 5 years     | Fixed-term, fixed rate .                 | 1,000              |                | 39,500      
|4.42          |      | Over 5 to 10 years    | Fixed-term, fixed rate .                 | 1,000              |                | 65,681      
|5.65          |      | Over 10 years         | Fixed-term, fixed rate .                 | 1,000              |                | 414         
|1.58%         |      |                       |                                          |                    |                | $ 851,039   



23

<PAGE>



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, 2004.



|                          | Maturity Period |              | Amount   
|------------------------- | --------------- | ------------ | ---------
|(In Thousands)            |                 |             
|                          |                 |             
|Three months or less      |                 | $     31,937
|Over three to six months  |                 | 5,584       
|Over six to twelve months |                 | 5,602       
|Over twelve months        |                 | 65,539      
|                          | Total           |              | $ 108,662

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,
|---------------------------------------- | ------------------------------------ | ---------------------- | -----------
|                                         |                                      |                        | 2004       
|                                         |                                      |                        |            
|                                         |                                      |                        |            
|                                         |                                      |                        | Amount     
|(Dollars In Thousands)                   |                                      |                        |            
|                                         |                                      |                        |            
|Checking accounts - non-interest bearing |                                      | $  41,551              |            
|Checking accounts - interest bearing     |                                      | 123,621                |            
|Savings accounts                         |                                      | 348,911                |            
|Money market accounts                    |                                      | 46,858                 |            
|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            |                        | 2,103      
|                                         | Total                                |                        | $ 851,039  





24

<PAGE>



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,           |           |     
|-------------- | ----- | ----------- | --------- | ----------- | --------- | --------------------- | --------- | ----
|               |       |             |           | 2004        |           | 2003                  |           | 2002
|(In Thousands) |       |            
|               |       |             |           |             |           |                       |           |     
|Below 1.00%    |       | $    40,867 |           | $    30,972 |           | $                  84
|1.00 to 1.99%  |       | 74,727      |           | 92,474      |           | 62,051               
|2.00 to 2.99%  |       | 78,066      |           | 38,404      |           | 42,385               
|3.00 to 3.99%  |       | 43,517      |           | 66,111      |           | 74,298               
|4.00 to 4.99%  |       | 37,816      |           | 40,831      |           | 79,399               
|5.00 to 5.99%  |       | 10,320      |           | 11,548      |           | 19,807               
|6.00 to 6.99%  |       | 4,463       |           | 9,504       |           | 57,001               
|7.00 to 7.99%  |       | 322         |           | 908         |           | 1,390                
|8.00% and over |       | -           |           | -           |           | 182                  
|               | Total |             | $ 290,098 |             | $ 290,752 |                       | $ 336,597



Time Deposits by Maturities.



|                 |       |           |  |                  |  |                       |  |                      |  |                      |  |             | 
|---------------- | ----- | --------- |  | ---------------- |  | --------------------- |  | -------------------- |  | -------------------- |  | ----------- | 
|                 |       |           |  |                  |  | One to                |  | Two to               |  | Three to             |  | After       | 
|                 |       |           |  | Less Than        |  | Two                   |  | Three                |  | Four                 |  | Four        | 
|                 |       |           |  | One Year         |  | Years                 |  | Years                |  | Years                |  | Years       | 
|(In Thousands)   |      
|                 |       |           |  |                  |  |                       |  |                      |  |                      |  |             | 
|Below 1.00%      |       | $  40,056 |  | $            811 |  | $                   - |  | $                  - |  | $                  - |  | $    40,867
|1.00 to 1.99%    |       | 62,476    |  | 11,688           |  | 537                   |  | 26                   |  | -                    |  | 74,727     
|2.00 to 2.99%    |       | 8,059     |  | 64,152           |  | 3,776                 |  | 1,737                |  | 342                  |  | 78,066     
|3.00 to 3.99%    |       | 7,446     |  | 3,832            |  | 8,683                 |  | 13,629               |  | 9,927                |  | 43,517     
|4.00 to 4.99%    |       | 6,693     |  | 1,316            |  | 13,278                |  | 7,778                |  | 8,751                |  | 37,816     
|5.00 to 5.99%    |       | 1,461     |  | 1,312            |  | 5,483                 |  | 1,853                |  | 211                  |  | 10,320     
|6.00 to 6.99%    |       | 2,004     |  | 2,459            |  | -                     |  | -                    |  | -                    |  | 4,463      
|7.00 to and over |       | 322       |  | -                |  | -                     |  | -                    |  | -                    |  | 322        
|                 |       |           |  |                  |  |                       |  |                      |  |                      |  |             | 
|                 | Total | $ 128,517 |  | $ 85,570         |  | $ 31,757              |  | $ 25,023             |  | $ 19,231             |  | $ 290,098  



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,
|--------------------------------------------------- | -------------- | --------- | --------- | ---------------------------------
|                                                    |                |           |           | 2004                             
|(In Thousands)                                      |                |          
|                                                    |                |           |           |                                  
|Beginning balance                                   |                | $ 754,106 |           | $ 677,448                        
|                                                    |                |           |           |                                  
|Net deposits (withdrawals) before interest credited |                | 83,591    |           | 60,377                           
|Interest credited                                   |                | 13,342    |           | 16,281                           
|Net increase (decrease) in deposits                 |                | 96,933    |           | 76,658                           
|                                                    |                |           |           |                                  
|                                                    | Ending balance |           | $ 851,039 |                                  

25

<PAGE>





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.  Total first mortgage loans pledged to the FHLB-San Francisco was $345.2 million at June 30, 2004 as compared to $348.8 million at June 30, 2003.  In addition, the Bank pledged investment securities totaling $206.9 million at June 30, 2004 as compared to $242.2 million at June 30, 2003 to collateralize its FHLB advances under the Securities-Backed Credit ("SBC") facility.  At June 30, 2004, the Bank had $324.9 million of borrowings from the FHLB-San Francisco with a weighted-average rate of 4.01%, of which $18.0 million was under the SBC facility.  Such borrowings mature between 2004 and 2021.

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, |           
|------------------------------------------------------------ | ------------- | ----------- | --------------------------------- | ----------
|                                                             |               |             | 2004                              |           
|(Dollars In Thousands)                                       |               |            
|                                                             |               |             |                                   |           
|Balance outstanding at the end of period:                    |               |             |                                   |           
|                                                             | FHLB advances | $ 324,877   |                                   | $ 367,938 
|                                                             |               |             |                                   |           
|Weighted average rate at the end of period:                  |               |             |                                   |           
|                                                             | FHLB advances | 4.01%       |                                   | 3.50%     
|                                                             |               |             |                                   |           
|Maximum amount of borrowings outstanding at any month end:   |               |             |                                   |           
|                                                             | FHLB advances | $ 385,385   |                                   | $ 367,938 
|                                                             |               |             |                                   |           
|Average short-term borrowings (1)                            |               |             |                                   |           
|With respect to:                                             |               |             |                                   |           
|                                                             | FHLB advances | $    97,638 |                                   | $  124,226
|                                                             |               |             |                                   |           
|Weighted average short-term borrowing rate during the period |               |             |                                   |           
|With respect to:                                             |               |             |                                   |           
|                                                             | FHLB advances | 2.42%       |                                   | 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  $45.0 million, none of which was outstanding at June 30, 2004 and 2003.



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, 2004.

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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 (through August 31, 2003), (iii) selling property insurance and life insurance, primarily to the Bank's customers (through August 31, 2003), and (iv) holding real estate for investment.  Effective September 1, 2003,

REGULATION



General



The Bank, as a federally-chartered savings institution, is subject to federal regulation and oversight by the OTS extending to all aspects of its operations.  The Bank also is subject to regulation and examination by the FDIC, which insures the deposits of the Bank to the maximum extent permitted by law, and requirements established by the Federal Reserve Board.  Federally-chartered savings institutions are required to file periodic reports with the OTS and are subject to periodic examinations by the OTS and the FDIC.  Federal laws and regulations prescribe the investment and lending authority of savings institutions, and these institutions are prohibited from engaging in any activities not permitted by the laws and regulations.  This regulation and supervision primarily is intended for the protection of depositors and not for the purpose of protecting shareholders.



The OTS regularly examines the Bank and prepares reports for the consideration of the Bank's Board of Directors on any deficiencies that it may find in the Bank's operations.  The FDIC also has the authority to examine the Bank in its roles as the administrator of the SAIF.  The Bank's relationship with its depositors and borrowers also is regulated to a great extent by both federal and state laws, especially in matters such as the ownership of savings accounts and the form and content of the Bank's mortgage requirements.  Any change in these regulations, whether by the FDIC, the OTS or Congress could have a material adverse impact on the Company, the Bank and their operations.



Federal Regulation of Savings Institutions



Office of Thrift Supervision.  The OTS has extensive authority over the operations of savings institution.



In addition, the investment, lending and branching authority of the Bank is prescribed by federal laws and it is prohibited from engaging in any activities not permitted by these laws.  For example, no savings institution may invest in non-investment grade corporate debt securities.  In addition, the permissible level of investment by federal institutions in loans secured by non-residential real property may not exceed 400% of total capital, except with approval of the OTS.  Federal savings institutions are also generally authorized to branch nationwide.  The Bank is in compliance with the noted restrictions



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

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consolidated subsidiaries.  The Bank's annual OTS assessment for the fiscal year ended June 30, 2004 was $224,000.



Federal Home Loan Bank System.



As a member, the Bank is required to purchase and maintain stock in the FHLB-San Francisco.  At June 30, 2004, the Bank had $27.9 million in FHLB stock, which was in compliance with this requirement.  In past years, the Bank has received substantial dividends on its FHLB stock.  Over the past two fiscal years such dividends have averaged 5.10% and were 3.91% for the fiscal year ended June 30, 2004.



Under federal law, the FHLB is required to provide funds for the resolution of troubled savings institutions and to contribute to low and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions



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



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 an 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., a 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.  The FDIC makes 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 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.



Since January 1, 1997, the premium schedule for BIF and SAIF insured institutions has ranged from 0 to 27 basis points.  However, SAIF- 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 equal to approximately 1.5 basis

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<PAGE>



points for each $100 in domestic deposits annually.  These assessments, which may be revised based upon the level of BIF and SAIF deposits, will continue until the bonds mature.



Under the Federal Deposit Insurance Act ("FDIA"), the FDIC may terminate deposit insurance 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.



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 8.0%, a ratio of Tier I (core) capital to risk-weighted assets of less than 4.0%, or a ratio of core capital to total assets of less than 4.0% (3.0% 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 6.0%, a Tier I capital ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be "significantly undercapitalized" and an institution that has a tangible capital to total assets ratio equal to or less than 1.5% 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."



At June 30, 2004, 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.



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%



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

29

<PAGE>



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, 2004, the Bank had tangible capital of $90.4 million, or 6.9% of adjusted total assets, which is approximately $70.8 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 3.0% or 4.0% of adjusted total assets, depending on an institution's supervisory rating.  Core capital generally consists of tangible capital.  At June 30, 2004, the Bank had core capital equal to $90.4 million, or 6.9% of adjusted tangible assets, which is $38.0 million above the 4.0% 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.



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, 2004, the Bank had total risk-based capital of approximately $95.0 million, including $90.4 million in core capital and $4.6 million in qualifying supplementary capital, and risk-weighted assets of $766.8 million, or a total capital ratio of 12.4% to risk-weighted assets. This amount was $33.7 million above the 8.0% 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 4.0% core capital ratio, a 4.0% Tier 1 capital ratio or an 8.0% 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.

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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.



The Bank may make a capital distribution without OTS approval provided that the Bank notify the OTS 30 days before it declares the capital distribution and that the following requirements are met: (i) the Bank has a regulatory rating in one of the two top examination categories; (ii) the Bank is not of supervisory concern, and will remain adequately or well capitalized, as defined in the OTS prompt corrective action regulations, following the proposed distribution; and (iii) the distribution does not exceed the Bank's net income for the calendar year-to-date plus retained net income for the previous two calendar years (less any dividends previously paid).  If the Bank does not meet these stated requirements, it must obtain the prior approval of the OTS before declaring any proposed distributions.



If the Bank's capital falls below its regulatory requirements or the OTS notifies it that it is in need of more than normal supervision, the Bank's ability to make capital distributions will be restricted.  In addition, no distribution will be made if OTS notifies the Bank that a proposed capital distribution would constitute an unsafe and unsound practice, which would otherwise be permitted by the regulation.



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, 2004, the Bank's limit on loans to one borrower was $16.0 million.  At June 30, 2004, the Bank's largest loan commitment to a related group of borrowers was $13.1 million.  Of this commitment, $ 7.7 million has been disbursed in the form of four loans, which are performing according to their original terms; while $2.3 million of these loans were sold to investors in the form of participation loans.



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 and orders.



The OTS may determine that the continuation by a savings institution of its 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 that 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.



On April 1, 2003, the Federal Reserve's Regulation W, which comprehensively amends sections 23A and 23B of the Federal Reserve Act, became effective.  The Federal Reserve Act and Regulation W are applicable to savings institutions such as the Bank.  The Regulation unifies and updates staff interpretations issued over the years,

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incorporates several new interpretative proposals (such as to clarify when transactions with an unrelated third party will be attributed to an affiliate) and addresses new issues arising as a result of the expanded scope of nonbanking activities engaged in by banks and bank holding companies in recent years and authorized for financial holding companies under the Financial Services Modernization Act of 1999.



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 the same as for loans to unaffiliated individuals.



Community Reinvestment Act.



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, and any 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 $25,000 per day, or $1.1 million per day in especially egregious cases.  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 the Director does not take action, the FDIC has authority to take such action under certain circumstances.  Federal law also establishes criminal penalties for certain violations.



Environmental Issues Associated with Real Estate Lending.



To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potential hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property.



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 Financial Services Modernization Act.  On November 12, 1999, the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 ("GLBA") 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 eliminates many federal and state law barriers to affiliations among banks, securities firms, insurance companies and other financial service providers;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                  
| | (b) | provided a uniform framework for the functional regulation of the activities of banks, savings institutions and their holding companies;                                                         
| |     |                                                                                                                                                                                                  
| | (c) | broadened the activities that may be conducted by national banks, banking subsidiaries of bank holding companies and their financial subsidiaries;                                               
| |     |                                                                                                                                                                                                  
| | (d) | provided an enhanced framework for protecting the privacy of consumer information;  and                                                                                                          
| |     |                                                                                                                                                                                                  
| | (e) | addressed a variety of other legal and regulatory issues affecting day-to-day operations and long-term activities of financial institutions.                                                     

The GLBA also imposes certain obligations on financial institutions to develop privacy policies, restrict the sharing of nonpublic customer data with nonaffiliated parties at the customer's request, and establish procedures and practices to protect and secure customer data. These privacy provisions were implemented by regulations that were effective on November 12, 2000. Compliance with the privacy provisions was required by July 1, 2001.



Acquisitions.  Federal law and OTS regulations issued thereunder generally prohibit a savings and loan holding company, without prior OTS approval, from acquiring more than 5% of the voting stock of any other savings institution or savings and loan holding company or controlling the assets thereof.  They also prohibit, among other things, any director or officer of a savings and loan holding company, or any individual who owns or controls more than 25% of the voting shares of such holding company, from acquiring control of any savings institution not a subsidiary of such savings and loan holding company, unless the acquisition is approved by the OTS.



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.

The USA Patriot Act.

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

- All financial institutions must establish anti-money laundering programs that include (i) internal policies, procedures and controls, (ii) specific designation of an anti-money laundering compliance officer, (iii) ongoing employee training programs and (iv) an independent audit function to test the anti-money laundering program.





















Our policies and procedures have been updated to reflect the requirements of the USA Patriot Act.  No significant changes in our business or customer practices were required as a result of the implementation of these requirements.



Sarbanes-Oxley Act.  The Sarbanes-Oxley Act 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.



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 related rules and mandates.  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.



The Sarbanes-Oxley Act addresses, among other matters:































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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 29).

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, 2004, 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.



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 2004, the Bank declared and paid cash dividends to the Corporation of $8.0 million while the Corporation declared and paid cash dividends to the shareholders of $2.4 million.



Corporate Alternative Minimum Tax.  The Internal Revenue Code of 1986 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 to



Non-Qualified Compensation Tax Benefits.  During fiscal 2004, 1,451 shares of common stock under the Management Recognition Plan ("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, 59,625 common stock option contracts to purchase shares of the Corporation's common stock were exercised as non-qualified stock option contracts during fiscal 2004.  The federal tax benefit from the non-qualified compensation in fiscal 2004 was $252,000.

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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, 2004, the total net state tax rate was 7.4%.  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 2004, as described under the Federal Taxation section, were $97,000.



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.



EXECUTIVE OFFICERS



The following table sets forth information with respect to the executive officers of the Corporation and the Bank.

|                  |         | Position               
|----------------- | ------- | -----------------------
|Name              | Age (1) | Corporation            
|Craig G. Blunden  | 56      | Chairman, President and
|                  |         | Chief Executive Officer
|                  |         |                        
|Lilian Brunner    | 49      | -                      
|                  |         |                        
|                  |         |                        
|Thomas "Lee" Fenn | 55      | -                      
|                  |         |                        
|                  |         |                        
|Richard L. Gale   | 53      | -                      
|                  |         |                        
|                  |         |                        
|Donavon P. Ternes | 44      | Chief Financial Officer
|                  |         | Corporate Secretary    





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.

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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.



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.



Item 2.  Properties



At June 30, 2004, the net book value of the Bank's property (including land and buildings) and its furniture, fixtures and equipment was $7.9 million.  The Bank's home office is located in Riverside, California.  Including the home office, the Bank has 12 banking offices, 11 of which are located in Riverside County in the cities of Riverside (4), Moreno Valley, Hemet, Sun City, Rancho Mirage, Corona, Temecula and Blythe and one is located in Redlands, San Bernardino County, California.  The Bank owns nine of the banking offices and three are leased.  The leases expire from 2004 to 2013.  The Bank also has eight separate loan production offices, which are located in City of Industry, Fullerton, Glendora, La Quinta, Corona, Rancho Cucamonga, Riverside, and Torrance, California.  All of these offices are leased.  The leases expire from 2004 to 2009.



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, 2004.

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PART II



Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



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, 2004, there were approximately 359 registered stockholders of record.



|               |      |  | First                |  | Second              |  | Third            |  | Fourth         
|-------------- | ---- |  | -------------------- |  | ------------------- |  | ---------------- |  | ---------------
|               |      |  | (Ended September 30) |  | (Ended December 31) |  | (Ended March 31) |  | (Ended June 30)
|               |      |  |                      |  |                     |  |                  |  |                
|2004 Quarters: |      |  |                      |  |                     |  |                  | 
|               | High |  | $ 20.39              |  | $ 25.28             |  | $ 25.98          |  | $ 25.90        
|               | Low  |  | $ 19.56              |  | $ 20.05             |  | $ 22.74          |  | $ 23.50        
|               |      |  |                      |  |                     |  |                  |  |                
|2003 Quarters: |      |  |                      |  |                     |  |                  | 
|               | High |  | $ 16.63              |  | $ 17.87             |  | $ 19.21          |  | $ 21.00        
|               | Low  |  | $ 13.67              |  | $ 14.84             |  | $ 17.60          |  | $ 18.67        
|               |      |  |                      |  |                     |  |                  |  |                



The Corporation started a quarterly cash dividend policy on July 24, 2002.  Quarterly dividends of $0.07, $0.07, $0.10 and $0.10 per share were paid for the quarters ended September 30, 2003, December 31, 2003, March 31, 2004 and June 30, 2004, respectively.  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.



The Corporation continues to repurchase its common stock consistent with the Board approved stock repurchase plan.  On June 28, 2004, the Corporation announced a plan regarding the repurchase of 5% of its common stock or approximately 354,585 shares, all of which are still available for repurchase.  During fiscal 2004, a total of 516,627 shares were repurchased at an average cost of $21.20 per share.



The table below sets forth information regarding the Corporation's repurchases of its common stock during fourth quarter of fiscal 2004.



|Period               | (a) Total Number of Shares Purchased | (b) Average PricePaid per Share | (c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plan | (d) Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plan
|-------------------- | ------------------------------------ | ------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------------------------------
|April 2004           | -                                    |                                 | -                                                                       |                                                                      
|May 4 - May 19, 2004 | 35,000                               |                                 | 23.99                                                                   |                                                                      
|June 17, 2004        | 81,669                               |                                 | 24.05                                                                   |                                                                      
|Total                | 116,669                              |                                 | $ 24.03                                                                 |                                                                      



(1)    On June 28, 2004, the Corporation announced the stock repurchase of up to 354,585 shares.





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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 Notes to the Consolidated Financial Statements 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 SEC.

Critical Accounting Policies



The discussion and analysis of the Corporation's financial condition and results of operations are based upon the Corporation's 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 allowance is based on two principles of accounting:  (i) SFAS No. 5, "Accounting for Contingencies," which requires that losses be accrued when they are probable of occurring and can be estimated; and (ii) SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures," which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.  The allowance has three components: (i)
a formula allowance for groups of homogeneous loans, (ii) a specific valuation
allowance for identified problem loans and (iii) an unallocated allowance. Each
of these components is based upon estimates that can change over time. The
formula allowance is based primarily on historical experience and as a result
can differ from actual losses incurred in the future. The history is reviewed at
least quarterly and adjustments are made as needed. Various techniques are used
to arrive at specific loss estimates, including historical loss information,
discounted cash flows and fair market value of collateral. The use of these
values is inherently subjective and the actual losses could be greater or less
than

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<PAGE>



the estimates. For further details, see the section entitled
"Comparison of Operating Results for the Year Ended June 30, 2004 and 2003 -
Provision for Loan Losses" narrative on page 43.



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 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.  Management considers this accounting policy to be a critical accounting policy.  The Bank's derivatives are primarily the result of its mortgage banking activities in the form of commitments to extend credit, commitments to sell loans and option contracts to hedge the risk of the commitments.  Estimates of the percentage of commitments to extend credit on loans to be held for sale that may 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.  During the third quarter of fiscal 2004, the Corporation adopted the SEC guidance regarding loan commitments that are recognized as derivatives pursuant to SFAS No. 133.  As a result of implementing the SEC Staff Accounting Bulletin No. 105, "Application of Accounting Principles to Loan Commitments," the Corporation excluded the recognition of servicing released premiums in the valuation of commitments to extend credit on loans to be held for sale.  The Corporation's previous practice had been to recognize, at the inception of the rate lock, the anticipated servicing released premiums on the underlying loans.  The Corporation elected to prospectively apply this guidance to new loan commitments initiated after January 1, 2004.

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's operating strategies for the next three years are designed to change the composition of, 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.

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<PAGE>





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.

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, 2004 and the effect such obligations are expected to have on the Corporation's liquidity and cash flows in future periods:





|                            | Payments Due by Period
|--------------------------- | ----------------------
|                            | Less than             
|(In Thousands)              | 1 year                
|Operating lease obligations | $       581           
|Time deposits               | 134,624               
|FHLB borrowings             | 80,587                
|Total                       | $ 215,792             



The expected obligations for time deposits and FHLB borrowings include anticipated interest accruals based on respective contractual terms.



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 Statements of Financial Condition.  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, 2004 and June 30, 2003



Total assets increased $57.5 million, or 5%, to $1.32 billion
at June 30, 2004 from $1.26 billion at June 30, 2003 primarily as a result of
increases in loans held for investment, partly offset by decreases in investment
securities and receivable from sale of loans. The loans held for investment
increased $118.3 million, or 16%, to $862.5 million at June 30, 2004 from $744.2
million at June 30, 2003 primarily as a result of originating $637.0 million of
loans held for investment, which was partly offset by $477.7 million of loan
prepayments. These prepayments were

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<PAGE>



attributable to the extraordinarily high volume of refinance
activity during fiscal 2004 in connection with the low interest rate
environment. The receivable from sale of loans decreased $28.4 million, or 25%,
to $86.5 million at June 30, 2004 from $114.9 million at June 30, 2003,
resulting from the timing difference between loan sales and loan sale
settlements.



The Bank originated approximately $1.71 billion in new loans, primarily through PBM, and purchased $37.7 million in loans from other financial institutions.  The PBM loan production is sold primarily servicing released.  A total of $1.16 billion was sold during fiscal 2004.  The outstanding balance of loans held for sale increased to $20.1 million at June 30, 2004 from $4.2 million at June 30, 2003.  The outstanding balance of loans held for sale is largely dependent on the timing of loan fundings and loan sales.



Total investment securities decreased $44.5 million, or 15%, to $252.6 million at June 30, 2004 from $297.1 million at June 30, 2003.  For fiscal 2004, the issuers called $148.8 million of investment securities and $94.9 million of reductions were the result of mortgage-backed securities principal payments, while $204.1 million of investment securities were purchased.  The high volume of called securities was primarily the result of a high volume of callable bonds purchased with coupon rates higher than market interest rates and short call dates during the period.  The securities called were government agency callable bonds and were primarily issued by the FHLB, the FNMA and the FHLMC.



Total liabilities increased $54.4 million, or 5%, to $1.21 billion at June 30, 2004 from $1.15 billion at June 30, 2003 as a result of the increase in customer deposits.  Total deposits increased $96.9 million, or 13%, to $851.0 million at June 30, 2004 from $754.1 million at June 30, 2003.  During fiscal 2004, the Bank continued its emphasis on expanding customer relationships, particularly in transaction accounts.  Transaction accounts increased $97.5 million, or 21%, to $560.9 million at June 30, 2004 from $463.4 million.  The transaction accounts comprised 66% of total deposits at June 30, 2004 as compared to 61% at June 30, 2003.



FHLB advances decreased $43.0 million, or 12%, to $324.9 million at June 30, 2004 from $367.9 million at June 30, 2003.  FHLB advances were primarily used to supplement the funding needs of the Bank, to the extent that an increase in deposits and a decrease in investment securities did not meet loan funding requirements.  The increase in deposits and the decrease in investment securities in fiscal 2004 exceeded the funding needs of the Bank and, therefore FHLB advances declined.



Total stockholders' equity was $110.0 million at June 30, 2004, as compared to $106.9 million at June 30, 2003.  The $3.1 million increase in stockholders' equity during fiscal 2004 was primarily attributable to earnings in fiscal 2004, partly offset by share repurchases.  The Corporation repurchased 516,627 shares, or approximately 7% of outstanding shares, at an average price of $21.20 per share, totaling $11.0 million during fiscal 2004.  The Corporation's book value per share increased to $15.51 at June 30, 2004 from $14.29 at June 30, 2003.

Comparison of Operating Results for the Years Ended June 30, 2004 and 2003



General.  The Corporation had net income of $15.1 million, or $2.09 per diluted share, for the year ended June 30, 2004, as compared to $16.9 million, or $2.20 per diluted share, for the year ended June 30, 2003.  The decrease in net income in fiscal 2004 was primarily attributable to a decrease in non-interest income and an increase in non-interest expenses, which was partly offset by an increase in net interest income.



Net Interest Income.  Net interest income before provision for loan losses increased $4.8 million, or 15.3%, to $36.2 million in fiscal 2004 from $31.4 million in fiscal 2003.  This increase resulted principally from increases in average earning assets and net interest margin.  The average balance of earning assets increased $147.4 million, or 13.8%, to $1.22 billion in fiscal 2004 from $1.07 billion in fiscal 2003.  The net interest margin increased to an average of 2.97% in fiscal 2004 from an average of 2.94% in fiscal 2003.  The increase in the net interest margin was primarily attributable to an increase in higher yielding assets and an increase in lower interest-bearing deposits.  The average balance of loans held for investment, which generally have average higher yields than investment securities, comprised 75.2% of the average earning assets in fiscal 2004 as compared to 70.5% in fiscal 2003.   The average balance on transaction accounts, which generally have a lower average cost than time deposits, comprised 66.6% of the average total deposits in fiscal 2004 as compared to 55.1% in fiscal 2003.

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<PAGE>





Interest Income.  Interest income increased $2.3 million, or 3.8%, to $62.2 million in fiscal 2004 from $59.9 million in fiscal 2003.  The increase in interest income was primarily a result of an increase in the average balance of earning assets, which was partly offset by a decrease in the average yield on earning assets.  The increase in the average assets was primarily attributable to the increase in loans held for investment, which was partly offset by the decrease in investment securities.  Total origination of loans held for investment, including loan purchases, was $637.0 million, while total loan prepayments were $477.7 million in fiscal 2004.  The decrease in the yields was the result of the decline in interest rates during fiscal 2004.  Average yield on loans held for investment decreased 72 basis points to 5.81% in fiscal 2004 from 6.53% in fiscal 2003.  The decrease in the average loan yield was primarily a result of the impact of the prepayment of higher yielding loans held for investment replaced with lower yielding loans.  Average yield on investment securities, including FHLB stock, decreased 37 basis points to 2.96% in fiscal 2004 from 3.33% in fiscal 2003. The decrease in the average yield of investment securities was primarily a result of the high volume of securities called by the issuers, which were replaced with investment securities with a lower average yield.



Interest Expense.  Interest expense decreased $2.5 million, or 8.8%, to $25.9 million in fiscal 2004 from $28.4 million in fiscal 2003.  The decrease in interest expense was attributable to the decrease in the average cost, which was partly offset by an increase in average costing liabilities.  The average cost of costing liabilities decreased 57 basis points to 2.28% in fiscal 2004 from 2.85% in fiscal 2003.  The average cost of deposits decreased 63 basis points to 1.63% in fiscal 2004 from 2.26% in fiscal 2003.  The decrease in the average cost of deposits was the result of the decline in interest rates during fiscal 2004, maturities of higher costing time deposits and the change in the deposit mix toward lower costing transaction accounts.  The average balance of deposits increased $97.2 million, or 13.5%, to $815.6 million in fiscal 2004 from $718.4 million in fiscal 2003.  The average cost of FHLB advances decreased 45 basis points to 3.90% in fiscal 2004 from 4.35% in fiscal 2003.  The decrease in the average cost of FHLB advances was primarily attributable to the decline in interest rates, maturities of higher costing advances and the utilization of lower costing overnight borrowings.  The average maturity of FHLB advances increased to 45 months at June 30, 2004 from 36 months at June 30, 2003.  The average balance of FHLB advances increased $43.3 million, or 15.5%, to $322.7 million in fiscal 2004 from $279.4 million in fiscal 2003.



Provision for Loan Losses.  Loan loss provisions in fiscal 2004 were $819,000 as compared to $1.1 million in fiscal 2003.  The decrease in loss provision in fiscal 2004 was primarily a result of the decrease in the balance and classification of commercial business loans and the slower growth of loans held for investment in fiscal 2004 as compared to the loan growth in fiscal 2003.  The balance of the commercial business loans, which generally have a higher allowance for loan loss requirement, was $13.8 million at June 30, 2004 as compared to $22.5 million at June 30, 2003.  The allowance for loan loss requirement for the commercial business loans declined to $1.2 million at June 30, 2004 from $1.6 million at June 30, 2003.  The loan growth in fiscal 2004 was $118.3 million as compared to $150.7 million in fiscal 2003.  The allowance for loan losses was $7.6 million, or 0.88% of gross loans held for investment at June 30, 2004 as compared to $7.2 million, or 0.96% of gross loans held for investment at June 30, 2003.  The allowance for loan losses as a percentage of non-performing loans at the end of fiscal 2004 was 701.8%, as compared to 480.6% at the end of fiscal 2003.



Consistent with its current operating strategy, the Corporation intends for the fastest growing segments of loans held for investment to be commercial real estate, multi-family 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 decreased $5.6 million, or 21.7%, to $20.2 million in fiscal 2004 from $25.8 million in fiscal 2003.  The decrease in non-interest income was primarily attributable to a decrease in gain on sale of loans, along with decreases in real estate operations, gain on sale of investment securities and other income, partly offset by increases in deposit account fees and loan servicing and other fees.



Loan servicing and other fees increased $447,000, or 24.2%, to $2.3 million in fiscal 2004 from $1.8 million in fiscal 2003, resulting primarily from increases in loan prepayment fees and loan servicing fees.  The increase in the loan servicing fees was also a result of a higher balance of loans serviced for others, $269.4 million as of June 30, 2004 as compared to $114.1 million as of June 30, 2003.

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<PAGE>





Total gain on sale of loans decreased $4.9 million, or 25.5%, to $14.3 million in fiscal 2004 from $19.2 million in fiscal 2003, and was the result of lower loan sale volume and an unfavorable SFAS No. 133 adjustment.  Total loans originated for sale decreased $158.9 million, or 12.5%, to $1.11 billion in fiscal 2004 from $1.27 billion in fiscal 2003.  The decrease in the loans originated for sale was primarily attributable to a strong refinance market, which appears to have peaked in fiscal 2003.



The net impact of derivative financial instruments (SFAS No. 133) was an unfavorable adjustment of $859,000 as compared to a favorable adjustment of $360,000 in the same period last year.  The fair value of the derivative financial instruments outstanding at June 30, 2004 was a loss of $109,000 in comparison to a gain of $1.6 million at June 30, 2003.



The Corporation implemented the SEC guidance described in the SEC Staff Accounting Bulletin No. 105, "Application of Accounting Principles to Loan Commitments," which does not allow for the recognition of servicing released premiums in the valuation of commitments to extend credit on loans to be held for sale.  Consequently, the Corporation excluded from its SFAS No. 133 adjustment $580,000 of estimated servicing released premiums at June 30, 2004.  This income will be realized in future periods when the underlying loans are funded and sold.  The SFAS No. 133 adjustment is relatively volatile and may have an adverse impact on future earnings.



As a result of the change in value of derivative financial instruments (including the impact of the implementation of the SEC Staff Accounting Bulletin No. 105), the PBM average loan sale margin decreased seven basis points to 1.36% during fiscal 2004 from 1.43% during fiscal 2003.  The decrease in the average loan sale margin was partly offset by the improvement in the mix of the loan sales with a higher percentage of high margin products.  The high margin products consist primarily of second trust deeds, Alt-A adjustable rate and Alt-A fixed rate first trust deed mortgage loans.  In fiscal 2004, the high margin products comprised of 40% of the PBM loan sale volume as compared to 19% of the loan sale volume in fiscal 2003.



The average profit margin for PBM in fiscal 2004 and 2003 was 85 basis points and 100 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 decrease of the profit margin was due to the decrease in gain on sale of loans.



Deposit account fees increased $252,000, or 14.5%, to $2.0 million in fiscal 2004 from $1.7 million in fiscal 2003.  The increase in deposit account fees was the direct result of the Bank's deposit strategy, which emphasizes transaction account growth.



There were no sales of investment securities during fiscal 2004 as compared to the sale of $25.4 million of investment securities for a $694,000 gain during fiscal 2003.



Other non-interest income decreased $289,000 to $1.3 million in fiscal 2004, primarily attributable to $283,000 of partial recoveries from two loans in fiscal 2003, which was not replicated in fiscal 2004.

Non-Interest Expense.



Income Taxes.

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<PAGE>



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



General.  The Corporation had net income of $16.9 million, or $2.20 per diluted share, for the year ended June 30, 2003, as compared to $9.1 million, or $1.12 per diluted share, for the year ended June 30, 2002.  The increase in net income 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 higher yielding investment securities called by the issuers, $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 incurring prepayment penalties of $298,000 as compared to the prepayment of $37.0 million of FHLB advances incurring 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 of charge-offs from 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 allowance for loan losses is prudent based upon the loans held for investment composition, historic loss experience and current economic conditions.

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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 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 on 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 principal 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, or 25.7%, to $1.6 million in fiscal 2003 from $1.2 million in fiscal 2002.   The increase was primarily attributable to $283,000 of partial recoveries from two loans.



Loan servicing and other fees decreased $333,000, or 15.3%, 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.  The provision for income taxes was $11.4 million for fiscal 2003, representing an effective tax rate of 40.2%, as compared to $6.5 million in 2002, representing an effective tax rate of 41.6%.

46

<PAGE>





Average Balances, Interest and Average Yields/Costs. 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.







47

<PAGE>





|                            |                                          |                                     |             |          |        |          |         |              |             |          |        | Year Ended June 30, |         |                |             |          |        |         
|--------------------------- | ---------------------------------------- | ----------------------------------- | ----------- | -------- | ------ | -------- | ------- | ------------ | ----------- | -------- | ------ | ------------------- | ------- | -------------- | ----------- | -------- | ------ | --------
|                            |                                          |                                     |             |          |        | 2004     |         |              |             |          |        | 2003                |         |                |             |          |        | 2002    
|                            |                                          |                                     |             |          |        |          |         | 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)                | $   915,894                         |             | $ 53,216 |        | 5.81%    |         | $    754,886 |             | $ 49,328 |        | 6.53%               |         | $    692,761   |             | $ 51,247 |        | 7.40%   
|                            | Investment securities                    | 276,436                             |             | 7,978    |        | 2.89%    |         | 297,760      |             | 9,668    |        | 3.25%               |         | 232,781        |             | 12,122   |        | 5.21%   
|                            | FHLB stock                               | 24,012                              |             | 938      |        | 3.91%    |         | 16,776       |             | 843      |        | 5.03%               |         | 15,006         |             | 779      |        | 5.19%   
|                            | Interest-earning deposits                | 1,793                               |             | 19       |        | 1.06%    |         | 1,318        |             | 17       |        | 1.29%               |         | 71,484         |             | 1,520    |        | 2.13%   
|                            |                                          | Total interest-earning assets       | 1,218,135   |          | 62,151 |          | 5.10%   |              | 1,070,740   |          | 59,856 |                     | 5.59%   |                | 1,012,032   |          | 65,668 |         
|                            |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|Non-interest earning assets | 67,709                                   |                                     |             |          |        |          | 74,740  |              |             |          |        |                     | 50,114  |                |             |          |       
|                            |                                          | Total assets                        | $ 1,285,844 |          |        |          |         |              | $ 1,145,480 |          |        |                     |         |                | $ 1,062,146 |          |        |         
|                            |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|Deposits and borrowings:    |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |       
|                            | Checking and money market
 
accounts (2) | $      206,384                      |             | 1,365    |        | 0.66%    |         | $    191,997 |             | 1,560    |        | 0.81%               |         | $      172,293 |             | 2,410    |        | 1.40%   
|                            | Savings accounts                         | 336,756                             |             | 5,267    |        | 1.56%    |         | 203,977      |             | 4,161    |        | 2.04%               |         | 135,621        |             | 3,170    |        | 2.34%   
|                            | Time deposits                            | 272,486                             |             | 6,688    |        | 2.45%    |         | 322,410      |             | 10,531   |        | 3.27%               |         | 393,857        |             | 18,474   |        | 4.69%   
|                            |                                          | Total deposits                      | 815,626     |          | 13,320 |          | 1.63%   |              | 718,384     |          | 16,252 |                     | 2.26%   |                | 701,771     |          | 24,054 |         
|                            |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|Borrowings (3)              | 322,745                                  |                                     | 12,599      |          | 3.90%  |          | 279,422 |              | 12,161      |          | 4.35%  |                     | 236,967 |                | 15,134      |          | 6.39% 
|                            |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|                            |                                          | Total deposits and borrowings       | 1,138,371   |          | 25,919 |          | 2.28%   |              | 997,806     |          | 28,413 |                     | 2.85%   |                | 938,738     |          | 39,188 |         
|                            |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|                            | Non-interest-bearing liabilities         | 40,830                              |             |          |        |          |         | 45,378       |             |          |        |                     |         | 22,705         |             |          |        |         
|                            |                                          | Total liabilities                   | 1,179,201   |          |        |          |         |              | 1,043,184   |          |        |                     |         |                | 961,443     |          |        |         
|                            |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|                            | Stockholders' equity                     | 106,643                             |             |          |        |          |         | 102,296      |             |          |        |                     |         | 100,703        |             |          |        |         
|                            |                                          | Total liabilities and stockholders' |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|                            |                                          | equity                              | $ 1,285,844 |          |        |          |         |              | $ 1,145,480 |          |        |                     |         |                | $ 1,062,146 |          |        |         
|                            |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|                            | Net interest income                      |                                     |             | $ 36,232 |        |          |         |              |             | $ 31,443 |        |                     |         |                |             | $ 26,480 |        |         
|                            |                                          |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|                            | Interest rate spread (4)                 |                                     |             |          |        | 2.82%    |         |              |             |          |        | 2.74%               |         |                |             |          |        | 2.32%   
|                            | Net interest margin (5)                  |                                     |             |          |        | 2.97%    |         |              |             |          |        | 2.94%               |         |                |             |          |        | 2.62%   
|                            | Ratio of average interest-earning        |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|                            | assets to average interest-bearing       |                                     |             |          |        |          |         |              |             |          |        |                     |         |                |             |          |        |         
|                            | liabilities                              | 107.01%                             |             |          |        |          |         | 107.31%      |             |          |        |                     |         | 107.81%        |             |          |        |         

|(1) | Includes loans held for sale and non-accrual loans, as well as net deferred loan fee amortization of $613,000, $574,000 and $247,000 for the years ended June 30, 2004, 2003 and 2002, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes average balance of non-interest bearing checking accounts of  $44.9 million, $43.8 million and $31.1 million in fiscal 2004, 2003 and 2002, respectively.                                  
|(3) | Includes interest prepayment penalties of $0, $298,000 and $365,000 for the years ended June 30, 2004, 2003 and 2002, respectively.                                                                 
|(4) | Represents difference between weighted average yield on all interest-earning assets and weighted average rate on all interest-bearing liabilities.                                                  
|(5) | Represents net income before provision for loan losses as a percentage of average interest-earning assets.                                                                                          

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<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,
|                                       |       |  | 2004     |  | 2004               
|                                       |       |  |          |  |                    
|Weighted average yield on:             |       |  |          |  |                    
|                                       |       |  |          |  |                    
|Loans receivable (1)                   | 5.62% |  | 5.81%    |  | 6.53%              
|                                       |       |  |          |  |                    
|Investment securities                  | 2.89% |  | 2.89%    |  | 3.25%              
|                                       |       |  |          |  |                    
|FHLB stock                             | 3.86% |  | 3.91%    |  | 5.03%              
|                                       |       |  |          |  |                    
|Interest-earning deposits              | 0.96% |  | 1.06%    |  | 1.29%              
|                                       |       |  |          |  |                    
|All interest-earning assets            | 5.00% |  | 5.10%    |  | 5.59%              
|                                       |       |  |          |  |                    
|Weighted average rate paid on:         |       |  |          |  |                    
|                                       |       |  |          |  |                    
|Checking and money market accounts (2) | 0.53% |  | 0.66%    |  | 0.81%              
|                                       |       |  |          |  |                    
|Savings accounts                       | 1.47% |  | 1.56%    |  | 2.04%              
|                                       |       |  |          |  |                    
|Time deposits                          | 2.40% |  | 2.45%    |  | 3.27%              
|                                       |       |  |          |  |                    
|Borrowings (3)                         | 3.91% |  | 3.90%    |  | 4.35%              
|                                       |       |  |          |  |                    
|All interest-bearing liabilities       | 2.21% |  | 2.28%    |  | 2.85%              
|                                       |       |  |          |  |                    
|Interest rate spread (4)               | 2.79% |  | 2.82%    |  | 2.74%              
|                                       |       |  |          |  |                    
|Net interest margin (5)                | 2.95% |  | 2.97%    |  | 2.94%              



|(1) | Includes loans held for sale and non-accrual loans, as well as net deferred loan fee amortization of $613,000, $574,000 and $247,000 for the years ended June 30, 2004, 2003 and 2002, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes average balance of non-interest bearing checking accounts of  $44.9 million, $43.8 million and $31.1 million in fiscal 2004, 2003 and 2002, respectively.                                  
|(3) | Includes interest prepayment penalties of $0, $298,000 and $365,000 for the years ended June 30, 2004, 2003 and 2002, respectively.                                                                 
|(4) | Represents difference between weighted average yield on all interest-earning assets and weighted average rate on all interest-bearing liabilities.                                                  
|(5) | Represents net income before provision for loan losses as a percentage of average interest-earning assets.                                                                                          

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<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, 2004   |      | Year Ended June 30, 2003   |    
|------------------------------ | ------------------------------ | -------------------------- | ---- | -------------------------- | ---
|                               |                                | Compared to Year           |      | Compared to Year           |    
|                               |                                | Ended June 30, 2003        |      | Ended June 30, 2002        |    
|                               |                                | Increase (Decrease) Due to |      | Increase (Decrease) Due to |    
|                               |                                |                            |      |                            |    
|                               |                                | Rate                       |      | Volume                     |    
|(In Thousands)                 |                               
|                               |                                |                            |      |                            |    
|Interest income:               |                                |                            |      |                            |    
|                               | Loans receivable (1)           | $ (5,467                   | )    | $ 10,514                   |    
|                               | Investment securities          | (1,074                     | )    | (693                       | )  
|                               | FHLB stock                     | (188                       | )    | 364                        |    
|                               | Interest-bearing deposits      | (3                         | )    | 6                          |    
|                               | Total net change in income     |                            |      |                            |    
|                               | on interest-earning assets     | (6,732                     | )    | 10,191                     |    
|                               |                                |                            |      |                            |    
|Interest-bearing liabilities : |                                |                            |      |                            |    
|                               | Checking and money market      |                            |      |                            |    
|                               |                                | accounts                   | (290 | )                          | 117
|                               | Savings accounts               | (966                       | )    | 2,709                      |    
|                               | Time deposits                  | (2,619                     | )    | (1,633                     | )  
|                               | FHLB advances                  | (1,252                     | )    | 1,885                      |    
|                               | Total net change in expense on |                            |      |                            |    
|                               | interest bearing liabilities   | (5,127                     | )    | 3,078                      |    
|                               |                                |                            |      |                            |    
|                               | Net change in  net             |                            |      |                            |    
|                               | interest income                | $ (1,605                   | )    | $   7,113                  |    



(1)    Includes loans held 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, 2004, total cash was $38.3 million, or 2.9% 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, 2004 increased to 24.0% from 20.3% during the same period ending June 30, 2003.  This increase was primarily due to less 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 on a servicing released basis. During the years ended June 30, 2004,
2003 and 2002, the Bank originated loans in the amounts of $1.71 billion, $1.79
billion and $1.35 billion, respectively. In addition, the Bank purchased loans
from other financial institutions in fiscal 2004, 2003 and 2002 in the amounts
of $37.7 million, $39.5 million and $38.6

50

<PAGE>

million, respectively. Total loans sold in fiscal 2004, 2003
and 2002 were $1.16 billion, $1.24 billion and $1.17 billion, respectively. At
June 30, 2004, the Bank had loan origination commitments totaling $86.9 million
and undisbursed loans in process totaling $78.1 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 on June 30, 2004 were $128.5 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 the OTS's current prompt corrective action provisions, a minimum ratio of 1.5% for the Tangible Capital ratio is required to be deemed other than "critically undercapitalized," while a minimum of 5.0% for Tier 1 (Core) capital, 10.0% for Total Risk-Based Capital and 6.0% for Tier 1 Risk-Based Capital is required to be deemed "well capitalized."  As of June 30, 2004, 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 6.9%, 6.9%, 11.4% and 12.4%, 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 4, "Investment Securities Activities" on page 21 through 22, "Time Deposits by Maturities" on page 25 and "Interest Rate Risk" on page 52.



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 repricing mismatch between interest-earning assets and interest-bearing liabilities.  The principal element in achieving this objective is to increase 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 that reprice
frequently. 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

51

<PAGE>

deposits with terms up to five years. For additional
information, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on page 39.



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 repricing mismatch between interest-earning assets and interest-bearing liabilities.  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 which can be structured with favorable interest rate risk characteristics.  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 risk 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, 2004 the estimated changes in NPV based on the indicated interest rate environments.  The Bank's balance sheet position as of June 30, 2004 can be summarized as follows: if interest rates decrease 100 basis points, increase 100 basis points, increase 200 basis points or increase 300 basis points, the NPV of the Bank is expected to decrease.



|                       |  |           |            |        |           |           |            | 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                |  |           | $  124,053 |        | $ (34,397 | )         | $1,308,112 |                    | 9.48%      
|+200 bp                |  |           | 140,018    |        | (18,432   | )         | 1,335,793  |                    | 10.48%     
|+100 bp                |  |           | 151,704    |        | (6,746    | )         | 1,360,365  |                    | 11.15%     
|0 bp                   |  |           | 158,450    |        | -         |           | 1,381,303  |                    | 11.47%     
|-100 bp                |  |           | 157,438    |        | (1,012    | )         | 1,395,165  |                    | 11.28%     
|                       |  |           |            |        |           |           |            |                    |            

|(1) | Represents the decrease of the estimated NPV at the indicated change in interest rates compared to the NPV calculated at June 30, 2004 ("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.                                              





52

<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 +200 bp rate shock at June 30, 2004 and at a -100 bp rate shock at June 30, 2003.

|                                         |  | At June 30, 2004 |  | At June 30, 2003 | 
|---------------------------------------- |  | ---------------- |  | ---------------- | 
|Risk Measure: +200 bp/-100 bp Rate Shock |  | (+200 bp)        |  | (-100 bp)        | 
|                                         |  |                  |  |                  | 
|Pre-Shock NPV Ratio                      |  | 11.47%           |  | 9.17%            | 
|Post-Shock NPV Ratio                     |  | 10.48%           |  | 8.96%            | 
|Sensitivity Measure                      |  | 99 bp            |  | 21 bp            | 
|                                         |  |                  |  |                  | 



As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables.  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 rates.  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 loan.  Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals of time deposits could likely deviate significantly from those assumed in calculating the respective 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.

The Bank also models the sensitivity of net interest income for the 12-month period subsequent to any given month-end assuming a dynamic balance sheet (accounting for the Bank's current balance sheet, 12-month business plan, embedded options, rate floors, periodic caps, lifetime caps, and loan, investment, deposit and borrowing cash flows, among others), and immediate, permanent and parallel movements in interest rates of plus or minus 100 and 200 basis points.  The following table describes the results of the analysis for June 30, 2004 and June 30, 2003.



|June 30, 2004    |  | June 30, 2003      
|---------------- |  | -------------------
|Basis Point (bp) |  | Change in          
|Change in Rates  |  | Net Interest Income
|+200 bp          |  | -13.28%            
|+100 bp          |  | -7.45%             
|-100 bp          |  | +2.00%             
|-200 bp          |  | +3.85%             



In both of the fiscal year-end periods described above, the Bank is liability sensitive.  Therefore, in a rising interest rate environment, the results project a decline in net interest income over the subsequent 12-month period, and in a falling interest rate environment, the results project an increase in net interest income over the subsequent 12-month period.



Management believes that the assumptions used to complete the analysis described in the table above are reasonable.  However, past experience has shown that immediate, permanent and parallel movements in interest rates will not necessarily occur.  Additionally, while the analysis provides a tool to evaluate the projected net interest income to changes in interest rates, actual results may be substantially different if actual experience differs from the assumptions used to complete the analysis.

53

<PAGE>

Item 8.  Financial Statements and Supplementary Data



Please refer to the index on page 60 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.



Item 9B.  Other Information



None.  During the quarter ended June 30, 2004, the Corporation filed a Current Report on Form 8-K for all information required to be disclosed in a report on Form 8-K.

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.  See "Business - Executive Officers" contained on page 36 in Item 1 of this report.



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.



Code of Ethics for Senior Financial Officers



The Corporation has adopted its Code of Ethics, which applies to all directors, officers, and employees of the Corporation.  The Code of Ethics is publicly available as Exhibit
14 to the Corporation's Annual Report on Form

54

<PAGE>



10-K for the year ended June 30, 2004, and is available on the Corporation's website, www.myprovident.com.  If the Corporation makes any substantial amendments to the Code of Ethics or grants any waiver, including any implicit waiver, from a provision of the code to the Corporation's Chief Executive Officer, Chief Financial Officer or Controller, the Corporation will disclose the nature of such amendment or waiver on the website and in a report on Form 8-K.



Audit Committee Financial Experts



The Corporation has designated Joseph P. Barr, Audit Committee Chairman, as its financial expert.  Mr. Barr is independent of management, a Certified Public Accountant in California and Ohio and has been practicing public accounting for over 35 years.

Item 11.  Executive Compensation



The information contained under the section captioned "Executive Compensation" and "Directors' Compensation" is 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 is 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.

(d)        Equity Compensation Plan Information.

55

<PAGE>





The following table summarizes share and exercise price information about the Corporation's equity compensation plans as of June 30, 2004.



|Plan Category                          | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Related in Column (a)
|-------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------
|                                       | (a)                                                                                         | (b)                                                                         | (c)                                                                                                                                     
|Equity Compensation Plans approved by  |                                                                                             |                                                                             |                                                                                                                                         
|                                       | security holders:                                                                           |                                                                             |                                                                                                                                         
|                                       | Management Recognition Plan .                                                               | 36,526                                                                      |                                                                                                                                         
|                                       | 1996 Stock Option Plan                                                                      | 774,850                                                                     |                                                                                                                                         
|                                       | 2003 Stock Option Plan                                                                      | 250,000                                                                     |                                                                                                                                         
|                                       |                                                                                             |                                                                             |                                                                                                                                         
|Equity Compensation Plans not approved |                                                                                             |                                                                             |                                                                                                                                         
|                                       | by security holders                                                                         | N/A                                                                         |                                                                                                                                         
|                                       |                                                                                             |                                                                             |                                                                                                                                         
|Total                                  | 1,061,376                                                                                   |                                                                             | N/A                                                                                                                                     

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.





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 60.



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, 2004

|            | (1) | The Corporation's Form 8-K dated April 22, 2004 regarding its earnings for the quarter ended March 31, 2004.                                                                                                                                                                                                               
|----------- | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            | (2) | The Corporation's Form 8-K dated April 22, 2004 regarding a quarterly cash dividend of $0.10 per share on the Corporation's outstanding shares of common stock with a record date of May 20, 2004, payable on June 16, 2004.                                                                                               
|56
  <PAGE>
|            | (3) | The Corporation's Form 8-K dated May 6, 2004 regarding its participation in the Community Bank Investor Conference hosted by America's Community Bankers and the NASDAQ Stock Market, the presentation materials are available on the Corporation's website.                                                               
|            | (4) | The Corporation's Form 8-K dated May 10, 2004 regarding the access to a live broadcast and a rebroadcast of the Community Bank Investor Conference.                                                                                                                                                                        
|            | (5) | The Corporation's Form 8-K dated June 28, 2004 regarding the stock repurchase of up to 5% of its common stock, or approximately 354,585 shares.  The shares will be repurchased from time to time in the open market over a one-year period depending on market conditions and the capital requirements of the Corporation.



(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)                                           
|            |       |                                                                                                                                                                        
|            | 10.4  | 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)     
|            |       |                                                                                                                                                                        
|            | 10.9  | 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, 2003)
|            |       |                                                                                                                                                                        
|            | 10.10 | Severance Agreement with Lilian Brunner (incorporated by reference to Exhibit 10.10 in the Corporation's Annual Report on Form 10-K for the year ended June 30, 2003)  
|            |       |                                                                                                                                                                        
|            | 10.11 | Severance Agreement with Thomas "Lee" Fenn (incorporated by reference to Exhibit 10.9 in the Corporation's Annual Report on Form 10-K for the year ended June 30, 2001)
|            |       |                                                                                                                                                                        
|            | 10.12 | 2003 Stock Option Plan (incorporated by reference to Exhibit A to the Corporation's proxy statement dated October 21, 2003)                                            
|            |       |                                                                                                                                                                        
|            | 13    | 2004 Annual Report                                                                                                                                                     
|            |       |                                                                                                                                                                        
|            | 14    | Code of Ethics for the Corporation's directors, officers and employees.                                                                                                
|            |       |                                                                                                                                                                        
|            | 21.1  | Subsidiaries of Registrant                                                                                                                                             
|            |       |                                                                                                                                                                        
|            | 23.1  | Consent of Independent Registered Public Accounting Firm                                                                                                               
|            |       |                                                                                                                                                                        
|            | 31.1  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                     
|57
  <PAGE>
|            | 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.                                       





58

<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 8, 2004                                                                  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. Blunden   |  |                               |  |                  
|Craig G. Blunden      |  | Chairman, President and       |  | September 8, 2004
|                      |  | Chief Executive Officer       |  |                  
|                      |  | (Principal Executive Officer) |  |                  
|                      |  |                               |  |                  
|                      |  |                               |  |                  
|/s/Donavon P. Ternes  |  |                               |  |                  
|Donavon P. Ternes     |  | Chief Financial Officer       |  | September 8, 2004
|                      |  | (Principal Financial          |  |                  
|                      |  | and Accounting Officer)       |  |                  
|                      |  |                               |  |                  
|/s/Joseph
P. Barr     |  |                               |  |                  
|Joseph P. Barr        |  | Director                      |  | September 8, 2004
|                      |  |                               |  |                  
|/s/Bruce W. Bennett   |  |                               |  |                  
|Bruce W. Bennett      |  | Director                      |  | September 8, 2004
|                      |  |                               |  |                  
|/s/Debbi H. Guthrie   |  |                               |  |                  
|Debbi H. Guthrie      |  | Director                      |  | September 8, 2004
|                      |  |                               |  |                  
|/s/Seymour
M. Jacobs  |  |                               |  |                  
|Seymour M. Jacobs     |  | Director                      |  | September 8, 2004
|                      |  |                               |  |                  
|/s/Robert
G. Schrader |  |                               |  |                  
|Robert G. Schrader    |  | Director                      |  | September 8, 2004
|                      |  |                               |  |                  
|/s/Roy
H. Taylor      |  |                               |  |                  
|Roy H. Taylor         |  | Director                      |  | September 8, 2004
|                      |  |                               |  |                  
|/s/William
E. Thomas  |  |                               |  |                  
|William E. Thomas     |  | Director                      |  | September 8, 2004

59

<PAGE>



Consolidated Financial Statements of
Provident Financial Holdings, Inc.

Index







Report of Independent Registered Public Accounting Firm                                                                                             61
Consolidated Statements of Financial Condition as of June 30, 2004 and 2003                                                             62
Consolidated Statements of Operations for the years ended June 30, 2004, 2003 and 2002                                        63
Consolidated Statements of Stockholders' Equity for the years ended June 30, 2004, 2003 and 2002                      64
Consolidated Statements of Cash Flows for the years ended June 30, 2004, 2003 and 2002                                       65
Notes to Consolidated Financial Statements                                                                                                                      67



60

<PAGE>

Report of Independent Registered Public Accounting
Firm
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, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended June 30, 2004.  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 standards of the Public Company Accounting Oversight Board (United States).  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, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2004 in conformity with accounting principles generally accepted in the United States of America.

s/ Deloitte & Touche LLP
Costa Mesa, California
September 2, 2004

61
<PAGE>

Consolidated Statements of Financial Condition

(In thousands, except share information)

---

|                                                                          | June 30,                                                                                                          
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------
|2004                                                                      |                                                                                                                   
|Assets                                                                    |                                                                                                                   
|Cash                                                                      | $     38,349                                                                                                      
|                                                                          |                                                                                                                   
|Investment securities - held to maturity                                  |                                                                                                                   
|                                                                          | (fair value $61,250 and $77,210, respectively)                                                                    
|Investment securities - available for sale, at fair value                 | 190,380                                                                                                           
|Loans held for investment, net of allowance for loan losses of $7,614 and |                                                                                                                   
|                                                                          | $7,218, respectively                                                                                              
|Loans held for sale, at lower of cost or market                           | 20,127                                                                                                            
|Receivable from sale of loans                                             | 86,480                                                                                                            
|Accrued interest receivable                                               | 4,961                                                                                                             
|Real estate held for investment, net                                      | 10,176                                                                                                            
|Other real estate owned, net                                              | -                                                                                                                 
|Federal Home Loan Bank stock                                              | 27,883                                                                                                            
|Premises and equipment, net                                               | 7,912                                                                                                             
|Prepaid expenses and other assets                                         | 8,032                                                                                                             
|                                                                          | Total assets                                                                                                      
|                                                                          |                                                                                                                   
|Liabilities and Stockholders' Equity                                      |                                                                                                                   
|Liabilities:                                                              |                                                                                                                   
|Non-interest-bearing deposits                                             | $          41,551                                                                                                 
|Interest-bearing deposits                                                 | 809,488                                                                                                           
|                                                                          | Total deposits                                                                                                    
|                                                                          |                                                                                                                   
|Borrowings                                                                | 324,877                                                                                                           
|Accounts payable, accrued interest and other liabilities                  | 33,137                                                                                                            
|Total liabilities                                                         | 1,209,053                                                                                                         
|                                                                          |                                                                                                                   
|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;             |                                                                                                                   
|                                                                          | 11,898,565 and 11,769,890 shares issued, respectively; 7,091,719 and
7,479,671 shares outstanding, respectively) .
|Additional paid-in capital                                                | 57,186                                                                                                            
|Retained earnings                                                         | 111,329                                                                                                           
|Treasury stock at cost (4,806,846 and 4,290,219 shares, respectively)     | (56,753                                                                                                           
|Unearned stock compensation                                               | (1,889                                                                                                            
|Accumulated other comprehensive (loss) income, net of tax                 | (10                                                                                                               
|                                                                          | Total stockholders' equity                                                                                        
|                                                                          |                                                                                                                   
|                                                                          | Total liabilities and stockholders' equity                                                                        

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

62

<PAGE>

Consolidated Statements of Operations

(Dollars in thousands, except per share information)

---



|                                                      | Year Ended June 30,                      
|----------------------------------------------------- | -----------------------------------------
|                                                      | 2004                                     
|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                                | 25,919                                   
|Net interest income, before provision for loan losses | 36,232                                   
|Provision for loan losses                             | 819                                      
|Net interest income, after provision for loan losses  | 35,413                                   
|                                                      |                                          
|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                             | 20,153                                   
|                                                      |                                          
|Non-interest expense:                                 |                                          
|                                                      | Salaries and employee benefits           
|                                                      | Premises and occupancy                   
|                                                      | Equipment expense                        
|                                                      | Professional expense                     
|                                                      | Sales and marketing expense              
|                                                      | Other                                    
|Total non-interest expense                            | 28,780                                   
|Income before income taxes                            | 26,786                                   
|Provision for income taxes                            | 11,717                                   
|                                                      | Net income                               
|Basic earnings per share                              | $         2.24                           
|Diluted earnings per share                            | $         2.09                           
|Cash dividends per share                              | $         0.33                           



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

63

<PAGE>

Consolidated Statements of Stockholders' Equity

(In thousands, except shares)

---

|                                                                |                                                                      | Accumulat-ed Other Comprehen-sive Income (Loss), Net of Tax |                            
|--------------------------------------------------------------- | -------------------------------------------------------------------- | ----------------------------------------------------------- | ---------------------------
|                                                                | Addi-tional
Paid-in
Capital                                          |                                                             | Unearned
Stock
Compensation
|Retained
Earnings                                               | Treasury 
Stock                                                     
|Common Stock                                                    | Total                                                               
|Shares                                                          | Amount                                                              
|Balance at June 30, 2001                                        | 8,574,352                                                            |                                                             | $ 117                      
|Comprehensive income:                                           |                                                                      |                                                             |                            
|                                                                | Net income                                                           |                                                             |                            
|                                                                | Unrealized holding gain on securities available for sale, net of tax |                                                             |                            
|Total comprehensive income                                      |                                                                      |                                                             |                            
|Purchase of treasury stock                                      | (420,291                                                             | )                                                           |                            
|Exercise of stock options                                       | 30,375                                                               |                                                             |                            
|Amortization and awards for Management Recognition Plan         | 10,255                                                               |                                                             |                            
|Allocation of contributions to Employee Stock Ownership Plan .. |                                                                      |                                                             |                            
|Cash dividends in lieu of fractional shares from stock split    |                                                                      |                                                             |                            
|Balance at June 30, 2002                                        | 8,194,691                                                            |                                                             | 117                        
|Comprehensive income:                                           |                                                                      |                                                             |                            
|                                                                | Net income                                                           |                                                             |                            
|                                                                | Unrealized holding gain on securities available for sale, net of tax |                                                             |                            
|Total comprehensive income                                      |                                                                      |                                                             |                            
|Purchase of treasury stock                                      | (935,082                                                             | )                                                           |                            
|Exercise of stock options                                       | 201,225                                                              |                                                             | 1                          
|Amortization and awards for Management Recognition Plan         | 18,837                                                               |                                                             |                            
|Tax benefit from non-qualified equity compensation              |                                                                      |                                                             |                            
|Allocation of contributions to Employee Stock Ownership Plan .. |                                                                      |                                                             |                            
|Prepayment of ESOP loan                                         |                                                                      |                                                             |                            
|Cash dividends                                                  |                                                                      |                                                             |                            
|Balance at June 30, 2003 .                                      | 7,479,671                                                            |                                                             | 118                        
|Comprehensive income:                                           |                                                                      |                                                             |                            
|                                                                | Net income                                                           |                                                             |                            
|                                                                | Unrealized holding loss on securities available for sale, net of tax |                                                             |                            
|Total comprehensive income                                      |                                                                      |                                                             |                            
|Purchase of treasury stock                                      | (516,627                                                             | )                                                           |                            
|Exercise of stock options                                       | 128,675                                                              |                                                             | 1                          
|Amortization for Management Recognition Plan                    |                                                                      |                                                             |                            
|Tax benefit from non-qualified equity compensation              |                                                                      |                                                             |                            
|Allocation of contributions to Employee Stock Ownership Plan .. |                                                                      |                                                             |                            
|Prepayment of ESOP loan                                         |                                                                      |                                                             |                            
|Cash dividends                                                  |                                                                      |                                                             |                            
|Balance at June 30, 2004                                        | 7,091,719                                                            |                                                             | $ 119                      

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

64

<PAGE>

Consolidated Statements of Cash Flows

(In thousands)

---



|                                      | Year Ended June 30,                                           
|------------------------------------- | --------------------------------------------------------------
|2004                                  |                                                               
|Cash flows from operating activities: |                                                               
|                                      | Net income                                                    
|                                      | Adjustments to reconcile net income to net                    
|                                      | cash provided by (used for) 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                                         
|                                      | Tax benefit from non-qualified compensation                   
|                                      | Increase (decrease) in accounts payable, accrued interest and 
|                                      | other liabilities                                             
|                                      | Decrease (increase) in prepaid expenses and other assets      
|                                      | Loans originated for sale                                     
|                                      | Proceeds from sale of loans                                   
|                                      | Additions to servicing assets                                 
|                                      | Amortization of servicing assets                              
|                                      | Stock compensation                                            
|                                      | Net cash provided by (used for) 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 accompany notes are an integral part of these consolidated financial
statements.

65

<PAGE>

Consolidated Statements of Cash Flows

(In thousands)

---



|                                               | Year Ended June 30,                                 
|---------------------------------------------- | ----------------------------------------------------
|2004                                           |                                                     
|Cash flows from financing activities:          |                                                     
|                                               | Net increase (decrease) in deposits                 
|                                               | (Repayment of) proceeds from  Federal Home Loan Bank
|                                               | advances, net                                       
|                                               | Treasury stock purchases                            
|                                               | Exercise of stock options                           
|                                               | Cash dividends                                      
|                                               | Net cash provided by (used for) financing activities
|                                               |                                                     
|                                               | Net (decrease) increase in cash and cash equivalents
|Cash and cash equivalents at beginning of year | 48,851                                              
|Cash and cash equivalents at end of year       | $         38,349                                    
|                                               |                                                     
|Supplemental information:                      |                                                     
|                                               | Cash paid for interest                              
|                                               | Cash paid for income taxes                          
|                                               | Real estate acquired in settlement of loans         





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

66

<PAGE>

Notes to Consolidated Financial Statements

---





Provident Savings Bank, F.S.B. (the "Bank") converted from a federally chartered mutual savings bank to a federally chartered stock bank effective June 27, 1996.  Provident Financial Holdings, Inc., a Delaware corporation organized by the Bank, acquired all of the capital stock of the Bank issued in the conversion; the transaction was recorded on a book value basis.



The consolidated financial statements include the accounts of Provident Financial Holdings Inc., and its wholly owned subsidiary, Provident Savings Bank, F.S.B. (collectively, the "Corporation").  All inter-company balances and transactions have been eliminated.



The Corporation operates in two business segments: community banking (Provident Bank) and mortgage banking (Provident Bank Mortgage, a division of Provident Bank).  Provident Bank activities include attracting deposits, offering banking services and originating multi-family, commercial real estate, construction, commercial business and consumer loans (primarily, overdraft and deposit loans).  Provident Bank Mortgage activities include originating single-family (one-to-four units) and consumer (second mortgages and equity lines of credit) loans for sale to investors and for investment.  Deposits are collected primarily from 12 banking locations located in Riverside and San Bernardino counties in California.  The mortgage banking loans are originated from ten freestanding lending offices in Southern California, as well as from the banking locations.



The accounting and reporting policies of the Corporation conform to accounting principles generally accepted in the United States of America and to prevailing practices within the banking industry.  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of foreclosed real estate, deferred tax assets, and derivative financial instruments.



The following accounting policies, together with those disclosed elsewhere in the consolidated financial statements, represent the significant accounting policies of Provident Financial Holdings, Inc. and the Bank.



ReclassificationsCertain reclassifications of prior year financial data have been made to conform to the current reporting practices of the Corporation.





Cash and cash equivalentsCash and cash equivalents include cash on hand and due from banks, as well as overnight deposits placed at correspondent banks.





Investment securitiesThe Corporation classifies its qualifying investments as
available for sale or held to maturity. The Corporation's policy of classifying
investments as held to maturity is based upon its ability and management's
positive intent to hold such securities to maturity. Securities expected to be
held to maturity are carried at amortized historical cost. All other securities
are classified as available for sale and are carried at fair value. Fair value
is determined based upon quoted market prices. Unrealized holding gains and
losses on securities available for sale are included in accumulated other
comprehensive income, net of tax. Gains and losses on dispositions of investment
securities are

67

<PAGE>

Notes to Consolidated Financial Statements

---



included in non-interest income and are determined using the
specific identification method. Purchase premiums and discounts are amortized
over the expected average life of the securities using the interest method.
Declines in the fair value of held to maturity and available for sale securities
below their cost that are deemed to be other than temporary are reflected in
earnings as realized losses.





LoansLoans held for investment consist primarily of long-term loans secured by first trust deeds on single-family residences, other residential property, commercial property and land.  The single-family adjustable-rate mortgage (ARM) is the Corporation's primary loan investment.  In addition to the single-family ARMs, multi-family, commercial real estate, construction, commercial business and consumer loans are becoming a substantial part of the loans held for investment.  These loans are generally offered to customers and businesses located in Southern California, primarily in Riverside and San Bernardino counties, commonly known as the Inland Empire, and to a lesser extent in Orange, Los Angeles, San Diego and other counties.  A deterioration in the economic conditions of these markets could adversely affect the Corporation's business, financial condition and profitability.  Such deterioration could give rise to increased loan delinquencies, an increase in problem assets and foreclosures, decreased loan demand and a decline in real estate values.



Loan origination fees and certain direct origination expenses are deferred and amortized to interest income on loans over the contractual life of the loan using the effective interest method.  The amortization is discontinued for non-performing loans.  Interest receivable represents, for the most part, the current month's





Receivable from sale of loansReceivable from sale of loans represents expected settlement proceeds from the sale of loans, which have closed but not settled. The duration of the loan sale settlement generally ranges from three to 30 days.





Provident Bank Mortgage activitiesLoans are originated for both investment and sale in the secondary market.  Since the Corporation is primarily an adjustable-rate mortgage and consumer lender for its own portfolio, most fixed-rate loans are originated for sale to institutional investors.

Loans held for sale are carried at the lower of cost or fair value.  Fair value is generally determined by outstanding commitments from investors or investors' current yield requirements as calculated on the aggregate loan basis.  Loans are sold generally without recourse, other than standard representations and warranties, except those loans sold to the Federal Home Loan Bank ("FHLB") under the Mortgage Partnership Finance ("MPF") Program and to the Federal Home Loan Mortgage Corporation ("FHLMC") under one commitment which has a recourse provision.  Most loans are sold on a servicing released basis.  For some loans sold, the Corporation may retain the servicing rights in order to generate servicing income.  Where the Corporation continues to service loans after sale, investors are paid their share of the principal collections together with interest at an agreed-upon rate, which generally differs from the loan's contractual interest rate.

Loans sold to FHLMC under the recourse commitment require the
Bank to be responsible for all losses on these loans. As of June 30, 2004, there
were 7 loans sold under this commitment with an outstanding balance of $1.4
million as compared to 21 loans under this commitment with an outstanding
balance of $4.2 million at June 30,

68

<PAGE>

Notes to Consolidated Financial Statements

---



2003. As of June 30, 2004 and 2003, the Bank has established
a recourse reserve of $4 and $13, respectively, for potential losses on these
loans. To date, no losses have been experienced in this program.

Loans sold to the FHLB San Francisco under the 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 the responsibility of the FHLB.  In consideration of the obligation of the Bank to accept the recourse liability, the FHLB pays the Bank a credit enhancement fee on a monthly basis.  As of June 30, 2004, the Bank has $214.9 million outstanding under this program and has established a recourse reserve of $255 as compared to $32.8 million outstanding under this program and a recourse reserve of $31 at June 30, 2003.



Occasionally, the Bank is required to repurchase loans sold to FHLMC, Federal National Mortgage Association ("FNMA"), FHLB or other institutional 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, 2004, the Bank repurchased $79 of single-family mortgage loans as compared to $835 in fiscal 2003 and $1.1 million in fiscal 2002.



Activity in the recourse provision for the years ended June 30, 2004, 2003 and 2002 was as follows:



|                           | 2004  | 2003 | 2002     
|-------------------------- | ----- | ---- | ---------
|Balance, beginning of year | $  44 |      | $       -
|                           |       |      |          
|Provision                  | 215   |      | 44       
|Charge-offs, net           | -     |      | -        
|                           |       |      |          
|Balance, end of the year   | $ 259 |      | $ 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 loan sale premium refunds in fiscal 2004, 2003 and 2002 were $652, $681 and $347, respectively.  As of June 30, 2004 and 2003, the Bank has accrued $70 and $59, respectively, for future loan sale premium refunds.



Gains or losses on the sale of loans, including fees received or paid, is recognized at the time of sale and is determined by the difference between the net sales proceeds and the allocated book value of the loans sold.  When loans are sold with servicing retained, the carrying value of the loans is allocated between the portion sold and the portion retained (i.e., servicing assets and interest-only strips), based on estimates of their relative fair values

Servicing assets are amortized in proportion to and over the period of the estimated net servicing income and are carried at the lower of cost or fair value.  The fair value of servicing assets is determined based on the present value of estimates net future cash flows related to contractually specified servicing fees.  The Corporation periodically evaluates servicing assets for impairment, which is measured as the excess of cost over fair value.  This review is performed on a disaggregated basis, based on loan type and interest rate.  In estimating fair values at June 30, 2004 and 2003, the Corporation used a weighted-average prepayment speed of 6.82% and 25.79%, respectively, and a weighted-average discount rate of 9.09% and 9.39%, respectively.  No impairment was identified as of June 30, 2004 and 2003.  Servicing assets, which are included in Other Assets in the accompanying Consolidated Statements of Financial Condition, had a carrying value of $1.6 million and a fair value of $2.6 million at June 30, 2004.  Servicing assets at June 30, 2003 had a carrying value of $289 and a fair value of $356.

69

<PAGE>

Notes to Consolidated Financial Statements

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Rights to future income from serviced loans that exceed contractually specified servicing fees are recorded as interest-only strips.  Interest-only strips are carried at fair value, utilizing the same assumptions as used to value the related servicing assets, with any unrealized gain or loss, net of tax, recorded as a component of accumulated other comprehensive income (loss).  Interest-only strips are included in Other Assets in the accompanying Consolidated Statements of Financial Condition and had a fair value of $500, gross unrealized gains of $193, and amortized cost of $307 at June 30, 2004.   Interest-only strips were not significant at June 30, 2003.

During the years ended June 30, 2004 and 2003, the Corporation sold 35% and 64%, respectively, of its loans originated for sale to a single primary investor.  If the Corporation is unable to sell loans to the primary investor, management believes the availability of other qualified investors would mitigate any significant risk to the Corporation's operations.



Allowance for loan lossesIt 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 susceptible to changes in the economic environment and market conditions.  The allowance is increased by the provision for losses charged against income and reduced by charge-offs, net of recoveries.





Impaired loansThe Corporation 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 Corporation measures each impaired loan based on the fair value of its collateral and charges off those loans or portions of loans deemed uncollectible.





Real estateReal estate acquired through foreclosure is initially recorded at the lesser of the loan balance at the time of foreclosure or the fair value of the real estate acquired, less estimated selling costs.  All real estate is carried at the lower of cost or fair value, less estimated selling costs.  Real estate loss provisions are recorded when the carrying value of the property exceeds the fair value.  Costs relating to improvement of property are capitalized.  Other costs are expensed as incurred.





Impairment of long-lived assetsThe Corporation reviews its long-lived assets for impairment annually or when events or circumstances indicate that the carrying amount of these assets may not be recoverable.  An asset is considered impaired when the expected undiscounted cash flows over the remaining useful life are less than the net book value.  When impairment is indicated for an asset, the amount of impairment loss is the excess of the net book value over its fair value.

70

<PAGE>

Notes to Consolidated Financial Statements

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Premises and equipmentPremises and equipment are stated at cost, less accumulated depreciation and amortization.  Depreciation is computed primarily on a straight-line basis over the estimated useful lives as follows:

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 taxesTaxes 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 enactment of changes in the tax law or rates are considered.





Risks and uncertaintiesIn the normal course of business, the Corporation encounters two significant types of risk: economic and regulatory.  There are three main components to economic risk: interest rate risk, credit risk and market risk.  The Corporation is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different frequencies, or on a different basis, than its interest-earning assets.  Credit risk is the risk of default on the Corporation's loans held for investment that results from the borrower's inability or unwillingness to make contractually required payments.  Market risk results from changes in the value of assets and liabilities, which may impact, favorably or unfavorably, the realizability of those assets and liabilities held by the Corporation.



The Corporation is subject to the regulations of various government agencies.  These regulations can and do change significantly from period to period.  The Corporation also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions resulting from the regulators' judgments based on information available to them at the time of their examination.





Cash dividendSince July 24, 2002, the Corporation has distributed a quarterly cash dividend on the Corporation's outstanding shares of common stock.

71

<PAGE>

Notes to Consolidated Financial Statements

---



Stock splitOn December 19, 2003, the Corporation declared a three-for-two stock split distributed in the form of a 50% stock dividend on February 2, 2004 to shareholders of record on January 15, 2004.  All share and per share information in the accompanying consolidated financial statements have been restated to reflect the stock split.





Earnings per common share (EPS)Basic EPS represents net income divided by the weighted average common shares outstanding during the period excluding any potential dilutive effects.  Diluted EPS gives effect to all potential issuance of common stock that would have caused basic EPS to be lower as if the issuance had already occurred.  Accordingly, diluted EPS reflects an increase in the weighted average shares outstanding due to the assumed exercise of stock options and the vesting of restricted stock.



Stock-based compensationStatement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value.  The Corporation has been accounting for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations.  Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair value of the Corporation's stock at the date of grant over the grant price.



The Corporation has adopted the disclosure-only provisions of SFAS No. 123.  Had compensation cost for the Corporation's stock-based compensation plans been determined based on the fair value at the grant date for awards consistent with the provisions of SFAS No. 123, the Corporation's net income and earnings per share would have been reduced to the pro forma amounts as follows:



|                                                   | Year Ended June 30,                
|-------------------------------------------------- | -----------------------------------
|                                                   | 2004                               
|Net income, as reported                            | $ 15,069                           
|Deduct:                                            |                                    
|Total stock-based compensation expense, determined |                                    
|                                                   | using fair value method, net of tax
|Pro forma net income                               | $ 14,822                           
|                                                   |                                    
|Earnings per share:                                |                                    
|Basic - as reported                                | $ 2.24                             
|Basic - pro forma                                  | $ 2.20                             
|                                                   |                                    
|Diluted - as reported                              | $ 2.09                             
|Diluted - pro forma                                | $ 2.06                             



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 (15% for grants in fiscal 2004, 26% for
grants in fiscal 2003 and 27% for grants in fiscal 2002), risk-free rate of the
10-year Treasury Note (4.36% for grants in fiscal 2004, 4.50% for grants in
fiscal 2003 and 4.42% for grants in fiscal 2002) and dividend payments ($0.33
for grants in fiscal 2004, $0.13 for grants in fiscal 2003 and no dividend for
grants in fiscal 2002). In fiscal 2004, 384,250 stock options were granted;
while 7,500 and 192,375 stock options were granted in fiscal 2003 and fiscal
2002, respectively. The Corporation calculates the fair value only at the time
of the

72

<PAGE>

Notes to Consolidated Financial Statements

---



stock option grant and no additional computations are
performed during the life of the options. 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.





Postretirement benefitsThe estimated obligation for postretirement health care and life insurance benefits is determined based on an actuarial computation of the cost of current and future benefits for the eligible (grandfathered) retirees and employees as of June 30, 2004.  Beginning in fiscal 2004, the Corporation no longer offers the postretirement health care and life insurance benefits to any employee not previously qualified (grandfathered) for these benefits.





Comprehensive incomeAccounting principles generally require that realized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains or losses on available for sale securities, are reported in a separate component of the equity section of the balance sheet, such items, along with income, are components of comprehensive income.



The components of other comprehensive income and related tax effects are as follows:



|                                      |                                    | For the Year Ended June 30,
|------------------------------------- | ---------------------------------- | ---------------------------
|                                      |                                    | 2004                       
|Unrealized holding (losses) gains on  |                                    |                            
|                                      | available-for-sale securities, net | $ (2,831                   
|Reclassification adjustment for gains |                                    |                            
|                                      | realized in income                 | -                          
|Net unrealized (losses) gains         | (2,831                             | )                          
|Tax effect                            | 1,161                              |                            
|Net-of-tax amount                     | $ (1,670                           | )                          



Recent accounting pronouncements



SFAS No. 149:
SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," is effective for hedging relationships entered into or modified after June 30, 2003.  SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging

73

<PAGE>

Notes to Consolidated Financial Statements

---



Activities."  The adoption of SFAS No. 149 did not have a significant impact on the Corporation's financial position, cash flows or results of operations.



SFAS No. 150:
SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope, which may have previously been reported as equity, as a liability (or an asset in some circumstances).  This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic entities.  The adoption of SFAS No. 150 did not have a significant impact on the Corporation's financial position, cash flows or results of operations.



FASB Interpretation ("FIN") No. 45:
In November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," an interpretation of SFAS Nos. 5, 57 and 107, and rescission of FIN No. 34,"Disclosure of Indirect Guarantees of Indebtedness of Others."  FIN No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements regarding its obligations under certain guarantees that it has issued.  It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, while the provisions of the disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002.  The adoption of this Interpretation on January 1, 2003 did not have a material impact on the Corporation's results of operations, financial position or cash flows.



FIN No. 46R:
In December 2003, the FASB issued FIN No. 46R, "Consolidation of Variable Interest Entities," an interpretation of Accounting Research Bulletin No. 51.  FIN No. 46R requires that variable interest entities be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns or both.  FIN 46R also requires disclosure about variable interest entities that companies are not required to consolidate but in which a company has a significant variable interest.  The consolidation requirements must be adopted no later than the beginning of the first fiscal year or interim period beginning after March 15, 2004.  The adoption of FIN No. 46R is not expected to have a material impact on the Corporation's results of operations, financial position or cash flows.



SOP 03-3:
In December 2003, the Accounting Standards Executive Committee of the AICPA issued Statement of Position No. 03-3 ("SOP 03-3"), "Accounting for Certain Loans or Debt Securities Acquired in a Transfer."  SOP 03-3 addresses the accounting for differences between contractual cash flows and the cash flows expected to be collected from purchased loans or debt securities if those differences are attributable, in part, to credit quality.  SOP 03-3 requires purchased loans and debt securities to be recorded initially at fair value based on the present value of the cash flows expected to be collected with no carryover of any valuation allowance previously recognized by the seller.  Interest income should be recognized based on the effective yield from the cash flows expected to be collected.  To the extent that the purchased loans or debt securities experience subsequent deterioration in credit quality, a valuation allowance would be established for any additional cash flows that are not expected to be received.  However, if more cash flows were subsequently expected to be received than originally estimated, the effective yield would be adjusted on a prospective basis.  SOP 03-3 will be effective for loans and debt securities acquired after December 31, 2004.  Management does not expect the adoption of this statement to have a material impact on the Corporation's financial position, results of operations, or cash flows.

74

<PAGE>

Notes to Consolidated Financial Statements

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EITF No. 03-1:
In March 2004, the Emerging Issues Task Force ("EITF") reached consensus on the guidance provided in EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments" ("EITF 03-1") as applicable to debt and equity securities that are within the scope of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and equity securities that are accounted for using the cost method specified in Accounting Policy Board Opinion No. 18 "The Equity Method of Accounting for Investments in Common Stock."  An investment is impaired if the fair value of the investment is less than its cost. EITF 03-1 outlines that an impairment would be considered other-than-temporary unless: a) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for the recovery of the fair value up to (or beyond) the cost of the investment, and b) evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. Although not presumptive, a pattern of selling investments prior to the forecasted recovery of fair value may call into question the investor's intent.  The severity and duration of the impairment should also be considered in determining whether the impairment is other-than-temporary. This new guidance for determining whether impairment is other-than-temporary is effective for reporting periods beginning after June 15, 2004. Adoption of this standard may cause the Corporation to recognize impairment losses in the Consolidated Statements of Operations which would not have been recognized under the current guidance or to recognize such losses in earlier periods.  Since fluctuations in the fair value for available-for-sale securities are already recorded in Accumulated Other Comprehensive Income (Loss), adoption of this standard is not expected to have a significant impact on stockholders' equity.



The amortized cost and estimated fair value of investment securities as of June 30, 2004 and 2003 were as follows:

|June 30, 2004               | Amortized
Cost                    | Gross
Unrealized
Gains |         | Gross
Unrealized
(Losses) |          | Estimated
Fair
Value | Carrying
Value
|--------------------------- | --------------------------------- | ---------------------- | ------- | ------------------------- | -------- | -------------------- | --------------
|                            |                                   |                        |         |                           |          |                      |               
|Held to maturity            |                                   |                        |         |                           |          |                      |               
|                            | U.S. government agency securities | $   59,199             |         | $          13             |          | $ (1,001             | )             
|                            | U.S. government MBS (1)           | 5                      |         | 2                         |          | -                    |               
|                            | Corporate bonds                   | 2,796                  |         | 36                        |          | -                    |               
|                            | Certificates of deposit           | 200                    |         | -                         |          | -                    |               
|                            | Total held to maturity            | 62,200                 |         | 51                        |          | (1,001               | )             
|                            |                                   |                        |         |                           |          |                      |               
|Available for sale          |                                   |                        |         |                           |          |                      |               
|                            | U.S. government agency securities | 24,831                 |         | -                         |          | (516                 | )             
|                            | U.S. government MBS               | 17,723                 |         | -                         |          | (190                 | )             
|                            | U.S. government agency MBS        | 137,517                |         | 530                       |          | (718                 | )             
|                            | Private issue CMO (2)             | 10,507                 |         | -                         |          | (91                  | )             
|                            | FHLMC common stock                | 12                     |         | 747                       |          | -                    |               
|                            | FNMA common stock                 | 1                      |         | 27                        |          | -                    |               
|                            | Total available for sale          | 190,591                |         | 1,304                     |          | (1,515               | )             
|Total investment securities | $ 252,791                         |                        | $ 1,355 |                           | $ (2,516 | )                    | $ 251,630     

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

75

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Notes to Consolidated Financial Statements

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|June 30, 2003               | Amortized
Cost                    | Gross
Unrealized
Gains |         | Gross
Unrealized
(Losses) |       | Estimated
Fair
Value | Carrying
Value
|--------------------------- | --------------------------------- | ---------------------- | ------- | ------------------------- | ----- | -------------------- | --------------
|                            |                                   |                        |         |                           |       |                      |               
|Held to maturity            |                                   |                        |         |                           |       |                      |               
|                            | U.S. government agency securities | $   73,851             |         | $      345                |       | $        -           |               
|                            | U.S. government MBS (1)           | 8                      |         | 4                         |       | -                    |               
|                            | Corporate bonds                   | 2,779                  |         | 28                        |       | (5                   | )             
|                            | Certificates of deposit           | 200                    |         | -                         |       | -                    |               
|                            | Total held to maturity            | 76,838                 |         | 377                       |       | (5                   | )             
|                            |                                   |                        |         |                           |       |                      |               
|Available for sale          |                                   |                        |         |                           |       |                      |               
|                            | U.S. government agency securities | 38,608                 |         | 176                       |       | (9                   | )             
|                            | U.S. government agency MBS        | 170,891                |         | 1,951                     |       | (48                  | )             
|                            | 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                     |       | (57                  | )             
|Total investment securities | $ 294,299                         |                        | $ 3,246 |                           | $ (62 | )                    | $ 297,483     

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

The gross realized gain on sale of investment securities based on identified securities during the years ended June 30, 2004, 2003 and 2002 was $0, $694 and $544, respectively. 
The accrued tax obligation for June 30, 2004, 2003 and 2002 was $0, $279, $226, respectively. 
There were no realized losses during the years ended June 30, 2004, 2003 and
2002.

During fiscal 2004, the issuers called $148.8 million of investment securities and MBS principal payments were $94.9 million.  In fiscal 2003, the issuers called $284.0 million of investment securities, $25.4 million were sold and MBS principal payments were $69.0 million.  The high volume of called securities was the result of the significant decline in interest rates during fiscal 2004 and fiscal 2003 and substantial callable agency securities which were purchased with coupon rates higher than market rates at the time of purchase.  Total called securities, which had coupon rates higher than market at the time of purchase in fiscal 2004 and 2003 were $80.4 million and $186.0 million, respectively.  The securities called were callable at the option of the issuer and were primarily issued by the FHLB, the FNMA or the FHLMC.  The increase in MBS principal payments was due primarily to the decline in interest rates and a larger proportion of MBS in the investment securities portfolio.  As of June 30, 2004, MBS and CMO investments represented 65% of investment securities as compared to 61% at June 30, 2003.

76

<PAGE>

Notes to Consolidated Financial Statements

---



As of June 30, 2004, the Corporation held investments with unrealized holding losses totaling $2.5 million, consisting of the following:





|                                   | Less than 12 months     |            | 12 months or more |          | Total               
|---------------------------------- | ----------------------- | ---------- | ----------------- | -------- | --------------------
|                                   | Fair                    | Unrealized |                   | Fair     | Unrealized          
|Description  of Securities         | Value                   | Losses     |                   | Value    | Losses              
|U.S. government agency securities: |                         |            |                   |          |                     
|                                   | FNMA                    | $  6,833   | $  156            |          | $                  -
|                                   | FHLMC                   | 9,911      | 97                |          | 3,809               
|                                   | FHLB                    | 48,040     | 828               |          | 2,881               
|                                   | FFCB (1)                | 5,872      | 128               |          | -                   
|U.S. government securities:        |                         |            |                   |          |                     
|                                   | GNMA (2)                | 17,533     | 190               |          | -                   
|U.S. government agency MBS:        |                         |            |                   |          |                     
|                                   | FNMA                    | 42,455     | 308               |          | 5,376               
|                                   | FHLMC                   | 16,530     | 190               |          | -                   
|Private issue CMO:                 |                         |            |                   |          |                     
|                                   | Washington Mutual, Inc. | 10,416     | 91                |          | -                   
|Total                              | $ 157,590               | $ 1,988    |                   | $ 12,066 | $ 528               



(1)    Federal Farm Credit Banks ("FFCB")
(2)    Government National Mortgage Association ("GNMA")



As of June 30, 2004, the unrealized holding losses relate to a total of 47 investment securities, which consist of 14 adjustable rate MBS, three adjustable CMO and 30 fixed rate government agency debt obligations, which have been in an unrealized loss position (ranging from

77

<PAGE>

Notes to Consolidated Financial Statements

---



Contractual maturities of investment securities as of June 30, 2004 and 2003 were as follows:

|                                  | June 30, 2004 | June 30, 2003
|--------------------------------- | ------------- | -------------
|                                  |               | Estimated    
|Amortized                         |               | Fair         
|Cost                              |               | Value        
|Held to maturity                  |               |              
|Due in one year or less           | $       7,174 |              
|Due after one through five years  | 55,026        |              
|Due after five through ten years  | -             |              
|                                  | 62,200        |              
|Available for sale                |               |              
|Due in one year or less           | -             |              
|Due after one through five years  | 29,870        |              
|Due after five through ten years  | -             |              
|Due after ten years               | 160,708       |              
|No stated maturity (common stock) | 13            |              
|                                  | 190,591       |              
|Total investment securities       | $ 252,791     |              

3.    Loans Held for Investment (in Thousands):

Loans held for investment consisted of the following:

|                                | June 30,                 
|------------------------------- | -------------------------
|2004                            |                          
|                                |                          
|Mortgage loans:                 |                          
|                                | Single-family            
|                                | Multi-family             
|                                | Commercial real estate   
|                                | Construction             
|Commercial business loans       | 13,770                   
|Consumer loans                  | 730                      
|Other                           | 7,371                    
|                                | 946,946                  
|Less:                           |                          
|                                | Undisbursed loan funds   
|                                | Deferred loan costs      
|                                | Allowance for loan losses
|Total loans held for investment | $ 862,535                

Fixed-rate loans comprised 4% and 6% of loans held for investment at June 30, 2004 and 2003, respectively.

78

<PAGE>

Notes to Consolidated Financial Statements

---



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

|                             | Year Ended June 30,
|---------------------------- | -------------------
|2004                         |                    
|                             |                    
|Balance, beginning of period | $ 7,218            
|Provision for losses         | 819                
|Recoveries                   | 1                  
|Charge-offs                  | (424               
|Balance, end of period       | $ 7,614            

The effect of non-accrual and restructured loans on interest income for the years ended June 30, 2004, 2003 and 2002 is presented below:

|                         | Year Ended June 30,
|------------------------ | -------------------
|2004                     |                    
|                         |                    
|Contractual interest due | $ 101              
|Interest recognized      | (58                
|Net interest foregone    | $  43              

At June 30, 2004 and 2003, there were no commitments to lend additional funds to those borrowers whose loans were classified as impaired.



The following table identifies the Corporation's total recorded investment in impaired loans, net of specific allowances, by type at June 30, 2004 and 2003:



|                           | June 30, 2004                  
|-------------------------- | -------------------------------
|Recorded
Investment        | Allowance
For Loan
Losses      
|                           |                                
|Mortgage loans:            |                                
|                           | Single-family:                 
|                           |                                
|                           | Total single-family loans      
|                           |                                
|Commercial business loans: |                                
|                           |                                
|                           |                                
|                           | Total commercial business loans
|Total impaired loans       | $ 2,484                        



79

<PAGE>

Notes to Consolidated Financial Statements

---



|                           | June 30, 2003                     
|-------------------------- | ----------------------------------
|Recorded
Investment        | Allowance
For Loan
Losses         
|                           |                                   
|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                           



During the years ended June 30, 2004, 2003 and 2002, the Corporation's average investment in impaired loans was $2.9 million, $2.4 million and $4.4 million, respectively; the imputed interest income during these periods was $297, $266 and $480, respectively; while the interest income recognized on a cash basis was $292, $327 and $674, 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,
|---------------------------- | -------------------
|2004                         |                    
|                             |                    
|Balance, beginning of period | $      5,556       
|Originations                 | 13,135             
|Sales/payments               | (14,293            
|Balance, end of period       | $      4,398       

Related-party loan originations decreased $5.1 million, or 28%, from $18.2 million in fiscal 2003 to $13.1 million in fiscal 2004.  The total sales/payments increased $710, or 5%, from $13.6 million in fiscal 2003 to $14.3 million in fiscal 2004.

80

<PAGE>

Notes to Consolidated Financial Statements

---





The following summarizes the unpaid principal balance of loans serviced for others by the Corporation:

|                                                 | Year Ended June 30,
|------------------------------------------------ | -------------------
|2004                                             |                    
|                                                 |                    
|Loans serviced for FHLMC                         | $    19,995        
|Loans serviced for FNMA                          | 19,419             
|Loans serviced for FHLB                          | 215,057            
|Loans serviced for other institutional investors | 14,914             
|Total loans serviced for others                  | $ 269,385          

Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and processing foreclosures.  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 $615, $279 and $267 as of June 30, 2004, 2003 and 2002, respectively.  These escrow balances are included in deposits in the accompanying Consolidated Statements of Financial Condition.

The following table summarizes the estimated aggregate amortization expense for servicing assets as of June 30, 2004:



|Year Ended June 30,                  | Amount    
|------------------------------------ | ----------
|                                     |           
|                                     | 2005      
|                                     | 2006      
|                                     | 2007      
|                                     | 2008      
|                                     | 2009      
|                                     | Thereafter
|Total estimated amortization expense | $ 1,622   

Loans sold consisted of the following:

|                 | Year Ended June 30, 
|---------------- | --------------------
|2004             |                     
|                 |                     
|Loans sold:      |                     
|                 | Servicing - released
|                 | Servicing - retained
|Total loans sold | $ 1,155,233         

81

<PAGE>

Notes to Consolidated Financial Statements

---



Loans held for sale consisted of the following:

|                          | June 30,
|------------------------- | --------
|2004                      | 2003    
|                          |         
|Fixed rate                | $ 18,797
|Adjustable rate           | 1,330   
|Total loans held for sale | $ 20,127

5.   Real Estate Held for Investment and Other Real Estate Owned (in Thousands):

Real estate held for investment consisted of the following:

|                                           | June 30,
|------------------------------------------ | --------
|2004                                       |         
|                                           |         
|Real estate held for investment            | $ 12,629
|Less accumulated depreciation              | (2,453  
|Total real estate held for investment, net | $ 10,176

Other real estate owned consisted of the following:

|                                      | June 30,
|------------------------------------- | --------
|2004                                  |         
|                                      |         
|Other real estate owned               | $  -    
|Less allowance for real estate losses | -       
|Total other real estate owned, net    | $  -    

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

|                             | Year Ended June 30,
|---------------------------- | -------------------
|2004                         |                    
|                             |                    
|Balance, beginning of period | $   -              
|Provisions for losses        | -                  
|Charge-offs                  | -                  
|Balance, end of period       | $   -              

82

<PAGE>

Notes to Consolidated Financial Statements

---



Premises and equipment consisted of the following:

|                                               | June 30,  
|---------------------------------------------- | ----------
|2004                                           |           
|                                               |           
|Land                                           | $    3,051
|Buildings                                      | 8,063     
|Leasehold improvements                         | 1,233     
|Furniture and equipment                        | 9,685     
|Automobiles                                    | 96        
|                                               | 22,128    
|Less accumulated depreciation and amortization | (14,216   
|Total premises and equipment, net              | $    7,912

Depreciation and amortization expense for the years ended June 30, 2004, 2003 and 2002 amounted to $1.8 million, $1.9 million and $2.2 million, respectively.



|                                           | June 30, 2004 |               | June 30, 2003
|------------------------------------------ | ------------- | ------------- | -------------
|Interest Rate                              |               | Amount        |              
|                                           |               |               |              
|Checking accounts - non-interest bearing   | -             |               | $     41,551 
|Checking accounts - interest bearing (1)   | 0% - 1.00%    |               | 123,621      
|Savings accounts (1)                       | 0% - 1.98%    |               | 348,911      
|Money market accounts (1)                  | 0% - 1.49%    |               | 46,858       
|Time deposits                              |               |               |              
|                                           | Under $100    | 0.50% - 7.23% |              
|                                           | $100 and over | 0.70% - 6.81% |              
|Total deposits                             |               |               | $ 851,039    
|Weighted average interest rate on deposits |               |               | 1.58%        

(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.

83

<PAGE>

Notes to Consolidated Financial Statements

---



The aggregate annual maturities of time deposits are as follows:

|                         | June 30, 
|------------------------ | ---------
|2004                     |          
|                         |          
|One year or less         | $ 128,517
|Over one to two years    | 85,570   
|Over two to three years  | 31,757   
|Over three to four years | 25,023   
|Over four to five years  | 19,131   
|Over five years          | 100      
|Total time deposits      | $ 290,098

Interest expense on deposits is summarized as follows:

|                                     | Year Ended June 30,
|------------------------------------ | -------------------
|2004                                 |                    
|                                     |                    
|Checking accounts - interest bearing | $     665          
|Savings accounts                     | 5,267              
|Money market accounts                | 700                
|Time deposits                        | 6,688              
|Total interest expense on deposits   | $ 13,320           

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, 2004 and 2003 were sufficient to cover the reserve requirements.



Advances from the FHLB were collateralized by pledges of certain real estate loans with an aggregate principal balance at June 30, 2004 and 2003 of $345.2 million and $348.8 million, respectively.  In addition, the Bank pledged investment securities totaling $206.9 million at June 30, 2004 to collateralize its FHLB advances under the Securities-Backed Credit ("SBC") program as compared to $242.2 million at June 30, 2003.  At June 30, 2004, the Bank's FHLB borrowing capacity, which is limited to 40% of total assets reported on the Bank's quarterly thrift financial report, was approximately $550.1 million as compared to $473.2 million at June 30, 2003.  In addition, the Bank has a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $45.0 million.  No borrowings under this facility were outstanding at June 30, 2004 and 2003.

84

<PAGE>

Notes to Consolidated Financial Statements

---



Borrowings consisted of the following:

|                      | June 30, 
|--------------------- | ---------
|2004                  |          
|                      |          
|Regular FHLB advances | $ 306,877
|SBC FHLB advances     | 18,000   
|Total borrowings      | $ 324,877

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 $27.0 million and an excess of $883 at June 30, 2004, as compared to the required investment of $18.4 million and an excess of $2.6 million at June 30, 2003.  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,
|------------------------------------------------------------ | ------------- | ---------- | ---------------------------------
|                                                             |               |            | 2004                             
|                                                             |               |            |                                  
|Balance outstanding at the end of period:                    |               |            |                                  
|                                                             | FHLB advances | $ 324,877  |                                  
|                                                             |               |            |                                  
|Weighted average rate at the end of period:                  |               |            |                                  
|                                                             | FHLB advances | 4.01%      |                                  
|                                                             |               |            |                                  
|Maximum amount of borrowings outstanding at any month end:   |               |            |                                  
|                                                             | FHLB advances | $ 385,385  |                                  
|                                                             |               |            |                                  
|Average short-term borrowings (1)                            |               |            |                                  
|with respect to:                                             |               |            |                                  
|                                                             | FHLB advances | $   97,638 |                                  
|                                                             |               |            |                                  
|Weighted average short-term borrowing rate during the period |               |            |                                  
|with respect to:                                             |               |            |                                  
|                                                             | FHLB advances | 2.42%      |                                  

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

85

<PAGE>

Notes to Consolidated Financial Statements

---



The aggregate annual contractual maturities of borrowings are as follows:

|                               | June 30,    
|------------------------------ | ------------
|2004                           |             
|                               |             
|Within one year                | $     69,000
|Over one to two years          | 27,000      
|Over two to three years        | 15,000      
|Over three to four years       | 72,000      
|Over four to five years        | 30,000      
|Over five years                | 111,877     
|Total borrowings               | $ 324,877   
|Weighted average interest rate | 4.01%       



The provision for income taxes consisted of the following:

|                           | Year Ended June 30,
|-------------------------- | -------------------
|2004                       |                    
|                           |                    
|Current:                   |                    
|                           | Federal            
|                           | State              
|                           | 11,100             
|Deferred:                  |                    
|                           | Federal            
|                           | State              
|                           | 617                
|Provision for income taxes | $ 11,717           

The Corporation's tax benefit from non-qualified equity compensation in fiscal 2004 and fiscal 2003 was approximately $349 and $308, respectively.

86

<PAGE>

Notes to Consolidated Financial Statements

---



The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pre-tax income from continuing operations as a result of the following differences:

|                                       | Year Ended June 30,
|-------------------------------------- | -------------------
|2004                                   |                    
|                                       |                    
|Federal statutory income tax rate      | 35.0               
|State taxes, net of federal tax effect | 7.4                
|Other                                  | 1.3                
|Effective income tax rate              | 43.7               

Deferred tax liabilities by jurisdiction were as follows:

|                             | June 30,
|---------------------------- | --------
|2004                         |         
|                             |         
|Deferred taxes - federal     | $ 302   
|Deferred taxes - state       | 109     
|Total deferred tax liability | $ 411   

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

|                                               | June 30,                      
|---------------------------------------------- | ------------------------------
|2004                                           |                               
|                                               |                               
|Depreciation                                   | $   3,459                     
|FHLB dividends                                 | 2,747                         
|Unrealized gain on investment securities       | -                             
|Unrealized gain on interest-only strips        | 78                            
|Other                                          | 58                            
|                                               | Total deferred tax liabilities
|                                               |                               
|State taxes                                    | (1,070                        
|Market value adjustments - loans held for sale | (193                          
|Loss reserves                                  | (3,323                        
|Deferred compensation                          | (1,162                        
|ESOP contribution                              | -                             
|Accrued vacation                               | (97                           
|Unrealized loss on investment securities       | (86                           
|Other                                          | -                             
|                                               | Total deferred tax assets     
|                                               | Net deferred tax liability    

87

<PAGE>

Notes to Consolidated Financial Statements

---



The net deferred tax liability is included in other liabilities in the accompanying Consolidated Statements of Financial Condition.



Retained earnings at June 30, 2004 included approximately $9.0 million for which federal income tax of $3.1 million had not been provided.  If the amounts that qualify as deductions for federal income tax purposes are later used for purposes other than for bad debt losses, including distribution in liquidation, they will be subject to federal income tax at the then current corporate tax rate.  If those amounts are not so used, they will not be subject to tax even in the event the Corporation were to convert its charter.



Federal regulations require that institutions with investments in subsidiaries conducting real estate investments and joint venture activities maintain sufficient capital over the minimum regulatory requirements.  The Bank maintains capital in excess of the minimum requirements.



The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Corporation's financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.



Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier 1 Capital (as defined in the regulations) to Risk-Weighted Assets (as defined), and of Core Capital (as defined) to Adjusted Tangible Assets (as defined).  Management believes, as of June 30, 2004 and 2003, that the Bank meets all capital adequacy requirements to which it is subject.



Various adjustments are required to be made to retained earnings and total assets for computing these capital ratios, depending on an institution's capital and asset structure.  The adjustment presently applicable to the Bank is for equity investments in real estate.  In addition, in calculating risk-based capital, general loss allowances are included as capital on a limited basis.



As of June 30, 2004 and 2003, the most recent notification from the Office of Thrift Supervision categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action.  To be categorized as "well capitalized" the Bank must maintain minimum Total Risk-Based, Core Capital and Tier 1 Risk-Based Capital ratios as set forth in the table.  There are no conditions or events since that notification that management believes have changed the Bank's category.

The Bank may not declare or pay cash dividends on or repurchase any of its shares of common stock, if the effect would cause stockholders' equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration and payment would otherwise violate regulatory requirements.  In fiscal 2004 and 2003, the Bank declared and paid cash dividends of $8.0 million and $26.4 million, respectively, to its parent.

88

<PAGE>

Notes to Consolidated Financial Statements

---



The Bank's actual capital amounts and ratios as of June 30, 2004 and 2003 are as follows:

|                                | Actual   | For Capital Adequacy
Purposes | To Be Well Capitalized
Under Prompt Corrective
Action Provisions
|------------------------------- | -------- | ----------------------------- | ----------------------------------------------------------------
|Amount                          |          | Ratio                         |                                                                 
|                                |          |                               |                                                                 
|As of June 30, 2004             |          |                               |                                                                 
|Total Capital to Risk-Weighted  |          |                               |                                                                 
|Assets                          | $ 94,983 |                               | 12.39%                                                          
|Core Capital to Adjusted        |          |                               |                                                                 
|Tangible Assets                 | 90,402   |                               | 6.90%                                                           
|Tier 1 Capital to Risk-Weighted |          |                               |                                                                 
|Assets                          | 87,385   |                               | 11.40%                                                          
|Tangible Capital                | 90,402   |                               | 6.90%                                                           
|                                |          |                               |                                                                 
|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%                                                           

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 to the plan from their pretax compensation up to the limits set by the Internal Revenue Service.  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 $335, $333 and $323 for the years ended June 30, 2004, 2003 and 2002, 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, 2004 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 Trust borrowed $4.1 million
from the Corporation to purchase 922,538 shares of the common stock issued in
the conversion. The loan will be

89

<PAGE>

Notes to Consolidated Financial Statements

---



repaid principally from the Corporation's contributions to
the ESOP over a period of 15 years. In addition to the scheduled principal loan
payments, the ESOP Trust paid additional principal amounts, which came from cash
dividends received on the unallocated ESOP shares. The additional principal
payment (loan prepayment) in fiscal 2004 and 2003 was $155 and $72,
respectively. At June 30, 2004 and 2003, the outstanding balance on the loan was
$2.1 million and $2.6 million, respectively. Shares purchased with the loan
proceeds are held in an unearned ESOP account and released on a pro rata basis
based on the distribution schedule. Contributions to the ESOP and shares
released from the unearned ESOP account are allocated among participants on the
basis of compensation, as described in the plan, in the year of allocation.
Benefits generally become 100% vested after six years of credited service.
Vesting will accelerate upon retirement, death or disability of the participant
or in the event of a change in control of the Corporation. Forfeitures will be
reallocated among remaining participating employees in the same proportion as
contributions. Benefits may be payable upon death, retirement, early retirement,
disability or separation from service. Since the annual contributions are
discretionary, the benefits payable under the ESOP cannot be estimated. The
expense related to the ESOP was $1.4 million, $1.1 million and $741 for the
years ending June 30, 2004, 2003 and 2002, respectively. At June 30, 2004 and
2003, the unearned ESOP account of $1.6 million and $2.0 million, respectively,
was reported as a reduction to stockholders' equity.

The table below reflects ESOP activity for the period indicated (in number of shares):

|                                          | June 30,
|----------------------------------------- | --------
|                                          | 2004    
|Unallocated shares at beginning of period | 471,719 
|Allocated                                 | (60,867 
|Unallocated shares at end of period       | 410,852 

The fair value of unallocated ESOP shares was $9.7 million, $9.2 million and $8.0 million at June 30, 2004, 2003 and 2002, respectively.





Management Recognition Plan (MRP)



The Corporation established the 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 461,250 shares of its common stock in the open market to fund the MRP in 1997.  All of the 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 $135, $331 and $728 for the years ended June 30, 2004, 2003 and 2002, respectively.



Stock Option Plan



The Corporation established the 1996 Stock Option Plan ("1996
SOP") for certain of its directors and key employees under which options to
acquire up to 1.15 million shares of common stock may be granted. All but 11,250
stock options under the 1996 SOP have been granted. On November 18, 2003,
shareholders approved the 2003 Stock Option Plan ("2003 SOP") for certain of its
directors and key employees under which options to acquire up to 352,500 shares
of common stock may be granted. In fiscal 2004, a total of 250,000 options were
granted under the

90

<PAGE>

Notes to Consolidated Financial Statements

---



2003 SOP. As of June 30, 2004, the number of options
available for future grants (under both plans) were 113,750 shares. Under the
Stock Option Plans, options may not be granted at a price less than the fair
market value at the date of grant. Options vest 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.

The following is a summary of changes in options outstanding:

|                             | Number of
Shares                    |          | Weighted
Average
Strike Price
|---------------------------- | ----------------------------------- | -------- | -----------------------------
|Outstanding at June 30, 2001 | 823,500                             |          |                              
|                             | Granted (fair value of $4.62/share) | 192,375  |                              
|                             | Exercised                           | (30,375  | )                            
|                             | Canceled                            | (11,250  | )                            
|Outstanding at June 30, 2002 | 974,250                             |          |                              
|                             | Granted (fair value of $5.45/share) | 7,500    |                              
|                             | Exercised                           | (201,225 | )                            
|Outstanding at June 30, 2003 | 780,525                             |          |                              
|                             | Granted (fair value of $6.19/share) | 384,250  |                              
|                             | Exercised                           | (128,675 | )                            
|                             | Cancelled                           | (11,250  | )                            
|Outstanding at June 30, 2004 | 1,024,850                           |          |                              



91

<PAGE>

Notes to Consolidated Financial Statements

---



The following table summarizes the outstanding stock options and the exercisable portion of the stock options as of June 30, 2004, 2003 and 2002:

|                  |  | Options Outstanding |  | Options Exercisable
|----------------- |  | ------------------- |  | -------------------
|                  |  |                     |  | Weighted           
|                  |  | Number              |  | Average            
|                  |  | Of                  |  | Remaining          
|Exercise Prices   |  | Options             |  | Option Life        
|                  |  |                     |  |                    
|At June 30, 2004  |  |                     |  |                    
|$ 24.80           |  | 235,000             |  | 9.82               
|23.35             |  | 15,000              |  | 9.57               
|20.33             |  | 53,250              |  | 9.09               
|20.23             |  | 76,500              |  | 9.24               
|13.67             |  | 7,500               |  | 8.07               
|9.67              |  | 144,625             |  | 7.34               
|9.15              |  | 33,750              |  | 3.56               
|8.28              |  | 67,500              |  | 6.34               
|6.78              |  | 391,725             |  | 2.57               
|$ 6.78 to $ 24.80 |  | 1,024,850           |  | 6.17               
|                  |  |                     |  |                    
|At June 30, 2003  |  |                     |  |                    
|$ 13.67           |  | 7,500               |  | 9.07               
|9.67              |  | 172,125             |  | 8.34               
|9.15              |  | 79,875              |  | 4.56               
|8.28              |  | 67,500              |  | 7.34               
|6.78              |  | 453,525             |  | 3.57               
|$ 6.78 to $ 13.67 |  | 780,525             |  | 5.10               
|                  |  |                     |  |                    
|At June 30, 2002  |  |                     |  |                    
|$ 9.67            |  | 192,375             |  | 9.34               
|9.15              |  | 79,875              |  | 5.56               
|8.28              |  | 67,500              |  | 8.34               
|6.78              |  | 634,500             |  | 4.57               
|$ 6.78 to $ 9.67  |  | 974,250             |  | 5.85               

13.  Earnings Per Share (in Thousands, Except Share Information):

Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the earnings of the entity. No shares have been excluded from the diluted EPS computations.

92

<PAGE>

Notes to Consolidated Financial Statements

---



|                           | For the Year Ended June 30, 2004     
|-------------------------- | -------------------------------------
|Income
(numerator)         | Shares
(denominator)                 
|                           |                                      
|Basic EPS                  | $ 15,069                             
|Effect of dilutive shares: |                                      
|                           | Stock options (1996 SOP and 2003 SOP)
|                           | Restricted stock awards (MRP)        
|Diluted EPS                | $ 15,069                             





|                           | For the Year Ended June 30, 2003
|-------------------------- | --------------------------------
|Income
(numerator)         | Shares
(denominator)            
|                           |                                 
|Basic EPS                  | $ 16,889                        
|Effect of dilutive shares: |                                 
|                           | Stock options (1996 SOP)        
|                           | 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 SOP)        
|                           | Restricted stock awards (MRP)   
|Diluted EPS                | $ 9,109                         



14.  Commitments and Contingencies (in Thousands):

The Corporation is involved in various legal matters associated with its normal operations.  In the opinion of management, these matters will be resolved without material effect on the Corporation's financial position, results of operations or cash flows.

93

<PAGE>

Notes to Consolidated Financial Statements

---



The Corporation conducts a portion of its operations in leased facilities under non-cancelable agreements classified as operating leases. The following is a schedule of minimum rental payments under such operating leases, which expire at various years:



|Year Ended June 30,             | Amount    
|------------------------------- | ----------
|                                |           
|                                | 2005      
|                                | 2006      
|                                | 2007      
|                                | 2008      
|                                | 2009      
|                                | Thereafter
|Total minimum payments required | $ 2,388   

Lease expense under operating leases was approximately $705, $622 and $553 for the years ended June 30, 2004, 2003 and 2002, respectively.

15.  Derivatives and Other Financial Instruments with Off-Balance Sheet Risks (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, and forward loan sale agreements to third parties.  These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying Consolidated Statements of Financial Condition.  The Corporation's exposure to credit loss, in the event of non-performance by the counter 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                                               | 2004      
|                                                          |           
|Undisbursed loan funds - Construction loans               | $   78,137
|Undisbursed lines of credit - Single-family loans         | 7,342     
|Undisbursed lines of credit - Commercial business loans   | 9,625     
|Undisbursed lines of credit - Consumer loans              | 1,794     
|Commitments to extend credit on loans held for investment | 23,170    
|                                                          | $ 120,068 



Commitments to extend credit are agreements to lend money to
a customer at some future date as long as all conditions have been met in the
agreement. These commitments generally have expiration dates within 60 days of
the commitment date and may require the payment of a fee. Since some of these
commitments are expected to expire, the total commitment amount outstanding does
not necessarily represent future cash requirements. The Corporation evaluates
each customer's creditworthiness on a case-by-case basis prior to issuing a
commitment. At

94

<PAGE>

Notes to Consolidated Financial Statements

---



June 30, 2004 and 2003, interest rates on commitments to
extend credit ranged from 4.50% to 10.75% and 3.75% to 11.50%, respectively.



In an effort to minimize its exposure to interest rate fluctuations on commitments to extend credit where the underlying loan will be sold, the Corporation enters into forward loan sale agreements to sell certain dollar amounts of fixed rate and adjustable rate loans to third parties.  These agreements specify the minimum maturity of the loans, the yield to the purchaser, the servicing spread to the Corporation (if servicing is retained), the maximum principal amount of all loans to be delivered and the maximum principal amount of individual loans to be delivered.  The Corporation typically satisfies these forward loan sale agreements with its current loan production; at June 30, 2004 and 2003 the aggregate amount of loans held for sale and of commitments to extend credit on loans to be held for sale exceeded the Corporation's forward loan sale agreements.  At June 30, 2004 and 2003, interest rates on forward loan sale agreements ranged from 5.00% to 6.00% and 4.00% to 5.50%, respectively.



In addition to the instruments described above, the Corporation also purchases over-the-counter put option contracts (with expiration dates that generally coincide with the terms of the commitments to extend credit) which mitigates the interest rate risk inherent in commitments to extend credit.  The contract amounts of these instruments reflect the extent of involvement the Corporation has in this particular class of financial instruments.  The Corporation's exposure to loss on these financial instruments is limited to the premiums paid for the put option contracts.  Put options are adjusted to market in accordance with SFAS No. 133.  As of June 30, 2004 and 2003, total nominal put option contracts were $10.0 million and $45.0 million, respectively; and the fair value was $41 and $235, respectively.



In accordance with SFAS No. 133 and interpretations of the FASB's Derivative Implementation Group, the fair value of the commitments to extend credit on loans to be held for sale, forward loan sale agreements and put option contracts are recorded at fair value on the balance sheet, and are included in other assets or other liabilities.  The Corporation does not apply hedge accounting to its derivative financial instruments; therefore, all changes in fair value are recorded in earnings.  The net impact of derivative financial instruments on the consolidated statements of operations during the year ended June 30, 2004, 2003 and 2002 was a loss of $859, a gain of $360 and a gain of $3, respectively.



|                                                 | June 30, 2004 |  | June 30, 2003 |  
|------------------------------------------------ | ------------- |  | ------------- | -
|                                                 |               |  | Fair          |  
|Derivative Financial Instruments                 | Amount        |  | Value         |  
|                                                 |               |  |               |  
|Commitments to extend credit on loans to be held |               |  |               |  
|for sale (1)                                     | $   63,750    |  | $  167        |  
|Forward loan sale agreements                     | 37,500        |  | (317          | )
|Put option contracts                             | 10,000        |  | 41            |  
|Total                                            | $ 111,250     |  | $ (109        | )

|(1) | Net of an estimated 26.6% of commitments at June 30, 2004 and 29.5% of commitments at June 30, 2003, which may not fund.  The fair value of servicing released premiums at June 30, 2004 and June 30, 2003 was zero (not recognized) and $1.8 million, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During the third quarter of fiscal 2004, the Corporation adopted the Securities and Exchange Commission ("SEC") guidance regarding loan commitments that are recognized as derivatives pursuant to SFAS
No. 133. As a result of implementing the SEC Staff Accounting Bulletin No. 105,
"Application of Accounting Principles to Loan Commitments," the Corporation
excluded the recognition of servicing released premiums in the valuation of
commitments to extend credit on loans to be held for sale. The Corporation's
previous practice had been to

95

<PAGE>

Notes to Consolidated Financial Statements

---



recognize, at the inception of the rate lock, the anticipated
servicing released premiums on the underlying loans. The Corporation elected to
prospectively apply this guidance to new loan commitments initiated after
January 1, 2004. This action resulted in the delay in recognition of
approximately $580 of servicing released premiums for the year ended June 30,
2004, which will be recognized in future periods when the underlying loans are
funded and sold.

The reported fair values of financial instruments are based on various factors. In some cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows, assumed discount rates and other factors reflecting varying degrees of risk. The estimates are subjective in nature and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Accordingly, the reported fair values may not represent actual values of the financial instruments that could have been realized as of year-end or that will be realized in the future. The following methods and assumptions were used to estimate fair value of each class of significant financial instrument:



Cash and due from banks, federal funds sold, interest bearing deposits with banks: The carrying amount of these financial assets approximates the fair value.



Investment securities: The fair value of investment securities is based on quoted market prices or dealer quotes.



Loans held for investment: For loans that reprice frequently at market rates, the carrying amount approximates the fair value.  For fixed-rate loans, the fair value is determined by either (i) discounting the estimated future cash flows of such loans over their estimated remaining contractual maturities using a current interest rate at which such loans would be made to borrowers, or (ii) quoted market prices. The allowance for loan losses is subtracted as an estimate of the underlying credit risk.



Loans held for sale: Fair values for loans are based on quoted market prices.  Forward loan sale agreements have been considered in the determination of the estimated fair value of loans held for sale.



Receivable from sale of loans: The carrying value for the receivable from sale of loans approximates fair value because of the short-term nature of the financial instruments.



Accrued interest receivable/payable: The carrying value for accrued interest receivable/payable approximates fair value because of the short-term nature of the financial instruments.



Federal Home Loan Bank stock: The carrying amount reported for FHLB stock approximates fair value. If redeemed, the Corporation will receive an amount equal to the par value of the stock.



Deposits: The fair value of the deposits is estimated using a discounted cash flow calculation. The discount rate on such deposits is based upon rates currently offered for borrowings of similar remaining maturities.



Borrowings: The fair value of borrowings has been estimated using a discounted cash flow calculation.  The discount rate on such borrowings is based upon rates currently offered for borrowings of similar remaining maturities.



Commitments: Commitments to extend credit on existing obligations are discounted in a manner similar to loans held for investment.

96

<PAGE>

Notes to Consolidated Financial Statements

---





Derivative Financial Instruments: The fair value of the derivative financial instruments are based upon quoted market prices, current market bids, outstanding forward loan sale commitments and estimates from independent pricing sources.

The carrying amount and fair values of the Corporation's financial instruments were as follows:

|                                                 | June 30, 2004 |        | June 30, 2003
|------------------------------------------------ | ------------- | ------ | -------------
|Carrying                                         |               | Market |              
|Amount                                           |               | Value  |              
|Financial assets:                                |               |        |              
|Cash and cash equivalents                        | $   38,349    |        | $     38,349 
|Investment securities                            | 252,580       |        | 251,630      
|Loans held for investment                        | 862,535       |        | 878,071      
|Loans held for sale                              | 20,127        |        | 20,464       
|Receivable from sale of loans                    | 86,480        |        | 86,480       
|Accrued interest receivable                      | 4,961         |        | 4,961        
|FHLB stock                                       | 27,883        |        | 27,883       
|                                                 |               |        |              
|Financial liabilities:                           |               |        |              
|Deposits                                         | 851,039       |        | 810,724      
|Borrowings                                       | 324,877       |        | 328,493      
|Accrued interest payable                         | 884           |        | 884          
|                                                 |               |        |              
|Derivative Financial Instruments:                |               |        |              
|Commitments to extend credit on loans to be held |               |        |              
|for sale                                         | 167           |        | 167          
|Forward loan sale agreements                     | (317          | )      | (317         
|Put option contracts                             | 41            |        | 41           

97

<PAGE>

Notes to Consolidated Financial Statements

---



17.  Operating Segments (in Thousands):

The following tables illustrate the Corporation's operating segments for the years ended June 30, 2004, 2003 and 2002, respectively.



|                            | Year Ended June 30, 2004             
|--------------------------- | -------------------------------------
|Provident
Bank              | Provident
Bank
Mortgage              
|                            |                                      
|Net interest income         | $ 32,518                             
|Non-interest income:        |                                      
|                            | Loan servicing and other fees        
|                            | Gain on sale of loans, net           
|                            | Real estate operations, net          
|                            | Deposit account fees                 
|                            | 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  | 14,043                               
|Provision for income taxes  | 6,409                                
|Net income                  | $   7,634                            
|Total assets, end of period | $ 1,212,073                          

98

<PAGE>

Notes to Consolidated Financial Statements

---



|                            | Year Ended June 30, 2003                 
|--------------------------- | -----------------------------------------
|Provident
Bank              | Provident
Bank
Mortgage                  
|                            |                                          
|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                              



|                            | Year Ended June 30, 2002                 
|--------------------------- | -----------------------------------------
|Provident
Bank              | Provident
Bank
Mortgage                  
|                            |                                          
|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                     
|                            | 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  | 8,005                                    
|Provision for income taxes  | 3,326                                    
|Net income                  | $     4,679                              
|Total assets, end of period | $ 937,313                                



99

<PAGE>

Notes to Consolidated Financial Statements

---



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



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

1. Borrowings for 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 new loans transferred to the Bank's loans held for investment.  The servicing released premiums in the years ended June 30, 2004, 2003 and 2002 were $3.9 million, $3.6 million and $1.6 million, respectively.
3. PBM receives a premium (gain on sale of loans) for the loans transferred to the Bank's loans held for investment.  The gain on sale of loans in the years ended June 30, 2004, 2003 and 2002 was $444, $365 and $482, respectively.
4. PBM receives fees for loans sold on a servicing retained basis.  The fees in the year ended June 30, 2004, 2003 and 2002 were $1.9 million, $425 and $8, respectively.
5. Loan servicing costs 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 costs in the years ended June 30, 2004, 2003 and 2002 were $103, $125 and $163, respectively.
6. The Bank allocates its quality assurance costs to PBM for its loan production, subject to management's review.  Quality assurance costs allocated to PBM in the years ended June 30, 2004, 2003 and 2002 were $115, $93 and $85, respectively.
7. The Bank allocates its loan vault service costs to PBM for its loan production, subject to management's review.  The loan vault service costs allocated to PBM in the years ended June 30, 2004, 2003 and 2002 were $105, $109 and $112, respectively.
8. The Bank allocated its marketing costs to PBM in the years ended June 30, 2004, 2003 and 2002 for $14, $26 and $13, respectively.
9. 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, 2004, 2003 and 2002 were $142, $142 and $93, respectively.
10. 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, 2004, 2003 and 2002 was $480, $480 and $360, 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, 2004 and 2003 and condensed statements of operations and cash flows for each of the three years in the period ended June 30, 2004.

100

<PAGE>

Notes to Consolidated Financial Statements

---



Condensed Balance Sheets

|                                     | June 30,                
|------------------------------------ | ------------------------
|                                     | 2004                    
|                                     |                         
|Assets                               |                         
|                                     | Cash                    
|                                     | Investment in subsidiary
|                                     | Other assets            
|                                     | $ 110,026               
|                                     |                         
|Liabilities and Stockholders' Equity |                         
|                                     | Other liabilities       
|                                     | Stockholders' equity    
|                                     | $ 110,026               



Condensed Statements of Operations

|                                         | Year Ended June 30,                                   
|---------------------------------------- | ------------------------------------------------------
|                                         | 2004                                                  
|                                         |                                                       
|Interest and other income                | $      298                                            
|General and administrative expenses      | 537                                                   
|                                         | (Loss) before equity in net earnings of the subsidiary
|Equity in net earnings of the subsidiary | 15,286                                                
|                                         | Income before income taxes                            
|                                         | Income taxes                                          
|                                         | Net income                                            

















101

<PAGE>

Notes to Consolidated Financial Statements

---



Condensed Statements of Cash Flows

|                                                           | Year Ended June 30,                              
|---------------------------------------------------------- | -------------------------------------------------
|                                                           | 2004                                             
|                                                           |                                                  
|Cash flows from operating activities:                      |                                                  
|                                                           | Net income                                       
|Adjustments to reconcile net income to net cashprovided by |                                                  
|                                                           | operating activities:                            
|                                                           | Equity in net earnings of the subsidiary         
|                                                           | Tax benefit from nonqualified equity compensation
|                                                           | Decrease (increase) in other assets              
|                                                           | Increase (decrease) in other liabilities         
|                                                           | Net cash provided by operating activities        
|                                                           |                                                  
|Cash flow from investing activities:                       |                                                  
|                                                           | 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 (decrease) increase in cash during the year            | (4,171                                           
|Cash and cash equivalents, beginning of year               | 11,207                                           
|Cash and cash equivalents, end of year                     | $     7,036                                      

102

<PAGE>

Notes to Consolidated Financial Statements

---



The following tables set forth the quarterly financial data, which was derived from the consolidated financial statements presented in Form 10-Qs, for the fiscal years ended June 30, 2004 and 2003.

|                                         | For Fiscal Year 2004
|---------------------------------------- | --------------------
|                                         | For the             
|                                         | Year Ended          
|                                         | June 30,            
|                                         | 2004                
|                                         |                     
|Interest income                          | $ 62,151            
|Interest expense                         | 25,919              
|Net interest income                      | 36,232              
|                                         |                     
|Provision for loan losses                | 819                 
|Net interest income, after provision for |                     
|loan losses                              | 35,413              
|                                         |                     
|Non-interest income                      | 20,153              
|Non-interest expense                     | 28,780              
|Income before income taxes               | 26,786              
|                                         |                     
|Provision for income taxes               | 11,717              
|Net income                               | $ 15,069            
|                                         |                     
|Basic earnings per share                 | $     2.24          
|Diluted earnings per share               | $     2.09          

103

<PAGE>

Notes to Consolidated Financial Statements

---



|                                         | 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                 | $     2.37          
|Diluted earnings per share               | $     2.20          







Cash Dividend

On July 22, 2004, 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 17, 2004, payable on September 10, 2004.





104

<PAGE>





EXHIBIT 13

2004 Annual Report



<PAGE>





































2004 Annual Report



<PAGE>

---

Message From the Chairman

---

Dear Shareholders,



I am pleased to forward our Annual Report for fiscal 2004, which describes another outstanding year for our Company.  Net income was  $15.07 million, or $2.09 per diluted share, and our return on equity was 14.1%.  More importantly, we were once again able to grow our Company to a record $1.32 billion in total assets primarily by serving the high growth communities of the Inland Empire in Southern California.  Our results continue to be reflected in the stock price of our Company.  The price appreciated 21% during fiscal 2004 closing at $23.65 per share on June 30, 2004, up from $19.56 per share on June 30, 2003.



Last year in the Chairman's Message, I described four major strategies for fiscal 2004: significant yet prudent growth of our loan portfolio, significant growth in transaction accounts (core deposits), aggressive operating expense control and sound capital management techniques.  I am pleased to report that we have accomplished meaningful progress in connection with each of these strategies.  Specifically, our loan portfolio grew by 16% during the year while our credit quality remained excellent.  Transaction accounts grew by 21% during the year, contributing to a 15% increase in deposit account fee income and operating expenses were held to a modest increase of 3% for the year.  As for capital management, we repurchased 512,769 shares of stock as a result of our stock repurchase programs and we increased our quarterly cash dividend, twice during the year, from $0.03 per share when we began the year to the current $0.10 per share.



Provident Bank



We continue to improve our core operations by refining our strategies and improving upon their execution.  The percentage of investment securities to total assets continues to decline, the percentage of loans held for investment to total assets continues to increase, and the percentage of transaction accounts (core deposits) to total deposits continues to increase.  These initiatives and the overall growth of our Company resulted in a 29% increase in pre-tax income in our community banking business in comparison to last year.



We continue to explore branching opportunities within the Inland Empire and analyze possible branch locations on an ongoing basis.  Our newest branch in the Orangecrest area of Riverside, California opened in August 2003 and in less than one year has grown to $13.5 million in deposits and over 1,200 accounts.



Provident Bank Mortgage



Fiscal 2004 has proven to be a transition year for mortgage banking with progressively higher interest rates during the course of the year in comparison to the prior year, resulting in lower loan origination volume.  We adjusted our strategy early in the year and made significant progress in changing the product composition of loans originated for sale, from lower margin products such as conforming 30-year fixed rate loans to higher margin products such as alt-A fixed, alt-A adjustable and second trust deed loans.  Our efforts were successful as demonstrated by the fact that our loan sale margin improved to 1.54% in the fourth quarter of the year compared to 1.14% in the first quarter of the year.  These efforts will continue to serve us well, particularly if interest rates continue to rise.



The Year Ahead



Our Business Plan for fiscal 2005 builds on our success this year and continues to emphasize the strategies implemented in previous years.  In our community banking business: significant yet prudent growth of our loan portfolio, significant growth in transaction accounts (core deposits), operating expense control and sound capital management techniques.  In our mortgage banking business: emphasis on high margin loan products, emphasis on purchase-money loan production and operating expense adjustments commensurate with loan origination volume.



<PAGE>

---

Message From the Chairman

---

We believe that successful execution of these strategies will deliver superior operating results and fulfill our promise to enhance shareholder value.



A Final Word



Recently, I came across an article that describes what I have known for a considerable period of time.  Our Company has a unique opportunity to grow by participating in the strong growth of the Inland Empire.  The article, Top 25 Cities for Doing Business in America written by Joel Kotkin and published in the March 2004 edition of Inc. Magazine, ranked the Inland Empire second of all large cities or regions.  The most impressive point about the Inland Empire being so high on the list was the criteria used to generate the rankings.  According to the article, "Inc. measured current-year employment growth in more than 250 regions (as defined by the Bureau of Labor Statistics) as well as current trends in the annual average growth over the past three years, and compared employment expansion in the first half versus the second half of the last decade.  Job growth factors account for approximately two-thirds of the final score for each city and the balance among industries accounts for approximately one-third of the final score."The article went on to state, "Regions that consistently generate jobs in a broad range of industries rank at the top of the list.  Those with poor and worsening job growth and increasingly undiversified economies do less well in the rankings."Our Company is well positioned to serve Inland Empire industries, the workers they employ and others that live in the region for affordability reasons.

Sincerely,

/s/ Craig G. BlundenCraig G. Blunden
Chairman, President and
Chief Executive Officer



<PAGE>

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Message From the Chairman

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<PAGE>

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Message From the Chairman

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<PAGE>

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Message From the Chairman

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<PAGE>

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Financial Highlights

---

The following tables set forth information concerning the consolidated financial position and results of operations of the Corporation and its subsidiary at the dates and for the periods indicated.

|                                              | At or for the year ended June 30,
|--------------------------------------------- | ---------------------------------
|                                              | 2004                             
|(In thousands, except per share information )
|                                              |                                  
|FINANCIAL CONDITION DATA:                     |                                  
|Total assets                                  | $ 1,319,035                      
|Loans held for investment, net                | 862,535                          
|Loans held for sale                           | 20,127                           
|Receivable from sale of loans                 | 86,480                           
|Cash and cash equivalents                     | 38,349                           
|Investment securities                         | 252,580                          
|Deposits                                      | 851,039                          
|Borrowings                                    | 324,877                          
|Stockholders' equity                          | 109,982                          
|Book value per share                          | 15.51                            
|Tangible book value per share                 | 15.49                            
|                                              |                                  
|OPERATING DATA:                               |                                  
|Interest income                               | $ 62,151                         
|Interest expense                              | 25,919                           
|                                             
|Net interest income                           | 36,232                           
|Provision for loan losses                     | 819                              
|                                             
|Net interest income after provision           | 35,413                           
|Loan servicing and other fees                 | 2,292                            
|Gain on sale of loans, net                    | 14,346                           
|Deposit account fees                          | 1,986                            
|Gain on sale of investment securities         | -                                
|Other non-interest income                     | 1,278                            
|Real estate operations, net                   | 251                              
|Operating expenses                            | 28,780                           
|                                             
|Income before income taxes                    | 26,786                           
|Provision for income taxes                    | 11,717                           
|                                             
|Net income                                    | $ 15,069                         
|                                             
|Basic earnings per share                      | $     2.24                       
|                                             
|Diluted earnings per share                    | $     2.09                       
|                                             
|Cash dividend per share                       | $     0.33                       
|                                             



<PAGE>

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Financial Highlights

---

|                          | At or for the year ended June 30,      
|------------------------- | ---------------------------------------
|2004                      |                                        
|                         
|                          |                                        
|KEY OPERATING RATIOS:     |                                        
|                          |                                        
|Performance Ratios        |                                        
|                          | Return on assets                       
|                          | Return on stockholders' equity         
|                          | Net interest rate spread               
|                          | Net interest margin                    
|                          | Average interest-earning assets to     
|                          | average interest-bearing liabilities   
|                          | Operating and administrative expenses  
|                          | as a percentage of average total assets
|                          | Efficiency ratio                       
|                          | Equity to asset ratio                  
|                          |                                        
|Regulatory Capital Ratios |                                        
|                          | Tangible capital                       
|                          | Tier 1 leverage capital                
|                          | Total risk-based capital               
|                          | Tier 1 risk-based capital              
|                          |                                        
|Asset Quality Ratios      |                                        
|                          | Non-accrual and 90 days or more        
|                          | past due loans as a percentage of      
|                          | loans held for investment, net         
|                          | Non-performing assets as a percentage  
|                          | of total assets                        
|                          | Allowance for loan losses as a         
|                          | percentage of loans held for           
|                          | investment                             
|                          | Allowance for loan losses as a         
|                          | percentage of non-performing loans     
|                          | Net charge-offs to average             
|                          | outstanding loans                      
|                          |                                        
|                         



<PAGE>

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Shareholder Information

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ANNUAL MEETING

The annual meeting of shareholders will be held at the Riverside Art Museum at 3425 Mission Inn Avenue, Riverside, California on Thursday, November 18, 2004 at 11:00 a.m. Pacific time.  A formal notice of the meeting, together with a proxy statement and proxy form, will be mailed to shareholders. CORPORATE OFFICE

Provident Financial Holdings, Inc.
3756 Central Avenue
Riverside, CA 92506
(951) 686-6060INTERNET ADDRESS
www.myprovident.comSPECIAL COUNSEL
Breyer & Associates PC
8180 Greensboro Drive, Suite 785
McLean, VA 22102
(703) 883-1100INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
695 Town Center Drive
Costa Mesa, CA 92626
(714) 436-7100TRANSFER AGENT
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
(908) 497-2300MARKET INFORMATION
Provident Financial Holdings, Inc. is traded on the NASDAQ Stock Market under the symbol PROV.



<PAGE>

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Shareholder Information

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FINANCIAL INFORMATION

Requests for copies of the Form 10-K and Forms 10-Q filed with the Securities and Exchange Commission should be directed in writing to:

Donavon P. Ternes
Chief Financial Officer
Provident Financial Holdings, Inc.
3756 Central Avenue
Riverside, CA 92506CORPORATE PROFILE

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. The Corporation does not engage in any significant activity other than holding the stock of the Bank. The Bank serves the banking needs of select communities in Riverside and San Bernardino Counties and has mortgage lending operations in Southern California.



<PAGE>

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Board of Directors and Senior Officers

|Board of Directors                                 |  | Senior Officers                   
|-------------------------------------------------- |  | ----------------------------------
|                                                   |  |                                   
|Joseph P. Barr, CPA                                |  | Provident Financial Holdings, Inc.
|Principal                                          |  |                                   
|Swenson Accountancy Corporation                    |  | Craig G. Blunden                  
|                                                   |  | Chairman, President and CEO       
|Bruce W. Bennett                                   |  |                                   
|President                                          |  | Donavon P. Ternes                 
|Community Care & Rehabilitation Center             |  | Chief Financial Officer           
|                                                   |  | Corporate Secretary               
|Craig G. Blunden                                   |  |                                   
|Chairman, President and CEO                        |  |                                   
|Provident Bank                                     |  | Provident Bank                    
|                                                   |  |                                   
|Debbi H. Guthrie                                   |  | Craig G. Blunden                  
|President                                          |  | Chairman, President and CEO       
|Roy O. Huffman Roofing Company                     |  |                                   
|                                                   |  | Lilian Brunner                    
|Seymour  M. Jacobs                                 |  | Senior Vice President             
|Managing Member                                    |  | Chief Information Officer         
|Jacobs Asset Management, LLC and JAM Managers, LLC |  |                                   
|                                                   |  | Thomas "Lee" Fenn                 
|Robert G. Schrader                                 |  | Senior Vice President             
|Retired Executive Vice President and COO           |  | Chief Lending Officer             
|Provident Bank                                     |  |                                   
|                                                   |  | Richard L. Gale                   
|Roy H. Taylor                                      |  | Senior Vice President             
|President                                          |  | Provident Bank Mortgage           
|Talbot Insurance and Financial Services            |  |                                   
|A Hub International Company                        |  | Milton J. Knox                    
|                                                   |  | Senior Vice President             
|William E. Thomas                                  |  | Retail Banking                    
|Principal                                          |  |                                   
|William E. Thomas, Inc.,                           |  | Donavon P. Ternes                 
|A Professional Law Corporation                     |  | Senior Vice President             
|                                                   |  | Chief Financial Officer           



<PAGE>

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|                                                           |  |                                       
|---------------------------------------------------------- |  | --------------------------------------
|                                                          
|RETAIL BANKING CENTERS                                     |  | Division Office                       
|                                                           |  | 3756 Central Avenue                   
|Blythe                                                     |  | Riverside, CA 92506                   
|350 E. Hobson Way                                          |  |                                       
|Blythe, CA 92225                                           |  | WHOLESALE OFFICE                      
|                                                           |  |                                       
|Canyon Crest                                               |  | Rancho Cucamonga                      
|5225 Canyon Crest Drive, Suite 86                          |  | 10370 Commerce Center Drive, Suite 200
|Riverside, CA 92507                                        |  | Rancho Cucamonga, CA 91730            
|                                                           |  |                                       
|Corona                                                     |  | RETAIL OFFICES                        
|487 Magnolia Avenue, Suite 101                             |  |                                       
|Corona, CA 92879                                           |  | Call Center                           
|                                                           |  | 6674 Brockton Avenue                  
|Corporate Office                                           |  | Riverside, CA 92506                   
|3756 Central Avenue                                        |  |                                       
|Riverside CA 92506                                         |  | City of Industry                      
|                                                           |  | 17800 Castleton Street, Suite 358     
|Downtown Business Center                                   |  | City of Industry, CA 91748            
|4001 Main Street                                           |  |                                       
|Riverside, CA 92501                                        |  | Corona                                
|                                                           |  | 2275 Sampson Avenue, Suite 106        
|Hemet                                                      |  | Corona, CA 92879                      
|1690 E. Florida Avenue                                     |  |                                       
|Hemet, CA 92544                                            |  | Fullerton                             
|                                                           |  | 1440 N. Harbor Boulevard, Suite 708   
|Moreno Valley                                              |  | Fullerton, CA 92835                   
|12460 Heacock Street                                       |  |                                       
|Moreno Valley, CA 92553                                    |  | Glendora                              
|                                                           |  | 1200 E. Route 66, Suite 102           
|Orangecrest                                                |  | Glendora, CA 91740                    
|19348 Van Buren Boulevard, Suite 119                       |  |                                       
|Riverside, CA 92508                                        |  | La Quinta                             
|                                                           |  | 51-105 Avenida Villa, Suite 201       
|Rancho Mirage                                              |  | La Quinta, CA 92253                   
|71-991 Highway 111                                         |  |                                       
|Ranch Mirage, CA 92270                                     |  | Rancho Mirage                         
|                                                           |  | 71-991 Highway 111                    
|Redlands                                                   |  | Rancho Mirage, CA 92270               
|125 E. Citrus Avenue                                       |  |                                       
|Redlands, CA 92373                                         |  | Riverside                             
|                                                           |  | 6529 Riverside Avenue, Suite 160      
|Sun City                                                   |  | Riverside, CA 92506                   
|27010 Sun City Boulevard                                   |  |                                       
|Sun City, CA 92586                                         |  | Torrance                              
|                                                           |  | 22805 Hawthorne Boulevard             
|Temecula                                                   |  | Torrance, CA 90505                    
|40325 Winchester Road                                      |  |                                       
|Temecula, CA 92591                                         |  |                                       
|                                                           |  |                                       
|Customer Information 1-800-442-5201 or www.myprovident.com



<PAGE>

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Corporate Office
3756 Central Avenue, Riverside, CA 92506
(951) 686-6060www.myprovident.comNASDAQ STOCK MARKET - PROV



<PAGE>

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EXHIBIT 14



Code of Ethics for Directors, Officers and Employees





<PAGE>



PROVIDENT FINANCIAL HOLDINGS, INC.



PROVIDENT SAVINGS BANK





CODE OF ETHICS



(As revised June 24, 2004)



PROVIDENT'S CODE OF ETHICS

---



This policy has been adopted by Provident's Board of Directors and is intended to cover all employees, including the Board of Directors, Chief Executive Officer, Chief Financial Officer, Senior Management and Controller.



I.        YOUR RESPONSIBILITIES

As a Provident employee, you are obliged to monitor your personal and professional affairs so as not to discredit Provident.  Your personal conduct should reflect the highest professional standards of behavior.  In this regard, you are expected to:

- Obey all applicable laws and regulations.
- Avoid activities that could create conflicts of interest or even the appearance of conflicts of interest with Provident.
- Respect the confidentiality of information about those with whom Provident has business relationships.
- Provide full, fair, accurate, timely and understandable disclosures in documents submitted to the Securities and Exchange Commission and all public filings.

Details of the above obligations are presented in the remainder of this Code of Ethics.  Violation of any provision of this Code may result in disciplinary action up to and including dismissal.  Provident must report all suspected violations of criminal laws to the appropriate authorities for possible prosecution.



II.    LAWS AND REGULATIONS WITH WHICH EMPLOYEES MUST BE THOROUGHLY FAMILIAR



A.Criminal Laws

A number of criminal statutes apply to employees of all financial institutions.  These laws forbid activities such as:

- Soliciting or receiving anything of value for or in connection with any transaction or business of Provident
- Stealing, embezzling or misapplying Bank funds or assets
- Using illegal threats, physical force or other unauthorized means to collect money
- Issuing unauthorized obligations (such as certificates of deposit, notes or mortgages) or recording false entries in Bank records
- Using corporate funds or assets to finance campaigns for political office
- Lending trust funds to an officer, director or employee
- Certifying a check drawn on an account with insufficient funds
- Making a loan or giving a gift to a bank examiner who has the authority to examine Provident
- Disclosing the contents of examination reports compiled by regulatory agencies (see Section IV.A)



<PAGE>

B.     Anti-Competitive Activities

The antitrust laws prohibit any combination, conspiracy or agreement among competitors to restrict or prevent competition.  An example of conduct that would violate the antitrust laws is a formal or informal agreement between you and a competitor of Provident to fix prices, allocate markets or refuse to deal with particular suppliers or customers.

In addition, employees are prohibited from participating in certain "tying arrangements."  A tying arrangement is one in which a seller conditions its sale of product or service on a buyer's purchase of a separate product or service.  For example, you may not condition the extension of credit on a customer's rental of a safe deposit box.  These prohibitions, however, do not apply to traditional banking practices such as requiring a compensating balance in connection with a loan.



C.    Illegal Use of Corporate Funds













D.Equal Opportunity Laws

Several equal opportunity laws apply to Provident.  Provident strongly supports the principles of these laws and expects all employees to comply with them.  Provident is extremely proud of its record as an equal opportunity employer and lender.



III.     AVOIDING CONFLICTS OF INTEREST

You should not participate in any activity that could cause a conflict of interest or give the appearance of a conflict of interest.  A conflict of interest is generally defined as a clash between an employee's personal interests and his or her duties to his or her employer.  A conflict of interest occurs when you allow any outside interest, activity or influence to:

- Influence your judgment when acting on behalf of Provident.
- Compete against Provident in any business activity.
- Diminish the efficiency with which you perform your regular duties.
- Harm or impair Provident's financial or professional reputation.

<PAGE>

You should promptly report to your Supervisor all potential conflicts of interest, including those in which you have been inadvertently placed because of business or personal relationships with customers, suppliers, business associates or competitors of Provident.  Areas in which conflicts of interest frequently arise and examples of prohibited activities are described below.



A.  Investment Decisions

You may not invest (directly or indirectly) in a publicly held security whenever:

- Such transaction would place Provident under an obligation (financial or other) to any investment banking or brokerage firm or to the seller or issuer of the security;
- You know Provident is in the process of buying or selling the security for its own account or for the account of others;
- You possess information not available to the general public (inside information) that is likely to affect the price of the security;
- You are considering granting or renewing a loan or acting as advisor to the issuer of the security;
- You are recommending to Provident or a customer the sale or purchase of the security.

The New York Stock Exchange, the American Stock Exchange and other national stock exchanges have rules that prohibit member firms from entering into margin transactions with employees of financial institutions without prior written consent from the financial institution.  Whenever an employee desires to enter into such an arrangement, he or she must receive written consent from his or her Supervisor.



B.Self-Dealing

To further avoid conflicts or interest, you should not:

- Directly or indirectly buy assets from or sell assets to Provident or any account for which Provident acts as fiduciary unless you have prior consent from your Supervisor and any required court of regulatory approval.
- Represent Provident in any transaction requiring our judgment or discretion with a person or organization in which you have a financial or material interest.  For example, lending money to a relative or close personal friend might impair or appear to impair your professional judgment or the performance of your duties.



C.Monitoring Outside Activities

You are expected to avoid any outside interest or activity that will interfere with your duties.  Generally, your outside interests:

- Should not significantly encroach on time or attention you devote to your duties
- Should not adversely affect the quality of your work
- Should not compete with the activities of Provident
- Should not involve any significant use of corporate equipment, facilities or supplies

<PAGE>



- Should not imply Provident's sponsorship or support (for example, through the use of corporate stationery for personal purposes)
- Should not adversely affect the reputation of Provident



1.     Outside Employment

Employees must inform their Supervisors of any outside employment.  Employees should not, while employed by Provident, also be employed by or advise any business if (a) the principal activity of the business competes with that of Provident; (b) such employment would subject Provident to criticism or adverse publicity; or (c) such employment would impair the employee's mental or physical efficiency with Provident.

Employees also may be prohibited by federal law from participating in "interlocking affiliations," that is, dual service, in the following areas:

- As an employee of an organization that is primarily engaged in the issue, flotation, underwriting, public sale or distribution of stocks, bonds or other securities

- As a director, officer or employee of any commercial bank, banking association, trust company or savings bank
- As a director or officer of a registered public utility holding company or subsidiary thereof



2.     Purchasing Real Estate

Unless you receive prior approval from your Supervisor, you should not (directly or indirectly):

- Purchase commercial real estate from or sell it to a present or known potential customer of Provident
- Purchase any real estate whose mortgage Provident is foreclosing or is planning to foreclose
- Bid on or purchase any real estate that Provident is considering or is likely to consider purchasing



3.     Accepting Appointments

In most cases, you need to obtain approval from your Supervisor before you accept any appointment or position.

a) 



Fiduciary Appointments

Unless you are acting on behalf of a member of your family or you have obtained approval from your Supervisor, you may not accept a fiduciary or co-fiduciary appointment.  A fiduciary appointment is an appointment as an administrator, executor, guardian, trustee or managing agent.

Even if you are acting on behalf of a family member or receive approval to act as fiduciary or co-fiduciary, you are expected to follow these guidelines:

- Avoid any representations that you are performing (or have access to) the same professional services that are performed by a bank
- Do not permit your appointment to interfere with the time and attention you devote to your duties.

<PAGE>

4.     Participation in Civic and Political Activity

Participation by employees in civic, charitable or political activities are encouraged to the extent that such participation does not encroach significantly on the individual's working time.  All political activities must be carried out on the employee's own time.  Employees must have prior approval from the President of Provident before accepting nomination or appointment to any public office.  Employees should not represent their political donations, endorsements or other political activities as made or engaged in with the approval of or on behalf of Provident.



D.  Dealing with Customers and Suppliers

In your dealings with customers and suppliers, situations sometimes occur that may create a conflict or the appearance of a conflict of interest.



1.     Giving and Receiving Gifts

As noted in Section II, employees are prohibited from directly or indirectly soliciting, receiving or giving anything of value for or in connection with any transaction, business service or confidential information of Provident.  This means you may not offer, solicit or accept anything of value from any existing or prospective customer or supplier.  These restrictions do not apply to:

- Gifts of reasonable value (not more than $1200) related to commonly recognized events or occasions such as a promotion, new job, wedding, retirement or Christmas, so long as the gift is unsolicited and the customer is not trying to exert any influence over you in connection with a transaction.
- Advertising or promotional material of nominal value such as pens, pencils, note pads, key chains, calendars and similar items.

- Acceptance of gifts, gratuities, amenities or favors based on obvious family or personal relationships when the circumstances make it clear that it is those relationships rather than the business of Provident that are the motivating factors.
- Customer- or supplier-paid meals, refreshments, travel arrangements or accommodations, or entertainment, all of reasonable value, in the course of a meeting or other occasion, the purpose of which is to hold bona fide business discussion and provided that the expenses are of a type that would be paid for by Provident if not paid for by the other party.  Customer- or supplier-paid trips must be approved in advance by your Supervisor and reported to the Compliance Officer.
- Loans from other banks or financial institutions on customary terms to finance proper and usual credit needs such as home mortgage loans.  Executive Officers, as defined under Regulation O, must report such loans to the Secretary within 10 days.
- Awards of reasonable value from charitable, civic, religious, educational or similar organizations for recognition of service.
- Non-cash gifts of reasonable value (not more than $100) that you give to customers or suppliers for holidays or special occasions.
- Salary, wages, fees or other compensation paid in the usual course of business.

If you are offered or receive something of value beyond what is authorized above or under circumstances not described above, you are required to report that fact in writing to the Compliance Officer.  If you feel that an exception to Provident's policy is warranted, your written report should include supporting reasons.  All such reports will be responded to in writing.

<PAGE>

2.     Bequests by Customers

Employees are not permitted to accept bequests of any kind from a customer to whom the employee has provided banking services.  If a customer advises you that he or she intends to name you as a beneficiary in his or her will, you should explain Provident's policy to the customer and report the matter to your Supervisor.



3.     Borrowing from Customers

You are not permitted to borrow from or lend your personal funds to customers, brokers or suppliers of Provident.  Credit transactions in the normal course of business (for example, transacting business with a recognized lending institution or charging items at a department store) and transactions with members of your immediate family are not included in this restriction.



4.     Giving Advice to Customers

Unless your regular duties specifically permit, you are not allowed to give personal, tax or investment advice to a customer.



IV.    RESPECTING CONFIDENTIAL INFORMATION

As a Provident employee, you may have access to information, reports or statements about Provident business, or possess confidential information about the private or business affairs of customers and suppliers.  Such information is privileged and must be held in strictest confidence.

Confidential information about those with whom we have business relations, if released, could have a significant effect on their operations, business reputation or the market price of their securities.  Disclosing such information could expose both you and Provident to civil and criminal liability.

Financial information about Provident is confidential unless it has been made available to the public.  Except as required by law or approved by Provident's Chief Financial Officer, financial information is not to be released to any person.  If you have any questions about disclosing financial information, consult Provident's Chief Executive Officer or Chief Financial Officer.

Confidential information is to be used only for corporate purposes.  Under no circumstances may you use such information for personal gain or pass it on to any person outside of Provident, including family or friends, or even to other employees who do not need such information to carry out their duties.



A.   Examination Information

Provident is periodically examined by regulatory agencies.  Any reports made by those regulatory agencies are the property of those agencies and are strictly confidential.  Giving information from those reports to anyone not officially connected with Provident is a criminal offense.



B.   Proprietary Information

Certain non-financial information developed by Provident such as business plans, marketing strategies and customer lists, is considered proprietary to Provident.  Unless such information has previously been published by Provident, you are not to disclose such information to anyone outside of Provident or use it directly or indirectly for your personal benefit or the benefit of any third party that is not entitled to such information.

<PAGE>



C.  Insider Information

Insider information is material non-public information relating to securities issued by a corporation.  Information is considered "material" if it is important enough:

- To affect the judgment of investors about whether to buy, sell or hold stock; or
- To influence the market price of the stock

Insider information about securities issued by public companies must be made public before anyone possessing it can trade on it or recommend the purchase or sale of the securities concerned.  Under federal and state securities laws, you, Provident, and the person who received the information could be held legally responsible for misusing insider information.

The insider information rules are very difficult to apply in given circumstances.  Employees must be extremely cautious in discussing corporate affairs with any person outside of Provident.  If you have any doubts about whether or not an item is insider information or whether or not it has been or should be revealed, consult Provident's Chief Executive Officer or Chief Financial Officer.



D.    Intra-Departmental Use of Information

Confidential information available to one unit of Provident may be communicated to other units of Provident when there exists a legitimate business need to know such information.



E.  Information Subject to Copyright Laws



The U.S. Copyright laws and various licensing agreements entered into by Provident with providers of computer software prohibit the unauthorized duplication, reproduction or use of certain software.  Employees should discuss these restrictions with their Supervisor or the Information Security Officer to insure that these guidelines are followed.

<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 a wholly owned subsidiary of Provident Savings Bank, F.S.B.
|(2)    Currently inactive.                                                            





<PAGE>

EXHIBIT 23.1



Consent of Independent Registered Public Accounting Firm





<PAGE>





Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement No's. 333-30935 and 333-112700 of Provident Financial Holdings, Inc. on Form S-8 of our report dated September 2, 2004, appearing in this Annual Report on Form 10-K of Provident Financial Holdings, Inc. for the year ended June 30, 2004.

/s/ Deloitte & Touche LLP
Costa Mesa, California
September 8, 2004



<PAGE>



EXHIBIT 31.1



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





<PAGE>



CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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(s) 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))
and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|   |                                                                                                                                                                                                                                                                                                                                        
|   | (a)                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                        
|   | (b)                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                        
|   | (c)                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                        
|   | (d)                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying officer(s) 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 8, 2004                                                                 
/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 OF PRINCIPAL FINANCIAL OFFICER 
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



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(s)
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))

and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f))for the registrant and have:
|   |                                                                                                                                                                                                                                                                                                                                        
|   | (a)                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                        
|   | (b)                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                        
|   | (c)                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                        
|   | (d)                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying officer(s) 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 8, 2004                                                                        /s/ Donavon P. Ternes
                                                                                                          
Donavon P. Ternes 
                                                                                                          
Chief 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 "Corporation") for the year ending June 30, 2004 (the "Report"), I, Craig G. Blunden, Chairman, President and Chief Executive Officer of the Corporation, 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 Corporation.



Date: September 8, 2004                                                        /s/ Craig G. Blunden
                                                                                                 
Craig G. Blunden
                                                                                                 
Chairman, President and Chief Executive Officer

<PAGE>



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 "Corporation") for the year ending June 30, 2004 (the "Report"), I, Donavon P. Ternes, Chief Financial Officer of the Corporation, 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 Corporation.





Date: September 8, 2004                                                        /s/ Donavon P. Ternes
                                                                                          
Donavon P. Ternes
                                                                                          
Chief Financial Officer



<PAGE>