UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2024

☐ 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		33-0704889
(State or other jurisdiction of incorporation		(I.R.S. Employer
or organization)		Identification Number)

3756 Central Avenue, Riverside, California		92506
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (951) 686-6060

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $.01 per share		PROV		The NASDAQ Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ Yes ☒ No

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). ☐ Yes ☒ No

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant, based on the closing sales price of the registrant’s common stock as quoted on the NASDAQ Global Select Market on December 31, 2023, was $77.6 million. As of August 23, 2024, there were 6,862,888 shares of the registrant’s common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the fiscal 2024 Annual Meeting of Shareholders (“Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2024 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Table of Contents

		Page
PART I
Item 1.	Business:	1
	General	1
	Subsequent Events	1
	Market Area	2
	Competition	2
	Reportable Segments	3
	Internet Website	3
	Lending Activities	3
	Loan Servicing	12
	Asset Quality	13
	Investment Securities Activities	19
	Deposit Activities and Other Sources of Funds	21
	Subsidiary Activities	25
	Regulation	26
	Taxation	34
	Employees and Human Capital	35
	Executive Officers	36
Item 1A.	Risk Factors	37
Item 1B.	Unresolved Staff Comments	47
Item 1C.	Cybersecurity	47
Item 2.	Properties	48
Item 3.	Legal Proceedings	48
Item 4.	Mine Safety Disclosures	49

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	49
Item 6.	[Reserved]	50
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations:	51
	General	52
	Critical Accounting Estimates	52
	Executive Summary and Operating Strategy	53
	Comparison of Financial Condition at June 30, 2024 and 2023	54
	Comparison of Operating Results for the Fiscal Years Ended June 30, 2024 and 2023	55
	Average Balances, Interest and Average Yields/Costs	59
	Rate/Volume Variance	60
	Liquidity and Capital Resources	60
	Impact of New Accounting Pronouncements	62
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 8.	Financial Statements and Supplementary Data	66
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	66
Item 9A.	Controls and Procedures	66
Item 9B.	Other Information	68
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	68

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	68
Item 11.	Executive Compensation	69
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	69
Item 13.	Certain Relationships and Related Transactions, and Director Independence	70
Item 14.	Principal Accountant Fees and Services	70

PART IV
Item 15.	Exhibits and Financial Statement Schedules	71
Item 16.	Form 10-K Summary	73

Signatures		74

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PART I

Item 1. Business

General

Provident Financial Holdings, Inc. (the “Corporation”), a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company of 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 is regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve”). At June 30, 2024, the Corporation had consolidated total assets of $1.27 billion, total deposits of $888.3 million and stockholders’ equity of $129.9 million. The Corporation has not engaged in any significant activity other than holding the stock of the Bank. Accordingly, the information set forth in this Annual Report on Form 10-K (“Form 10-K”), including the audited consolidated financial statements and related data, relates primarily to the Bank. As used in this report, the terms “we,” “our,” “us,” and the “Corporation” refer to Provident Financial Holdings, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. When we refer to the “Provident” in this report, we are referring to Provident Financial Holdings, Inc. When we refer to the “Bank” or “Provident Savings Bank” in this report, we are referring to Provident Savings Bank, F.S.B., a wholly owned subsidiary of Provident.

The Bank, founded in 1956, is a federally chartered stock savings bank headquartered in Riverside, California. The Bank is regulated by the Office of the Comptroller of the Currency (“OCC”), 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. The Bank has been a member of the Federal Home Loan Bank (“FHLB”) – San Francisco 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 through its subsidiary, Provident Financial Corp (“PFC”). The business activities of the Bank consist of community banking, investment services and trustee services for real estate transactions.

The Bank’s community banking operations primarily consist of accepting deposits from customers within the communities surrounding its full-service offices and investing those funds in the origination of single-family, multi-family and commercial real estate loans and, to a lesser extent, construction, commercial business, consumer and other mortgage loans to be held for investment. Through its subsidiary, PFC, the Bank conducts trustee services for the Bank’s real estate transactions and in the past has held real estate for investment. For additional information, see “Subsidiary Activities” in this Form 10-K. The activities of PFC are included in the Bank's operating segment results. The Bank’s revenues are derived principally from interest earned on its loan and investment portfolios, and fees generated through its community banking activities.

On June 22, 2006, the Bank established the Provident Savings Bank Charitable Foundation (“Foundation”) in order to further its commitment to the local community. The specific purpose of the Foundation is to promote and provide for the betterment of youth, education, housing and the arts in the Bank’s primary market areas of Riverside and San Bernardino counties. The Foundation was funded with a $500,000 charitable contribution made by the Bank in the fourth quarter of fiscal 2006. The Bank contributed $40,000 to the Foundation in both fiscal 2024 and 2023.

Subsequent Event

On July 25, 2024, the Corporation announced that the Provident Board of Directors declared a cash dividend of $0.14 per share. Shareholders of Provident common stock at the close of business on August 15, 2024 were entitled to receive the cash dividend, payable on September 5, 2024.

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Market Area

The Bank is headquartered in Riverside, California and operates 12 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. As of June 30, 2024, the Bank was the largest independent community bank headquartered in Riverside County and held the eighth largest deposit market share of all banks in the county, with the largest share among community banks.

The region encompassing Riverside and San Bernardino counties, known as the “Inland Empire,” is the Bank’s main market area. According to the 2020 Census Bureau, these counties have the fourth and fifth largest populations in California, respectively, and are part of the greater Los Angeles metropolitan area, consisting primarily of suburban and urban communities. The Inland Empire, with a population of approximately 4.7 million, is relatively densely populated. The U.S. Department of Labor’s Bureau of Labor Statistics reported an unemployment rate of 5.3% in the Inland Empire in June 2024, slightly higher than California’s rate of 5.2% and the national rate of 4.1%. In June 2023, these rates were 4.4% in the Inland Empire, 4.6% in California, and 3.6% nationwide.

California’s home sales remained stagnant for the second consecutive month in June 2024, with a 30-year fixed mortgage rate above 7% throughout most of May 2024. Closed escrow sales of existing single-family detached homes in California were at a seasonally adjusted annualized rate of 270,200 in June 2024, down 0.8% from the revised 272,410 homes sold in May 2024 and 2.7% from June 2023’s revised 277,690. This sales pace has been below the 300,000 threshold for 21 consecutive months, with year-to-date home sales falling behind last year’s level by 0.5% in the first half of 2024. After setting record highs in the past two months, the statewide median home price decreased by 0.8% from $908,040 in May 2024 to $900,720 in June 2024, marking the third month in a row above the $900,000 benchmark. The June 2024 median home price was 7.5% higher than the $837,850 recorded in June 2023, marking the 12th consecutive month of annual price increases, although the smallest since January 2024. The continued rise in million-dollar home sales in California contributed to median price growth, with the million-dollar-and-higher market segment increasing by 2.0% year-over-year in June 2024, while the sub-$500,000 segment declined by 21.0%. Homes priced above $1 million now account for 36.3% of all sales, the largest share in at least five years. (Source data from California Association of Realtors – July 17, 2024 News Release).

The Inland Empire, also known as the Riverside-San Bernardino-Ontario Metropolitan Statistical Area, is a large, two-county area where about 30% of the labor force commutes, with nearly 400,000 people traveling daily from the Inland Empire to coastal areas. Over the past 20 years, the region has undergone significant changes, particularly in the health care and transportation and warehousing sectors, which have seen substantial employment growth. Typically, the Inland Empire's unemployment rate is higher than those of California and the U.S. except during specific recessions like the dot-com and COVID-19 periods. The region performed better during the recovery from the 2020 recession, with the latest unemployment rate published by the Employment Development Department (EDD) for December 2023 at 5.1%. The change in unemployment rate from February 2020 to December 2023 was 0.2% for the U.S., 0.5% for California, and 1.2% for the Inland Empire, indicating a higher increase in the Inland Empire, which is less desirable. Conversely, the employment growth rate over the same period was 1.8% for the U.S., -1.2% for California, and 2.8% for the Inland Empire. In 2023, the Inland Empire was a top performer in job creation compared to other California regions, with a 1.9% increase. The Inland Empire also led the state in business creation during the recovery from the 2020 recession, with a significant acceleration starting in the second quarter of 2022 and reaching near-national levels by the second quarter of 2023. (Source data from the Lowe Institute of Political Economy - The State of the Region the Inland Empire 2024 – March 2024).

Competition

The Bank faces significant competition in its market area in originating real estate loans and attracting deposits. The population growth in the Inland Empire has attracted numerous financial institutions to the Bank’s market area. The Bank’s primary competitors are large national and 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, as well as unregulated or less regulated non-banking entities operating locally and elsewhere. Many of these institutions are significantly larger than the Bank and therefore have greater financial and marketing resources than the Bank. This competition may limit the Bank’s growth and profitability in the future.

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Reportable Segments

Management monitors the revenue and expense components of the various products and services the Bank offers, but operations are managed and financial performance is evaluated on a Corporation-wide basis in comparison to a business plan which is developed each year. Accordingly, all operations are considered by management to be one operating segment and one reportable segment as contained in the Consolidated Statements of Operations to the Corporation’s audited consolidated financial statements included in Item 8 of this Form 10-K.

Internet Website

The Corporation maintains a website at www.myprovident.com. The information contained on that website is not included as a part of, or incorporated by reference into, this Form 10-K. Other than an investor’s own internet access charges, the Corporation makes available free of charge through that website the Corporation’s annual report, quarterly reports on Form 10-Q and current reports on Form 8-K, including amendments to these reports, if any, as soon as reasonably practicable after these materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC. This information is available at www.sec.gov.

Lending Activities

General. The lending activity of the Bank is comprised of the origination of single-family, multi-family and commercial real estate loans and, to a lesser extent, construction, commercial business, consumer and other mortgage loans to be held for investment. Additional lending activities have historically included originating saleable single-family loans, primarily fixed-rate first trust deed mortgages. The Bank’s net loans held for investment were $1.05 billion at June 30, 2024, representing 83% of consolidated total assets. This compares to $1.08 billion, or 81% of consolidated total assets, at June 30, 2023.

At June 30, 2024, the maximum amount that the Bank could have loaned to any one borrower and the borrower’s related entities under applicable regulations was $20.1 million, or 15% of the Bank’s unimpaired capital and surplus. At June 30, 2024, the Bank had no loans or group of loans to related borrowers with outstanding balances in excess of this amount. The Bank’s five largest lending relationships at June 30, 2024 consisted of: four multi-family loans totaling $5.0 million to one group of borrowers; eight single-family loans totaling $4.4 million to one group of borrowers; three multi-family loans totaling $4.1 million to one group of borrowers; one multi-family loan totaling $4.1 million to one group of borrowers; and one multi-family loan totaling $4.0 million to one group of borrowers. The real estate collateral for these loans are primarily located in Southern and Northern California. At June 30, 2024, all of these loans were performing in accordance with their repayment terms.

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Loans Held For Investment Analysis. The following table sets forth the composition of the Bank’s loans held for investment at the dates indicated:


	At June 30,
	2024				2023
(Dollars In Thousands)	Amount		Percent		Amount		Percent

Mortgage loans:
Single-family	$	518,091	49.30	%	$	518,821	48.30	%
Multi-family		445,182	42.36			461,113	42.93
Commercial real estate		83,349	7.93			90,558	8.43
Construction		2,692	0.26			1,936	0.18
Other		95	0.01			106	0.01
Total mortgage loans		1,049,409	99.86			1,072,534	99.85

Commercial business loans		1,372	0.13			1,565	0.14
Consumer loans		65	0.01			65	0.01
Total loans held for investment, gross		1,050,846	100.00	%		1,074,164	100.00	%

Advance payments of escrows		102				148
Deferred loan costs, net		9,096				9,263
ACL⁽¹⁾ on loans		(7,065)				(5,946)
Total loans held for investment, net	$	1,052,979			$	1,077,629

(1)	Allowance for credit losses (“ACL”)

Maturity of Loans Held for Investment. The following table sets forth information at June 30, 2024 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, loans having no stated maturity, and overdrafts are reported as becoming due within one year. The table does not include any estimate of prepayments, which can significantly shorten the average life of loans held for investment and may cause the Bank’s actual principal payment experience to differ materially from that shown below:


			After		After
			One Year		5 Years
	Within		Through		Through		Beyond
(In Thousands)	One Year		5 Years		15 Years		15 Years		Total

Mortgage loans:
Single-family	$	15	$	1,523	$	25,691	$	490,862	$	518,091
Multi-family		—		16,055		9,149		419,978		445,182
Commercial real estate		4,100		18,490		53,851		6,908		83,349
Construction		228		1,480		—		984		2,692
Other		95		—		—		—		95
Commercial business loans		1,239		133		—		—		1,372
Consumer loans		65		—		—		—		65
Total loans held for investment, gross	$	5,742	$	37,681	$	88,691	$	918,732	$	1,050,846

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The following table sets forth the dollar amount of all loans held for investment due after one year from June 30, 2024 which have fixed and floating or adjustable interest rates:


					Floating or
					Adjustable
(Dollars In Thousands)	Fixed-Rate		%	⁽¹⁾	Rate		%	⁽¹⁾

Mortgage loans:
Single-family	$	108,754	21	%	$	409,322	79	%
Multi-family		94	—	%		445,088	100	%
Commercial real estate		387	—	%		78,862	100	%
Construction		—	—	%		2,464	100	%
Commercial business loans		—	—	%		133	100	%
Total loans held for investment, gross	$	109,235	10	%	$	935,869	90	%

(1)	As a percentage of each category.

Scheduled contractual principal payments of loans do not reflect the actual life of such assets. The average life of loans is generally substantially less than their contractual terms because of prepayments. In addition, due-on-sale clauses 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 that secures the loan. The average life of mortgage loans tends to increase, however, when current market 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 market interest rates, as borrowers are generally less inclined to refinance their loans when market rates increase and more inclined to refinance their loans when market rates decrease.

The table below describes the geographic dispersion of real estate secured loans held for investment (gross) at June 30, 2024 and 2023, as a percentage of the total dollar amount outstanding (dollars in thousands):

As of June 30, 2024:


	Inland				Southern				Other				Other
	Empire⁽¹⁾				California⁽²⁾				California				States				Total
Loan Category	Balance		%		Balance		%		Balance		%		Balance		%		Balance		%
Single-family	$	146,003	28	%	$	175,127	34	%	$	196,707	38	%	$	254	—	%	$	518,091	100	%
Multi-family		56,693	13	%		256,692	58	%		131,797	29	%		—	—	%		445,182	100	%
Commercial real estate		13,583	16	%		44,574	54	%		25,192	30	%		—	—	%		83,349	100	%
Construction		228	8	%		1,480	55	%		984	37	%		—	—	%		2,692	100	%
Other		—	—	%		95	100	%		—	—	%		—	—	%		95	100	%
Total	$	216,507	21	%	$	477,968	45	%	$	354,680	34	%	$	254	—	%	$	1,049,409	100	%

(1)	Comprised of Riverside and San Bernardino counties.

(2)	Other than the Inland Empire.

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As of June 30, 2023:


	Inland				Southern				Other				Other
	Empire⁽¹⁾				California⁽²⁾				California				States				Total
Loan Category	Balance		%		Balance		%		Balance		%		Balance		%		Balance		%
Single-family	$	149,569	29	%	$	174,421	34	%	$	194,570	37	%	$	261	—	%	$	518,821	100	%
Multi-family		61,672	13	%		272,178	59	%		127,263	28	%		—	—	%		461,113	100	%
Commercial real estate		16,586	18	%		49,183	54	%		24,789	28	%		—	—	%		90,558	100	%
Construction		590	30	%		1,116	58	%		230	12	%		—	—	%		1,936	100	%
Other		—	—	%		106	100	%		—	—	%		—	—	%		106	100	%
Total	$	228,417	21	%	$	497,004	47	%	$	346,852	32	%	$	261	—	%	$	1,072,534	100	%

(1)	Comprised of Riverside and San Bernardino counties.

(2)	Other than the Inland Empire.

Single-Family Mortgage Loans. One of the Bank’s primary lending activities is the origination and purchase of adjustable and fixed rate mortgage loans to be held for investment, secured by first trust deed mortgages on owner-occupied, single-family (one to four units) residences in the communities where the Bank’s branches are located and surrounding areas in Southern and Northern California. During fiscal 2024, the Bank originated $40.9 million of single-family loans to be held for investment, all of which were underwritten in accordance with the Bank’s origination guidelines, and did not purchase any single-family loans. This compares to single-family loan originations of $165.9 million and no loan purchases during fiscal 2023. At June 30, 2024, total single-family loans held for investment decreased slightly to $518.1 million, or 49% of the total loans held for investment, from $518.8 million, or 48% of the total loans held for investment, at June 30, 2023. The decrease in the single-family loans in fiscal 2024 was primarily attributable to loan principal payments that exceeded new loans originated for investment. During fiscal 2024, the Bank did not have any recovery from non-performing single-family loans, as compared to net recoveries of $8,000 during fiscal 2023. At June 30, 2024 and 2023, total non-performing single-family loans were $2.6 million and $1.3 million, respectively, net of allowances and charge-offs, and there were no loans past due 30 to 89 days at both dates.

The Bank has underwriting standards that generally conform with the standards of the government sponsored entities (“GSE”) which include Fannie Mae and Freddie Mac. Mortgage insurance is usually required for all loans exceeding 80% loan-to-value (“LTV”) based on the lower of the purchase price or appraised value at the time of loan origination. The Bank is not currently offering loans with LTV ratios greater than 90%. The ratio is derived by dividing the original loan balance by the lower of the original appraised value or purchase price of the real estate collateral. Currently, the maximum LTV ratio is 90% for new purchases and limited cash-out refinances and 75% for cash-out refinances. The maximum loan amount offered on single-family homes is $1.5 million. A limited cash-out refinance transaction limits cash back to the borrower to the lesser of 2% of the new loan amount or $2,000. The lowest FICO score currently offered for a purchase or no cash-out refinance transaction is 700, while the lowest FICO score for a cash-out refinance transaction is 720. The FICO score represents the creditworthiness of a borrower based on the borrower’s credit history, as reported by an independent third party. A higher FICO score indicates a greater degree of creditworthiness. Bank regulators have issued guidance stating that a FICO score of 660 and below is indicative of a “subprime” borrower.

The Bank currently lends on residential properties classified as single-family units, planned unit developments and condominiums. Underwriting standards and guidelines may change at any time, based on shifts in real estate market conditions or changes to GSE policies and guidelines. To enhance protection, the Bank purchases lender-paid mortgage insurance for certain single-family mortgage loans. As of June 30, 2024, a total of approximately $141.8 million of single-family mortgage loans, with a 79% weighted average LTV at the time of origination have lender-paid mortgage insurance. This insurance provides a weighted average coverage ratio of approximately 11% of the original loan amount.

Prior to fiscal 2009, many of the loans we originated for investment consisted of non-traditional single-family residential loans that do not conform to Fannie Mae or Freddie Mac underwriting guidelines as a result of the characteristics of the borrower or property, the loan terms, loan size or exceptions from agency underwriting guidelines. In exchange for the additional risk to us associated with these loans, these borrowers generally are required to pay a higher interest rate, and

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depending on the credit history, a lower loan-to-value ratio was generally required than for a conforming loan. Our non-traditional single-family residential loans include loans to borrowers who provided limited or no documentation of their income or stated income loans, negative amortization loans (a loan in which accrued interest exceeding the required monthly loan payment is added to loan principal up to 115% of the original loan amount), more than 30-year amortization loans, and loans to borrowers with a FICO score below 660 (these loans are considered subprime by the OCC).

As of June 30, 2024, these non-traditional loans totaled $17.7 million, comprising 3% of total single-family residential loans held for investment and 2% of total loans held for investment, with a weighted average seasoning of 16.1 years. At that date, stated income loans totaled $13.0 million, more than 30-year amortization loans totaled $6.0 million, low FICO score loans totaled $1.7 million, and negative amortization loans totaled $402,000 (the outstanding balances described may overlap more than one category).

The Bank currently offers fixed-rate loans in Riverside and San Bernardino counties, along with adjustable-rate mortgage (“ARM”) loans throughout California. Substantially all the loans originated by the Bank comply with GSE underwriting standards concerning credit and collateral. The Bank's ARM products offer various options, with interest rates adjusting every six months after an initial fixed period of five to ten years. These adjustments are limited by caps on semi-annual and lifetime rate changes.

Currently, the ARM programs have a rate consisting of an Index tied to the Secured Overnight Financing Rate (“SOFR”), plus a margin. The programs are limited to a maximum semi-annual increase or decrease of one percentage point with a maximum lifetime increase of five percentage points and the rate may not fall below the margin. The portfolio currently consists of the following indices, plus a margin of between 2.00% and 3.25%, which are used to calculate the periodic interest rate changes: SOFR, the 12-month average U.S. Treasury (“12 MAT”) or the weekly average yield on one-year U.S. Treasury securities adjusted to a constant maturity of one year (“CMT”). Loans based on the SOFR index constitute a majority of the Bank’s loans held for investment. The majority of the ARM loans held for investment have five, seven, or 10-year fixed periods prior to the first adjustment and provide for fully amortizing loan payments throughout the term of the loan. Loans of this type have embedded interest rate risk if interest rates should rise during the initial fixed rate period or if rates should rise beyond the periodic or lifetime caps.

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 product in a given interest rate and competitive environment.

The retention of ARM loans, rather than fixed-rate loans, helps to reduce the Bank’s exposure to changes in interest rates. There is, however, unquantifiable credit risk resulting from the potential of increased interest charges to be paid by the borrower 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. Further, 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. Because of these characteristics, ARM loans are subject to increased risks of default or delinquency. Additionally, while ARM loans allow the Bank to increase the sensitivity of its assets as a result of changes in interest rates, the extent of this interest rate sensitivity is limited by the periodic and lifetime interest rate adjustment limits. Furthermore, because loan indexes may not respond perfectly to changes in market interest rates, upward adjustments on loans may occur more slowly than increases in the Bank’s cost of interest-bearing liabilities, especially during periods of rapidly increasing interest rates. Conversely, downward adjustments on the Bank’s cost of funds typically lag adjustments on ARM loans which may occur more rapidly during periods of declining interest rates. For additional information concerning the effect of interest rates on our loan portfolio, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-K.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires lenders to make a reasonable, good faith determination of a borrower’s ability to repay any consumer closed-end credit transaction secured by a dwelling and to limit prepayment penalties. Increased risks of legal challenge, private right of action and regulatory enforcement actions result from these rules. The Bank may originate loans that do not meet the definition of a “qualified mortgage” (“QM”). To mitigate the risks involved with non-QM loans, the Bank has implemented systems, processes,

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procedural and product changes, and maintains its underwriting standards, to ensure that the “ability-to-repay” requirements are adequately addressed.

A decline in real estate values subsequent to the time of origination of real estate secured loans could result in higher loan delinquency levels, foreclosures, provisions for credit losses and net charge-offs. Real estate values and real estate markets are beyond the Bank’s control and are generally affected by changes in national, regional or local economic conditions and other factors. These factors include fluctuations in interest rates and the availability of loans to potential purchasers, housing supply and demand, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes, fires, droughts and other natural disasters particular to California where substantially all of our real estate collateral is located. If real estate values decline from the levels at the time of loan origination, the value of our real estate collateral securing the loans could be significantly reduced. The Bank’s ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and it would be more likely that the Bank could suffer losses on defaulted loans.

Multi-Family and Commercial Real Estate Loans. At June 30, 2024, multi-family loans were $445.2 million and commercial real estate loans were $83.3 million, or 42% and 8%, respectively, of loans held for investment. This compares to multi-family loans of $461.1 million and commercial real estate loans of $90.6 million, or 43% and 8%, respectively, of loans held for investment at June 30, 2023. Consistent with its strategy to diversify the composition of loans held for investment, the Bank has emphasized the origination and purchase of multi-family and commercial real estate loans. During fiscal 2024, the Bank originated $31.9 million in multi-family and commercial real estate loans but did not purchase any. This is a decrease from fiscal 2023, when $69.3 million of such loans were originated and none were purchased. As of June 30, 2024, the average outstanding loan balance was approximately $724,000 for multi-family loans and approximately $731,000 for commercial real estate loans.

The multi-family loans originated by the Bank are predominately adjustable-rate loans, including hybrid ARM loans, with terms ranging from 10 to 30 years and amortization schedules of 25 to 30 years. Similarly, the Bank’s commercial real estate loans are mainly adjustable-rate loans, also including hybrid ARM loans, with the same maturity terms and amortization schedules. The interest rates on multi-family and commercial real estate ARM loans generally adjust monthly, quarterly, semi-annually, or annually, based on a specific margin over the relevant interest rate index and are subject to periodic and lifetime interest rate caps. At June 30, 2024, $428.4 million, or 96%, of the Bank’s multi-family loans were secured by projects with five to 36 units. The Bank’s commercial real estate loan portfolio primarily consists of loans secured by small office buildings, light industrial buildings, warehouses, and small retail centers. The properties securing these loans are mainly located in the counties of Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Francisco, and Santa Clara. The Bank typically originates multi-family and commercial real estate loans in amounts ranging from $350,000 to $6.0 million. At June 30, 2024, the Bank had 57 commercial real estate and multi-family loans with principal balances greater than $1.5 million, totaling $125.7 million. Appraisals are obtained for all properties securing multi-family and commercial real estate loans. The underwriting process for these loans includes a thorough analysis of the property's cash flows to ensure adequate debt service coverage, as well as an evaluation of the financial resources, experience, and income levels of the borrowers and guarantors.

Multi-family and commercial real estate loans afford the Bank an opportunity to price the loans with 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 real estate 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. During both fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on multi-family and commercial real estate loans. At June 30, 2024 and 2023, there were no non-performing or 30 to 89 days delinquent multi-family and commercial real estate loans. Non-performing loans and/or delinquent loans may increase if there is a general decline in California real estate markets and in the event poor general economic conditions prevail.

Construction Loans. The Bank originates from time to time two types of construction loans: short-term construction loans and construction/permanent loans. During fiscal 2024 and 2023, the Bank originated a total of $1.5 million and $1.6 million of construction loans (including undisbursed loan funds), respectively. As of June 30, 2024 and 2023, the Bank had construction loans totaling $2.7 million and $1.9 million, net of undisbursed loan funds of $435,000 and $1.9 million,

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respectively. On these dates, the loans consisted of bridge loans totaling $1.5 million and $0, short-term construction loans totaling $228,000 and $1.7 million, and construction/permanent loans totaling $984,000 and $230,000 respectively.

Short-term construction loans include three types of loans: custom construction, tract construction, and speculative construction. The Bank provides construction financing for single-family, multi-family and commercial real estate properties. Custom construction loans are made to individuals who, at the time of application, have a contract executed with a builder to construct their residence. Custom construction loans are generally originated for a term of 12 to 18 months, with adjustable or fixed interest rates at the prime lending rate plus a margin and with loan-to-value ratios of up to 75% of the appraised value of the completed property. The owner secures long-term permanent financing at the completion of construction. At June 30, 2024, there were no custom short-term single-family construction loans. This compares to June 30, 2023 when the Bank had one custom short-term single-family construction loan totaling $496,000, net of undisbursed loan funds of $49,000.

From time to time the Bank makes lot loans to individuals to finance land acquisition prior to the start of construction or 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. Tract construction may include the building and financing of model homes under a separate loan. At June 30, 2024, there was one land loan of $95,000 (reported as other mortgage loans) and no tract construction loans; as compared to one land loan for $106,000 (reported as other mortgage loans) and one tract construction loan for $1.1 million, net of undisbursed loan funds of $567,000 at June 30, 2023.

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 sale contract with a home buyer who has a commitment for permanent financing with either the Bank or another lender for the finished home. The home buyer may be identified during or after the construction period. The builder may be required 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, 2024, the Bank had one speculative construction loan of $228,000, net of undisbursed loan funds of $32,000, as compared to one construction loan of $94,000, net of undisbursed loan funds of $166,000 at June 30, 2023.

Construction/permanent loans automatically roll from the construction to the permanent phase. The construction phase generally lasts 12 to 18 months and the interest rate charged is generally fixed at a margin above prime rate and with a loan-to-value ratio of up to 75% of the appraised value of the completed property. At June 30, 2024, there were $984,000 of custom construction/permanent loans, net of undisbursed loan funds of $403,000 as compared to $230,000 of custom construction/permanent loans, net of undisbursed loan funds of $1.2 million at June 30, 2023.

Construction loans under $1.0 million are approved by Bank personnel specifically designated to approve construction loans. The Bank’s Loan Committee, comprised of the Chief Executive Officer, Chief Lending Officer, Senior Vice President – Single-Family Division and Vice President - Loan Administration, approves all construction loans over $1.0 million. Prior to approval of any construction loan, an independent fee appraiser inspects the site and the Bank reviews the existing or proposed improvements, identifies the market for the proposed project, and analyzes the pro-forma data and assumptions on the project. In the case of a tract or speculative construction loan, the Bank also reviews the experience and expertise of the builder. The Bank obtains credit reports, financial statements and tax returns on the borrowers and guarantors, an independent appraisal of the project, and any other expert report necessary to evaluate the proposed project. In the event of cost overruns, the Bank requires the borrower to deposit their own funds into a loan-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 inspectors and/or Bank personnel. At inception, the Bank also requires borrowers to deposit funds into a loan-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 inspectors perform periodic inspections. The Bank believes that the internal monitoring system helps reduce many of the risks inherent in its construction loans.

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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 costs 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 is in its primary market area, changes in the local or regional economy and real estate market could adversely affect the Bank’s construction loans held for investment. During fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on construction loans, and no construction loans were non-performing or 30-89 days delinquent at both June 30, 2024 and June 30, 2023.

Participation Loan Purchases and Sales. To expand production and diversify risk, the Bank purchases loans and loan participations, primarily with collateral located in California, which allows for greater geographic distribution outside of the Bank’s primary lending areas. The Bank typically purchases between 50% and 100% of the total loan amount. When purchasing a participation loan, the lead lender usually retains a servicing fee, which reduces the loan yield to approximately the cost the Bank would incur if it serviced the loan itself. All properties serving as collateral for these loan participations are inspected by either a Bank employee or a third-party inspection service before being approved by the Loan Committee. The Bank uses the same underwriting criteria for these purchases as it does for loans it originates. The Bank did not purchase any loans to be held for investment in fiscal 2024 and 2023, due primarily to concerns over asset quality in light of the current economic climate and fewer loans available for purchase. As of June 30, 2024 and 2023, there were $1.8 million and $10.6 million of loans serviced by other financial institutions, respectively. As of June 30, 2024 and 2023, all loans serviced by others were performing according to their original contractual payment terms, except for one loan totaling $362,000 that was classified as non-performing as of June 30, 2024.

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. The Bank did not sell any participation loans in fiscal 2024 or fiscal 2023.

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 yield. As of June 30, 2024, commercial business loans were $1.4 million, down from $1.6 million at June 30, 2023. These loans represent secured and 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 to a negotiated margin above the prime rate and term loans are at a fixed or variable rate. The Bank may also require personal guarantees from financially capable parties associated with the business 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 are typically 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 value 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 not be collectible and inventories and equipment may be obsolete or of limited

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use. 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. At June 30, 2024 and 2023, there were no non-performing commercial business loans. During fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on commercial business loans.

Consumer Loans. At June 30, 2024, the Bank’s consumer loans were $65,000, unchanged from June 30, 2023. The Bank offers open-ended lines of credit on an unsecured basis, primarily deposit overdraft lines of credit.

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 ongoing 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. The Bank had no non-performing consumer loans at both June 30, 2024 and 2023. During fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on consumer loans.

Loans Originations, Purchases, Sales and Repayments

Mortgage loans are primarily originated for investment. Prior to scaling back originations of saleable single-family fixed-rate mortgage loans during fiscal 2019, a large amount of single-family fixed-rate mortgage loans were originated for sale to institutional investors. Mortgage loans sold to investors generally were sold without recourse other than standard representations and warranties. Generally, mortgage loans sold to Fannie Mae and Freddie Mac were sold on a non-recourse basis and foreclosure losses are generally the responsibility of the purchaser and not the Bank, except in the case of Federal Housing Administration (“FHA”) and Veterans’ Administration (“VA”) loans used to form Government National Mortgage Association pools, which are subject to limitations on the FHA’s and VA’s loan guarantees.

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The following table shows the Bank’s loan originations, purchases, sales and principal repayments during the periods indicated. No loans were purchased during the periods indicated:


	Year Ended June 30,
(In Thousands)	2024		2023

Loans originated for sale:
Wholesale originations	$	5,605	$	512
Total loans originated for sale		5,605		512

Loans sold:
Servicing retained		(5,605)		(512)
Total loans sold		(5,605)		(512)

Loans originated for investment:
Mortgage loans:
Single-family		40,920		165,942
Multi-family		22,112		50,323
Commercial real estate		9,757		18,979
Construction		1,480		1,648
Commercial business loans		1,250		190
Total loans originated for investment		75,519		237,082

Loan principal repayments		(99,915)		(102,288)
(Decrease) increase in other items, net ⁽¹⁾		(254)		2,843
Net (decrease) increase in loans held for investment	$	(24,650)	$	137,637

(1)	Includes net changes in undisbursed loan funds, deferred loan fees or costs, ACL, fair value of loans held for investment and advance payments of escrows.

Loan Servicing

The Bank receives fees from a variety of investors in return for performing the traditional services of collecting individual loan payments on loans sold by the Bank to such investors. At June 30, 2024, the Bank was servicing $34.6 million of loans for others, a 6% increase from $32.6 million at June 30, 2023. The increase was primarily attributable to new loans sold with servicing retained, partly offset by scheduled principal payments and prepayments. 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. After 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 of cost or fair value. The fair value of servicing assets is determined by calculating the present value of the estimated net future cash flows consistent with contractually specified servicing fees. The Bank 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 rise (as prepayments typically decrease) and less valuable when interest rates decline (as prepayments typically increase). In estimating fair values at June 30, 2024 and 2023, the Bank used a weighted average Constant Prepayment Rate (“CPR”) of 9.59% and 7.44%, and a weighted average discount rate of 9.06% and 9.05%, respectively. The required impairment reserve against servicing assets at June 30, 2024 and 2023 was $170,000 and $165,000, respectively. In aggregate, servicing assets had a carrying value of $272,000 and a fair value of $102,000 at June 30, 2024, compared to a carrying value of $256,000 and a fair value of $91,000 at June 30, 2023.

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Asset Quality

Delinquent Loans. When a mortgage loan borrower fails to make a required payment when due, the Bank initiates collection procedures. In most cases, delinquencies are cured promptly; however, if the loan remains delinquent on the 120th day for single-family loans or the 90th day for other loans, or sooner if the borrower is chronically delinquent, and after 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.

As of June 30, 2024, total non-performing assets, net of the ACL and fair value adjustments, were $2.6 million, or 0.20% of total assets, which was comprised of 10 single-family loans. As of June 30, 2024, $1.1 million or 43% of the total non-performing loans had a current payment status. In comparison, as of June 30, 2023, total non-performing assets, net of the ACL and fair value adjustments, were $1.3 million, or 0.10% of total assets, consisting of six single-family loans, with $175,000 or 13% having a current payment status. The Bank had no real estate owned (“REO”) both at June 30, 2024 and 2023.

The following table sets forth information with respect to the Bank’s non-performing assets, net of the ACL and fair value adjustments, at the dates indicated:


	At June 30,
(Dollars In Thousands)	2024			2023

Loans on non-performing status:
Mortgage loans:
Single-family	$	2,596		$	1,300
Total		2,596			1,300

Accruing loans past due 90 days or more		—			—

Total non-performing loans		2,596			1,300

Real estate owned, net		—			—
Total non-performing assets	$	2,596		$	1,300

Non-performing loans as a percentage of loans held for investment, net		0.25	%		0.12	%

Non-performing loans as a percentage of total assets		0.20	%		0.10	%

Non-performing assets as a percentage of total assets		0.20	%		0.10	%

The Bank assesses loans individually and classifies the loans as non-performing and substandard in accordance with regulatory requirements when the accrual of interest has been discontinued, loans have been modified or management has serious doubts about the future collectability of principal and interest, even though the loans may be currently performing. Factors considered in determining classification include, but are not limited to, expected future cash flows, collateral value, the financial condition of the borrower and/or guarantor and current economic conditions. The Bank measures each non-performing loan based on Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses,” establishes a collectively evaluated or individually evaluated allowance, and charges off those loans or portions of loans deemed uncollectible.

Modified Loans to Borrowers Experiencing Financial Difficulty. We occasionally modify loans to alleviate temporary difficulties in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize our potential losses. We refer to these modifications as modified loans to troubled borrowers. Modifications may include changes in the amortization terms of the loan, reductions in interest rates, acceptance of interest only payments, and, in very limited cases, reductions to the outstanding loan balance. Such loans are typically placed on nonaccrual status

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when there is doubt concerning the full repayment of principal and interest or the loan has been past due for a period of 120th day for single-family loans or the 90th day for other loans or sooner if other activities have taken place such as a notice of default has been issued, or if the borrower is chronically delinquent. Such loans may be returned to accrual status when all contractual amounts past due have been brought current, and the borrower’s performance under the modified terms of the loan agreement and the ultimate collectability of all contractual amounts due under the modified terms is no longer in doubt.

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, “Financial Instruments-Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures.” This ASU provides new guidance on the treatment of troubled debt restructurings (“TDR”) in relation to the adoption of the current expected credit loss methodology, or CECL model, for the accounting for credit losses (discussed below). Previous accounting guidance related to TDRs is eliminated and new disclosure requirements are adopted in regards to loan modifications made to borrowers experiencing financial difficulties under the assumption that the CECL model will capture credit losses related to TDRs. The required disclosures regarding gross write-offs for financing receivables by year of origination and loan modifications are presented under Note 3 of the Notes to Consolidated Financial Statements. Subsequent to the adoption of ASC 326, the Bank no longer reports TDRs or classifies loans as TDRs given those loans previously recognized as TDRs have been incorporated into the CECL methodology in regard to credit loss reserves as of July 1, 2023. As of June 30, 2024, there were no loan modifications for borrowers experiencing financial difficulties.

Foreclosed Real Estate. Real estate acquired by the Bank as a result of foreclosure or by deed-in-lieu of foreclosure is classified as REO until it is sold. When a property is acquired, it is recorded at its fair market value less the estimated cost of sale. Subsequent declines in value are charged to operations. As of both June 30, 2024 and 2023, there was no REO property. In managing the real estate owned properties for quick disposition, the Bank completes the necessary repairs and maintenance to the individual properties before listing for sale, obtains new appraisals and broker price opinions (“BPO”) to determine current market listing prices, and engages local realtors who are most familiar with real estate sub-markets, among other techniques, which generally results in the quick disposition of real estate owned.

Asset Classification. The OCC has adopted various regulations regarding the 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, OCC 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 an individually evaluated allowance and may subsequently charge-off the amount of the asset classified as loss. A portion of the ACL established to cover probable losses related to assets classified substandard or doubtful may be included in determining an institution’s 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 are closely monitored by the Bank.

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The following table summarizes classified assets, which is comprised of classified loans located in California, including loans classified by the Bank as special mention, net of the ACL, and REO at the dates indicated:


	At June 30, 2024				At June 30, 2023
(Dollars In Thousands)	Balance			Count	Balance			Count

Special mention loans:
Mortgage loans:
Single-family	$	1,099		1	$	—		—
Multi-family		—		—		510		1
Total special mention loans		1,099		1		510		1

Substandard loans:
Mortgage loans:
Single-family		2,596		10		1,300		6
Multi-family		2,066		3		—		—
Commercial real estate		—		—		547		1
Total substandard loans		4,662		13		1,847		7

Total classified loans		5,761		14		2,357		8

Real estate owned:
Single-family		—		—		—		—
Total real estate owned		—		—		—		—

Total classified assets	$	5,761		14	$	2,357		8

Total classified assets as a percentage of total assets		0.45	%			0.18	%

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, the reserves of the borrower and guarantors, and the debt coverage ratio of the property securing the loan, among other factors. After consideration of these and other 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 single-family, 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 and/or guarantor who have sufficient resources to support the repayment of the loan.

Allowance for Credit Losses. On July 1, 2023, the Corporation adopted ASC 326 that replaced the incurred loss methodology with the current expected credit loss or CECL methodology. CECL requires an estimate of expected credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and applies to financial assets measured at amortized cost, including loans held for investment, held-to-maturity investment securities and some off-balance sheet credit exposures such as unfunded loan commitments to extend credit. Financial assets measured at amortized cost are presented at the net amount expected to be collected by using an ACL. The responsibility for the review of the Bank’s assets and the determination of the adequacy of the ACL lies with the Internal Asset Review Committee (“IAR Committee”). The Bank adjusts its ACL by charging (crediting) its provision for (recovery of) credit losses against the Bank’s operations.

The Bank has established a methodology for the determination of the provision for credit losses. The methodology is set forth in a formal policy and takes into consideration the need for a collectively evaluated allowance for groups of homogeneous loans and an individually evaluated allowance that is tied to individual problem loans. The Bank’s methodology for assessing the appropriateness of the ACL consists of several key elements.

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Under ASC 326, the ACL is a valuation account that is deducted from the related loan’s amortized cost basis to present the net amount expected to be collected on the loans. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Bank’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL trued-up through an entry to the provision for credit losses. Management calculates the quantitative portion of the collectively evaluated allowance for all loan categories using an average charge-off or loss rate methodology and generally evaluates collectively evaluated loans by Call Report code in order to group and determine portfolio loan segments with similar risk characteristics. The Bank primarily utilizes historical loss rates for the CECL calculation based on its own specific historical losses and/or with peer loss history where applicable.

The expected loss rates are applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The prepayment assumptions applied to expected cash flow over the contractual life of the loans are estimated based on historical and bank-specific experience and the consideration of current and expected conditions and circumstances including the level of interest rates. The prepayment assumptions may be updated by management in the event that changing conditions impact management’s estimate or additional historical data gathered has resulted in the need for a reevaluation.

For its reasonable and supportable forecasting of current expected credit losses, the Bank utilizes a regression model using forecasted economic metrics and historical loss data. The regression model utilized upon implementation of CECL on July 1, 2023, and as of June 30, 2024, relied upon reasonable and supportable 12-month forecasts of the National Unemployment Rate and change in the Real Gross Domestic Product, after which it reverts to a historical loss rate. Management selected the National Unemployment Rate and the Real Gross Domestic Product as the drivers of the forward look component of the collectively evaluated allowance, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts, including the quarterly Federal Open Market Committee (“FOMC”) forecast, and the widespread familiarity of these economic metrics.

Management recognizes that there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of allowance on collectively evaluated loans. As current and expected conditions may vary compared with conditions over the historical lookback period, which is utilized in the calculation of the quantitative allowance, management considers whether additional or reduced allowance levels on collectively evaluated loans may be warranted, given the consideration of a variety of qualitative factors. The following qualitative factors (“Q-factors”) considered by management reflect the regulatory guidance on the Q-factors:

●

Changes in the experience, ability, and depth of lending management and other relevant staff.

●

Changes in the value of underlying collateral for collateral-dependent loans.

●

The existence and effect of any concentrations of credit, and changes in the level of such concentrations.

●

Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments.

●

The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution's existing portfolio.

●

Changes in the volume and severity of past due loans, the volume of non-performing loans, and the volume and severity of adversely classified or graded loans.

●

Changes in the quality of the Bank’s loan review system.

●

Changes in the nature, volume and terms of loans in the portfolio.

●

Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.

The qualitative portion of the Bank’s allowance on collectively evaluated loans are calculated using management judgment, to determine risk categorizations in each of the Q-factors presented above. The amount of qualitative allowance is also contingent upon the relative weighting of the Q-factors according to management’s judgment.

Loans that do not share similar risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date, less selling costs.

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Accrued interest receivable for loans is included in the accrued interest receivable line item on the Corporation’s Consolidated Statements of Financial Condition. The Bank elected not to measure an allowance for accrued interest receivable and instead elected to reverse accrued interest income on loans that are placed on non-performing status. A loan is deemed non-performing when the Bank has stopped accruing interest income, or it is 90 days or more delinquent. Any outstanding interest receivable that has not been collected is reversed, disclosed accordingly; and therefore, no allowance is established. The Bank believes this policy results in the timely reversal of potentially uncollectible interest.

Management believes the ACL on loans held for investment is maintained at a level sufficient to provide for expected losses on the Corporation’s loans held for investment based on historical loss experience, current conditions, and reasonable and supportable forecasts. The provision for (recovery of) credit losses is charged (credited) against operations on a quarterly basis, as necessary, to maintain the ACL at appropriate levels. Future adjustments to the ACL may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory, and other conditions beyond the Corporation’s control.

Non-performing loans are charged-off to their fair market values in the period the loans, or portion thereof, are deemed uncollectible, generally after the loan becomes 150 days delinquent for real estate secured first trust deed loans and 120 days delinquent for commercial business or real estate secured second trust deed loans. For loans that were previously modified from their original terms, were re-underwritten and identified as modified loans, the charge-off occurs when the loan becomes 90 days delinquent; and where borrowers file bankruptcy, the charge-off occurs when the loan becomes 60 days delinquent. The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the ACL. For modified loans that are less than 90 days delinquent, the ACL is segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their modification period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method. For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method. For non-performing commercial real estate loans, an individually evaluated allowance is derived based on the loan's discounted cash flow fair value (for modified loans) or collateral fair value less estimated selling costs and if the fair value is higher than the loan balance, no allowance is required.

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The following table shows certain credit ratios at and for the periods indicated and each component of the ratio’s calculations:


	At or For The Year Ended June 30,
(Dollars In Thousands)	2024			2023

ACL on loans as a percentage of total gross loans held for investment at period end		0.67	%		0.55	%
ACL on loans	$	7,065		$	5,946
Total gross loans held for investment	$	1,050,846		$	1,074,164

Non-performing loans as a percentage of net loans held for investment at period end		0.25	%		0.12	%
Total non-performing loans, net	$	2,596		$	1,300
Total loans held for investment, net	$	1,052,979		$	1,077,629

ACL on loans as a percentage of gross non-performing loans at period end		264.71	%		418.14	%
ACL on loans	$	7,065		$	5,946
Total gross non-performing loans	$	2,669		$	1,422

Net recoveries (charge-offs) to average loans receivable during the period:
Mortgage loans:

Single-family:		-	%		-	%
Net recoveries	$	-		$	8
Average loans receivable	$	520,071		$	471,347

Multi-family:		-	%		-	%
Net charge-offs	$	-		$	-
Average loans receivable	$	459,025		$	464,511

Commercial real estate:		-	%		-	%
Net charge-offs	$	-		$	-
Average loans receivable	$	86,425		$	89,060

Construction:		-	%		-	%
Net charge-offs	$	-		$	-
Average loans receivable	$	2,340		$	2,606

Other:		-	%		-	%
Net charge-offs	$	-		$	-
Average loans receivable	$	99		$	111

Commercial business loans:		-	%		-	%
Net charge-offs	$	-		$	-
Average loans receivable	$	1,592		$	1,290

Consumer loans:		-	%		-	%
Net charge-offs	$	-		$	-
Average loans receivable	$	64		$	75

Total loans:		-	%		-	%
Total net recoveries	$	-		$	8
Total average loans receivable	$	1,069,616		$	1,029,000

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The distribution of the ACL on loans at the dates indicated is summarized as follows:


	At June 30,
	2024				2023
			% of				% of
			Loans in				Loans in
			Each				Each
			Category				Category
			to Total				to Total
(Dollars In Thousands)	Amount		Loans		Amount		Loans

Mortgage loans:
Single-family	$	6,295	49.30	%	$	1,720	48.30	%
Multi-family		595	42.36			3,270	42.93
Commercial real estate		66	7.93			868	8.43
Construction		97	0.26			15	0.18
Other		1	0.01			2	0.01
Commercial business loans		11	0.13			67	0.14
Consumer loans		—	0.01			4	0.01
Total ACL	$	7,065	100.00	%	$	5,946	100.00	%

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 government sponsored enterprises 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.

The investment policy of the Bank, established by the Board of Directors and implemented by the Bank’s Asset-Liability Committee, seeks to provide and maintain adequate liquidity, complement the Bank’s lending activities, and generate a favorable return on investment without incurring undue interest rate risk or credit risk. Investments are made based on certain considerations, such as credit quality, yield, maturity, liquidity and marketability. The Bank also considers the effect that the proposed investment would have on the Bank’s risk-based capital requirements and interest rate risk sensitivity.

At June 30, 2024 and 2023, the Bank’s investment securities portfolio was $131.9 million and $156.6 million, respectively, which primarily consisted of federal agency and GSE obligations. The Bank did not purchase any investment securities during fiscal 2024 and 2023. At June 30, 2024 and 2023, the Bank’s securities portfolio did not contain securities of any issuer with an aggregate book value in excess of 10% of our equity capital, excluding those issued by the United States government or its agencies or a GSE.

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The following table sets forth the composition of the Bank’s investment portfolio at the dates indicated:


	At June 30,
	2024						2023
			Estimated						Estimated
	Amortized		Fair				Amortized		Fair
(Dollars In Thousands)	Cost		Value		Percent		Cost		Value		Percent

Held to maturity securities:
U.S. government sponsored enterprise MBS⁽¹⁾	$	125,883	$	110,478	95.04	%	$	149,803	$	131,344	95.39	%
U.S. government sponsored enterprise CMO⁽²⁾		3,713		3,460	2.97			3,883		3,547	2.58
U.S. SBA securities⁽³⁾		455		455	0.39			651		650	0.47
Total investment securities - held to maturity	$	130,051	$	114,393	98.40	%	$	154,337	$	135,541	98.44	%

Available for sale securities:
U.S. government agency MBS⁽¹⁾	$	1,222	$	1,208	1.04	%	$	1,417	$	1,370	0.99	%
U.S. government sponsored enterprise MBS⁽¹⁾		548		553	0.48			697		683	0.50
Private issue CMO⁽²⁾		91		88	0.08			103		102	0.07
Total investment securities - available for sale	$	1,861	$	1,849	1.60	%	$	2,217	$	2,155	1.56	%
Total investment securities	$	131,912	$	116,242	100.00	%	$	156,554	$	137,696	100.00	%

(1)Mortgage-backed securities (“MBS”)

(2)Collateralized mortgage obligations (“CMO”)

(3)Small Business Administration ("SBA")

The following table sets forth the outstanding balance, maturity and weighted average yield of the investment securities at June 30, 2024. The weighted average yields were calculated by multiplying each carrying value by its yield and dividing the sum of these results by the total carrying values.


	Due in				Due				Due				Due
	One Year				After One to				After Five to				After
	or Less				Five Years				Ten Years				Ten Years				Total
(Dollars in Thousands)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Held to maturity securities:
U.S. government sponsored enterprise MBS	$	349	2.52	%	$	3,390	2.95	%	$	49,331	1.27	%	$	72,813	1.67	%	$	125,883	1.55	%
U.S. government sponsored enterprise CMO		—	—			938	2.70			—	—			2,775	1.97			3,713	2.16
U.S. SBA securities		—	—			—	—			—	—			455	5.85			455	5.85
Total investment securities - held to maturity	$	349	2.52	%	$	4,328	2.89	%	$	49,331	1.27	%	$	76,043	1.71	%	$	130,051	1.58	%

Available for sale securities:
U.S. government agency MBS	$	—	—	%	$	—	—	%	$	466	4.13	%	$	742	3.75	%	$	1,208	3.89	%
U.S. government sponsored enterprise MBS		—	—			—	—			499	6.50			54	7.44			553	6.59
Private issue CMO		—	—			—	—			88	6.17			—	—			88	6.17
Total investment securities - available for sale	$	—	—	%	$	—	—	%	$	1,053	5.42	%	$	796	4.00	%	$	1,849	4.81	%
Total investment securities	$	349	2.52	%	$	4,328	2.89	%	$	50,384	1.36	%	$	76,839	1.73	%	$	131,900	1.63	%

The actual maturity and yield for MBS and CMO may differ from the stated maturity and stated yield due to scheduled amortization, prepayments and acceleration of premium amortization or discount accretion.

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As of June 30, 2024	Unrealized Holding Losses				Unrealized Holding Losses				Unrealized Holding Losses
(In Thousands)	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Held to maturity
U.S. government sponsored enterprise MBS	$	—	$	—	$	105,530	$	15,481	$	105,530	$	15,481
U.S. government sponsored enterprise CMO		—		—		3,460		253		3,460		253
U.S. SBA securities		455	$	—		—		—		455		—
Total investment securities - held to maturity		455		—		108,990		15,734		109,445		15,734

Available for sale
U.S government agency MBS		91		—		1,117		14		1,208		14
U.S. government sponsored enterprise MBS		—		—		8		—		8		—
Private issue CMO		—		—		88		3		88		3
Total investment securities - available for sale		91		—		1,213		17		1,304		17
Total investment securities	$	546	$	—	$	110,203	$	15,751	$	110,749	$	15,751

The Bank evaluates individual investment securities quarterly for impairment based on ASC 326 since the adoption on July 1, 2023. At June 30, 2024, the Bank reported $15.8 million of unrealized holding losses, which were in a loss position for 12 months or more. The unrealized losses on investment securities were attributable to changes in interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities, which are predominately GSE securities that are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. Therefore, the Corporation has determined that the unrealized losses are due to the fluctuating nature of interest rates, and not related to any potential credit risks within the investment portfolio. The Bank does not currently intend to sell any investment securities classified as held to maturity or available for sale and as such, records the investment security at book value or fair market value as prescribed by accounting principles generally accepted in the U.S. ("U.S. GAAP."). As a part of the Bank’s monthly risk assessment, it runs a number of stressed liquidity scenarios to determine if it is more likely than not that the Bank will be required to sell the investment security before the recovery of its amortized costs basis. These liquidity scenarios support the Bank’s assessment that it has the ability to hold these held to maturity securities until maturity or available for sale securities until recovery of the amortized costs is realized and it is not more likely than not that the Bank will be required to sell the securities prior to recovery of the amortized costs. There were no ACL on investment securities held to maturity and there was no impairment on investment securities available for sale at the adoption date of ASC 326 on July 1, 2023 and at June 30, 2024.

At June 30, 2024 and 2023, the Corporation did not hold any investment securities held to maturity or investment securities available for sale with the intent to sell and determined it had the ability to hold these investment securities until maturity. As previously discussed, it also determined that it was more likely than not that the Bank would not be required to sell the securities prior to recovery of the amortized cost basis; therefore, no impairment losses were recorded on investment securities available for sale and investment securities held to maturity for the fiscal years ended June 30, 2024 and 2023.

Deposit Activities and Other Sources of Funds

General. Deposits 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. Borrowings through the FHLB – San

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Francisco, Federal Reserve Bank (“FRB”) of San Francisco and the correspondent bank may be used to compensate for declines in the availability of funds from other sources.

Deposit Accounts. Substantially all of the Bank’s depositors are residents of the State of California. Deposits are attracted from within the Bank’s market area by offering a broad selection of deposit instruments, including checking, savings, money market and time deposit accounts. 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 customers’ preferences and concerns. Generally, the Bank’s deposit rates are commensurate with 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 reviews its deposit composition and pricing on a weekly basis.

The Bank generally offers time deposits for terms not exceeding seven years. As illustrated in the following table, time deposits represented approximately 31% of the Bank’s deposit portfolio at June 30, 2024, compared to approximately 23% at June 30, 2023. The time deposits included $131.8 million and $106.4 million of brokered certificates of deposit at June 30, 2024 and 2023, respectively. At June 30, 2024, the Bank had related party deposits of approximately $6.3 million, compared to $8.1 million at June 30, 2023. For additional information, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.

The following table sets forth information concerning the Bank’s weighted average interest rate of deposits at June 30, 2024:


Weighted				Minimum			Percentage
Average			Amount		Balance		of Total
Interest Rate	Original Term	Deposit Account Type	(In Thousands)		(In Thousands)		Deposits

		Transaction accounts:
—%	N/A	Checking accounts – noninterest-bearing	$	—	$	95,627	10.77	%
0.04%	N/A	Checking accounts – interest-bearing	$	—		254,624	28.66
0.18%	N/A	Savings accounts	$	—		238,878	26.89
0.50%	N/A	Money market accounts	$	—		25,324	2.85

		Time deposits:
4.55%	30 days or less	Fixed-term, fixed rate	$	1		1,713	0.19
2.34%	31 to 90 days	Fixed-term, fixed rate	$	1		2,856	0.32
4.08%	91 to 180 days	Fixed-term, fixed rate	$	1		24,572	2.77
3.81%	181 to 365 days	Fixed-term, fixed rate	$	1		71,688	8.07
4.61%	Over 1 to 2 years	Fixed-term, fixed rate	$	1		144,636	16.28
0.65%	Over 2 to 3 years	Fixed-term, fixed rate	$	1		10,234	1.15
0.73%	Over 3 to 5 years	Fixed-term, fixed rate	$	1		15,182	1.71
0.84%	Over 5 to 10 years	Fixed-term, fixed rate	$	1		3,014	0.34
1.29%					$	888,348	100.00	%

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


	At June 30,
	2024						2023
			Percent						Percent
			of		Increase				of		Increase
(Dollars In Thousands)	Amount		Total		(Decrease)		Amount		Total		(Decrease)

Checking accounts – noninterest-bearing	$	95,627	10.77	%	$	(7,379)	$	103,006	10.84	%	$	(22,083)
Checking accounts – interest-bearing		254,624	28.66			(48,248)		302,872	31.86			(32,916)
Savings accounts		238,878	26.89			(51,326)		290,204	30.53			(43,377)
Money market accounts		25,324	2.85			(8,227)		33,551	3.53			(6,346)
Time deposits:⁽¹⁾
Fixed-term, fixed rate which mature:
Within one year		245,713	27.66			79,212		166,501	17.51			87,857
Over one to two years		19,604	2.21			(17,458)		37,062	3.90			16,462
Over two to five years		7,324	0.82			(8,245)		15,569	1.64			(5,059)
Over five years		1,254	0.14			(552)		1,806	0.19			529
Total⁽²⁾	$	888,348	100.00	%	$	(62,223)	$	950,571	100.00	%	$	(4,933)

(1)	Includes brokered certificates of deposit of $131.8 million and $106.4 million at June 30, 2024 and 2023, respectively.

(2)

Includes uninsured deposits of approximately $122.7 million and $140.1 million at June 30, 2024 and 2023, respectively. The amounts of uninsured deposits are based on estimated amounts of uninsured deposits as of the reported period. Such estimates are based on the same methodologies and assumptions used for regulatory reporting requirements.

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,
(Dollars In Thousands)	2024		2023

Below 1.00%	$	54,668	$	71,211
1.00 to 1.99%		6,190		12,409
2.00 to 2.99%		424		14,572
3.00 to 3.99%		6,447		13,445
4.00 to 4.99%		111,996		57,437
5.00 to 5.99%		94,170		51,864
Total	$	273,895	$	220,938

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Time Deposits by Remaining Maturity. The following table sets forth the aggregate dollar amount of time deposits at June 30, 2024, differentiated by interest rates and remaining maturity:


			Over One		Over Two		Over Three		After
	One Year		to		to		to		Four
(Dollars In Thousands)	or Less		Two Years		Three Years		Four Years		Years		Total

Below 1.00 %	$	33,130	$	13,204	$	3,628	$	1,896	$	2,810	$	54,668
1.00 to 1.99 %		4,837		1,109		151		—		93		6,190
2.00 to 2.99 %		356		68		—		—		—		424
3.00 to 3.99%		6,447		—		—		—		—		6,447
4.00 to 4.99%		111,773		223		—		—		—		111,996
5.00 to 5.99%		89,170		5,000		—		—		—		94,170
Total	$	245,713	$	19,604	$	3,779	$	1,896	$	2,903	$	273,895

Time Deposits Insurance Coverage by the FDIC. The following tables set forth the time deposit FDIC insurance coverage by account and remaining maturity at the dates indicated:


	At June 30, 2024
Maturity Period	Insured		Uninsured		Total
(In Thousands)
Three months or less	$	58,386	$	8,470	$	66,856
Over three to six months		72,995		8,576		81,571
Over six to twelve months		93,014		4,272		97,286
Over twelve months		25,715		2,467		28,182
Total	$	250,110	$	23,785	$	273,895


	At June 30, 2023
Maturity Period	Insured		Uninsured		Total
(In Thousands)
Three months or less	$	55,317	$	1,849	$	57,166
Over three to six months		52,583		4,292		56,875
Over six to twelve months		49,829		2,631		52,460
Over twelve months		49,669		4,768		54,437
Total	$	207,398	$	13,540	$	220,938

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


	At or For the Year Ended June 30,
(In Thousands)	2024		2023

Beginning balance	$	950,571	$	955,504

Net deposits before interest credited		(71,889)		(8,079)
Interest credited		9,666		3,146
Net (decrease) increase in deposits		(62,223)		(4,933)

Ending balance	$	888,348	$	950,571

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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) 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 served as the Bank’s primary borrowing source.

As of June 30, 2024, the FHLB – San Francisco borrowing capacity was limited to 40% of the Bank’s total assets, amounting to $516.0 million, as compared to $534.1 million at June 30, 2023. Advances from the FHLB – San Francisco are typically secured by the Bank’s single-family residential, multi-family and commercial real estate mortgage loans. Total mortgage loans pledged to the FHLB – San Francisco were $774.1 million at June 30, 2024 as compared to $967.6 million at June 30, 2023. In addition, the Bank pledged investment securities totaling $3.9 million and $4.2 million at June 30, 2024 and 2023, respectively, to collateralize its FHLB – San Francisco advances under the Securities-Backed Credit (“SBC”) facility. At June 30, 2024 and 2023, the Bank had $238.5 million and $235.0 million of outstanding borrowings from the FHLB – San Francisco with a weighted average interest rate of 4.88% and 4.34%, respectively. At June 30, 2024, the outstanding borrowings mature between 2024 and 2028 with a weighted average maturity of 13 months.

In addition to the total borrowings mentioned above, the Bank utilized its borrowing facility for letters of credit and credit enhancement for loans previously sold to the FHLB – San Francisco under the Mortgage Partnership Finance (“MPF”) program which have a recourse liability. The letters of credit are used to collateralize the local agency deposits. The outstanding letters of credit were $16.0 million and $11.0 million at June 30, 2024 and 2023; while the outstanding MPF credit enhancement was $216,000 at both June 30, 2024 and 2023.

As of June 30, 2024 and 2023, the remaining financing availability through the FHLB – San Francisco was $261.3 million and $287.9 million, with remaining available collateral of $367.4 million and $468.6 million, respectively.

As of June 30, 2024 and 2023, the Bank also had secured a discount window facility of $208.6 million and $139.0 million at the FRB of San Francisco, respectively. As of June 30, 2024, the Bank collateralized $126.6 million of investment securities and $178.6 million of loans held for investment. This compared to a total of $150.3 million of investment securities collateralized under the discount window facility at June 30, 2023. As of June 30, 2024 and 2023, there were no outstanding borrowings under the discount window facility at both dates.

At June 30, 2024 and 2023, the Bank also has a federal funds facility with its correspondent bank for $50.0 million, which matures annually on June 30th. As of June 30, 2024 and 2023, there were no outstanding borrowings under the federal funds facility with the correspondent bank at both dates.

As a member of the FHLB – San Francisco, the Bank is required to maintain a minimum investment in FHLB – San Francisco stock. The Bank held the required investment in stock at June 30, 2024 and 2023 of $9.6 million and $9.5 million with no excess investment, respectively.

During fiscal 2024 and 2023, the Bank purchased FHLB – San Francisco capital stock totaling $63,000 and $1.3 million, respectively, and did not redeem any of the capital stock during both periods. In fiscal 2024 and 2023, the FHLB – San Francisco distributed cash dividends to the Bank totaling $793,000 and $556,000, respectively.

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, 2024 and 2023.

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The Bank has three wholly owned subsidiaries: PFC, Profed Mortgage, Inc., and First Service Corporation. PFC’s current activities include: (i) acting as trustee for the Bank’s real estate transactions and (ii) holding real estate for investment, if any. Profed Mortgage, Inc and First Service Corporation are currently inactive. In fiscal 2024 and 2023, the Bank contributed capital of $0 and $10,000 to PFC, respectively. At June 30, 2024 and 2023, the Bank’s investment in all its combined subsidiaries totaled $8,000 and $13,000, respectively.

REGULATION

The following is a brief description of certain laws and regulations which are applicable to the Corporation and the Bank. The description of these laws and regulations, as well as descriptions of laws and regulations contained elsewhere herein, does not purport to be complete and is qualified in its entirety by reference to the applicable laws and regulations. Legislation is introduced from time to time in the United States Congress (“Congress”) that may affect the Corporation’s and the Bank’s operations. In addition, the regulations governing the Corporation and the Bank may be amended from time to time by the OCC, FDIC, FRB and SEC, as appropriate. Any such legislation or regulatory changes in the future could adversely affect the operations and financial condition of the Corporation and the Bank. The Bank cannot predict whether any such changes may occur.

General

The Bank, as a federally chartered savings institution, is subject to extensive regulation, examination and supervision by the OCC, as its primary federal regulator, and the FDIC, as its insurer of deposits. The Bank's relationship with its depositors and borrowers is regulated by federal consumer protection laws, which must be complied with by the Bank. The Bank is a member of the FHLB System and its deposits are insured up to applicable limits by the FDIC. The Bank must file reports with the OCC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the OCC to evaluate the Bank’s safety and soundness and compliance with various regulatory requirements. This regulatory structure establishes a comprehensive framework of activities in which the Bank may engage and is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate allowance for credit loss for regulatory purposes. Any change in such policies, whether by the OCC, the FRB, the FDIC or Congress, could have a material adverse impact on the Corporation and the Bank and their operations. The Corporation, as a savings and loan holding company, is required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of the FRB, its primary regulator. The Corporation is also subject to the rules and regulations of the SEC under the federal securities laws. For additional information, see “Savings and Loan Holding Company Regulations” below in this Form 10-K.

Set forth below is a brief description of material regulatory requirements that are applicable to the Bank and the Corporation. The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on the Bank and the Corporation.

Federal Regulation of Savings Institutions

Office of the Comptroller of the Currency. The OCC has extensive authority over the operations of federal savings institutions. As part of this authority, the Bank is required to file periodic reports with the OCC and is subject to periodic examinations by the OCC. The OCC also has extensive enforcement authority over all federal savings institutions, including the Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease-and-desist or removal orders and initiate prompt corrective action orders. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the OCC. Except under certain circumstances, public disclosure of final enforcement actions by the OCC is required by law.

All federal savings institutions must pay assessments to the OCC, 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 OCC annual assessments for the fiscal years ended June 30, 2024 and 2023 were $179,000 and $198,000, respectively.

The Bank's general permissible lending limit for loans to one borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus). The Bank’s limits on loans to one borrower or group of related borrowers at June 30, 2024 and 2023 were $20.1 million and $19.8 million, respectively. At June 30, 2024, the Bank’s largest lending relationship to a single borrower or group of borrowers consisted of four multi-family loans totaling $5.0 million, which were performing according to their original payment terms.

Effective July 1, 2019, the OCC issued a final rule implementing a section of the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”) which permits an eligible federal savings bank with assets of $20.0 billion or less as of December 31, 2017 to elect to operate with the business powers of a national bank, generally subject to the same limitations and restrictions, without converting to a national bank charter. A federal savings bank that makes the so-called “covered savings association” election must divest any activities or investments that are not permitted for a national bank. The Bank had not made such an election as of June 30, 2024.

Federal Home Loan Bank System. The Bank is a member of the FHLB – San Francisco, which is one of 11 regional FHLBs, each of which serves as a reserve or central bank for its members within its assigned region. The FHLB - San Francisco is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans or advances to members in accordance with policies and procedures, established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB - San Francisco. At June 30, 2024 and 2023, the Bank had $238.5 million and $235.0 million of outstanding advances, respectively, from the FHLB – San Francisco with a remaining available credit facility of $261.3 million and $287.9 million, respectively, based on 40% of total assets for both dates, which is limited to available collateral. For additional information, see “Business – Deposit Activities and Other Sources of Funds – Borrowings” above in this Form 10-K.

As a member of the FHLB - San Francisco, the Bank is required to purchase and maintain stock in the FHLB – San Francisco. At June 30, 2024 and 2023, the Bank held $9.6 million and $9.5 million of FHLB - San Francisco stock, respectively, which were in compliance with this membership requirement. During fiscal 2024 and 2023, the Bank was required to purchase $63,000 and $1.3 million of FHLB – San Francisco capital stock, respectively, and the Bank did not redeem any capital stock during both periods. In fiscal 2024 and 2023, the FHLB – San Francisco distributed cash dividends to the Bank totaling $793,000 and $556,000, respectively. There is no guarantee in the future that the FHLB – San Francisco will pay cash dividends or redeem excess capital stock held by its members.

Under federal law, the FHLB - San Francisco is required 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 have in the past adversely affected the level of dividends paid by the FHLB - San Francisco and could continue to do so in the future. These contributions also could have an adverse effect on the value of FHLB - San Francisco stock in the future. A reduction in value of the Bank’s FHLB - San Francisco stock may result in a corresponding reduction in the Bank’s capital.

Insurance of Accounts and Regulation by the FDIC. The Deposit Insurance Fund (“DIF”) of the FDIC insures deposits up to $250,000 per account owner as defined by the FDIC, backed by the full faith and credit of the United States. As an insurer, the FDIC imposes deposit insurance premiums in the form of assessments to maintain the DIF and is authorized to conduct examinations of and to require reporting by FDIC insured institutions. On October 18, 2022, the FDIC adopted a final rule to increase its initial base insurance assessment rate schedules by two basis points to improve the likelihood that the reserve ratio of the DIF would be restored to at least 1.35% by September 30, 2028. The revised assessment rate schedules became effective January 1, 2023, with the first invoice payment date of June 30, 2023 for the assessment period of January 1, 2023 through March 31, 2023. The Bank’s FDIC annual assessments for the fiscal years ended June 30, 2024 and 2023 were $601,000 and $459,000, respectively.

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Under the FDIC’s risk-based assessment system, institutions deemed less likely to fail pay lower assessments. Assessments for institutions of less than $10 billion in assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years.

The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank. We cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an 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. We do not know of any practice, condition or violation that may lead to termination of the Bank’s deposit insurance.

Qualified Thrift Lender Test. Like all savings institutions (subject to a narrow exception not applicable to the Bank), the Bank is required to meet a qualified thrift lender (“QTL”) test to avoid certain restrictions on its operations. This test requires a savings institution to have at least 65% of its total assets as defined by regulation, in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis. As an alternative, a savings institution may maintain 60% of its assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code of 1986 (“Code”), as amended. Under either test, such assets primarily consist of residential housing related loans and investments.

Any savings institution that fails to meet the QTL test is subject to certain operating restrictions and may be required to convert to a national bank charter, and a savings and loan holding company of such an institution may become regulated as a bank holding company. As of June 30, 2024 and 2023, the Bank maintained 92.3% and 92.1% of its portfolio assets in qualified thrift investments, respectively, and therefore, met the qualified thrift lender test at both dates. During fiscal 2024 and 2023, the Bank was in compliance with the QTL test as of each month end.

Capital Requirements. Federally insured savings institutions, such as the Bank, are required by the OCC to maintain minimum levels of regulatory capital, including a Tier 1 capital to adjusted average assets leverage ratio, a common equity Tier 1 (“CET1”) to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio and a total capital to risk-based assets ratio. The capital standards require the maintenance of the following minimum capital ratios: (i) a Tier 1 leverage ratio of 4%, (ii) a CET1 capital ratio of 4.5%; (iii) a Tier 1 capital ratio of 6%; and (iv) a total capital ratio of 8%.

Mortgage servicing assets and deferred tax assets over designated percentages of CET1 are also deducted from capital. In addition, Tier 1 capital includes accumulated other comprehensive income, which includes all unrealized gains and losses on available for sale debt securities and interest-only strips. Because of the Bank’s asset size, the Bank was given a one-time option to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt securities and interest-only strips in its capital calculations. The Bank elected to exercise this option to opt-out in order to reduce the impact of market volatility on its regulatory capital levels.

The Bank also must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. If the Bank does not have the ability to pay dividends to the Corporation, the Corporation may be limited in its ability to pay dividends to its stockholders.

In order to be considered well-capitalized under the prompt corrective action regulations, the Bank must maintain a minimum Tier 1 leverage capital ratio of 5%, a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8% and a total risk-based capital ratio of 10% and the Bank must not be subject to certain mandates by the OCC requiring it as an individual institution to meet any specified capital level.

EGRRCPA required the federal banking agencies, including the OCC, to establish a “community bank leverage ratio” of between 8% and 10% for institutions with assets of less than $10.0 billion. Institutions with a capital level at or exceeding the ratio and otherwise meeting the specified requirements, and electing the alternative framework, are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements. Final rules issued by the agencies established the community bank leverage ratio at 9% of Tier 1 capital to adjusted average assets, effective January 1, 2020. A qualifying institution may opt in or out of the community bank leverage ratio framework on its quarterly Call Report. An institution that temporarily ceases to meet any qualifying criteria is provided with a two quarter grace

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period to regain compliance. Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable regulatory capital requirements. The Corporation did not opt in to the community bank leverage ratio framework for the year ended June 30, 2024.

The FASB has issued a new accounting standard, ASC 326, for U.S. GAAP that was adopted by the Corporation on July 1, 2023. This standard, referred to as Current Expected Credit Loss or CECL requires all entities holding leases that are not accounted for at fair value to recognize credit losses expected over the life of certain financial assets. CECL covers a broader range of assets than the previous method of recognizing credit losses and generally results in earlier recognition of credit losses. Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL. For a banking organization, implementation of CECL is generally likely to reduce retained earnings, and to affect other items, in a manner that reduces its regulatory capital. The federal banking regulators (the FRB, the OCC and the FDIC) have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital. The Bank elected to recognize the full $824,000 adjustment to retained earnings resulting from the adoption of CECL on July 1, 2023, instead of over the permitted three-year phase-in option.

Prompt Corrective Action. An institution is considered adequately capitalized if it meets the minimum capital ratios described above. The OCC is required to take certain supervisory actions against undercapitalized savings institutions, the severity of which depends upon the institution's degree of undercapitalization. Subject to a narrow exception, the OCC is required to appoint a receiver or conservator for a savings institution that is "critically undercapitalized." OCC regulations also require that a capital restoration plan be filed with the OCC within 45 days of the date a savings institution receives notice that it is "undercapitalized," "significantly undercapitalized" or "critically undercapitalized." Numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. In addition, “significantly undercapitalized” and “critically undercapitalized” institutions are subject to even more extensive mandatory regulatory actions. The OCC also may take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors.

As of June 30, 2024, the most recent notification from the OCC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. See Note 9 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Limitations on Capital Distributions. OCC regulations impose various restrictions on savings institutions and on their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account. Generally, savings institutions, such as the Bank, that before and after the proposed distribution are well-capitalized, may make capital distributions during any calendar year up to 100% of net income for the year-to-date plus retained net income for the two preceding years, without regulatory approval. However, an institution deemed to be in need of more than normal supervision or in troubled condition by the OCC may have its dividend authority restricted by the OCC. If the Bank, however, proposes to make a capital distribution when it does not meet its capital requirements (or will not following the proposed capital distribution) or that will exceed these net income-based limitations, it must obtain the OCC's approval prior to making such distribution. In addition, the Bank must file a prior written notice of a dividend with the FRB. The FRB or the OCC may object to a capital distribution based on safety and soundness concerns. Further restrictions on Bank’s dividends may apply if the Bank fails the QTL test. In addition, as noted above, if the Bank does not have the required capital conservation buffer, its ability to pay dividends to the Corporation will be limited, which may limit the ability of the Corporation to pay dividends to its stockholders.

Activities of Savings 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 savings institution controls, the savings institution must file a notice or application with the OCC and in certain circumstances with the FDIC and receive regulatory approval or non-objection. Savings institutions also must conduct the activities of subsidiaries in accordance with existing regulations and orders. With respect to subsidiaries generally, the OCC may determine that investment by a savings institution in, or the activities of, a subsidiary must be restricted or eliminated based on safety and soundness or legal reasons.

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Transactions with Affiliates. The Bank’s authority to engage in transactions with “affiliates” is limited by Sections 23A and 23B of the Federal Reserve Act as implemented by the FRB’s Regulation W. The term “affiliates” for these purposes generally mean any company that controls or is under common control with an institution except subsidiaries of the institution. The Corporation and its non-savings institution subsidiaries are affiliates of the Bank. In general, transactions with affiliates must be on terms that are as favorable to the institution as comparable transactions with non-affiliates. In addition, certain types of transactions are restricted to an aggregate percentage of the institution’s capital. Institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary. FDIC-insured institutions are subject, with certain exceptions, to certain restrictions on extensions of credit to their parent holding companies or other affiliates, on investments in the stock or other securities of affiliates and on the taking of such stock or securities as collateral from any borrower. Collateral in specified amounts must be provided by affiliates in order to receive loans from an institution. In addition, these institutions are prohibited from engaging in certain tying arrangements in connection with any extension of credit or the providing of any property or service.

Community Reinvestment Act. Under the Community Reinvestment Act of 1977 (“CRA”), every FDIC-insured institution has a continuing and affirmative obligation consistent with safe and sound banking practices to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA requires that the OCC assess the Bank's record in meeting the credit needs of the communities it serves, especially low and moderate income neighborhoods. While CRA modernization is underway and scheduled for implementation by 2026, the current evaluation system focuses on three tests: (1) a lending test, to evaluate the institution's record of making loans in its assessment areas; (2) an investment test, to evaluate the institution's record of investing in community development projects, affordable housing and programs benefiting low or moderate income individuals and businesses; and (3) a service test, to evaluate the institution's delivery of banking services through its branches, ATM centers and other offices. Institutions are assigned a rating of "outstanding," "satisfactory," "needs to improve," or "substantial non-compliance." The Bank received a rating of satisfactory when it was last examined for CRA compliance.

On October 24, 2023, the federal banking agencies, including the OCC, issued a final rule designed to strengthen and modernize regulations implementing the CRA. The changes are designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type. The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. The Bank cannot predict the impact the changes to the CRA will have on its operations at this time.

Anti-Money Laundering and Customer Identification. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) was signed into law on October 26, 2001. The USA Patriot Act and the Bank Secrecy Act requires financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts, and, effective in 2018, the beneficial owners of accounts. Bank regulators are directed to consider a holding company’s effectiveness in combating money laundering when reviewing mergers and acquisitions.

Regulatory and Criminal Enforcement Provisions. The OCC has primary enforcement responsibility over federally chartered savings institutions and has the authority to bring action against all “institution-affiliated parties,” including stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease-and-desist order to removal of officers or directors, receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide range of violations and can be nearly $2.0 million per day per violation in especially egregious cases. The FDIC has the authority to recommend to the OCC that enforcement action be taken with respect to a particular savings institution. If the OCC does not take action, the FDIC has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations.

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Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted interagency guidelines prescribing standards for safety and soundness. 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 OCC determines that a savings institution fails to meet any standard prescribed by the guidelines, the OCC may require the institution to submit an acceptable plan to achieve compliance with the standard.

Federal Reserve System. The FRB requires that all depository institutions maintain reserves on transaction accounts or non-personal time deposits. These reserves may be in the form of cash or noninterest-bearing deposits with the regional FRB. Interest-bearing checking accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any non-personal time deposits at a bank. Effective March 26, 2020, the FRB reduced reserve requirement ratios to 0%, which eliminated reserve requirements for all depository institutions.

Environmental Issues Associated with Real Estate Lending. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), is a federal statute, that generally imposes strict liability on all prior and present "owners and operators" of sites containing hazardous waste. However, Congress acted to protect secured creditors by providing that the term "owner and operator" excludes a person whose ownership is limited to protecting its security interest in the site. Since the enactment of the CERCLA, this “secured creditor exemption” has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan.

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

Privacy and Cybersecurity Regulations. Federal regulations generally require that the Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter. In addition, the Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes. In addition, the California Consumer Privacy Act of 2018 (the "CCPA"), which became effective on January 1, 2020, gives California residents the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of personal information, and the right not to be discriminated against for exercising these rights. The CCPA also created a private right of action with statutory damages for data security breaches, thereby increasing potential liability associated with a data breach, which has triggered a number of class actions against other companies since January 1, 2020. Although the Bank may enjoy several fairly broad exemptions from the CCPA's privacy requirements, those exemptions do not extend to the private right of action for a data security breach. The CCPA, including any amendments thereto or final regulations implemented thereunder, as well as other similar state data privacy laws and regulations, may require the establishment by the Bank of certain regulatory compliance and risk management controls. In addition, on November 18, 2021, the federal banking agencies announced the adoption of a final rule providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents. Specifically, the new rule requires a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours. Compliance with the new rule was required by May 1, 2022.

In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance. The new rules require registrants to disclose on Form 8-K any cybersecurity incident they determine to be material and to describe the material aspects of the incident's nature, scope, and timing, as well as its material impact or

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reasonably likely material impact on the registrant. The Corporation provided disclosures on its cybersecurity risk management and governance on this Form 10-K for fiscal years ended June 20, 2024 (See Part I, Item 1C - Cybersecurity).

Non-compliance with federal or similar state privacy and cybersecurity laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm. The Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations.

Other Consumer Protection Laws and Regulations. The Consumer Financial Protection Bureau (“CFPB”) exercises broad regulatory, supervisory and enforcement authority with respect to both new and existing consumer financial protection laws. The Bank is subject to consumer protection regulations issued by the CFPB, but as a financial institution with assets of less than $10.0 billion in assets, the Bank is generally subject to supervision and enforcement by the OCC with respect to compliance with consumer financial protection laws and CFPB regulations.

The Bank is subject to a broad array of federal and state consumer protection laws and regulations that govern almost every aspect of its business relationships with consumers. While not exhaustive, these laws and regulations include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans and providing other services. Failure to comply with these laws and regulations can subject the Bank to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages and the loss of certain contractual rights.

Savings and Loan Holding Company Regulation

General. The Corporation is a unitary savings and loan holding company, subject to the regulatory oversight of the FRB. Accordingly, the Corporation is required to register and file reports with the FRB and is subject to regulation and examination by the FRB. In addition, the FRB has enforcement authority over the Corporation and its non-savings institution subsidiaries, which also permits the FRB to restrict or prohibit activities that are determined to present a serious risk to the Bank. The FRB has promulgated regulations implementing the “source of strength” doctrine that require holding companies, including savings and loan holding companies, to act as a source of financial and managerial strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress. These and other FRB policies, as well as the capital conservation buffer may restrict the Corporation’s ability to pay dividends.

Capital Requirements. For a savings and loan holding company with less than $3.0 billion in consolidated assets that qualifies as a small bank holding company under the FRB’s Small Bank Holding Company Policy Statement, such as the Corporation, the capital regulations apply to its savings institution subsidiaries, but not the Corporation, unless the FRB determines otherwise in particular cases. For a description of the capital regulations, see “Federal Regulation of Savings Institutions - Capital Requirements” above.

Activities Restrictions. The Gramm-Leach-Bliley Act of 1999 (“GLBA”) provides that no company may acquire control of a savings association after May 4, 1999 unless it engages only in the financial activities permitted for financial holding companies under the law or for multiple savings and loan holding companies. The GLBA also specifies, subject to a grandfather provision, that existing savings and loan holding companies may only engage in such activities. The Corporation qualifies for the grandfathering and is therefore not restricted in terms of its activities. Upon any non-supervisory acquisition by the Corporation of another savings association as a separate subsidiary, the Corporation would become a multiple savings and loan holding company and would be limited to those activities permitted by FRB regulation. Multiple savings and loan holding companies may engage in activities permitted for financial holding companies, and certain other activities including acting as a trustee under a deed of trust and real estate investments.

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If the Bank were to fail the QTL test, the Corporation must, within one year of that failure, register as, and become subject to the restrictions applicable to bank holding companies. For additional information, see “Federal Regulation of Savings Institutions – Qualified Thrift Lender Test” in this Form 10-K.

Mergers and Acquisitions. The Corporation must obtain approval from the FRB before acquiring more than 5% of the voting stock of another savings institution or savings and loan holding company or acquiring such an institution or holding company by merger, consolidation or purchase of its assets. In evaluating an application for the Corporation to acquire control of a savings institution, the FRB would consider the financial and managerial resources and future prospects of the Corporation and the target institution, the effect of the acquisition on the risk to the DIF, the convenience and the needs of the community, including performance under the CRA and competitive factors.

The FRB may not approve any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions; (i) supervisory acquisitions and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Acquisition of the Corporation. Any company, except a bank holding company, that acquires control of a savings association or savings and loan holding company becomes a “savings and loan holding company” subject to registration, examination and regulation by the FRB and must obtain the prior approval of the FRB under the Savings and Loan Holding Company Act before obtaining control of a savings association or savings and loan holding company. A bank holding company must obtain the prior approval of the FRB under the Bank Holding Company Act before obtaining control or more than 5% of a class of voting stock of a savings association or savings and loan holding company and remains subject to regulation under the Bank Holding Company Act. The term “company” includes corporations, partnerships, associations, and certain trusts and other entities. “Control” of a savings association or savings and loan holding company is deemed to exist if a company has voting control, directly or indirectly of more than 25% of any class of the savings association’s voting stock or controls in any manner the election of a majority of the directors of the savings association or savings and loan holding company, and may be presumed under other circumstances, including, but not limited to, holding in certain cases 10% or more of a class of voting securities. Control may be direct or indirect and may occur through acting in concert with one or more other persons. In addition, a savings and loan holding company must obtain FRB approval prior to acquiring voting control of more than 5% of any class of voting stock of another savings association or another savings association holding company. A similar provision limiting the acquisition by a bank holding company of 5% or more of a class of voting stock of any company is included in the Bank Holding Company Act.

Accordingly, the prior approval of the FRB would be required:

●

before any savings and loan holding company or bank holding company could acquire 5% or more of the common stock of the Corporation; and

●

before any other company could acquire 25% or more of the common stock of the Corporation, and may be required for an acquisition of as little as 10% of such stock.

In addition, persons that are not companies are subject to the same or similar definitions of control with respect to savings and loan holding companies and savings associations and requirements for prior regulatory approval by the FRB in the case of control of a savings and loan holding company or by the OCC in the case of control of a savings association not obtained through control of a holding company of such savings association.

Federal Securities Laws. Provident Financial Holdings, Inc.’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Corporation is subject to information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

Dividends and Stock Repurchases. The FRB’s policy statement on the payment of cash dividends applicable to savings and loan holding companies expresses its view that a savings and loan holding company must maintain an adequate capital position and generally should not pay cash dividends unless the company’s net income for the past year is sufficient to fully fund the cash dividends and that the prospective rate of earnings appears consistent with the company’s capital needs, asset quality, and overall financial condition. The FRB policy statement also indicates that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends.

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In addition, a savings and loan holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of its consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order or any condition imposed by, or written agreement with, the FRB. As discussed above, the capital conservation buffer requirements may also limit or preclude dividends payable by the Corporation.

TAXATION

Federal Taxation

General. The Corporation reports its income on a fiscal year basis using the accrual method of accounting and is 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 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 is 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, 2024, 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. Currently, the Bank uses the specific charge-off method to account for bad debt deductions for income tax purposes.

Distributions. In the event that the Bank makes “non-dividend distributions” to Provident that are considered as made from the reserve for losses on qualifying real estate 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 Provident 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. For additional information, see "Regulation - Federal Regulation of Savings Institutions - Limitations on Capital Distributions” in this Form 10-K 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 2024, the Bank declared and paid $7.0 million of cash dividends to Provident, while Provident declared and paid $3.9 million of cash dividends to shareholders.

Excise Tax on Stock Repurchases. The Inflation Reduction Act of 2022 imposed a one percent excise tax on the value of corporate share repurchases (net of issuance). On December 27, 2022, the Internal Revenue Services issued Note 2023-2 which provides interim guidance on the implementation of the excise tax on stock repurchases. The excise tax is a non-deductible tax of one percent of the fair market value of the Corporation’s stock repurchases, net of restricted stock distributions, stock option exercises, ESOP repurchases and contributions and other qualified activities, occurring after December 31, 2022 in excess of $1.0 million. The excise tax on the stock repurchases in fiscal 2024 was $26,000.

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Tax Effect from Stock-Based Compensation. During fiscal 2024, there were no shares of restricted common stock vested and distributed to employees but there were 2,000 shares of restricted stock distributed to non-employee members of the Corporation’s Board of Directors. Also, there were no non-qualified stock options exercised and no incentive stock options exercised as disqualifying dispositions, but there were 39,220 shares of non-qualified stock options that expired and/or were forfeited and 3,350 shares of restricted stock that were forfeited. As a result, there was a $38,000 adjustment to federal tax expense from stock-based compensation in fiscal 2024.

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. Also, the Internal Revenue Service completed a review of the Corporation’s income tax returns for fiscal 2006 and 2007; and the California Franchise Tax Board completed a review of the Corporation’s income tax returns for fiscal 2009 and 2010. Fiscal 2022 and fiscal years thereafter remain subject to federal examination, while the California state tax returns for fiscal 2021 and fiscal years thereafter are subject to examination by state taxing authorities.

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 Corporation). At June 30, 2024, the Corporation’s net state tax rate was 8.5%. 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. There was $22,000 adjustment to state tax expense from stock-based compensation in fiscal 2024.

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. During fiscal 2024, the Corporation paid franchise taxes of $200,000.

Employees and Human Capital

As of June 30, 2024, the Bank had 160 full-time equivalent employees, which consisted of 94 full-time, 66 prime-time and no part-time employees. The employees are not represented by a collective bargaining unit and management believes that its relationship with employees is good.

To facilitate talent attraction and retention, we strive to make the Bank an inclusive, safe and healthy workplace, with opportunities for our employees to grow and develop in their careers, supported by market-based compensation, benefits, health and welfare programs. At June 30, 2024, approximately 73.0% of our workforce was female and 27.0% male, and our average employee tenure was approximately 8.3 years, down slightly from an average employee tenure of 8.5 years at June 30, 2023. The ethnicity of our workforce was 40.5% White, 42.2% Hispanic or Latino, 6.5% African American or Black, 6.0% Asian, 2.7% two or more races, 0.5% American Indian or Alaskan Native and 1.6% Not Specified. As part of our compensation philosophy, we offer and maintain market competitive compensation programs for our employees in order to attract and retain superior talent. In addition to strong base wages, additional programs include quarterly or annual bonus opportunities, an Employee Stock Ownership Plan, a Corporation-matched 401(k) Plan, healthcare and insurance benefits, flexible spending accounts, accrued vacation and sick time, family leave, and an employee assistance program.

The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety, and wellness of our employees. In support of our commitment, we provide our employees and their families with access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health by providing tools and resources to help them improve or maintain their health status; and that offer choice, where possible, so they can customize their benefits to meet their needs and the needs of their families.

A core value of our talent management approach is to both develop talent from within and supplement with external hires. This approach has yielded loyalty and dedication in our employee base which in turn grows our business, our commitment to our communities, and our customers, while adding new employees and external ideas supports a continuous

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improvement mindset. We believe that our average employee tenure of over eight years reflects the engagement of our employees in this talent management philosophy. Turnover for employees, as measured by terminated employees to the average total employees, was 23.3% in fiscal 2024, down from 41.4% in fiscal 2023.

EXECUTIVE OFFICERS

The following table sets forth information with respect to the executive officers of the Provident and the Bank:


		Position
Name	Age⁽¹⁾	Provident	Bank

Donavon P. Ternes	64	President and	President and
		Chief Executive Officer	Chief Executive Officer

Tam B. Nguyen	46	Senior Vice President and	Senior Vice President and
		Chief Financial Officer	Chief Financial Officer
		Corporate Secretary	Corporate Secretary

Robert "Scott" Ritter	55	—	Senior Vice President
			Single-Family Division

David S. Weiant	65	—	Senior Vice President
			Chief Lending Officer

Gwendolyn L. Wertz	58	—	Senior Vice President
			Retail Banking Division

(1)	As of June 30, 2024.

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.

Tam B. Nguyen was appointed Senior Vice President, Chief Financial Officer and Corporate Secretary of Provident and the Bank effective January 2, 2024. Ms. Nguyen's previous position was Vice President, Chief Accounting Officer, and Controller of the Bank since September 2022. Prior to that, Ms. Nguyen served the Bank as Vice President and Controller from her first employment date in October 2016 to September 2022. Ms. Nguyen’s professional designations include Certified Public Accountant, Chartered Global Management Accountant, and Certified Management Accountant. Her educational background includes a Master of Business Administration from California State University, San Marcos, and a Bachelor of Arts in Economics and a Bachelor of Science in Biochemistry/Cell Biology both from the University of California, San Diego. Ms. Nguyen is also a member of the American Institute of Certified Public Accountants, the Institute of Management Accountants, and the Financial Managers Society.

Robert "Scott" Ritter joined the Bank as Senior Vice President on September 26, 2016 and currently oversees the single-family mortgage operations. Prior to joining the Bank, Mr. Ritter was the Chief Operating Officer at California Mortgage Advisors since November 2011 where he was responsible for overseeing all of California Mortgage Advisors' operations, including product development, underwriting, loan processing and information technology. Prior to that, he held positions with increasing responsibilities at mortgage banking firms such as Green Point Financial and its predecessor Headlands Mortgage Company, among others.

Donavon P. Ternes was appointed President and Chief Executive Officer of Provident and the Bank effective January 2, 2024. Donavon P. Ternes joined Provident and the Bank as Senior Vice President and Chief Financial Officer on November 1, 2000 and was appointed Secretary in April 2003. Effective January 1, 2008, Mr. Ternes was appointed Executive Vice President and Chief Operating Officer, while continuing to serve as the Chief Financial Officer and Corporate Secretary

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of Provident and the Bank. Effective June 27, 2011, the Boards of Directors of Provident and the promoted Mr. Ternes to serve as President of Provident and the Bank, while continuing to serve as Chief Operating Officer, Chief Financial Officer and Corporate Secretary. Prior to joining the Bank, Mr. Ternes was the President, Chief Executive Officer, Chief Financial Officer and Director of Mission Savings and Loan Association, located in Riverside, California, holding those positions for over 11 years.

David S. Weiant joined the Bank as Senior Vice President and Chief Lending Officer on June 29, 2007. Prior to joining the Bank, Mr. Weiant was a Senior Vice President of Professional Business Bank (June 2006 to June 2007) where he was responsible for commercial lending in the Los Angeles and Inland Empire regions of Southern California.

Gwendolyn L. Wertz joined the Bank as Senior Vice President of Retail Banking on February 3, 2014. Prior to joining the Bank, Ms. Wertz was with CommerceWest Bank where she was responsible for the management of commercial banking activities, treasury management and specialty banking. Prior to that she was with Opportunity Bank, N.A. where she was responsible for the commercial treasury sales and service team. Ms. Wertz has more than 35 years of experience with financial institutions including the last 20 years in senior management roles. Her experience includes depository growth initiatives, operations, compliance and deposit acquisition management.

Item 1A. Risk Factors

We assume and manage a certain degree of risk in order to conduct our business. In addition to the risk factors described below, other risks and uncertainties not specifically mentioned, or that are currently known to, or deemed by, management to be immaterial also may materially and adversely affect our financial position, results of operation and/or cash flows. Before making an investment decision, you should carefully consider the risks described below together with all of the other information included in this Form 10-K. If any of the circumstances described in the following risk factors actually occur, the value of our common stock could decline and you could lose all or part of your investment.

Risks Related to Macroeconomic Conditions

Our business may be adversely affected by downturns in the national economy and the regional economies on which we depend.

As of June 30, 2024, approximately 66% of our real estate loans were secured by collateral and made to borrowers located in Southern California with the balance located predominantly throughout the rest of California. A return of recessionary conditions or adverse economic conditions in California may reduce our rate of growth, affect our customers' ability to repay loans and adversely impact our capital, liquidity, financial condition and earnings. General economic conditions, including inflation, unemployment and money supply fluctuations, may also adversely affect our profitability. Weakness in the global economy and global supply chain issues have adversely affected many businesses operating in our markets that are dependent upon international trade. Changes in agreements or relationships between the United States and other countries may also affect these businesses.

A deterioration in economic conditions in our market areas could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations:

●an increase in loan delinquencies, problem assets and foreclosures;

●an increase in our ACL;

●the slowing of sales of foreclosed assets;

●a decline in demand for our products and services;

●

a decline in the value of collateral for loans may in turn reduce customers' borrowing power, and the value of assets and collateral associated with existing loans;

●the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and

●a decrease in the amount of our low cost or noninterest-bearing deposits.

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A decline in California economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse. Many of the loans in our portfolio are secured by real estate. Deterioration in the real estate markets where collateral for a mortgage loan is located could negatively affect the borrower’s ability to repay the loan and the value of the collateral securing the loan. Real estate values are affected by various other factors, including changes in general or regional economic conditions, governmental rules or policies and natural disasters such as fires, droughts and earthquakes. If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected.

External economic factors, such as changes in monetary policy and inflation and deflation, may have an adverse effect on our business, financial condition and results of operations.

Our financial condition and results of operations are affected by credit policies of monetary authorities, particularly the FRB. Actions by monetary and fiscal authorities, including the FRB, could lead to inflation, deflation, or other economic phenomena that could adversely affect our financial performance. Inflation has risen sharply since the end of 2021 and, while dissipating, remains elevated. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Corporation to increase, which could adversely affect our results of operations and financial condition. Virtually all of our assets and liabilities are monetary in nature. As a result, interest rates tend to have a more significant impact on our performance than general levels of inflation or deflation. Interest rates do not necessarily move in the same direction or by the same magnitude as the prices of goods and services.

Risks Related to our Lending Activities

Our business may be adversely affected by credit risk associated with residential property.

At June 30, 2024, $518.1 million, or 49% of our loans held for investment, were secured by single-family residential real property. This type of lending is generally sensitive to regional and local economic conditions that may significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. Jumbo single-family loans which do not conform to secondary market mortgage requirements for our market areas are not immediately saleable in the secondary market and may expose us to increased risk because of their larger balances. Higher market interest rates, recessionary conditions or declines in the volume of single-family real estate sales and/or the sales prices as well as elevated unemployment rates, may result in higher than expected loan delinquencies or problem assets, and a decline in demand for our products and services. These potential negative events may cause us to incur losses, adversely affect our capital and liquidity and damage our financial condition and business operations.

A few of our legacy residential mortgage loans are secured by properties in which the borrowers have little or no equity because either we originated a first mortgage with an 80% loan-to-value ratio and a concurrent second mortgage for a combined loan-to-value ratio of up to 100% or because of a decline in home values in our market areas. Residential loans with high loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses.

Our multi-family and commercial real estate loans involve higher principal amounts than other loans and repayment of these loans may be dependent on factors outside our control or the control of our borrowers.

We originate multi-family and commercial real estate loans for individuals and businesses for various purposes, which are secured by residential and non-residential properties. At June 30, 2024, we had $528.5 million or 50% of total loans held for investment in multi-family and commercial real estate loans. These loans typically involve higher principal amounts than other types of loans and some of our commercial borrowers have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a single-family residential loan. Repayment on these loans typically is dependent upon income generated, or expected to be generated, by the property securing the loan

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in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions. For example, if the cash flow from the borrower's project is reduced as a result of leases not being obtained or renewed, the borrower's ability to repay the loan may be impaired. Multi-family and commercial real estate loans also expose a lender to greater credit risk than loans secured by single-family residential real estate because the collateral securing these loans typically cannot be sold as easily as single-family residential real estate. In addition, many of our multi-family and commercial real estate loans are not fully amortizing and contain large balloon payments upon maturity, which would require the borrower to either sell or refinance the underlying property to make the balloon payment at maturity, thus increasing the risk of default or non-payment.

A secondary market for many types of multi-family and commercial real estate loans is not readily liquid, so we have less opportunity to mitigate credit risk by selling part or all of our interest in these loans. As a result of these characteristics, if we foreclose on a multi-family or commercial real estate loan, our holding period for the collateral typically is longer than for a single-family residential mortgage loan because there are fewer potential purchasers of the collateral. Accordingly, charge-offs on multi-family and commercial real estate loans may be larger on a per loan basis than those incurred within the single-family residential loan portfolio.

We occasionally purchase loans in bulk or “pools.” We may experience lower yields or losses on loan “pools” because the assumptions we use when purchasing loans in bulk may not prove correct.

In order to achieve our loan growth objectives and/or improve earnings, we may purchase loans, either individually, through participations, or in bulk. We did not purchase any loans in fiscal 2024 and 2023. When we determine the purchase price we are willing to pay to purchase loans in bulk, management makes certain assumptions about, among other things, how fast borrowers will prepay their loans, the real estate market, our ability to collect on loans successfully and, if necessary, our ability to dispose of any real estate that may be acquired through foreclosure. In addition, when we purchase loans, we perform certain due diligence procedures and typically require customary limited indemnities. To the extent that our underlying assumptions prove to be inaccurate or the basis for those assumptions change, the purchase price paid for “pools” of loans may prove to have been excessive, resulting in a lower yield or a loss of some or all of the loan principal. For example, if we purchase pools of loans at a premium and some of the loans are prepaid before we modeled, we will earn less interest income on the purchase than expected. Our success in growing our loan portfolio through purchases of loan “pools” depends on our ability to price loan “pools” properly and on the general economic conditions within the geographic areas where the underlying properties of the purchased loans are located.

Acquiring loans through bulk purchases may involve acquiring loans of a type or in geographic areas where management may not have substantial prior experience. We may be exposed to a greater risk of loss to the extent that bulk purchases contain such loans.

Our allowance for credit losses may not be sufficient to absorb losses in our loan portfolio.

Our business relies significantly on the creditworthiness of our customers. To account for potential defaults and nonperformance in our loan portfolio, we maintain an ACL on loans using the CECL methodology. This allowance represents management's best estimate of the lifetime expected credit losses in our loan portfolio. The amount of this allowance is determined by management through periodic reviews and consideration of several factors, including, but not limited to:

●

our collective allowance, for loans evaluated on a pool basis with similar risk characteristics based on our and peer life of loan historical loss experience, certain qualitative factors consisting of macroeconomic conditions and external factors as regulatory requirements, and reasonable and supportable forecasts relating to management’s expectations of future events; and

●

our individual allowance, for evaluation of individual loans that do not share similar risk characteristics based on the present value of the expected future cash flows or the fair value of the underlying collateral.

The determination of the appropriate ACL involves a significant degree of subjectivity, relying on substantial estimates of both current credit risks and future trends, all of which are subject to potential material changes. Inaccuracies in our estimations could lead to an insufficient ACL, necessitating increases through provisions for credit losses, adversely impacting our recorded income.

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Further, included in our single-family residential loan portfolio, which comprised 49% of our total loan portfolio at June 30, 2024, were $17.7 million or 2% of total loans held for investment that were non-traditional single-family loans, which include negative amortization and more than 30-year amortization loans, stated income loans and low FICO score loans, all of which have a higher risk of default and loss than conforming residential mortgage loans. Additionally, as we acknowledge the potential impact of significant portfolio growth, new loan products, and refinancing activities, these actions may result in portfolios consisting of unseasoned loans that may not perform as anticipated, elevating the risk of an inadequate allowance to absorb losses without additional provisions. A material decrease in the credit quality of our loan portfolio, significant changes in the risk profile of markets, industries, or customer groups, or inadequacy in the ACL could have a materially adverse impact on our business, financial condition, liquidity, capital, and results of operations.

Bank regulatory agencies also periodically review our ACL and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on their judgment about information available to them at the time of their examination.

If charge-offs in future periods exceed the ACL, we may need additional provisions to increase the ACL. Any increases in the ACL will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition, results of operations, liquidity and capital.

Non-performing assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future.

Non-performing assets, consisting of non-performing loans and real estate acquired through foreclosure, adversely affect our earnings in various ways. We reverse accrued interest on non-performing loans and do not record interest income on foreclosed assets. Additionally, non-performing loans increase our loan administration costs and costs also increase due to the improvement, maintenance and repairs of the foreclosed assets. Upon foreclosure or similar proceedings, we record the repossessed asset at the estimated fair value, less costs to sell, which may result in a write-down or loss. A significant increase in the level of non-performing assets from current levels would also increase our risk profile and may impact the capital levels our regulators believe are appropriate in light of the increased risk profile. While we attempt to reduce problem assets through various means such as collection efforts, asset sales, workouts and modifications, a decline in the value of the underlying collateral or in the borrower’s performance or financial condition could adversely affect our business, results of operations and financial condition. In addition, the resolution of non-performing assets often requires a significant time commitment from management, diverting their attention from other aspects of our operations.

Risks Related to Market and Interest Rate Changes

Fluctuating interest rates can adversely affect our profitability.

Our earnings and cash flows are largely dependent upon our net interest income. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the FRB. Beginning in March 2022, in response to high inflation, the FOMC commenced increasing the target range for the federal funds rates by implementing multiple increases. As of June 30, 2024, the FOMC target range for the federal funds rate was 5.25% to 5.50% as economic conditions remained relatively resilient and inflation remained elevated. As inflation eases, the FOMC has indicated rate decreases may be expected during the second half of 2024, although to date that has not been the case. However, if the FOMC further increases the targeted federal funds rate, overall interest rates will likely continue to rise, which will negatively impact our net interest income and may negatively impact both the housing market, by reducing refinancing activity and new home purchases, and the U.S. economy.

We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially affected.

A sustained increase in market interest rates could adversely affect our earnings. As is the case with many financial institutions, we attempt to increase our proportion of deposits comprising either no or relatively low-interest-bearing accounts, which has been challenging over the last couple of years. At June 30, 2024, we had $245.7 million in time

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deposits that mature within one year, $95.6 million in noninterest-bearing checking accounts and $518.8 million in interest-bearing checking, savings and money market accounts. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

In addition, most of our mortgage loans have adjustable interest rates. As a result, these loans may experience a higher rate of default in a rising interest rate environment.

Changes in interest rates also affect the value of our securities portfolio available for sale. Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on securities available for sale are reported as a separate component of stockholders’ equity, net of tax. Decreases in the fair value of securities available for sale resulting from increases in interest rates could have an adverse effect on stockholders’ equity.

Although management believes it has implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on our results of operations, any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our consolidated balance sheet or projected operating results. For additional information concerning the effect of interest rates on our loan portfolio, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-K.

Certain hedging strategies that we may use to manage investment in mortgage servicing assets, mortgage loans held for sale and interest rate lock commitments may be ineffective to offset any adverse changes in the fair value of these assets due to changes in interest rates and market liquidity.

We may use derivative instruments to economically hedge mortgage servicing assets, mortgage loans held for sale and interest rate lock commitments to offset changes in fair value resulting from changing interest rate environments. Our hedging strategies are susceptible to prepayment risk, basis risk, market volatility and changes in the shape of the yield curve, among other factors. In addition, hedging strategies rely on assumptions and projections regarding assets and general market factors. If these assumptions and projections prove to be incorrect or our hedging strategies do not adequately mitigate the impact of changes in interest rates, we may incur losses that would adversely impact earnings.

We may incur losses on our securities portfolio as a result of changes in interest rates.

Factors beyond our control can significantly impact the fair value of securities within our portfolio, potentially leading to adverse changes in their value. These factors include, but are not limited to, actions taken by rating agencies regarding the securities, defaults by the issuer, adverse events affecting either the issuer or the underlying securities, and shifts in market interest rates along with continued instability in the capital markets. These influences could result in impairments that are not just temporary, leading to realized and/or unrealized losses in future periods. Such developments could also lead to declines in other comprehensive income, thereby potentially affecting our business, financial condition, and results of operations in a significant manner. We evaluate individual investment securities quarterly for expected credit losses based on Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses,” since the adoption on July 1, 2023. The process usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security to assess the probability of receiving all contractual principal and interest payments on the security. Despite our efforts to evaluate these factors, there can be no assurance that the declines in market value will not result in credit losses on these assets. Such credit losses could lead to accounting charges that might materially impact our net income and capital levels. There were no ACL on investment securities held to maturity at adoption of ASC 326 or at June 30, 2024 and there were no impairment on investment securities available for sale at June 30, 2024.

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Risks Related to Regulatory, Legal and Compliance Matters

We are subject to an extensive body of accounting rules and best practices. Periodic changes to such rules may change the treatment and recognition of critical financial line items and affect our profitability.

Our business operations are significantly influenced by the extensive body of accounting regulations in the United States. Regulatory bodies periodically issue new guidance, altering accounting rules and reporting requirements, which can substantially affect the preparation and reporting of our financial statements. These changes might necessitate retrospective application, potentially leading to restatements of prior period financial statements.

One such significant change in fiscal 2024 was the implementation of the CECL model, which we adopted on July 1, 2023. Under the CECL model, financial assets carried at amortized cost, such as loans and held-to-maturity debt securities, are presented at the net amount expected to be collected. This forward-looking approach in estimating expected credit losses contrasts starkly with the prior, "incurred loss" model, which delays recognition until a loss is probable. CECL mandates considering historical experience, current conditions, and reasonable forecasts affecting collectability, leading to periodic adjustments of financial asset values. However, this forward-looking methodology, reliant on macroeconomic variables, introduces the potential for increased earnings volatility due to unexpected changes in these indicators between periods. An additional consequence of CECL is an accounting asymmetry between loan-related income, recognized periodically based on the effective interest method, and credit losses, recognized upfront at origination. This asymmetry might create the perception of reduced profitability during loan expansion periods due to the immediate recognition of expected credit losses. Conversely, periods with stable or declining loan levels might seem relatively more profitable as income accrues gradually for loans where losses had been previously recognized.

As a result of the change in methodology from the incurred loss model to the CECL model, on July 1, 2024, the Corporation recorded a one-time, net of tax charge of $824,000 to retained earnings, a $1.2 million increase to the ACL for credit losses for loans, and no change to the ACL on unfunded loan commitments.

Non-compliance with the USA Patriot Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions.

The USA Patriot and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.

If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses and our results of operations could be materially adversely affected.

Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing stockholder value. We have established processes and procedures intended to identify, measure, monitor, report, analyze, and control the types of risk to which we are subject to. These risks include, among others, liquidity, credit, market, interest rate, operational, legal and compliance, and reputational risk. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. We also maintain a compliance program to identify, measure, assess, and report on our adherence to applicable laws, policies, and procedures. While we assess and improve these programs on an ongoing basis, there can be no assurance that our risk management or compliance programs, along with other related controls, will effectively mitigate risk under all circumstances, or that it will adequately mitigate any risk or loss to us. However, as with any risk management framework, there are inherent limitations to our risk management strategies as they may exist, or develop in the future, including risks that we have not appropriately anticipated or identified. If our risk management framework proves ineffective, we could suffer unexpected losses and our business, financial condition, results of operations or growth prospects could be materially adversely affected. We may also be subject to potentially adverse regulatory consequences.

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Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations.

Climate change continues to be a pressing concern, prompting heightened awareness and action on a global scale. Efforts include international agreements such as the Paris Agreement, with the United States rejoining, and ongoing initiatives at various governmental levels to address climate-related issues. Under the current administration, additional measures are anticipated, potentially impacting banks' risk management practices, stress testing, credit portfolio concentrations, and investment strategies. The lack of empirical data makes it challenging to predict the precise financial impact of climate change, though its physical effects, such as more frequent weather disasters, could directly affect our real estate collateral and loan portfolios. Inadequate insurance coverage for borrowers may compound these risks, impacting our financial condition. Furthermore, climate change's broader economic effects could adversely affect our customers and the communities we serve, potentially impacting our financial performance.

On March 6, 2024, the SEC implemented new climate-related disclosure rules for U.S. public companies and foreign private issuers. These rules introduce extensive disclosure requirements, increasing reporting costs, risks, and complexity. Challenges include short compliance timelines, interpretive issues, legal liabilities, and global regulatory overlaps. Lawsuits contesting these rules add further uncertainty. However, on March 15, 2024, the Fifth Circuit granted an administrative stay, temporarily halting the implementation of the SEC's climate rules.

Our litigation related costs may increase.

We are subject to a variety of legal proceedings that have arisen in the ordinary course of the Bank's business. Our involvement in litigation may increase significantly. The expenses of some legal proceedings will adversely affect our results of operations until they are resolved. Further, there can be no assurance that loan workouts and other activities will not expose us to additional legal actions, including lender liability or environmental claims.

Risks Related to Cybersecurity, Data and Fraud

We are subject to certain risks in connection with our use of technology.

Our security measures may not be sufficient to mitigate the risk of a cyber attack. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software, and networks may be vulnerable to breaches, fraudulent or unauthorized access, denial or degradation of service attacks, misuse, computer viruses, malware or other malicious code and cyber-attacks that could have a security impact. If one or more of these events occur, this could jeopardize our or our customers' confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our customers or counterparties. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. We could also suffer significant reputational damage.

Further, our cardholders use their debit and credit cards to make purchases from third parties or through third party processing services. As such, we are subject to risk from data breaches of such third party’s information systems or their payment processors. Such a data security breach could compromise our customer’s account information. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for losses associated with reimbursing our customers for such fraudulent transactions on customers’ card accounts, as well as costs incurred by payment card issuing banks and other third parties or may be subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. We may also incur other costs related to data security breaches, such as replacing cards

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associated with compromised card accounts or credit monitoring services. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs.

Breaches of information security may also occur through intentional or unintentional acts by those having access to our systems, our customers’ or counterparties’ confidential information, including employees. We are continuously working to install new, and upgrade our existing, information technology systems and provide employee awareness training around ransomware, phishing, malware, and other cyber risks to further protect the Corporation against cyber risks and security breaches.

There continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts. We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Insider or employee cyber and security threats are increasingly a concern for companies, including ours. We are not aware that we have experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a cyber-security breach or other act, however, some of our customers may have been affected by these breaches, which could increase their risks of identity theft, debit and card fraud and other fraudulent activity that could involve their accounts with us.

Security breaches in our internet banking activities could further expose us to possible liability and damage our reputation. Increases in criminal activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third party technologies (including browsers and operating systems) or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our customers and underlying transactions. Any compromise of our security could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on internet security systems to provide the security and authentication necessary to effect secure transmission of data. Although we have developed and continue to invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, these precautions may not protect our systems from compromises or breaches of our security measures, and could result in losses to us or our customers, our loss of business and/or customers, damage to our reputation, the incurrence of additional expenses, disruption to our business, our inability to grow our online services or other businesses, additional regulatory scrutiny or penalties, or our exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition and results of operations.

Our security measures may not protect us from system failures or interruptions. While we have established policies and procedures to prevent or limit the impact of systems failures and interruptions, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. While we select our third-party vendors carefully, we do not control their actions. If our third-party providers encounter difficulties including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher transaction volumes, cyber-attacks and security breaches or if we otherwise have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected, and our ability to deliver products and services to our customers and otherwise conduct business operations could be adversely impacted. Replacing these third-party vendors could also entail significant delay and expense. Threats to information security also exist in the processing of customer information through various other vendors and their personnel. We cannot ensure that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely. We may not be insured against all types of losses as a result of third party failures and insurance coverage may be inadequate to cover all losses resulting from breaches, system failures or other disruptions. If any of our third-party service providers experience financial, operational or technological difficulties, or if there is any other disruption in our relationships with them, we may be required to identify alternative sources of such services, and we cannot assure that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all. Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and

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business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.

We are susceptible to fraudulent activity that may be committed against us or our customers, which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our customer’s information, misappropriation of assets, privacy breaches against our customers, litigation or damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Nationally, reported incidents of fraud and other financial crimes have increased. We have also experienced losses due to apparent fraud and other financial crimes. While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur.

Risks Related to Our Business and Industry Generally

Ineffective liquidity management could adversely affect our financial results and condition.

Liquidity is essential to our business. We rely on a number of different sources in order to meet our potential liquidity demands. Our primary sources of liquidity are increases in deposit accounts, cash flows from loan payments and our securities portfolio. Borrowings also provide us with a source of funds to meet liquidity demands. An inability to raise funds through deposits, borrowings or other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities on terms acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the California markets in which our loans are concentrated, negative operating results, or adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry or deterioration in credit markets. Any decline in available funding in amounts adequate to finance our activities on acceptable terms could adversely impact our ability to originate loans, invest in securities, meet our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could, in turn, have a material adverse effect on our business, financial condition and results of operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” of this Form 10-K.

We rely on other companies to provide key components of our business infrastructure.

We rely on numerous external vendors to provide us with products and services necessary to maintain our day-to-day operations. Accordingly, our operations are exposed to the risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements. The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements because of changes in the vendor’s organizational structure, financial condition, support for existing products and services, strategic focus or for any other reason, could be disruptive to our operations, which in turn could have a material negative impact on our financial condition and results of operations. We also could be adversely affected to the extent such an agreement is not renewed by a third party vendor or is renewed on terms less favorable to us. Additionally, the bank regulatory agencies expect financial institutions to be responsible for all aspects of our vendors’ performance, including aspects which they delegate to third parties. Disruptions or failures in the physical infrastructure or operating systems that support our business and customers, or cyber-attacks or security breaches of the networks, systems or devices that our customers use to access our products and services could result in customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition.

Managing reputational risk is important to attracting and maintaining customers, investors and employees.

Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers. We have policies and procedures in place to protect

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our reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be exceedingly high.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control, and on our financial condition and performance. Accordingly, we cannot make assurances that we will be able to raise additional capital if needed on terms that are acceptable to us, or at all. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, any additional capital we obtain may dilute the interests of existing holders of our common stock. Further, if we are unable to raise additional capital when required by our bank regulators, we may be subject to adverse regulatory action.

The financial services market is undergoing rapid technological changes, and if we are unable to stay current with those changes, we will not be able to effectively compete.

The financial services market is undergoing rapid changes with frequent introductions of new technology-driven products and services. Our future success will depend, in part, on our ability to keep pace with the technological changes and to use technology to satisfy and grow customer demand for our products and services and to create additional efficiencies in our operations. We expect that we will need to make substantial investments in our technology and information systems to compete effectively and to stay current with technological changes. Some of our competitors have substantially greater resources to invest in technological improvements and will be able to invest more heavily in developing and adopting new technologies, which may put us at a competitive disadvantage. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. As a result, our ability to effectively compete to retain or acquire new business may be impaired, and our business, financial condition or results of operations may be adversely affected.

Earthquakes, fires, mudslides and other natural disasters in our primary market area may result in material losses because of damage to collateral properties and borrowers' inability to repay loans.

Since our geographic concentration is in California, we are subject to earthquakes, fires, mudslides, droughts and other natural disasters. A major earthquake or other natural disaster may disrupt our business operations for an indefinite period of time and could result in material losses, although we have not experienced any losses in many years as a result of earthquake damage or other natural disaster. Although we are in an earthquake prone area, we and other lenders in the market area may not require earthquake insurance as a condition of making a loan. In addition to possibly sustaining damage to our own properties, if there is a major earthquake, fire, mudslide, or other natural disaster, we face the risk that many of our borrowers may experience uninsured property losses, or sustained job interruption and/or loss which may materially impair their ability to meet the terms of their loan obligations.

Any breach of representations and warranties made by us to our loan purchasers or credit default on our loan sales may require us to repurchase or substitute such loans we have sold.

We have previously engaged in bulk loan sales pursuant to agreements that generally require us to repurchase or substitute loans in the event of a breach of a representation or warranty made by us to the loan purchaser. Any misrepresentation during the mortgage loan origination process or, in some cases, upon any fraud or early payment default on such mortgage loans, may require us to repurchase or substitute loans. Any claims asserted against us in the future by one of our loan purchasers may result in liabilities or legal expenses that could have a material adverse effect on our results of operations and financial condition. During fiscal 2024 and 2023, the Bank did not repurchase any loans. Additionally, the Bank did not have any claims or settlements for previously sold loans during fiscal 2024 and 2023.

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Our assets as of June 30, 2024 include a deferred tax asset, the full value of which we may not be able to realize.

We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. At June 30, 2024, the net deferred tax asset was approximately $606,000, an increase from $218,000 at the prior fiscal year end. The net deferred tax asset results primarily from (1) deferred loan costs, (2) provisions for credit losses recorded for financial reporting purposes, which were in the past significantly larger than net loan charge-offs deducted for tax reporting proposes and (3) deferred compensation, among others.

We regularly review our deferred tax assets for recoverability based on our history of earnings, expectations for future earnings and expected timing of reversals of temporary differences. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income, including taxable income in prior carryback years, as well as future taxable income. We believe the recorded net deferred tax asset at June 30, 2024 is fully realizable based on our expected future earnings; however, expected future earnings may not be realized, which could impact our deferred tax assets.

Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, due diligence, and disclosure.

We rely on dividends from the Bank for substantially all of our revenue at the holding company level.

We are an entity separate and distinct from our principal subsidiary, the Bank, and derive substantially all of our revenue at the holding company level in the form of dividends from that subsidiary. Accordingly, we are, and will continue to be, dependent upon dividends from the Bank to pay the principal of and interest on our indebtedness, to satisfy our other cash needs, to pay for share buybacks and to pay dividends on our common stock. The Bank's ability to pay dividends is subject to its ability to earn net income and to meet certain regulatory requirements. In the event the Bank is unable to pay dividends to us, we may not be able to pay dividends on our common stock nor share buybacks. Also, our right to participate in a distribution of assets upon a subsidiary's liquidation or reorganization is subject to the prior claims of the subsidiary's creditors. In fiscal 2024 and 2023, the Bank paid cash dividends to its holding company totaling $7.0 million and $9.5 million, respectively.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

Managing technology risks, including cybersecurity risks, is a fundamental part of the Corporation’s risk management framework and processes. The Corporation employs a variety of processes, risk assessments, and controls to assess, identify, and manage these risks. This includes estimating the likelihood and potential impact of cybersecurity incidents. To manage these risks, the Corporation designs, documents, and implements controls, which are then tested through compliance assessments and internal and external audits. In some cases, the Corporation also transfers risk, either wholly or partially, through insurance and other methods. When an incident occurs, the Corporation responds by remediating the incident while complying with regulatory obligations, and then evaluates the remediation’s effectiveness. Communication about risk management matters is conducted through documented policies and procedures, management and Board

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committee reporting, and employee training and communications. For a detailed description of how cybersecurity risks may materially affect the Corporation’s business strategy or results, see "Item 1A. Risk Factors.”

The Corporation’s information technology risk management department consists of professionals with experience and expertise in cybersecurity, including specialists in identity and access management, cyber defense operations, security engineering, and information technology governance, risk, and compliance. This department is led by the Chief Information Officer (“CIO”), who has over 27 years of experience in technology risk management, and the Information Security Officer (“ISO”), who has a bachelor in computer science and has over 18 years of experience in cybersecurity risk management. The ISO reports to the CIO, and the CIO reports directly to the President and Chief Executive Officer. Additionally, the Corporation engages third-party experts as needed to assess, manage, and respond to cybersecurity risks through various methods, including risk assessments, IT audits based on different frameworks, penetration and vulnerability testing, social engineering, incident response, threat intelligence, education, and managed security services.

The Corporation also monitors risks from third parties, such as service providers, through efforts like monitoring, information sharing, risk assessments, audits, contractual due diligence, and adherence to third-party security standards. Senior management governs risk management and is informed about and monitors the prevention, detection, mitigation, and mediation of cybersecurity incidents. This is facilitated through working review committees, on which the ISO and/or CIO serve. These committees receive risk management reports appropriate to their scope of review, covering assessment results, risk ratings, and critical issues. They report significant matters to enterprise-wide risk committees, which oversee the broader scope of risk management for the enterprise. Through these efforts, senior management makes decisions and sets priorities for allocating resources to address risk management issues.

The Corporation’s Board of Directors, including the Audit Committee, oversees all risk management policies, procedures, and practices, including those related to cybersecurity. Senior management generally reports quarterly, or more frequently as necessary, to the Enterprise Risk Committee on technology risks, including those from cybersecurity threats. The Board’s Audit Committee and the Board of Directors receive these reports as part of their risk management oversight responsibilities. Board members have direct access to senior management and other relevant personnel and may direct questions and request further information as needed to fulfill their oversight responsibilities.

Item 2. Properties

At June 30, 2024, the net book value of the Corporation’s properties (including land and buildings) and its furniture, fixtures and equipment was $8.0 million. The Corporation’s home office is located in Riverside, California. Including the home office, the Corporation has 13 retail banking offices, 12 of which are located in Riverside County in the cities of Riverside (5), Moreno Valley, Hemet, Sun City, Rancho Mirage, Corona, Temecula and Blythe. One office is located in Redlands, San Bernardino County, California. The Corporation owns six of the retail banking offices and has seven leased retail banking offices. The lease term maturity dates range from 2024 to 2029, some of which has remaining extension options. In the opinion of management, all properties are adequately covered by insurance, are in a good state of repair and are appropriately designed for their present and future use.

Item 3. Legal Proceedings

Periodically, there have been various claims and lawsuits involving the Corporation, such as claims to enforce liens, condemnation proceedings on properties in which the Corporation holds security interests, claims involving the making and servicing of real property loans, employment matters and other issues in the ordinary course of and incidental to the Corporation’s business. These proceedings and the associated legal claims are often contested and the outcome of individual matters is not always predictable. Additionally, in some actions, it is difficult to assess potential exposure because the Corporation is still in the early stages of the litigation. The Corporation is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, operations or cash flows.

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Item 4. Mine Safety Disclosures

Not applicable.

PART II

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

Market Information and Holders

The common stock of Provident Financial Holdings, Inc. is listed on the NASDAQ Global Select Market under the symbol “PROV.” At August 15, 2024, there were 400 shareholders of record, and there were approximately 1,917 persons or entities that hold stock in nominee or “street name” accounts with brokers.

Dividends

The Corporation’s cash dividend payout policy is reviewed regularly by management and the Board of Directors. The Board of Directors has declared quarterly cash dividends on the Corporation’s common stock for consecutive quarters since September 30, 2002. On April 25, 2024, the Corporation declared a quarterly cash dividend of $0.14 per share with a record date of May 16, 2024 and the dividend was paid on June 6, 2024. Future declarations or payments of dividends will be subject to the consideration of 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, legal restrictions, 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 current fiscal year and/or the preceding fiscal year in which the dividend is declared. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in future periods. Dividends on common stock from Provident depend substantially upon receipt of dividends from the Bank, which is Provident’s predominant source of income. Management’s projections show an expectation that cash dividends will continue for the foreseeable future.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On September 28, 2023, the Board approved a stock repurchase plan, authorizing the purchase of up to 350,353 shares of the Corporation’s outstanding common stock over a one-year period. Simultaneously, the Board canceled the remaining 25,428 shares available for purchase under the prior repurchase plan. The Corporation may purchase the shares from time to time in the open market or through privately negotiated transactions depending on market conditions, the capital requirements of the Corporation, and available cash that can be allocated to the stock repurchase program, among other considerations. The September 2023 stock repurchase plan terminates on September 28, 2024, unless completed sooner or extended.

The table below sets forth information regarding the Corporation’s purchases of its common stock during the fourth quarter of fiscal 2024.


					Maximum
				Total Number of	Number of Shares
				Shares Purchased as	that May Yet Be
	Total Number of	Average Price		Part of Publicly	Purchased Under
Period	Shares Purchased	Paid per Share		Announced Plan	the Plan⁽¹⁾
April 1, 2024 – April 30, 2024	18,351	$	13.52	18,351	219,241
May 1, 2024 – May 31, 2024	18,494	$	12.71	18,494	200,747
June 1, 2024 – June 30, 2024	11,631	$	12.64	11,631	189,116
Total	48,476	$	13.00	48,476	189,116

(1)	Represents the remaining shares available for future purchases under the September 2023 stock repurchase plan.

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Performance Graph

The following graph compares the cumulative total shareholder return on the Corporation’s common stock with the cumulative total return of the Nasdaq Stock Index (U.S. Stock) and Nasdaq Bank Index. Total return assumes the reinvestment of all dividends.


	6/30/2019		6/30/2020		6/30/2021		6/30/2022		6/30/2023		6/30/2024
PROV	$	100.00	$	65.88	$	88.15	$	78.33	$	70.14	$	71.83
NASDAQ Stock Index	$	100.00	$	106.96	$	154.52	$	132.54	$	157.83	$	195.09
NASDAQ Bank Index	$	100.00	$	77.27	$	133.59	$	109.09	$	105.72	$	144.54

(1)	Assumes that the value of the investment in the Corporation’s common stock and each index was $100 on June 30, 2019 and that all dividends were reinvested.

Securities Authorized for Issuance under Equity Compensation Plans

See Part III, Item 12 of this Form 10-K for information regarding the Corporation’s Equity Compensation Plans, which is incorporated into this Item 5 by reference.

Item 6. [Reserved]

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

Safe-Harbor Statement

Certain matters discussed in this Form 10-K constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to the Corporation’s financial condition, liquidity, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements as they are subject to various risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Corporation may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Corporation.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially from the results anticipated or implied by our forward-looking statements include, but are not limited to:

●

adverse economic conditions in our local market areas or other markets where we have lending relationships

●

effects of employment levels, labor shortages, inflation, a recession or slowed economic growth;

●

changes in the interest rate environment, including the past increases in the Federal Reserve benchmark rate and the duration of such increased levels, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity;

●

the impact of inflation and the Federal Reserve monetary policy;

●

the effects of any Federal government shutdown;

●

credit risks of lending activities, including loan delinquencies, write-offs, changes in our ACL, and provision for credit losses;

●

increased competitive pressures;

●

quality and composition of our securities portfolio and the impact of adverse changes in the securities markets;

●

quality and composition of our securities portfolio and the impact of adverse changes in the securities markets;

●

fluctuations in deposits;

●

secondary market conditions for loans and our ability to sell loans in the secondary market;

●

liquidity issues, including our ability to borrow funds or raise additional capital, if necessary;

●

expectations regarding key growth initiatives and strategic priorities;

●

the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment;

●

results of examinations of us by regulatory authorities, which may the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or our bank subsidiary which could require us to increase our ACL, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings;

●

legislative and regulatory changes, including changes in banking, securities and tax law, in regulatory policies and principles, or the interpretation of regulatory capital or other rules;

●

use of estimates in determining the fair value of assets, which may prove incorrect;

●

disruptions or security breaches, or other adverse events, failures or interruptions in or attacks on our information technology systems or on the our third-party vendors;

●

staffing fluctuations in response to product demand or corporate implementation strategies;

●

our ability to pay dividends on our common stock;

●

environmental, social and governance goals;

●

effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest and other external events;

●

and other factors described in this Form 10-K and in Quarterly Reports on Form 10-Q and other reports filed with and furnished to the Securities and Exchange Commission (“SEC”), which are available on our website at www.myprovident.com and on the SEC’s website at www.sec.gov.

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Forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur, and you should not put undue reliance on any forward-looking statements. These factors could cause our actual results for the fiscal 2025 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Corporation’s consolidated financial condition and consolidated results of operations as well as its stock price performance.

General

Provident, a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company of the Bank upon the Bank’s conversion completed on June 27, 1996. Provident is regulated by the FRB. At June 30, 2024, the Corporation, on a consolidated basis, had total assets of $1.27 billion, total deposits of $888.3 million and total stockholders’ equity of $129.9 million. Provident 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 Bank, founded in 1956, is a federally chartered stock savings bank headquartered in Riverside, California. The Bank is regulated by the OCC, its primary federal regulator, and the FDIC, the insurer of its deposits. The Bank’s deposits are federally insured up to applicable limits by the FDIC. The Bank has been a member of the Federal Home Loan Bank System since 1956.

The Corporation operates in a single business segment through the Bank. The Bank's activities include attracting deposits, offering banking services and originating and purchasing single-family, multi-family, commercial real estate, construction and, to a lesser extent, other mortgage (generally land loans), commercial business and consumer loans. Deposits are collected primarily from 13 banking locations located in Riverside and San Bernardino counties in California. Loans are primarily originated and purchased in Southern and Northern California to be held for investment. There are various risks inherent in the Corporation’s business including, among others, the general business environment, interest rates, the California real estate market, the demand for loans, the prepayment of loans, the repurchase of loans previously sold to investors, the secondary market conditions to sell loans, competitive conditions, legislative and regulatory changes, fraud and other risks.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is 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 audited Consolidated Financial Statements and accompanying selected Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Critical Accounting Estimates

The discussion and analysis of the Corporation’s financial condition and results of operations is 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 difficult, subjective or complex 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 consolidated financial statements and, therefore, management considers the following to be critical accounting estimates. These estimates involve a significant level of uncertainty at the time they are made, and changes in these estimates that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Accordingly, actual results may differ from these estimates under different assumptions or conditions. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit committee of our Board of Directors. See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements.

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Allowance for Credit Losses.

The ACL involves significant judgment and assumptions by management, which has a material impact on the carrying value of financial assets. The Corporation adopted ASC 326 using the prospective transition approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after July 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

As required by ASC 326, on July 1, 2023 the Corporation implemented CECL and recognized a $1.2 million one-time increase to its ACL, which was recorded directly to retained earnings. Under ASC 326, the ACL is a valuation account that is deducted from the related loan’s amortized cost basis to present the net amount expected to be collected on the loans. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

Provision for Income Taxes. Management accounts for income taxes by estimating future tax effects of temporary differences between the tax and book basis of assets and liabilities considering the provisions of enacted tax laws. These differences result in deferred tax assets and liabilities, which are included in the Corporation’s Consolidated Statements of Financial Condition. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, management is required to make many subjective assumptions and judgments regarding the Corporation’s income tax exposures, including judgments in determining the amount and timing of recognition of the resulting deferred tax assets and liabilities, including projections of future taxable income. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes in management’s subjective assumptions and judgments can materially affect amounts recognized in the Consolidated Statements of Financial Condition and Consolidated Statements of Operations.

Executive Summary and Operating Strategy

Provident Savings Bank, F.S.B., 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 and through its subsidiary, PFC. The business activities of the Corporation, primarily through the Bank, consist of community banking and, to a lesser degree, investment services for customers and trustee services on behalf of the Bank.

Community banking operations primarily consist of accepting deposits from customers within the communities surrounding the Bank’s full service offices and investing those funds in single-family, multi-family and commercial real estate loans. Also, to a lesser extent, the Bank originates construction, commercial business, consumer and other mortgage loans. The primary source of income in community banking is net interest income, which is the difference between the interest income earned on loans and investment securities, and the interest expense paid on interest-bearing deposits and borrowed funds. Additionally, certain fees are collected from depositors, such as returned check fees, deposit account service charges, ATM fees, IRA/KEOGH fees, safe deposit box fees, wire transfer fees and overdraft protection fees, among others.

The Corporation plans to enhance its community banking business by moderately increasing its total assets, focusing on expanding single-family, multi-family, commercial real estate, construction, and commercial business loans. Additionally, the Corporation aims to reduce the percentage of retail time deposits in its deposit base while increasing the proportion of lower-cost checking and savings accounts. To diversify its deposit instruments, the Corporation will consider utilizing brokered certificates of deposit and the State of California’s time deposits, subject to market conditions and its funding

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needs. This strategy is designed to improve core revenue by achieving a higher net interest margin and, combined with the Corporation’s growth, ultimately increase net interest income. While the Corporation’s long-term strategy targets moderate growth, management acknowledges that this growth may be influenced by general economic conditions and other factors.

Investment services operations primarily consist of selling alternative investment products such as annuities and mutual funds to the Bank’s depositors. Investment services and trustee services contribute a very small percentage of gross revenue.

PFC performs trustee services for the Bank’s real estate secured loan transactions and has in the past held, and may in the future hold, real estate for investment.

There are a number of risks associated with the business activities of the Corporation, many of which are beyond the Corporation’s control, including: changes in accounting principles, laws, regulation, interest rates and the economy, among others. The Corporation attempts to mitigate many of these risks through prudent banking practices, such as interest rate risk management, credit risk management, operational risk management, and liquidity risk management. The California economic environment presents heightened risk for the Corporation primarily with respect to real estate values and loan delinquencies. Since the majority of the Corporation’s loans are secured by real estate located within California, significant declines in the value of California real estate may also inhibit the Corporation’s ability to recover on defaulted loans by selling the underlying real estate. For further details on risk factors and uncertainties, see “Safe-Harbor Statement” included above in this Item 7, and Item 1A, "Risk Factors.”

Comparison of Financial Condition at June 30, 2024 and 2023

Total assets decreased $60.7 million, or 5%, to $1.27 billion at June 30, 2024 from $1.33 billion at June 30, 2023. The decrease was primarily attributable to decreases in loans held for investment, investment securities and cash and cash equivalents.

Total cash and cash equivalents, primarily excess cash deposited with the FRB of San Francisco, decreased $14.4 million, or 22%, to $51.4 million at June 30, 2024 from $65.8 million at June 30, 2023. The decrease was consistent with the Corporation’s strategy of adequately managing credit and liquidity risk.

Total investment securities (held to maturity and available for sale) decreased $24.6 million, or 16%, to $131.9 million at June 30, 2024 from $156.5 million at June 30, 2023. The decrease was the result of scheduled and accelerated principal payments on investment securities. During fiscal 2024 and 2023, the Bank did not purchase or sell any investment securities. For additional information on investment securities, see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Loans held for investment, net decreased $24.7 million, or 2%, to $1.05 billion at June 30, 2024 from $1.08 billion at June 30, 2023. In fiscal 2024, the Bank originated $75.5 million of loans held for investment, down 68% from $237.1 million during fiscal 2023. In both years these loans consisted primarily of single-family, multi-family and commercial real estate loans. The Bank did not purchase any loans in fiscal 2024 or 2023. Management attributes the decrease in loan originations to the higher interest rate environment and overall uncertainty in the economy. Total loan principal payments in fiscal 2024 were $99.9 million, down 2% from $102.3 million in fiscal 2023. There was no REO in both fiscal 2024 and 2023. The balance of multi-family, commercial real estate, construction and commercial business loans, net of undisbursed loan funds, decreased $22.6 million, or 4%, to $532.6 million at June 30, 2024 from $555.2 million at June 30, 2023, and represented 51% and 52% of loans held for investment, respectively. The balance of single-family loans held for investment decreased slightly to $518.1 million at June 30, 2024, from $518.8 million at June 30, 2023. For additional information on loans held for investment, see Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

FHLB – San Francisco and other equity investments increased $603,000, or 6%, to $10.1 million at June 30, 2024 from $9.5 million at June 30, 2023. The increase was due to a VISA stock conversion and the purchase of additional FHLB stock. In May 2024, the Bank converted its Class B1 VISA stock to Class B2 VISA stock and Class C VISA stock. Subsequently, the Bank recorded the Class C VISA stock at its fair value on its Consolidated Statements of Condition. As

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of June 30, 2024, the fair value of the Class C VISA stock was $540,000. The Bank also purchased $63,000 of required additional FHLB - San Francisco stock during the year.

Total deposits decreased $62.3 million, or 7%, to $888.3 million at June 30, 2024 from $950.6 million at June 30, 2023. Transaction accounts decreased $115.1 million, or 16%, to $614.5 million at June 30, 2024 from $729.6 million at June 30, 2023, while time deposits increased $53.0 million, or 24%, to $273.9 million at June 30, 2024 from $220.9 million at June 30, 2023. The increase in time deposits includes the increased utilization of brokered certificates of deposit. Brokered certificates of deposit increased $25.4 million, or 24%, to $131.8 million at June 30, 2024 from $106.4 million at June 30, 2023. As of June 30, 2024 and 2023, the percentage of transaction accounts to total deposits was 69% and 77%, respectively. Total retail deposits, defined as total deposits excluding brokered certificates of deposit, decreased by $87.7 million, or 10% to $756.5 million at June 30, 2024 from $844.2 million at June 30, 2023, due primarily to the decline of transaction account balances related to some customers seeking higher interest rates elsewhere. For additional information on deposits, see Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Borrowings, consisting of FHLB – San Francisco advances increased $3.5 million, or 1%, to $238.5 million at June 30, 2024 from $235.0 million at June 30, 2023. The increase was primarily due to new advances to augment the decrease in deposits. The weighted average maturity of the Corporation’s FHLB – San Francisco advances was approximately 13 months at June 30, 2024, up from 12 months at June 30, 2023. For additional information on borrowings, see Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Total stockholders’ equity increased slightly to $129.9 million at June 30, 2024 from $129.7 million at June 30, 2023, primarily as a result of net income and the amortization of stock-based compensation in fiscal 2024, partly offset by stock repurchases (see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K) and quarterly cash dividends paid to shareholders.

Comparison of Operating Results for the Fiscal Years Ended June 30, 2024 and 2023

General. The Corporation recorded net income of $7.4 million, or $1.06 per diluted share, for the fiscal year ended June 30, 2024, down $1.2 million, or 14%, from $8.6 million, or $1.19 per diluted share, for the fiscal year ended June 30, 2023. The decrease in net income was primarily attributable to a $2.1 million decrease in net interest income, a $270,000 increase in non-interest expense and a $134,000 decrease in non-interest income, partly offset by a $437,000 change in the provision for credit losses resulting from a $63,000 recovery of credit losses recorded during fiscal 2024 compared to a $374,000 provision for credit losses during fiscal 2023. The Corporation's efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, increased to 73% in fiscal 2024 from 69% in fiscal 2023 due to both an increase in non-interest expenses and a decline in revenues. Return on average assets in fiscal 2024 decreased to 0.57% from 0.68% in fiscal 2023 and return on average stockholders' equity in fiscal 2024 decreased to 5.62% from 6.58% in fiscal 2023.

Net Interest Income. Net interest income decreased $2.1 million, or 6%, to $34.9 million in fiscal 2024 from $37.0 million in fiscal 2023. This decrease resulted from interest expense on interest-bearing liabilities increasing at a faster pace than interest income earned on interest-earning assets. Net interest margin decreased 21 basis points to 2.78% in fiscal 2024 from 2.99% in fiscal 2023, due to the decline in net interest income coupled with an increase in average interest earning assets. The average balance of interest-earning assets increased $18.6 million, or 2%, to $1.25 billion in fiscal 2024 from $1.24 billion in fiscal 2023. The average balance of interest-bearing liabilities increased $16.8 million, or 2%, to $1.13 billion during fiscal 2024 as compared to $1.12 billion during fiscal 2023.

Interest Income. Total interest income increased $8.7 million, or 19%, to $54.7 million for fiscal 2024 from $46.0 million for fiscal 2023. The increase was primarily attributable to an increase of interest income from loans receivable.

Interest income on loans receivable increased $8.0 million, or 19%, to $50.2 million in fiscal 2024 from $42.2 million in fiscal 2023. The increase was attributable to a higher average loan yield and, to a lesser extent, a higher average loan balance. The weighted average loan yield during fiscal 2024 increased 59 basis points to 4.69% from 4.10% in fiscal 2023,

reflecting new loans being originated at higher interest rates and adjustable rate loans repricing higher due to overall higher market interest rates resulting from the FOMC increases in the targeted federal funds rate during the latter half of fiscal

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2023. The average balance of loans receivable increased $40.6 million, or 4%, to $1.07 billion during fiscal 2024 from $1.03 billion during fiscal 2023.

Interest income on investment securities decreased $109,000, or 5%, to $2.1 million in fiscal 2024 from $2.2 million in fiscal 2023, due to a decrease in the average balance, partly offset by an increase in the average yield.. The average balance of investment securities decreased $27.5 million, or 16%, to $144.5 million in fiscal 2024 from $172.0 million in fiscal 2023 as a result of scheduled and accelerated principal payments on mortgage-backed securities. The average yield on investment securities increased 17 basis points to 1.43% for fiscal 2024 from 1.26% for fiscal 2023. The increase in the average yield of investment securities was primarily attributable to a lower premium amortization resulting from lower principal payments. Total premium amortization in fiscal 2024 was $532,000, down $259,000, or 33%, from $791,000 in fiscal 2023.

During fiscal 2024, the Bank received $802,000 of cash dividends from the FHLB - San Francisco and other equity investments, an increase of $246,000 or 44% from the $556,000 of cash dividends received in fiscal 2023, resulting in an average yield of 8.35% during fiscal 2024 compared to 6.55% during fiscal 2023.

Interest income on interest-earning deposits, primarily cash deposited at the FRB of San Francisco, increased $598,000, or 56%, to $1.7 million in fiscal 2024 from $1.1 million in fiscal 2023, due to a higher average yield and, to a lesser extent, a higher average balance. The average yield increased 133 basis points to 5.38% in fiscal 2024 from 4.05% in fiscal 2023, resulting from increases in the targeted federal funds interest rate since March 2022 to July 2023. The average balance of interest-earning deposits increased $4.4 million, or 17%, to $30.6 million in fiscal 2024 from $26.2 million in fiscal 2023.

Interest Expense. Total interest expense for fiscal 2024 was $19.8 million compared to $9.0 million for fiscal 2023, an increase of $10.8 million or 120%. This increase was primarily attributable to a higher interest expense on deposits, particularly time deposits and, to a lesser extent, a higher interest expense on borrowings. The average cost of interest-bearing liabilities was 1.74% during fiscal 2024, up 94 basis points from 0.80% during fiscal 2023, and the average balance of interest-bearing liabilities was $1.14 billion during fiscal 2024, up $16.8 million or 2% from $1.12 billion during fiscal 2023.

Interest expense on deposits for fiscal 2024 was $9.7 million compared to $3.1 million for fiscal 2023, an increase of $6.6 million or 213%. The increase was primarily attributable to a higher average cost for time deposits and, to a lesser extent, a higher average balance of such deposit. The average cost of time deposits in fiscal 2024 was 3.66%, up 196 basis points, from 1.70% in fiscal 2023, while the average cost of transaction accounts was 0.09% in fiscal 2024, up four basis points from 0.05% in fiscal 2023. The average cost of all deposits increased 73 basis points to 1.06% in fiscal 2024 from 0.33% in fiscal 2023. The average balance of time deposits increased $85.8 million, or 53%, to $247.9 million in fiscal 2024 from $162.1 million in fiscal 2023, which as partly offset a decrease in the average balance of transaction accounts which decreased $130.5 million, or 16%, to $668 2 million in fiscal 2024 from $798.7 million in fiscal 2023. The increase of time deposits included increased brokered certificates of deposit. The average balance of brokered certificates of deposit in fiscal 2024 was $118.8 million with the average cost of 5.17% compared to the average balance of $48.7 million with the average cost of 3.97% in fiscal 2023.

Interest expense on borrowings, consisting of FHLB - San Francisco advances, for fiscal 2024 increased $4.2 million, or 71%, to $10.1 million as compared to $5.9 million in fiscal 2023. The increase in interest expense on borrowings was due to a higher average balance and, to a lesser extent, a higher average cost. The average balance of borrowings increased $61.7 million, or 39%, to $221.4 million during fiscal 2024 from $159.7 million during fiscal 2023 and the average cost of borrowings was 4.58% in fiscal 2024, up 91 basis points from 3.67% in fiscal 2023.

Provision for (Recovery of) Credit Losses. During fiscal 2024, the Corporation recorded a recovery of credit losses of $63,000, compared to a provision for credit losses of $374,000 during fiscal 2023. The recovery of credit losses reflected in fiscal 2024 was primarily due to a $23.5 million decrease in loans held for investment at June 30, 2024 from June 30, 2023 and a slightly shorter estimated life of the single-family loan portfolio resulting from higher loan prepayment estimates, partly offset by higher unfunded loan commitments resulting from a higher outstanding balance at June 30, 2024 as compared to the prior fiscal year end. The provision for credit losses in fiscal 2023 was primarily due to a higher outstanding balance of loans held for investment.

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At June 30, 2024, the ACL on loans held for investment was $7.1 million, comprised of collectively evaluated allowances of $7.1 million and individually evaluated allowances of $37,000; up 20% from $5.9 million at June 30, 2023. The ACL on loans as a percentage of gross loans held for investment was 0.67% at June 30, 2024, compared to 0.55% at June 30, 2023. The increase in the ACL on loans was due primarily to the adoption of the CECL methodology ($1.2 million), partly offset by the recovery of credit losses in fiscal 2024 ($63,000, net of a $15,000 provision for unfunded loan commitment reserves). The ACL on loans as a percentage of gross loans held for investment was 0.67% at June 30, 2024, compared to 0.55% at June 30, 2023.

The following chart quantifies the factors contributing to the changes in the ACL on loans held for investment (“LHFI”) for the year ended June 30, 2024 subsequent to the adoption of the CECL methodology on July 1, 2023.

Management believes, based on currently available information, the ACL is sufficient to absorb expected losses inherent in loans held for investment at June 30, 2024 under the CECL methodology adopted since July 1, 2023. For additional information, see Item 1, “Business - “Asset Quality” in this Form 10-K.

Non-Interest Income. Total non-interest income was $3.9 million in fiscal 2024, a decrease of $134,000 or 3% from $4.1 million in fiscal 2023.

Loan servicing and other fees decreased $77,000, or 19%, to $337,000 for fiscal 2024 from $414,000 in fiscal 2023, due primarily to lower loan prepayment fees, attributable to lower loan payoffs.

Deposit account fees decreased $142,000, or 11%, to $1.2 million for fiscal 2024 from $1.3 million in fiscal 2023, due primarily to lower non-sufficient funds account fees, attributable to lower transactions and lower transaction account balances.

Card and processing fees decreased $141,000, or 9%, to $1.4 million for fiscal 2024 from $1.5 million in fiscal 2023, due primarily to lower debit card transactions.

Other fees increased $226,000, or 27%, to $1.1 million for fiscal 2024 from $840,000 in fiscal 2023, due primarily to a $540,000 net unrealized gain on other equity investments resulting from the VISA share conversion, partly offset by a net change of $190,000 on the losses on sale of loans (a net loss of $64,000 on sale of loans in fiscal 2024 compared to a net gain of $124,000 on sale of loans in the prior fiscal year). In May 2024, the Bank converted its VISA Class B1 shares into VISA Class B2 shares and VISA Class C shares and recorded the VISA Class C shares at fair value subsequent to the conversion.

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Non-Interest Expense. Total non-interest expense was $28.5 million in fiscal 2024, an increase of $270,000 or 1% from $28.3 million in fiscal 2023. The increase in non-interest expense was primarily attributable to increases in premises and occupancy expenses, equipment expense, deposit insurance premiums and regulatory assessments, partly offset by decreases in salaries and employee benefits and other operating expenses.

Salaries and employee benefits expense decreased $95,000, or 1%, to $17.6 million in fiscal 2024 from $17.7 million in fiscal 2023. The decrease in salaries and employee benefits expense was primarily attributable to a decrease in incentive compensation, partly offset by increases in the supplemental executive retirement plans and compensation costs.

Premises and occupancy expense increased $139,000, or 4%, to $3.6 million in fiscal 2024 from $3.4 million in fiscal 2023. The increase was primarily attributable to increases in building maintenance and fixture depreciation costs, resulting primarily from the relocation of one of our banking offices and ATM upgrades, partly offset by lower on-line service expenses.

Equipment expense increased $157,000, or 14%, to $1.3 million in fiscal 2024 from $1.2 million in fiscal 2023, due primarily to the upgrades of computer hardware and software and an increase of equipment lease expenses.

Deposit insurance premiums and regulatory assessments increased $123,000, or 19%, to $780,000 in fiscal 2024 from $657,000 in fiscal 2023, primarily attributable to the increase in FDIC insurance assessments.

Provision for Income Taxes. The income tax provision reflects accruals for taxes at the applicable rates for federal income tax and California franchise tax based upon reported pre-tax income, adjusted for the effect of all permanent differences between income for tax and financial reporting purposes, such as non-deductible stock-based compensation and bank-owned life insurance policies, among others. Therefore, there are fluctuations in the effective income tax rate from period to period based on the relationship of net permanent differences to income before tax.

The provision for income taxes was $3.0 million for fiscal 2024, representing an effective tax rate of 29.2%, down $788,000 or 21% from $3.8 million in fiscal 2023, representing an effective tax rate of 30.8%. The lower effective tax rate in fiscal 2024 was attributable primarily to the decreased tax benefit in fiscal 2023 from the equity incentive awards with the share price lower at vesting and distribution than the fair value estimated at the grant date, which was not replicated in fiscal 2024.

The Corporation’s effective tax rate may differ from the estimated tax rates described above due to discrete items such as further adjustments to net deferred tax assets, excess tax benefits derived from stock option exercises and non-taxable earnings from bank owned life insurance, among other items. The Corporation determined that the above tax rates meet its estimated income tax obligations. For additional information, see Note 8, "Income Taxes," of the Notes to Consolidated Financial Statements, contained in Item 8 of this Form 10-K.

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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. 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.


	Year Ended June 30,
	2024						2023
	Average				Yield/		Average				Yield/
(Dollars In Thousands)	Balance		Interest		Cost		Balance		Interest		Cost
Interest-earning assets:
Loans receivable, net⁽¹⁾	$	1,069,616	$	50,194	4.69	%	$	1,029,000	$	42,191	4.10	%
Investment securities		144,466		2,060	1.43	%		172,005		2,169	1.26	%
FHLB - San Francisco and other equity investments		9,601		802	8.35	%		8,488		556	6.55	%
Interest-earning deposits		30,610		1,674	5.38	%		26,214		1,076	4.05	%

Total interest-earning assets		1,254,293		54,730	4.36	%		1,235,707		45,992	3.72	%

Noninterest-earning assets		30,655						32,763

Total assets	$	1,284,948					$	1,268,470

Interest-bearing liabilities:
Checking and money market accounts⁽²⁾	$	407,938		290	0.07	%	$	479,921		227	0.05	%
Savings accounts		260,249		313	0.12	%		318,795		168	0.05	%
Time deposits		247,863		9,063	3.66	%		162,144		2,751	1.70	%

Total deposits⁽³⁾		916,050		9,666	1.06	%		960,860		3,146	0.33	%

Borrowings		221,368		10,141	4.58	%		159,742		5,861	3.67	%

Total interest-bearing liabilities		1,137,418		19,807	1.74	%		1,120,602		9,007	0.80	%

Noninterest-bearing liabilities		16,731						17,307

Total liabilities		1,154,149						1,137,909

Stockholders’ equity		130,799						130,561
Total liabilities and stockholders’ equity	$	1,284,948					$	1,268,470

Net interest income			$	34,923					$	36,985

Interest rate spread⁽⁴⁾					2.62	%					2.92	%
Net interest margin⁽⁵⁾					2.78	%					2.99	%
Ratio of average interest- earning assets to average interest-bearing liabilities					110.28	%					110.27	%

(1)	Includes the average balance of non-performing loans of $2.1 million and $1.1 million, as well as net deferred loan costs of $955 thousand and $959 thousand for the fiscal years ended June 30, 2024 and 2023, respectively.

(2)	Includes the average balance of noninterest-bearing checking accounts of $97.3 million and $112.9 million in the fiscal years ended June 30, 2024 and 2023, respectively.

(3)	Includes the average balance of uninsured deposits of $135.7 million and $170.2 million in the fiscal years ended June 30, 2024 and 2023, respectively.

(4)	Represents the difference between the weighted average yield on all interest-earning assets and the weighted average rate on all interest-bearing liabilities.

(5)	Represents net interest income as a percentage of average interest-earning assets.

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Rate/Volume Variance

The following table sets forth the effects of changing rates and volumes on interest income and expense of the Corporation for the period presented. 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 the effects attributable to changes that cannot be allocated between rate and volume.


	Year Ended June 30, 2024 Compared
	To Year Ended June 30, 2023
	Increase (Decrease) Due to
(In Thousands)	Rate		Volume		Rate/Volume		Net
Interest-earning assets:
Loans receivable⁽¹⁾	$	6,098	$	1,665	$	240	$	8,003
Investment securities		285		(347)		(47)		(109)
FHLB – San Francisco and other equity investments		153		73		20		246
Interest-bearing deposits		362		178		58		598
Total net change in income on interest-earning assets		6,898		1,569		271		8,738

Interest-bearing liabilities:
Checking and money market accounts		113		(36)		(14)		63
Savings accounts		215		(29)		(41)		145
Time deposits		3,175		1,457		1,680		6,312
Borrowings		1,457		2,262		561		4,280
Total net change in expense on interest-bearing liabilities		4,960		3,654		2,186		10,800
Net increase (decrease) in net interest income	$	1,938	$	(2,085)	$	(1,915)	$	(2,062)

(1)	Includes non-performing loans. For purposes of calculating volume, rate and rate/volume variances, non-performing loans were included in the weighted average balance outstanding.

Liquidity and Capital Resources

The Bank’s primary sources of funds are deposits, proceeds from principal and interest payments on loans, proceeds from the maturity and sale of investment securities, proceeds from FHLB - San Francisco advances, access to the discount window facility at the FRB of San Francisco and access to the correspondent bank’s federal funds facility. While maturities and scheduled amortization of loans and investment securities are a relatively predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

The primary investing activity of the Bank has been the origination and, to a lesser extent, purchase of loans held for investment. During the fiscal years ended June 30, 2024 and 2023, the Bank originated loans held for investment of $75.5 million and $237.1 million, respectively. The Bank did not purchase any loans held for investment from other financial institutions in fiscal 2024 or 2023. At June 30, 2024 and 2023, the Bank had loan origination commitments totaling $9.4 million and $2.4 million, with undisbursed loan funds of $435,000 and $2.0 million, respectively. The Bank anticipates that it will have sufficient funds available to meet its current loan origination commitments.

The Bank's primary financing activity is gathering deposits, which include both retail and brokered deposits. During the fiscal years ended June 30, 2024 and 2023, the net decrease in deposits was $62.2 million and $4.9 million, respectively. On June 30, 2024, time deposits scheduled to mature in one year or less were $245.7 million. Historically, the Bank has been able to retain a significant percentage of its time deposits as they mature by adjusting deposit rates based upon the current interest rate environment.

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 and cash equivalents to meet short-term liquidity needs. At June 30, 2024, total cash and cash equivalents were $51.4 million, or 4.0% of total assets. Depending on market conditions and the pricing of deposit products and FHLB - San Francisco advances, the Bank may continue to rely on FHLB - San Francisco advances for part

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of its liquidity needs. As of June 30, 2024, the remaining financing availability at the FHLB - San Francisco was $261.3 million and the remaining available collateral was $367.4 million. In addition, the Bank has secured a $208.6 million discount window facility at the FRB of San Francisco, collateralized by $126.6 million of investment securities and $178.6 million of loans held for investment. The Bank also has a federal funds facility with its correspondent bank for $50.0 million which matures on June 30, 2025. As of June 30, 2024, there were no outstanding borrowings under the discount window facility or the federal funds facility with its correspondent bank. The total available borrowing capacity across all sources totals approximately $519.9 million at June 30, 2024.

Regulations require the Bank to maintain adequate liquidity to assure safe and sound operations. The Bank's average liquidity ratio (defined as the ratio of average qualifying liquid assets to average deposits and borrowings) for the quarter ended June 30, 2024 decreased to 16.6% from 18.1% during the same quarter ended June 30, 2023. The decrease in the liquidity ratio was due primarily to the decrease in average qualifying liquid assets which exceeded the decrease in average deposits and borrowings during the quarter ended June 30, 2024 in comparison to the quarter ended June 30, 2023. The Bank augments its liquidity by maintaining sufficient borrowing capacity at the FHLB - San Francisco, FRB of San Francisco and its correspondent bank.

We incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and our expected return on investment. The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations.

Based on our current capital allocation objectives, during fiscal 2025 we project expenditures of ranging from $270,000 to $1.5 million for capital investment in premises and equipment. For additional information regarding our commitments, see Note 13, "Commitments and Contingencies," of the Notes to Consolidated Financial Statements, contained in Item 8 of this Form 10-K.

Provident is a separate legal entity from the Bank and, on a stand-alone level, must provide for its own liquidity and pay its own operating expenses, cash dividends and stock repurchases. Provident’s primary sources of funds consist of capital raised through dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. During fiscal 2024, the Corporation purchased 197,349 shares of the Corporation’s common stock with a weighted average cost of $13.05 per share. As of June 30, 2024, there are 189,116 shares available for purchase under the Corporation’s existing stock repurchase plan. The Corporation purchases the shares from time to time in the open market or through privately negotiated transactions depending on market conditions, the capital requirements of the Corporation, and available cash that can be allocated to the stock repurchase program, among other considerations. In addition, we currently expect to continue our current practice of paying quarterly cash dividends on our common stock subject to our Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Our current quarterly common stock dividend rate is $0.14 per share, as approved by our Board of Directors, which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of our cash to our shareholders. Assuming continued payment during fiscal 2025 at this rate of $0.14 per share, our average total dividend paid each quarter would be approximately $959,000 based on the number of our current outstanding shares as of June 30, 2024. At June 30, 2024, Provident (on an unconsolidated basis) had liquid assets of approximately $3.4 million.

The Bank, as a federally-chartered, federally insured savings bank, is subject to the capital requirements established by the OCC. Under the OCC's 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 weighting and other factors. In addition, Provident Financial Holdings, Inc., as a savings and loan holding company registered with the FRB, is required by the FRB to maintain capital adequacy that generally parallels the OCC requirements. Since the holding company has less than $3.0 billion in assets, the capital guidelines apply on a bank only basis, and the FRB expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations.

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At June 30, 2024, the Bank exceeded all regulatory capital requirements. Under the prompt corrective action provisions, minimum ratios of 5.0% for Tier 1 Leverage Capital, 6.5% for CET1 Capital, 8.0% for Tier 1 Risk-based Capital and 10.0% for Total Risk-based Capital are required to be deemed “well capitalized.” As of June 30, 2024, the Bank exceeded the capital ratios needed to be considered well capitalized with Tier 1 Leverage Capital, CET1 Capital, Tier 1 Risk-based Capital and Total Risk-based Capital ratios of 10.0%, 19.3%, 19.3% and 20.4%, respectively. See also, “Regulation – Federal Regulation of Savings Institutions – Capital Requirements” and Note 9, "Capital" of the Notes to Consolidated Financial Statements contained in Items 1 and 8 of this Form 10-K, respectively.

Impact of New Accounting Pronouncements

Various elements of the Corporation's accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, management has identified several accounting policies that, as a result of the judgments, estimates and assumptions inherent in those policies, are important to gain an understanding of the financial statements of the Corporation. These policies relate to the methodology for the recognition of interest income, determination of the provision for credit losses and the ACL, the estimated fair value of derivative financial instruments, the valuation of mortgage servicing assets and real estate owned and the provision for income taxes. These policies and judgments, estimates and assumptions are described in greater detail in this Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the section entitled “Organization and Summary of Significant Accounting Policies” contained in Note 1 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K. Management believes that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate based on the factual circumstances at the time. However, because of the sensitivity of the financial statements to these accounting policies, changes to the judgments, estimates and assumptions used could result in material differences in the results of operations or financial condition.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Quantitative Aspects of Market Risk. The Corporation does not maintain a trading account for any class of financial instrument nor does it purchase high-risk derivative financial instruments. Furthermore, the Corporation is not subject to foreign currency exchange rate risk or commodity price risk. The primary market risk that the Corporation faces is interest rate risk. For information regarding the sensitivity to interest rate risk of the Corporation's interest-earning assets and interest-bearing liabilities, see “Interest Rate Risk” below and Item 1, “Business - Lending Activities - Maturity of Loans Held for Investment,” “- Investment Securities Activities,” and “- Deposit Activities and Other Sources of Funds - Time Deposits by Remaining Maturity” in this Form 10-K.

Interest Rate Risk. One of the Corporation's principal financial objectives is to achieve long-term profitability while reducing its exposure to fluctuating interest rates. The Corporation, through the Corporation's Asset-Liability Committee, 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 Corporation's interest-earning assets by retaining for its portfolio new loan originations with interest rates subject to periodic adjustment to market conditions. In addition, the Corporation maintains an investment portfolio, which is largely comprised of U.S. government agency MBS and U.S. government sponsored enterprise MBS and CMO with contractual maturities of up to 30 years that reprice frequently or have a relatively short-average life. The Corporation relies on retail deposits as its primary source of funds while utilizing brokered certificates of deposit and FHLB - San Francisco advances as secondary sources of funding. Management believes retail deposits, unlike brokered certificates of deposit, 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 Corporation promotes transaction accounts and time deposits with terms up to seven years. For additional information, see Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.

Through the use of an internal interest rate risk model, the Corporation is able to analyze its interest rate risk exposure by measuring the change in net portfolio value (“NPV”) over a variety of interest rate scenarios. NPV is defined as the net present value of expected future 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 -300, -

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200, -100, +100, +200 and +300 basis points (“bp”) with no effect given to steps that management might take to counter the effect of the interest rate movement. As of June 30, 2024, the targeted federal funds rate range was 5.25% to 5.50%.

The following table sets forth as of June 30, 2024 the estimated changes in NPV based on the indicated interest rate environment (dollars in thousands):


	Net				Portfolio		NPV as Percentage
Basis Points ("bp")	Portfolio		NPV		Value of		of Portfolio Value		Sensitivity
Change in Rates	Value		Change⁽¹⁾		Assets		Assets⁽²⁾		Measure⁽³⁾
+300 bp	$	99,797	$	(29,127)	$	1,233,560	8.09	%	(203)	bp
+200 bp	$	114,840	$	(14,084)	$	1,252,262	9.17	%	(95)	bp
+100 bp	$	124,386	$	(4,538)	$	1,265,538	9.83	%	(29)	bp
-	$	128,924	$	—	$	1,273,858	10.12	%	—
-100 bp	$	136,297	$	7,373	$	1,285,088	10.61	%	49	bp
-200 bp	$	128,436	$	(488)	$	1,281,017	10.03	%	(9)	bp
-300 bp	$	129,438	$	514	$	1,286,155	10.06	%	(6)	bp

(1)Represents the (decrease) increase of the NPV at the indicated interest rate change in comparison to the NPV at June 30, 2024 (“base case”).

(2)Calculated as the NPV divided by the portfolio value of total assets.

(3)Calculated as the change in the NPV ratio (NPV as a Percentage of Portfolio Value Assets) from the base case amount assuming the indicated change in interest rates (expressed in basis points).

The following table is derived from the internal interest rate risk model and represents the change in the NPV at a +200 bp rate shock at June 30, 2024 and -200 bp rate shock at June 30, 2023 which has been determined to be the most detrimental to the interest rate risk of the Corporation in a -200, -100, +100 and +200 bp rate shock scenario:


	At June 30, 2024		At June 30, 2023
	(+200 bp rate shock)		(-200 bp rate shock)
Pre-Shock NPV Ratio: NPV as a % of PV Assets	10.12	%	9.29	%
Post-Shock NPV Ratio: NPV as a % of PV Assets	9.17	%	8.37	%
Sensitivity Measure: Change in NPV Ratio	-95	bp	-92	bp

The pre-shock NPV ratio increased 83 basis points to 10.12% at June 30, 2024 from 9.29% at June 30, 2023, and the post-shock NPV ratio increased 80 basis points to 9.17% (+200 basis point rate shock) at June 30, 2024 from 8.37% (-200 basis point rate shock) at June 30, 2023. The increase of the NPV ratios was primarily attributable to the net income in fiscal 2024 and amortization of stock-based compensation, partly offset by a $7.0 million cash dividend distribution from the Bank to the Corporation in September 2023, an $824,000 CECL adoption charged to equity, and increases in market interest rates. The sensitivity measure increased to 95 basis points at June 30, 2024 from 92 basis points at June 30, 2023.

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 periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. Additionally, certain assets, such as ARM loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from time deposits could likely deviate significantly from those assumed when calculating the results described in the tables above. It is also possible that, as a result of an interest rate increase, the higher mortgage payments required from ARM borrowers could result in an increase in delinquencies and defaults. Accordingly, the data presented in the tables in this section 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 Corporation, nor does it represent amounts that would be available for distribution to shareholders in the event of the liquidation of the Corporation.

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The Corporation measures and evaluates the potential effects of interest rate movements through an interest rate sensitivity "gap" analysis. Interest rate sensitivity reflects the potential effect on net interest income when there is movement in interest rates. For loans, securities and liabilities with contractual maturities, the table presents contractual repricing or scheduled maturity. For transaction accounts (checking, money market and savings deposits) that have no contractual maturity, the table presents estimated principal cash flows and, as applicable, the Corporation's historical experience, management's judgment and statistical analysis concerning their most likely withdrawal behaviors.

The following table represents the interest rate gap analysis of the Corporation's assets and liabilities as of June 30, 2024:


	Term to Contractual Repricing, Estimated Repricing, or Contractual
	Maturity⁽¹⁾
	As of June 30, 2024
				Greater than			Greater than			Greater than
	12 months or			1 year to 3			3 years to			5 years or
(Dollars In Thousands)	less			years			5 years			non-sensitive			Total

Repricing Assets:
Cash and cash equivalents	$	45,058		$	—		$	—		$	6,318		$	51,376
Investment securities		7,176			—			—			124,724			131,900
Loans held for investment		273,678			199,276			245,557			334,468			1,052,979
FHLB - San Francisco and other equity investments		10,108			—			—			—			10,108
Other assets		4,287			—			—			21,550			25,837
Total assets		340,307			199,276			245,557			487,060			1,272,200

Repricing Liabilities and Equity:
Checking deposits - noninterest-bearing		—			—			—			95,627			95,627
Checking deposits - interest bearing		38,194			76,387			76,387			63,656			254,624
Savings deposits		47,776			95,551			95,551			—			238,878
Money market deposits		12,662			12,662			—			—			25,324
Time deposits		245,713			23,383			3,545			1,254			273,895
Borrowings		145,500			78,000			15,000			—			238,500
Other liabilities		1,783			—			—			13,628			15,411
Stockholders' equity		—			—			—			129,941			129,941
Total liabilities and stockholders' equity		491,628			285,983			190,483			304,106			1,272,200

Repricing gap positive (negative)	$	(151,321)		$	(86,707)		$	55,074		$	182,954		$	—
Cumulative repricing gap:
Dollar amount	$	(151,321)		$	(238,028)		$	(182,954)		$	—		$	—
Percent of total assets		(12)	%		(19)	%		(14)	%		—	%		—	%

(1)

Cash and cash equivalents are presented as estimated repricing; investment securities and loans held for investment are presented as contractual maturities or contractual repricing (without consideration for prepayments); FHLB - San Francisco and other equity investments are presented as contractual repricing; transaction accounts (checking, savings and money market deposits) are presented as estimated repricing; and time deposits (without consideration for early withdrawals) and borrowings are presented as contractual maturities.

The static gap analysis under “12 months or less” duration, “Greater than 1 year to 3 years” duration and “Greater than 3 years to 5 years” duration show negative positions in the "Cumulative repricing gap - dollar amount" category, indicating more liabilities are sensitive to repricing than assets in the short and intermediate terms. Management views noninterest-bearing deposits to be the least sensitive to changes in market interest rates and these accounts are therefore characterized as long-term funding. Interest-bearing checking deposits are considered more sensitive, followed by increased sensitivity

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for savings and money market deposits. For the purpose of calculating gap, a portion of these interest-bearing deposit balances are assumed to be subject to estimated repricing as follows: interest-bearing checking deposits at 15% per year, savings deposits at 20% per year and money market deposits at 50% in the first and second years.

The gap results presented above could vary substantially if different assumptions are used or if actual experience differs from the assumptions used in the preparation of the gap analysis. Furthermore, the gap analysis provides a static view of interest rate risk exposure at a specific point in time without taking into account redirection of cash flows activity and deposit fluctuations.

The extent to which the net interest margin will be impacted by changes in prevailing interest rates will depend on a number of factors, including how quickly interest-earning assets and interest-bearing liabilities react to interest rate changes. It is not uncommon for rates on certain assets or liabilities to lag behind changes in the market rates of interest. Additionally, prepayments of loans and early withdrawals of time deposits could cause interest sensitivities to vary. As a result, the relationship between interest-earning assets and interest-bearing liabilities, as shown in the previous table, is only a general indicator of interest rate sensitivity and the effect of changing interest rates on net interest income. Results are likely to be different from that predicted solely on the basis of the interest rate sensitivity analysis set forth in the previous table.

The Corporation 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, among other items:

●

The Corporation’s current balance sheet and repricing characteristics;

●

Forecasted balance sheet growth consistent with the business plan;

●

Current interest rates and yield curves and management estimates of projected interest rates;

●

Embedded options, interest rate floors, periodic caps and lifetime caps;

●

Repricing characteristics for market rate sensitive instruments;

●

Loan, investment security, deposit and borrowing cash flows;

●

Loan prepayment estimates for each type of loan; and

●

Immediate, permanent and parallel movements in interest rates of +300, +200 +100, and -100, -200 and -300 bp.

The following table describes the results of the analysis at June 30, 2024 and 2023:


At June 30, 2024		At June 30, 2023
Basis Point (bp)	Change in	Basis Point (bp)	Change in
Change in Rates	Net Interest Income	Change in Rates	Net Interest Income
+300 bp	-8.12%	+300 bp	-10.56%
+200 bp	-3.45%	+200 bp	-5.26%
+100 bp	-0.51%	+100 bp	-1.95%
-100 bp	-0.67%	-100 bp	1.25%
-200 bp	-1.15%	-200 bp	-0.59%
-300 bp	-1.86%	-300 bp	-3.33%

At June 30, 2024, the Corporation was close to neutral with regard to the sensitivity of net interest income as projected net interest income declines slightly under rising or declining interest rates during the subsequent 12-month period.

At June 30, 2023, the Corporation was liability sensitive as its interest-bearing liabilities are expected to reprice more quickly than its interest-earning assets during the subsequent 12-month period. Therefore, in a rising interest rate environment, the model projects a decrease in net interest income over the subsequent 12-month period. In a falling interest rate environment, the results project an increase in net interest income over the subsequent 12-month period at the -100 basis point scenario and a decrease in net interest income over the subsequent 12-month period for the -200 and -300 basis point scenarios.

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

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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, particularly with respect to the 12-month business plan when asset growth is forecast. Therefore, the model results that the Corporation discloses should be thought of as a risk management tool to compare the trends of the Corporation’s current disclosure to previous disclosures, over time, within the context of the actual performance of the treasury yield curve.

Item 8. Financial Statements and Supplementary Data

Please refer to the Consolidated Financial Statements and Notes to Consolidated Financial Statements in this Form 10-K and incorporated into this Item 8 by reference.

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

None.

Item 9A. Controls and Procedures

An evaluation of the Corporation’s disclosure controls and procedures (as defined in Section 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934 (the “Act”)) was carried out under the supervision and with the participation of the Corporation’s Chief Executive Officer (principal executive officer), Chief Financial Officer (principal financial officer) and the Corporation’s Disclosure Committee as of the end of the period covered by this report. In designing and evaluating the Corporation’s disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Also, because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been detected. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures as of June 30, 2024 are effective, at the reasonable assurance level, in ensuring that the information required to be disclosed by the Corporation in the reports it files or submits under the Act is (i) accumulated and communicated to the Corporation’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There have been no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter year ended June 30, 2024, that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting. The Corporation does not expect that its internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance

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with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

Management Report on Internal Control Over Financial Reporting

This management report includes the subsidiary institution of Provident Financial Holdings, Inc. (the "Corporation"), Provident Savings Bank, F.S.B. which is subject to Part 363 in the statement of management's responsibilities; the report on management's assessment of compliance with the Federal laws and regulations pertaining to insider loans and the Federal and, if applicable, State laws and regulations pertaining to dividend restrictions; and the report on management's assessment of internal control over financial reporting.

Management of the Corporation is responsible for preparing the Corporation’s annual consolidated financial statements in accordance with generally accepted accounting principles; for establishing and maintaining an adequate internal control structure and procedures for financial reporting, including controls over the preparation of regulatory financial statements in accordance with the instructions for the Parent Company Only Financial Statements for Small Holding Companies (Form FR Y-9SP); and for complying with the Federal laws and regulations pertaining to insider loans and the Federal and, if applicable, State laws and regulations pertaining to dividend restrictions. The Corporation's internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

To comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, the Corporation designed and implemented a structured and comprehensive assessment process to evaluate its internal control over financial reporting across the enterprise. The assessment of the effectiveness of the Corporation's internal control over financial reporting was based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment of the Corporation's internal control over financial reporting was also conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), which include controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions for the Parent Company Only Financial Statements for Small Holding Companies (Form FR Y-9SP).

Because of its inherent limitations, including the possibility of human error and the circumvention of overriding controls, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on its assessment, management has concluded that, as of June 30, 2024, the Corporation's internal control over financial reporting, including controls over the preparation of regulatory financial statements in accordance with the instructions for the Parent Company Only Financial Statements for Small Holding Companies (Form FR Y-9SP), is effective based on the criteria established in Internal Control-Integrated Framework (2013).

Management of the Corporation has assessed the Corporation's compliance with the Federal laws and regulations pertaining to insider loans and the Federal and, if applicable, State laws and regulations pertaining to dividend restrictions during the fiscal year ended on June 30, 2024. Management has concluded that the Corporation complied with the Federal laws and regulations pertaining to insider loans and the Federal and, if applicable, State laws and regulations pertaining to dividend restrictions during the fiscal year ended on June 30, 2024.

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Date: August 30, 2024

	/s/ Donavon P. Ternes
	Donavon P. Ternes
	President and Chief Executive Officer


	/s/ Tam B. Nguyen
	Tam B. Nguyen
	Senior Vice President and Chief Financial Officer

Item 9B. Other Information

(a) None

(b) Trading Plans. During the quarter ended June 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Corporation adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

The information required by this item regarding the Corporation’s Board of Directors is incorporated herein by reference from the section captioned “Proposal I – Election of Directors” in the Corporation’s Proxy Statement, a copy of which will be filed with the Securities and Exchange Commission no later than 120 days after the Corporation’s fiscal year end.

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. For information regarding the Corporation’s executive officers, see Item 1, “Business - Executive Officers” in this Form 10-K, which is incorporated herein by reference.

Code of Ethics for Senior Financial Officers

The Corporation has adopted a 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 10-K for the fiscal year June 30, 2007, 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 of Ethics to the Corporation’s principal executive officer, principal financial and accounting officer, controller, or person performing similar functions, the Corporation will disclose the nature of such amendment or waiver on the Corporation’s website and in a report on Form 8-K.

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Audit Committee and Audit Committee Financial Expert

The Corporation has a separately-designated standing audit committee established in accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The audit committee consists of three independent directors of the Corporation: Judy A. Carpenter, Kathy M. Michalak and Matthew E. Webb. The Corporation has designated Judy A. Carpenter, Audit Committee Chair, as its audit committee financial expert. Ms. Carpenter is independent, as independence for audit committee members is defined under the listing standards of the NASDAQ Stock Market, is a Certified Public Accountant in California (inactive), has been in public accounting, and has extensive business knowledge, financial expertise and familiarity with our local market and communities.

Nominating Procedures

There have been no material changes to the procedures by which shareholders may recommend nominees to its Board of Directors since last disclosed to shareholders.

Item 11. Executive Compensation

The information required by this item is incorporated herein by reference from the sections captioned “Executive Compensation” and “Directors’ Compensation” in the Proxy Statement, a copy of which will be filed with the Securities and Exchange Commission no later than 120 days after the Corporation’s fiscal year end.

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

a)	Security Ownership of Certain Beneficial Owners.

The information required by this item is incorporated herein by reference from the section captioned “Security Ownership of Certain Beneficial Owners and Management” in the Corporation’s Proxy Statement, a copy of which will be filed with the Securities and Exchange Commission no later than 120 days after the Corporation’s fiscal year end.

b)	Security Ownership of Management.

The information required by this item is incorporated herein by reference from the sections captioned “Security Ownership of Certain Beneficial Owners and Management” in the Corporation’s Proxy Statement, a copy of which will be filed with the Securities and Exchange Commission no later than 120 days after the Corporation’s fiscal year end.

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.

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d)	Equity Compensation Plan Information.

The following table summarizes share and exercise price information regarding the Corporation's equity compensation plans as of June 30, 2024:


				Number of Securities
				Remaining Available for
	Number of Securities			Future Issuance Under
	to Be Issued Upon	Weighted Average		Equity Compensation
	Exercise of	Exercise Price of		Plans (Excluding
	Outstanding Options,	Outstanding Options,		Securities Reflected in
Plan Category	Warrants and Rights	Warrants and Rights		Column (a))
	(a)		(b)	(c)
Equity compensation plans approved by security holders:
2006 Equity Incentive Plan:
Stock Options	11,000	$	16.93	—
2010 Equity Incentive Plan:
Stock Options	158,000	$	15.65	—
2013 Equity Incentive Plan:
Stock Options	213,000	$	16.39	—
Restricted Stock	47,650		N/A	—
2022 Equity Incentive Plan:
Stock Options	98,000	$	12.44	77,000
Restricted Stock	129,000		N/A	69,000

Equity compensation plans not approved by security holders	N/A		N/A	N/A
Total	656,650	$	15.35	146,000

Item 13. Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions. The information required by this item is incorporated herein by reference from the section captioned “Board of Directors’ Meetings, Board Committees and Corporate Governance Matters - Corporate Governance - Certain Relationships and Related Transactions” in the Corporation’s Proxy Statement, a copy of which will be filed with the Securities and Exchange Commission no later than 120 days after the Corporation’s fiscal year end.

Director Independence. The information contained in the section captioned “Board of Directors’ Meetings, Board Committees and Corporate Governance Matters - Corporate Governance - Director Independence” is incorporated herein by reference in the Corporation’s Proxy Statement, a copy of which will be filed with the Securities and Exchange Commission no later than 120 days after the Corporation’s fiscal year end.

Item 14. Principal Accountant Fees and Services

The information required by this item is incorporated herein by reference from the section captioned “Proposal 3 - Ratification of Appointment of Independent Auditor” in the Corporation’s Proxy Statement, a copy of which will be filed with the Securities and Exchange Commission no later than 120 days after the Corporation’s fiscal year end.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) 1. Financial Statements

See Consolidated Financial Statements beginning on page 78 of this Form 10-K.

2. Financial Statement Schedules

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

(b) Exhibits

Exhibits are available from the Corporation by written request.

3.1	Amended and Restated Certificate of Incorporation of Provident Financial Holdings, Inc. as filed with the Delaware Secretary of State on November 24, 2009 (incorporated by reference to Exhibit 3.1 to the Corporation’s Quarterly Report on Form 10-Q filed on November 9, 2010)

3.2	Amended and Restated Bylaws of Provident Financial Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Corporation’s Current Report on Form 8-K filed on November 30, 2022)

4.1	Form of Certificate of Provident's Common Stock (incorporated by reference to the Corporation’s Registration Statement on Form S-1 (333-2230) filed on March 11, 1996))

4.2	Description of Capital Stock of Provident Financial Holdings, Inc. (incorporated by reference to Exhibit 4.2 to the Corporation’s Annual Report on Form 10-K for the year ended June 30, 2019)

10.1	Transition Agreement with Craig G. Blunden (incorporated by reference to Exhibit 10.13 to the Corporation’s Form 8-K dated October 31, 2023)

10.2	Post-Retirement Compensation Agreement with Craig G. Blunden (incorporated by reference to Exhibit 10.2 to the Corporation’s Form 8-K dated December 19, 2005)

10.3	Employment Agreement with Donavon P. Ternes (incorporated by reference to Exhibit 10.14 to the Corporation’s Form 8-K dated October 31, 2023)

10.4	Post-Retirement Compensation Agreement with Donavon P. Ternes (incorporated by reference to Exhibit 10.1 to the Corporation’s Form 8-K dated July 7, 2009)

10.5	Form of Amended Severance Agreement with Tam B. Nguyen, Robert "Scott" Ritter, Lilian Salter, David S. Weiant and Gwendolyn L. Wertz (incorporated by reference to Exhibit 10.3 to the Corporation’s Form 10-Q dated May 8, 2024)

10.6	2006 Equity Incentive Plan (incorporated by reference to Exhibit A to the Corporation’s proxy statement dated October 12, 2006)

10.7	Form of Incentive Stock Option Agreement for options granted under the 2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.10 in the Corporation’s Form 10-Q for the quarter ended December 31, 2006)

10.8	2010 Equity Incentive Plan (incorporated by reference to Exhibit A to the Corporation’s proxy statement dated October 28, 2010)

10.9	Form of Incentive Stock Option Agreement for options granted under the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 in the Corporation’s Form 8-K dated November 30, 2010)

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10.10	Form of Non-Qualified Stock Option Agreement for options granted under the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 in the Corporation’s Form 8-K dated November 30, 2010)

10.11	2013 Equity Incentive Plan (incorporated by reference to Exhibit A to the Corporation’s proxy statement dated October 24, 2013)

10.12	Form of Incentive Stock Option Agreement for options granted under the 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 in the Corporation’s Registration Statement on Form S-8 (333-192727) dated December 9, 2013)

10.13	Form of Non-Qualified Stock Option Agreement for options granted under the 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 in the Corporation’s Registration Statement on Form S-8 (333-192727) dated December 9, 2013)

10.14	Form of Restricted Stock Agreement for restricted shares awarded under the 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 in the Corporation’s Registration Statement on Form S-8 (333-192727) dated December 9, 2013)

10.15		2022 Equity Incentive Plan (incorporated by reference to Exhibit A to the Corporation’s proxy statement dated October 27, 2022)

10.16		Form of Incentive Stock Option Agreement for options granted under the 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 in the Corporation’s Form S-8 dated December 16, 2022)

10.17		Form of Non-Qualified Stock Option Agreement for options granted under the 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 in the Corporation’s Form S-8 dated December 16, 2022)

10.18		Form of Restricted Stock Agreement for restricted shares awarded under the 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 in the Corporation’s Form S-8 dated December 16, 2022)

13	2024 Annual Report to Stockholders

14.0	Code of Ethics for the Corporation’s directors, officers and employees (Registrant elects to satisfy Regulation S-K §229.406(c) by posting its Code of Ethics on its website at www.myprovident.com in the section titled About: Investor Relations.

21.1	Subsidiaries of the 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

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

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

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

97	Compensation Recovery Policy

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101	The following materials from the Corporation’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Statements of Financial Condition; (2) Consolidated Statements of Operations; (3) Consolidated Statements of Comprehensive Income; (4) Consolidated Statements of Stockholders’ Equity; (5) Consolidated Statements of Cash Flows; and (6) Selected Notes to Consolidated Financial Statements

104	The cover page from this Annual Report on Form 10-K for the year ended June 30, 2024, formatted in Inline XBRL and contained in Exhibit 101.

Item 16. Form 10-K Summary.

None.

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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.

Date:	August 30, 2024	Provident Financial Holdings, Inc.

		/s/ Donavon P. Ternes
		Donavon P. Ternes
		President and Chief Executive Officer

Pursuant to the requirements of 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/ Donavon P. Ternes	President and	August 30, 2024
Donavon P. Ternes	Chief Executive Officer (Principal Executive Officer)

/s/ Tam B. Nguyen	Senior Vice President and	August 30, 2024
Tam B. Nguyen	Chief Financial Officer (Principal Financial and Accounting Officer)

/s/ Craig G. Blunden	Chairman of the Board of Directors	August 30, 2024
Craig G. Blunden

/s/ Judy A. Carpenter	Director	August 30, 2024
Judy A. Carpenter

/s/ Debbi H. Guthrie	Director	August 30, 2024
Debbi H. Guthrie

/s/ Brian N. Hawley	Director	August 30, 2024
Brian N. Hawley

/s/ Kathy M. Michalak	Director	August 30, 2024
Kathy M. Michalak

/s/ William E. Thomas	Lead Director	August 30, 2024
William E. Thomas

/s/ Matthew E. Webb	Director	August 30, 2024
Matthew E. Webb

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Provident Financial Holdings, Inc.

Consolidated Financial Statements

Index

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)	76
Consolidated Statements of Financial Condition as of June 30, 2024 and 2023	78
Consolidated Statements of Operations for the fiscal years ended June 30, 2024 and 2023	79
Consolidated Statements of Comprehensive Income for the fiscal years ended June 30, 2024 and 2023	80
Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2024 and 2023	81
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2024 and 2023	82
Notes to Consolidated Financial Statements	83

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Provident Financial Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of Provident Financial Holdings, Inc. and subsidiary (the “Corporation”) as of June 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the two years in the period ended June 30, 2024, and the related (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of June 30, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses related to Qualitative Factors for Single Family Mortgage, Multifamily Mortgage, and Commercial Real Estate - Refer to Notes 1 and 3 to the Financial Statements

Critical Audit Matter Description

Management estimates the Corporation’s allowance for credit losses (“ACL”) Management calculates the quantitative portion of the collectively evaluated allowance for all loan categories using an average charge-off methodology. The Corporation primarily utilizes historical loss rates for the ACL based on its own specific historical losses and/or with peer loss history where applicable. Management considers whether additional or reduced allowance levels on collectively evaluated loans may be warranted, given the consideration of a variety of qualitative factors.

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The qualitative portion of the Corporation’s allowance on collectively evaluated loans are calculated using management judgment, to determine risk categorizations in each of the qualitative factors. The amount of qualitative allowance is also contingent upon the relative weighting of the qualitative factors according to management’s judgment.

Auditing the collectively evaluated loans of the Corporation’s ACL, specifically management’s qualitative loss factors for certain single-family, multi-family and commercial real estate loans, involved significant judgment. Given the management judgments required for the determination of risk categorization and relative weighting of qualitative factors, performing audit procedures to evaluate the Qualitative Factors in the ACL requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our credit specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the ACL included the following, among others:

●

We performed inquiries and examined documentation to understand management’s methodology and process in determining the qualitative factors in the ACL, including the key assumptions and relevant data utilized.

●

We involved our credit specialists to assist us in evaluating the reasonableness and conceptual soundness of the qualitative and methodologies applied by management.

●

We tested the design and implementation of controls over the (i) selection of the risk categorizations and relative weighting in each of the qualitative factors used as an input to the model and (ii) overall calculation and disclosure.

●

We evaluated the reasonableness of the ACL inputs, including management’s judgments and assumptions used in the development of the qualitative factors, including the directional consistency and magnitude of the qualitative factors applied, and the reasonableness of the period selected for the forecast and the associated economic factors identified by management.

●

We compared the Corporation’s ACL with benchmark data obtained independently to assess whether the ACL is within a reasonable range for specific loan categories.

/s/Deloitte & Touche LLP

Costa Mesa, California
August 30, 2024

We have served as the Corporation's auditor since 2001.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Consolidated Statements of Financial Condition


	June 30,		June 30,
(In Thousands, Except Share and Per Share Information)	2024		2023
Assets
Cash and cash equivalents	$	51,376	$	65,849
Investment securities - held to maturity, at cost with no allowance for credit losses		130,051		154,337
Investment securities - available for sale, at fair value with no allowance for credit losses		1,849		2,155
Loans held for investment, net of allowance for credit losses of $7,065 and $5,946, respectively; includes $1,047 and $1,312 of loans held at fair value, respectively; $861.1 million and $967.6 million pledged to Federal Home Loan Bank ("FHLB") - San Francisco, respectively; $178.6 million and $0 pledged to Federal Reserve Bank ("FRB") - San Francisco, respectively		1,052,979		1,077,629
Accrued interest receivable		4,287		3,711
FHLB - San Francisco and other equity investments, includes $540 and $0 of other equity investments at fair value, respectively		10,108		9,505
Premises and equipment, net		9,313		9,231
Prepaid expenses and other assets		12,237		10,531

Total assets	$	1,272,200	$	1,332,948

Liabilities and Stockholders’ Equity

Liabilities:
Noninterest-bearing deposits	$	95,627	$	103,007
Interest-bearing deposits		792,721		847,564
Total deposits		888,348		950,571

Borrowings		238,500		235,009
Accounts payable, accrued interest and other liabilities		15,411		17,681
Total liabilities		1,142,259		1,203,261

Commitments and Contingencies (Note 13)

Stockholders’ equity:
Preferred stock, $0.01 par value (2,000,000 shares authorized; none issued and outstanding)		—		—
Common stock, $0.01 par value; (40,000,000 shares authorized; 18,229,615 and 18,229,615 shares issued; 6,847,821 and 7,043,170 shares outstanding, respectively)		183		183
Additional paid-in capital		98,532		99,505
Retained earnings		209,914		207,274
Treasury stock at cost (11,381,794 and 11,186,445 shares, respectively)		(178,685)		(177,237)
Accumulated other comprehensive loss, net of tax		(3)		(38)

Total stockholders’ equity		129,941		129,687

Total liabilities and stockholders’ equity	$	1,272,200	$	1,332,948

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

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PROVIDENT FINANCIAL HOLDINGS, INC.

Consolidated Statements of Operations


	Fiscal Year Ended June 30,
(In Thousands, Except Per Share Information)	2024		2023
Interest income:
Loans receivable, net	$	50,194	$	42,191
Investment securities		2,060		2,169
FHLB - San Francisco and other equity investments		802		556
Interest-earning deposits		1,674		1,076
Total interest income		54,730		45,992

Interest expense:
Deposits		9,666		3,146
Borrowings		10,141		5,861
Total interest expense		19,807		9,007

Net interest income		34,923		36,985
(Recovery of) provision for credit losses		(63)		374
Net interest income, after (recovery of) provision for credit losses		34,986		36,611

Non-interest income:
Loan servicing and other fees		337		414
Deposit account fees		1,154		1,296
Card and processing fees		1,384		1,525
Other		1,066		840
Total non-interest income		3,941		4,075

Non-interest expense:
Salaries and employee benefits		17,642		17,737
Premises and occupancy		3,586		3,447
Equipment		1,309		1,152
Professional		1,530		1,517
Sales and marketing		709		622
Deposit insurance premium and regulatory assessments		780		657
Other		2,984		3,138
Total non-interest expense		28,540		28,270

Income before income taxes		10,387		12,416
Provision for income taxes		3,036		3,824
Net income	$	7,351	$	8,592

Basic earnings per share	$	1.06	$	1.20
Diluted earnings per share	$	1.06	$	1.19

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

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PROVIDENT FINANCIAL HOLDINGS, INC.

Consolidated Statements of Comprehensive Income


	Fiscal Year Ended June 30,
(In Thousands)	2024		2023
Net income	$	7,351	$	8,592

Change in unrealized holding gains (losses) on securities available for sale and interest-only strips		50		(57)
Less: Income tax expense (benefit)		15		(17)
Other comprehensive income (loss)		35		(40)
Total comprehensive income	$	7,386	$	8,552

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

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PROVIDENT FINANCIAL HOLDINGS, INC.

Consolidated Statements of Stockholders’ Equity


										Accumulated
										Other
	Common									Comprehensive
	Stock			Additional						Income (Loss),
(In Thousands, Except Share Information)	Shares	Amount		Paid-In Capital		Retained Earnings		Treasury Stock		Net of Tax			Total
Balance at June 30, 2022	7,285,184	$	183	$	98,826	$	202,680	$	(173,041)	$	2	$	128,650

Net income							8,592						8,592
Other comprehensive loss											(40)		(40)
Purchase of treasury stock⁽¹⁾	(335,764)								(4,648)				(4,648)
Awards for restricted stock	93,750				(479)				479				—
Forfeiture of restricted stock					27				(27)				—
Amortization of restricted stock, net of tax					1,109								1,109
Stock options expense, net of tax					76								76
Tax effect from stock-based compensation					(54)								(54)
Cash dividends⁽²⁾							(3,998)						(3,998)
Balance at June 30, 2023	7,043,170	$	183	$	99,505	$	207,274	$	(177,237)	$	(38)	$	129,687

Net income							7,351						7,351
Other comprehensive income											35		35
Purchase of treasury stock	(197,349)								(2,601)				(2,601)
Distribution of restricted stock	2,000												—
Awards for restricted stock					(1,183)				1,183				—
Forfeiture of restricted stock					30				(30)				—
Amortization of restricted stock, net of tax					203								203
Stock options expense, net of tax					37								37
Tax effect from stock-based compensation					(60)								(60)
Cash dividends⁽²⁾							(3,887)						(3,887)
Adoption of CECL standard							(824)						(824)
Balance at June 30, 2024	6,847,821	$	183	$	98,532	$	209,914	$	(178,685)	$	(3)	$	129,941

(1)	Includes the purchase of 33,045 shares of distributed restricted stock in fiscal 2023 in settlement of employees' withholding tax obligations.

(2)	Cash dividends of $0.56 per share were paid in both fiscal 2024 and 2023.

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

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PROVIDENT FINANCIAL HOLDINGS, INC.

Consolidated Statements of Cash Flows


	Fiscal Year Ended June 30,
(In Thousands)	2024		2023
Cash flows from operating activities:
Net income	$	7,351	$	8,592
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,155		3,188
(Recovery of) provision for credit losses		(63)		374
Net unrealized gain on other equity investments		(540)		—
Stock-based compensation		240		1,185
(Benefit) provision for deferred income taxes		(58)		1,231
(Decrease) increase in accounts payable, accrued interest and other liabilities		(2,399)		121
(Increase) decrease in prepaid expenses and other assets		(2,001)		1,634
Net cash provided by operating activities		5,685		16,325

Cash flows from investing activities:
Decrease (increase) in loans held for investment, net		22,604		(138,970)
Maturity of investment securities - held to maturity		—		400
Principal payments from investment securities - held to maturity		23,754		30,217
Principal payments from investment securities - available for sale		356		464
Purchase of FHLB - San Francisco stock		(63)		(1,266)
Purchase of premises and equipment		(1,589)		(741)
Net cash provided by (used for) investing activities		45,062		(109,896)

Cash flows from financing activities:
Decrease in deposits, net		(62,223)		(4,933)
Proceeds from long-term borrowings		85,500		65,000
Repayments of long-term borrowings		(30,009)		(30,000)
(Repayment of) proceeds from short-term borrowings, net		(52,000)		115,009
Treasury stock purchases		(2,601)		(4,648)
Withholding taxes on stock-based compensation		—		(424)
Cash dividends		(3,887)		(3,998)
Net cash (used for) provided by financing activities		(65,220)		136,006

Net (decrease) increase in cash and cash equivalents		(14,473)		42,435
Cash and cash equivalents at beginning of year		65,849		23,414
Cash and cash equivalents at end of year	$	51,376	$	65,849
Supplemental information:
Cash paid for interest	$	19,762	$	7,480
Cash paid for income taxes	$	3,090	$	2,725

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

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Note 1: Organization and Summary of Significant Accounting Policies

Basis of presentation

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.

Provident Savings Bank, F.S.B. (the “Bank”) converted from a federally chartered mutual savings bank to a federally chartered stock savings 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 Corporation has determined that it operates in one business segment through the Bank. The Bank's activities include attracting deposits, offering banking services and originating and purchasing single-family, multi-family, commercial real estate, construction and other mortgage loans and, to a lesser extent, commercial business and consumer loans held for investment. Deposits are collected primarily from 13 banking locations located in Riverside and San Bernardino counties in California. Additional activities may include originating saleable single-family loans, primarily fixed-rate first mortgages. Loans are primarily originated and purchased in California.

Use of estimates

The accounting and reporting policies of the Corporation conform to generally accepted accounting principles in the United States of America (“GAAP”). 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 credit losses, the valuation of investment securities, the valuation of loans held for investment at fair value, deferred tax assets, mortgage servicing assets, real estate owned and deferred compensation costs.

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.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and due from banks, as well as overnight deposits placed at the FRB – San Francisco and correspondent banks.

Investment securities

The Corporation classifies its qualifying investments as available for sale or held to maturity. The Corporation classifies investments as held to maturity when it has the ability and it is management’s positive intent to hold such securities to maturity. Securities 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 generally is determined based upon quoted market prices. Changes in net unrealized gains (losses) on debt securities available for sale are included in accumulated other comprehensive income, net of tax. Gains and losses on sale or dispositions of investment securities are 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 effective interest method.

The Corporation evaluates individual investment securities quarterly for impairment based on Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses,” which was adopted on July 1, 2023. The Corporation does not currently intend to sell any investment securities classified as held to maturity or available for sale and as such, records the investment security at book value or fair market value as prescribed by GAAP. As a part of the Corporation’s monthly risk assessment, the Corporation runs a number of stressed liquidity scenarios to determine if it is more likely than not that the Bank will be required to sell the investment security before the recovery of its amortized costs basis. These liquidity scenarios support the Corporation’s assessment that the Corporation has the ability to hold these held to maturity securities until maturity or available for sale securities until recovery of the amortized costs is realized and it is not more likely than not that the Corporation will be required to sell the securities prior to recovery of the amortized costs.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Loans held for investment

Loans held for investment consist of long-term single-family adjustable and fixed rate loans secured by single-family residences and multi-family and commercial real estate loans secured by commercial property, land and other residential properties, which the Corporation intends to hold for the foreseeable future. These loans are generally offered to customers and businesses located in California.

Net loan origination fees and certain direct origination expenses are deferred and amortized to interest income over the contractual life of the loan using the effective interest method. Amortization is discontinued for non-performing loans. Interest receivable represents primarily the current month’s interest, which will be included as a part of the borrower’s next monthly loan payment. Interest receivable is accrued only if deemed collectible. Loans are placed on non-performing status when they become 90 days past due. When a loan is placed on non-performing status, interest accrued but not received is reversed against interest income. Interest income on non-performing loans is subsequently recognized only to the extent that cash is received and the principal balance is deemed collectible. If the principal balance is not deemed collectible, the entire payment received (principal and interest) is applied to the outstanding loan balance. Non-performing loans that become current as to both principal and interest are returned to accrual status after demonstrating satisfactory payment history (usually six consecutive months) and when future payments are expected to be collectible.

Allowance for credit losses

The allowance for credit losses involves significant judgment and assumptions by management, which has a material impact on the carrying value of financial assets. The Corporation adopted ASC 326 using the prospective transition approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after July 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

Non-performing loans

The Corporation assesses loans individually and classifies them as non-performing when the accrual of interest has been discontinued, loans have been modified or management has serious doubts about the future collectability of principal and interest, even though the loans may currently be performing. Factors considered in determining classification include, but are not limited to, expected future cash flows, the financial condition of the borrower and current economic conditions. The Corporation measures each non-performing loan based on ASC 326, establishes a collectively evaluated or individually evaluated allowance, and charges off those loans or portions of loans deemed uncollectible. Loans identified to be individually evaluated have an allowance that is based upon the appraised value of the collateral, less selling costs or discounted cash flow with an appropriate default factor.

Real estate owned

Real estate acquired through foreclosure is initially recorded at the fair value of the real estate acquired, less estimated selling costs. Subsequent to foreclosure, the Corporation charges current earnings for estimated losses if the carrying value of the property exceeds its fair value. Gains or losses on the sale of real estate are recognized upon disposition of the property. Costs relating to improvement, maintenance and repairs of the property are expensed as incurred under gain (loss) on sale and operations of real estate owned acquired in the settlement of loans in the Consolidated Statements of Operations.

Impairment of long-lived assets

The 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. Long-lived assets include buildings, land, fixtures, furniture and equipment. An asset is considered impaired when the expected discounted 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.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Premises and equipment

Premises 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 to 5 years
Computer equipment		3 to 5 years

Leasehold improvements are amortized over the lesser of their respective lease terms or the useful life of the improvement, which ranges from one to 10 years. Maintenance and repair costs are charged to operations as incurred.

Income taxes

The Corporation accounts for income taxes in accordance with ASC 740, “Income Taxes.” ASC 740 requires the affirmative evaluation that it is more likely than not, based on the technical merits of a tax position, that an enterprise is entitled to economic benefits resulting from positions taken in income tax returns. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements.

ASC 740 requires that when determining the need for a valuation allowance against a deferred tax asset, management must assess both positive and negative evidence with regard to the realizability of the tax losses represented by that asset. To the extent available, if sources of taxable income are insufficient to absorb tax losses, a valuation allowance is necessary. Sources of taxable income for this analysis include prior years’ tax returns, the expected reversals of taxable temporary differences between book and tax income, prudent and feasible tax-planning strategies, and future taxable income. The deferred income tax asset related to the allowance for credit losses will be realized when actual charge-offs are made against the allowance. Based on the availability of loss carry-backs and projected taxable income during the periods for which loss carry-forwards are available, management believes it is more likely than not the Corporation will realize the deferred tax asset. The Corporation continues to monitor the deferred tax asset on a quarterly basis for a valuation allowance. The future realization of these tax benefits primarily hinges on adequate future earnings to utilize the tax benefit. Prospective earnings or losses, tax law changes or capital changes could prompt the Corporation to reevaluate the assumptions which may be used to establish a valuation allowance. As of June 30, 2024 and 2023, the estimated net deferred tax asset, which is included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition, was $606,000 and $218,000, respectively. The Corporation maintains net deferred tax assets for deductible temporary tax differences, such as loss reserves, deferred compensation, non-accrued interest and unrealized gains (losses), among other items. The increase in the net deferred tax asset resulted primarily from higher loss reserves and a decrease in deferred tax liabilities from lower net deferred loan costs. The Corporation did not have any liabilities for uncertain tax positions or any known unrecognized tax benefit at June 30, 2024 or 2023.

Bank owned life insurance ("BOLI")

ASC 715-60-35, "Accounting for Deferred Compensation and Post-retirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements," requires an employer to recognize obligations associated with endorsement split-dollar life insurance arrangements that extend into the participant’s post-employment benefit cost for the continuing life insurance or based on the future death benefit depending on the contractual terms of the underlying agreement. The Corporation adopted ASC 715-60-35 using the latter option, i.e., based on the future death benefit. The Bank purchases BOLI policies on the lives of certain executive officers while they are employed by the Bank and is the owner and beneficiary of the policies. The Bank invests in BOLI to provide an efficient form of funding for long-term retirement and other employee benefits costs. The Bank records these BOLI policies within prepaid expenses and other assets in the Consolidated Statements of Financial Condition at each policy’s respective cash surrender value, with net changes recorded in other non-interest income in the Consolidated Statements of Operations.

Cash dividend

A declaration or payment of dividends is at the discretion of the Corporation’s Board of Directors, who 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 current fiscal year and/or the preceding fiscal year in which the dividend is declared. For additional

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

information, see Note 18 of the Notes to Consolidated Financial Statements regarding the subsequent event related to the cash dividend.

Stock repurchases

The Corporation repurchased 197,349 shares of its common stock with an average cost of $13.05 per share during fiscal 2024 pursuant to its publicly announced stock repurchase plans. As of June 30, 2024, a total of 189,116 shares or 54% of the shares authorized for repurchase under the Corporation’s existing stock repurchase plan remain available to purchase until the plan expires on September 28, 2024.

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 any 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 as a result of the assumed exercise of stock options and the vesting of restricted stock. The computation of diluted EPS does not assume exercise of stock options and vesting of restricted stock that would have an anti-dilutive effect on EPS.

Stock-based compensation

ASC 718, “Compensation – Stock Compensation,” requires companies to recognize in the Consolidated Statements of Operations the grant-date fair value of stock options and other equity-based compensation issued to employees and directors. Stock-based compensation, inclusive of restricted stock expense, recognized in the Consolidated Statements of Operations for the fiscal years ended June 30, 2024 and 2023 was $240,000 and $1.2 million, respectively.

Employee Stock Ownership Plan ("ESOP")

The Corporation recognizes compensation expense when the Bank contributes funds to the ESOP for the purchase of the Corporation’s common stock to be allocated to the ESOP participants. Since the contributions are discretionary, the benefits payable under the ESOP cannot be estimated.

Restricted stock

The Corporation recognizes compensation expense over the vesting period of the shares awarded, equal to the fair value of the shares at the award date. A total of $203,000 and $1.1 million of restricted stock expense was amortized during fiscal 2024 and 2023, respectively.

Post-retirement benefits

The estimated obligation for post-retirement health care and life insurance benefits is determined based on an actuarial computation of the cost of current and future benefits for the eligible (grandfathered) retirees and employees. The post retirement benefit liability is included in accounts payable, accrued interest and other liabilities in the Consolidated Statements of Financial Condition. Effective July 1, 2003, the Corporation discontinued the post-retirement health care and life insurance benefits to any employee not previously qualified (grandfathered) for these benefits, unless included within an employment agreement. At June 30, 2024 and 2023, the accrued liability for post-retirement benefits was $450,000 and $270,000, respectively.

Comprehensive income

ASC 220, “Comprehensive Income,” requires that realized revenues, expenses, gains and losses be included in net income (loss). Unrealized gains (losses) on available for sale securities and interest-only strips are reported as a separate component of the stockholders’ equity section of the Consolidated Statements of Financial Condition and the change in the unrealized gains (losses) are reported on the Consolidated Statements of Comprehensive Income and Consolidated Statements of Stockholders’ Equity.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Accounting Standard Updates (“ASU”)

ASU 2023-09:

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires public business entities to annually (a) disclose specific categories in the rate reconciliation and (b) provide additional information for reconciling items that meet a quantitative threshold of equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Corporation is in the process of reviewing the impact of this ASU and has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.

ASU 2023-07:

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The key amendments include: (a) introducing a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”), (b) extending certain annual disclosures to interim periods, (c) clarifying that single reportable segment entities must apply ASC 280 in its entirety, (d) permitting more than one measure of segment profit or loss to be reported under certain conditions, and (e) requiring disclosure of the title and position of the CODM. This ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Corporation is in the process of reviewing the impact of this ASU and has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.

ASU 2020-04:

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU applies to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or other rate references expected to be discontinued as a result of reference rate reform. The ASU permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination. In January 2021, ASU 2021-01 clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the changes in the interest rates used for margining, discounting, or contract price alignment for derivative instruments that are being implemented as part of the market-wide transition to new reference rates (commonly referred to as the “discounting transition”). In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848. The FASB had originally included a sunset provision within Topic 848 based on expectations of when the LIBOR would cease being published. In March 2021, it was announced that the intended cessation date of LIBOR was extended to June 30, 2023. As a result, the FASB issued ASU 2022-06 deferring the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. This ASU is effective for all entities as of March 12, 2020 through December 31, 2024. As of June 30, 2023, the Corporation had approximately $469.4 million in loans held for investment with LIBOR indices. Beginning July 1, 2023, the Corporation started to transition these loans to Secured Overnight Financing Rate (“SOFR”) indices or other rate indices in accordance with the government agency guidelines. As of September 30, 2023, all loans held for investment with LIBOR indices had been transitioned to SOFR or other rate indices. The Corporation determined that the impact of the adoption of this ASU did not have a material impact to its consolidated financial statements.

ASU 2016-13:

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” and subsequent amendments to the initial guidance. On July 1, 2023, the Corporation adopted this ASU that replaced the incurred loss methodology with the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and applies to financial assets measured at amortized cost, including loans held for investment, held-to-maturity investment securities and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses (“ACL”).

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

In addition, CECL made changes to the accounting for available for sale investment securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell.

The Corporation adopted ASC 326, “Financial Instruments – Credit Losses,” and all related subsequent amendments using the prospective transition approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment of the adoption of CECL included an $1.2 million increase in the ACL, which is presented as a reduction to net loans held for investment. The Corporation recorded a net decrease to retained earnings of $824,000 as of July 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Results for reporting periods beginning after July 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

The Corporation adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to July 1, 2023. As of June 30, 2023, the Corporation did not have any other-than-temporary impaired investment securities. Therefore, upon adoption of ASC 326, the Corporation determined that an ACL on available for sale securities was not deemed necessary.

The following table illustrates the impact on the ACL from the adoption of ASC 326:


	Allowance for		Allowance		Impact to
	credit losses		before adoption		allowance after ASC
	under ASC 326		of ASC 326		326 adoption
(In Thousands)	(07/01/2023)		(06/30/2023)		(07/01/2023)
Assets:
Mortgage loans:
Single-family	$	6,325	$	1,720	$	4,605
Multi-family		656		3,270		(2,614)
Commercial real estate		82		868		(786)
Construction		62		15		47
Other		5		2		3
Commercial business loans		13		67		(54)
Consumer loans		—		4		(4)
ACL on loans	$	7,143	$	5,946	$	1,197

Liabilities:
Unfunded loan commitment reserve	$	42	$	42	$	—

In March 2022, FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures.” This ASU eliminates the concept and treatment of troubled debt restructurings (“TDR”) in relation to the adoption of the CECL model for the accounting for credit losses (see note above regarding ASU 2016-13). The new disclosure requirements are adopted in regards to loan modifications made to borrowers experiencing financial difficulties. The required disclosures regarding gross write-offs for financing receivables by year of origination and loan modifications are presented under Note 3 of the Notes to Consolidated Financial Statements. Subsequent to the adoption of ASC 326 on July 1, 2023, the Corporation did have any loan modifications for borrowers experiencing financial difficulties during fiscal 2024.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Note 2: Investment Securities

The amortized cost and estimated fair value of investment securities as of June 30, 2024 and 2023 were as follows:


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair		Carrying
June 30, 2024	Cost		Gains		(Losses)		Value		Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS⁽¹⁾	$	125,883	$	76	$	(15,481)	$	110,478	$	125,883
U.S. government sponsored enterprise CMO⁽²⁾		3,713		—		(253)		3,460		3,713
U.S. SBA securities⁽³⁾		455		—		—		455		455
Total investment securities - held to maturity		130,051		76		(15,734)		114,393		130,051

Available for sale
U.S. government agency MBS⁽¹⁾		1,222		—		(14)		1,208		1,208
U.S. government sponsored enterprise MBS⁽¹⁾		548		5		—		553		553
Private issue CMO⁽²⁾		91		—		(3)		88		88
Total investment securities - available for sale		1,861		5		(17)		1,849		1,849
Total investment securities	$	131,912	$	81	$	(15,751)	$	116,242	$	131,900

(1)	Mortgage-backed securities (“MBS”).

(2)	Collateralized mortgage obligations (“CMO”).

(3)	Small Business Administration ("SBA").


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair		Carrying
June 30, 2023	Cost		Gains		(Losses)		Value		Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS	$	149,803	$	—	$	(18,459)	$	131,344	$	149,803
U.S. government sponsored enterprise CMO		3,883		—		(336)		3,547		3,883
U.S. SBA securities		651		—		(1)		650		651
Total investment securities - held to maturity		154,337		—		(18,796)		135,541		154,337

Available for sale
U.S. government agency MBS		1,417		—		(47)		1,370		1,370
U.S. government sponsored enterprise MBS		697		—		(14)		683		683
Private issue CMO		103		—		(1)		102		102
Total investment securities - available for sale		2,217		—		(62)		2,155		2,155
Total investment securities	$	156,554	$	—	$	(18,858)	$	137,696	$	156,492

In fiscal 2024 and 2023, the Corporation received principal payments from its investment securities of $24.1 million and $30.7 million, respectively and did not sell any investment securities. The Corporation did not purchase any investment securities in fiscal 2024 and 2023.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

As of June 30, 2024 and 2023, the Corporation held investments with an unrealized loss position of $15.8 million and $18.9 million, respectively.


As of June 30, 2024	Unrealized Holding Losses				Unrealized Holding Losses				Unrealized Holding Losses
(In Thousands)	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Held to maturity
U.S. government sponsored enterprise MBS	$	—	$	—	$	105,530	$	15,481	$	105,530	$	15,481
U.S. government sponsored enterprise CMO		—		—		3,460		253		3,460		253
U.S. SBA securities		455	$	—		—		—		455		—
Total investment securities - held to maturity		455		—		108,990		15,734		109,445		15,734

Available for sale
U.S government agency MBS		91		—		1,117		14		1,208		14
U.S. government sponsored enterprise MBS		—		—		8		—		8		—
Private issue CMO		—		—		88		3		88		3
Total investment securities - available for sale		91		—		1,213		17		1,304		17
Total investment securities	$	546	$	—	$	110,203	$	15,751	$	110,749	$	15,751


As of June 30, 2023	Unrealized Holding Losses				Unrealized Holding Losses				Unrealized Holding Losses
(In Thousands)	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Held to maturity
U.S. government sponsored enterprise MBS	$	10,839	$	253	$	120,506	$	18,206	$	131,345	$	18,459
U.S. government sponsored enterprise CMO		—		—		3,547		336		3,547		336
U.S. SBA securities		650		1		—		—		650		1
Total investment securities - held to maturity		11,489		254		124,053		18,542		135,542		18,796

Available for sale
U.S government agency MBS		696		20		673		27		1,369		47
U.S. government sponsored enterprise MBS		87		2		558		12		645		14
Private issue CMO		—		—		102		1		102		1
Total investment securities - available for sale		783		22		1,333		40		2,116		62
Total investment securities	$	12,272	$	276	$	125,386	$	18,582	$	137,658	$	18,858

The Corporation evaluates individual investment securities quarterly for impairment based on ASC 326 since the adoption on July 1, 2023. At June 30, 2024, all of the $15.8 million of unrealized holding losses were in a loss position for 12 months or more, while at June 30, 2023, $18.6 million of the $18.9 million of unrealized holding losses were in a loss position for 12 months or more. The unrealized losses on investment securities were attributable to changes in interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities,

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

which are predominately U.S. government sponsored enterprise (GSE) securities that are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. Therefore, the Corporation has determined that the unrealized losses are due to the fluctuating nature of interest rates, and not related to any potential credit risks within the investment portfolio. The Bank does not currently intend to sell any investment securities classified as held to maturity or available for sale and as such, records the investment security at amortized cost or fair market value as prescribed by GAAP. As a part of the Corporation’s monthly risk assessment, the Corporation runs a number of stressed liquidity scenarios to determine if it is more likely than not that the Bank will be required to sell the investment security before the recovery of its amortized costs basis. These liquidity scenarios support the Corporation’s assessment that the Corporation has the ability to hold these held to maturity securities until maturity or available for sale securities until recovery of the amortized costs is realized and it is not more likely than not that the Corporation will be required to sell the securities prior to recovery of the amortized costs. There were no ACL or impairment on investment securities held to maturity and there was no impairment on investment securities available for sale at the adoption date of ASC 326 on July 1, 2023 and at June 30, 2024.

In order to maintain adequate liquidity, the Bank has established borrowing facilities with various counterparties. The Bank had a remaining borrowing capacity of $261.3 million as of June 30, 2024 at the FHLB of San Francisco. In addition, the Bank has secured an estimated $208.6 million discount window facility at the FRB of San Francisco collateralized by investment securities totaling $126.6 million and loans held for investment totaling $178.6 million as of June 30, 2024. As of June 30, 2024, the Bank also has an unsecured borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under the Federal Reserve discount window or correspondent bank facility as of June 30, 2024. The total available borrowing capacity across all sources totaled approximately $519.9 million at June 30, 2024.

At June 30, 2023, the Bank had a remaining borrowing capacity of $287.9 million at the FHLB of San Francisco. In addition, the Bank had secured an estimated $139.0 million discount window facility at the FRB of San Francisco collateralized by investment securities totaling $150.3 million at June 30, 2023. As of June 30, 2023, the Bank also had an unsecured borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under the Federal Reserve discount window or the correspondent bank facility as of June 30, 2023. The total available borrowing capacity across all sources totaled approximately $476.9 million at June 30, 2023.

At June 30, 2024 and 2023, the Corporation did not hold any investment securities held to maturity or investment securities available for sale with the intent to sell and determined it had the ability to hold these investment securities until maturity. It also determined that it was more likely than not that the Corporation would not be required to sell the securities prior to recovery of the amortized cost basis; therefore, no impairment losses were recorded on investment securities available for sale for fiscal years ended June 30, 2024 and 2023. In addition, no allowance for credit losses were recorded on investment securities held to maturity for the fiscal years ended June 30, 2024 and 2023.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Contractual maturities of investment securities as of June 30, 2024 and 2023 were as follows:


	June 30, 2024				June 30, 2023
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
(In Thousands)	Cost		Value		Cost		Value
Held to maturity
Due in one year or less	$	349	$	343	$	303	$	300
Due after one through five years		4,328		4,167		7,686		7,365
Due after five through ten years		49,331		44,830		61,043		54,686
Due after ten years		76,043		65,053		85,305		73,190
Total investment securities - held to maturity		130,051		114,393		154,337		135,541

Available for sale
Due in one year or less		—		—		—		—
Due after one through five years		—		—		—		—
Due after five through ten years		1,055		1,053		590		580
Due after ten years		806		796		1,627		1,575
Total investment securities - available for sale		1,861		1,849		2,217		2,155
Total investment securities	$	131,912	$	116,242	$	156,554	$	137,696

Note 3: Loans Held for Investment

Loans held for investment consisted of the following at June 30, 2024 and 2023:


(In Thousands)	June 30, 2024		June 30, 2023
Mortgage loans:
Single-family	$	518,091	$	518,821
Multi-family		445,182		461,113
Commercial real estate		83,349		90,558
Construction		2,692		1,936
Other		95		106
Commercial business loans		1,372		1,565
Consumer loans		65		65
Total loans held for investment, gross		1,050,846		1,074,164

Advance payments of escrows		102		148
Deferred loan costs, net		9,096		9,263
ACL on loans		(7,065)		(5,946)
Total loans held for investment, net	$	1,052,979	$	1,077,629

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following table sets forth information at June 30, 2024 regarding the dollar amount of loans held for investment that are contractually repricing during the periods indicated, segregated between adjustable rate loans and fixed rate loans. Fixed-rate loans comprised 10% and 11% of loans held for investment at June 30, 2024 and 2023, respectively. Adjustable rate loans having no stated repricing date that reprice when the index to which they are tied to reprices (e.g. prime rate index) and checking account overdrafts are reported as repricing within one year, subject to periodic and maximum rate caps. The table does not include any estimate of prepayments which may cause the Corporation’s actual repricing experience to differ materially from that shown.


	Adjustable Rate
			After		After		After
	Within		One Year		3 Years		5 Years
(In Thousands)	One Year		Through 3 Years		Through 5 Years		Through 10 Years		Fixed Rate		Total
Mortgage loans:
Single-family	$	54,686	$	30,234	$	104,979	$	219,436	$	108,756	$	518,091
Multi-family		180,464		144,227		115,785		4,612		94		445,182
Commercial real estate		33,863		24,241		24,018		—		1,227		83,349
Construction		2,692		—		—		—		—		2,692
Other		—		—		—		—		95		95
Commercial business loans		1,372		—		—		—		—		1,372
Consumer loans		65		—		—		—		—		65
Total loans held for investment, gross	$	273,142	$	198,702	$	244,782	$	224,048	$	110,172	$	1,050,846

The following tables present the Corporation’s commercial real estate loans by property type and LTV as of June 30, 2024 and 2023:


	Owner			Non-Owner			% of Total		Weighted
June 30, 2024	Occupied Loan			Occupied Loan		Total	Commercial		Average
(Dollars In Thousands)	Balance			Balance		Balance	Real Estate		LTV ⁽¹⁾
Office	$	6,690	$	20,084	$	26,774	32	%	43	%
Mixed use⁽²⁾		293		15,797		16,090	19		35	%
Retail		—		12,501		12,501	15		30	%
Warehouse		2,076		9,848		11,924	14		31	%
Medical/dental office		2,439		4,645		7,084	9		44	%
Mobile home park		—		6,909		6,909	8		38	%
Restaurant/fast food		690		500		1,190	2		46	%
Automotive - non gasoline		—		578		578	1		26	%
Live/work		—		299		299	—		13	%
Total commercial real estate	$	12,188	$	71,161	$	83,349	100	%	37	%

(1)Current loan balance as a percentage of the original appraised value.

(2)	Mixed use includes $6.9 million in Office/Retail, $4.7 million in Multi-family/Retail, $3.0 million in Other Mixed Use, $754,000 in Multi-family/Commercial and $685,000 in Multi-family/Office.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements


	Owner		Non-Owner				% of Total		Weighted
June 30, 2023	Occupied Loan		Occupied Loan			Total	Commercial		Average
(Dollars In Thousands)	Balance		Balance			Balance	Real Estate		LTV ⁽¹⁾
Office	$	9,283	$	23,915	$	33,198	37	%	44	%
Mixed use⁽²⁾		306		17,614		17,920	20		36	%
Retail		—		12,991		12,991	14		32	%
Warehouse		2,133		8,511		10,644	12		31	%
Mobile home park		—		7,057		7,057	8		39	%
Medical/dental office		1,117		5,524		6,641	7		50	%
Restaurant/fast food		—		1,014		1,014	1		24	%
Automotive - non gasoline		—		485		485	1		19	%
Live/work		—		337		337	—		15	%
Light industrial/manufacturing		—		271		271	—		8	%
Total commercial real estate	$	12,839	$	77,719	$	90,558	100	%	38	%

(1)	Current loan balance as a percentage of the original appraised value.

(2)	Mixed use includes $8.2 million in Office/Retail, $5.6 million in Multi-family/Retail, $3.4 million in Other Mixed Use and $700,000 in Multi-family/Office.

The following tables present the Corporation’s commercial real estate loans by geographic concentration as of June 30, 2024 and 2023:


	Inland				Southern				Other
June 30, 2024	Empire⁽¹⁾				California⁽²⁾				California				Total
(Dollars in Thousands)	Balance		%		Balance		%		Balance		%		Balance		%
Owner occupied:
Office	$	1,540	23	%	$	4,959	74	%	$	191	3	%	$	6,690	100	%
Mixed use		—	—	%		—	—	%		293	100	%		293	100	%
Warehouse		—	—	%		1,689	81	%		387	19	%		2,076	100	%
Medical/dental office		276	11	%		1,791	74	%		372	15	%		2,439	100	%
Restaurant/fast food		—	—	%		690	100	%		—	—	%		690	100	%
Total owner occupied		1,816	15	%		9,129	75	%		1,243	10	%		12,188	100	%

Non-owner occupied:
Office		2,951	15	%		13,837	69	%		3,296	16	%		20,084	100	%
Mixed use		505	3	%		6,243	40	%		9,049	57	%		15,797	100	%
Retail		1,050	8	%		6,996	56	%		4,455	36	%		12,501	100	%
Warehouse		605	6	%		4,774	49	%		4,469	45	%		9,848	100	%
Mobile home park		4,859	70	%		358	5	%		1,692	25	%		6,909	100	%
Medical/dental office		1,797	39	%		2,159	46	%		689	15	%		4,645	100	%
Automotive - non gasoline		—	—	%		578	100	%		—	—	%		578	100	%
Restaurant/fast food		—	—	%		500	100	%		—	—	%		500	100	%
Live/work		—	—	%		—	—	%		299	100	%		299	100	%
Total non-owner occupied		11,767	16	%		35,445	50	%		23,949	34	%		71,161	100	%

Total commercial real estate	$	13,583	16	%	$	44,574	54	%	$	25,192	30	%	$	83,349	100	%

(1)Inland Empire comprised of San Bernardino and Riverside counties.

(2)Other than the Inland Empire.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements


	Inland				Southern				Other
June 30, 2023	Empire⁽¹⁾				California⁽²⁾				California				Total
(Dollars in Thousands)	Balance		%		Balance		%		Balance		%		Balance		%
Owner occupied:
Office	$	2,649	29	%	$	6,436	69	%	$	198	2	%	$	9,283	100	%
Mixed use		—	—	%		—	—	%		306	100	%		306	100	%
Warehouse		—	—	%		1,733	81	%		400	19	%		2,133	100	%
Medical/dental office		281	25	%		453	41	%		383	34	%		1,117	100	%
Total owner occupied		2,930	23	%		8,622	67	%		1,287	10	%		12,839	100	%

Non-owner occupied:
Office		4,420	18	%		14,767	62	%		4,728	20	%		23,915	100	%
Mixed use		660	4	%		7,292	41	%		9,662	55	%		17,614	100	%
Retail		1,076	8	%		7,353	57	%		4,562	35	%		12,991	100	%
Warehouse		623	7	%		5,690	67	%		2,198	26	%		8,511	100	%
Mobile home park		4,967	70	%		364	5	%		1,726	25	%		7,057	100	%
Medical/dental office		1,910	35	%		3,325	60	%		289	5	%		5,524	100	%
Restaurant/fast food		—	—	%		1,014	100	%		—	—	%		1,014	100	%
Automotive - non gasoline		—	—	%		485	100	%		—	—	%		485	100	%
Live/work		—	—	%		—	—	%		337	100	%		337	100	%
Light industrial/ manufacturing		—	—	%		271	100	%		—	—	%		271	100	%
Total non-owner occupied		13,656	18	%		40,561	52	%		23,502	30	%		77,719	100	%

Total commercial real estate	$	16,586	18	%	$	49,183	54	%	$	24,789	28	%	$	90,558	100	%

(1)Other than the Inland Empire.

The Corporation has developed an internal loan grading system to evaluate and quantify loans held for investment with respect to quality and risk. Management continually evaluates the credit quality of the loan portfolio and conducts a quarterly review of the adequacy of the ACL. The Corporation has adopted an internal risk rating policy in which each loan is rated for credit quality with a rating of pass, special mention, substandard, doubtful or loss.

The two primary components that are used during the loan review process to determine the proper allowance levels are individually evaluated allowances and collectively evaluated allowances. The collectively evaluated allowance is based on a pooling method for groups of homogeneous loans sharing similar loan characteristics to calculate an allowance which reflects an estimate of lifetime expected credit losses using historical experience, current conditions, and reasonable and supportable forecasts. Loans identified to be individually evaluated have an allowance that is based upon the appraised value of the collateral, less selling costs or discounted cash flow with an appropriate default factor.

The Corporation categorizes all loans held for investment into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades is as follows:

●

Pass – A pass loan ranges from minimal credit risk to average, but still acceptable, credit risk. The likelihood of loss is considered remote.

●

Special Mention - A special mention loan has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the Corporation is currently protected and loss is considered unlikely and not imminent.

●

Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

●

Doubtful - A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

●

Loss - A loss loan is considered uncollectible and of such little value that continuance as an asset of the Corporation is not warranted.

The following table presents the Corporation’s recorded investment in loans by risk categories and gross charge-offs by year of origination as of June 30, 2024:


June 30, 2024	Term Loans by Year of Origination												Revolving
(In Thousands)	2024		2023		2022		2021		2020		Prior		Loans		Total
Mortgage loans:
Single-family:
Pass	$	19,476	$	60,688	$	205,817	$	149,084	$	19,606	$	59,702	$	14	$	514,387
Special Mention		-		-		-		-		-		1,111		-		1,111
Substandard		-		-		-		-		-		2,593		-		2,593
Total single-family		19,476		60,688		205,817		149,084		19,606		63,406		14		518,091
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Multi-family:
Pass		10,374		28,892		75,876		86,916		60,938		180,119		-		443,115
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		478		-		1,589		-		2,067
Total multi-family		10,374		28,892		75,876		87,394		60,938		181,708		-		445,182
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial real estate:
Pass		3,874		13,763		23,298		4,018		5,450		32,946		-		83,349
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total commercial real estate		3,874		13,763		23,298		4,018		5,450		32,946		-		83,349
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Construction:
Pass		1,480		228		984		-		-		-		-		2,692
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total construction		1,480		228		984		-		-		-		-		2,692
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Other:
Pass		-		-		-		-		95		-		-		95
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total other		-		-		-		-		95		-		-		95
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial business loans:
Pass		-		-		133		-		-		-		1,239		1,372
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total commercial business loans		-		-		133		-		-		-		1,239		1,372
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer loans:
Not graded		23		-		-		-		-		-		-		23
Pass		-		-		-		-		-		-		42		42
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total consumer loans		23		-		-		-		-		-		42		65
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total loans held for investment, gross	$	35,227	$	103,571	$	306,108	$	240,496	$	86,089	$	278,060	$	1,295	$	1,050,846
Total current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following table presents the Corporation’s recorded investment in loans by risk categories by year of origination as of June 30, 2023:


June 30, 2023	Term Loans by Year of Origination												Revolving
(In Thousands)	2023		2022		2021		2020		2019		Prior		Loans		Total
Mortgage loans:
Single-family:
Pass	$	51,378	$	216,989	$	157,015	$	20,741	$	11,793	$	59,451	$	32	$	517,399
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		251		-		1,171		-		1,422
Total single-family		51,378		216,989		157,015		20,992		11,793		60,622		32		518,821
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Multi-family:
Pass		17,429		77,956		90,926		65,127		59,709		149,456		-		460,603
Special Mention		-		-		510		-		-		-		-		510
Substandard		-		-		-		-		-		-		-		-
Total multi-family		17,429		77,956		91,436		65,127		59,709		149,456		-		461,113
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial real estate:
Pass		8,586		23,815		5,527		6,525		9,981		35,577		-		90,011
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		547		-		547
Total commercial real estate		8,586		23,815		5,527		6,525		9,981		36,124		-		90,558
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Construction:
Pass		94		726		1,116		-		-		-		-		1,936
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total construction		94		726		1,116		-		-		-		-		1,936
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Other:
Pass		-		-		-		106		-		-		-		106
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total other		-		-		-		106		-		-		-		106
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial business loans:
Pass		-		171		-		-		-		-		1,394		1,565
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total commercial business loans		-		171		-		-		-		-		1,394		1,565
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer loans:
Not graded		15		-		-		-		-		-		-		15
Pass		-		-		-		-		-		-		50		50
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total consumer loans		15		-		-		-		-		-		50		65
Current period gross charge-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total loans held for investment, gross	$	77,502	$	319,657	$	255,094	$	92,750	$	81,483	$	246,202	$	1,476	$	1,074,164
Total current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

As required by ASC 326, on July 1, 2023 the Corporation implemented CECL and recognized a $1.2 million one-time increase to its ACL. Under ASC 326, the ACL is a valuation account that is deducted from the related loans’ amortized cost basis to present the net amount expected to be collected on the loans. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Corporation’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL trued-up through an entry to the provision for (recovery of) credit losses. Management calculates the quantitative portion of the collectively evaluated allowance for all loan categories using an average charge-off or loss rate methodology and generally evaluates collectively evaluated loans by Call Report code in order to group and determine portfolio loan segments with similar risk characteristics. The Corporation primarily utilizes historical loss rates for the CECL calculation based on its own specific historical losses and/or with peer loss history where applicable.

For its reasonable and supportable forecasting of current expected credit losses, the Corporation utilizes a regression model using forecasted economic metrics and historical loss data. The regression model utilized upon implementation of CECL on July 1, 2023, and as of June 30, 2024, relied upon reasonable and supportable 12-month forecasts of the National Unemployment Rate and change in the Real Gross Domestic Product, after which it reverts to a historical loss rate. Management selected the National Unemployment Rate and the Real Gross Domestic Product as the drivers of the forward look component of the collectively evaluated allowance, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts, including the quarterly Federal Open Market Committee forecast, and the widespread familiarity of these economic metrics.

●

Changes in the experience, ability, and depth of lending management and other relevant staff.

●

Changes in the value of underlying collateral for collateral-dependent loans.

●

The existence and effect of any concentrations of credit, and changes in the level of such concentrations.

●

The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution's existing portfolio.

●

Changes in the volume and severity of past due loans, the volume of non-performing loans, and the volume and severity of adversely classified or graded loans.

●

Changes in the quality of the Corporation’s loan review system.

●

Changes in the nature, volume and terms of loans in the portfolio.

●

Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.

The qualitative portion of the Corporation’s allowance on collectively evaluated loans are calculated using management judgment, to determine risk categorizations in each of the Q-factors presented above. The amount of qualitative allowance is also contingent upon the relative weighting of the Q-factors according to management’s judgment.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Loans that do not share similar risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable or the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date, less selling costs.

Accrued interest receivable for loans is included in accrued interest receivable in the Consolidated Statements of Financial Condition. The Corporation elected not to measure an allowance for accrued interest receivable and instead elected to reverse accrued interest income on loans that are placed on non-performing status. A loan is deemed non-performing when it is 90 days or more delinquent. The Corporation believes this policy results in the timely reversal of potentially uncollectible interest.

Pursuant to ASU 2022-02, “Troubled Debt Restructurings and Vintage Disclosures,” the Corporation may agree to different types of modifications, including principal forgiveness, interest rate reductions, term extension, significant payment delay or any combination of modifications noted above. During the fiscal year ended June 30, 2024, there were no loan modifications to borrowers experiencing financial difficulties.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following tables summarize the Corporation’s ACL and recorded investment in gross loans, by portfolio type, at the dates and for the years indicated.


	Year Ended June 30, 2024
							Commercial									Commercial
(In Thousands)	Single-family			Multi-family			Real Estate			Construction			Other Mortgage			Business			Consumer			Total
ACL:
ACL, beginning of period	$	1,720		$	3,270		$	868		$	15		$	2		$	67		$	4		$	5,946
Adjustment to ACL for adoption of ASC 326		4,605			(2,614)			(786)			47			3			(54)			(4)			1,197
(Recovery of) provision for credit losses		(30)			(61)			(16)			35			(4)			(2)			—			(78)
Recoveries		—			—			—			—			—			—			—			—
Charge-offs		—			—			—			—			—			—			—			—
ACL, end of period	$	6,295		$	595		$	66		$	97		$	1		$	11		$	—		$	7,065

ACL:
Individually evaluated for allowances	$	37		$	—		$	—		$	—		$	—		$	—		$	—		$	37
Collectively evaluated for allowances		6,258			595			66			97			1			11			—			7,028
ACL, end of period	$	6,295		$	595		$	66		$	97		$	1		$	11		$	—		$	7,065

Loans held for investment:
Individually evaluated for allowances	$	1,134		$	—		$	—		$	—		$	—		$	—		$	—		$	1,134
Collectively evaluated for allowances		516,957			445,182			83,349			2,692			95			1,372			65			1,049,712
Total loans held for investment, gross	$	518,091		$	445,182		$	83,349		$	2,692		$	95		$	1,372		$	65		$	1,050,846
ACL on loans as a percentage of gross loans held for investment		1.22	%		0.13	%		0.08	%		3.60	%		1.05	%		0.80	%		—	%		0.67	%
Net (recoveries) charge-offs to average loans receivable, net during the period		—	%		—	%		—	%		—	%		—	%		—	%		—	%		—	%


	Year Ended June 30, 2023
							Commercial									Commercial
(In Thousands)	Single-family			Multi-family			Real Estate			Construction			Other Mortgage			Business			Consumer			Total
ACL:
ACL, beginning of period	$	1,383		$	3,282		$	816		$	23		$	3		$	52		$	5		$	5,564
Provision for (recovery of) credit losses		329			(12)			52			(8)			(1)			15			(1)			374
Recoveries		8			—			—			—			—			—			—			8
Charge-offs		—			—			—			—			—			—			—			—
ACL, end of period	$	1,720		$	3,270		$	868		$	15		$	2		$	67		$	4		$	5,946

ACL:
Individually evaluated for allowances	$	37		$	—		$	—		$	—		$	—		$	—		$	—		$	37
Collectively evaluated for allowances		1,683			3,270			868			15			2			67			4			5,909
ACL, end of period	$	1,720		$	3,270		$	868		$	15		$	2		$	67		$	4		$	5,946

Loans held for investment:
Individually evaluated for allowances	$	996		$	—		$	—		$	—		$	—		$	—		$	—		$	996
Collectively evaluated for allowances		517,825			461,113			90,558			1,936			106			1,565			65			1,073,168
Total loans held for investment, gross	$	518,821		$	461,113		$	90,558		$	1,936		$	106		$	1,565		$	65		$	1,074,164
ACL on loans as a percentage of gross loans held for investment		0.33	%		0.71	%		0.96	%		0.77	%		1.89	%		4.28	%		6.15	%		0.55	%
Net (recoveries) charge-offs to average loans receivable, net during the period		(0.00)	%		—	%		—	%		—	%		—	%		—	%		—	%		(0.00)	%

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following summarizes the components of the net change in the allowance for credit losses for the years indicated:


	Year Ended June 30,
(In Thousands)	2024		2023

Balance, beginning of year	$	5,946	$	5,564
Adjustment to ACL for adoption of ASC 326		1,197		—
(Recovery of) provision for credit losses		(78)		374
Recoveries		—		8
Charge-offs		—		—
Balance, end of year	$	7,065	$	5,946

The following tables identify the Corporation’s total recorded investment in non-performing loans by type at the dates and for the periods indicated. Generally, a loan is placed on non-performing status when it becomes 90 days past due as to principal or interest or after considering economic and business conditions and collection efforts, where the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. In addition, interest income is not recognized on any loan where management has determined that collection is not reasonably assured. A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current, the borrower(s) has demonstrated sustained payment performance and future monthly principal and interest payments are expected to be collected on a timely basis. Loans with a related allowance have been (a) collectively evaluated using a pooling method analysis or (b) individually evaluated using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell, to establish realizable value. This analysis may identify a specific allowance amount needed or may conclude that no allowance is needed.


	At or For the Year Ended June 30, 2024
	Unpaid								Net		Average		Interest
	Principal		Related		Recorded				Recorded		Recorded		Income
(In Thousands)	Balance		Charge-offs		Investment		ACL⁽¹⁾		Investment		Investment		Recognized

Mortgage loans:
Single-family:
With a related allowance	$	2,267	$	—	$	2,267	$	(73)	$	2,194	$	1,627	$	96
Without a related allowance⁽²⁾		427		(25)		402		—		402		444		23
Total single-family loans		2,694		(25)		2,669		(73)		2,596		2,071		119

Total non-performing loans	$	2,694	$	(25)	$	2,669	$	(73)	$	2,596	$	2,071	$	119

(1)	ACL, specifically assigned to the individual loan.

(2)	There was no related ACL because the loans were charged-off to their fair value or the fair value of the collateral was higher than the loan balance.


	At or For the Year Ended June 30, 2023
	Unpaid								Net		Average		Interest
	Principal		Related		Recorded				Recorded		Recorded		Income
(In Thousands)	Balance		Charge-offs		Investment		ACL⁽¹⁾		Investment		Investment		Recognized

Mortgage loans:
Single-family:
With a related allowance	$	1,171	$	—	$	1,171	$	(122)	$	1,049	$	996	$	42
Without a related allowance⁽²⁾		276		(25)		251		—		251		112		—
Total single-family loans		1,447		(25)		1,422		(122)		1,300		1,108		42

Total non-performing loans	$	1,447	$	(25)	$	1,422	$	(122)	$	1,300	$	1,108	$	42

(1)	ACL, specifically assigned to the individual loan.

(2)	There was no related ACL because the loans were charged-off to their fair value or the fair value of the collateral was higher than the loan balance.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

At June 30, 2024 and 2023, there were no commitments to lend additional funds to those borrowers whose loans were classified as non-performing.

During the fiscal years ended June 30, 2024 and 2023, the Corporation’s average investment in non-performing loans was $2.1 million and $1.1 million, respectively. The Corporation records payments on non-performing loans utilizing the cash basis or cost recovery method of accounting during the periods when the loans are on non-performing status. For the fiscal year ended June 30, 2024, the Corporation received $119,000 in interest payments from non-performing loans, all of which was recognized as interest income and none was applied to reduce the loan balances under the cost recovery method. In comparison, for the fiscal year ended June 30, 2023, the Bank received $49,000 in interest payments from non-performing loans, of which $42,000 was recognized as interest income. The remaining $7,000 was applied to reduce the loan balances under the cost recovery method.

As outlined in the implementation of ASC 326, the Bank includes the off-balance sheet reserve for unfunded loan commitments within the provision for (recovery of) credit losses.

The following table provides information regarding the unfunded loan commitment reserve for the fiscal years ended June 30, 2024 and 2023.


	Year Ended
	June 30,
(In Thousands)	2024		2023
Balance, beginning of the year	$	42	$	130
Impact of ASC 326 CECL adoption		—		—
Provision for (recovery of) credit losses		15		(88)
Balance, end of the year	$	57	$	42

The method for calculating the unfunded commitment reserve is based on a historical funding rate applied to the undisbursed loan amount to estimate an average outstanding amount during the life of the loan commitment. The Corporation applies the same assumptions and methodologies by loan groupings to these unfunded loan commitments as it does for its funded loans held for investment to determine the reserve rate and the allowance. Assumptions are evaluated by management periodically as part of the CECL procedures. The unfunded loan commitment reserve is recorded in accounts payable, accrued interest and other liabilities in the Consolidated Statements of Financial Condition.

The following tables provide information on the past due status of the Corporation’s loans held for investment, gross, at the dates indicated.


	June 30, 2024
			30-89 Days Past				Total Loans Held for
(In Thousands)	Current		Due		Non-Accrual⁽¹⁾		Investment, Gross

Mortgage loans:
Single-family	$	515,498	$	—	$	2,593	$	518,091
Multi-family		445,182		—		—		445,182
Commercial real estate		83,349		—		—		83,349
Construction		2,692		—		—		2,692
Other		95		—		—		95
Commercial business loans		1,372		—		—		1,372
Consumer loans		64		1		—		65
Total loans held for investment, gross	$	1,048,252	$	1	$	2,593	$	1,050,846

(1)	All loans 90 days or greater past due are placed on non-accrual status.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements


	June 30, 2023
			30-89 Days Past				Total Loans Held for
(In Thousands)	Current		Due		Non-Accrual⁽¹⁾		Investment, Gross

Mortgage loans:
Single-family	$	517,399	$	—	$	1,422	$	518,821
Multi-family		461,113		—		—		461,113
Commercial real estate		90,558		—		—		90,558
Construction		1,936		—		—		1,936
Other		106		—		—		106
Commercial business loans		1,565		—		—		1,565
Consumer loans		64		1		—		65
Total loans held for investment, gross	$	1,072,741	$	1	$	1,422	$	1,074,164

(1)	All loans 90 days or greater past due are placed on non-accrual status.

In the ordinary course of business, the Bank may offer loans to its directors, officers and employees on substantially the same terms prevailing at the time of origination for comparable transactions with unaffiliated borrowers. During fiscal 2024 and 2023, there were no related-party loan activities and as of June 30, 2024 and 2023, there were no outstanding related-party loans.

Note 4: Leases

The Corporation accounts for its leases in accordance with ASC 842, which was implemented on July 1, 2019, and requires the Corporation to record liabilities for future lease obligations as well as assets representing the right to use the underlying leased assets. The Corporation’s leases primarily represent future obligations to make payments for the use of buildings, space or equipment for its operations. Liabilities to make future lease payments are recorded in accounts payable, accrued interest and other liabilities, while right-of-use assets are recorded in premises and equipment in the Consolidated Statements of Financial Condition. At June 30, 2024, all the Corporation’s leases were classified as operating leases and the Corporation did not have any operating leases with an initial term of 12 months or less (“short-term leases”).

Liabilities to make future lease payments and right-of-use assets are recorded for operating leases and do not include short-term leases. These liabilities and right-of-use assets are determined based on the total contractual base rents for each lease, which include options to extend or renew each lease, where applicable, and where the Corporation believes it has an economic incentive to extend or renew the lease. Since lease extensions are not reasonably certain, the Corporation generally does not recognize payments occurring during option periods in the calculation of its operating right-of-use lease assets and operating lease liabilities. The Bank utilizes the FHLB - San Francisco interest rates as a discount rate for each of the remaining contractual terms at the adoption date as well as for future leases if the discount rate is not stated in the lease. For leases that contain variable lease payments, the Corporation assumes future lease payment escalations based on a lease payment escalation rate specified in the lease or the specified index rate observed at the time of lease commencement. Liabilities to make future lease payments are accounted for using the interest method, being reduced by periodic contractual lease payments net of periodic interest accretion. Right-of-use assets for operating leases are amortized over the term of the associated lease by amounts that represent the difference between periodic straight-line lease expense and periodic interest accretion in the related liability to make future lease payments.

For the fiscal years ended June 30, 2024 and 2023, expenses associated with the Corporation’s leases totaled $927,000 and $882,000, respectively, and were recorded in premises and occupancy expenses and equipment expenses in the Consolidated Statements of Operations.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following table presents supplemental information related to operating leases at the date and for the years indicated:


	As of June 30,
(In Thousands)	2024			2023
Consolidated Statements of Condition:
Premises and equipment - Operating lease right of use assets	$	1,356	$	2,147
Accounts payable, accrued interest and other liabilities – Operating lease liabilities	$	1,407	$	2,169


	Year Ended June 30,
		2024		2023
Consolidated Statements of Operations:
Premises and occupancy expenses from operating leases⁽¹⁾	$	789	$	787
Equipment expenses from operating leases⁽¹⁾		138		95
Total lease expense	$	927	$	882

Consolidated Statements of Cash Flows:
Operating cash flows from operating leases, net	$	884	$	879

(1)	Includes immaterial variable lease costs.

The following table provides information related to remaining minimum contractual lease payments and other information associated with the Corporation’s leases as of June 30, 2024:


	Amount⁽¹⁾
Year Ending June 30,	(In Thousands)
2025	$	678
2026		387
2027		192
2028		156
2029		74
Thereafter		—
Total contract lease payments	$	1,487

Total liability to make lease payments	$	1,407
Difference in undiscounted and discounted future lease payments	$	80
Weighted average discount rate		3.34	%
Weighted average remaining lease term (years)		3.0

(1)	Contractual base rents do not include property taxes and other operating expenses due under respective lease agreements.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Note 5: Premises and Equipment

Premises and equipment at June 30, 2024 and 2023 consisted of the following:


	June 30,
(In Thousands)	2024		2023
Land	$	2,853	$	2,853
Buildings		10,136		10,311
Leasehold improvements		4,065		3,135
Furniture and equipment		5,458		5,226
Automobiles		149		176
Operating lease – right of use assets ⁽¹⁾		1,356		2,147
		24,017		23,848
Less accumulated depreciation and amortization		(14,704)		(14,617)
Total premises and equipment, net	$	9,313	$	9,231

⁽¹⁾	Net of accumulated amortization.

Depreciation and amortization expense for the fiscal years ended June 30, 2024 and 2023 amounted to $1.6 million and $1.4 million, respectively.

Note 6: Deposits

Deposits at June 30, 2024 and 2023 consisted of the following:


	June 30, 2024				June 30, 2023
(Dollars in Thousands)	Interest Rate	Amount			Interest Rate	Amount
Checking deposits – noninterest-bearing	—	$	95,627		—	$	103,006
Checking deposits – interest-bearing⁽¹⁾	0.00% - 0.20%		254,624		0.00% - 0.20%		302,872
Savings deposits⁽¹⁾	0.00% - 4.64%		238,878		0.00% - 0.70%		290,204
Money market deposits⁽¹⁾	0.00% - 4.64%		25,324		0.00% - 2.00%		33,551
Time deposits:
$250 and under⁽¹⁾⁽²⁾	0.00% - 5.35%		226,110		0.00% - 5.25%		192,147
Over $250	0.10% - 5.12%		47,785		0.10% - 5.35%		28,791
Total deposits⁽³⁾		$	888,348			$	950,571
Weighted average interest rate on deposits			1.29	%			0.73	%

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

(2)	Includes brokered certificates of deposit of $131.8 million and $106.4 million at June 30, 2024 and 2023, respectively.

(3)	Includes uninsured deposits of approximately $122.7 million and $140.1 million at June 30, 2024 and 2023, respectively.

The aggregate annual maturities of time deposits at June 30, 2024 and 2023 were as follows:


	June 30,
(In Thousands)	2024		2023
One year or less	$	245,713	$	166,501
Over one to two years		19,604		37,062
Over two to three years		3,779		9,922
Over three to four years		1,896		3,069
Over four to five years		1,649		2,578
Over five years		1,254		1,806
Total time deposits	$	273,895	$	220,938

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Interest expense on deposits for the years indicated is summarized as follows:


	Year Ended June 30,
(In Thousands)	2024		2023
Checking deposits – interest-bearing	$	118	$	140
Savings deposits		313		168
Money market deposits		172		87
Time deposits		9,063		2,751
Total interest expense on deposits	$	9,666	$	3,146

At June 30, 2024, the Bank had related party deposits of approximately $6.3 million, compared to $8.1 million at June 30, 2023. At June 30, 2024 and 2023, deposits with negative balances (i.e. overdrafts) that were reclassified to loans held for investment totaled $24,000 and $15,000, respectively. The Bank is required to maintain reserve balances with the Federal Reserve Bank of San Francisco. Effective March 26, 2020, the FRB lowered the reserve ratios on transaction accounts maintained at a depository institution to zero percent so there was no required reserve balance at June 30, 2024 and 2023.

Note 7: Borrowings

As of June 30, 2024, the Bank’s FHLB – San Francisco maximum borrowing capacity was approximately $516.0 million, which is limited to 40% of total assets reported on the Bank’s quarterly Call Report. This borrowing capacity was collateralized by pledges of certain real estate loans with an aggregate loan balance of $774.1 million and investment securities of $3.9 million. As of June 30, 2024, the Bank’s borrowings from the FHLB – San Francisco were $238.5 million, with varying maturity dates through the year 2028. In addition, the Bank utilizes its borrowing facility for letters of credit and for the Mortgage Partnership Finance (“MPF”) program credit enhancement. The outstanding letters of credit was $16.0 million and the outstanding MPF credit enhancement was $216,000 at June 30, 2024. As of June 30, 2024, the remaining borrowing capacity with the FHLB – San Francisco was $261.3 million.

As of June 30, 2023, the Bank’s FHLB – San Francisco maximum borrowing capacity was approximately $534.1 million, which is limited to 40% of total assets reported on the Bank’s quarterly Call Report. This borrowing capacity was collateralized by pledges of certain real estate loans with an aggregate loan balance of $967.6 million and investment securities of $4.2 million. As of June 30, 2023, the Bank’s borrowings from the FHLB – San Francisco were $235.0 million, with varying maturity dates through the year 2028. In addition, the Bank utilizes its borrowing facility for letters of credit and for the MPF program credit enhancement. The outstanding letters of credit were $11.0 million and the outstanding MPF credit enhancement was $216,000 at June 30, 2023. As of June 30, 2023, the remaining borrowing capacity with FHLB – San Francisco was $287.9 million.

In addition, as of June 30, 2024 and 2023, the Bank had $208.6 million and $139.0 million of borrowing capacity available from the discount window facility at the FRB of San Francisco, respectively, collateralized by investment securities and loans held for investment at June 30, 2024 and collateralized by investment securities only at June 30, 2023. As of June 30, 2024 and 2023, the Bank also had a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million at both dates. The Bank intends to request a renewal of its borrowing arrangement with the correspondent bank prior to maturity on June 30, 2025. As of both June 30, 2024 and 2023, there were no outstanding borrowings under the discount window facility or the federal funds facility.

Borrowings at June 30, 2024 and 2023 consisted of the following:

As a member of the FHLB – San Francisco, the Bank is required to maintain a minimum investment in FHLB – San Francisco capital stock. At June 30, 2024 and 2023, the Bank held a stock investment of $9.6 million and $9.5 million, respectively, with no excess capital stock.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

During fiscal 2024 and 2023, the Bank purchased $63,000 and $1.3 million of FHLB - San Francisco capital stock, respectively. In fiscal 2024 and 2023, the FHLB – San Francisco distributed $793,000 and $556,000 of cash dividends, respectively, to the Bank.

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


	At or For the Year Ended June 30,
(Dollars in Thousands)	2024			2023

Balance outstanding at the end of year:
FHLB - San Francisco advances	$	238,500		$	235,009

Weighted average rate at the end of year:
FHLB - San Francisco advances		4.88	%		4.34	%

Maximum amount of borrowings outstanding at any month end:
FHLB - San Francisco advances	$	242,500		$	235,009

Average short-term borrowings during the year with respect to:⁽¹⁾
FHLB - San Francisco advances	$	127,506		$	113,688

Weighted average short-term borrowing rate during the year with respect to:⁽¹⁾
FHLB - San Francisco advances		4.70	%		3.87	%

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

The aggregate annual contractual maturities of borrowings at June 30, 2024 and 2023 were as follows:


	June 30,
(Dollars in Thousands)	2024			2023
Within one year	$	145,500		$	150,009
Over one to two years		68,000			70,000
Over two to three years		10,000			10,000
Over three to four years		5,000			—
Over four to five years		10,000			5,000
Over five years		—			—
Total borrowings	$	238,500		$	235,009
Weighted average interest rate		4.88	%		4.34	%

Note 8: Income Taxes

ASC 740, “Income Taxes,” requires the affirmative evaluation that it is more likely than not, based on the technical merits of a tax position, that an enterprise is entitled to economic benefits resulting from positions taken in income tax returns. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements. Management has determined that there were no unrecognized tax benefits to be reported in the Corporation’s consolidated financial statements for the fiscal years ended June 30, 2024 and 2023.

Under generally accepted accounting principles, the Corporation uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their

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respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Corporation’s effective tax rate may differ from the estimated statutory tax rates described above due to discrete items such as further adjustments to net deferred tax assets, excess tax benefits derived from stock option exercises and non-taxable earnings from bank owned life insurance, among other items.

The Corporation utilizes the asset and liability method of accounting for income taxes whereby deferred tax assets are recognized for deductible temporary differences and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

The provision for income taxes for the years indicated consisted of the following:


	Year Ended June 30,
(In Thousands)	2024		2023

Current:
Federal	$	2,161	$	1,638
State		1,278		955
		3,439		2,593
Deferred:
Federal		(238)		783
State		(165)		448
		(403)		1,231
Provision for income taxes	$	3,036	$	3,824

The Corporation’s tax expense from non-qualified stock-based compensation recognized in the Consolidated Statements of Operations in connection with the adoption of ASU 2016-09 for fiscal 2024 and 2023 was $0 and $186,000, respectively.

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 net income before income taxes as a result of the following differences for the years indicated:


	Year Ended June 30,
	2024				2023
(In Thousands)	Amount		Tax Rate		Amount		Tax Rate

Federal income tax at statutory rate	$	2,181	21.00	%	$	2,607	21.00	%
State income tax, net of federal income tax benefit		880	8.48	%		1,107	8.92	%
Changes in taxes resulting from:
Bank-owned life insurance		(39)	(0.38)	%		(39)	(0.31)	%
Non-deductible expenses		12	0.12	%		11	0.09	%
Shortfall on stock-based compensation		—	—	%		132	1.06	%
Return to provision adjustment		(1)	(0.01)	%		4	0.03	%
Other		3	0.02	%		2	0.01	%
Effective income tax	$	3,036	29.23	%	$	3,824	30.80	%

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Deferred tax assets at June 30, 2024 and 2023 by jurisdiction were as follows:


	June 30,
(In Thousands)	2024		2023

Deferred taxes - federal	$	404	$	179
Deferred taxes - state		202		39
Total net deferred tax assets	$	606	$	218

Net deferred tax assets at June 30, 2024 and 2023 were comprised of the following:


	June 30,
(In Thousands)	2024		2023

Loss reserves	$	2,387	$	2,032
Non-accrued interest		175		188
Deferred compensation		2,388		2,339
Accrued vacation		187		194
Depreciation		174		155
State tax		203		199
Unrealized loss on investment securities		4		19
Lease liability		448		691
Other		208		288
Total deferred tax assets		6,174		6,105

FHLB - San Francisco stock dividends		(645)		(645)
Prepaid expenses		(39)		(45)
Unrealized gain on interest-only strips		(3)		(3)
Right-of-use asset		(432)		(684)
Deferred loan costs, net		(4,449)		(4,510)
Total deferred tax liabilities		(5,568)		(5,887)
Net deferred tax assets	$	606	$	218

The net deferred tax assets were included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition. The Corporation analyzes the deferred tax assets to determine whether a valuation allowance is required based on the more-likely-than-not criteria that such assets will be realized principally through future taxable income. This criteria takes into account the actual earnings and the estimates of future profitability. The Corporation may carryback net federal tax losses to the preceding five taxable years and forward to the succeeding 20 taxable years. At June 30, 2024 and 2023, the Corporation had no federal and state net tax loss carryforwards. Based on management’s consideration of historical and anticipated future income before income taxes, as well as the reversal period for the items giving rise to the deferred tax assets and liabilities, a valuation allowance was not considered necessary at June 30, 2024 and 2023 and management believes it is more likely than not the Corporation will realize its deferred tax asset.

Retained earnings at June 30, 2024 and 2023 include approximately $9.0 million (pre-1988 bad debt reserve for tax purposes) for which federal income tax of $3.1 million has 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 Bank were to convert its charter from a thrift to a bank.

The Corporation files income tax returns for the United States and California jurisdictions. 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. Also, the Internal Revenue Service completed a review of the Corporation’s income tax returns for fiscal 2006 and 2007; and the California Franchise Tax Board completed a review of the Corporation’s income tax returns for

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Notes to Consolidated Financial Statements

fiscal 2009 and 2010. Fiscal years 2022 and thereafter remain subject to federal examination, while the California state tax returns for fiscal years 2021 and thereafter are subject to examination by state taxing authorities.

It is the Corporation’s policy to record any penalties or interest charges arising from federal or state taxes as a component of income tax expense. For the fiscal years ended June 30, 2024 and 2023, there were no tax penalties and no interest charges arising from federal or state taxes.

Note 9: Capital

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.

For a bank holding company such as the Corporation with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis. The FRB expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations. If the Corporation was subject to regulatory guidelines for bank holding companies at June 30, 2024, it would have exceeded all regulatory capital requirements.

The Bank is subject to capital regulations which establish minimum required capital ratios for Tier 1 leverage, common equity Tier 1 (“CET1”), Tier 1 risk-based and total risk-based capital. Additionally, a capital conservation buffer is required over the required minimum capital ratios, and capital regulations also defines what qualifies as capital for purposes of meeting the capital requirements. Failure to meet minimum requirements can initiate certain mandatory and possibly additional discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements.

In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The Bank’s actual and required minimum capital amounts and ratios at the dates indicated are as follows (dollars in thousands):


					Regulatory Requirements
					Minimum for Capital				Minimum to Be
	Actual				Adequacy Purposes⁽¹⁾				Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio

Provident Savings Bank, F.S.B.:

As of June 30, 2024⁽²⁾
Tier 1 leverage capital (to adjusted average assets)	$	126,601	10.02	%	$	50,555	4.00	%	$	63,194	5.00	%
CET1 capital (to risk-weighted assets)	$	126,601	19.29	%	$	45,934	7.00	%	$	42,653	6.50	%
Tier 1 capital (to risk-weighted assets)	$	126,601	19.29	%	$	55,777	8.50	%	$	52,496	8.00	%
Total capital (to risk-weighted assets)	$	133,723	20.38	%	$	68,900	10.50	%	$	65,620	10.00	%

As of June 30, 2023
Tier 1 leverage capital (to adjusted average assets)	$	125,979	9.59	%	$	52,521	4.00	%	$	65,651	5.00	%
CET1 capital (to risk-weighted assets)	$	125,979	18.50	%	$	47,674	7.00	%	$	44,269	6.50	%
Tier 1 capital (to risk-weighted assets)	$	125,979	18.50	%	$	57,890	8.50	%	$	54,485	8.00	%
Total capital (to risk-weighted assets)	$	131,967	19.38	%	$	71,511	10.50	%	$	68,106	10.00	%

(1)	Inclusive of the conservation buffer of 2.50% for CET1 capital, Tier 1 capital and Total capital ratios.

(2)	The Bank elected to recognize the full $824 thousand adjustment to retained earnings resulting from the adoption of CECL on July 1, 2023 instead of over the permitted three-year phase-in option.

At June 30, 2024, the Bank exceeded all regulatory capital requirements. The Bank was categorized as "well-capitalized" at June 30, 2024 under the regulations of the Office of the Comptroller of the Currency (“OCC”).

The ability of Provident Financial Holdings to pay dividends to stockholders depends primarily on the ability of the Bank to pay dividends to Provident Financial Holdings. Provident Financial Holdings and 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.

Generally, savings institutions, such as the Bank, that are well-capitalized before and after the proposed distribution may make capital distributions during any calendar year up to 100% of net income for the year-to-date plus retained net income for the two preceding years. However, an institution deemed to be in need of more than normal supervision or classified as troubled condition by the OCC may have its dividend authority restricted by the OCC. If the Bank, however, proposes to make a capital distribution when it does not meet its capital requirements (or will not following the proposed capital distribution) or that will exceed the net income-based limitations, it must obtain the OCC's approval prior to making such distribution. In addition, the Bank must file a prior written notice of a dividend with the FRB. The FRB or the OCC may object to a capital distribution based on safety and soundness concerns. Additional restrictions on Bank dividends may apply if the Bank fails the Qualified Thrift Lender test. In fiscal 2024 and 2023, the Bank declared and paid $7.0 million and $9.5 million of cash dividends to its parent, Provident Financial Holdings, respectively.

Note 10: Benefit Plans

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 a participants’ pretax compensation. Participants vest immediately in their own contributions with 100% vesting in the Corporation’s

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Notes to Consolidated Financial Statements

contributions occurring after six years of credited service. The Corporation’s expense for the plan was approximately $303,000 and $306,000 for the fiscal years ended June 30, 2024 and 2023, respectively.

The Corporation has a multi-year employment agreement and a post-retirement compensation agreement with one executive officer. In addition, the Corporation has a transition agreement and a post-retirement compensation agreement with the previous executive officer (currently the Chairman of the Board of Directors). At June 30, 2024 and 2023, the accrued liability of the post-retirement compensation agreements was $5.7 million at both dates; any costs (recoveries) are being accrued and expensed quarterly. In fiscal 2024, the increase in the discount rate and a lower life expectancy was offset by a higher current compensation. For fiscal 2024 and 2023, the accrued expense (recovery) for these liabilities was $85,000 and $(1.1 million), respectively. The current obligation for these post-retirement benefits was fully funded consistent with contractual requirements and actuarially determined estimates of the total future obligation. The Corporation invests in BOLI to provide sufficient funding for these post-retirement obligations. As of June 30, 2024 and 2023, the total outstanding cash surrender value of the BOLI was $8.6 million and $8.4 million, respectively. For fiscal 2024 and 2023, total BOLI non-taxable income, net of mortality cost, was $186,000 for both periods.

Employee Stock Ownership Plan

The Corporation established an ESOP on June 27, 1996 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 Corporation recognizes compensation expense when the Corporation contributes funds to the ESOP for the purchase of the Corporation’s common stock to be allocated to the ESOP participants. The Corporation's contribution to the ESOP plan is discretionary. During fiscal 2024 and 2023, there were 40,000 shares for each year that were purchased in the open market to fulfill the annual discretionary allocation. Since the annual contributions are discretionary, the benefits payable under the ESOP cannot be estimated.

Benefits generally become 100% vested after six years of credited service. Vesting accelerates upon retirement, death or disability of the participant or in the event of a change in control of the Corporation. Forfeitures are reallocated among remaining participating employees in the same proportion as contributions. Benefits are payable upon death, retirement, early retirement, disability or separation from service.

The net expense related to the ESOP for the fiscal years ended June 30, 2024 and 2023 was $540,000 and $563,000, respectively. Available shares and cash contributions, if any, are allocated every calendar year end. The total ESOP allocation for calendar 2023 was 40,000 shares, as compared to 20,000 shares and $317,000 of cash contributions for calendar 2022.

Note 11: Incentive Plans

As of June 30, 2024, the Corporation had four share-based compensation plans: the 2022 Equity Incentive Plan (“2022 Plan”); the 2013 Equity Incentive Plan (“2013 Plan”); the 2010 Equity Incentive Plan (“2010 Plan”); and the 2006 Equity Incentive Plan (“2006 Plan”), collectively, the “Plans”. For the fiscal years ended June 30, 2024 and 2023, the compensation cost for the Plans was $240,000 and $1.2 million, respectively.

Equity Incentive Plans. The Corporation established the Plans, which were all approved by shareholders for directors, advisory directors, directors emeriti, officers and employees of the Corporation and its subsidiary. The 2022 Plan authorizes 175,000 stock options and 200,000 shares of restricted stock. The 2022 Plan also provides that no person may be granted more than 35,000 stock options or 30,000 shares of restricted stock in any one year. The 2013 Plan authorizes 300,000 stock options and 300,000 shares of restricted stock. The 2013 Plan also provides that no person may be granted more than 60,000 stock options or 45,000 shares of restricted stock in any one year. The 2010 Plan authorized 586,250 stock options and 288,750 shares of restricted stock. The 2006 Plan authorized 365,000 stock options and 185,000 shares of restricted stock. As of June 30, 2024, equity awards may be granted only from the 2022 Plan, while no new equity awards can be granted from the 2013 Plan, 2010 Plan and 2006 Plan.

Equity Incentive Plans - Stock Options. Under the Plans, options may not be granted at a price less than the fair market value at the date of the grant. Options typically vest over a five-year or shorter period as long as the director, advisory

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Notes to Consolidated Financial Statements

director, director emeritus, officer or employee remains in service to 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 fair value of each option grant is estimated using the Black-Scholes option valuation model with the following assumptions as of the grant date for the periods indicated. The expected volatility is based on implied volatility from historical common stock closing prices for the prior 84 months. The expected dividend yield is based on the most recent quarterly dividend on an annualized basis. The expected term is based on the historical experience of all fully vested stock option grants and is reviewed annually. The risk-free interest rate is based on the U.S. Treasury note rate with a term similar to the underlying stock option on the particular grant date.


	Fiscal 2024		Fiscal 2023
Expected volatility	21.6% - 22.9	%	20.3	%
Weighted average volatility	22.5	%	20.3	%
Expected dividend yield	4.5	%	3.9	%
Expected term (in years)	7.4		7.3
Risk-free interest rate	4.3	%	2.9	%

As of June 30, 2024, there were 77,000 options available for future grants under the 2022 Plan. As of June 30, 2023, there were 175,000 options available for future grants under the 2022 Plan and 21,000 options available for future grants under the 2013 Plan.

The following tables summarize the stock option activity in the Plans during the fiscal years ended June 30, 2024 and 2023:


				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
		Exercise		Contractual	Value
Options	Shares	Price		Term (Years)	($000)
Outstanding at June 30, 2022	431,000	$	16.24
Granted	30,000	$	14.52
Exercised	—	$	—
Forfeited	(7,500)	$	20.19
Expired	(19,000)	$	16.47
Outstanding at June 30, 2023	434,500	$	16.04	3.01	$	—
Vested and expected to vest at June 30, 2023	425,700	$	16.06	2.89	$	—
Exercisable at June 30, 2023	390,500	$	16.13	2.34	$	—

Outstanding at June 30, 2023	434,500	$	16.04
Granted	98,000	$	12.44
Exercised	—	$	—
Forfeited	(5,000)	$	14.52
Expired	(47,500)	$	15.71
Outstanding at June 30, 2024	480,000	$	15.35	3.29	$	—
Vested and expected to vest at June 30, 2024	475,950	$	16.36	3.25	$	—
Exercisable at June 30, 2024	355,000	$	16.18	1.14	$	—

As of June 30, 2024 and 2023, there was $231,000 and $72,000 of unrecognized compensation expense, respectively, related to unvested share-based compensation arrangements with respect to stock options issued under the Plans. The expense is expected to be recognized over a weighted average period of 3.5 years and 2.9 years, respectively. The forfeiture rate during fiscal 2024 and 2023 was 15% and 20%, respectively, and was calculated by using the historical forfeiture experience of all fully vested stock option grants which is reviewed annually.

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Notes to Consolidated Financial Statements

Equity Incentive Plans – Restricted Stock. Awarded shares typically vest over a five-year or shorter period as long as the director, advisory director, director emeriti, officer or employee remains in service to the Corporation. Once vested, a recipient of restricted stock will have all rights of a shareholder, including the power to vote and the right to receive dividends. The Corporation recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the award date.

As of June 30, 2024, there were 69,000 shares available for future awards under the 2022 Plan. As of June 30, 2023, there were 200,000 shares available for future awards under the 2022 Plan and 18,250 shares available for future awards under the 2013 Plan.

The following table summarizes the restricted stock activity for the fiscal years ended June 30, 2024 and 2023:


		Weighted Average
		Award Date
Unvested Shares	Shares	Fair Value
Unvested at June 30, 2022	94,750	$	18.57
Awarded	53,000	$	12.95
Vested	(93,750)	$	18.57
Forfeited	(3,000)	$	14.82
Unvested at June 30, 2023	51,000	$	12.95
Expected to vest at June 30, 2023	40,800	$	12.95

Unvested at June 30, 2023	51,000	$	12.95
Awarded	131,000	$	11.08
Vested	(2,000)	$	12.09
Forfeited	(3,350)	$	12.95
Unvested at June 30, 2024	176,650	$	11.57
Expected to vest at June 30, 2024	150,153	$	11.57

As of June 30, 2024 and 2023, the unrecognized compensation expense was $1.8 million and $544,000, respectively, related to unvested share-based compensation arrangements with respect to restricted stock issued under the Plans, and reported as a reduction to stockholders’ equity. This expense is expected to be recognized over a weighted average period of 3.5 years and 3.1 years, respectively. Similar to stock options, a forfeiture rate of 15% and 20% was applied to the restricted stock compensation expense calculations in fiscal 2024 and 2023, respectively. For the fiscal years ended June 30, 2024 and 2023, the fair value of shares vested and distributed was $24,000 and $1.1 million, respectively.

Note 12: Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders 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 Corporation.

As of June 30, 2024 and 2023, there were outstanding options to purchase 480,000 shares and 434,500 shares of the Corporation’s common stock, of which 382,000 shares and 434,500 shares, respectively, were excluded from the diluted EPS computation as their effect was anti-dilutive. As of June 30, 2024 and 2023, there were outstanding restricted stock awards of 176,650 shares and 51,000 shares, respectively.

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Notes to Consolidated Financial Statements

The following table provides the basic and diluted EPS computations for the fiscal years ended June 30, 2024 and 2023, respectively:


	For the Year Ended June 30, 2024
	Income		Shares	Per-Share
(Dollars in Thousands, Except Share Amount)	(Numerator)		(Denominator)	Amount

Basic EPS	$	7,351	6,942,918	$	1.06
Effect of dilutive shares:
Stock options			76
Restricted stock			16,149
Diluted EPS	$	7,351	6,959,143	$	1.06


	For the Year Ended June 30, 2023
	Income		Shares	Per-Share
(Dollars in Thousands, Except Share Amount)	(Numerator)		(Denominator)	Amount

Basic EPS	$	8,592	7,143,273	$	1.20
Effect of dilutive shares:
Stock options			—
Restricted stock			48,412
Diluted EPS	$	8,592	7,191,685	$	1.19

Note 13: Commitments and Contingencies

The Corporation conducts a portion of its operations in leased facilities and has maintenance contracts under non-cancelable agreements classified as operating leases, which include leases recorded under ASC 842 on liabilities for future lease obligations as well as assets representing the right-to-use the underlying leased assets (See Note 4 of the Notes to Consolidated Financial Statements).

The following is a schedule of the Corporation’s lease and operating commitments:


	Amount
Year Ending June 30,	(In Thousands)

2025	$	1,837
2026		1,139
2027		358
2028		156
2029		74
Thereafter		—
Total minimum payments required	$	3,564

For the fiscal years ended June 30, 2024 and 2023, the lease and operating commitment expense was approximately $2.3 million and $1.9 million, respectively.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The Bank sold single-family mortgage loans to unrelated third parties with standard representation and warranty provisions in the ordinary course of its business activities. Under these provisions, the Bank is required to repurchase any previously sold loan for which the representations or warranties of the Bank prove to be inaccurate, incomplete or misleading. In the event of a borrower default or fraud, pursuant to a breached representation or warranty, the Bank may be required to reimburse the investor for any losses suffered. As of June 30, 2024 and 2023, the Bank maintained a non-contingent recourse liability related to these representations and warranties of $18,000 and $25,000, respectively. In addition, the Bank maintained a recourse liability of $8,000 at both June 30, 2024 and 2023 for loans sold to the FHLB – San Francisco under the MPF program.

In the ordinary course of business, the Corporation enters into contracts with third parties under which the third parties provide services on behalf of the Corporation. In many of these contracts, the Corporation agrees to indemnify the third party service provider under certain circumstances. The terms of the indemnity vary from contract to contract and the amount of the indemnification liability, if any, cannot be determined. The Corporation also enters into other contracts and agreements; such as, loan sale agreements, litigation settlement agreements, confidentiality agreements, loan servicing agreements, leases and subleases, among others, in which the Corporation agrees to indemnify third parties for acts by the Corporation’s agents, assignees and/or sub-lessees, and employees. Due to the nature of these indemnification provisions, the Corporation cannot calculate its aggregate potential exposure.

Pursuant to their governing instruments, the Corporation and its subsidiaries provide indemnification to directors, officers, employees and, in some cases, agents of the Corporation against certain liabilities incurred as a result of their service on behalf of or at the request of the Corporation and its subsidiaries. It is not possible for the Corporation to determine the aggregate potential exposure resulting from the obligation to provide this indemnity.

Note 14: Derivative and Other Financial Instruments with Off-Balance Sheet Risks

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, loan sale commitments to third parties and option contracts. 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 counterparty to these financial instruments, is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in entering into financial instruments with off-balance sheet risk as it does for on-balance sheet instruments. As of June 30, 2024 and 2023, the Corporation had commitments to extend credit on loans to be held for investment of $9.4 million and $2.4 million, respectively.

The following table provides information at the dates indicated regarding undisbursed funds to borrowers on existing lines of credit with the Corporation as well as commitments to originate loans to be held for investment at the dates indicated below:


	June 30,
Commitments	2024		2023
(In Thousands)
Undisbursed loan funds – Construction loans	$	435	$	2,032
Undisbursed lines of credit – Commercial business loans		2,936		607
Undisbursed lines of credit – Consumer loans		341		363
Commitments to extend credit on loans to be held for investment		9,387		2,394
Total	$	13,099	$	5,396

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Notes to Consolidated Financial Statements

Note 15: Fair Value of Financial Instruments

The Corporation adopted ASC 820, “Fair Value Measurements and Disclosures,” and elected the fair value option pursuant to ASC 825, “Financial Instruments” on single-family loans originated for sale. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 825 permits entities to elect to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the “Fair Value Option”) at specified election dates. At each subsequent reporting date, an entity is required to report unrealized gains and losses on items in earnings for which the fair value option has been elected. The objective of the Fair Value Option is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.

The following table describes the difference at the dates indicated between the aggregate fair value and the aggregate unpaid principal balance of loans held for investment at fair value:


			Aggregate
			Unpaid		Net
	Aggregate		Principal		Unrealized
(In Thousands)	Fair Value		Balance		Loss
As of June 30, 2024:
Loans held for investment, at fair value	$	1,047	$	1,200	$	(153)

As of June 30, 2023:
Loans held for investment, at fair value	$	1,312	$	1,483	$	(171)

ASC 820 establishes a three-level valuation hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

Level 1	-	Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date.
Level 2	-	Observable inputs other than Level 1 such as: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated to observable market data for substantially the full term of the asset or liability. Valuation techniques may include the use of discounted cash flow models and similar techniques.
Level 3	-	Unobservable inputs for the asset or liability that use significant assumptions, including assumptions of risks. These unobservable assumptions reflect the Corporation’s estimate of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of pricing models, discounted cash flow models and similar techniques.

ASC 820 requires the Corporation to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.

The Corporation’s financial assets and liabilities measured at fair value on a recurring basis consist of investment securities available for sale, loans held for investment at fair value, other equity investments and interest-only strips; while loans with individually evaluated allowances and mortgage servicing assets (“MSA”) are measured at fair value on a nonrecurring basis.

Investment securities - available for sale are primarily comprised of U.S. government agency MBS, U.S. government sponsored enterprise MBS, private issue CMO and investment in equity securities. The Corporation utilizes quoted prices in active markets for similar securities for its fair value measurement of MBS and investment in equity securities (Level 2) and broker price indications for similar securities in non-active markets for its fair value measurement of the private issue CMO (Level 3).

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Loans held for investment at fair value are primarily single-family loans which have been transferred from loans held for sale. The fair value is determined by management estimates of the specific credit risk attributes of each loan, in addition to the quoted secondary-market prices which account for the interest rate characteristics of each loan (Level 3).

Loans with individually evaluated allowance that are recorded at fair value on a nonrecurring basis are loans which are inadequately protected by the current sound worth and paying capacity of the borrowers or of the collateral pledged. These loans are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. The fair value of a loan with an individually evaluated allowance is determined based on the discounted cash flow or current appraised value of the underlying collateral. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the collateral. For commercial real estate loans with an individually evaluated allowance, the fair value is derived from the appraised value of its collateral. Loans with an individually evaluated allowance are reviewed and evaluated on at least a quarterly basis for additional allowance and adjusted accordingly, based on the same factors identified above (Level 3). This loss is not recorded directly as an adjustment to current earnings or other comprehensive income (loss), but rather as a component in determining the overall adequacy of the ACL. These adjustments to the estimated fair value of loans with an individually evaluated allowance may result in increases or decreases to the provision for (recovery of) credit losses recorded in current earnings.

The fair value of other equity investments is derived from quoted prices in active markets for the equivalent or similar investments (Level 2).

The Corporation uses the amortization method for its MSA, which amortizes the MSA in proportion to and over the period of estimated net servicing income and assesses the MSA for impairment based on fair value at each reporting date. The fair value of the MSA is derived using the present value method; which includes a third party’s prepayment projections of similar instruments, weighted average coupon rates, estimated servicing costs and discount interest rates (Level 3).

The fair value of interest-only strips is derived using the same assumptions that are used to value the related MSA (Level 3).

The Corporation’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Corporation’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following fair value hierarchy tables present information at the dates indicated about the Corporation’s assets and liabilities measured at fair value on a recurring basis:


	Fair Value Measurement at June 30, 2024 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	1,208	$	—	$	1,208
U.S. government sponsored enterprise MBS		—		553		—		553
Private issue CMO		—		—		88		88
Investment securities - available for sale		—		1,761		88		1,849

Loans held for investment, at fair value		—		—		1,047		1,047
Other equity investments, fair value		—		540		—		540
Interest-only strips		—		—		8		8
Total assets	$	—	$	2,301	$	1,143	$	3,444

Liabilities:	$	—	$	—	$	—	$	—
Total liabilities	$	—	$	—	$	—	$	—


	Fair Value Measurement at June 30, 2023 Using:
(In Thousands)		Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	1,370	$	—	$	1,370
U.S. government sponsored enterprise MBS		—		683		—		683
Private issue CMO		—		—		102		102
Investment securities - available for sale		—		2,053		102		2,155

Loans held for investment, at fair value		—		—		1,312		1,312
Interest-only strips		—		—		9		9
Total assets	$	—	$	2,053	$	1,423	$	3,476

Liabilities:	$	—	$	—	$	—	$	—
Total liabilities	$	—	$	—	$	—	$	—

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following tables provide a reconciliation of the beginning and ending balances during the periods shown of recurring fair value measurements recognized in the Consolidated Statements of Financial Condition using Level 3 inputs:


	Fair Value Measurement
	Using Significant Other Unobservable Inputs
	(Level 3)
	Private		Loans Held For		Interest-
	Issue		Investment, at		Only
(In Thousands)	CMO		fair value⁽¹⁾		Strips		Total
Beginning balance at June 30, 2023	$	102	$	1,312	$	9	$	1,423
Adjustment due to ASC 326 CECL adoption		—		28		—		28
Total gains or losses (realized/unrealized):
Included in earnings		—		(10)		—		(10)
Included in other comprehensive income (loss)		(1)		—		(1)		(2)
Purchases		—		—		—		—
Issuances		—		—		—		—
Settlements		(13)		(283)		—		(296)
Transfers in and/or out of Level 3		—		—		—		—
Ending balance at June 30, 2024	$	88	$	1,047	$	8	$	1,143

(1)	The valuation of loans held for investment at fair value includes management’s estimate of the specific credit risk attributes of each loan, in addition to the quoted secondary-market prices which account for interest rate characteristics.


	Fair Value Measurement
	Using Significant Other Unobservable Inputs
	(Level 3)
	Private		Loans Held For		Interest-
	Issue		Investment, at		Only
(In Thousands)	CMO		fair value⁽¹⁾		Strips		Total
Beginning balance at June 30, 2022	$	113	$	1,396	$	7	$	1,516
Total gains or losses (realized/ unrealized):
Included in earnings		—		2		—		2
Included in other comprehensive income (loss)		3		—		2		5
Purchases		—		—		—		—
Issuances		—		—		—		—
Settlements		(14)		(86)		—		(100)
Transfers in and/or out of Level 3		—		—		—		—
Ending balance at June 30, 2023	$	102	$	1,312	$	9	$	1,423

(1)	The valuation of loans held for investment at fair value includes management’s estimate of the specific credit risk attributes of each loan, in addition to the quoted secondary-market prices which account for interest rate characteristics.

The following fair value hierarchy table presents information about the Corporation’s assets measured at fair value at the dates indicated on a nonrecurring basis:


	Fair Value Measurement at June 30, 2024 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Loans with individually evaluated allowance	$	—	$	—	$	695	$	695
Mortgage servicing assets		—		—		87		87
Total	$	—	$	—	$	782	$	782

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Notes to Consolidated Financial Statements


	Fair Value Measurement at June 30, 2023 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Loans with individually evaluated allowance	$	—	$	251	$	1,049	$	1,300
Mortgage servicing assets		—		—		90		90
Total	$	—	$	251	$	1,139	$	1,390

The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivative financial instruments, which are measured at fair value and categorized within Level 3 as of June 30, 2024:


						Impact to
	Fair Value					Valuation
	As of					from an
	June 30,		Valuation		Range⁽¹⁾	Increase in
(Dollars In Thousands)	2024		Techniques	Unobservable Inputs	(Weighted Average)	Inputs⁽²⁾
Assets:
Securities available-for sale: Private issue CMO	$	88	Market comparable pricing	Comparability adjustment	(2.0%) - (6.5%) (2.9%)	Increase

Loans held for investment, at fair value	$	1,047	Relative value analysis	Broker quotes	86.9% - 89.0% (88.2%) of par	Increase
				Credit risk factor	1.0% - 1.1% (1.0%)	Decrease

Loans with individually evaluated allowance	$	695	Discounted cash flow	Default rate	5.0%	Decrease
				Discount rate	6.9%	Decrease

MSAs	$	87	Discounted cash flow	Prepayment rate (CPR)	5.1% - 60.0% (9.6%)	Decrease
				Discount rate	9.0% - 10.5% (9.1%)	Decrease

Interest-only strips	$	8	Discounted cash flow	Prepayment rate (CPR)	7.3% - 12.3% (8.6%)	Decrease
				Discount rate	9.0%	Decrease


Liabilities:

None

(1)	The range is based on the historical estimated fair values and management estimates.

(2)

Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

The significant unobservable inputs used in the fair value measurement of the Corporation’s assets and liabilities include the following: CMO offered quotes, prepayment rates and discount rates, among others. Significant increases or decreases in any of these inputs in isolation could result in significantly lower or higher fair value measurement. The various unobservable inputs used to determine valuations may have similar or diverging impacts on valuation. For the fiscal year ended June 30, 2024, there were no significant changes to the Corporation's valuation techniques and inputs that had, or are expected to have, a material impact on its consolidated financial position or results of operations.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The carrying amount and fair value of the Corporation’s other financial instruments as of June 30, 2024 and 2023 were as follows:


	June 30, 2024
	Carrying		Fair
(In Thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Loans held for investment, not recorded at fair value	$	1,051,932	$	973,453	$	—	$	—	$	973,453
Investment securities - held to maturity	$	130,051	$	114,393	$	—	$	114,393	$	—
FHLB – San Francisco stock	$	9,568	$	9,568	$	—	$	9,568	$	—

Financial liabilities:
Deposits	$	888,348	$	888,527	$	—	$	888,527	$	—
Borrowings	$	238,500	$	237,691	$	—	$	237,691	$	—


	June 30, 2023
	Carrying		Fair
(In Thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Loans held for investment, not recorded at fair value	$	1,076,317	$	970,277	$	—	$	—	$	970,277
Investment securities - held to maturity	$	154,337	$	135,541	$	—	$	135,541	$	—
FHLB – San Francisco stock	$	9,505	$	9,505	$	—	$	9,505	$	—

Financial liabilities:
Deposits	$	950,571	$	949,116	$	—	$	949,116	$	—
Borrowings	$	235,009	$	232,764	$	—	$	232,764	$	—

Loans held for investment, not recorded at fair value: 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.

Investment securities - held to maturity: The investment securities - held to maturity consist of U.S. SBA securities, U.S. government sponsored enterprise MBS and U.S. government sponsored enterprise CMO. For the U.S. SBA securities and U.S. government sponsored enterprise MBS and CMO, the Corporation utilizes quoted prices in active markets for similar securities for its fair value measurement (Level 2).

FHLB – San Francisco stock is carried at cost/par value and represents its fair value. When redeemed, the Corporation will receive an amount equal to the par value of the stock.

Deposits: The fair value of time deposits is estimated using a discounted cash flow calculation. The discount rate is based upon observable inputs, including rates currently offered for deposits of similar remaining maturities. The fair value of transaction accounts (checking, money market and savings accounts) is equal to the carrying amounts payable on demand.

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.

The Corporation has various processes and controls in place to ensure that fair value is reasonably estimated. The Corporation generally determines fair value of their Level 3 assets and liabilities by using internally developed models which primarily utilize discounted cash flow techniques and prices obtained from independent management services or brokers. The Corporation performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process.

While the Corporation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

different estimate of fair value at the reporting date. For the fiscal year ended June 30, 2024, there were no significant changes to the Corporation’s valuation techniques that had, or are expected to have, a material impact on its consolidated financial position or results of operations.

Note 16: Revenue From Contracts With Customers

In accordance with ASC 606, revenues are recognized when goods or services are transferred to the customer in exchange for the consideration the Corporation expects to be entitled to receive. The largest portion of the Corporation’s revenue is from interest income, which is not in the scope of ASC 606. All the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized in non-interest income.

If a contract is determined to be within the scope of ASC 606, the Corporation recognizes revenue as it satisfies a performance obligation. Payments from customers are generally collected at the time services are rendered, monthly, or quarterly. For contracts with customers within the scope of ASC 606, revenue is either earned at a point in time or revenue is earned over time. Examples of revenue earned at a point in time are automated teller machine ("ATM") transaction fees, wire transfer fees, overdraft fees and interchange fees. Revenue is primarily based on the number and type of transactions that are generally derived from transactional information accumulated by the Corporation’s systems and is recognized immediately as the transactions occur or upon providing the service to complete the customer's transaction. The Corporation is generally the principal in these contracts, with the exception of interchanges fees, in which case the Corporation is acting as the agent and records revenue net of expenses paid to the principal. Examples of revenue earned over time, which generally occur on a monthly basis, are deposit account maintenance fees, investment advisory fees, merchant revenue, trust and investment management fees and safe deposit box fees. Revenue is generally derived from transactional information accumulated by its systems or those of third-parties and is recognized as the related transactions occur or services are rendered to the customer.

Disaggregation of Revenue:

The following table includes the Corporation's non-interest income disaggregated by type of services for the fiscal years ended June 30, 2024 and 2023:


	Year Ended June 30,
Type of Services	2024		2023
(In Thousands)
Loan servicing and other fees⁽¹⁾	$	337	$	414
Deposit account fees		1,154		1,296
Card and processing fees		1,384		1,525
Other⁽²⁾		1,066		840
Total non-interest income	$	3,941	$	4,075

(1)	Not within the scope of ASC 606.

(2)

Includes income on BOLI of $186 thousand and $186 thousand, net loss on sale of loans of $66 thousand and net gain on sale of loans of $124 thousand and net unrealized gain on other equity investments of $540 thousand and $0 for the fiscal years ended June 30, 2024 and 2023, respectively, which are not within the scope of ASC 606.

For the fiscal years ended June 30, 2024 and 2023, substantially all the Corporation’s revenues within the scope of ASC 606 were for performance obligations satisfied at a specified date.

Revenues recognized within the scope of ASC 606:

Deposit account fees: Fees are earned on the Bank's deposit accounts for various products offered to or services performed for the Bank's customers. Fees include business account fees, non-sufficient fund fees, ATM fees and others. These fees are recognized on a daily, monthly or quarterly basis, depending on the type of service.

Card and processing fees: Debit interchange income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange fees from cardholder transactions through a third party payment network. Interchange fees

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders' debit card. Certain expenses directly associated with the debit cards are recorded on a net basis with the interchange income.

Other: Includes asset management fees, stop payment fees, wire services fees, safe deposit box fees and other fees earned on other services, such as merchant services or occasional non-recurring type services, are recognized at the time of the event or the applicable billing cycle. Asset management fees are variable, since they are based on the underlying portfolio value, which is subject to market conditions and amounts invested by customers through a third-party provider. Asset management fees are recognized over the period that services are provided, and when the portfolio values are known or can be estimated at the end of each month.

Note 17: Holding Company Condensed Financial Information

This information should be read in conjunction with the other notes to the consolidated financial statements. The following is the Condensed Statements of Financial Condition for Provident Financial Holdings (Holding Company only) as of June 30, 2024 and 2023 and Condensed Statements of Operations and Cash Flows for the fiscal years ended June 30, 2024 and 2023.

Condensed Statements of Financial Condition


	June 30,
(In Thousands)	2024		2023

Assets
Cash and cash equivalents	$	3,385	$	3,737
Investment in subsidiary		126,601		125,949
Other assets		64		67
	$	130,050	$	129,753

Liabilities and Stockholders’ Equity
Other liabilities	$	109	$	66
Stockholders’ equity		129,941		129,687
	$	130,050	$	129,753

Condensed Statements of Operations


	Year Ended June 30,
(In Thousands)	2024		2023

Dividend from the Bank	$	7,000	$	9,500
Interest and other income		2		3
Total income		7,002		9,503

General and administrative expenses		1,294		1,267
Earnings before income taxes and equity in undistributed earnings of the Bank		5,708		8,236

Income tax benefit		(382)		(373)
Earnings before equity in undistributed earnings of the Bank		6,090		8,609

Equity in undistributed earnings of the Bank		1,261		(17)
Net income	$	7,351	$	8,592

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Condensed Statements of Cash Flows


	Year Ended June 30,
(In Thousands)	2024		2023

Cash flow from operating activities:
Net income	$	7,351	$	8,592
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of the Bank		(1,261)		17
Decrease (increase) in other assets		3		(6)
Increase in other liabilities		43		29
Net cash provided by operating activities		6,136		8,632

Cash flow from financing activities:
Treasury stock purchases		(2,601)		(4,648)
Cash dividends		(3,887)		(3,998)
Net cash used for financing activities		(6,488)		(8,646)
Net decrease in cash during the year		(352)		(14)
Cash and cash equivalents at beginning of year		3,737		3,751
Cash and cash equivalents at end of year	$	3,385	$	3,737

Note 18: Subsequent Events

On July 25, 2024, the Corporation announced that the Provident Financial Holdings Board of Directors declared a quarterly cash dividend of $0.14 per share. Shareholders of Provident Financial Holdings common stock at the close of business on August 15, 2024 are entitled to receive the cash dividend, payable on September 5, 2024.

************

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June 30,

(In Thousands)

FHLB - San Francisco advances