What changed in this filing

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Item 9A. Controls and Procedures

2020-09-04 compared with 2019-08-30 · 666 added, 883 removed, 1706 unchanged (48% of the section changed)

Controls and Procedures

a) 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, Chief 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

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, 2019 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.

b) 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 fiscal year

ended June 30, 2019, 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) 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, Chief Financial Officer and the Corporation’s Disclosure Committee as of the end of the period covered by this

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.

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.

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.

b) 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 fiscal year ended June 30, 2020, 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 with the policies or procedures may

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

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 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

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(the "Corporation"), Provident Savings Bank, F.S.B.

which is subject to Part 363 in the statement of management's

responsibilities;

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.

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);

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

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, 2019, 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).

The effectiveness of internal control over financial reporting as of June 30, 2019, has been audited by Deloitte & Touche LLP, the independent registered public accounting firm who also audited the Corporation's

consolidated financial statements.

Deloitte & Touche LLP's attestation report on the Corporation's internal control over financial reporting follows.

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, 2019.

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, 2019.

August 30, 2019

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, 2020, 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

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, 2020.

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, 2020.

September 4, 2020

Chairman and Chief Executive Officer

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Chief Financial Officer

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

Provident Financial Holdings, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Provident Financial Holdings, Inc.

and subsidiary (the “Corporation”) as of June 30, 2019 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Because management’s assessment and our audit were conducted to meet the reporting requirements of

Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’s assessment and our audit of the Corporation’s internal control over financial reporting included controls over the preparation of the schedules equivalent

to the basic financial statements in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C).

In our opinion, the Corporation maintained, in all material respects, effective internal

control over financial reporting as of June 30, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have not examined and, accordingly, we do not express an opinion or any other form of assurance on management's statement referring to compliance with laws and regulations.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, 2019, of the

Corporation and our report dated August 30, 2019, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the

accompanying Management Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.

We are a public accounting firm registered

with the PCAOB and are required to be independent with respect to the Bank 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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial

reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating

effectiveness of internal control based on the

assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process 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.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately

and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted

accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection

of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting 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.

/s/ Deloitte & Touche LLP

Costa Mesa, California

August 30, 2019

Other Information

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Directors, Executive Officers and Corporate Governance

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

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.

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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 to the Corporation’s Chief Executive Officer, Chief Financial Officer or Controller, the Corporation will disclose the nature of such amendment or waiver on the Corporation’s website and in a report on Form 8-K.

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 to the Corporation’s Chief Executive Officer, Chief Financial Officer or Controller, the Corporation will disclose the nature of such amendment or waiver on the Corporation’s website and in

a report on Form 8-K.

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:

The audit committee

consists of three independent directors of the Corporation:

Barr, Judy A.

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Barr, Audit Committee Chairman, as its audit committee financial expert.

Barr is independent, as

independence for audit committee members is defined under the listing standards of the NASDAQ Stock Market, a Certified Public Accountant in California and Ohio and has been practicing public accounting for over 40 years.

independent, as independence for audit committee members is defined under the listing standards of the NASDAQ Stock Market, a Certified Public Accountant in California and Ohio and has been practicing public accounting for over 40 years.

Nominating Procedures

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

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.

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.

will be filed with the Securities and Exchange Commission no later than 120 days after the Corporation’s fiscal year end.

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.

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” and “Proposal 1 - 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.

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 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.

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

of the Corporation.

(d) Equity Compensation Plan Information.

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Restricted Stock

Equity compensation plans not approved by security holders

Equity compensation plans not approved by

security holders

(1) Excludes restricted stock from the calculation since restricted stock awards do not contain an exercise price requirement.

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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.

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” in the Proxy Statement is incorporated herein by reference.

The information contained in the section captioned “Board of Directors’ Meetings, Board Committees and Corporate Governance Matters

- Corporate Governance - Director Independence” in the Proxy Statement is incorporated herein by reference.

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.

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.

Exhibits, Financial Statement Schedules.

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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)

Employment Agreement with Craig G.

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2020 Annual Report to Stockholders

Code of Ethics for the Corporation’s directors, officers and employees (incorporated by reference to

Exhibit 14 in the Corporation’s Annual Report on Form 10-K dated September 12, 2007)

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.

Subsidiaries of the Registrant

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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

August 30, 2019

September 4, 2020

Provident Financial Holdings, Inc.

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and on the dates indicated.

August 30, 2019

September 4, 2020

Chief Executive Officer

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President, Chief Operating Officer

August 30, 2019

September 4, 2020

and Chief Financial Officer

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/s/ Joseph P.

August 30, 2019

September 4, 2020

/s/ William E.

August 30, 2019

September 4, 2020

Provident Financial Holdings, Inc.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Provident Financial Holdings, Inc.

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We have audited the accompanying consolidated statements of financial condition of Provident Financial Holdings, Inc.

and subsidiary (the “Corporation”) as of June 30, 2019 and 2018, the related

consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2019, and the related notes (collectively referred to as the “financial statements”).

opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of June 30, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended

June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation’s internal control over financial reporting as of

June 30, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 30,

2019, expressed an unqualified opinion on the Corporation’s internal control over financial reporting.

and subsidiary

(the “Corporation”) as of June 30, 2020 and 2019, 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, 2020, and the related notes

(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, 2020 and 2019, and the results of its operations and

its cash flows for each of the two years in the period ended June 30, 2020, 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.

a public accounting firm registered with the 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.

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.

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.

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.

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.

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Costa Mesa, California

August 30, 2019

September 4, 2020

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

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includes $2,258 and $5,094 of loans held at fair value, respectively)

Loans held for sale, at fair value

Accrued interest receivable

Real estate owned, net

Federal Home Loan Bank (“FHLB”) – San Francisco stock

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Common stock, $0.01 par value (40,000,000 shares authorized;

18,081,365 and 18,033,115 shares issued;

18,097,615 and

18,081,365 shares issued;

7,436,315 and 7,486,106 shares outstanding, respectively)

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Net interest income

Recovery from the allowance for loan losses

Net interest income, after recovery from the allowance for loan losses

Provision (recovery) for loan losses

Net interest income, after provision (recovery) for loan losses

Non-interest income:

Loan servicing and other fees

Gain on sale of loans, net

(Loss) gain on sale of loans, net

Deposit account fees

Loss on sale and operations of real estate owned acquired in the settlement of loans, net

Card and processing fees

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Cash dividends per share

Includes $1.7 million of non-recurring expenses related to scaling back of the origination of saleable single-family mortgage loans for the fiscal year ended June 30, 2019.

Includes $0.3 million of non-recurring expenses related to scaling back of the origination of saleable single-family mortgage loans for the fiscal year ended June 30, 2019.

Includes $0.8 million of non-recurring expenses related to scaling back of the origination of saleable single-family mortgage loans for the fiscal year ended June 30, 2019.

Includes $3.4 million of litigation settlement expenses for the fiscal year ended June 30, 2018.

Includes a net tax charge of $1.8 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act of 2017 ("Tax Act") for the

fiscal year ended June 30, 2018.

Includes $1.7 million of non-recurring expenses related to scaling back origination of saleable single-family mortgage loans for the fiscal year ended June 30, 2019.

Includes $0.3 million of non-recurring expenses related to scaling back the origination of saleable single-family mortgage loans for the fiscal year ended June 30, 2019.

Includes $0.8 million of non-recurring expenses related to scaling back the origination of saleable single-family mortgage loans for the fiscal year ended June 30, 2019.

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

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Total comprehensive income

(1) Includes income tax benefit from the reclassification of losses to net income.

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

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Purchase of treasury stock (1)

Forfeiture of restricted stock

Distribution of restricted stock

Amortization of restricted stock

Award of restricted stock

Exercise of stock options

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Purchase of treasury stock

Distribution of restricted stock

Forfeiture of restricted stock

Amortization of restricted stock

Award of restricted stock

Exercise of stock options

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Balance at June 30, 2020

Includes the repurchase of 21,071 shares and 3,291 shares of distributed restricted stock in fiscal 2019 and 2018, respectively in settlement of employees' withholding tax obligations.

Includes the purchase of 21,071 shares of distributed restricted stock in fiscal 2019 in settlement of employees' withholding tax obligations.

Cash dividends of $0.56 per share were paid in both fiscal 2020 and 2019.

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PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

June 30, 2019

PROVIDENT FINANCIAL HOLDINGS, INC.

Consolidated Statements of Cash Flows

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Depreciation and amortization

Recovery from the allowance for loan losses

Recovery of losses on real estate owned

Gain on sale of loans, net

(Gain) loss on sale of real estate owned, net

Provision (recovery) for loan losses

Loss (gain) on sale of loans, net

Stock-based compensation

Provision for deferred income taxes

Increase in accounts payable, accrued interest and other liabilities

Decrease (increase) in prepaid expenses and other assets

(Decrease) increase in accounts payable, accrued interest and other liabilities

(Increase) decrease in prepaid expenses and other assets

Loans originated for sale

2 unchanged sentences

Cash flows from investing activities:

Decrease (increase) in loans held for investment, net

(Increase) decrease in loans held for investment, net

Purchase of investment securities - held to maturity

2 unchanged sentences

Principal payments from investment securities - available for sale

Purchase of FHLB – San Francisco stock

Proceeds from redemption of FHLB – San Francisco stock

Proceeds from sale of real estate owned

Purchase of premises and equipment

Net cash provided by (used for) investing activities

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

Net cash (used for) provided by investing activities

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

PROVIDENT FINANCIAL HOLDINGS, INC.

3 unchanged sentences

Cash flows from financing activities:

Decrease in deposits, net

Increase (decrease) in deposits, net

Proceeds from long-term borrowings

Repayments of long-term borrowings

Repayments of short-term borrowings, net

Proceeds (repayments) of short-term borrowings, net

Treasury stock purchases

2 unchanged sentences

Cash dividends

Net cash used for financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by (used for) financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Transfer of loans held for sale to held for investment

Real estate acquired in the settlement of loans

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

Provident Financial Holdings, Inc.

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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 single-family,

multi-family, commercial real estate, construction and, to a lesser extent, other mortgage, commercial business and consumer loans for investment/its loan portfolio.

Deposits are collected primarily from 13 banking locations located in Riverside

and San Bernardino counties in California.

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, commercial business and consumer loans for investment/its loan portfolio.

Deposits are collected primarily from 13 banking locations located

in Riverside and San Bernardino counties in California.

Additional activities include originating saleable single-family loans, primarily fixed-rate first mortgages.

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Material estimates that are particularly susceptible to significant change in the near term relate to the

determination of the allowance for loan losses and the loan repurchase reserve and the valuation of investment securities, loans held for sale, loans held for investment at fair value, deferred tax assets, loan servicing assets, real estate owned,

derivative financial instruments and deferred compensation costs.

determination of the allowance for loan losses, the loan repurchase reserve, the valuation of investment securities, the valuation of loans held for investment at fair value, deferred tax assets, loan 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,

1 unchanged sentence

Cash and cash equivalents

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

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

Investment securities

23 unchanged sentences

Additionally, multi-family and commercial real estate loans secured

by commercial property, land and other residential properties have become a substantial part of loans held for investment and comprised of 63% and 65% of total loans held for investment at June 30, 2019 and 2018, respectively.

These loans are

generally offered to customers and businesses located in California.

by commercial property, land and other residential properties have become a substantial part of loans held for investment and comprised 66% and 63% of total loans held for investment at June 30, 2020 and 2019, respectively.

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

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flows and the fair market value of collateral.

The use of these techniques is inherently subjective and the actual losses could be greater or

less than the estimates.

The use of these techniques is inherently subjective and the actual losses could be greater or less than the estimates.

Loans originated and held for sale

1 unchanged sentence

Since the Corporation is primarily a single-family adjustable-rate mortgage (“ARM”) lender for its own loan

portfolio, a high percentage of fixed-rate loans are originated for sale to institutional investors.

Loans held for sale consist primarily of long-term fixed-rate loans secured by first trust deeds on single-family residences, the majority of which

are Federal Housing Administration (“FHA”), United States Department of Veterans Affairs (“VA”), Fannie Mae and Freddie Mac loan products.

The loans are generally offered to customers located in (a) Southern California, primarily in Riverside and

San Bernardino counties, commonly known as the Inland Empire, and Orange, Los Angeles, San Diego and other surrounding counties and (b) Northern California, primarily Alameda, Placer, San Luis Obispo and other surrounding counties.

The loans have

been hedged with loan sale commitments, TBA MBS trades and option contracts.

portfolio, fixed-rate loans are originated for sale to institutional investors.

Loans held for sale consist primarily of long-term fixed-rate loans secured by first trust deeds on single-family residences, the majority of which are Federal Housing

Administration (“FHA”), United States Department of Veterans Affairs (“VA”), Fannie Mae and Freddie Mac loan products.

The loans are generally offered to customers located in (a) Southern California, primarily in Riverside and San Bernardino

counties, commonly known as the Inland Empire, and Orange, Los Angeles, San Diego and other surrounding counties and (b) Northern California, primarily Alameda, Placer, San Luis Obispo and other surrounding counties.

The loans have been hedged with

loan sale commitments, TBA MBS trades and option contracts.

The loan sale settlement period is generally between 20 to 30 days from the date of the loan funding.

On February 4, 2019, the Corporation announced that it was its best interests to scale

back the saleable single-family mortgage loan originations and focus on increasing the portfolio single-family mortgage loans.

The Corporation adopted Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” and elected the fair value option (ASC 825, “Financial Instruments”) on loans held

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During the years ended June 30, 2020 and 2019, the Bank repurchased $1.1

and $602,000 of single-family loans, respectively.

million and $948,000 of single-family loans, respectively.

No other repurchase requests, which did not result in the repurchase of the loan itself, were settled in fiscal 2020 and 2019.

In addition to the specific recourse liability for the MPF program,

the Bank established a recourse liability of $200,000 for loans sold to other investors as of both, June 30, 2019 and 2018.

In addition to the specific recourse liability for the MPF

program, the Bank established a recourse liability of $200,000 for loans sold to other investors as of both, June 30, 2020 and 2019.

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

Activity in the recourse liability for the years ended June 30, 2019 and 2018 was as follows:

Activity in the recourse liabilities for the years ended June 30, 2020 and 2019 was as follows:

For Year Ended June 30,

1 unchanged sentence

Balance, beginning of year

Recourse recovery

Recourse reserve (recovery)

Balance, end of the year

3 unchanged sentences

Total loan sale premium refunds in fiscal 2020 and 2019 were $78,000 and $96,000, respectively.

As of June 30, 2019 and 2018, the Bank’s estimated liability was $25,000 and $113,000, respectively, for future

loan sale premium refunds.

The Bank has no estimated liability for future loan sale premium refunds at June 30, 2020, as compared to

$25,000 at June 30, 2019.

Gains or losses on the sale of loans, including fees received or paid, are recognized at the time of sale and are determined by the difference between the net sales proceeds and the allocated book

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commitments are included in other non-interest expense on the Consolidated Statements of Operations.

Loans in forbearance

On March 27, 2020, the CARES Act was signed into law and on April 7, 2020, the Board of Governors of the Federal Reserve System, FDIC, National Credit Union Administration, OCC and consumer

Financial Protection Bureau issued Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (“Interagency Statement”).

Among other things, the CARES Act and Interagency

Statement provided relief to borrowers, including the opportunity to defer loan payments while not negatively affecting their credit standing.

For commercial and consumer customers, the Corporation has provided relief options, including payment

deferrals and fee waivers.

All loans modified due to COVID-19 will be separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further

modification should be granted and if a downgrade in risk rating is appropriate.

After the payment deferral period, normal loan payments will once again become due and payable.

The forbearance amount will be due and payable in full as a balloon payment at the end of the loan

term or sooner if the loan becomes due and payable

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

in full at an earlier date.

The Corporation believes the steps we are taking are necessary to effectively manage its portfolio and assist the borrowers through the ongoing uncertainty surrounding

the duration, impact and government response to the COVID-19 pandemic.

Troubled debt restructuring (“restructured loans”)

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Loans that have been discharged in a Chapter 7 Bankruptcy that have not been reaffirmed by the borrower.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

To qualify for restructuring, a borrower must provide evidence of creditworthiness such as, current financial statements, most recent income tax returns, current paystubs, current W-2s, and most

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The Corporation assesses loans individually and classifies as non-performing loans when the accrual of interest has been discontinued, loans have been restructured or management has serious doubts

about the future collectibility of principal and interest, even though the loans may currently be performing.

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 310, establishes a collectively evaluated or individually evaluated allowance and charges off those loans or portions of loans deemed

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

Corporation measures each non-performing loan based on ASC 310, establishes a collectively evaluated or individually evaluated allowance and charges off those loans or portions of loans deemed

uncollectible.

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amount of impairment loss is the excess of the net book value over its fair value.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

Premises and equipment

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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, 2019 and 2018,

the estimated deferred tax asset was $3.5 million and $4.2 million, 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, among other items.

The decrease in the net deferred tax asset resulted primarily from items related to loss reserves and unpaid litigation expense, partly offset by increases in PBM rescaling costs and decreases in unrealized gains

and losses on assets measured at fair value.

Prospective earnings or losses, tax law

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

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, 2020 and 2019, the estimated deferred tax

asset was $3.0 million and $3.5 million, respectively, and presented in prepaid expenses and other assets.

The Corporation maintains net deferred tax assets for deductible temporary tax differences, such as loss reserves, deferred compensation,

non-accrued interest and unrealized gains, among other items.

The decrease in the net deferred tax asset resulted primarily from a decline in litigation reserves and an increase in deferred loan costs, partly offset by increases in loan loss

reserves and deferred compensation.

The Corporation did not have any liabilities for uncertain tax positions or any known unrecognized tax benefit at June 30, 2020 or 2019.

8 unchanged sentences

The Bank records these BOLI policies within prepaid expenses and other assets in the

Consolidated Statements of Financial Condition at each

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

policy’s respective cash surrender value, with net changes recorded in other non-interest income in the Consolidated Statements of Operations.

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

7 unchanged sentences

The Corporation repurchases its common stock consistent with Board-approved stock repurchase plans.

As of June 30, 2019, a total of 51,999 shares of common stock were purchased during fiscal 2019

at an average cost of $19.74 per share, and 321,001 shares remain available for future repurchase pursuant to the Corporation’s April 2018 stock repurchase plan.

In addition, the Corporation purchased 21,071 shares of distributed restricted stock in

settlement of employees' withholding tax obligations.

During fiscal 2020, a total of 66,041 shares of common stock were purchased at an average cost of

$19.43 per share.

As of June 30, 2020, a total of 371,815 shares remain available for future repurchase pursuant to the Corporation’s April 2020 stock repurchase plan.

Earnings per common share (“EPS”)

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employees and directors.

Stock-based compensation expense, inclusive of restricted stock expense, recognized in the consolidated statements of operations for the years ended June 30, 2019 and 2018 was $869,000 and $1.1 million, respectively.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

compensation expense, inclusive of restricted stock expense, recognized in the consolidated statements of operations for the years ended June 30, 2020 and 2019 was $954,000 and $869,000, respectively.

Employee Stock Ownership Plan ("ESOP")

4 unchanged sentences

A total of $873,000 and $515,000 of

restricted stock was amortized during fiscal 2019 and 2018, respectively.

restricted stock expense was amortized during fiscal 2020 and 2019, respectively.

Post-retirement benefits

1 unchanged sentence

(grandfathered) retirees and employees.

The post retirement benefit liability is included in accounts payable, accrued interest and other liabilities in the Consolidated Statements

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

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.

At June 30, 2019 and 2018, the accrued liability for post-retirement benefits was $196,000 and $204,000, respectively, which was fully funded consistent with actuarially determined estimates of the future obligation.

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.

At June 30, 2020 and 2019, the accrued liability for post-retirement benefits was $184,000 and

$196,000, respectively, which was fully funded consistent with actuarially determined estimates of the future obligation.

Comprehensive income

4 unchanged sentences

Accounting standard updates (“ASU”)

In August 2015, the Financial Accounting Standards Board ("FASB") issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606)," which defers the effective date of ASU No.

2014-09 created Topic 606 and supersedes Topic 605, Revenue Recognition.

The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects

the consideration to which the entity expects to be entitled in exchange for those goods or services.

In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying

performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

For financial reporting purposes, the standard

allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements

with the cumulative effect of initially applying the standard recognized at the date of initial application.

Management adopted the new guidance on July 1, 2018.

The adoption of this ASU did not have a material impact on the Corporation’s

Consolidated Financial Statements.

See Note 17 for additional discussion.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of

the new lessor model with those in the new revenue recognition standard, ASC 606, Revenue From Contracts With Customers.

The new leases standard represents a wholesale change to lease accounting requiring the recognition of lease assets and lease

liabilities in the balance sheet and disclosure of key information about leasing arrangements.

The principal change required by ASU 2016-02 relates to lessee accounting, for operating leases, a lessee is required to (1) recognize a right-of-use asset

and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position, (2) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term generally on a

straight-line basis, and (3) classify all cash payments within operating activities in the statement of cash flows.

For leases with an initial term of 12 months or less, a lessee is permitted to make an accounting policy election by class of

underlying asset not to recognize lease assets and lease liabilities.

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, “Leases (Topic 842).” This ASU introduces a lessee model that brings most leases on the balance sheet and

aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard, ASC 606, Revenue From Contracts With Customers.

The new leases standard represents a wholesale change to lease accounting requiring

the recognition of lease assets and lease liabilities in the balance sheet and disclosure of key information about leasing arrangements.

The principal change required by ASU 2016-02 relates to lessee accounting, for operating leases, a lessee is

required to (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position, (2) recognize a single lease cost, calculated so that the cost of the lease

is allocated over the lease term generally on a straight-line basis, and (3) classify all cash payments within operating activities in the statement of cash flows.

For leases with an initial term of 12 months or less, a lessee is permitted to make an

accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities.

If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.

ASU 2016-02 also changes disclosure

requirements related to leasing activities and requires certain qualitative disclosures along with specific quantitative disclosures.

This ASU will be effective for annual periods beginning after December 15, 2018 (i.e., calendar periods beginning on

January 1, 2019), and interim periods therein, early adoption is permitted.

In July 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which allows entities the option of initially applying the new leases standard at the adoption date

(such as January 1, 2019, for calendar year-end public business entities) and recognize a

ASU 2016-02 also changes disclosure requirements related to leasing activities and requires certain qualitative disclosures along with specific quantitative disclosures.

This ASU was effective for annual periods

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

beginning after December 15, 2018 (i.e., calendar periods beginning on January 1, 2019), and interim periods therein, early adoption was permitted.

In July 2018, the FASB issued ASU 2018-11,

Leases, Targeted Improvements, which allowed entities the option of initially applying the new leases standard at the adoption date (such as January 1, 2019, for calendar year-end public business entities) and recognize a cumulative-effect adjustment

to the opening balance of retained earnings in the period of adoption.

In January 2019, the FASB issued ASU 2019-01, Codification Improvements.

The amendments in this

update include the following items:

(i) determining the fair value of the underlying asset by lessors that are not manufacturers or dealers;

(ii) requiring cash received from lessors from sales-type and direct financing leases to be presented in the

cash flow statement within investing activities;

and (iii) clarifying interim disclosure requirements.

The effective date and transition requirements for the first and second items of this ASU are effective for annual periods, and interim periods

within those annual periods, beginning after December 15, 2019 and early adoption is permitted.

The effective date and transition requirements for the third item of this ASU are the same as ASU 2016-02.

The Corporation plans to adopt these ASUs on

July 1, 2019 utilizing the transition method allowed under ASU 2018-11 and will not restate comparative periods.

The Corporation will also elect to not recognize lease assets and lease liabilities for leases with an initial term of 12 months or less.

The Corporation expects the adoption of these ASUs will result in an increase in premises and equipment and an increase in other liabilities of approximately $3.3 million.

The Corporation does not expect the adoption of these ASUs to have a material

impact on the Corporation’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” and subsequent amendment to the initial

guidance in November 2018, ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, in April 2019, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives

and Hedging, and Topic 825, Financial Instruments, and in May 2019, ASU 2019-05 Financial Instruments—Credit Losses, Topic 326, all of which clarifies codification and corrects unintended application of the guidance.

This ASU requires organizations

to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.

ASU 2018-19 clarifies that receivables arising from operating

leases are accounted for using lease guidance and not as financial instruments.

ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,”

affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance.

ASU 2019-05 allows entities to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on

financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under ASC 825-10.

The fair value option election does not apply to

held-to-maturity debt securities.

Entities are required to make this election on an instrument-by-instrument basis.

The amendments in this ASU included the following items:

(i) determining the fair value of the underlying

asset by lessors that are not manufacturers or dealers;

(ii) requiring cash received from lessors from sales-type and direct financing leases to be presented in the cash flow statement within investing activities;

and (iii) clarifying interim

disclosure requirements.

The effective date and transition requirements for the first and second items of ASU 2019-01 were effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019.

The effective

date and transition requirements for the third item of ASU 2019-01 were the same as ASU 2016-02.

The adoption of this ASU did not have a material impact on the Corporation’s Consolidated Financial Statements.

See Note 5 of the Notes to Consolidated

Financial Statements for additional discussion.

In June 2016, the Financial Accounting Standards Board (“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 in November 2018, ASU No.

2018-19, April 2019, ASU 2019-04, May 2019, ASU 2019-05, November 2019, ASU 2019-11, February 2020, ASU 2020-02 and March 2020, ASU 2020-03, all of which clarifies codification

and corrects unintended application of the guidance.

In November 2019, the FASB also issued ASU 2019-10, “Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates” extending the

adoption date for certain registrants, including the Corporation.

These ASUs will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

however, the FASB board proposed in July 2019 extending the adoption date for certain SEC filers, including the Corporation, to fiscal years beginning after December 15, 2022 The Corporation is evaluating its current expected loss methodology of its

loan and investment portfolios to identify the necessary modifications in accordance with these standards and expects a change in the processes and procedures to calculate the allowance for loan losses, including changes in assumptions and estimates

to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model.

A valuation adjustment to its allowance for loan losses or investment portfolio that is identified in this

process will be reflected as a one-time adjustment in equity rather than earnings upon adoption.

The Corporation is in the process of compiling historical data that will be used to calculate expected credit losses on its loan portfolio to ensure the

Corporation is fully compliant with these ASUs at the adoption date and is evaluating the potential impact adoption of this ASU will have on the Corporation’s Consolidated Financial Statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715):

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost.”

This ASU requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period.

The other components of net benefit cost as

defined in paragraphs 715-30-35-4 and

The Corporation is evaluating its current expected

loss methodology of its loan and investment portfolios to identify the necessary modifications in accordance with these standards and expects a change in the processes and procedures to calculate the allowance for loan losses, including changes in

assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model.

A valuation adjustment to its allowance for loan losses or investment portfolio that

is identified in this process will be reflected as a one-time adjustment in equity rather than earnings upon adoption.

The Corporation is in the process of compiling historical data that will be used to calculate expected credit losses on its loan

portfolio to ensure the Corporation is fully compliant with these ASUs at the adoption date and is evaluating the potential impact adoption that these ASUs will have on the Corporation’s Consolidated Financial Statements.

Once adopted, the

Corporation anticipates the allowance for loan losses to increase through a one‑time adjustment to retained earnings, however, until the evaluation is complete the magnitude of the potential increase will be unknown.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies disclosure requirements on fair value

measurements to improve their effectiveness.” The guidance permits entities to consider materiality when evaluating fair value measurement disclosures and, among other modifications, requires certain new disclosures related to Level 3 fair value

measurements.

This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.

The guidance only affects disclosures in the notes to the

consolidated financial statements and will not otherwise affect the Corporation’s Consolidated Financial Statements.

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

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented.

If a separate line

item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described.

If a separate line item or items are not used, the line item or items used in the income statement to present the

other components of net benefit cost must be disclosed.

Management adopted the new guidance on July 1, 2018.

The Corporation’s adoption of this ASU did not have a material impact on the Corporation’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies disclosure requirements on fair value

measurements to improve their effectiveness.

The guidance permits entities to consider materiality when evaluating fair value measurement disclosures and, among other modifications, requires certain new disclosures related to Level 3 fair value

measurements.

The guidance will be effective beginning January 1, 2020, with early adoption permitted.

The guidance only affects disclosures in the notes to the consolidated financial statements and will not otherwise affect the Corporation’s

Consolidated Financial Statements.

LIBOR or other rate references expected to be discontinued because of reference rate reform.

The ASU permits an entity to make necessary modifications to eligible contracts or transactions without

requiring contract re-measurement or reassessment of a previous accounting determination.

This ASU is effective for all entities as of March 12, 2020 through December 31, 2022.

The Corporation is in the process of compiling data on the impact of

reference rate reform and has not determined the impact of the adoption of this ASU on its consolidated financial statements.

Investment Securities

31 unchanged sentences

Total investment securities

Small Business Administration ("SBA").

Collateralized Mortgage Obligations (“CMO”).

In fiscal 2020 and 2019, the Corporation received MBS principal payments of $32.1 million and $34.2 million, respectively and did not sell any investment securities.

1 unchanged sentence

mortgage-backed securities totaling $55.9 million and $39.9 million during fiscal 2020 and 2019, respectively.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

As of June 30, 2019 and 2018, the Corporation held investments with unrealized loss position of $21,000 and $777,000, respectively.

As of June 30, 2020 and 2019, the Corporation held investments with an unrealized loss position of $69,000 and $21,000, respectively.

As of June 30, 2020

Unrealized Holding

Unrealized Holding Losses

(In Thousands)

7 unchanged sentences

Available for sale

government agency MBS

Private issue CMO

Total investment securities – available for sale

Total investment securities

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

As of June 30, 2019

9 unchanged sentences

SBA securities

Total investment securities – held to maturity

Available for sale

government agency MBS

Total investment securities – available for sale

Total investment securities

As of June 30, 2020, the Corporation had investment securities with unrealized holding losses of $52,000 that were less than 12 months and $17,000 that were in an unrealized loss position for more

than 12 months, as compared to investment securities at June 30, 2018 with unrealized holding losses of $777,000 that were less than 12 months.

The unrealized loss at June 30, 2019 was attributable to one U.S.

than 12 months, as compared to investment securities at June 30, 2019 with unrealized holding losses of $9,000 that were less than 12 months and $12,000 that were in an unrealized loss position for more than 12 months.

The unrealized loss at June 30,

2020 was attributable to two U.S.

government sponsored enterprise MBS, one U.S.

SBA security and three private issue CMOs and, based on the nature of the investments, management concluded that such unrealized losses were not other than temporary.

unrealized loss at June 30, 2019 was attributable to one U.S.

government agency MBS, three U.S.

government sponsored enterprise MBS and one U.S.

SBA security and, based on the nature of the investments, management concluded that such unrealized losses were not other than temporary;

while the unrealized loss at June 30, 2018 was attributable to

government sponsored enterprise MBS and one U.S.

SBA security, and based on the nature of the investments, management concluded that such unrealized losses were not other than temporary.

The Corporation does not believe that there was any

OTTI at June 30, 2019 and 2018.

At each of these dates, the Corporation intended and had the ability to hold the investment securities and was not likely to be required to sell the securities before realizing a full recovery.

SBA security, and based on the nature of the investments, management concluded that such unrealized

losses were not other than temporary.

The Corporation does not believe that there was any OTTI at June 30, 2020 and 2019.

At each of these dates, the Corporation intended and had the ability to hold the investment securities and was not likely to

be required to sell the securities before realizing a full recovery.

Contractual maturities of investment securities as of June 30, 2020 and 2019 were as follows:

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

Contractual maturities of investment securities as of June 30, 2019 and 2018 were as follows:

June 30, 2020

12 unchanged sentences

Due after ten years

No stated maturity (common stock)

Total investment securities - available for sale

Total investment securities

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

Loans Held for Investment

11 unchanged sentences

Total loans held for investment, net

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

The following table sets forth information at June 30, 2020 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 2% of loans held for investment at both June 30, 2019 and June 30, 2018.

Adjustable rate loans having no stated repricing date that reprice when

the index they are tied to reprices (e.g.

Fixed-rate loans comprised 1% and 2% of loans held for investment at June 30, 2020 and June 30, 2019, respectively.

Adjustable rate loans having no stated repricing date that

reprice when the index they are tied to reprices (e.g.

prime rate index) and checking account overdrafts are reported as repricing within one year.

The table does not include any estimate of prepayments which may cause the Corporation’s actual repricing

experience to differ materially from that shown.

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

6 unchanged sentences

Total loans held for investment,

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

The Corporation has developed an internal loan grading system to evaluate and quantify the Bank’s loans held for investment portfolio with respect to quality and risk.

19 unchanged sentences

Loans so classified must

have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt.

have a well-defined weakness, or weaknesses, that

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

may jeopardize the liquidation of the debt.

A substandard loan is characterized by the distinct possibility that the Bank 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.

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.

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

5 unchanged sentences

investment, gross

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

June 30, 2018

(In Thousands)

14 unchanged sentences

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 modified from their original terms, were re-underwritten and identified in the Corporation's

asset quality reports as restructured 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 allowance for loan losses.

The allowance

for loan losses for non-performing loans is determined by applying ASC 310, “Receivables.” For restructured loans that are less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for

those loans with applicable discounted cash flow calculations still in their restructuring period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling

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,

individually evaluated allowances are calculated based on their fair values and if their fair values are higher than their loan balances, no allowances are required.

For loans that were modified from their

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

original terms, were re-underwritten and identified in the Corporation's asset quality reports as restructured loans, the charge-off occurs when the loan becomes 90 days delinquent;

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 allowance for loan losses.

The allowance for loan losses for non-performing loans is determined by applying ASC 310, “Receivables.” For restructured loans that are

less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their restructuring 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, individually evaluated allowances are calculated based on their fair values and if their fair values are higher than their loan

balances, no allowances are required.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

The following tables summarize the Corporation’s allowance for loan losses and recorded investment in gross loans, by portfolio type, at the dates and for the periods indicated.

1 unchanged sentence

(In Thousands)

Commercial Business

Allowance at beginning of period

14 unchanged sentences

(In Thousands)

Commercial Business

Allowance at beginning of period

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Balance, beginning of year

Recovery from the allowance for loan losses

Provision (recovery) for loan losses

Balance, end of year

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dependent loans, current appraisals less costs to sell to establish realizable value.

These analysis may identify a specific impairment amount needed or may

conclude that no reserve is needed.

This evaluation may identify a specific impairment amount needed or may conclude that no

reserve is needed.

Loans that are not individually evaluated for impairment are included in pools of homogeneous loans for evaluation of related allowance reserves.

6 unchanged sentences

Without a related allowance (2)

Total single-family

Total single-family loans

Construction:

Without a related allowance (2)

Total commercial real estate

Total construction loans

Commercial business loans:

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Without a related allowance (2)

Total single-family

Commercial real estate:

Total single-family loans

Construction:

Without a related allowance (2)

Total commercial real estate

Total construction loans

Commercial business loans:

5 unchanged sentences

the loan balance.

On March 27, 2020, the CARES Act was signed into law and on April 7, 2020, the Board of Governors of the Federal Reserve System, FDIC, National Credit Union Administration, OCC and consumer

Among other things, the CARES Act and Interagency

Statement provided relief to borrowers, including the opportunity to defer loan payments while not negatively affecting their credit standing.

For commercial and consumer customers, the Corporation has provided relief options, including payment

deferrals and fee waivers.

All loans modified due to COVID-19 will be separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further

modification should be granted and if a downgrade in risk rating is appropriate.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

As of June 30, 2020, loan forbearance related to COVID-19 hardship requests are described below:

Forbearance Granted

Forbearance Completed

Forbearance Remaining

(Dollars In Thousands)

Single-family loans

Multi-family loans

Commercial real estate loans

Total loan forbearance

As of June 30, 2020, loan forbearance outstanding balances are described below:

(Dollars In Thousands)

Weighted Avg.

Single-family loans

Multi-family loans

Commercial real estate loans (5)

Total loans in forbearance

Current loan balance in comparison to the original appraised value.

At time of loan origination, borrowers and/or guarantors.

At time of loan origination.

Comprised of $579 thousand in Office and $493 thousand in Mixed Used – Office/Single-Family Residential.

In addition, as of June 30, 2020, the Bank had pending requests for payment relief for an additional seven single-family loans totaling approximately $2.6 million.

After the payment deferral period, normal loan payments will once again become due and payable.

The forbearance amount will be due and payable in full as a balloon payment at the end of the loan

term or sooner if the loan becomes due and payable in full at an earlier date.

The Corporation believes the steps we are taking are necessary to effectively manage its portfolio and assist the borrowers through the ongoing uncertainty surrounding the

duration, impact and government response to the COVID-19 pandemic.

At June 30, 2020 and 2019, there were no commitments to lend additional funds to those borrowers whose loans were classified as non-performing, except for one construction loan with undisbursed

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For the fiscal year ended June 30, 2020, the Bank received $312,000 in interest payments from

non-performing loans and $408,000 was recognized as interest income.

The remaining $166,000 was applied to reduce the loan balances under the cost recovery method.

In comparison, for the fiscal year ended June 30, 2018, the Bank received $564,000 in

interest payments from non-performing loans and $272,000 was recognized as interest income.

non-performing loans, of which $203,000 was recognized as interest income.

The remaining $109,000 was applied to reduce the loan balances under the cost recovery method.

In comparison, for the fiscal year ended June 30, 2019, the Bank received

$574,000 in interest payments from non-performing

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

loans, of which $408,000 was recognized as interest income.

The remaining $166,000 was applied to reduce the loan balances under the cost recovery method.

The following tables denote the past due status of the Corporation's loans held for investment, gross, at the dates indicated.

23 unchanged sentences

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

For the fiscal year ended June 30, 2019, there were no loans that were newly modified from their original terms, re-underwritten or identified as a restructured loan;

one loan (previously modified)

was downgraded;

For the fiscal year ended June 30, 2020, there were two loans that were newly modified from their original terms, re-underwritten or identified as a restructured loan;

one loan (previously

modified) was downgraded;

one loan was upgraded to the pass category;

two loans were paid off;

and no loans were converted to real estate owned.

For the fiscal year ended June 30, 2019, there were no loans that were newly modified from their

original terms, re-underwritten or identified as a restructured loan;

one loan (previously modified) was downgraded;

three loans were upgraded to the pass category;

1 unchanged sentence

and no loans were converted to real estate owned.

For the fiscal year ended June 30, 2018, there were two loans that were newly modified from their original

terms, re-underwritten or identified as a restructured loan;

two loans (previously modified) were downgraded;

while two loans were upgraded to the pass category;

and one loan was converted to a real estate owned.

During the fiscal years ended June

30, 2019 and 2018, no restructured loans were in default within a 12-month period subsequent to their original restructuring.

Additionally, during the fiscal year ended June 30, 2019, there was one restructured loan of $56,000 that was extended

beyond the initial maturity of the modification;

while in fiscal 2018, there were no restructured loans that were extended beyond the initial maturity of the modification.

fiscal years ended June 30, 2020 and 2019, no restructured loans

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

were in default within a 12-month period subsequent to their original restructuring.

Additionally, during the fiscal year ended June 30, 2020, there were no restructured loans that were extended

beyond the initial maturity of the modification;

while in fiscal 2019, there was one restructured loan of $56,000 that was extended beyond the initial maturity of the modification.

As of June 30, 2020, the net outstanding balance of the Corporation’s eight restructured loans was $2.6 million, all were classified as substandard on non-accrual status.

As of June 30, 2020, $1.2

million, or 44 percent, of the restructured loans were current with respect to their payment status, consistent with modified terms.

As of June 30, 2019, the net outstanding balance of the Corporation’s eight restructured loans was $3.8 million:

one was classified as special mention and remains on accrual status ($437,000);

was classified as substandard on accrual status ($1.4 million);

was classified as special mention on accrual status ($437,000);

one was classified as substandard on accrual status ($1.4 million);

and six were classified as substandard on non-accrual status ($1.9 million).

As of June 30, 2019, $2.4 million, or 63 percent, of the restructured loans were current with respect to

their payment status.

As of June 30, 2018, the net outstanding balance of the Corporation’s 11 restructured loans was $5.2 million:

one loan was classified as special mention on accrual status ($389,000);

one was classified as substandard on accrual

status ($1.4 million);

and nine loans were classified as substandard ($3.4 million, all on non-accrual status).

As of June 30, 2018, $2.9 million, or 56 percent, of the restructured loans had a current payment status, consistent with modified their

At both June 30, 2019 and June 30, 2018, there were no commitments to lend additional funds to those borrowers whose loans were restructured.

As of June 30, 2019, $1.2 million, or 44

percent, of the restructured loans were current with respect to their payment status, consistent with modified terms.

At both June 30, 2020 and June 30, 2019, there were no commitments to lend additional funds to those borrowers whose loans were

restructured.

The following table summarizes at the dates indicated the restructured loan balances, net of allowance for loan losses or charge-offs, by loan type and non-accrual versus

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This compares to the MSA at June 30, 2019 which had a carrying value of $925,000

and a fair value of $1.0 million.

An allowance may be recorded to adjust the carrying value of each of the nine strata of MSA to the lower of cost or fair value.

and a fair value of $627,000.

An allowance may be recorded to adjust the carrying value of the MSA to the lower of cost or fair value.

As of June 30, 2020, a

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

of June 30, 2019, a total allowance of $298,000 was required for all nine categories of MSA, compared to a total allowance of $82,000 for six categories of MSA as of June 30, 2018.

Total additions

to the MSA during the years ended June 30, 2019 and 2018 were $52,000 and $237,000, respectively.

total allowance of $291,000 was required for MSA, compared to a total allowance of $298,000 for MSA as of June 30, 2019.

Total additions to the MSA during the years ended June 30, 2020 and 2019 were $0 and $52,000,

respectively.

Total amortization of the MSA during the years ended June 30, 2020 and 2019 was $252,000 and $125,000, respectively.

10 unchanged sentences

Allowance, beginning of fiscal year

Impairment provision (recovery)

Impairment (recovery) provision

Allowance, end of fiscal year

29 unchanged sentences

Total loans sold

During the years ended June 30, 2019 and 2018, the Corporation sold 16% and 12%, respectively, of its loans originated for sale to a single investor, other than Freddie Mac or Fannie Mae.

Consistent with the Corporation’s announcement on February 4, 2019 to scale back operations related to the origination of saleable single-family mortgage loans and improve on its efforts to

increase the volume of portfolio single-family mortgage loan originations, there were no loans sold in fiscal 2020, as compared to $559.0 million in fiscal 2019;

and there were no outstanding loans held for sale at June 30, 2020 and June 30, 2019.

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

Loans held for sale, at fair value, at June 30, 2019 and 2018 consisted of the following:

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 Corporation’s consolidated statements of financial condition.

At June 30, 2020, all of 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.

Due to the fact that 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 Corporation utilizes the FHLB - San Francisco 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 year ended June 30, 2020, expenses associated with the Corporation’s leases totaled $825,000, and was recorded in premises and occupancy expenses and equipment expenses in the

consolidated statements of operations.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

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

(In Thousands)

Adjustable rate

Total loans held for sale, at fair value

Consistent with the Corporation’s announcement on February 4, 2019 to scale back operations related to the origination of saleable single-family mortgage loans and improve on its efforts to

increase the volume of portfolio single-family mortgage loan originations, total loans sold in fiscal 2019 were $559.0 million, down 54% from $1.20 billion in fiscal 2018;

and there were no outstanding loans held for sale at June 30, 2019 as compared

to $96.3 million at June 30, 2018.

The Corporation recognized during fiscal 2019 non-recurring costs of $2.80 million in connection with reducing its saleable single-family loan origination operations, which is comprised of $1.70 million in salaries

and employee benefits expenses (attributable to severance and other personnel expenses), $337,000 in premises and occupancy expenses (attributable to accelerated lease expenses and accelerated depreciation of furniture and fixtures), and $758,000 in

equipment expenses (attributable to termination, charge-off, or modification of data processing and other contractual arrangements).

Real Estate Owned

Real estate owned at June 30, 2019 and 2018 consisted of the following:

June 30, 2020

Consolidated Statements of Condition:

Premises and equipment - Operating lease right of use assets

Accounts payable, accrued interest and other liabilities –

Operating lease liabilities

Consolidated Statements of Operations:

Premises and occupancy expenses from operating leases (1) (2)

Equipment expenses from operating leases

Consolidated Statements of Cash Flows:

Operating cash flows from operating leases, net (2)

Variable lease costs are immaterial.

Revenue related to sublease activity is immaterial and netted against operating lease expenses.

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, 2020:

Year Ending June 30,

(In Thousands)

Real estate owned

Allowance for estimated real estate owned losses

Total real estate owned, net

Real estate owned is primarily the result of real estate acquired in the settlement of loans.

As of June 30, 2019, the Corporation did not have any real estate owned.

As of June 30, 2018, real

estate owned was comprised of two single-family residences located in California.

During fiscal 2019, the Corporation did not acquire any real estate owned properties in the settlement of loans and sold the remaining two properties for a net gain of $9,000 which was offset by

real estate owned expenses of $13,000.

In fiscal 2018, the Corporation acquired four real estate owned properties in the settlement of loans and sold four properties for a net loss of $558,000 and incurred real estate owned expenses of $89,000,

which was offset by a recovery of losses on real estate owned of $561,000.

Total contract lease payments

Total liability to make lease payments

Difference in undiscounted and discounted future lease payments

Weighted average discount rate

Weighted average remaining lease term (years)

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

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

A summary of the disposition and operations of real estate owned acquired in the settlement of loans for the years ended June 30, 2019 and 2018 consisted of the following:

Year Ended June 30,

The following table summarizes the impact of the adoption of the new lease accounting guidance on the Corporation’s consolidated statements of financial condition as of July 1, 2019:

(In Thousands)

Net gain (loss) on sale

Net operating expenses

Recovery of losses on real estate owned

Loss on sale and operations of real estate owned acquired in

the settlement of loans, net

lease guidance

Total liabilities

Premises and Equipment

3 unchanged sentences

Furniture and equipment

Operating lease – right of use assets (1)

Less accumulated depreciation and amortization

Total premises and equipment, net

Depreciation and amortization expense for the years ended June 30, 2019 and 2018 amounted to $881,000 and $845,000, respectively.

Net of accumulated amortization.

Depreciation and amortization expense for the years ended June 30, 2020 and 2019 amounted to $1.5 million and $881,000, respectively.

Provident Financial Holdings, Inc.

12 unchanged sentences

Time deposits:

Under $100 (2)

0.00% - 2.13%

6 unchanged sentences

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

Includes brokered deposits of $0 and $1.6 million at June 30, 2019 and 2018, respectively.

The aggregate annual maturities of time deposits at June 30, 2020 and 2019 were as follows:

24 unchanged sentences

$658.7 million and $643.0 million, respectively.

In addition, the Bank pledged investment securities totaling $3.2 million at June 30, 2019 to collateralize its FHLB – San Francisco advances under the Securities-Backed Credit (“SBC”) program as

compared to $3.3 million at June 30, 2018.

At June 30, 2019, the Bank’s FHLB – San Francisco borrowing capacity, which is limited to 35% of total assets reported on the Bank’s quarterly Call Report, was approximately $391.8 million as compared to

$411.8 million at June 30, 2018 which was similarly limited.

As of June 30, 2019 and 2018, the remaining/available borrowing facility was $275.2 million and $275.1 million, respectively, and the remaining/available collateral was $434.7 million and

$500.3 million, respectively.

In addition, the Bank pledged investment securities totaling $2.2 million and $3.2 million to collateralize its FHLB – San Francisco advances under the Securities-Backed Credit (“SBC”) program at June

30, 2020 and 2019, respectively.

At June 30, 2020, the Bank’s FHLB – San Francisco borrowing capacity, which is limited to 35% of total assets reported on the Bank’s quarterly Call Report, was approximately $387.6 million and $391.8 million at June

30, 2020 and 2019, respectively.

As of June 30, 2020 and 2019, the remaining/available borrowing facility was $228.1 million and $275.2 million, respectively, and the remaining/available collateral was $351.5 million and $434.7 million,

respectively.

In addition, as of June 30, 2020 and 2019, the Bank had a $94.4 million and $74.2 million discount window facility, respectively, at the Federal Reserve Bank of San Francisco, collateralized by

3 unchanged sentences

The Bank intends to request a renewal of its borrowing arrangement with the correspondent bank prior to maturity.

As of both June 30, 2020 and 2019, there were no outstanding borrowings under the discount window facility or

the federal funds facility with the correspondent bank.

Borrowings at June 30, 2020 and 2019 consisted of the following:

8 unchanged sentences

The Bank held a stock investment of $8.0 million with excess

capital stock of $470,000 at June 30, 2019.

This compares to a required stock investment of $8.2 million with no excess capital stock at June 30, 2018.

The FHLB – San Francisco did not redeem any capital stock during fiscal 2019 and 2018, while the Bank purchased no FHLB - San Francisco capital stock in fiscal 2019 and $91,000 of FHLB - San

Francisco capital stock in fiscal 2018.

capital stock of $1.1 million at June 30, 2020.

This compares to a required stock investment of $8.2 million with excess capital stock of $470,000 at June 30, 2019.

During fiscal 2020, the FHLB – San Francisco redeemed $229,000 of the excess capital stock, while the Bank did not purchase any FHLB - San Francisco capital stock.

During fiscal 2019, the FHLB –

San Francisco did not redeem any capital stock and the Bank did not purchase any FHLB - San Francisco capital stock.

In fiscal 2020 and 2019, the FHLB – San Francisco distributed $534,000 and $707,000 of cash dividends, respectively, to the Bank.

The cash dividends received by the Bank in fiscal 2019 included a special cash

dividend of $133,000.

The cash dividends received by the Bank in fiscal 2019 included a special cash dividend of $133,000.

Provident Financial Holdings, Inc.

36 unchanged sentences

were no unrecognized tax benefits to be reported in the Corporation’s consolidated financial statements for the years ended June 30, 2020 and 2019.

On December 22, 2017, the U.S.

Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The Tax Act amends the Internal Revenue Code to

reduce tax rates and modify policies, credits, and deductions for individuals and businesses.

For businesses, the Tax Act reduces the corporate federal tax income rate from a maximum of 35 percent to a flat 21 percent.

The federal corporate tax rate

reduction was effective January 1, 2018.

Since the Corporation has a fiscal year end of June 30 th , the reduced federal corporate income tax rate for its fiscal year 2018 resulted in the application of a blended federal statutory income tax

rate of 28.06 percent, which was based on the applicable tax rates before and after the Tax Act and corresponding number of days in the fiscal year before and after enactment, and then a flat 21 percent tax rate thereafter.

Under generally accepted accounting principles, the Corporation uses the asset and liability method of accounting for income taxes.

2 unchanged sentences

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.

At June 30, 2017, the Corporation’s deferred tax assets and liabilities were determined based on the then-current

enacted federal tax rate of 35 percent.

As a result of the reduction in the federal corporate income tax rate under the Tax Act, the Corporation revalued its deferred tax assets and liabilities at December 31, 2017.

Deferred tax assets and

liabilities realized in fiscal year 2018 and prior fiscal years were re-measured using the aforementioned blended rate.

These re-measurements collectively resulted in a discrete tax expense of $1.8 million that was recognized in fiscal 2018.

tax assets and liabilities realized in fiscal 2019 were re-measured using the statutory federal rate of 21 percent.

The estimated combined federal and state statutory tax rates, before discrete items, for fiscal years 2019 and 2018 are as follows:

Statutory Tax Rates

Federal Tax Rate

State Tax Rate

Combined Statutory Tax Rate (1)

(1) The combined statutory tax rate is net of the federal tax benefit for the state tax deduction.

tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled On March 18, 2020, President Trump signed into law H.R.6201/P.L.

116-27, “An Act making emergency supplemental

appropriations”, the legislation more commonly known as the Families First Coronavirus Response Act (the “Families First Act”).

Additionally, on March 27, 2020, President Trump signed into law H.R.

748/Public Law No.

116-36, “An Act to provide

emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic, the “CARES Act.

Pursuant to ASC 740-10-25-47, the effects of the new federal legislation are recognized upon

enactment, which is the date the president signs a bill into law.

The Corporation believes it has applied the provisions of the Families First Act and CARES act in accordance with ASC 740.

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

1 unchanged sentence

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

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

taxable temporary differences.

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 basis.

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.

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 periods indicated consisted of the following:

2 unchanged sentences

Provision for income taxes

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

The Corporation's tax benefit from non-qualified equity compensation recognized in the Consolidated Statements of Operations in connection with the adoption of ASU 2016-09 for fiscal 2020 and 2019

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Federal income tax at statutory rate

State income tax, net of federal income tax benefits

State income tax, net of federal income tax benefit

Changes in taxes resulting from:

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Excess tax benefit on stock-based compensation

Deferred tax asset revaluation due to the Tax Act

Return to provision adjustment

Effective income tax

(1) Tax benefit resulting from the corporate tax rate reduction in fiscal 2018.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

Deferred tax assets at June 30, 2020 and 2019 by jurisdiction were as follows:

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Total net deferred tax assets

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

Net deferred tax assets at June 30, 2020 and 2019 were comprised of the following:

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FHLB - San Francisco stock dividends

Unrealized gain on derivative financial instruments, at fair value

Prepaid expenses

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necessary at June 30, 2020 and 2019 and management believes it is more likely than not the Corporation will realize its deferred tax asset.

Retained earnings at June 30, 2019 and 2018 includes 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.

the amounts that qualify as deductions for federal

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

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

Retained earnings at June 30, 2020 and 2019 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.

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

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.

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taxing authorities.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

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 year ended June 30, 2019, there

was an $18,000 penalty that was non-tax deductible due to the nature of the expenses and no interest charges;

during fiscal 2018, there were no tax penalties or interest charges.

For the fiscal year ended June 30, 2020 and

2019, there were no tax penalties and no interest charges arising from federal or state taxes.

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.

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classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank and Provident Financial Holdings, Inc.

became subject to new capital adequacy

requirements which were fully phased-in on January 1, 2019.

Since the Provident Financial Holdings, Inc.

has less than $3.0 billion in assets, the capital guidelines apply on a bank only basis, and the Federal Reserve expects the holding company’s

subsidiary bank to be well capitalized under the prompt corrective action regulations.

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank and the Corporation became subject to new capital adequacy requirements which

were fully phased-in on January 1, 2019.

Since the Corporation has less than $3.0 billion in assets, the capital guidelines apply on a bank only basis, and the Federal Reserve expects the holding company’s subsidiary bank to be well capitalized

under the prompt corrective action regulations.

The capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital.

The Bank changes in capital requirements adopted by the OCC required a ratio for common equity Tier 1 (“CET1”) capital, increased the Tier1 leverage and Tier 1 capital ratios, changed the

risk-weightings of certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over the required capital ratios and changed what qualifies as capital for purposes of meeting these various capital

requirements.

The changes in capital requirements required a minimum ratio for common equity Tier 1 (“CET1”) capital, increased the Tier1 leverage and Tier 1 capital ratios, changed the risk-weightings of

certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over the required capital ratios and changed what qualifies as capital for purposes of meeting these various 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.

The Bank is required to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before payment of dividends, repurchase of shares or payment of discretionary bonuses.

required to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before payment of dividends, repurchase of shares or payment of discretionary bonuses.

In addition to the minimum CET1, Tier 1 and total capital ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital 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

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.

As of June 30, 2020, the capital conservation

buffer required a minimum of 2.50% of risk weighted assets.

For calendar 2019 and thereafter, the minimum requirements call for a Tier1 leverage ratio of 4.00%, a ratio of common equity Tier 1 capital ("CET1") to total risk-weighted assets (“CET1 risk-based

ratio”) of 7.00%, a Tier 1 capital ratio of 8.50%, and a total capital ratio of 10.50%.

Under the standards, in order to be considered well-capitalized, the Bank must have at minimum a Tier1 leverage ratio of 5%, a CET1 capital ratio of 6.50%, a Tier 1 capital ratio of 8.00%, and a

total capital ratio of 10.00%.

Provident Financial Holdings, Inc.

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June 30, 2020

utilized for such actions.

As of June 30, 2019, the capital conservation buffer required a minimum of 2.50% of risk weighted assets.

For calendar 2019, the minimum requirements call for a Tier1 leverage ratio of 4.00%, a ratio of common equity Tier 1 capital ("CET1") to total risk-weighted assets (“CET1 risk-based ratio”) of

7.00%, a Tier 1 capital ratio of 8.50%, and a total capital ratio of 10.50%.

Under the standards, in order to be considered well-capitalized, the Bank must have a Tier1 leverage ratio of 5%, a CET1 capital ratio of 6.5%, a Tier 1 capital ratio of 8%, and a total capital

ratio of 10%.

At June 30, 2019, the Bank exceeded all regulatory capital requirements.

The Bank was categorized as "well-capitalized" at June 30, 2019 under the regulations of the OCC.

The Bank's actual and required minimum capital amounts and ratios at the dates indicated are as follows (dollars in thousands):

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Total capital (to risk-weighted assets)

Inclusive of the conservation buffer of 2.50% for CET1 capital, Tier 1 capital and Total capital ratios.

At June 30, 2020, the Bank exceeded all regulatory capital requirements.

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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

If the Bank, however, proposes to make a capital distribution

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 Federal Reserve Board (“FRB”).

The FRB or the OCC may object to a capital distribution based on safety and soundness

Additional restrictions on Bank dividends may apply if the Bank fails the Qualified Thrift Lender test.

In fiscal 2020 and 2019, the Bank declared $7.5 million of cash dividends to its parent, the Corporation, at both dates.

Provident Financial Holdings, Inc.

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June 30, 2020

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 Federal Reserve Board.

The Federal Reserve Board or the OCC may object to a capital distribution based on safety and soundness

Additional restrictions on Bank dividends may apply if the Bank fails the QTL test.

In fiscal 2019 and 2018, the Bank declared $7.5 million and $5.0 million of cash dividends to its parent, the Corporation, respectively.

Benefit Plans

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Corporation's contribution to the ESOP plan is discretionary.

During fiscal 2019, there were 28,000 shares that were purchased in the open market and $539,000 of cash contributions to fulfill the annual discretionary allocation.

This compares to

fiscal 2018 when the Corporation purchased 60,000 shares in the open market and no cash contributions to fulfill the annual discretionary allocation.

During fiscal 2020, there were 32,000 shares that were purchased in the open market and no cash contributions to fulfill the annual discretionary allocation.

This compares to fiscal 2019

when the Corporation purchased 28,000 shares in the open market and made $539,000 of cash contributions to fulfill the annual discretionary allocation.

Since the annual contributions are discretionary, the benefits payable under the ESOP cannot be

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Benefits are payable upon death, retirement, early retirement, disability or separation from service.

The net expense related to the ESOP for the years ended June 30, 2020 and 2019 was $602,000 and $1.1 million, respectively.

Available shares and cash contributions, if any, are allocated every

calendar year end;

and the total allocated at December 31, 2019 were 40,000 shares and no cash contributions.

This compares to 30,000 of shares and $539,000 of cash contributions allocated at December 31, 2018.

Provident Financial Holdings, Inc.

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June 30, 2020

The net expense related to the ESOP for both the years ended June 30, 2019 and 2018 was $1.1

Available shares and cash contributions, if any, are allocated every calendar year end;

and the total allocated at December 31, 2018 were 30,000 shares and $539,000 of cash contributions.

This compares to 60,000 shares and no cash

contributions allocated at December 31, 2017.

Incentive Plans

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Plan (“2010 Plan”) and the 2006 Equity Incentive Plan (“2006 Plan”).

For the years ended June 30, 2019 and 2018, the compensation cost for these plans was $869,000 and $1.1 million, respectively.

For the years ended June 30, 2020 and 2019, the compensation cost for these plans was $954,000 and $869,000, respectively.

Equity Incentive Plans.

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Risk-free interest rate

In fiscal 2019, there were 90,000 options granted under the Plans, while 48,250 options were exercised and no options were forfeited.

In fiscal 2018, there were no options granted under the Plans,

while 83,750 options were exercised and 2,500 options were forfeited.

In fiscal 2020, there were no options granted under the Plans, while 16,250 options were exercised and no options were forfeited.

In fiscal 2019, there were 90,000 options granted under the Plans,

while 48,250 options were exercised and no options were forfeited.

As of both June 30, 2020 and 2019, there were 57,500 options available for future grants under the Plans.

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

As of June 30, 2019 and 2018, there were 57,500 and 147,500 options, respectively, available for future grants under the Plans.

The following tables summarize the stock option activity in the Plans during the years ended June 30, 2020 and 2019:

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options issued under the Plans.

The expense is expected to be recognized over a weighted-average period of 3.4 years and 10 months, respectively.

The expense is expected to be recognized over a weighted-average period of 2.6 years and 3.4 years, respectively.

The forfeiture rate during both fiscal 2020 and 2019 was 20 percent, and was calculated by using the

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awards based on the fair value of the shares at the award date.

In fiscal 2019, 224,500 shares of restricted stock were awarded under the Plans with 50% vesting after two years of service and 50% vesting after four years of service, while 89,500 shares were

vested and distributed and no shares were forfeited.

In fiscal 2018, no shares of restricted stock were awarded under the Plans, while 10,500 shares were vested and distributed and 2,000 shares were forfeited.

As of June 30, 2019 and 2018, there

were 43,250 and 267,750 shares available for future awards under the Plans, respectively.

In fiscal 2020, no shares of restricted stock were awarded under the Plans or vested and distributed, while 8,000 shares were forfeited.

In fiscal 2019, 224,500 shares of restricted stock were

awarded under the Plans with 50% vesting after two years of service and 50% vesting after four years of service, while 89,500 shares were vested and distributed and no shares were forfeited.

As of June 30, 2020 and 2019, there were 51,250 and 43,250

shares available for future awards under the Plans, respectively.

No new awards can be granted from the 2006 Plan.

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Expected to vest at June 30, 2020

As of June 30, 2019 and 2018, the unrecognized compensation expense was $4.2 million and $409,000, 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 3.9 years and 10 months, respectively.

Similar to stock options, a forfeiture rate of 20

percent has been applied to the restricted stock compensation expense calculations in fiscal 2019 and 2018.

For the fiscal years ended June 30, 2019 and 2018, the fair value of shares vested and distributed was $1.6 million and $194,000,

As of June 30, 2020 and 2019, the unrecognized compensation expense was $3.2 million and $4.2 million, 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 2.9 years and 3.9 years, respectively.

Similar to stock options, a forfeiture

rate of 20 percent has been applied to the restricted stock compensation expense calculations in fiscal 2020 and 2019.

For the fiscal years ended June 30, 2020 and 2019, the fair value of shares vested and distributed was $0 and $1.6 million,

respectively.

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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

As of June 30, 2019 and 2018, there were outstanding options to purchase 570,750 shares and 529,000 shares of the Corporation’s common stock, respectively, and no shares and 20,000 shares,

As of June 30, 2020 and 2019, there were outstanding options to purchase 554,500 shares and 570,750 shares of the Corporation’s common stock, respectively, of which 419,500 shares and no shares,

respectively, were excluded from the diluted EPS computation as their effect was anti-dilutive.

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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.

The Corporation is not a party to any pending legal proceedings

that it believes would have a material adverse effect on the financial condition, operations or cash flows of the Corporation, except as set forth below.

Additionally, in some actions, it is difficult to assess potential exposure because the

Corporation is still in the early stages of the litigation.

McKeen-Chaplin and Neal lawsuits:

On December 17, 2012, a class and collective action lawsuit, Gina McKeen-Chaplin, individually and on behalf of others similarly situated vs.

the Bank was filed in the United States District Court

for the Eastern District of California (the "Court") against the Bank claiming damages, restitution and injunctive relief for alleged misclassification of certain employees as exempt rather than non-exempt, resulting in a failure to pay appropriate

overtime compensation, to provide meal and rest periods, to pay waiting time penalties and to provide accurate wage statements (the “McKeen-Chaplin lawsuit”).

On May 22, 2013, counsel in the McKeen-Chaplin lawsuit filed another class action called Neal vs.

Provident Savings Bank, F.S.B.

(the “Neal lawsuit”) in California Superior Court in Alameda County

(the "State Court").

The Neal lawsuit is virtually identical to the McKeen-Chaplin lawsuit alleging that mortgage underwriters were misclassified as exempt employees.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

On August 12, 2015, the Court issued an order denying the plaintiffs' motion for summary judgment and granting the Bank's motion for summary judgment affirming that the plaintiffs were properly

classified as exempt employees and denying the federal claims under the Fair Labor Standards Act (“FSLA”).

On August 18, 2015, the plaintiffs filed an appeal to the order.

On July 5, 2017, the United States Court of Appeals for the Ninth Circuit (the

“Ninth Circuit”) reversed the Court’s ruling granting the Bank's motion for summary judgment, instead ruling the plaintiffs were improperly classified as exempt employees and were entitled to overtime compensation.

The Ninth Circuit remanded the case

back to the Court with instructions to enter summary judgement in favor of the plaintiffs.

As a result of the Ninth Circuit’s unfavorable ruling, the Bank filed on September 7, 2017, a petition for writ of certiorari to the United States Supreme

Court, which was denied on November 27, 2017.

On December 18, 2017, the Bank entered into a Memorandum of Understanding with the plaintiffs' representatives to memorialize an agreement in principle to settle the pending McKeen-Chaplin and Neal

The Memorandum of Understanding assumes class certification for purposes of the settlement only and provides for an aggregate settlement payment by the Bank of $1.8 million, which includes all settlement funds, the named plaintiff service

payments, and class counsel's attorneys' fees and costs.

Any additional costs and expenses related to employer-side payroll taxes will be paid by the Bank.

The parties subsequently successfully negotiated and executed a mutually acceptable long-form

settlement agreement.

On February 21, 2018, plaintiffs filed a motion in McKeen-Chaplin asking the Court to approve the FLSA portion of the settlement agreement.

The parties also worked together to jointly request that

the Court of Appeal in the Neal lawsuit pass jurisdiction back to the State Court to oversee the settlement process, which was preliminary approved on May 15, 2018.

Subsequently, on July 18, 2018 the Court approved the FLSA portion of the settlement

which allowed the parties to begin the process of providing notice of the settlement to class members.

The State Court had already granted preliminary approval of the state law class settlement in the Neal lawsuit.

The Bank’s decision to settle these lawsuits was the result of the unfavorable ruling by the United States Supreme Court in the McKeen-Chaplin lawsuit and the significant legal costs, distraction

from day-to-day operating activities and substantial resources that would be required to defend the Bank in protracted litigation if the Neal lawsuit would proceed.

In addition, the Bank determined that the settlement would reduce the Bank's

potential exposure to damages, penalties, fines and plaintiffs' legal fees in the event of an unfavorable outcome in the Neal lawsuit.

The settlement includes the dismissal of all claims against the Bank and related parties in the McKeen-Chaplin and

Neal lawsuits without any admission of liability or wrongdoing attributed to the Bank.

Based on the proposed settlement, the Corporation recorded a litigation settlement expense accrual of $650,000 in the second quarter of fiscal 2018 to fully reserve for the agreed upon settlement

On November 13, 2018, the State Court approved the motion for final approval of the settlement agreement in the two class and collective action lawsuits filed by McKeen-Chaplin and Neal,

respectively, against the Bank.

Following the grant of the final approval, the Court in McKeen-Chaplin dismissed the case.

The settlement funds have been distributed to the plaintiffs and plaintiff’s counsel consistent with the settlement

On April 8, 2019, the State Court signed an order closing and dismissing the cases.

The McKeen-Chaplin and Neal cases are now completed and dismissed.

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.

Cannon lawsuit:

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The Memorandum of Understanding assumes class certification for purposes of

the settlement only and provides for an aggregate settlement payment by the Bank of up to $2.8 million, which includes all settlement funds, the class representative

the settlement only and provides for an

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

enhancement award, settlement administrator’s expenses, any employer-side payroll taxes, and class counsel’s attorneys’ fees and costs.

The Bank’s decision to settle this matter was the result of

the significant legal costs, distraction from day-to-day operating activities and substantial resources that would be required to defend the Bank in protracted litigation.

In addition, the Bank determined that the settlement would reduce the Bank’s

potential exposure to damages, penalties, fines and plaintiffs’ legal fees in the event of an unfavorable outcome in a court trial.

The settlement includes the dismissal of all claims against the Bank and related parties in the Cannon lawsuit and

claim under the PAGA, without any admission of liability or wrongdoing attributed to the Bank.

Because of the uncertainty surrounding this litigation, no litigation reserve had been previously established by the Bank resulting in the full $2.8

million settlement expense being recognized in the first quarter of fiscal 2018.

aggregate settlement payment by the Bank of up to $2.8 million, which includes all settlement funds, the class representative enhancement award, settlement administrator’s expenses, any

employer-side payroll taxes, and class counsel’s attorneys’ fees and costs.

The Bank’s decision to settle this matter was the result of the significant legal costs, distraction from day-to-day operating activities and substantial resources that would

be required to defend the Bank in protracted litigation.

In addition, the Bank determined that the settlement would reduce the Bank’s potential exposure to damages, penalties, fines and plaintiffs’ legal fees in the event of an unfavorable outcome in

a court trial.

The settlement includes the dismissal of all claims against the Bank and related parties in the Cannon lawsuit and claim under the PAGA, without any admission of liability or wrongdoing attributed to the Bank.

Because of the

uncertainty surrounding this litigation, no litigation reserve had been previously established by the Bank resulting in the full $2.8 million settlement expense being recognized in the first quarter of fiscal 2019.

On December 20, 2018, counsel in the Cannon lawsuit filed a Motion for Preliminary Approval of the Settlement in the California Superior Court for the County of San Bernardino.

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order was signed by this court and on August 6, 2019, the Bank forwarded the settlement amount to the class administrator.

The total settlement may be slightly reduced.

The Corporation is not a party to any other pending legal proceedings that it believes would have a material adverse effect on the financial condition, operations and cash flows of the Corporation.

The Corporation conducts a portion of its operations in leased facilities and has maintenance contracts under non-cancelable agreements classified as operating leases.

following is a schedule of the Corporation’s operating lease obligations:

The total settlement was reduced to $2.5 million from $2.8 million, resulting in a $296,000 settlement expense recovery which

was recognized in the first quarter of fiscal 2020.

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 5 of the Notes to Consolidated Financial Statements).

The following is a schedule of the Corporation’s lease and operating commitments:

Year Ending June 30,

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Total minimum payments required

Lease expense under operating leases was approximately $3.9 million and $3.1 million for the years ended June 30, 2019 and 2018, respectively.

Lease and operating commitment expense was approximately $1.7 million and $3.9 million for the years ended June 30, 2020 and 2019, respectively.

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.

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In addition, the Bank maintained a recourse liability of $70,000 and $50,000 at June 30, 2020 and 2019, respectively, for loans sold to the FHLB – San Francisco under the MPF program.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

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.

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The Corporation also enters into other contracts and agreements;

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

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.

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

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

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As of June 30, 2020 and

2018, the Corporation had commitments to extend credit (on loans to be held for investment and loans to be held for sale) of $4.3 million and $66.3 million, respectively.

2019, the Corporation had commitments to extend credit on loans to be held for investment of $13.6 million and $4.3 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

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Commitments to extend credit on loans to be held for investment

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

The following table provides information regarding the allowance for loan losses for the undisbursed funds and commitments to extend credit on loans to be held for investment

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Balance, beginning of the year

Provision (recovery)

Balance, end of the year

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

Consistent with the Corporation’s announcement on February 4, 2019 to scale back the origination of saleable single-family mortgage loans and improve on its efforts to increase the volume of

portfolio single-family mortgage loan originations, the Corporation does not have any outstanding derivative and other financial instruments as of June 30, 2019.

portfolio single-family mortgage loan originations, the Corporation does not have any outstanding derivative and other financial instruments as of June 30, 2020 and 2019.

In accordance with ASC 815, “Derivatives and Hedging,” and interpretations of the Derivatives Implementation Group of the FASB, the fair value of the commitments to extend credit on loans to be

held for sale, loan sale commitments, TBA MBS trades, put option contracts and call option contracts are recorded at fair value on the Consolidated Statements of Financial Condition.

At June 30, 2019, there were no fair value derivative balances

included in other assets and other liabilities.

At June 30, 2018, $849,000 was included in other assets and $464,000 was included in other liabilities.

At June 30, 2020 and 2019, there were no fair value derivative

balances included in other assets and other liabilities.

The Corporation does not apply hedge accounting to its derivative financial instruments;

therefore, all changes in fair value are recorded in the Consolidated Statements of Operations.

The net impact of derivative financial instruments on the gain on sale of loans contained in the Consolidated Statements of Operations for the years ended June 30, 2019 and 2018 was as follows:

The net impact of derivative financial instruments on the gain (loss) on sale of loans contained in the Consolidated Statements of Operations for the years ended June 30, 2020 and 2019 was as

Year Ended June 30,

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Mandatory loan sale commitments and TBA MBS trades

Option contracts

Total net loss

The outstanding derivative financial instruments at the dates indicated were as follows:

(In Thousands)

June 30, 2019

June 30, 2018

Derivative Financial Instruments

Commitments to extend credit on loans to be held for sale (1)

Best efforts loan sale commitments

Mandatory loan sale commitments and TBA MBS trades

Option contracts

Net of 24.7% at June 30, 2018, which management has estimated may not fund.

Fair Value of Financial Instruments

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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

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.

Provident Financial Holdings, Inc.

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June 30, 2020

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 and loans

held for sale at fair value:

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:

(In Thousands)

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Loans held for investment, at fair value

Loans held for sale, at fair value

As of June 30, 2019:

Loans held for investment, at fair value

Loans held for sale, at fair value

ASC 820 establishes a three-level valuation hierarchy that prioritizes inputs to valuation techniques used in fair value calculations.

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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, loans

held for sale at fair value, interest-only strips and derivative financial instruments;

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,

interest-only strips and derivative financial instruments;

while non-performing loans, MSA and real estate owned are measured at fair value on a nonrecurring basis.

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The Corporation utilizes quoted

prices in active markets for similar securities for

prices in active markets for similar securities for its fair value measurement of MBS (Level 2) and broker price indications for similar securities in non-active markets for its fair value measurement of the CMO (Level 3).

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).

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

its fair value measurement of MBS (Level 2) and broker price indications for similar securities in non-active markets for its fair value measurement of the CMO (Level 3).

Derivative financial instruments are comprised of commitments to extend credit on loans to be held for sale, mandatory loan sale commitments, TBA MBS trades and option contracts.

The fair value of

TBA MBS trades is determined using quoted secondary-market prices (Level 2).

The fair values of other derivative financial instruments are determined by quoted prices for a similar commitment or commitments, adjusted for the specific attributes of

each commitment (Level 3).

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 held for sale at fair value are primarily single-family loans.

The fair value is determined, when possible, using quoted secondary-market prices such as mandatory loan sale commitments.

no such quoted price exists, the fair value of a loan is determined by quoted prices for a similar loan or loans, adjusted for the specific attributes of each loan (Level 2).

Non-performing loans are loans which are inadequately protected by the current sound worth and paying capacity of the borrowers or of the collateral pledged.

21 unchanged sentences

The fair value of interest-only strips is derived using the same assumptions that are used to value the related MSA (Level 3).

The fair value of real estate owned is derived from the lower of the appraised value or the listing price, net of estimated selling costs (Level 2).

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.

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

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.

The following fair value hierarchy table presents information at the dates indicated about the Corporation’s assets measured at fair value on a recurring basis:

9 unchanged sentences

Total liabilities

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

Fair Value Measurement at June 30, 2019 Using:

6 unchanged sentences

Loans held for investment, at fair value

Loans held for sale, at fair value

Interest-only strips

Derivative assets:

Commitments to extend credit on loans to be held for sale

Derivative assets

Derivative liabilities:

Commitments to extend credit on loans to be held for sale

Mandatory loan sale commitments

TBA MBS trades

Derivative liabilities

Total liabilities

9 unchanged sentences

fair value (1)

Originate (2)

Beginning balance at June 30, 2019

7 unchanged sentences

prices which account for interest rate characteristics.

Consists of commitments to extend credit on loans to be held for sale.

Consists of mandatory loan sale commitments.

Provident Financial Holdings, Inc.

39 unchanged sentences

Private issue CMO

Market comparable pricing

Market comparable

Comparability adjustment

1 unchanged sentence

Loans held for investment, at fair

Relative value analysis

Relative value

Broker quotes

28 unchanged sentences

The significant unobservable inputs used in the fair value measurement of the Corporation’s assets and liabilities include the following:

CMO offered quotes, prepayment speeds, discount rates, TBA

MBS quotes, fallout ratios, investor quotes and roll-forward costs, among others.

CMO offered quotes, prepayment speeds 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.

The various unobservable inputs used to determine valuations may have similar or diverging

impacts on valuation.

For the fiscal year ended June 30, 2020, 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.

Provident Financial Holdings, Inc.

16 unchanged sentences

Financial liabilities:

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:

1 unchanged sentence

SBA securities and U.S.

government sponsored enterprise MBS.

government sponsored

enterprise MBS.

Due to the short-term nature of the time deposits, the principal balance approximated fair value (Level 2).

For the MBS and the U.S.

SBA securities, the Corporation utilizes quoted prices in active markets for

similar securities for its fair value measurement (Level 2).

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

SBA securities, the Corporation utilizes quoted prices in active markets for similar securities for

its fair value measurement (Level 2).

FHLB – San Francisco stock:

1 unchanged sentence

When redeemed, the Corporation will receive an amount equal to the par value of the

The fair value of time deposits is estimated using a discounted cash flow calculation.

The discount rate is based upon rates currently offered for deposits of similar remaining

The fair value of transaction accounts (checking, money

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

The fair value of time deposits is estimated using a discounted cash flow calculation.

The discount rate is based upon rates currently offered for deposits of similar remaining

The fair value of transaction accounts (checking, money market and savings accounts) is estimated using a discounted cash flow calculation and management estimates of current market conditions.

market and savings accounts) is estimated using a discounted cash flow calculation and management estimates of current market conditions.

The fair value of borrowings has been estimated using a discounted cash flow calculation.

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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 our 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 our systems or those of third-parties and is recognized as the related transactions occur or services

are rendered to the customer.

Revenue is primarily based on the number and type of transactions that are generally derived from transactional information accumulated by the bank’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.

Provident Financial Holdings, Inc.

6 unchanged sentences

(In Thousands)

Asset management fees

Debit card and ATM fees

Deposit related fees

Loan related fees

Loan servicing fees (1)

Net gain on sale of loans (1)

Loan servicing and other fees (1)

Gain (loss) on sale of loans, net (1)

Deposit account fees

Card and processing fees

Total non-interest income

Not in scope of ASC 606.

Includes BOLI of $189 and $186 for the year ended June 30, 2020 and 2019, respectively, which are not in scope of ASC 606.

For the fiscal years ended June 30, 2020 and 2019, substantially all of the Corporation's revenues within the scope of ASC 606 are for performance obligations satisfied at a specified date.

Revenues recognized in scope of ASC 606:

Asset management fees :

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.

Debit card and ATM fees :

Debit and ATM 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 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.

Deposit related fees :

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.

include business account fees, non-sufficient fund fees, stop payment fees, wire services, safe deposit box and others.

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.

Loan related fees :

Non-interest loan fee income is earned on loans that the Bank services, excluding loan servicing fees which are not within the scope of

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 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.

Includes asset management fees, certain loan related 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.

Loan related fees include prepayment fees, late charges, brokered loan fees, maintenance fees and others.

These fees are recognized on a daily, monthly, quarterly or annual basis, depending on the type of service.

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.

Provident Financial Holdings, Inc.

1 unchanged sentence

June 30, 2020

Reportable Segments

The segment reporting is organized consistent with the Corporation’s executive summary and operating strategy.

The business activities of the Corporation consist primarily of the Bank.

operations primarily consist of accepting deposits from customers within the communities surrounding the Bank’s full service offices and investing those funds in single-family, multi-family, commercial real estate, construction, commercial business,

consumer, and other mortgage loans.

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.

The following table illustrates the Corporation’s single operating segment, the Bank, for the fiscal years ended June 30, 2019 and 2018, respectively:

Year Ended June 30,

(In Thousands)

Net interest income

Provision (recovery) for loan losses

Net interest income, after provision (recovery) for loan losses

Non-interest income:

Loan servicing and other fees

Gain on sale of loans, net

Deposit account fees

Loss on sale and operations of real estate owned

acquired in the settlement of loans, net

Card and processing fees

Total non-interest income

Non-interest expense:

Salaries and employee benefits (1)

Premises and occupancy (2)

Operating and administrative expenses (3)

Total non-interest expense

Income (loss) before taxes

Provision (benefit) for income taxes (4)

Net income (loss)

Total assets, end of period

Includes $1.7 million of non-recurring expenses related to scaling back of the origination of saleable single-family mortgage loans for the fiscal year ended June 30,

Includes $0.3 million of non-recurring expenses related to scaling back of the origination of saleable single-family mortgage loans for the fiscal year ended June 30,

Includes $0.8 million of non-recurring equipment expenses related to scaling back of the origination of saleable single-family mortgage loans for the fiscal year ended

June 30, 2019;

and includes $3.4 million of litigation settlement expenses for the fiscal year ended June 30, 2018.

Includes a net tax charge of $1.8 million resulting from the revaluation of net deferred tax assets consistent with the Tax Act for the fiscal year ended June 30, 2018.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

Holding Company Condensed Financial Information

22 unchanged sentences

June 30, 2020

Condensed Statements of Comprehensive Income

Year Ended June 30,

(In Thousands)

Other comprehensive income

Total comprehensive income

Condensed Statements of Cash Flows

1 unchanged sentence

(In Thousands)

Cash flows from operating activities:

Cash flow from operating activities:

Adjustments to reconcile net income to net cash

1 unchanged sentence

Equity in undistributed earnings of the Bank

(Increase) decrease in other assets

Increase in other liabilities

Decrease (increase) in other assets

(Decrease) increase in other liabilities

Net cash provided by operating activities

4 unchanged sentences

Net cash used for financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

19 unchanged sentences

Ending balance at June 30, 2020

Offsetting Derivative and Other Financial Instruments

The Corporation’s derivative transactions are generally governed by International Swaps and Derivatives Association Master Agreements and similar arrangements, which include provisions governing

the offset of assets and liabilities between the parties.

When the Corporation has more than one outstanding derivative transaction with a single counterparty, the offset provisions contained within these agreements generally allow the

non-defaulting party the right to reduce its liability to the defaulting party by amounts eligible for offset, including the collateral received as well as eligible offsetting transactions with that counterparty, irrespective of the currency, place

of payment, or booking office.

The Corporation’s policy is to present its derivative assets and derivative liabilities on the Consolidated Statements of Financial Condition on a net basis for each type of derivative.

The derivative assets and

liabilities are comprised of mandatory loan sale commitments, TBA MBS trades and option contracts.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

The following tables present the gross and net amounts of derivative assets and liabilities and other financial instruments as reported in the Corporation’s Consolidated Statements of Financial

Condition, and the gross amount not offset in the Corporation’s Consolidated Statements of Financial Condition as of the dates indicated.

As of June 30, 2019:

Gross Amount Not

Offset in the

Offset in the Consolidated

the Consolidated

Statements of Financial Condition

(In Thousands)

of Liabilities

Gross Amount Not

Offset in the

Offset in the Consolidated

the Consolidated

Statements of Financial Condition

(In Thousands)

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

As of June 30, 2018:

Gross Amount Not

Offset in the

Offset in the Consolidated

the Consolidated

Statements of Financial Condition

(In Thousands)

of Liabilities

Gross Amount Not

Offset in the

Offset in the Consolidated

the Consolidated

Statements of Financial Condition

(In Thousands)

Subsequent Event

1 unchanged sentence

Shareholders of the Corporation’s common stock at the

close of business on August 20, 2019 are entitled to receive the cash dividend, that is payable on September 10, 2019.

Provident Financial Holdings, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

Exhibit Index

Description of Capital

Stock of Provident Financial Holdings, Inc.

2019 Annual Report to Stockholders

Subsidiaries of the Registrant

Consent of Independent Registered Public Accounting Firm

Certification of Chief Executive Officer Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

The following materials from the Corporation’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019, formatted in Extensible Business Reporting Language (XBRL):

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) Notes to Consolidated Financial Statements.

close of business on August 20, 2020 are entitled to receive the cash dividend, which is payable on September 10, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures