What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-08-30 compared with 2023-09-05 · 561 added, 457 removed, 1206 unchanged (46% of the section changed)

6 unchanged sentences

Based on their evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures as of June 30, 2024 are effective, at the reasonable assurance level, in ensuring that the information required to be disclosed by the Corporation in the reports it files or submits under the Act is (i) accumulated and communicated to the Corporation’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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, 2023, that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

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 quarter year ended June 30, 2024, that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

The Corporation does not expect that its internal control over financial reporting will prevent all error and all fraud.

4 unchanged sentences

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.

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.

1 unchanged sentence

This management report includes the subsidiary institution of Provident Financial Holdings, Inc.

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

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

13 unchanged sentences

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

September 5, 2023

Chairman and Chief Executive Officer

August 30, 2024

/s/ Donavon P.

President, Chief Operating Officer and

Chief Financial Officer

President and Chief Executive Officer

Senior Vice President and Chief Financial Officer

Other Information

Not Applicable.

(b) Trading Plans.

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

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

8 unchanged sentences

The Code of Ethics is publicly available as Exhibit 14 to the Corporation’s Annual Report on Form 10-K for the fiscal year June 30, 2007, and is available on the Corporation’s website, www.myprovident.com .

If the Corporation makes any substantial amendments to the Code of Ethics or grants any waiver, including any implicit waiver, from a provision of the Code of Ethics to the Corporation’s principal executive officer, principal financial officer, principal accounting officer or controller, or person performing similar functions, the Corporation will disclose the nature of such amendment or waiver on the Corporation’s website and in a report on Form 8-K.

If the Corporation makes any substantial amendments to the Code of Ethics or grants any waiver, including any implicit waiver, from a provision of the Code of Ethics to the Corporation’s principal executive officer, principal financial and accounting officer, controller, or person performing similar functions, the Corporation will disclose the nature of such amendment or waiver on the Corporation’s website and in a report on Form 8-K.

Audit Committee and Audit Committee Financial Expert

1 unchanged sentence

The audit committee consists of three independent directors of the Corporation:

Carpenter, Debbi H.

Guthrie and Kathy M.

Carpenter, Kathy M.

Michalak and Matthew E.

The Corporation has designated Judy A.

Carpenter, Audit Committee Chair, as its audit committee financial expert.

Carpenter 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 (inactive) and has been in public accounting as well as has extensive business knowledge, financial expertise and unparalleled familiarity with our local market and communities.

Carpenter is independent, as independence for audit committee members is defined under the listing standards of the NASDAQ Stock Market, is a Certified Public Accountant in California (inactive), has been in public accounting, and has extensive business knowledge, financial expertise and familiarity with our local market and communities.

Nominating Procedures

6 unchanged sentences

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.

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

c) Changes in Control.

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Equity compensation plans not approved by security holders

(1) Includes 218,250 securities available for future issuance as restricted stock or restricted stock units under the foregoing compensation plans.

Certain Relationships and Related Transactions, and Director Independence

2 unchanged sentences

Director Independence.

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

Principal Accountant Fees and Services

2 unchanged sentences

Financial Statements

See Exhibit 13 to Consolidated Financial Statements beginning on this Form 10-K.

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

Financial Statement Schedules

8 unchanged sentences

(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.

Blunden (incorporated by reference to Exhibit 10.1 to the Corporation’s Form 8-K dated December 19, 2005)

Transition Agreement with Craig G.

Blunden (incorporated by reference to Exhibit 10.13 to the Corporation’s Form 8-K dated October 31, 2023)

Post-Retirement Compensation Agreement with Craig G.

Blunden (incorporated by reference to Exhibit 10.2 to the Corporation’s Form 8-K dated December 19, 2005)

Employment Agreement with Donavon P.

Ternes (incorporated by reference to Exhibit 10.14 to the Corporation’s Form 8-K dated October 31, 2023)

Post-Retirement Compensation Agreement with Donavon P.

Ternes (incorporated by reference to Exhibit 10.1 to the Corporation’s Form 8-K dated July 7, 2009)

Form of Severance Agreement with Deborah L.

Hill, Robert "Scott"

Ritter, Lilian Salter, Donavon P.

Ternes, David S.

Form of Amended Severance Agreement with Tam B.

Nguyen, Robert "Scott" Ritter, Lilian Salter, David S.

Weiant and Gwendolyn L.

Wertz (incorporated by reference to Exhibit 10.1 and 10.2 in the Corporation’s Form 8-K dated February 24, 2012)

Wertz (incorporated by reference to Exhibit 10.3 to the Corporation’s Form 10-Q dated May 8, 2024 )

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

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

Form of Non-Qualified Stock Option Agreement for options granted under the 2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 in the Corporation’s Form 10-Q for the quarter ended December 31, 2006)

Form of Restricted Stock Agreement for restricted shares awarded under the 2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.12 in the Corporation’s Form 10-Q for the quarter ended December 31, 2006)

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

1 unchanged sentence

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

Form of Restricted Stock Agreement for restricted shares awarded under the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 in the Corporation’s Form 8-K dated November 30, 2010)

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

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

Compensation Recovery Policy

The following materials from the Corporation’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, formatted in Extensible Business Reporting Language (XBRL):

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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 authorized.

September 5, 2023

August 30, 2024

Provident Financial Holdings, Inc.

Chairman and Chief Executive Officer

/s/ Donavon P.

President and Chief Executive Officer

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

September 5, 2023

/s/ Donavon P.

President and

August 30, 2024

Chief Executive Officer

(Principal Executive Officer)

/s/ Donavon P.

President, Chief Operating Officer

September 5, 2023

and Chief Financial Officer

Senior Vice President and

August 30, 2024

Chief Financial Officer

(Principal Financial and

Accounting Officer)

September 5, 2023

Chairman of the Board of Directors

August 30, 2024

/s/ William E.

September 5, 2023

Lead Director

August 30, 2024

/s/ Matthew E.

August 30, 2024

Provident Financial Holdings, Inc.

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Report of Independent Registered Public Accounting Firm

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

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

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of Provident Financial Holdings and subsidiary (the "Corporation") as of June 30, 2023 and 2022, 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, 2023, and the related notes (collectively referred to as the "financial statements").

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

and subsidiary (the “Corporation”) as of June 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the two years in the period ended June 30, 2024, and the related (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of June 30, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

14 unchanged sentences

Critical Audit Matter

The critical audit matter communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Loans Held for Investment - Allowance for Loan Losses — Refer to Notes 1 and 3 to the financial statements

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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

Critical Audit Matter Description

Management estimates the Corporation’s allowance for loan losses (”ALL”) for the probable losses inherent in loans held for investment, segregating collectively evaluated allowances and individually evaluated allowances for loans.

The total estimate was $5.9 million at June 30, 2023.

The determination of the appropriate ALL inherently involves a high degree

of subjectivity and requires significant estimates of the existing credit risks using both quantitative and qualitative analyses.

For the collectively evaluated allowances, the Corporation uses historical experience to develop quantitative loss factors, which it applies to these loans based on management’s assigned internal risk ratings.

The Corporation also applies qualitative loss factors by assessing general economic indicators such as gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices, as well as peer group data, reflecting the effect of events that have occurred but are not yet evidenced in the historical data.

Auditing the collectively evaluated loans of the Corporation’s ALL, specifically management’s qualitative loss factors for certain single-family, multi-family and commercial real estate loans, involved especially significant judgment.

Given the significant judgments in determining these qualitative loss factors, performing procedures to evaluate the reasonableness of management’s estimates for these qualitative loss factors involved a high degree of auditor judgment and an increased extent of effort.

Management estimates the Corporation’s allowance for credit losses (“ACL”) Management calculates the quantitative portion of the collectively evaluated allowance for all loan categories using an average charge-off methodology.

The Corporation primarily utilizes historical loss rates for the ACL based on its own specific historical losses and/or with peer loss history where applicable.

Management considers whether additional or reduced allowance levels on collectively evaluated loans may be warranted, given the consideration of a variety of qualitative factors.

The qualitative portion of the Corporation’s allowance on collectively evaluated loans are calculated using management judgment, to determine risk categorizations in each of the qualitative factors.

The amount of qualitative allowance is also contingent upon the relative weighting of the qualitative factors according to management’s judgment.

Auditing the collectively evaluated loans of the Corporation’s ACL, specifically management’s qualitative loss factors for certain single-family, multi-family and commercial real estate loans, involved significant judgment.

Given the management judgments required for the determination of risk categorization and relative weighting of qualitative factors, performing audit procedures to evaluate the Qualitative Factors in the ACL requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our credit specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the qualitative loss factors for certain loan types described above included the following, among others:

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

● We tested the design and operating effectiveness of internal controls over type of loan, loan classification, and determination of the qualitative loss factors and management’s review of the relevant qualitative loss factors.

● We tested the completeness and accuracy of the inputs used in the determination of the loss factors by selecting loans and through the reconciliation of the loan data testing to the ALL data inputs.

● We made a selection of loans and reviewed the supporting loan files, which includes borrower correspondence, payment history, property inspections, and status of current borrower-provided financial information, to evaluate the appropriateness of the loans’ classification considered as input to the ALL.

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

● We evaluated the Corporation's historical allowance estimation process by comparing the ALL recorded in historical periods to actual results .

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

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

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

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

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

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

/s/ Deloitte & Touche LLP

Costa Mesa, California

September 5, 2023

August 30, 2024

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

3 unchanged sentences

Cash and cash equivalents

Investment securities - held to maturity, at cost

Investment securities - available for sale, at fair value

Loans held for investment, net of allowance for loan losses of $ 5,946 and $ 5,564 , respectively;

Investment securities - held to maturity, at cost with no allowance for credit losses

Investment securities - available for sale, at fair value with no allowance for credit losses

Loans held for investment, net of allowance for credit losses of $ 7,065 and $ 5,946 , respectively;

includes $ 1,047 and $ 1,312 of loans held at fair value, respectively;

$ 967.6 million and $ 570.4 million pledged to FHLB - San Francisco, respectively

$ 861.1 million and $ 967.6 million pledged to Federal Home Loan Bank ("FHLB") - San Francisco, respectively;

$ 178.6 million and $ 0 pledged to Federal Reserve Bank ("FRB") - San Francisco, respectively

Accrued interest receivable

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

FHLB - San Francisco and other equity investments, includes $ 540 and $ 0 of other equity investments at fair value, respectively

Premises and equipment, net

17 unchanged sentences

Treasury stock at cost ( 11,381,794 and 11,186,445 shares, respectively)

Accumulated other comprehensive (loss) income, net of tax

Accumulated other comprehensive loss, net of tax

Total stockholders’ equity

8 unchanged sentences

Investment securities

FHLB - San Francisco stock

FHLB - San Francisco and other equity investments

Interest-earning deposits

3 unchanged sentences

Net interest income

Provision (recovery) for loan losses

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

(Recovery of) provision for credit losses

Net interest income, after (recovery of) provision for credit losses

Non-interest income:

6 unchanged sentences

Premises and occupancy

Equipment expense

Professional expense

Sales and marketing expense

Sales and marketing

Deposit insurance premium and regulatory assessments

9 unchanged sentences

(In Thousands)

Change in unrealized holding losses on securities available for sale and interest-only strips

Reclassification of losses to net income

Other comprehensive loss, before income tax benefit

Income tax benefit

Other comprehensive loss

Change in unrealized holding gains (losses) on securities available for sale and interest-only strips

Income tax expense (benefit)

Other comprehensive income (loss)

Total comprehensive income

11 unchanged sentences

Purchase of treasury stock (1)

Distribution of restricted stock

Awards for restricted stock

2 unchanged sentences

Stock options expense, net of tax

Tax effect from stock-based compensation

Cash dividends (2)

Balance at June 30, 2023

Other comprehensive loss

Other comprehensive income

Purchase of treasury stock

Distribution of restricted stock

Awards for restricted stock

4 unchanged sentences

Cash dividends (2)

Adoption of CECL standard

Balance at June 30, 2024

(1) Cash dividends of $ 0.56 per share were paid in both fiscal 2023 and 2022.

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

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

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

6 unchanged sentences

Depreciation and amortization

Provision (recovery) for loan losses

(Recovery of) provision for credit losses

Net unrealized gain on other equity investments

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

(Benefit) provision for deferred income taxes

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

(Increase) decrease in prepaid expenses and other assets

Net cash provided by operating activities

Cash flows from investing activities:

Increase in loans held for investment, net

Purchase of investment securities - held to maturity

Decrease (increase) in loans held for investment, net

Maturity of investment securities - held to maturity

3 unchanged sentences

Purchase of premises and equipment

Net cash used for investing activities

Net cash provided by (used for) investing activities

Cash flows from financing activities:

(Decrease) increase in deposits, net

Decrease in deposits, net

Proceeds from long-term borrowings

Repayments of long-term borrowings

Proceeds from short-term borrowings, net

(Repayment of) proceeds from short-term borrowings, net

Treasury stock purchases

1 unchanged sentence

Cash dividends

Net cash provided by (used for) financing activities

Net increase (decrease) in cash and cash equivalents

Net cash (used for) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

24 unchanged sentences

Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, 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.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, the valuation of investment securities, the valuation of loans held for investment at fair value, deferred tax assets, mortgage servicing assets, real estate owned and deferred compensation costs.

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

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 the Federal Reserve Bank – San Francisco and correspondent banks.

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

Investment securities

4 unchanged sentences

Fair value generally is determined based upon quoted market prices.

Changes in net unrealized gains (losses) on securities available for sale are included in accumulated other comprehensive income, net of tax.

Changes in net unrealized gains (losses) on debt securities available for sale are included in accumulated other comprehensive income, net of tax.

Gains and losses on sale or dispositions of investment securities are included in non-interest income and are determined using the specific identification method.

Purchase premiums and discounts are amortized over the expected average life of the securities using the effective interest method.

Investment securities are reviewed quarterly for possible other-than-temporary impairment (“OTTI”).

For debt securities, an OTTI is evident if the Corporation intends to sell the debt security or will more likely than not be required to sell the debt security before full recovery of the entire amortized cost basis is realized.

However, even if the Corporation does not intend to sell the debt security and will not likely be required to sell the debt security before recovery of its entire amortized cost basis, the Corporation performs an analysis of evaluating factors such as cash and working capital requirements, contractual and regulatory obligations, and specific company/industry considerations.

In addition, the Corporation must evaluate expected cash flows to be received and determine if a credit loss has occurred.

In the event of a credit loss, the credit component of the impairment is recognized within non-interest income and the non-credit component is recognized through accumulated other comprehensive income, net of tax.

The Corporation evaluates individual investment securities quarterly for impairment based on Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses,” which was adopted on July 1, 2023.

The Corporation does not currently intend to sell any investment securities classified as held to maturity or available for sale and as such, records the investment security at book value or fair market value as prescribed by GAAP.

As a part of the Corporation’s monthly risk assessment, the Corporation runs a number of stressed liquidity scenarios to determine if it is more likely than not that the Bank will be required to sell the investment security before the recovery of its amortized costs basis.

These liquidity scenarios support the Corporation’s assessment that the Corporation has the ability to hold these held to maturity securities until maturity or available for sale securities until recovery of the amortized costs is realized and it is not more likely than not that the Corporation will be required to sell the securities prior to recovery of the amortized costs.

PROVIDENT FINANCIAL HOLDINGS, INC.

1 unchanged sentence

Loans held for investment

Loans held for investment consist of long-term adjustable and fixed rate loans secured by first trust deeds on single-family residences and multi-family and commercial real estate loans secured by commercial property, land and other residential properties, which the Corporation intends to hold for the foreseeable future.

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

These loans are generally offered to customers and businesses located in California.

1 unchanged sentence

Amortization is discontinued for non-performing loans.

Interest receivable represents, for the most part, the current month’s interest, which will be included as a part of the borrower’s next monthly loan payment.

Interest receivable represents primarily the current month’s interest, which will be included as a part of the borrower’s next monthly loan payment.

Interest receivable is accrued only if deemed collectible.

Loans are placed on non-performing status when they become 90 days past due or if the loan is deemed impaired.

Loans are placed on non-performing status when they become 90 days past due.

When a loan is placed on non-performing status, interest accrued but not received is reversed against interest income.

2 unchanged sentences

Non-performing loans that become current as to both principal and interest are returned to accrual status after demonstrating satisfactory payment history (usually six consecutive months) and when future payments are expected to be collectible.

Allowance for loan losses

The allowance for loan losses involves significant judgment and assumptions by management, which has a material impact on the carrying value of net loans.

Management considers the accounting estimate related to the allowance for loan losses a critical accounting estimate because it is highly susceptible to changes from period to period, requiring management to make assumptions about probable incurred losses inherent in the loan portfolio at the balance sheet date.

The impact of a sudden large loss could deplete the allowance and require increased provisions to replenish the allowance, which would negatively affect earnings.

The allowance is based on two principles of accounting:

(i) Accounting Standards Codification (“ASC”) 450, “Contingencies,” which requires that losses be accrued when they are probable of occurring and can be estimated;

and (ii) ASC 310, “Receivables,” which requires that losses be accrued for non-performing loans that may be determined on an individually evaluated basis or based on an aggregated pooling method.

The allowance has two components:

collectively evaluated allowances and individually evaluated allowances.

Each of these components is based upon estimates that can change over time.

The allowance is based on historical experience and, as a result, can differ from actual losses incurred in the future.

The historical data is reviewed at least quarterly and adjustments are made as needed.

Management considers, based on currently available information, the allowance for loan losses sufficient to absorb probable losses inherent within loans held for investment.

Various techniques are used to arrive at an individually evaluated allowance, including discounted cash 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.

On July 1, 2023, the Corporation will adopt a new measurement of credit losses on its financial instruments, the Current Expected Credit Losses (“CECL”), as described in the Accounting Standard Updates section below under ASU 2016-13.

Allowance for unfunded loan commitments

The Corporation maintains the allowance for unfunded loan commitments at a level that is adequate to absorb estimated probable losses related to these unfunded credit facilities.

The Corporation determines the adequacy of the allowance based on periodic evaluations of the unfunded credit facilities, including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities.

The allowance for unfunded loan commitments is recorded in other liabilities on the Consolidated Statements of Financial Condition.

Net adjustments to the allowance for unfunded loan commitments are included in other non-interest expense on the Consolidated Statements of Operations.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Troubled debt restructuring (“restructured loans”)

A restructured loan is a loan which the Corporation, for reasons related to a borrower’s financial difficulties, grants a more than insignificant concession to the borrower that the Corporation would not otherwise consider.

These financial difficulties include, but are not limited to, the borrowers’ default status on any of their debts, bankruptcy and recent changes in their financial circumstances (loss of job, etc.).

The loan terms which have been modified or restructured due to a borrower’s financial difficulty, may include but are not limited to:

a) A reduction in the stated interest rate and/or accrued interest.

b) An extension of the maturity date, typically longer than six months.

c) A reduction in the principal loan balance.

d) Extensions, deferrals, renewals and rewrites.

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

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 recent bank statements, among other documents, which are then verified by the Corporation.

The Corporation re-underwrites the loan with the borrower’s updated financial information, new credit report, current loan balance, new interest rate, remaining loan term, updated property value and modified payment schedule, among other considerations, to determine if the borrower qualifies.

The Corporation measures the allowance for loan losses of restructured loans based on the difference between the loan’s original carrying amount and the present value of expected future cash flows discounted at the original effective yield of the loan.

Based on the Office of the Comptroller of the Currency (“OCC”) guidance with respect to restructured loans and to conform to general practices within the banking industry, the Corporation maintains certain restructured loans on accrual status, provided there is reasonable assurance of repayment and performance, consistent with the modified terms based upon a current, well-documented credit evaluation.

All other restructured loans are classified as “Substandard” and placed on non-performing status.

The Corporation typically upgrades restructured loans to the pass category if the borrower has demonstrated satisfactory contractual payments for at least six consecutive months or 12 consecutive months for those loans that were restructured more than once.

Once the borrower has demonstrated satisfactory contractual payments beyond 12 consecutive months, the loan is no longer categorized as a restructured loan.

In addition to the payment history described above;

multi-family, commercial real estate, construction and commercial business loans must also demonstrate a combination of corroborating characteristics to be upgraded, such as satisfactory cash flow, satisfactory guarantor support, and additional collateral support, among others.

Allowance for credit losses

The allowance for credit losses involves significant judgment and assumptions by management, which has a material impact on the carrying value of financial assets.

The Corporation adopted ASC 326 using the prospective transition approach for all financial assets measured at amortized cost and off-balance sheet credit exposures.

Results for reporting periods beginning after July 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

Non-performing loans

The Corporation assesses loans individually and classifies as non-performing when the accrual of interest has been discontinued, loans have been restructured or management has serious doubts about the future collectability of principal and interest, even though the loans may currently be performing.

The Corporation assesses loans individually and classifies them as non-performing when the accrual of interest has been discontinued, loans have been modified or management has serious doubts about the future collectability of principal and interest, even though the loans may currently be performing.

Factors considered in determining classification include, but are not limited to, expected future cash flows, the financial condition of the borrower and current economic conditions.

The Corporation measures each non-performing loan based on ASC 326, establishes a collectively evaluated or individually evaluated allowance, and charges off those loans or portions of loans deemed uncollectible.

Loans identified to be individually evaluated have an allowance that is based upon the appraised value of the collateral, less selling costs or discounted cash flow with an appropriate default factor.

Real estate owned

2 unchanged sentences

Gains or losses on the sale of real estate are recognized upon disposition of the property.

Costs relating to improvement, maintenance and repairs of the property are expensed as incurred under gain (loss) on sale and operations of real estate owned acquired in the settlement of loans within the Consolidated Statements of Operations.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Impairment of long-lived assets

3 unchanged sentences

When impairment is indicated for an asset, the 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

Premises and equipment

12 unchanged sentences

Sources of taxable income for this analysis include prior years’ tax returns, the expected reversals of taxable temporary differences between book and tax income, prudent and feasible tax-planning strategies, and future taxable income.

The deferred income tax asset related to the allowance for loan losses will be realized when actual charge-offs are made against the allowance.

The deferred income tax asset related to the allowance for credit losses will be realized when actual charge-offs are made against the allowance.

Based on the availability of loss carry-backs and projected taxable income during the periods for which loss carry-forwards are available, management believes it is more likely than not the Corporation will realize the deferred tax asset.

2 unchanged sentences

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, 2023 and 2022, the estimated deferred tax asset, which is included in prepaid expenses and other assets, was $ 218,000 and $ 1.4 million, respectively.

As of June 30, 2024 and 2023, the estimated net deferred tax asset, which is included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition, was $ 606,000 and $ 218,000 , respectively.

The Corporation maintains net deferred tax assets for deductible temporary tax differences, such as loss reserves, deferred compensation, non-accrued interest and unrealized gains (losses), among other items.

The decrease in the net deferred tax asset resulted primarily from a lower deferred compensation and an increase in deferred tax liabilities from higher net deferred loan costs.

The increase in the net deferred tax asset resulted primarily from higher loss reserves and a decrease in deferred tax liabilities from lower net deferred loan costs.

The Corporation did no t have any liabilities for uncertain tax positions or any known unrecognized tax benefit at June 30, 2024 or 2023.

Bank owned life insurance ("BOLI")

ASC 715-60-35, "Accounting for Deferred Compensation and Post-retirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,"

requires an employer to recognize obligations associated with endorsement split-dollar life insurance arrangements that extend into the participant’s post-employment benefit cost for the continuing life insurance or based on the future death benefit depending on the contractual terms of the underlying agreement.

Bank owned life insurance ("BOLI")

ASC 715-60-35, "Accounting for Deferred Compensation and Post-retirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements," requires an employer to recognize obligations associated with endorsement split-dollar life insurance arrangements that extend into the participant’s post-employment benefit cost for the continuing life insurance or based on the future death benefit depending on the contractual terms of the underlying agreement.

The Corporation adopted ASC 715-60-35 using the latter option, i.e., based on the future death benefit.

2 unchanged sentences

The Bank records these BOLI policies within prepaid expenses and other assets in the Consolidated Statements of Financial Condition at each policy’s respective cash surrender value, with net changes recorded in other non-interest income in the Consolidated Statements of Operations.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Cash dividend

1 unchanged sentence

Under Delaware law, dividends may be paid either out of surplus or, if there is no surplus, out of net profits for the current fiscal year and/or the preceding fiscal year in which the dividend is declared.

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

For additional

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

Stock repurchases

The Corporation repurchased 302,719 shares of its common stock with an average cost of $ 14.01 per share during fiscal 2023 pursuant to its April 2022 stock repurchase plan that was extended through April 28, 2024.

As of June 30, 2023, a total of 61,540 shares or 17 percent of the shares authorized for repurchase under the plan remain available to purchase until the plan expires on April 28, 2024.

The Corporation repurchased 197,349 shares of its common stock with an average cost of $ 13.05 per share during fiscal 2024 pursuant to its publicly announced stock repurchase plans.

As of June 30, 2024, a total of 189,116 shares or 54 % of the shares authorized for repurchase under the Corporation’s existing stock repurchase plan remain available to purchase until the plan expires on September 28, 2024.

Earnings per common share (“EPS”)

5 unchanged sentences

ASC 718, “Compensation – Stock Compensation,” requires companies to recognize in the Consolidated Statements of Operations the grant-date fair value of stock options and other equity-based compensation issued to employees and directors.

Stock-based compensation, inclusive of restricted stock expense, recognized in the Consolidated Statements of Operations for the fiscal years ended June 30, 2023 and 2022 was $ 1.2 million and $ 798,000 , respectively.

Employee Stock Ownership Plan ("ESOP")

Stock-based compensation, inclusive of restricted stock expense, recognized in the Consolidated Statements of Operations for the fiscal years ended June 30, 2024 and 2023 was $ 240,000 and $ 1.2 million, respectively.

Employee Stock Ownership Plan ("ESOP")

The Corporation recognizes compensation expense when the Bank contributes funds to the ESOP for the purchase of the Corporation’s common stock to be allocated to the ESOP participants.

2 unchanged sentences

The Corporation recognizes compensation expense over the vesting period of the shares awarded, equal to the fair value of the shares at the award date.

A total of $ 1.1 million and $ 747,000 of restricted stock expense was amortized during fiscal 2023 and 2022, respectively.

A total of $ 203,000 and $ 1.1 million of restricted stock expense was amortized during fiscal 2024 and 2023, respectively.

Post-retirement benefits

1 unchanged sentence

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, 2023 and 2022, the accrued liability for post-retirement benefits was $ 270,000 and $ 174,000 , respectively, which was fully funded consistent with actuarially determined estimates of the future obligation.

Effective July 1, 2003, the Corporation discontinued the post-retirement health care and life insurance benefits to any employee not previously qualified (grandfathered) for these benefits, unless included within an employment agreement.

At June 30, 2024 and 2023, the accrued liability for post-retirement benefits was $ 450,000 and $ 270,000 , respectively.

Comprehensive income

4 unchanged sentences

Accounting Standard Updates (“ASU”)

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, March 2020, ASU 2020-03 and March 2022, ASU 2022-02, 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 related to Topic 326 will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Corporation is evaluating its current expected credit loss methodology of its loans held for investment and investment securities held to maturity to identify the necessary modifications in accordance with these standards and expects a change in the processes and procedures to calculate the allowance for credit 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.

The Corporation established a project team and implementation plan to address the key components to this process.

The Corporation has determined its loan segmentation, compiled historical data and selected methodologies for each loan grouping.

The Corporation ran several sets of parallel runs, and sensitivity analysis on its initial modeling assumptions and completed validation of the model in the fourth quarter of fiscal year 2023 prior to the adoption date of July 1, 2023.

The Corporation anticipates the allowance for credit losses for loans held for investment to change through a one-time adjustment to retained earnings, net of estimated income taxes.

Upon adoption of ASU 2016-13 on July 1, 2023, we expect to recognize a reduction to our opening retained earnings of approximately $ 825,000 , net of deferred taxes and other immaterial adjustments, resulting from a pretax increase to our allowance for credit losses of approximately $ 1.2 million.

The increase is primarily related to the difference between the historical incurred loss methodology currently utilized, as compared to estimating lifetime credit losses as required by the CECL standard.

Additionally, we do not expect the adoption of CECL to result in a material impact to our held-to-maturity securities portfolio, which is primarily comprised of government agency mortgage-backed securities.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This ASU requires public business entities to annually (a) disclose specific categories in the rate reconciliation and (b) provide additional information for reconciling items that meet a quantitative threshold of equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate.

This ASU is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

The Corporation is in the process of reviewing the impact of this ASU and has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The key amendments include:

(a) introducing a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”), (b) extending certain annual disclosures to interim periods, (c) clarifying that single reportable segment entities must apply ASC 280 in its entirety, (d) permitting more than one measure of segment profit or loss to be reported under certain conditions, and (e) requiring disclosure of the title and position of the CODM.

This ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Corporation is in the process of reviewing the impact of this ASU and has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This ASU applies to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or other rate references expected to be discontinued because of reference rate reform.

The ASU permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination.

2 unchanged sentences

The FASB had originally included a sunset provision within Topic 848 based on expectations of when the LIBOR would cease being published.

In March 2021, it was announced that the intended cessation date of LIBOR would be extended to June 30, 2023.

As a result, the FASB issued ASU 2022-06 deferring the sunset date of Topic 848 from March 31, 2023 to December 31, 2024.

In March 2021, it was announced that the intended cessation date of LIBOR was extended to June 30, 2023.

As a result, the FASB issued ASU 2022-06 deferring the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

This ASU is effective for all entities as of March 12, 2020 through December 31, 2024.

The Corporation is in the process of transitioning into other rate indices in accordance with the government agency guidelines.

As of June 30, 2023, the Corporation had approximately $ 469.4 million in loans held for investment with LIBOR indices.

Beginning July 1, 2023, the Corporation is transitioning these loans to Secured Overnight Financing Rate (“SOFR”) indices.

The Corporation is evaluating the impact of the adoption of this ASU and does not anticipate a material impact to its consolidated financial statements.

Beginning July 1, 2023, the Corporation started to transition these loans to Secured Overnight Financing Rate (“SOFR”) indices or other rate indices in accordance with the government agency guidelines.

As of September 30, 2023, all loans held for investment with LIBOR indices had been transitioned to SOFR or other rate indices.

The Corporation determined that the impact of the adoption of this ASU did not have a material impact to its consolidated financial statements.

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

Measurement of Credit Losses on Financial Instruments,” and subsequent amendments to the initial guidance.

On July 1, 2023, the Corporation adopted this ASU that replaced the incurred loss methodology with the current expected credit loss (“CECL”) methodology.

CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and applies to financial assets measured at amortized cost, including loans held for investment, held-to-maturity investment securities and some off-balance sheet credit exposures such as unfunded commitments to extend credit.

Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses (“ACL”).

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

In addition, CECL made changes to the accounting for available for sale investment securities.

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

The Corporation adopted ASC 326, “Financial Instruments – Credit Losses,” and all related subsequent amendments using the prospective transition approach for all financial assets measured at amortized cost and off-balance sheet credit exposures.

The transition adjustment of the adoption of CECL included an $ 1.2 million increase in the ACL, which is presented as a reduction to net loans held for investment.

The Corporation recorded a net decrease to retained earnings of $ 824,000 as of July 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded.

Results for reporting periods beginning after July 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

The Corporation adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to July 1, 2023.

As of June 30, 2023, the Corporation did not have any other-than-temporary impaired investment securities.

Therefore, upon adoption of ASC 326, the Corporation determined that an ACL on available for sale securities was not deemed necessary.

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

Allowance for

credit losses

before adoption

allowance after ASC

under ASC 326

(In Thousands)

Mortgage loans:

Single-family

Commercial real estate

Commercial business loans

Consumer loans

Unfunded loan commitment reserve

In March 2022, FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures.” This ASU eliminates the concept and treatment of troubled debt restructurings (“TDR”) in relation to the adoption of the CECL model for the accounting for credit losses (see note above regarding ASU 2016-13).

The new disclosure requirements are adopted in regards to loan modifications made to borrowers experiencing financial difficulties.

The required disclosures regarding gross write-offs for financing receivables by year of origination and loan modifications are presented under Note 3 of the Notes to Consolidated Financial Statements.

Subsequent to the adoption of ASC 326 on July 1, 2023, the Corporation did have any loan modifications for borrowers experiencing financial difficulties during fiscal 2024.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Investment Securities

15 unchanged sentences

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

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

June 30, 2023

4 unchanged sentences

SBA securities

Certificates of deposit

Total investment securities - held to maturity

6 unchanged sentences

In fiscal 2024 and 2023, the Corporation received principal payments from its investment securities of $ 24.1 million and $ 30.7 million, respectively and did no t sell any investment securities.

The Corporation did no t purchase any investment securities in fiscal 2023, while in fiscal 2022, the Corporation purchased investment securities totaling $ 19.0 million.

The Corporation did no t purchase any investment securities in fiscal 2024 and 2023.

PROVIDENT FINANCIAL HOLDINGS, INC.

31 unchanged sentences

government sponsored enterprise CMO

SBA securities

Total investment securities - held to maturity

5 unchanged sentences

Total investment securities

The Corporation evaluates individual investment securities quarterly for other-than-temporary impairment.

At June 30, 2023, $ 18.6 million of the $ 18.9 million of unrealized holding losses were in a loss position for 12 months or more;

while at June 30, 2022, $ 4.9 million of the $ 14.1 million of unrealized holding losses were in a loss position for 12 months or more.

The Corporation evaluates individual investment securities quarterly for impairment based on ASC 326 since the adoption on July 1, 2023.

At June 30, 2024, all of the $ 15.8 million of unrealized holding losses were in a loss position for 12 months or more, while at June 30, 2023, $ 18.6 million of the $ 18.9 million of unrealized holding losses were in a loss position for 12 months or more.

The unrealized losses on investment securities were attributable to changes in interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities,

which are predominately U.S.

government sponsored enterprise (GSE) securities.

The Corporation performs an analysis of evaluating

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

factors such as cash and working capital requirements, contractual and regulatory obligations, and specific company/industry considerations.

Based on its analysis, the Corporation has determined that the unrealized losses are temporary in nature due to the fluctuating nature of interest rates, as well as the Corporation’s intent and ability to hold these investments until maturity.

As a part of the Corporation’s monthly risk assessment, the Corporation runs a number of stressed liquidity scenarios.

These liquidity scenarios support the Corporation’s assessment that the Corporation has the ability to hold these securities until maturity and does not need to liquidate these investment securities in order to maintain adequate liquidity.

which are predominately U.S.

government sponsored enterprise (GSE) securities that are either explicitly or implicitly guaranteed by the U.S.

government and have a long history of no credit losses.

Therefore, the Corporation has determined that the unrealized losses are due to the fluctuating nature of interest rates, and not related to any potential credit risks within the investment portfolio.

The Bank does not currently intend to sell any investment securities classified as held to maturity or available for sale and as such, records the investment security at amortized cost or fair market value as prescribed by GAAP.

There were no ACL or impairment on investment securities held to maturity and there was no impairment on investment securities available for sale at the adoption date of ASC 326 on July 1, 2023 and at June 30, 2024.

In order to maintain adequate liquidity, the Bank has established borrowing facilities with various counterparties.

The Bank had a remaining borrowing capacity of $ 287.9 million as of June 30, 2023 at the Federal Home Loan Bank of San Francisco.

In addition, the Bank has secured an estimated $ 139.0 million discount window facility at the Federal Reserve Bank of San Francisco collateralized by investment securities with June 30, 2023 balances of $ 150.3 million.

As of June 30, 2023, the Bank also has a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $ 50.0 million.

The total available borrowing capacity across all sources totals approximately $ 476.9 million at June 30, 2023.

The Bank had no advances under the Federal Reserve Bank of San Francisco discount window or correspondent bank facility as of June 30, 2023 .

At June 30, 2022, the Bank had a remaining borrowing capacity of $ 310.3 million at the Federal Home Loan Bank of San Francisco.

In addition, the Bank had secured an estimated $ 153.9 million discount window facility at the Federal Reserve Bank of San Francisco collateralized by investment securities with June 30, 2022 balances of $ 180.6 million.

As of June 30, 2022, the Bank also had a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $ 50.0 million.

The total available borrowing capacity across all sources totals approximately $ 514.2 million at June 30, 2022.

The Bank had no advances under the Federal Reserve Bank of San Francisco discount window or correspondent bank facility as of June 30, 2022 .

At June 30, 2023 and 2022, the Corporation did not hold any investment securities with the intent to sell and determined it had the ability to hold these investment securities until maturity.

The Bank had a remaining borrowing capacity of $ 261.3 million as of June 30, 2024 at the FHLB of San Francisco.

In addition, the Bank has secured an estimated $ 208.6 million discount window facility at the FRB of San Francisco collateralized by investment securities totaling $ 126.6 million and loans held for investment totaling $ 178.6 million as of June 30, 2024.

As of June 30, 2024, the Bank also has an unsecured borrowing arrangement in the form of a federal funds facility with its correspondent bank for $ 50.0 million.

The Bank had no advances under the Federal Reserve discount window or correspondent bank facility as of June 30, 2024.

The total available borrowing capacity across all sources totaled approximately $ 519.9 million at June 30, 2024.

At June 30, 2023, the Bank had a remaining borrowing capacity of $ 287.9 million at the FHLB of San Francisco.

In addition, the Bank had secured an estimated $ 139.0 million discount window facility at the FRB of San Francisco collateralized by investment securities totaling $ 150.3 million at June 30, 2023.

As of June 30, 2023, the Bank also had an unsecured borrowing arrangement in the form of a federal funds facility with its correspondent bank for $ 50.0 million.

The Bank had no advances under the Federal Reserve discount window or the correspondent bank facility as of June 30, 2023.

The total available borrowing capacity across all sources totaled approximately $ 476.9 million at June 30, 2023.

At June 30, 2024 and 2023, the Corporation did not hold any investment securities held to maturity or investment securities available for sale with the intent to sell and determined it had the ability to hold these investment securities until maturity.

It also determined that it was more likely than not that the Corporation would not be required to sell the securities prior to recovery of the amortized cost basis;

therefore, no impairment losses were recorded for the fiscal years ended June 30, 2023 and 2022.

therefore, no impairment losses were recorded on investment securities available for sale for fiscal years ended June 30, 2024 and 2023.

In addition, no allowance for credit losses were recorded on investment securities held to maturity for the fiscal years ended June 30, 2024 and 2023.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

15 unchanged sentences

Total investment securities

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Loans Held for Investment

11 unchanged sentences

Deferred loan costs, net

Allowance for loan losses

Total loans held for investment, net

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following table sets forth information at June 30, 2024 regarding the dollar amount of loans held for investment that are contractually repricing during the periods indicated, segregated between adjustable rate loans and fixed rate loans.

Fixed-rate loans comprised 11 % of loans held for investment at both June 30, 2023 and June 30, 2022.

Fixed-rate loans comprised 10 % and 11 % of loans held for investment at June 30, 2024 and 2023, respectively.

Adjustable rate loans having no stated repricing date that reprice when the index to which they are tied to reprices (e.g.

prime rate index) and checking account overdrafts are reported as repricing within one year, subject to periodic and maximum rate cap.

prime rate index) and checking account overdrafts are reported as repricing within one year, subject to periodic and maximum rate caps.

The table does not include any estimate of prepayments which may cause the Corporation’s actual repricing experience to differ materially from that shown.

10 unchanged sentences

Total loans held for investment, gross

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.

Management continually evaluates the credit quality of the Corporation’s loan portfolio and conducts a quarterly review of the adequacy of the allowance for loan losses using quantitative and qualitative methods.

The Corporation has adopted an internal risk rating policy in which each loan is rated for credit quality with a rating of pass, special mention, substandard, doubtful or loss.

The two primary components that are used during the loan review process to determine the proper allowance levels are individually evaluated allowances and collectively evaluated allowances.

Quantitative loan loss factors are developed by determining the historical loss experience, expected future cash flows, discount rates and collateral fair values, among others.

Qualitative loan loss factors are developed by assessing general economic indicators such as gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices, as well as peer group data, reflecting the

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

June 30, 2024

Occupied Loan

(Dollars In Thousands)

Mixed use (2)

Medical/dental office

Mobile home park

Restaurant/fast food

Automotive - non gasoline

Total commercial real estate

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

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

effect of events that have occurred but are not yet evidenced in the historical data.

The Corporation assigns individual factors for the quantitative and qualitative methods for each loan category and each internal risk rating.

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

June 30, 2023

Occupied Loan

(Dollars In Thousands)

Mixed use (2)

Mobile home park

Medical/dental office

Restaurant/fast food

Automotive - non gasoline

Light industrial/manufacturing

Total commercial real estate

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

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

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

June 30, 2024

California (2)

(Dollars in Thousands)

Owner occupied:

Medical/dental office

Restaurant/fast food

Total owner occupied

Non-owner occupied:

Mobile home park

Medical/dental office

Automotive - non gasoline

Restaurant/fast food

Total non-owner occupied

Total commercial real estate

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

(2) Other than the Inland Empire.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

June 30, 2023

California (2)

(Dollars in Thousands)

Owner occupied:

Medical/dental office

Total owner occupied

Non-owner occupied:

Mobile home park

Medical/dental office

Restaurant/fast food

Automotive - non gasoline

Light industrial/ manufacturing

Total non-owner occupied

Total commercial real estate

(1) Other than the Inland Empire.

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

Management continually evaluates the credit quality of the loan portfolio and conducts a quarterly review of the adequacy of the ACL.

The Corporation has adopted an internal risk rating policy in which each loan is rated for credit quality with a rating of pass, special mention, substandard, doubtful or loss.

The two primary components that are used during the loan review process to determine the proper allowance levels are individually evaluated allowances and collectively evaluated allowances.

The collectively evaluated allowance is based on a pooling method for groups of homogeneous loans sharing similar loan characteristics to calculate an allowance which reflects an estimate of lifetime expected credit losses using historical experience, current conditions, and reasonable and supportable forecasts.

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

A description of the general characteristics of the risk grades is as follows:

● Pass - These loans range from minimal credit risk to average however still acceptable credit risk.

● Pass – A pass loan ranges from minimal credit risk to average, but still acceptable, credit risk.

The likelihood of loss is considered remote.

● Special Mention - A special mention asset has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss.

While concerns exist, the Bank is currently protected and loss is considered unlikely and not imminent.

● Special Mention - A special mention loan has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss.

While concerns exist, the Corporation is currently protected and loss is considered unlikely and not imminent.

● Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any.

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

A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

A substandard loan is characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

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

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

The following tables summarize gross loans held for investment by loan types and risk category at the dates indicated:

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

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

June 30, 2024

Term Loans by Year of Origination

(In Thousands)

Mortgage loans:

Single-family:

Special Mention

Total single-family

Current period gross charge-off

Multi-family:

Special Mention

Total multi-family

Current period gross charge-off

Commercial real estate:

Special Mention

Total commercial real estate

Current period gross charge-off

Construction:

Special Mention

Total construction

Current period gross charge-off

Special Mention

Current period gross charge-off

Commercial business loans:

Special Mention

Total commercial business loans

Current period gross charge-off

Consumer loans:

Special Mention

Total consumer loans

Current period gross charge-off

Total loans held for investment, gross

Total current period gross charge-offs

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

June 30, 2023

Term Loans by Year of Origination

(In Thousands)

Mortgage loans:

Single-family:

Special Mention

Total single-family

Current period gross charge-off

Multi-family:

Special Mention

Total multi-family

Current period gross charge-off

Commercial real estate:

Special Mention

Total commercial real estate

Current period gross charge-off

Construction:

Special Mention

Total construction

Current period gross charge-off

Special Mention

Current period gross charge-off

Commercial business loans:

Special Mention

Total commercial business loans

Current period gross charge-off

Consumer loans:

Special Mention

Total consumer loans

Current period gross charge-off

Total loans held for investment, gross

The allowance for loan losses is maintained at a level sufficient to provide for estimated losses based on evaluating known and inherent risks in the loans held for investment and upon management’s continuing analysis of the factors underlying the quality of the loans held for investment.

These factors include changes in the size and composition of the loans held for investment, actual loan loss experience, current economic conditions, detailed analysis of individual loans for which full collectability may not be assured, and determination of the realizable value of the collateral securing the loans.

Provisions (recoveries) for loan losses are charged (credited) against operations on a quarterly basis, as necessary, to maintain the allowance at appropriate levels.

Future adjustments to the allowance for loan losses may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory, and other conditions beyond the Corporation’s control.

Total current period gross charge-offs

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

As required by ASC 326, on July 1, 2023 the Corporation implemented CECL and recognized a $ 1.2 million one-time increase to its ACL.

Under ASC 326 , the ACL is a valuation account that is deducted from the related loans’ amortized cost basis to present the net amount expected to be collected on the loans.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

The Corporation’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL trued-up through an entry to the provision for (recovery of) credit losses.

Management calculates the quantitative portion of the collectively evaluated allowance for all loan categories using an average charge-off or loss rate methodology and generally evaluates collectively evaluated loans by Call Report code in order to group and determine portfolio loan segments with similar risk characteristics.

The Corporation primarily utilizes historical loss rates for the CECL calculation based on its own specific historical losses and/or with peer loss history where applicable.

The expected loss rates are applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments.

The prepayment assumptions applied to expected cash flow over the contractual life of the loans are estimated based on historical and bank-specific experience and the consideration of current and expected conditions and circumstances including the level of interest rates.

The prepayment assumptions may be updated by management in the event that changing conditions impact management’s estimate or additional historical data gathered has resulted in the need for a reevaluation.

For its reasonable and supportable forecasting of current expected credit losses, the Corporation utilizes a regression model using forecasted economic metrics and historical loss data.

The regression model utilized upon implementation of CECL on July 1, 2023 , and as of June 30, 2024, relied upon reasonable and supportable 12-month forecasts of the National Unemployment Rate and change in the Real Gross Domestic Product, after which it reverts to a historical loss rate.

Management selected the National Unemployment Rate and the Real Gross Domestic Product as the drivers of the forward look component of the collectively evaluated allowance, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts, including the quarterly Federal Open Market Committee forecast, and the widespread familiarity of these economic metrics.

Management recognizes that there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of allowance on collectively evaluated loans.

As current and expected conditions may vary compared with conditions over the historical lookback period, which is utilized in the calculation of the quantitative allowance, management considers whether additional or reduced allowance levels on collectively evaluated loans may be warranted, given the consideration of a variety of qualitative factors.

The following qualitative factors (“Q-factors”) considered by management reflect the regulatory guidance on the Q-factors:

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

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

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

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

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

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

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

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

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

The amount of qualitative allowance is also contingent upon the relative weighting of the Q-factors according to management’s judgment.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Loans that do not share similar risk characteristics are evaluated on an individual basis.

When management determines that foreclosure is probable or the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date, less selling costs.

Accrued interest receivable for loans is included in accrued interest receivable in the Consolidated Statements of Financial Condition.

The Corporation elected not to measure an allowance for accrued interest receivable and instead elected to reverse accrued interest income on loans that are placed on non-performing status.

A loan is deemed non-performing when it is 90 days or more delinquent.

The Corporation believes this policy results in the timely reversal of potentially uncollectible interest.

Pursuant to ASU 2022-02, “Troubled Debt Restructurings and Vintage Disclosures,” the Corporation may agree to different types of modifications, including principal forgiveness, interest rate reductions, term extension, significant payment delay or any combination of modifications noted above.

During the fiscal year ended June 30, 2024, there were no loan modifications to borrowers experiencing financial difficulties.

Management believes the ACL on loans held for investment is maintained at a level sufficient to provide for expected losses on the Corporation’s loans held for investment based on historical loss experience, current conditions, and reasonable and supportable forecasts.

The provision for (recovery of) credit losses is charged (credited) against operations on a quarterly basis, as necessary, to maintain the ACL at appropriate levels.

Future adjustments to the ACL may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory, and other conditions beyond the Corporation’s control.

Non-performing loans are charged-off to their fair market values in the period the loans, or portion thereof, are deemed uncollectible, generally after the loan becomes 150 days delinquent for real estate secured first trust deed loans and 120 days delinquent for commercial business or real estate secured second trust deed loans.

For loans that were modified from their original terms, were re-underwritten and identified in the Corporation’s reports as restructured loans, the charge-off occurs when the loan becomes 90 days delinquent;

For loans that were previously modified from their original terms, were re-underwritten and identified as modified loans, the charge-off occurs when the loan becomes 90 days delinquent;

and where borrowers file bankruptcy, the charge-off occurs when the loan becomes 60 days delinquent.

The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the 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 is 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 modified loans that are less than 90 days delinquent, the ACL is segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their modification period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method.

For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method.

For non-performing commercial real estate loans, 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.

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 years indicated.

For non-performing commercial real estate loans, an individually evaluated allowance is derived based on the loan's discounted cash flow fair value (for modified loans) or collateral fair value less estimated selling costs and if the fair value is higher than the loan balance, no allowance is required.

A non-performing loan can be restored to accrual status when a borrower is current in payments for six consecutive months.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

Year Ended June 30, 2024

2 unchanged sentences

Other Mortgage

Allowance at beginning of period

Provision (recovery) for loan losses

Allowance for loan losses, end of period

ACL, beginning of period

Adjustment to ACL for adoption of ASC 326

(Recovery of) provision for credit losses

ACL, end of period

Individually evaluated for allowances

Collectively evaluated for allowances

Allowance for loan losses, end of period

ACL, end of period

Loans held for investment:

Individually evaluated for allowances

1 unchanged sentence

Total loans held for investment, gross

Allowance for loan losses as a percentage of gross loans held for investment

ACL on loans as a percentage of gross loans held for investment

Net (recoveries) charge-offs to average loans receivable, net during the period

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Year Ended June 30, 2023

2 unchanged sentences

Other Mortgage

Allowance at beginning of period

(Recovery) provision for loan losses

Allowance for loan losses, end of period

ACL, beginning of period

Provision for (recovery of) credit losses

ACL, end of period

Individually evaluated for allowances

Collectively evaluated for allowances

Allowance for loan losses, end of period

ACL, end of period

Loans held for investment:

Individually evaluated for allowances

1 unchanged sentence

Total loans held for investment, gross

Allowance for loan losses as a percentage of gross loans held for investment

ACL on loans as a percentage of gross loans held for investment

Net (recoveries) charge-offs to average loans receivable, net during the period

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

Year Ended June 30,

1 unchanged sentence

Balance, beginning of year

Provision (recovery) for loan losses

Adjustment to ACL for adoption of ASC 326

(Recovery of) provision for credit losses

Balance, end of year

The following tables identify the Corporation’s total recorded investment in non-performing loans by type at the dates and for the years indicated.

Generally, a loan is placed on non-accrual status when it becomes 90 days past due as to principal or interest or if the loan is deemed impaired, after considering economic and business conditions and collection efforts, where the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful.

The following tables identify the Corporation’s total recorded investment in non-performing loans by type at the dates and for the periods indicated.

Generally, a loan is placed on non-performing status when it becomes 90 days past due as to principal or interest or after considering economic and business conditions and collection efforts, where the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful.

In addition, interest income is not recognized on any loan where management has determined that collection is not reasonably assured.

A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current and future monthly principal and interest payments are expected to be collected on a timely basis.

Loans with a related allowance reserve have been individually evaluated for impairment using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell to establish realizable value.

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.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current, the borrower(s) has demonstrated sustained payment performance and future monthly principal and interest payments are expected to be collected on a timely basis.

Loans with a related allowance have been (a) collectively evaluated using a pooling method analysis or (b) individually evaluated using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell, to establish realizable value.

This analysis may identify a specific allowance amount needed or may conclude that no allowance is needed.

At or For the Year Ended June 30, 2024

(In Thousands)

Allowance (1)

Mortgage loans:

4 unchanged sentences

Total non-performing loans

(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan.

(2) There was no related allowance for loan losses because these loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

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

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

At or For the Year Ended June 30, 2023

(In Thousands)

Allowance (1)

Mortgage loans:

3 unchanged sentences

Total single-family loans

Multi-family:

With a related allowance

Total multi-family loans

Total non-performing loans

(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan.

(2) There was no related allowance for loan losses because these loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

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

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

1 unchanged sentence

The Corporation records payments on non-performing loans utilizing the cash basis or cost recovery method of accounting during the periods when the loans are on non-performing status.

For the fiscal year ended June 30, 2023, the Bank received $ 49,000 in interest payments from non-performing loans, of which $ 42,000 was recognized as interest income.

The remaining $ 7,000 was applied to reduce the loan balances under the cost recovery method.

For the fiscal year ended June 30, 2024, the Corporation received $ 119,000 in interest payments from non-performing loans, all of which was recognized as interest income and none was applied to reduce the loan balances under the cost recovery method.

In comparison, for the fiscal year ended June 30, 2023, the Bank received $ 49,000 in interest payments from non-performing loans, of which $ 42,000 was recognized as interest income.

The remaining $ 7,000 was applied to reduce the loan balances under the cost recovery method.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

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

(In Thousands)

Balance, beginning of the year

Impact of ASC 326 CECL adoption

Provision for (recovery of) credit losses

Balance, end of the year

The method for calculating the unfunded commitment reserve is based on a historical funding rate applied to the undisbursed loan amount to estimate an average outstanding amount during the life of the loan commitment.

The Corporation applies the same assumptions and methodologies by loan groupings to these unfunded loan commitments as it does for its funded loans held for investment to determine the reserve rate and the allowance.

Assumptions are evaluated by management periodically as part of the CECL procedures.

The unfunded loan commitment reserve is recorded in accounts payable, accrued interest and other liabilities in the Consolidated Statements of Financial Condition.

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

12 unchanged sentences

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

June 30, 2023

11 unchanged sentences

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

For the fiscal year ended June 30, 2023, there were no loans that were newly modified from their original terms, re-underwritten or identified as a restructured loan;

11 loans were upgraded to the pass category;

one loan was downgraded to the special mention category and subsequently upgraded back to the pass category;

one loan was paid off;

and no loans were converted to real estate owned.

For the fiscal year ended June 30, 2022, there were no loans that were newly modified from their original terms, re-underwritten or identified as a restructured loan;

three loans were upgraded to the pass category;

seven loans were paid off;

and no loans were converted to real estate owned.

During the fiscal years ended June 30, 2023 and 2022, no restructured loans were in default within a 12-month period subsequent to their original restructuring.

Additionally, during the fiscal years ended June 30, 2023 and 2022, there were no restructured loans that were extended beyond the initial maturity of the modification.

As of June 30, 2023, the net outstanding balance of the Corporation’s restructured loans was $ 708,000 , consisting of one loan classified as substandard on non-accrual status.

As of June 30, 2023, the restructured loan was delinquent with respect to its payment status.

As of June 30, 2022, the net outstanding balance of the Corporation’s 13 restructured loans was $ 4.5 million;

one loan with an outstanding balance of $ 722,000 was classified as substandard on non-accrual status and 12 loans totaling $ 3.7 million were classified in the pass category on accrual status.

As of June 30, 2022, all of the restructured loans were current with respect to their payment status, consistent with their modified terms.

At both June 30, 2023 and June 30, 2022, there were no commitments to lend additional funds to those borrowers whose loans were restructured.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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 accrual status at June 30, 2023 and 2022 :

(In Thousands)

Restructured loans on non-accrual status:

Mortgage loans:

Single-family

Restructured loans on accrual status:

Mortgage loans:

Single-family

Total restructured loans

The following tables show the restructured loans by type, net of allowance for loan losses or charge-offs, at June 30, 2023 and 2022:

At June 30, 2023

(In Thousands)

Allowance (1)

Mortgage loans:

Single-family:

With a related allowance

Total single-family

Total restructured loans

(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan.

At June 30, 2022

(In Thousands)

Allowance (1)

Mortgage loans:

Single-family:

With a related allowance

Without a related allowance (2)

Total single-family

Total restructured loans

(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan.

(2) There was no related allowance for loan losses because these loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

In the ordinary course of business, the Bank may offer loans to its directors, officers and employees on substantially the same terms prevailing at the time of origination for comparable transactions with unaffiliated borrowers.

During fiscal

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

2023 and 2022, there were no related-party loan activities and as of June 30, 2023 and 2022, there were no outstanding related-party loans.

During fiscal 2024 and 2023, there were no related-party loan activities and as of June 30, 2024 and 2023, there were no outstanding related-party loans.

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, 2024, all the Corporation’s leases were classified as operating leases and the Corporation did not have any operating leases with an initial term of 12 months or less (“short-term leases”).

7 unchanged sentences

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

12 unchanged sentences

(1) Includes immaterial variable lease costs.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

7 unchanged sentences

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Premises and Equipment

8 unchanged sentences

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

15 unchanged sentences

Time deposits:

Under $100 (1)(2)

$250 and under (1)(2)

0.00 % - 5.35 %

0.00 % - 5.25 %

$100 and over

0.10 % - 5.12 %

3 unchanged sentences

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

(2) Includes brokered certificates of deposit of $ 106.4 million and $ 0 at June 30, 2023 and 2022, respectively.

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

(3) Includes uninsured deposits of approximately $ 122.7 million and $ 140.1 million at June 30, 2024 and 2023, respectively.

8 unchanged sentences

Total time deposits

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Interest expense on deposits for the years indicated is summarized as follows:

11 unchanged sentences

Effective March 26, 2020, the FRB lowered the reserve ratios on transaction accounts maintained at a depository institution to zero percent so there was no required reserve balance at June 30, 2024 and 2023.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

As of June 30, 2024, the Bank’s FHLB – San Francisco maximum borrowing capacity was approximately $ 516.0 million, which is limited to 40 % of total assets reported on the Bank’s quarterly Call Report.

This borrowing capacity was collateralized by pledges of certain real estate loans with an aggregate loan balance of $ 774.1 million and investment securities of $ 3.9 million.

As of June 30, 2023, the Bank’s borrowings from the FHLB – San Francisco were $ 235.0 million, with varying maturity dates thru the year 2028.

In addition, the Bank utilizes its borrowing facility for letters of credit and for Mortgage Partnership Finance (“MPF”) program credit enhancement.

As of June 30, 2024, the Bank’s borrowings from the FHLB – San Francisco were $ 238.5 million, with varying maturity dates through the year 2028.

In addition, the Bank utilizes its borrowing facility for letters of credit and for the Mortgage Partnership Finance (“MPF”) program credit enhancement.

The outstanding letters of credit was $ 16.0 million and the outstanding MPF credit enhancement was $ 216,000 at June 30, 2024.

As of June 30, 2023, the remaining borrowing capacity was $ 287.9 million.

As of June 30, 2024, the remaining borrowing capacity with the FHLB – San Francisco was $ 261.3 million.

As of June 30, 2023, the Bank’s FHLB – San Francisco maximum borrowing capacity was approximately $ 534.1 million, which is limited to 40 % of total assets reported on the Bank’s quarterly Call Report.

1 unchanged sentence

As of June 30, 2023, the Bank’s borrowings from the FHLB – San Francisco were $ 235.0 million, with varying maturity dates through the year 2028.

In addition, the Bank utilizes its borrowing facility for letters of credit and for MPF program credit enhancement.

The outstanding letters of credit was $ 18.0 million and the outstanding MPF credit enhancement was $ 2.5 million at June 30, 2022.

As of June 30, 2022, the remaining borrowing capacity was $ 310.3 million.

In addition, as of June 30, 2023 and 2022, the Bank had $ 139.0 million and $ 153.9 million borrowing capacity available from the discount window facility at the Federal Reserve Bank of San Francisco, respectively, collateralized by investment securities.

In addition, the Bank utilizes its borrowing facility for letters of credit and for the MPF program credit enhancement.

The outstanding letters of credit were $ 11.0 million and the outstanding MPF credit enhancement was $ 216,000 at June 30, 2023.

As of June 30, 2023, the remaining borrowing capacity with FHLB – San Francisco was $ 287.9 million.

In addition, as of June 30, 2024 and 2023, the Bank had $ 208.6 million and $ 139.0 million of borrowing capacity available from the discount window facility at the FRB of San Francisco, respectively, collateralized by investment securities and loans held for investment at June 30, 2024 and collateralized by investment securities only at June 30, 2023.

As of June 30, 2024 and 2023, the Bank also had a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $ 50.0 million at both dates.

The Bank intends to request a renewal of its borrowing arrangement with the correspondent bank prior to maturity on June 30, 2025.

As of both June 30, 2023 and 2022, there were no outstanding borrowings under the discount window facility or the federal funds facility with the correspondent bank.

As of both June 30, 2024 and 2023, there were no outstanding borrowings under the discount window facility or the federal funds facility.

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

3 unchanged sentences

At June 30, 2024 and 2023, the Bank held a stock investment of $ 9.6 million and $ 9.5 million, respectively, with no excess capital stock.

During fiscal 2023 and 2022, the FHLB – San Francisco did no t redeem any excess capital stock, while the Bank purchased $ 1.3 million and $ 84,000 of FHLB - San Francisco capital stock, respectively.

In fiscal 2023 and 2022, the FHLB – San Francisco distributed $ 556,000 and $ 489,000 of cash dividends, respectively, to the Bank.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

During fiscal 2024 and 2023, the Bank purchased $ 63,000 and $ 1.3 million of FHLB - San Francisco capital stock, respectively.

In fiscal 2024 and 2023, the FHLB – San Francisco distributed $ 793,000 and $ 556,000 of cash dividends, respectively, to the Bank.

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

26 unchanged sentences

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

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Corporation’s effective tax rate may differ from the estimated statutory tax rates described above due to discrete items such as further adjustments to net deferred tax assets, excess tax benefits derived from stock option exercises and non-taxable earnings from bank owned life insurance, among other items.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Corporation utilizes the asset and liability method of accounting for income taxes whereby deferred tax assets are recognized for deductible temporary differences and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.

16 unchanged sentences

Non-deductible expenses

Excess tax benefit on stock-based compensation

Shortfall on stock-based compensation

Return to provision adjustment

Effective income tax

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Deferred tax assets at June 30, 2024 and 2023 by jurisdiction were as follows:

3 unchanged sentences

Total net deferred tax assets

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Net deferred tax assets at June 30, 2024 and 2023 were comprised of the following:

26 unchanged sentences

Also, the Internal Revenue Service completed a review of the Corporation’s income tax returns for fiscal 2006 and 2007;

and the California Franchise Tax Board completed a review of the Corporation’s income tax returns for fiscal 2009 and 2010.

Fiscal years of 2020 and thereafter remain subject to federal examination, while the California state tax returns for fiscal years 2019 and thereafter are subject to examination by state taxing authorities.

It is the Corporation’s policy to record any penalties or interest charges arising from federal or state taxes as a component of income tax expense.

For the fiscal years ended June 30, 2023 and 2022, there were no tax penalties and no interest charges arising from federal or state taxes.

and the California Franchise Tax Board completed a review of the Corporation’s income tax returns for

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

fiscal 2009 and 2010.

Fiscal years 2022 and thereafter remain subject to federal examination, while the California state tax returns for fiscal years 2021 and thereafter are subject to examination by state taxing authorities.

It is the Corporation’s policy to record any penalties or interest charges arising from federal or state taxes as a component of income tax expense.

For the fiscal years ended June 30, 2024 and 2023, there were no tax penalties and no interest charges arising from federal or state taxes.

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

9 unchanged sentences

In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5 % above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

16 unchanged sentences

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

(2) The Bank elected to recognize the full $ 824 thousand adjustment to retained earnings resulting from the adoption of CECL on July 1, 2023 instead of over the permitted three-year phase-in option .

At June 30, 2024, the Bank exceeded all regulatory capital requirements.

The Bank was categorized as "well-capitalized"

at June 30, 2023 under the regulations of the OCC.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The ability of the Provident Financial Holdings to pay dividends to stockholders depends primarily on the ability of the Bank to pay dividends to the Provident Financial Holdings.

The Bank was categorized as "well-capitalized" at June 30, 2024 under the regulations of the Office of the Comptroller of the Currency (“OCC”).

The ability of Provident Financial Holdings to pay dividends to stockholders depends primarily on the ability of the Bank to pay dividends to Provident Financial Holdings.

Provident Financial Holdings and the Bank may not declare or pay cash dividends on or repurchase any of its shares of common stock, if the effect would cause stockholders’ equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration and payment would otherwise violate regulatory requirements.

Generally, savings institutions, such as the Bank, that before and after the proposed distribution are well-capitalized, may make capital distributions during any calendar year up to 100% of net income for the year-to-date plus retained net income for the two preceding years.

However, an institution deemed to be in need of more than normal supervision or in troubled condition by the OCC may have its dividend authority restricted by the OCC.

If the Bank, however, proposes to make a capital distribution when it does not meet its capital requirements (or will not following the proposed capital distribution) or that will exceed these net income-based limitations, it must obtain the OCC's approval prior to making such distribution.

Generally, savings institutions, such as the Bank, that are well-capitalized before and after the proposed distribution may make capital distributions during any calendar year up to 100% of net income for the year-to-date plus retained net income for the two preceding years.

However, an institution deemed to be in need of more than normal supervision or classified as troubled condition by the OCC may have its dividend authority restricted by the OCC.

If the Bank, however, proposes to make a capital distribution when it does not meet its capital requirements (or will not following the proposed capital distribution) or that will exceed the net income-based limitations, it must obtain the OCC's approval prior to making such distribution.

In addition, the Bank must file a prior written notice of a dividend with the FRB.

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The Corporation makes matching contributions up to 3 % of a participants’ pretax compensation.

Participants vest immediately in their own contributions with 100 % vesting in the Corporation’s contributions occurring after six years of credited service.

Participants vest immediately in their own contributions with 100 % vesting in the Corporation’s

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

contributions occurring after six years of credited service.

The Corporation’s expense for the plan was approximately $ 303,000 and $ 306,000 for the fiscal years ended June 30, 2024 and 2023, respectively.

The Corporation has a multi-year employment agreement and a post-retirement compensation agreement with one executive officer and a post-retirement compensation agreement with another executive officer, which requires payments of certain benefits upon retirement.

At June 30, 2023 and 2022, the accrued liability of the post-retirement compensation agreements was $ 5.7 million and $ 6.8 million, respectively;

costs are being accrued and expensed quarterly.

The decline in the accrued liability was due to an increase in the discount rate and a lower life expectancy, partly offset by a higher current compensation.

For fiscal 2023 and 2022, the accrued (recovery) expense for these liabilities was $( 1.1 million) and $ 217,000 , respectively.

The Corporation has a multi-year employment agreement and a post-retirement compensation agreement with one executive officer.

In addition, the Corporation has a transition agreement and a post-retirement compensation agreement with the previous executive officer (currently the Chairman of the Board of Directors).

At June 30, 2024 and 2023, the accrued liability of the post-retirement compensation agreements was $ 5.7 million at both dates;

any costs (recoveries) are being accrued and expensed quarterly.

In fiscal 2024, the increase in the discount rate and a lower life expectancy was offset by a higher current compensation.

For fiscal 2024 and 2023, the accrued expense (recovery) for these liabilities was $ 85,000 and $( 1.1 million), respectively.

The current obligation for these post-retirement benefits was fully funded consistent with contractual requirements and actuarially determined estimates of the total future obligation.

1 unchanged sentence

As of June 30, 2024 and 2023, the total outstanding cash surrender value of the BOLI was $ 8.6 million and $ 8.4 million, respectively.

For fiscal 2023 and 2022, the total BOLI non-taxable income, net of mortality cost was $ 186,000 and $ 188,000 , respectively.

For fiscal 2024 and 2023, total BOLI non-taxable income, net of mortality cost, was $ 186,000 for both periods.

Employee Stock Ownership Plan

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The Corporation's contribution to the ESOP plan is discretionary.

During fiscal 2023, there were 40,000 shares that were purchased in the open market to fulfill the annual discretionary allocation.

This compares to fiscal 2022 when the Corporation purchased 20,000 shares in the open market and made $ 317,000 in cash contributions to fulfill the annual discretionary allocation.

During fiscal 2024 and 2023, there were 40,000 shares for each year that were purchased in the open market to fulfill the annual discretionary allocation.

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

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The net expense related to the ESOP for the fiscal years ended June 30, 2024 and 2023 was $ 540,000 and $ 563,000 , respectively.

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

The total ESOP allocation for calendar 2022 was 20,000 shares and $ 317,000 of cash contributions, as compared to 40,000 shares for calendar 2021.

The total ESOP allocation for calendar 2023 was 40,000 shares, as compared to 20,000 shares and $ 317,000 of cash contributions for calendar 2022.

Incentive Plans

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and the 2006 Equity Incentive Plan (“2006 Plan”), collectively, the “Plans”.

For the fiscal years ended June 30, 2023 and 2022, the compensation cost for the Plans was $ 1.2 million and $ 798,000 , respectively.

For the fiscal years ended June 30, 2024 and 2023, the compensation cost for the Plans was $ 240,000 and $ 1.2 million, respectively.

Equity Incentive Plans.

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The 2006 Plan authorized 365,000 stock options and 185,000 shares of restricted stock.

As of June 30, 2023, equity awards may be granted only from the 2022 Plan and 2013 Plan, while no new equity awards can be granted from the 2010 Plan and 2006 Plan.

As of June 30, 2024, equity awards may be granted only from the 2022 Plan, while no new equity awards can be granted from the 2013 Plan, 2010 Plan and 2006 Plan.

Equity Incentive Plans - Stock Options.

Under the Plans, options may not be granted at a price less than the fair market value at the date of the grant.

Options typically vest over a five-year or shorter period as long as the director, advisory director, director emeritus, officer or employee remains in service to the Corporation.

Options typically vest over a five-year or shorter period as long as the director, advisory

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

director, director emeritus, officer or employee remains in service to the Corporation.

The options are exercisable after vesting for up to the remaining term of the original grant.

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Expected volatility

21.6 % - 22.9

Weighted average volatility

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Risk-free interest rate

As of June 30, 2023, there were 175,000 options available for future grants under the 2022 Plan and 21,000 options available for future grants under the 2013 Plan.

As of June 30, 2024, there were 77,000 options available for future grants under the 2022 Plan.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

As of June 30, 2023, there were 175,000 options available for future grants under the 2022 Plan and 21,000 options available for future grants under the 2013 Plan.

The following tables summarize the stock option activity in the Plans during the fiscal years ended June 30, 2024 and 2023:

9 unchanged sentences

The expense is expected to be recognized over a weighted average period of 3.5 years and 2.9 years, respectively.

The forfeiture rate during both fiscal 2023 and 2022 was 20 percent, and was calculated by using the historical forfeiture experience of all fully vested stock option grants which is reviewed annually.

The forfeiture rate during fiscal 2024 and 2023 was 15 % and 20 %, respectively, and was calculated by using the historical forfeiture experience of all fully vested stock option grants which is reviewed annually.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Equity Incentive Plans – Restricted Stock.

The Corporation used 200,000 shares, 300,000 shares and 288,750 shares of its treasury stock to fund awards of restricted stock under the 2022 Plan, the 2013 Plan and the 2010 Plan, respectively.

Awarded shares typically vest over a five-year or shorter period as long as the director, advisory director, director emeriti, officer or employee remains in service to the Corporation.

1 unchanged sentence

The Corporation recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the award date.

As of June 30, 2024, there were 69,000 shares available for future awards under the 2022 Plan.

As of June 30, 2023, there were 200,000 shares available for future awards under the 2022 Plan and 18,250 shares available for future awards under the 2013 Plan.

As of June 20, 2022, there were only 68,250 shares available for future awards under the 2013 Plan.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following table summarizes the restricted stock activity for the fiscal years ended June 30, 2024 and 2023:

7 unchanged sentences

Expected to vest at June 30, 2024

As of June 30, 2023 and 2022, the unrecognized compensation expense was $ 544,000 and $ 994,000 , 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.

As of June 30, 2024 and 2023, the unrecognized compensation expense was $ 1.8 million and $ 544,000 , respectively, related to unvested share-based compensation arrangements with respect to restricted stock issued under the Plans, and reported as a reduction to stockholders’ equity.

This expense is expected to be recognized over a weighted average period of 3.5 years and 3.1 years, respectively.

Similar to stock options, a forfeiture rate of 20 percent was applied to the restricted stock compensation expense calculations in fiscal 2023 and 2022.

For the fiscal years ended June 30, 2023 and 2022, the fair value of shares vested and distributed was $ 1.1 million and $ 17,000 , respectively.

Similar to stock options, a forfeiture rate of 15 % and 20 % was applied to the restricted stock compensation expense calculations in fiscal 2024 and 2023, respectively.

For the fiscal years ended June 30, 2024 and 2023, the fair value of shares vested and distributed was $ 24,000 and $ 1.1 million, respectively.

Earnings Per Share

3 unchanged sentences

As of June 30, 2024 and 2023, there were outstanding restricted stock awards of 176,650 shares and 51,000 shares, respectively.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following table provides the basic and diluted EPS computations for the fiscal years ended June 30, 2024 and 2023, respectively:

5 unchanged sentences

Restricted stock

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

For the Year Ended June 30, 2023

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For the fiscal years ended June 30, 2024 and 2023, the lease and operating commitment expense was approximately $ 2.3 million and $ 1.9 million, respectively.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The Bank sold single-family mortgage loans to unrelated third parties with standard representation and warranty provisions in the ordinary course of its business activities.

2 unchanged sentences

As of June 30, 2024 and 2023, the Bank maintained a non-contingent recourse liability related to these representations and warranties of $ 18,000 and $ 25,000 , respectively.

In addition, the Bank maintained a recourse liability of $ 8,000 and $ 10,000 at June 30, 2023 and 2022, respectively, for loans sold to the FHLB – San Francisco under the MPF program.

In addition, the Bank maintained a recourse liability of $ 8,000 at both June 30, 2024 and 2023 for loans sold to the FHLB – San Francisco under the MPF program.

In the ordinary course of business, the Corporation enters into contracts with third parties under which the third parties provide services on behalf of the Corporation.

1 unchanged sentence

The terms of the indemnity vary from contract to contract and the amount of the indemnification liability, if any, cannot be determined.

The Corporation also enters into other contracts and

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The Corporation also enters into other contracts and agreements;

such as, loan sale agreements, litigation settlement agreements, confidentiality agreements, loan servicing agreements, leases and subleases, among others, in which the Corporation agrees to indemnify third parties for acts by the Corporation’s agents, assignees and/or sub-lessees, and employees.

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Commitments to extend credit on loans to be held for investment

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 for the fiscal years ended June 30, 2023 and 2022:

(In Thousands)

Balance, beginning of the year

(Recovery) provision

Balance, end of the year

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Fair Value of Financial Instruments

2 unchanged sentences

ASC 825 permits entities to elect to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the “Fair Value Option”) at specified election dates.

At each subsequent reporting date, an entity is

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

required to report unrealized gains and losses on items in earnings for which the fair value option has been elected.

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.

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quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated to observable market data for substantially the full term of the asset or liability.

Valuation techniques may include the use of discounted cash flow models and similar techniques.

Unobservable inputs for the asset or liability that use significant assumptions, including assumptions of risks.

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If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.

The Corporation’s financial assets and liabilities measured at fair value on a recurring basis consist of investment securities available for sale, loans held for investment at fair value and interest-only strips;

while non-performing loans and mortgage servicing assets (“MSA”) are measured at fair value on a nonrecurring basis.

while loans with individually evaluated allowances and mortgage servicing assets (“MSA”) are measured at fair value on a nonrecurring basis.

Investment securities - available for sale are primarily comprised of U.S.

government agency MBS, U.S.

government sponsored enterprise MBS and private issue CMO.

The Corporation utilizes quoted 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 private issue 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).

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.

The non-performing loans are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

The fair value of a non-performing loan is

government sponsored enterprise MBS, private issue CMO and investment in equity securities.

The Corporation utilizes quoted prices in active markets for similar securities for its fair value measurement of MBS and investment in equity securities (Level 2) and broker price indications for similar securities in non-active markets for its fair value measurement of the private issue CMO (Level 3).

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

determined based on an observable market price or current appraised value of the underlying collateral.

Loans held for investment at fair value are primarily single-family loans which have been transferred from loans held for sale.

Loans with individually evaluated allowance that are recorded at fair value on a nonrecurring basis are loans which are inadequately protected by the current sound worth and paying capacity of the borrowers or of the collateral pledged.

These loans are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

The fair value of a loan with an individually evaluated allowance is determined based on the discounted cash flow or current appraised value of the underlying collateral.

Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the collateral.

For non-performing loans which are restructured loans, the fair value is derived from discounted cash flow analysis (Level 3), except those which are in the process of foreclosure or 90 days delinquent for which the fair value is derived from the appraised value of its collateral (Level 2).

For other non-performing loans which are not restructured loans, other than non-performing commercial real estate loans, the fair value is derived from relative value analysis:

historical experience and management estimates by loan type for which collectively evaluated allowances are assigned (Level 3);

or the appraised value of its collateral for loans which are in the process of foreclosure or where borrowers file bankruptcy (Level 2).

For non-performing commercial real estate loans, the fair value is derived from the appraised value of its collateral (Level 2).

Non-performing loans are reviewed and evaluated on at least a quarterly basis for additional allowance and adjusted accordingly, based on the same factors identified above.

This loss is not recorded directly as an adjustment to current earnings or other comprehensive income (loss), but rather as a component in determining the overall adequacy of the allowance for loan losses.

These adjustments to the estimated fair value of non-performing loans may result in increases or decreases to the provision for loan losses recorded in current earnings.

For commercial real estate loans with an individually evaluated allowance, the fair value is derived from the appraised value of its collateral.

Loans with an individually evaluated allowance are reviewed and evaluated on at least a quarterly basis for additional allowance and adjusted accordingly, based on the same factors identified above (Level 3).

This loss is not recorded directly as an adjustment to current earnings or other comprehensive income (loss), but rather as a component in determining the overall adequacy of the ACL.

These adjustments to the estimated fair value of loans with an individually evaluated allowance may result in increases or decreases to the provision for (recovery of) credit losses recorded in current earnings.

The fair value of other equity investments is derived from quoted prices in active markets for the equivalent or similar investments (Level 2).

The Corporation uses the amortization method for its MSA, which amortizes the MSA in proportion to and over the period of estimated net servicing income and assesses the MSA for impairment based on fair value at each reporting date.

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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.

Notes to Consolidated Financial Statements

The following fair value hierarchy tables present information at the dates indicated about the Corporation’s assets and liabilities measured at fair value on a recurring basis:

7 unchanged sentences

Loans held for investment, at fair value

Other equity investments, fair value

Interest-only strips

Total liabilities

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Fair Value Measurement at June 30, 2023 Using:

8 unchanged sentences

Total liabilities

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

The following tables provide a reconciliation of the beginning and ending balances during the periods shown of recurring fair value measurements recognized in the Consolidated Statements of Financial Condition using Level 3 inputs:

6 unchanged sentences

Beginning balance at June 30, 2023

Adjustment due to ASC 326 CECL adoption

Total gains or losses (realized/unrealized):

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(1) The valuation of loans held for investment at fair value includes management’s estimate of the specific credit risk attributes of each loan, in addition to the quoted secondary-market prices which account for interest rate characteristics.

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

1 unchanged sentence

(In Thousands)

Non-performing loans

Loans with individually evaluated allowance

Mortgage servicing assets

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Fair Value Measurement at June 30, 2023 Using:

(In Thousands)

Non-performing loans

Loans with individually evaluated allowance

Mortgage servicing assets

14 unchanged sentences

1.0 % - 1.1 % ( 1.0 %)

Non-performing loans (3)

Loans with individually evaluated allowance

Discounted cash flow

Default rates

Non-performing loans (4)

Relative value analysis

Credit risk factor

Mortgage servicing assets

Discount rate

Discounted cash flow

12 unchanged sentences

Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

(3) Consist of restructured loans.

(4) Consist of other non-performing loans, excluding restructured loans.

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

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Investment securities - held to maturity:

The investment securities - held to maturity consist of time deposits at Community Reinvestment Act qualified minority financial institutions, U.S.

The investment securities - held to maturity consist of U.S.

SBA securities, U.S.

1 unchanged sentence

government sponsored enterprise CMO.

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

SBA securities and U.S.

government sponsored enterprise MBS and CMO, the Corporation utilizes quoted prices in active markets for similar securities for its fair value measurement (Level 2).

FHLB – San Francisco stock:

The carrying amount reported for FHLB – San Francisco stock approximates fair value.

FHLB – San Francisco stock is carried at cost/par value and represents its fair value.

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

1 unchanged sentence

The discount rate is based upon observable inputs, including rates currently offered for deposits of similar remaining maturities.

The fair value of transaction accounts (checking, money market and savings accounts) are equal to the carrying amounts payable on demand or estimated using a discounted cash flow calculation and management estimates of current market conditions.

The fair value of transaction accounts (checking, money market and savings accounts) is equal to the carrying amounts payable on demand.

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

3 unchanged sentences

The Corporation performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process.

While the Corporation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

different estimate of fair value at the reporting date.

For the fiscal year ended June 30, 2024, there were no significant changes to the Corporation’s valuation techniques that had, or are expected to have, a material impact on its consolidated financial position or results of operations.

6 unchanged sentences

For contracts with customers within the scope of ASC 606, revenue is either earned at a point in time or revenue is earned over time.

Examples of revenue earned at a point in time are automated teller machine ("ATM") transaction fees, wire transfer fees, overdraft fees and interchange fees.

Revenue is primarily based on the number and type of transactions that are generally derived from transactional information accumulated by the Corporation’s systems and is recognized immediately as the transactions occur or upon providing the service to complete the customer's transaction.

11 unchanged sentences

Total non-interest income

(1) Not in scope of ASC 606.

(2) Includes BOLI of $ 186 thousand and $ 188 thousand and net gain on sale of loans of $ 124 thousand and net gain on sale of loans of $ 40 thousand for the fiscal years ended June 30, 2023 and 2022, respectively, which are not in scope of ASC 606.

(1) Not within the scope of ASC 606.

(2) Includes income on BOLI of $ 186 thousand and $ 186 thousand, net loss on sale of loans of $ 66 thousand and net gain on sale of loans of $ 124 thousand and net unrealized gain on other equity investments of $ 540 thousand and $ 0 for the fiscal years ended June 30, 2024 and 2023, respectively, which are not within the scope of ASC 606.

For the fiscal years ended June 30, 2024 and 2023, substantially all the Corporation’s revenues within the scope of ASC 606 were for performance obligations satisfied at a specified date.

Revenues recognized in scope of ASC 606:

Revenues recognized within the scope of ASC 606:

Deposit account fees:

2 unchanged sentences

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

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Card and processing fees:

1 unchanged sentence

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.

Interchange fees

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders' debit card.

13 unchanged sentences

Stockholders’ equity

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Condensed Statements of Operations

8 unchanged sentences

Equity in undistributed earnings of the Bank

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Consolidated Financial Statements

Condensed Statements of Cash Flows

4 unchanged sentences

Equity in undistributed earnings of the Bank

Increase in other assets

Increase (decrease) in other liabilities

Decrease (increase) in other assets

Increase in other liabilities

Net cash provided by operating activities

7 unchanged sentences

Subsequent Events

On July 27, 2023 , the Corporation announced that the Provident Board of Directors declared a quarterly cash dividend of $ 0.14 per share.

Shareholders of the Provident common stock at the close of business on August 17, 2023 were entitled to receive the cash dividend, payable on September 7, 2023 .

On July 25, 2024 , the Corporation announced that the Provident Financial Holdings Board of Directors declared a quarterly cash dividend of $ 0.14 per share.

Shareholders of Provident Financial Holdings common stock at the close of business on August 15, 2024 are entitled to receive the cash dividend, payable on September 5, 2024 .

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