PART 1 - FINANCIAL INFORMATION [ITEM 1 - Financial Statements](index=4&type=section&id=ITEM%201%20-%20Financial%20Statements) This section presents Provident Financial Holdings, Inc.'s unaudited interim condensed consolidated financial statements and notes for the quarter ended September 30, 2021 [Condensed Consolidated Statements of Financial Condition](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at September 30, 2021, and June 30, 2021 Condensed Consolidated Statements of Financial Condition (In Thousands) | (In Thousands, Except Share Information) | September 30, 2021 | June 30, 2021 | | :-------------------------------------- | :------------------ | :------------- | | **Assets** | | | | Cash and cash equivalents | $88,249 | $70,270 | | Investment securities - held to maturity, at cost | $205,821 | $223,306 | | Investment securities - available for sale, at fair value | $3,316 | $3,587 | | Loans held for investment, net | $859,035 | $850,960 | | Total assets | $1,192,281 | $1,183,596 | | **Liabilities** | | | | Non interest-bearing deposits | $120,883 | $123,179 | | Interest-bearing deposits | $835,859 | $814,794 | | Total deposits | $956,742 | $937,973 | | Borrowings | $90,000 | $100,983 | | Total liabilities | $1,064,046 | $1,056,316 | | **Stockholders' equity** | | | | Total stockholders' equity | $128,235 | $127,280 | | Total liabilities and stockholders' equity | $1,192,281 | $1,183,596 | - Total assets increased by **$8.7 million (1%)** to **$1.19 billion** at September 30, 2021, primarily driven by increases in cash and cash equivalents and loans held for investment, partially offset by a decrease in investment securities[10](index=10&type=chunk)[153](index=153&type=chunk) - Total deposits increased by **$18.7 million (2%)** to **$956.7 million**, mainly due to increases in transaction accounts, partly offset by a decrease in higher-cost time deposits[10](index=10&type=chunk)[159](index=159&type=chunk) - Total stockholders' equity increased by **$955,000 (1%)** to **$128.2 million**, primarily from net income, partly offset by cash dividends and stock repurchases[10](index=10&type=chunk)[161](index=161&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net income for the quarters ended September 30, 2021, and 2020 Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Information) | (In Thousands, Except Per Share Information) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :------------------------------------------- | :------------------------- | :------------------------- | | Total interest income | $8,746 | $9,519 | | Total interest expense | $858 | $1,353 | | Net interest income | $7,888 | $8,166 | | (Recovery) provision for loan losses | $(339) | $220 | | Net interest income, after (recovery) provision for loan losses | $8,227 | $7,946 | | Total non-interest income | $1,069 | $1,159 | | Total non-interest expense | $5,668 | $6,985 | | Income before income taxes | $3,628 | $2,120 | | Provision for income taxes | $961 | $635 | | Net income | $2,667 | $1,485 | | Basic earnings per share | $0.35 | $0.20 | | Diluted earnings per share | $0.35 | $0.20 | | Cash dividends per share | $0.14 | $0.14 | - Net income for Q1 fiscal 2022 increased by **$1.2 million (80%)** to **$2.7 million**, compared to $1.5 million in Q1 fiscal 2021[12](index=12&type=chunk)[163](index=163&type=chunk) - Diluted earnings per share rose to **$0.35** in Q1 fiscal 2022 from $0.20 in Q1 fiscal 2021, a **75% increase**[12](index=12&type=chunk)[164](index=164&type=chunk) - Net interest income decreased by **$278,000 (3%)** to **$7.9 million**, primarily due to a lower net interest margin, despite a higher average interest-earning asset balance[12](index=12&type=chunk)[165](index=165&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents net income and other comprehensive income components for the quarters ended September 30, 2021, and 2020 Condensed Consolidated Statements of Comprehensive Income (In Thousands) | (In Thousands) | For the Quarter Ended Sep 30, 2021 | For the Quarter Ended Sep 30, 2020 | | :------------- | :--------------------------------- | :--------------------------------- | | Net income | $2,667 | $1,485 | | Other comprehensive loss, before income tax benefit | $(9) | $(7) | | Income tax benefit | $(3) | $(2) | | Other comprehensive loss | $(6) | $(5) | | Total comprehensive income | $2,661 | $1,480 | - Total comprehensive income increased to **$2.66 million** for the quarter ended September 30, 2021, from $1.48 million in the prior year, reflecting the increase in net income[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in stockholders' equity, including net income, dividends, and stock repurchases, for the quarter ended September 30, 2021 Changes in Stockholders' Equity (In Thousands) | (In Thousands) | Balance at June 30, 2021 | Net Income | Other Comprehensive Loss | Purchase of Treasury Stock | Cash Dividends | Balance at Sep 30, 2021 | | :------------- | :----------------------- | :--------- | :----------------------- | :------------------------- | :------------- | :---------------------- | | Total Equity | $127,280 | $2,667 | $(6) | $(851) | $(1,056) | $128,235 | - Stockholders' equity increased by **$955,000** from June 30, 2021, to September 30, 2021, primarily due to net income of **$2.67 million**, partially offset by **$1.06 million** in cash dividends and **$851,000** in treasury stock purchases[16](index=16&type=chunk)[161](index=161&type=chunk) - Cash dividends of **$0.14 per share** were paid in both the quarter ended September 30, 2021, and September 30, 2020[16](index=16&type=chunk)[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities for the quarters ended September 30, 2021, and 2020 Condensed Consolidated Statements of Cash Flows (In Thousands) | (In Thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | | :------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $3,047 | $3,048 | | Net cash used for investing activities | $9,053 | $(58,215) | | Net cash provided by financing activities | $5,879 | $5,600 | | Net increase (decrease) in cash and cash equivalents | $17,979 | $(49,567) | | Cash and cash equivalents at end of year | $88,249 | $66,467 | - Net cash provided by investing activities significantly improved to **$9.05 million** in Q1 fiscal 2022 from a net use of $58.22 million in Q1 fiscal 2021, primarily due to a net decrease in loans held for investment and principal payments from investment securities[20](index=20&type=chunk) - Net cash provided by financing activities increased to **$5.88 million**, driven by a net increase in deposits, partially offset by repayments of borrowings and treasury stock purchases[20](index=20&type=chunk) - Cash and cash equivalents at the end of the period increased by **$17.98 million** to **$88.25 million**, a significant reversal from a $49.57 million decrease in the prior year[20](index=20&type=chunk) [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) These notes provide additional detail and context for the interim condensed consolidated financial statements [Note 1: Basis of Presentation](index=11&type=section&id=Note%201%3A%20Basis%20of%20Presentation) This note describes the basis for preparing the unaudited interim condensed consolidated financial statements - The unaudited interim condensed consolidated financial statements reflect all necessary adjustments for a fair statement of operations and should be read in conjunction with the Corporation's Annual Report on Form 10-K for the year ended June 30, 2021[22](index=22&type=chunk) [Note 2: Accounting Standard Updates ("ASU")](index=11&type=section&id=Note%202%3A%20Accounting%20Standard%20Updates%20(%22ASU%22)) This note addresses recent accounting standard updates and their impact on the financial statements - There have been no material accounting standard updates or changes in their adoption status since the Corporation's Annual Report on Form 10-K for the year ended June 30, 2021[23](index=23&type=chunk) [Note 3: Earnings Per Share](index=11&type=section&id=Note%203%3A%20Earnings%20Per%20Share) This note details the computation of basic and diluted earnings per share for the reporting periods Basic and Diluted EPS Computations (In Thousands, Except Earnings Per Share) | (In Thousands, Except Earnings Per Share) | For the Quarter Ended Sep 30, 2021 | For the Quarter Ended Sep 30, 2020 | | :---------------------------------------- | :--------------------------------- | :--------------------------------- | | Net income – numerator | $2,667 | $1,485 | | Weighted-average shares (basic) | 7,530 | 7,436 | | Adjusted weighted-average shares (diluted) | 7,575 | 7,457 | | Basic earnings per share | $0.35 | $0.20 | | Diluted earnings per share | $0.35 | $0.20 | - As of September 30, 2021, **116,000 shares** from outstanding stock options and **101,250 shares** from restricted stock awards were excluded from diluted EPS computation due to their anti-dilutive effect[25](index=25&type=chunk) [Note 4: Investment Securities](index=12&type=section&id=Note%204%3A%20Investment%20Securities) This note provides information on the Corporation's investment securities, including held-to-maturity and available-for-sale portfolios Investment Securities Summary (In Thousands) | (In Thousands) | September 30, 2021 | June 30, 2021 | | :------------- | :----------------- | :------------ | | Held to maturity (Amortized Cost) | $205,821 | $223,306 | | Available for sale (Fair Value) | $3,316 | $3,587 | | Total investment securities | $209,137 | $226,893 | - Total investment securities decreased by **$17.8 million (8%)** to **$209.1 million** at September 30, 2021, primarily due to scheduled and accelerated principal payments on mortgage-backed securities[31](index=31&type=chunk)[155](index=155&type=chunk) - The Corporation held investments with unrealized losses of **$1.1 million** at September 30, 2021, an increase from $810,000 at June 30, 2021, primarily due to changes in interest rates[32](index=32&type=chunk)[34](index=34&type=chunk) - No impairment losses were recorded as the Corporation did not intend to sell securities and expected to recover amortized cost prior to sale[35](index=35&type=chunk) [Note 5: Loans Held for Investment](index=16&type=section&id=Note%205%3A%20Loans%20Held%20for%20Investment) This note details the composition of loans held for investment, allowance for loan losses, and asset quality metrics Loans Held for Investment, Gross (In Thousands) | (In Thousands) | September 30, 2021 | June 30, 2021 | | :------------- | :----------------- | :------------ | | Single-family | $274,970 | $268,272 | | Multi-family | $489,550 | $484,408 | | Commercial real estate | $91,779 | $95,279 | | Construction | $2,574 | $3,040 | | Total loans held for investment, gross | $859,959 | $852,082 | - Loans held for investment, net, increased by **$8.0 million (1%)** to **$859.0 million** at September 30, 2021, primarily due to increases in single-family and multi-family loans[37](index=37&type=chunk)[156](index=156&type=chunk) Allowance for Loan Losses (In Thousands) | (Dollars in Thousands) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :--------------------- | :------------------------- | :------------------------- | | Allowance at beginning of period | $7,587 | $8,265 | | (Recovery) provision for loan losses | $(339) | $220 | | Net recoveries (charge-offs) | $165 | $5 | | Balance at end of period | $7,413 | $8,490 | | Allowance for loan losses as a percentage of gross loans held for investment | 0.86% | 0.95% | - The Corporation recorded a recovery from the allowance for loan losses of **$339,000** in Q1 fiscal 2022, compared to a provision of $220,000 in Q1 fiscal 2021, reflecting improved credit quality and non-performing loan payoffs[46](index=46&type=chunk)[180](index=180&type=chunk) - Non-performing loans, net of allowance, decreased by **23%** to **$6.6 million** at September 30, 2021, from $8.6 million at June 30, 2021[52](index=52&type=chunk)[54](index=54&type=chunk)[181](index=181&type=chunk)[191](index=191&type=chunk) - As of September 30, 2021, only one single-family forbearance loan remained with an outstanding balance of **$308,000**, representing **0.04% of total loans**, indicating a significant reduction in COVID-19 related payment relief[58](index=58&type=chunk)[150](index=150&type=chunk) [Note 6: Derivative and Other Financial Instruments with Off-Balance Sheet Risks](index=32&type=section&id=Note%206%3A%20Derivative%20and%20Other%20Financial%20Instruments%20with%20Off-Balance%20Sheet%20Risks) This note describes the Corporation's commitments to extend credit and other off-balance sheet financial instruments Commitments to Extend Credit (In Thousands) | Commitments (In Thousands) | September 30, 2021 | June 30, 2021 | | :------------------------- | :----------------- | :------------ | | Undisbursed loan funds – Construction loans | $3,763 | $4,479 | | Undisbursed lines of credit – Commercial business loans | $441 | $460 | | Undisbursed lines of credit – Consumer loans | $415 | $425 | | Commitments to extend credit on loans to be held for investment | $22,508 | $21,887 | | Total | $27,127 | $27,251 | - Total commitments to extend credit were **$27.1 million** at September 30, 2021, slightly down from $27.25 million at June 30, 2021[74](index=74&type=chunk) Recourse Liability (In Thousands) | Recourse Liability (In Thousands) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :-------------------------------- | :------------------------- | :------------------------- | | Balance, beginning of the period | $200 | $270 | | Provision for recourse liability | $0 | $100 | | Balance, end of the period | $200 | $370 | - The recourse liability for loans sold to FHLB – San Francisco and other investors remained at **$200,000** at September 30, 2021, with no new provision for recourse liability during the quarter[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 7: Fair Value of Financial Instruments](index=34&type=section&id=Note%207%3A%20Fair%20Value%20of%20Financial%20Instruments) This note explains the methodologies and disclosures for fair value measurements of financial instruments - The Corporation measures financial assets and liabilities at fair value on a recurring basis, including investment securities available for sale, loans held for investment at fair value, and interest-only strips[87](index=87&type=chunk) Fair Value Measurement at September 30, 2021 (In Thousands) | (In Thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------- | :------ | :------ | :------ | :---- | | Investment securities - available for sale | $0 | $3,166 | $150 | $3,316 | | Loans held for investment, at fair value | $0 | $0 | $1,577 | $1,577 | | Interest-only strips | $0 | $0 | $9 | $9 | | Total assets | $0 | $3,166 | $1,736 | $4,902 | - Non-performing loans and mortgage servicing assets are measured at fair value on a nonrecurring basis, with non-performing loans totaling **$6.62 million** and mortgage servicing assets at **$132,000** at September 30, 2021[87](index=87&type=chunk)[99](index=99&type=chunk) - Valuation techniques for Level 3 assets include market comparable pricing for CMOs, relative value analysis for loans held for investment, discounted cash flow for restructured non-performing loans and mortgage servicing assets, and relative value analysis for other non-performing loans[100](index=100&type=chunk) [Note 8: Reclassification Adjustment of Accumulated Other Comprehensive Income ("AOCI")](index=43&type=section&id=Note%208%3A%20Reclassification%20Adjustment%20of%20Accumulated%20Other%20Comprehensive%20Income%20(%22AOCI%22)) This note details changes in accumulated other comprehensive income and related reclassification adjustments Changes in AOCI (In Thousands, Net of Statutory Taxes) | (Dollars In Thousands, Net of Statutory Taxes) | For the Quarter Ended Sep 30, 2021 | | :--------------------------------------------- | :--------------------------------- | | Beginning balance at June 30, 2021 | $72 | | Other comprehensive loss before reclassifications | $(6) | | Ending balance at September 30, 2021 | $66 | - AOCI decreased from **$72,000** at June 30, 2021, to **$66,000** at September 30, 2021, primarily due to other comprehensive loss of $6,000[114](index=114&type=chunk) [Note 9: Revenue From Contracts With Customers](index=43&type=section&id=Note%209%3A%20Revenue%20From%20Contracts%20With%20Customers) This note disaggregates non-interest income from contracts with customers, excluding interest income - The largest portion of the Corporation's revenue is from interest income, which is outside the scope of ASC 606. All revenue within ASC 606 is recognized as non-interest income[115](index=115&type=chunk) Non-Interest Income Disaggregation (In Thousands) | Type of Services (In Thousands) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :------------------------------ | :------------------------- | :------------------------- | | Loan servicing and other fees | $186 | $405 | | Deposit account fees | $312 | $310 | | Card and processing fees | $405 | $364 | | Other | $166 | $80 | | Total non-interest income | $1,069 | $1,159 | - Total non-interest income decreased by **$90,000 (8%)** to **$1.07 million**, primarily due to a **54% decrease** in loan servicing and other fees, driven by lower loan prepayment fees[118](index=118&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) [Note 10: Leases](index=45&type=section&id=Note%2010%3A%20Leases) This note provides information on the Corporation's operating lease assets, liabilities, and related expenses - The Corporation accounts for leases under ASC 842, recording liabilities for future lease obligations and right-of-use assets for underlying leased assets[123](index=123&type=chunk) Operating Lease Information (In Thousands) | (In Thousands) | As of Sep 30, 2021 | As of Jun 30, 2021 | | :------------- | :----------------- | :----------------- | | Operating lease right of use assets | $1,904 | $2,117 | | Operating lease liabilities | $1,970 | $2,192 | | Premises and occupancy expenses from operating leases (Qtr Ended Sep 30, 2021) | $200 | $199 | | Equipment expenses from operating leases (Qtr Ended Sep 30, 2021) | $23 | $12 | - Total lease expenses for the quarter ended September 30, 2021, were **$223,000**, an increase from $211,000 in the prior year[126](index=126&type=chunk) - The weighted average remaining lease term is **3.6 years** with a weighted average discount rate of **2.01%** as of September 30, 2021[128](index=128&type=chunk) [Note 11: Stock Repurchases](index=48&type=section&id=Note%2011%3A%20Stock%20Repurchases) This note details the Corporation's common stock repurchase activities during the reporting period - During Q1 fiscal 2022, the Corporation repurchased **49,764 shares** of common stock at a weighted average cost of **$17.10 per share** under its April 2020 stock repurchase plan[130](index=130&type=chunk)[162](index=162&type=chunk) - As of September 30, 2021, **217,069 shares** remained available for purchase under the plan, which expires on April 27, 2022[130](index=130&type=chunk)[205](index=205&type=chunk) [Note 12: Subsequent Events](index=48&type=section&id=Note%2012%3A%20Subsequent%20Events) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On October 28, 2021, the Board of Directors declared a quarterly cash dividend of **$0.14 per share**, payable on December 9, 2021, to shareholders of record on November 18, 2021[131](index=131&type=chunk) [ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=ITEM%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Corporation's financial condition, operating results, and strategic initiatives [General](index=48&type=section&id=General) This section provides an overview of Provident Financial Holdings, Inc.'s operations and primary business activities - Provident Financial Holdings, Inc. operates through its wholly-owned subsidiary, Provident Savings Bank, F.S.B., a federally chartered stock savings bank headquartered in Riverside, California[132](index=132&type=chunk)[134](index=134&type=chunk) Key Financials at September 30, 2021 (In Millions) | Metric | Amount (Millions) | | :--------------- | :---------------- | | Total assets | $1.19 | | Total deposits | $956.7 | | Stockholders' equity | $128.2 | - The Bank's primary activities include attracting deposits from **13 banking locations** in Riverside and San Bernardino counties, California, and originating/purchasing various types of loans, primarily in Southern and Northern California[135](index=135&type=chunk) [Safe-Harbor Statement](index=50&type=section&id=Safe-Harbor%20Statement) This statement addresses forward-looking information and associated risks and uncertainties within the report - This section contains forward-looking statements subject to various risks and uncertainties, including the impact of the COVID-19 pandemic, credit risks, interest rate fluctuations, regulatory changes, and real estate market conditions[138](index=138&type=chunk)[140](index=140&type=chunk) [Critical Accounting Policies](index=52&type=section&id=Critical%20Accounting%20Policies) This section confirms no significant changes to the Corporation's critical accounting policies during the quarter - There have been no significant changes to the Corporation's critical accounting policies during the three months ended September 30, 2021, as previously disclosed in the 2021 Annual Report on Form 10-K[142](index=142&type=chunk) [Executive Summary and Operating Strategy](index=54&type=section&id=Executive%20Summary%20and%20Operating%20Strategy) This section outlines the Corporation's core business, strategic goals, and outlook for net interest income and margin - The Corporation's core business is community banking, focusing on deposits and investing in single-family, multi-family, and commercial real estate loans, with net interest income as the primary revenue source[143](index=143&type=chunk)[144](index=144&type=chunk) - The strategic goal for the next three years is to moderately increase total assets by growing various loan categories and to improve core revenue by decreasing time deposits and increasing lower-cost checking and savings accounts to enhance net interest margin[145](index=145&type=chunk) - Despite recent economic improvements, management anticipates continued compression in net interest income and net interest margin for the remainder of calendar 2021 and potentially longer[145](index=145&type=chunk) [COVID-19 Impact to the Corporation](index=54&type=section&id=COVID-19%20Impact%20to%20the%20Corporation) This section details the ongoing impact of the COVID-19 pandemic on the Corporation's operations and loan portfolio - As of September 30, 2021, all Bank branches are operating with normal hours, and most employees have returned to routine working environments[148](index=148&type=chunk) - Only one single-family forbearance loan, with an outstanding balance of **$308,000 (0.04% of total loans)**, remained under a COVID-19 related forbearance agreement, and there were no pending requests for payment relief[150](index=150&type=chunk) [Off-Balance Sheet Financing Arrangements](index=56&type=section&id=Off-Balance%20Sheet%20Financing%20Arrangements) This section discusses the Corporation's off-balance sheet activities, including commitments and derivative instruments - The Corporation engages in off-balance sheet activities, including commitments to extend credit and derivative financial instruments, which involve credit and interest-rate risk[152](index=152&type=chunk) - For detailed information on commitments and derivative financial instruments, refer to Note 6 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements[152](index=152&type=chunk) [Comparison of Financial Condition at September 30, 2021 and June 30, 2021](index=56&type=section&id=Comparison%20of%20Financial%20Condition%20at%20September%2030%2C%202021%20and%20June%2030%2C%202021) This section analyzes changes in the Corporation's assets, liabilities, and equity between September 30, 2021, and June 30, 2021 - Total assets increased by **$8.7 million (1%)** to **$1.19 billion**, driven by a **$17.9 million** increase in cash and cash equivalents and an **$8.0 million** increase in loans held for investment, partially offset by a **$17.8 million** decrease in investment securities[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - Loans held for investment increased by **$8.0 million (1%)** to **$859.0 million**, with **$60.9 million** in originations (primarily single-family and multi-family loans) and **$53.9 million** in principal payments during Q1 fiscal 2022[156](index=156&type=chunk) - Total deposits increased by **$18.7 million (2%)** to **$956.7 million**, with transaction accounts rising by **$23.8 million (3%)** and time deposits decreasing by **$4.9 million (3%)**, reflecting a strategic shift towards lower-cost deposits[159](index=159&type=chunk) - Total borrowings decreased by **$11.0 million (11%)** to **$90.0 million** due to maturities of long-term borrowings[160](index=160&type=chunk) [Comparison of Operating Results for the Quarter Ended September 30, 2021 and 2020](index=59&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Quarter%20Ended%20September%2030%2C%202021%20and%202020) This section compares the Corporation's financial performance for the quarters ended September 30, 2021, and 2020 Key Operating Results Comparison (Q1 FY2022 vs Q1 FY2021) | Metric | Q1 FY2022 (Sep 30, 2021) | Q1 FY2021 (Sep 30, 2020) | Change (YoY) | | :------------------------- | :----------------------- | :----------------------- | :----------- | | Net Income | $2.7 million | $1.5 million | +80% | | Diluted EPS | $0.35 | $0.20 | +75% | | Efficiency Ratio | 63% | 75% | -12 pp | | Return on Average Assets | 0.89% | 0.50% | +39 bps | | Return on Average Equity | 8.39% | 4.78% | +361 bps | | Net Interest Income | $7.9 million | $8.2 million | -3% | | (Recovery) Provision for Loan Losses | $(339) thousand | $220 thousand | Improvement | | Total Non-Interest Expense | $5.7 million | $7.0 million | -19% | | Salaries and Employee Benefits | $3.1 million | $4.4 million | -30% | - The efficiency ratio improved to **63%** from 75%, and return on average assets increased to **0.89%** from 0.50% year-over-year[164](index=164&type=chunk) - Net interest income decreased by **$278,000 (3%)** due to a **13 basis point reduction** in net interest margin to **2.71%**, as the decrease in average yield on interest-earning assets outpaced the decrease in average cost of interest-bearing liabilities[165](index=165&type=chunk) - Total non-interest expense decreased by **$1.3 million (19%)**, primarily due to a **$1.2 million credit** from the Employee Retention Tax Credit (ERTC) which reduced salaries and employee benefits expense[187](index=187&type=chunk)[188](index=188&type=chunk) - The effective income tax rate decreased to **26.5%** from 30.0%, attributable to the non-taxable treatment of the ERTC for state tax purposes[190](index=190&type=chunk) [Asset Quality](index=65&type=section&id=Asset%20Quality) This section reviews the Corporation's asset quality, including non-performing loans and the allowance for loan losses Non-Performing Assets (In Thousands) | (In Thousands) | At Sep 30, 2021 | At Jun 30, 2021 | | :------------- | :-------------- | :-------------- | | Total non-performing loans | $6,616 | $8,646 | | Real estate owned, net | $0 | $0 | | Total non-performing assets | $6,616 | $8,646 | | Non-performing loans as a percentage of loans held for investment, net of allowance for loan losses | 0.77% | 1.02% | | Non-performing assets as a percentage of total assets | 0.55% | 0.73% | - Non-performing loans, net of allowance and fair value adjustments, decreased by **23%** to **$6.6 million** at September 30, 2021, from $8.6 million at June 30, 2021[191](index=191&type=chunk) - Total restructured loans remained at **$7.9 million**, but the portion classified as non-performing decreased to **$5.1 million (65%)** from $7.0 million (89%) at June 30, 2021[194](index=194&type=chunk) - The allowance for loan losses was **$7.4 million** at September 30, 2021, representing **0.86%** of gross loans held for investment, deemed sufficient by management[183](index=183&type=chunk)[184](index=184&type=chunk) [Loan Volume Activities](index=70&type=section&id=Loan%20Volume%20Activities) This section details the Corporation's loan origination, purchase, and payment volumes for the reporting periods Loan Origination and Purchase Volume (In Thousands) | (In Thousands) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :------------- | :------------------------- | :------------------------- | | Loans originated for investment | $60,938 | $39,108 | | Loans purchased for investment | $0 | $8,938 | | Mortgage loan principal payments | $(53,859) | $(66,323) | | Net increase (decrease) in loans held for investment | $8,075 | $(17,843) | - Loans originated for investment increased to **$60.9 million** in Q1 fiscal 2022 from $39.1 million in Q1 fiscal 2021, primarily in single-family and multi-family mortgages[199](index=199&type=chunk) - The Corporation did not purchase any loans for investment in Q1 fiscal 2022, compared to $8.9 million in Q1 fiscal 2021[199](index=199&type=chunk) [Liquidity and Capital Resources](index=70&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Corporation's funding sources, liquidity position, and regulatory capital adequacy - Primary funding sources include deposits, loan payments, investment security maturities/sales, and FHLB – San Francisco advances[200](index=200&type=chunk) - Total cash and cash equivalents were **$88.2 million (7% of total assets)** at September 30, 2021, with **$305.8 million** in remaining FHLB borrowing facility and a **$189.8 million** discount window facility at the Federal Reserve Bank[204](index=204&type=chunk) Bank Capital Ratios at September 30, 2021 | Capital Ratio (Provident Savings Bank, F.S.B.) | Actual Ratio | Minimum for Capital Adequacy | Minimum to Be Well Capitalized | | :--------------------------------------------- | :----------- | :--------------------------- | :----------------------------- | | Tier 1 leverage capital | 9.81% | 4.00% | 5.00% | | CET1 capital | 18.90% | 7.00% | 6.50% | | Tier 1 capital | 18.90% | 8.50% | 8.00% | | Total capital | 20.12% | 10.50% | 10.00% | - The Bank exceeded all regulatory capital requirements and was categorized as **'well-capitalized'** at September 30, 2021[208](index=208&type=chunk) - The Bank paid a cash dividend of **$7.5 million** to the Corporation in Q1 fiscal 2022, while the Corporation paid **$1.1 million** in cash dividends to its shareholders[212](index=212&type=chunk) [Supplemental Information](index=73&type=section&id=Supplemental%20Information) This section provides additional financial metrics, including loans serviced for others and book value per share Supplemental Information (In Thousands) | Metric | At Sep 30, 2021 | At Jun 30, 2021 | At Sep 30, 2020 | | :------------------------- | :-------------- | :-------------- | :-------------- | | Loans serviced for others | $46,454 | $50,448 | $77,562 | | Book value per share | $17.12 | $16.88 | $16.75 | - Loans serviced for others decreased to **$46.45 million** at September 30, 2021, from $50.45 million at June 30, 2021[213](index=213&type=chunk) - Book value per share increased to **$17.12** at September 30, 2021, from $16.88 at June 30, 2021[213](index=213&type=chunk) [ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk](index=73&type=section&id=ITEM%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details the Corporation's strategies and analyses for managing market risk, particularly interest rate risk - The Corporation aims to reduce exposure to fluctuating interest rates by managing the repricing mismatch between interest-earning assets and interest-bearing liabilities, primarily by increasing the interest-rate sensitivity of assets through new loan originations with adjustable rates[214](index=214&type=chunk)[215](index=215&type=chunk) - The Corporation uses an internal interest rate risk model to analyze NPV sensitivity under various interest rate scenarios (+/- 100, +200, +300 basis points)[217](index=217&type=chunk) NPV Sensitivity to Interest Rate Changes (September 30, 2021) | Basis Points Change in Rates | NPV Change (In Thousands) | NPV as Percentage of Portfolio Value Assets | | :--------------------------- | :------------------------ | :------------------------------------------ | | +300 bp | $107,227 | 19.44% | | +200 bp | $79,535 | 17.68% | | +100 bp | $45,118 | 15.41% | | -100 bp | $(23,627) | 10.55% | - At September 30, 2021, the Corporation was asset sensitive, projecting an increase in net interest income in a rising interest rate environment and a smaller increase in a falling rate environment over the subsequent 12-month period[234](index=234&type=chunk) [ITEM 4 - Controls and Procedures](index=81&type=section&id=ITEM%204%20-%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and reports on internal control over financial reporting - The Corporation's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2021[238](index=238&type=chunk) - No material changes occurred in the Corporation's internal control over financial reporting during the quarter ended September 30, 2021[239](index=239&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the Corporation is not a party to any material legal proceedings - The Corporation is not involved in any legal proceedings that are believed to have a material adverse effect on its financial condition, operations, or cash flows[242](index=242&type=chunk) [Item 1A. Risk Factors](index=83&type=section&id=Item%201A.%20Risk%20Factors) This section confirms no material changes to the risk factors previously disclosed in the annual report - No material changes in risk factors have occurred since the Corporation's Annual Report on Form 10-K for the year ended June 30, 2021[243](index=243&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Corporation's common stock repurchase activities during the quarter Equity Securities Purchases (Q1 FY2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan | Maximum Number of Shares that May Yet Be Purchased Under the Plan | | :--------------------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------- | :---------------------------------------------------------------- | | July 1, 2021 – July 31, 2021 | — | $— | — | 266,833 | | August 1, 2021 – August 31, 2021 | 25,674 | $17.17 | 25,674 | 241,159 | | September 1, 2021 – September 30, 2021 | 24,090 | $17.02 | 24,090 | 217,069 | | Total | 49,764 | $17.10 | 49,764 | 217,069 | - The Corporation repurchased **49,764 shares** of its common stock at a weighted average cost of **$17.10 per share** during the quarter ended September 30, 2021[245](index=245&type=chunk) - As of September 30, 2021, **217,069 shares** remained available for purchase under the April 2020 stock repurchase plan, which expires on April 27, 2022[245](index=245&type=chunk) [Item 3. Defaults Upon Senior Securities](index=83&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as not applicable, indicating no defaults upon senior securities during the reporting period - This item is not applicable for the reporting period[247](index=247&type=chunk) [Item 4. Mine Safety Disclosures](index=83&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as not applicable, indicating no mine safety disclosures are required for the Corporation - This item is not applicable for the reporting period[248](index=248&type=chunk) [Item 5. Other Information](index=83&type=section&id=Item%205.%20Other%20Information) This item is marked as not applicable, indicating no other material information to disclose that is not covered elsewhere in the report - This item is not applicable for the reporting period[249](index=249&type=chunk) [Item 6. Exhibits](index=85&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications, and XBRL-formatted financial statements - The exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Form of Certificate of Common Stock, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and XBRL-formatted financial statements[252](index=252&type=chunk)

Provident Financial Holdings, Inc. (NASDAQ:PROV) Q1 2022 Earnings Conference Call October 27, 2021 12:00 PM ET Company Participants Craig Blunden - Chairman & CEO Donavon Ternes - President, Chief Operating & Chief Financial Officer Conference Call Participants Nick Cucharale - Piper Sandler Ben Gerlinger - Hovde Group Tim Coffey - Janney Rob Cook - PRV Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are design ...

PART I [Business](index=4&type=section&id=Item%201.%20Business) Provident Financial Holdings, Inc. operates as a Southern California community bank with **$1.18 billion** in assets as of June 30, 2021, focusing on deposits and real estate loans while navigating regulatory oversight and COVID-19 impacts Consolidated Financial Highlights as of June 30, 2021 | Metric | Amount (Millions) | | :--- | :--- | | Total Assets | $1,180 | | Total Deposits | $938.0 | | Stockholders' Equity | $127.3 | - The company's primary business activities consist of community banking, investment services, and trustee services for real estate transactions, with revenues derived principally from interest on its loan and investment portfolios[13](index=13&type=chunk)[14](index=14&type=chunk) - The COVID-19 pandemic has significantly affected the company's communities, customers, and operations, leading to operational changes and uncertainties regarding its ultimate adverse impact[16](index=16&type=chunk) [Subsequent Events](index=6&type=section&id=Subsequent%20Events) Details events occurring after the reporting period, including a declared cash dividend - On July 22, 2021, the Board of Directors declared a cash dividend of **$0.14 per share**, which was paid on September 2, 2021[18](index=18&type=chunk) [Market Area](index=6&type=section&id=Market%20Area) The Bank operates **13 full-service offices** primarily in the Inland Empire, where it is the largest independent community bank - The Bank operates **13 full-service banking offices**, primarily in Riverside and San Bernardino counties (the "Inland Empire"), and is the largest independent community bank headquartered in Riverside County[19](index=19&type=chunk) - In June 2021, the unemployment rate in the Inland Empire was **7.9%**, higher than the national average of **5.9%** but significantly lower than the **13.3%** rate in June 2020. The median home price in the Inland Empire was **$525,000**, up **28%** from June 2020[20](index=20&type=chunk)[21](index=21&type=chunk) [Lending Activities](index=8&type=section&id=Lending%20Activities) The Bank's **$851.0 million** loan portfolio, primarily multi-family and single-family mortgages, is concentrated in California with a high proportion of adjustable-rate loans - Net loans held for investment were **$851.0 million** at June 30, 2021, a decrease from **$902.8 million** at June 30, 2020. The portfolio is primarily composed of multi-family (**56.9%**) and single-family (**31.5%**) mortgage loans[27](index=27&type=chunk)[29](index=29&type=chunk)[36](index=36&type=chunk)[47](index=47&type=chunk) Composition of Loans Held for Investment (Gross) | Loan Type | Amount at June 30, 2021 ($ thousands) | % of Total | Amount at June 30, 2020 ($ thousands) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Single family | $268,272 | 31.48% | $298,810 | 33.04% | | Multi family | $484,408 | 56.85% | $491,903 | 54.38% | | Commercial real estate | $95,279 | 11.18% | $105,235 | 11.64% | | Construction | $3,040 | 0.36% | $7,801 | 0.86% | | Other mortgage loans | $139 | 0.02% | $143 | 0.02% | | Commercial business loans | $849 | 0.10% | $480 | 0.05% | | Consumer loans | $95 | 0.01% | $94 | 0.01% | | **Total** | **$852,082** | **100.00%** | **$904,466** | **100.00%** | - At June 30, 2021, **96%** of loans held for investment due after one year had floating or adjustable interest rates, which helps mitigate interest rate risk[32](index=32&type=chunk) - The Bank's real estate secured loans are geographically concentrated in California, with **53%** in Southern California (excluding the Inland Empire), **27%** in other parts of California, and **20%** in the Inland Empire as of June 30, 2021[34](index=34&type=chunk) Loan Originations, Purchases, and Repayments (Fiscal Year) | Activity | 2021 ($ thousands) | 2020 ($ thousands) | | :--- | :--- | :--- | | Total loans originated for investment | 214,954 | 106,044 | | Total loans purchased for investment | 16,909 | 142,077 | | Loan principal repayments | (281,477) | (228,250) | [Loan Servicing](index=23&type=section&id=Loan%20Servicing) The Bank's loan servicing portfolio for others significantly decreased, leading to an impairment reserve on servicing assets - The Bank's loan servicing portfolio for others decreased by **42%** to **$50.4 million** at June 30, 2021, from **$86.5 million** at June 30, 2020, primarily due to loan prepayments[73](index=73&type=chunk) - Servicing assets had a carrying value of **$384,000** and a fair value of **$208,000** at June 30, 2021, with a required impairment reserve of **$176,000**[76](index=76&type=chunk) [Delinquencies and Classified Assets](index=25&type=section&id=Delinquencies%20and%20Classified%20Assets) Non-performing assets increased, primarily due to COVID-19 related loan forbearance, while total classified assets decreased Non-Performing Assets Summary | Metric | June 30, 2021 ($ million) | June 30, 2020 ($ million) | | :--- | :--- | :--- | | Total Non-Performing Assets | $8.6 | $4.9 | | As a % of Total Assets | 0.73% | 0.42% | | Total Non-Performing Loans | $8.6 | $4.9 | | As a % of Net Loans | 1.02% | 0.55% | - The outstanding balance of troubled debt restructurings (TDRs) increased to **$7.9 million** (**23 loans**) at June 30, 2021, from **$2.6 million** (**8 loans**) at June 30, 2020. The increase was primarily due to **19 COVID-19 related forbearance loans** being downgraded when their deferrals were extended beyond six months[85](index=85&type=chunk)[86](index=86&type=chunk)[369](index=369&type=chunk) - Total classified assets, including special mention loans, decreased by **26%** to **$10.4 million** at June 30, 2021, from **$14.1 million** at June 30, 2020[91](index=91&type=chunk) Allowance for Loan Losses Activity (Fiscal Year) | Metric | 2021 ($ thousands) | 2020 ($ thousands) | | :--- | :--- | :--- | | Allowance at beginning of period | $8,265 | $7,076 | | (Recovery) provision for loan losses | ($708) | $1,119 | | Net recoveries (charge-offs) | $30 | $70 | | **Allowance at end of period** | **$7,587** | **$8,265** | | **Allowance as a % of gross loans** | **0.88%** | **0.91%** | [Investment Securities Activities](index=35&type=section&id=Investment%20Securities%20Activities) The investment securities portfolio significantly increased to **$226.9 million**, primarily due to mortgage-backed securities purchases, with most held to maturity - The investment securities portfolio increased to **$226.9 million** at June 30, 2021, from **$123.3 million** at June 30, 2020, primarily due to the purchase of **$158.0 million** in mortgage-backed securities[108](index=108&type=chunk) Investment Securities Composition | Security Type | Amortized Cost at June 30, 2021 ($ thousands) | % of Total | Amortized Cost at June 30, 2020 ($ thousands) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Held to maturity | $223,306 | 98.4% | $118,627 | 96.3% | | Available for sale | $3,494 | 1.6% | $4,583 | 3.7% | | **Total** | **$226,800** | **100.0%** | **$123,210** | **100.0%** | [Deposit Activities and Other Sources of Funds](index=37&type=section&id=Deposit%20Activities%20and%20Other%20Sources%20of%20Funds) Total deposits grew with a strategic shift towards lower-cost transaction accounts, while FHLB borrowings decreased - Total deposits grew to **$938.0 million** at June 30, 2021. The deposit mix shifted towards lower-cost transaction accounts, which comprised **85%** of total deposits, up from **81%** in the prior year, while time deposits decreased to **15%** from **19%**[115](index=115&type=chunk)[350](index=350&type=chunk) Deposit Composition as of June 30, 2021 | Deposit Type | Balance ($ thousands) | % of Total | | :--- | :--- | :--- | | Non interest-bearing checking | $123,179 | 13.13% | | Interest-bearing checking | $327,388 | 34.90% | | Savings accounts | $307,299 | 32.76% | | Money market accounts | $39,670 | 4.23% | | Time deposits | $140,437 | 14.98% | | **Total Deposits** | **$937,973** | **100.00%** | - Borrowings from the FHLB – San Francisco decreased to **$101.0 million** at June 30, 2021, from **$141.0 million** a year prior. The Bank maintained significant additional borrowing capacity[119](index=119&type=chunk)[121](index=121&type=chunk) [Subsidiary Activities](index=42&type=section&id=Subsidiary%20Activities) The Bank operates three wholly-owned subsidiaries, with two currently inactive - The Bank has three wholly owned subsidiaries: Provident Financial Corp (PFC), which acts as a trustee and holds real estate; Profed Mortgage, Inc.; and First Service Corporation. The latter two are currently inactive[127](index=127&type=chunk) [Regulation](index=44&type=section&id=Regulation) The Corporation and Bank are extensively regulated by the OCC, FDIC, and Federal Reserve, with the Bank categorized as "well capitalized" - The Bank is primarily regulated by the Office of the Comptroller of the Currency (OCC) and the FDIC. The Corporation, as a savings and loan holding company, is regulated by the Federal Reserve Board (FRB)[132](index=132&type=chunk) - As of June 30, 2021, the Bank met the Qualified Thrift Lender (QTL) test, with **90.3%** of its portfolio assets in qualified thrift investments[149](index=149&type=chunk) - The Bank was categorized as "well capitalized" under the regulatory framework for prompt corrective action as of June 30, 2021, exceeding all minimum capital requirements[153](index=153&type=chunk)[156](index=156&type=chunk) [Taxation](index=58&type=section&id=Taxation) The Corporation and Bank are subject to federal and state income taxes, with a pre-1988 bad debt reserve that could be subject to recapture - The Corporation and Bank are subject to federal and state income taxes. The Tax Cuts and Jobs Act of 2017 reduced the corporate federal income tax rate to a flat **21%**[190](index=190&type=chunk) - As of June 30, 2021, the Bank had a pre-1988 bad debt reserve for tax purposes of approximately **$9.0 million**, which would be subject to recapture into taxable income if certain non-dividend distributions were made[191](index=191&type=chunk) [Employees and Human Capital](index=60&type=section&id=Employees%20and%20Human%20Capital) The Bank had **161 full-time equivalent employees** as of June 30, 2021, with a predominantly female workforce and long average tenure - As of June 30, 2021, the Bank had **161 full-time equivalent employees**. Approximately **75%** of the workforce was female, and the average tenure was **10.1 years**[198](index=198&type=chunk)[199](index=199&type=chunk) [Risk Factors](index=65&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse and significant risks, including macroeconomic, credit, market, regulatory, and operational challenges, particularly those stemming from its concentrated market and the ongoing COVID-19 pandemic - The COVID-19 pandemic has adversely impacted business operations and is expected to negatively affect financial results, with the ultimate impact remaining highly uncertain[215](index=215&type=chunk) - The business is heavily dependent on the Southern California economy, and a regional downturn could increase loan delinquencies, reduce collateral values, and decrease demand for products and services[223](index=223&type=chunk)[224](index=224&type=chunk) - Multi-family and commercial real estate loans, which constitute **68.0%** of the loan portfolio, involve higher principal amounts and greater credit risk than single-family loans[231](index=231&type=chunk)[233](index=233&type=chunk) - Fluctuating interest rates pose a significant risk to profitability by impacting net interest income, the value of the securities portfolio, and borrowers' ability to repay adjustable-rate loans[248](index=248&type=chunk)[249](index=249&type=chunk) - The company faces cybersecurity risks, including potential breaches of its information systems, which could jeopardize confidential information, cause operational interruptions, and result in financial losses or reputational damage[261](index=261&type=chunk)[263](index=263&type=chunk) - The planned discontinuation of the LIBOR interest rate index, to which a majority of the company's loans are tied, creates uncertainty and may result in significant transition expenses and potential disputes with customers[273](index=273&type=chunk)[274](index=274&type=chunk) [Unresolved Staff Comments](index=89&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[289](index=289&type=chunk) [Properties](index=89&type=section&id=Item%202.%20Properties) The Bank operates **13 retail offices** (six owned, seven leased) primarily in Riverside County, with property and equipment valued at **$7.3 million** net book value - The Bank operates **13 retail banking offices**, with **12** in Riverside County and **one** in San Bernardino County. **Six** of these properties are owned, and **seven** are leased[290](index=290&type=chunk) [Legal Proceedings](index=89&type=section&id=Item%203.%20Legal%20Proceedings) The Corporation is not a party to any pending legal proceedings expected to have a material adverse effect on its financial condition or operations - The Corporation is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, operations or cash flows[291](index=291&type=chunk) [Mine Safety Disclosures](index=89&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Corporation - Not applicable[292](index=292&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=89&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The Corporation's common stock trades on NASDAQ under PROV, with a policy of quarterly cash dividends and recent share repurchases - The Corporation's common stock trades on the NASDAQ Global Select Market under the symbol **PROV**. As of June 30, 2021, there were **7,436,315 shares outstanding** held by **436 shareholders of record**[294](index=294&type=chunk) - The Board of Directors has declared quarterly cash dividends consecutively since September 2002. A dividend of **$0.14 per share** was declared on July 22, 2021[295](index=295&type=chunk)[297](index=297&type=chunk) Common Stock Purchases - Q4 FY2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2021 | 5,581 | $16.23 | | May 2021 | 35,254 | $16.47 | | June 2021 | 40,993 | $17.48 | | **Total Q4** | **81,828** | **$16.96** | - As of June 30, 2021, **266,833 shares** remained available for future purchases under the April 2020 stock repurchase plan[298](index=298&type=chunk) [Selected Financial Data](index=92&type=section&id=Item%206.%20Selected%20Financial%20Data) This section incorporates the "Financial Highlights" from the Corporation's Annual Report to Shareholders by reference [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=93&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal year 2021 net income decreased to **$7.6 million** due to lower net interest income, offset by a loan loss recovery and reduced non-interest expense, with assets growing to **$1.18 billion** and deposits shifting to lower-cost accounts [Comparison of Financial Condition at June 30, 2021 and 2020](index=104&type=section&id=Comparison%20of%20Financial%20Condition%20at%20June%2030%2C%202021%20and%202020) Total assets increased to **$1.18 billion** due to higher investment securities, offset by decreased loans and cash, while deposits grew with a shift to lower-cost funding - Total assets increased by **$6.8 million** (**1%**) to **$1.18 billion**, primarily due to a **$103.6 million** (**84%**) increase in investment securities, offset by a **$51.8 million** (**6%**) decrease in loans held for investment and a **$45.7 million** (**39%**) decrease in cash[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk) - Total deposits increased by **$45.0 million** (**5%**) to **$938.0 million**, with transaction accounts growing by **10%** while time deposits decreased by **17%**, reflecting a strategic shift to lower-cost funding[350](index=350&type=chunk) - Borrowings decreased by **$40.0 million** (**28%**) to **$101.0 million** due to scheduled maturities and prepayments of FHLB advances[351](index=351&type=chunk) [Comparison of Operating Results for the Years Ended June 30, 2021 and 2020](index=106&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Years%20Ended%20June%2030%2C%202021%20and%202020) Net income slightly decreased due to lower net interest income, largely offset by a loan loss recovery and reduced non-interest expenses, including an ERTC credit Key Operating Results (Fiscal Year) | Metric | 2021 (Millions) | 2020 (Millions) | | :--- | :--- | :--- | | Net Income | $7.6 | $7.7 | | Diluted EPS | $1.00 | $1.01 | | Return on Average Assets | 0.64% | 0.69% | | Return on Average Stockholders' Equity | 6.05% | 6.26% | - Net interest income decreased by **$5.8 million** (**16%**) to **$30.6 million**, as the net interest margin fell **70 basis points** to **2.66%** due to a sharp decline in the average yield on interest-earning assets[355](index=355&type=chunk) - The company recorded a **$708,000 recovery** from the allowance for loan losses in fiscal 2021, compared to a **$1.1 million provision** in fiscal 2020. The recovery was driven by an improved economic outlook and a decrease in the loan portfolio[366](index=366&type=chunk) - Non-interest expense decreased by **$3.2 million** (**11%**) to **$25.7 million**, primarily due to a **$3.7 million** decrease in salaries and benefits, which included a **$2.4 million credit** from the Employee Retention Tax Credit (ERTC)[377](index=377&type=chunk)[378](index=378&type=chunk)[474](index=474&type=chunk) [Average Balances, Interest and Average Yields/Costs](index=113&type=section&id=Average%20Balances%2C%20Interest%20and%20Average%20Yields%2FCosts) The net interest margin compressed due to a significant decline in the average yield on interest-earning assets Net Interest Margin Analysis (Fiscal Year) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Average Yield on Interest-Earning Assets | 3.06% | 3.92% | | Average Cost of Interest-Bearing Liabilities | 0.44% | 0.62% | | **Net Interest Spread** | **2.62%** | **3.30%** | | **Net Interest Margin** | **2.66%** | **3.36%** | [Liquidity and Capital Resources](index=117&type=section&id=Liquidity%20and%20Capital%20Resources) The Bank maintains strong liquidity through deposits, loan repayments, and FHLB advances, exceeding all minimum regulatory capital requirements - Primary sources of funds are deposits, loan repayments, and FHLB advances. At June 30, 2021, cash and cash equivalents were **$70.3 million**[391](index=391&type=chunk)[394](index=394&type=chunk) - The Bank maintained significant borrowing capacity, with **$296.8 million** available from the FHLB-San Francisco and a **$206.1 million** discount window facility at the Federal Reserve Bank[394](index=394&type=chunk) Bank Regulatory Capital Ratios as of June 30, 2021 | Ratio | Actual | Minimum to be Well Capitalized | | :--- | :--- | :--- | | Tier 1 Leverage Capital | 10.19% | 5.00% | | CET1 Capital | 18.58% | 6.50% | | Tier 1 Capital | 18.58% | 8.00% | | Total Capital | 19.76% | 10.00% | [Quantitative and Qualitative Disclosures about Market Risk](index=119&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Corporation manages interest rate risk, showing asset sensitivity where a **+100 basis point** rate shock is estimated to increase Net Portfolio Value by **$42.5 million** and Net Interest Income by **0.23%** Net Portfolio Value (NPV) Sensitivity Analysis as of June 30, 2021 | Rate Change (Basis Points) | Change in NPV ($ thousands) | NPV as % of Portfolio Value Assets | | :--- | :--- | :--- | | +300 bp | $102,842 | 19.50% | | +200 bp | $75,230 | 17.72% | | +100 bp | $42,534 | 15.53% | | Base Case | $0 | 12.54% | | -100 bp | ($17,691) | 11.25% | Net Interest Income (NII) Sensitivity Analysis (Next 12 Months) | Rate Change (Basis Points) | Change in NII (as of June 30, 2021) | | :--- | :--- | | +300 bp | +4.55% | | +200 bp | +2.06% | | +100 bp | +0.23% | | -100 bp | +0.22% | [Financial Statements and Supplementary Data](index=127&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates the Consolidated Financial Statements and Notes to Consolidated Financial Statements by reference [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=127&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[419](index=419&type=chunk) [Controls and Procedures](index=127&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the Corporation's disclosure controls and internal control over financial reporting were effective as of June 30, 2021 - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021[421](index=421&type=chunk) - Management concluded that as of June 30, 2021, the Corporation's internal control over financial reporting was effective based on the criteria established in the Internal Control-Integrated Framework (2013)[425](index=425&type=chunk) [Other Information](index=130&type=section&id=Item%209B.%20Other%20Information) This item is not applicable PART III [Directors, Executive Officers and Corporate Governance](index=130&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors is incorporated by reference from the Proxy Statement, and the company has a Code of Ethics and an audit committee with a financial expert - Information regarding the Board of Directors is incorporated by reference from the Proxy Statement[431](index=431&type=chunk) - The Corporation has adopted a Code of Ethics and has a designated audit committee financial expert, Joseph P. Barr[433](index=433&type=chunk)[434](index=434&type=chunk) [Executive Compensation](index=130&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's Proxy Statement [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=132&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the company's Proxy Statement Equity Compensation Plan Information as of June 30, 2021 | Plan Category | Securities to Be Issued Upon Exercise (a) | Weighted-Average Exercise Price (b) | Securities Available for Future Issuance (c) | | :--- | :--- | :--- | :--- | | **Equity compensation plans approved by security holders** | | | | | Stock Options | 417,000 | $16.22 | 57,500 | | Restricted Stock | 101,250 | N/A | 62,750 | | **Total** | **518,250** | **$16.22** | **120,250** | [Certain Relationships and Related Transactions, and Director Independence](index=134&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's Proxy Statement [Principal Accountant Fees and Services](index=134&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's Proxy Statement PART IV [Exhibits, Financial Statement Schedules](index=134&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K, including corporate governance and employment documents Consolidated Financial Statements [Notes to Consolidated Financial Statements](index=148&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the Corporation's accounting policies and financial data, covering loan loss allowance, investment securities, loan portfolio credit quality, deposits, borrowings, regulatory capital, and fair value measurements [Note 2: Investment Securities](index=160&type=section&id=Note%202%3A%20Investment%20Securities) This note provides a detailed breakdown of the investment securities portfolio by type, amortized cost, and estimated fair value Investment Securities by Type as of June 30, 2021 | Security Type | Amortized Cost ($ thousands) | Estimated Fair Value ($ thousands) | | :--- | :--- | :--- | | **Held to maturity** | | | | U.S. government sponsored enterprise MBS | $220,448 | $221,847 | | U.S. SBA securities | $1,858 | $1,874 | | Certificate of deposits | $1,000 | $1,000 | | **Available for sale** | | | | U.S. government agency MBS | $2,146 | $2,222 | | U.S. government sponsored enterprise MBS | $1,197 | $1,211 | | Private issue CMO | $151 | $154 | | **Total** | **$226,800** | **$228,308** | [Note 3: Loans Held for Investment](index=164&type=section&id=Note%203%3A%20Loans%20Held%20for%20Investment) This note details the loan portfolio by risk category and provides an update on COVID-19 related loan forbearance status Loan Portfolio by Risk Category as of June 30, 2021 | Risk Category | Amount ($ thousands) | % of Total | | :--- | :--- | :--- | | Pass | $840,908 | 98.69% | | Special Mention | $1,767 | 0.21% | | Substandard | $9,407 | 1.10% | | **Total** | **$852,082** | **100.00%** | COVID-19 Loan Forbearance Status as of June 30, 2021 | Loan Type | Forbearance Granted (Amount) ($ thousands) | Forbearance Remaining (Amount) ($ thousands) | | :--- | :--- | :--- | | Single-family loans | $23,551,000 | $897,000 | | Multi-family loans | $2,321,000 | $0 | | Commercial real estate loans | $2,000,000 | $945,000 | | **Total** | **$27,872,000** | **$1,842,000** | - As of June 30, 2021, **four loans** with a total balance of **$1.8 million** remained in forbearance under the CARES Act. The company ceased offering new forbearance relief on March 31, 2021[561](index=561&type=chunk)[564](index=564&type=chunk) [Note 7: Deposits](index=186&type=section&id=Note%207%3A%20Deposits) This note provides a breakdown of time deposit maturities as of June 30, 2021 Maturities of Time Deposits as of June 30, 2021 | Maturity Period | Amount ($ thousands) | | :--- | :--- | | One year or less | $76,705 | | Over one to two years | $37,687 | | Over two to five years | $25,646 | | Over five years | $399 | | **Total** | **$140,437** | [Note 12: Incentive Plans](index=198&type=section&id=Note%2012%3A%20Incentive%20Plans) This note details the activity for stock options and restricted stock under the company's incentive plans for fiscal year 2021 Stock Option Activity (Fiscal Year 2021) | Activity | Shares | Weighted-Average Exercise Price | | :--- | :--- | :--- | | Outstanding at June 30, 2020 | 554,500 | $14.07 | | Exercised | (132,000) | $7.43 | | Forfeited | (5,500) | $10.68 | | **Outstanding at June 30, 2021** | **417,000** | **$16.22** | Restricted Stock Activity (Fiscal Year 2021) | Activity | Shares | Weighted-Average Award Date Fair Value | | :--- | :--- | :--- | | Unvested at June 30, 2020 | 225,500 | $18.55 | | Vested | (112,750) | $18.53 | | Forfeited | (11,500) | $18.57 | | **Unvested at June 30, 2021** | **101,250** | **$18.57** | [Note 16: Fair Value of Financial Instruments](index=204&type=section&id=Note%2016%3A%20Fair%20Value%20of%20Financial%20Instruments) This note provides a breakdown of assets measured at fair value on both a recurring and nonrecurring basis, categorized by fair value hierarchy levels Assets Measured at Fair Value on a Recurring Basis (June 30, 2021) | Asset Type | Level 1 ($ thousands) | Level 2 ($ thousands) | Level 3 ($ thousands) | Total ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Investment securities - available for sale | $0 | $3,433 | $154 | $3,587 | | Loans held for investment, at fair value | $0 | $0 | $1,874 | $1,874 | | Interest-only strips | $0 | $0 | $10 | $10 | | **Total** | **$0** | **$3,433** | **$2,038** | **$5,471** | Assets Measured at Fair Value on a Nonrecurring Basis (June 30, 2021) | Asset Type | Level 2 ($ thousands) | Level 3 ($ thousands) | Total ($ thousands) | | :--- | :--- | :--- | :--- | | Non-performing loans | $899 | $7,747 | $8,646 | | Mortgage servicing assets | $0 | $208 | $208 | | **Total** | **$899** | **$7,955** | **$8,854** |

Financial Data and Key Metrics Changes - In Q4 2021, the company originated and purchased $93.3 million of loans held for investment, an increase from $61 million in the prior sequential quarter [5] - Nonperforming assets decreased to $8.6 million from $9.8 million on March 31, 2021 [7] - The allowance for loan losses to gross loans held for investment decreased to 88 basis points from 98 basis points [8] - The net interest margin compressed by 6 basis points to 2.54% due to a decrease in the average yield on total interest-bearing assets [8][9] Business Line Data and Key Metrics Changes - Loans held for investment increased by approximately 1% compared to March 31, 2021, with increases in single-family and multifamily loan categories [6] - The company recorded a $767,000 negative provision for loan losses in the June 2021 quarter [8] - The average cost of deposits decreased by 2 basis points to 15 basis points [9] Market Data and Key Metrics Changes - The purchase market remains active but is constrained by low inventory, with demand for single-family products being robust [15] - Refinance activity began to slow in the June quarter but has since grown as mortgage rates have decreased [14] Company Strategy and Development Direction - The company aims to leverage its balance sheet with prudent loan portfolio growth while redeploying excess liquidity into government-sponsored mortgage-backed securities [11][12] - Maintaining cash dividends is prioritized over stock buyback activity, although stock repurchase remains a valid capital management tool [12][22] Management's Comments on Operating Environment and Future Outlook - Management expressed that current health protocols may have a minor impact on loan originations, but overall market activity remains strong [24][25] - The company believes that the lending environment is normalizing back to pre-pandemic levels, despite challenges in the purchase market [15][24] Other Important Information - The company recorded a $2.4 million credit for the employee retention tax credit in the June 2021 quarter [10] - The FTE count decreased to 161 from 178 year-over-year, indicating a 10% decline [10] Q&A Session Summary Question: Has refinance activity slowed or is it still elevated? - Management noted that refinance activity began to slow in the June quarter but has since grown as mortgage rates have decreased [14] Question: Can you describe the overall lending environment? - Management indicated that the purchase market is active but constrained by low inventory, with demand for single-family products remaining strong [15] Question: Was the current tax rate partly attributable to the employee retention tax credit? - Management confirmed that the employee retention credit provided a benefit, affecting the tax rate for the quarter [16] Question: Can you expand on the expense base and potential for branch consolidation? - Management stated that branch consolidation is reviewed as leases become due, and they have reduced FTE count significantly [20][21] Question: Is there a threshold where stock repurchase would become a priority? - Management emphasized that supporting the cash dividend is the priority, but stock repurchase remains part of their capital management strategy [22] Question: What is the concern level about future loan originations given health warnings? - Management believes there may be a minor impact from health conditions, but overall market activity remains strong [24][25]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _________________ Commission File Number 000-28304 PROVIDENT FINANCIAL HOLDINGS, INC. (Exact name of registrant as specified in its cha ...

Financial Data and Key Metrics Changes - In Q3 2021, the company originated and purchased $61 million of loans held for investment, an increase from $29.6 million in the prior sequential quarter [6] - Loan principal payments and payoffs were $75.7 million, up from $59.6 million in the previous quarter [6] - Loans held for investment decreased by approximately 2% compared to December 31, 2020, with declines across various categories [6] - Non-performing assets decreased to $9.8 million from $10.3 million on December 31, 2020 [7] - The allowance for loan losses to gross loans held for investment decreased to 98 basis points from 99 basis points [9] - Net interest margin compressed by 6 basis points to 2.6% for the quarter ended March 31, 2021 [9][10] - Operating expenses declined to approximately $6.9 million, an 8% decrease compared to the same quarter last year [11] Business Line Data and Key Metrics Changes - The company experienced growth in single-family and multi-family pipelines, indicating potential for increased originations and purchases in the upcoming quarter [6] - The average cost of deposits decreased by 4 basis points to 17 basis points for the quarter [10] - The company recorded a $200,000 negative provision for loan losses in the March 2021 quarter [8] Market Data and Key Metrics Changes - Competition remains elevated for lower credit risk loan products, with multi-family and commercial real estate borrowers considering transactions due to improved economic conditions [6] - The California banking landscape has seen significant changes, with multiple deals announced recently, presenting potential opportunities for the company [25] Company Strategy and Development Direction - The company aims to leverage its balance sheet with prudent loan portfolio growth, although executing this strategy may be challenging in the current environment [11] - The company is redeploying excess liquidity into government-sponsored mortgage-backed securities [12] - Maintaining cash dividends is prioritized over stock buyback activities, although share repurchases have begun under the April 2020 program [12] Management's Comments on Operating Environment and Future Outlook - Management noted that current credit quality is holding up well, with no early-stage delinquency balances reported [7] - There is an expectation that payoff volume will decline, particularly in the single-family space, due to rising mortgage interest rates [30] - The company is optimistic about origination volume based on current pipelines and expects to meet or exceed previous quarter's performance [32] Other Important Information - The company has not adopted CECL, making its allowance methodology not directly comparable to CECL adopters [9] - The company is evaluating its branch structure to identify potential cost-saving opportunities [20][21] Q&A Session Summary Question: Expectations for changes in amortization due to rate changes - Management indicated that a decline in payoff volume could lead to a reduction in net deferred loan cost amortization, positively impacting net interest margin [16] Question: Considerations for stock buyback program - Management acknowledged that the stock is trading below book value, suggesting an opportunity for buybacks, but emphasized executing the existing plan [18] Question: Thoughts on expense base and cost reduction initiatives - Management is continuously looking to reduce operating costs and is evaluating branch structures for potential savings [20][21] Question: Broader market changes and opportunities - Management noted that consolidation in the California banking landscape could present opportunities for deposit and loan activity, although competition remains strong [26] Question: Outlook for loan growth and payoffs - Management expects a decline in payoff volume and is cautiously optimistic about loan growth based on current pipelines [30][32]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=ITEM%201%20-%20Financial%20Statements) Unaudited interim financial statements detail the company's financial condition, operating results, and cash flows for the period [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets decreased slightly to $1.17 billion, with a shift from cash and loans to investment securities Condensed Consolidated Statements of Financial Condition (In Thousands) | Account | December 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $74,001 | $116,034 | | Investment securities | $207,256 | $123,344 | | Loans held for investment, net | $855,086 | $902,796 | | **Total Assets** | **$1,170,727** | **$1,176,837** | | **Liabilities** | | | | Total deposits | $909,968 | $892,969 | | Borrowings | $116,015 | $141,047 | | **Total Liabilities** | **$1,045,743** | **$1,052,861** | | **Total Stockholders' Equity** | **$124,984** | **$123,976** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net income declined significantly for the quarter and six-month period, driven primarily by lower net interest income Key Operating Results (In Thousands, Except Per Share Data) | Metric | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $7,638 | $9,639 | $15,804 | $19,221 | | Provision for loan losses | $39 | $(22) | $259 | $(203) | | Non-interest Income | $974 | $1,344 | $2,133 | $2,414 | | Non-interest Expense | $6,916 | $7,554 | $13,901 | $14,792 | | **Net Income** | **$1,176** | **$2,398** | **$2,661** | **$4,960** | | **Diluted EPS** | **$0.16** | **$0.31** | **$0.36** | **$0.65** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) A net decrease in cash of $42.0 million resulted from significant use of cash for investing and financing activities Cash Flow Summary for Six Months Ended December 31 (In Thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,733 | $2,077 | | Net cash used for investing activities | $(38,577) | $(44,524) | | Net cash (used for) provided by financing activities | $(10,189) | $20,048 | | **Net decrease in cash and cash equivalents** | **$(42,033)** | **$(22,399)** | [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes reveal a mortgage-heavy loan portfolio, an increased allowance for loan losses, and the impact of COVID-19 - The loan portfolio is primarily composed of mortgage loans, with multi-family loans at **$488.4 million** and single-family loans at **$257.9 million** as of December 31, 2020[50](index=50&type=chunk) - The allowance for loan losses increased to **$8.54 million (0.99% of gross loans)** at Dec 31, 2020, from $8.27 million (0.91% of gross loans) at June 30, 2020, reflecting increased qualitative adjustments due to the COVID-19 pandemic's economic impact[56](index=56&type=chunk)[59](index=59&type=chunk)[240](index=240&type=chunk) - As of December 31, 2020, the Corporation had granted forbearance on 65 loans totaling **$26.7 million** related to COVID-19 hardship, with 8 loans totaling **$2.6 million** remaining in forbearance[96](index=96&type=chunk) - Restructured loans increased significantly to **$8.2 million** as of December 31, 2020, from $2.6 million at June 30, 2020, primarily due to extended COVID-19 related forbearance modifications[82](index=82&type=chunk)[83](index=83&type=chunk)[97](index=97&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=ITEM%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial results, highlighting decreased profitability due to margin compression and the ongoing impact of COVID-19 [Executive Summary and Operating Strategy](index=45&type=section&id=Executive%20Summary%20and%20Operating%20Strategy) The company outlines its community banking strategy focused on real estate lending and improving its deposit mix amid economic headwinds - The company's primary business is community banking, focusing on deposits and real estate lending (single-family, multi-family, commercial) in Southern California[168](index=168&type=chunk)[169](index=169&type=chunk) - The operating strategy is to moderately increase total assets by growing various loan categories and to improve the deposit mix by increasing lower-cost checking/savings accounts and decreasing higher-cost time deposits[170](index=170&type=chunk) - Management anticipates that the COVID-19 pandemic and the **150 basis point reduction** in the federal funds rate in March 2020 will negatively impact net interest income and margin for calendar 2021 and possibly longer[170](index=170&type=chunk) [COVID-19 Impact to the Corporation](index=46&type=section&id=COVID-19%20Impact%20to%20the%20Corporation) The company is actively managing the pandemic's impact through customer relief programs, with a small number of loans remaining in forbearance Loan Forbearance Status as of December 31, 2020 (Dollars in Thousands) | Loan Type | Forbearance Granted (Count) | Forbearance Granted (Amount) | Forbearance Remaining (Count) | Forbearance Remaining (Amount) | | :--- | :--- | :--- | :--- | :--- | | Single-family loans | 58 | $23,239 | 6 | $1,835 | | Multi-family loans | 5 | $2,346 | 2 | $763 | | Commercial real estate loans | 2 | $1,066 | 0 | $0 | | **Total** | **65** | **$26,651** | **8** | **$2,598** | - Of the loans that completed their initial forbearance period, 16 single-family loans totaling **$6.3 million** were extended and subsequently reclassified as restructured loans[182](index=182&type=chunk) - Potential future impacts from COVID-19 include higher provisions for loan losses, negative pressure on net interest margin from low interest rates, a decline in non-interest income, and increased non-interest expenses[186](index=186&type=chunk) [Comparison of Financial Condition at December 31, 2020 and June 30, 2020](index=48&type=section&id=Comparison%20of%20Financial%20Condition%20at%20December%2031%2C%202020%20and%20June%2030%2C%202020) The balance sheet remained stable as a decrease in cash and loans was offset by a significant increase in investment securities - Total assets decreased by **$6.1 million (1%)** to $1.17 billion[189](index=189&type=chunk) - Cash and cash equivalents decreased by **$42.0 million (36%)** to $74.0 million, used to fund investment security purchases and pay down borrowings[190](index=190&type=chunk) - Loans held for investment decreased by **$47.7 million (5%)** to $855.1 million, primarily due to a decline in single-family loans as repayments outpaced originations[192](index=192&type=chunk) - Investment securities increased by **$84.0 million (68%)** to $207.3 million, following purchases of $106.4 million[191](index=191&type=chunk) - Total deposits increased by **$17.0 million (2%)** to $910.0 million, as a $33.2 million increase in transaction accounts offset a $16.2 million decrease in time deposits[196](index=196&type=chunk) - Total borrowings decreased by **$25.0 million (18%)** to $116.0 million due to repayments[197](index=197&type=chunk) [Comparison of Operating Results for the Quarter and Six Months ended December 31, 2020 and 2019](index=50&type=section&id=Comparison%20of%20Operating%20Results) Quarterly and six-month net income declined significantly year-over-year, driven by lower net interest income and a weaker efficiency ratio Key Performance Metrics | Metric | Q2 FY2021 | Q2 FY2020 | 6M FY2021 | 6M FY2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income (in millions) | $1.2 | $2.4 | $2.7 | $5.0 | | Diluted EPS | $0.16 | $0.31 | $0.36 | $0.65 | | Return on Average Assets | 0.40% | 0.87% | 0.45% | 0.91% | | Return on Average Equity | 3.77% | 7.81% | 4.27% | 8.13% | | Efficiency Ratio | 80% | 69% | 78% | 68% | [Asset Quality](index=62&type=section&id=Asset%20Quality) Asset quality deteriorated as non-performing and restructured loans increased significantly from the previous period Non-Performing Assets (In Thousands) | Metric | Dec 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | | Total non-performing loans | $10,270 | $4,924 | | Real estate owned, net | $0 | $0 | | **Total non-performing assets** | **$10,270** | **$4,924** | | NPLs as a % of loans held for investment, net | 1.20% | 0.55% | | NPAs as a % of total assets | 0.88% | 0.42% | - Total restructured loans increased by **215%** to **$8.2 million** at Dec 31, 2020, from $2.6 million at June 30, 2020, with all restructured loans on non-accrual status[260](index=260&type=chunk) Classified Assets (In Thousands) | Classification | Dec 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | | Special mention loans | $4,667 | $8,600 | | Substandard loans | $10,270 | $5,469 | | **Total classified assets** | **$14,937** | **$14,069** | [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) The Corporation maintains adequate liquidity and strong capital ratios that remain well above all regulatory requirements - Primary sources of funds are deposits and loan payments, and as of Dec 31, 2020, the Corporation had **$74.0 million** in cash and cash equivalents[268](index=268&type=chunk)[272](index=272&type=chunk) - The Corporation has significant secondary liquidity sources, including a remaining FHLB borrowing facility of **$277.9 million** and a **$176.2 million** discount window facility at the Federal Reserve[272](index=272&type=chunk) Bank Regulatory Capital Ratios as of December 31, 2020 | Ratio | Actual | Minimum to Be Well Capitalized | | :--- | :--- | :--- | | Tier 1 leverage capital | 9.78% | 5.00% | | CET1 capital | 18.30% | 6.50% | | Tier 1 capital | 18.30% | 8.00% | | Total capital | 19.56% | 10.00% | - The Bank paid a cash dividend of **$5.0 million** to the holding company in the first six months of fiscal 2021, while the holding company paid **$2.1 million** in dividends to its shareholders[278](index=278&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=69&type=section&id=ITEM%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Corporation is asset-sensitive and manages interest rate risk through its loan origination and investment strategies - The Corporation's strategy to mitigate interest rate risk involves originating adjustable-rate loans and holding frequently repricing mortgage-backed securities[281](index=281&type=chunk) Net Portfolio Value (NPV) Sensitivity as of December 31, 2020 (in thousands) | Basis Points Change in Rates | NPV Change | NPV as % of Portfolio Value Assets | | :--- | :--- | :--- | | +300 bp | $111,580 | 19.77% | | +200 bp | $82,528 | 17.88% | | +100 bp | $48,233 | 15.57% | | 0 bp | $0 | 12.14% | | -100 bp | $(19,278) | 10.73% | Net Interest Income (NII) Sensitivity (Next 12 Months) | Basis Point Change in Rates | Change in NII (Dec 31, 2020) | Change in NII (June 30, 2020) | | :--- | :--- | :--- | | +300 bp | 9.42% | 15.11% | | +200 bp | 6.28% | 9.95% | | +100 bp | 3.40% | 5.25% | | -100 bp | (0.10)% | (0.05)% | - The Corporation is asset sensitive, meaning its net interest income is projected to increase in a rising interest rate environment and decrease slightly in a falling rate environment[297](index=297&type=chunk) [Controls and Procedures](index=73&type=section&id=ITEM%204%20-%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were **effective** as of December 31, 2020[299](index=299&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[300](index=300&type=chunk) [PART II - OTHER INFORMATION](index=73&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=73&type=section&id=Item%201.%20Legal%20Proceedings) No pending legal proceedings are expected to have a material adverse effect on the Corporation's financial condition - The Corporation is not a party to any pending legal proceedings that it believes would have a **material adverse effect** on its financial condition or operations[301](index=301&type=chunk) [Risk Factors](index=74&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the most recent Annual Report - **No material changes** in risk factors were reported since the last Annual Report on Form 10-K[302](index=302&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Corporation did not repurchase shares under its public plan but did acquire shares from employees for tax purposes - The Corporation did not purchase any shares under its April 2020 stock repurchase plan during the quarter[305](index=305&type=chunk) - As of December 31, 2020, **371,815 shares** were available for purchase under the plan, which expires on April 30, 2021[305](index=305&type=chunk) - The Corporation purchased **505 shares** from employees at an average price of $13.68 per share to satisfy their withholding tax obligations on vested restricted stock[304](index=304&type=chunk)[306](index=306&type=chunk)

Start Time: 12:00 January 1, 0000 12:29 PM ET Provident Financial Holdings, Inc. (NASDAQ:PROV) Q2 2021 Earnings Conference Call January 28, 2021, 12:00 PM ET Company Participants Craig Blunden - Chairman and CEO Donavon Ternes - President, COO and CFO Conference Call Participants Timothy Coffey - Janney Montgomery Scott Operator Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, there will be an oppor ...

Provident Financial Holdings, Inc. (NASDAQ:PROV) Q3 2020 Results Earnings Conference Call October 29, 2020 12:00 PM ET Company Participants Craig Blunden - Chairman and CEO Donavon Ternes - President, Chief Operating and CFO Conference Call Participants Tim Coffey - Janney Montgomery Scott Matthew Clark - Piper Sandler & Co. Operator And ladies and gentlemen, thank you for standing by. Welcome to the Provident Financial Holdings First Quarter Earnings Conference Call. At this time, all participants are in l ...

TM | --- | --- | --- | |-------|-------|-------| | | | | | | | | | D | | | September 30, 2020 PROVIDENT2 www.myprovident.com Safe Harbor Statement This presentation contains statements that the Company believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to the Company's financial condition, liquidity, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these ...