PROVIDENT FINANCIAL HOLDINGS INC

**General.**Deposits and loan repayments are the major sources of the Bank’s funds for lending and other investment purposes. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows are influenced significantly by general interest rates and money market conditions. Borrowings through the FHLB – San

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

**Deposit Accounts.**Substantially all of the Bank’s depositors are residents of the State of California. Deposits are attracted from within the Bank’s market area by offering a broad selection of deposit instruments, including checking, savings, money market and time deposit accounts. Deposit account terms vary, differentiated by the minimum balance required, the time periods that the funds must remain on deposit and the interest rate, among other factors. In determining the terms of its deposit accounts, the Bank considers current interest rates, profitability to the Bank, interest rate risk characteristics, competition and its customers’ preferences and concerns. Generally, the Bank’s deposit rates are commensurate with the median rates of its competitors within a given market. The Bank may occasionally pay above-market interest rates to attract or retain deposits when less expensive sources of funds are not available. The Bank may also pay above-market interest rates in specific markets in order to increase the deposit base of a particular office or group of offices. The Bank reviews its deposit composition and pricing on a weekly basis.

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

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

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

Time Deposits by Rates. The following table sets forth the aggregate balance of time deposits categorized by interest rates at the dates indicated:

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

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

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

**Borrowings.**The FHLB – San Francisco functions as a central reserve bank providing credit for member financial institutions. As a member, the Bank is required to own capital stock in the FHLB – San Francisco and is authorized to apply for advances using such stock and certain of its mortgage loans and other assets (principally investment securities) as collateral, provided certain creditworthiness standards have been met. Advances are made pursuant to several different credit programs. Each credit program has its own interest rate, maturity, terms and conditions. Depending on the program, limitations on the amount of advances are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit. The Bank utilizes advances from the FHLB – San Francisco as an alternative to deposits to supplement its supply of lendable funds, to meet deposit withdrawal requirements and to help manage interest rate risk. The FHLB – San Francisco has served as the Bank’s primary borrowing source.

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

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

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

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

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

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

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