PROVIDENT FINANCIAL HOLDINGS INC

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

The primary investing activity of the Corporation is the origination and purchase of loans held for investment. During the first nine months of fiscal 2025 and 2024, the Corporation originated loans held for investment of $93.3 million and $56.9 million, respectively, with no loan purchases during either period. At March 31, 2025, the Corporation had loan origination commitments totaling $10.5 million, undisbursed lines of credit totaling $2.2 million and undisbursed loan funds totaling $53,000. The Corporation anticipates having sufficient funds available to meet its current loan funding commitments. During the first nine months of fiscal 2025 and 2024, total loan repayments were $91.4 million and $69.3 million, respectively.

The Corporation’s primary financing activity is gathering deposits and, when needed, borrowings, principally FHLB – San Francisco advances. During the first nine months of fiscal 2025, total deposits increased $13.0 million, or one percent, to $901.3 million, due to the addition of government deposits, partly offset by the declines in all other deposit account categories. Time deposits include brokered certificates of deposit totaling $129.8 million and $131.8 million at March 31, 2025 and June 30, 2024, respectively. At March 31, 2025, time deposits with a principal amount of $250,000 or less and

scheduled to mature in one year or less were $196.5 million and total time deposits with a principal amount of more than $250,000 and scheduled to mature in one year or less were $89.2 million. Historically, the Corporation has been able to retain most of its time deposits as they mature.

The Corporation must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. The Corporation maintains sufficient cash and cash equivalents to meet short-term liquidity needs. At March 31, 2025, total cash and cash equivalents were $50.9 million, or four percent of total assets. Depending on market conditions and the pricing of deposit products, the Bank may rely on FHLB – San Francisco advances for part of its liquidity needs. As of March 31, 2025, total borrowings were $215.6 million and the financing availability at the FHLB – San Francisco was limited to 40 percent of total assets. As a result, the remaining borrowing capacity available at the FHLB – San Francisco was $269.8 million and the remaining available collateral was $346.9 million at March 31, 2025. In addition, the Bank has secured a $151.0 million discount window facility at the FRB of San Francisco, collateralized by investment securities and single-family loans with a total balance of $259.1 million. As of March 31, 2025, the Bank also has a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under its discount window or correspondent bank facilities as of March 31, 2025.

The Bank continues to work with both the FHLB - San Francisco and FRB of San Francisco to ensure that borrowing capacity is continuously reviewed and updated in order to be accessed seamlessly should the need arise. This includes establishing accounts and pledging assets as needed in order to maximize borrowing capacity and liquidity. The total remaining available borrowing capacity across all sources totaled approximately $470.8 million at March 31, 2025.

Regulations require the Bank to maintain adequate liquidity to assure safe and sound operations. The Bank’s average liquidity ratio (defined as the ratio of average qualifying liquid assets to average deposits and borrowings) for the quarter ended March 31, 2025 was 14.3 percent, down from 16.6 percent for the quarter ended June 30, 2024.

On January 23, 2025, the Corporation’s Board of Directors announced a stock repurchase plan, authorizing the purchase of up to 334,773 shares of the Corporation’s outstanding common stock over a one-year period. In connection with this new program, the previously extended September 2023 stock repurchase program, which was extended for an additional year on September 26, 2024 and had 21,691 shares remaining available for repurchase as of January 23, 2025, was canceled effective January 24, 2025. The Corporation plans to purchase shares periodically in the open market or through privately negotiated transactions over a one-year period, subject to market conditions, the Corporation’s capital requirements, available cash, and other relevant factors. For the first nine months of fiscal 2025, the Corporation purchased 209,066 shares of its common stock under the stock repurchase plans with a weighted average cost of $15.06 per share. As of March 31, 2025, 293,132 shares or 88 percent of authorized common stock under the current plan remain available for purchase.

Provident Financial Holdings is a separate legal entity from the Bank and, on a stand-alone level, must provide for its own liquidity and pay its own operating expenses and cash dividends. Provident Financial Holdings’ primary sources of funds consist of capital raised through dividends or capital distributions from the Bank, although there are general regulatory restrictions on the ability of the Bank to pay dividends. We expect to continue our current practice of paying quarterly cash dividends on our common stock subject to our Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. Our current quarterly common stock dividend rate is $0.14 per share, as approved by our Board of Directors, which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank, and returning a portion of our cash to our shareholders. Assuming continued cash dividend payments during fiscal 2025 at $0.14 per share, our average total dividend paid each quarter would be approximately $932,000 based on the number of outstanding shares at March 31, 2025. At March 31, 2025, the Corporation (on an unconsolidated basis) had liquid assets of $5.6 million.

The Bank, as a federally-chartered, federally insured savings bank, is subject to the capital requirements established by the OCC. Under the OCC’s capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

At March 31, 2025, the Bank exceeded all regulatory capital requirements. The Bank was categorized as "well-capitalized" at March 31, 2025 under the regulations of the OCC. As a bank holding company registered with the Federal Reserve, Provident Financial Holdings, Inc. is also subject to the capital adequacy requirements of the Federal Reserve. For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis, and the Federal Reserve expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations.

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

In addition to the minimum CET1, Tier 1 and Total capital ratios, the Bank is required to maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum capital levels. Failure to maintain the required buffer could result in limitations on the Bank’s ability to pay dividends, repurchase shares, and pay discretionary bonuses, based on specified percentages of eligible retained income. At March 31, 2025, the Bank’s capital exceeded the conservation buffer.

If the Bank does not have the ability to pay dividends to the Corporation, the Corporation may be limited in its ability to pay dividends to its stockholders. The Bank may not declare or pay a cash dividend if the effect thereafter would cause its net worth to be reduced below the regulatory capital requirements imposed by federal regulation. On September 26, 2024, the Bank paid a $9.0 million cash dividend to the Holding Company.