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Financial Services

Provident Financial Holdings Inc.

11/06/2026 | Press release | Distributed by Public on 11/06/2026 12:16

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Provident Financial Holdings, Inc., a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company of Provident Savings Bank, F.S.B. (the "Bank") upon the Bank's conversion from a federal mutual to a federal stock savings bank ("Conversion"). The Conversion was completed in June 1996. Provident Financial Holdings, Inc. is regulated by the Board of Governors of the Federal Reserve System ("Federal Reserve"). At September 30, 2026, Provident Financial Holdings, Inc., on a consolidated basis, had total assets of $1.21 billion, total deposits of

$897.7 million and total stockholders' equity of $125.4 million. Provident Financial Holdings, Inc. has not engaged in any significant activity other than holding the stock of the Bank. Accordingly, the information set forth in this report, including financial statements and related data, relates primarily to the Bank and its subsidiaries. As used in this report, the terms "we," "our," "us," and "Corporation" refer to Provident Financial Holdings, Inc. and its consolidated subsidiaries, unless the context indicates otherwise.

The Bank, founded in 1956, is a federally chartered stock savings bank headquartered in Riverside, California. The Bank is regulated by the Office of the Comptroller of the Currency ("OCC"), its primary federal regulator, and the Federal Deposit Insurance Corporation ("FDIC"), the insurer of its deposits. The Bank's deposits are federally insured up to applicable limits by the FDIC. The Bank has been a member of the FHLB System since 1956.

The Corporation operates in a single business segment through the Bank. The Bank's activities include attracting deposits, offering banking services and originating and purchasing single-family, multi-family, commercial real estate, construction and, to a lesser extent, other mortgage, commercial business and consumer loans. Deposits are collected primarily from 13 banking locations located in Riverside and San Bernardino counties in California. Loans are primarily originated and purchased in California. There are various risks inherent in the Corporation's business including, among others, the general business environment, interest rates, the California real estate market, the demand for loans, the prepayment of loans, the repurchase of loans previously sold to investors, the secondary market conditions to buy and sell loans, competitive conditions, legislative and regulatory changes, fraud and other risks.

The Corporation began paying quarterly cash dividends during the quarter ended September 30, 2002. On July 23, 2026, the Corporation's Board of Directors declared a quarterly cash dividend of $0.14 per share for shareholders of record as of the close of business on August 13, 2026. This dividend was paid on September 3, 2026. Future dividend declarations and payments will be subject to the Board of Directors' discretion, considering factors such as the Corporation's financial condition, operational results, tax implications, capital requirements, industry standards, legal restrictions, economic conditions, and other relevant factors, including regulatory limitations that affect the Bank's ability to pay dividends to the Corporation. Under Delaware law, dividends may be paid from surplus or, in the absence of surplus, from net profits of the current fiscal year and/or the preceding fiscal year in which the dividend is declared.

Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding the financial condition and results of operations of the Corporation. The information contained in this section should be read in conjunction with the Unaudited Interim Condensed Consolidated Financial Statements and accompanying selected Notes to Unaudited Interim Condensed Consolidated Financial Statements.

Safe-Harbor Statement

Certain matters discussed in this Form 10-Q may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to the Corporation's financial condition, liquidity, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements because they are subject to various risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Corporation may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Corporation.

There are a number of important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements and from historical performance. These factors include, but are not limited to:

●

adverse economic conditions in our local market areas or other markets where we have lending relationships;

●

changes in employment levels, labor shortages, persistent inflation, recessionary pressures, or slowing economic growth;

●

changes in interest rate levels and volatility, and the timing and pace of such changes, including actions by the Federal Reserve, which could adversely affect our revenues and expenses, the value of our assets and obligations, and the availability and cost of capital and liquidity;

●

the impact of inflation and related monetary and fiscal policy responses, and their effect on consumer and business behavior;

●

the effects of a Federal government shutdown, debt ceiling standoff, or other fiscal policy uncertainty;

●

credit risks of lending activities, including loan delinquencies, loan charge-offs, changes in our allowance for credit losses ("ACL"), and provision for credit losses;

●

increased competitive pressures, including repricing and competitors' pricing initiatives, and their impact on our market position and loan and deposit products;

●

quality and composition of our securities portfolio and the impact of adverse changes in the securities markets;

●

fluctuations in deposits;

●

secondary market conditions for loans and our ability to sell loans in the secondary market;

●

liquidity issues, including our ability to borrow funds or raise additional capital, if necessary;

●

the Corporation's ability to successfully implement key growth initiatives and strategic priorities;

●

the impact of bank failures or adverse developments at other banks and related negative publicity about the banking industry in general on investor and depositor sentiment;

●

results of examinations by regulatory authorities, including the possibility that a regulatory authority may, among other things, institute a formal or informal enforcement action against us or our bank subsidiary which could require us to increase our ACL, write down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings;

●

the ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity;

●

legislative or regulatory changes, including but not limited to changes in capital requirements, banking regulation, tax laws, or consumer protection laws;

●

use of estimates in determining the fair value of assets, which may prove inaccurate;

●

vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or cyberattacks;

●

geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, which could disrupt financial markets, global supply chains, commodity prices, or economic activity;

●

staffing fluctuations in response to changes in product demand or corporate implementation strategies;

●

our ability to pay dividends on our common stock;

●

environmental, social and governance matters;

●

effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, domestic political unrest and other external events;

●

availability and cost of appropriate insurance products in our market areas, which could affect borrowers' ability to maintain coverage and the value of collateral securing our loans; and

●

other factors described in our latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports filed with or furnished to the Securities and Exchange Commission ("SEC"), which are available on our website at www.myprovident.com and on the SEC's website at www.sec.gov.

Forward-looking statements are based upon management's beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur, and you should not put undue reliance on any forward-looking statements. These factors could cause our actual results for fiscal year 2027 and beyond to differ materially from those expressed or implied in any forward-looking statements by, or on behalf of, us and could negatively affect the Corporation's consolidated financial condition and consolidated results of operations as well as its stock price performance.

Critical Accounting Estimates

The discussion and analysis of the Corporation's financial condition and results of operations is based upon the Corporation's condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

The Corporation's critical accounting estimates are described in the Critical Accounting Estimates section of Management's Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 - Organization and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the fiscal year ended June 30, 2026 ("2026 Annual Form 10-K"). There have not been any material changes in the Corporation's critical accounting policies and estimates as compared to the disclosures contained in the Corporation's 2026 Annual Form 10-K.

Executive Summary and Operating Strategy

Provident Savings Bank, F.S.B., established in 1956, is a financial services company committed to serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank conducts its business operations as Provident Bank and through its subsidiary, Provident Financial Corp ("PFC"). The business activities of the Corporation, primarily through the Bank, consist of community banking and, to a lesser degree, investment services for customers and trustee services on behalf of the Bank.

Community banking operations primarily consist of accepting deposits from customers within the communities surrounding the Bank's full service offices and investing those funds in single-family, multi-family and commercial real estate loans. Also, to a lesser extent, the Bank may originate construction, commercial business, consumer and other mortgage loans. The primary source of income in community banking is net interest income, which is the difference between the interest income earned on loans and investment securities, and the interest expense paid on interest-bearing deposits and borrowed funds. Additionally, certain fees are collected from depositors, such as returned check fees, deposit account service charges, ATM fees, IRA/KEOGH fees, safe deposit box fees, wire service fees and overdraft protection fees, among others.

The Corporation plans to enhance its community banking business by moderately increasing its total assets, focusing on expanding single-family, multi-family and commercial real estate loans. Additionally, the Corporation aims to reduce the percentage of retail time deposits in its deposit base while increasing the proportion of lower-cost checking and savings accounts. To diversify its deposit funding base, the Corporation will consider utilizing brokered certificates of deposit and government deposits, subject to market conditions and funding needs. This strategy is designed to improve core revenue by achieving a higher net interest margin and, combined with the Corporation's growth, ultimately increase net interest income. While the Corporation's long-term strategy targets moderate growth, management acknowledges that this growth may be influenced by general economic conditions and other factors.

Investment services operations primarily consist of selling alternative investment products such as annuities and mutual funds to the Bank's depositors. Investment services and trustee services contribute a very small percentage to gross revenue.

PFC performs trustee services for the Bank's real estate secured loan transactions and has in the past held, and may in the future hold, real estate for investment.

There are a number of risks associated with the business activities of the Corporation, many of which are beyond the Corporation's control, including: changes in accounting principles, laws, regulation, interest rates and the economy, among others. The Corporation attempts to mitigate many of these risks through prudent banking practices, such as interest rate risk management, credit risk management, operational risk management, and liquidity risk management.

The California economic environment presents heightened risk to the Corporation, particularly with respect to real estate values and loan delinquencies. Because the majority of the Corporation's loans are secured by real estate located in California, significant declines in California property values could limit the Corporation's ability to recover on defaulted loans through the sale of the underlying collateral. Within commercial real estate, the office sector continues to face elevated risk, driven by higher vacancy rates, slower leasing activity, and downward pressure on rental rates in certain California markets. These trends may negatively affect collateral values and the repayment capacity of borrowers. In response, the Bank has evaluated its existing loans collateralized by office properties for outsized concentrations and has implemented tighter underwriting standards for such collateral. At September 30, 2026, our commercial real estate portfolio totaled $69.1 million, of which $33.5 million, or 48.5%, was secured by various types of office properties, representing 3.2% of the total loan portfolio. While current credit performance within the office segment remains satisfactory, management continues to monitor the portfolio closely in light of evolving market conditions.

The Corporation remains committed to prudent risk management practices to mitigate potential risks and support customers in navigating any financial challenges that may arise. For additional information, see "Asset Quality" below.

Commitments and Derivative Financial Instruments

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, in the form of originating loans or providing funds under existing lines of credit, loan sale agreements to third parties and option contracts. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying Condensed Consolidated Statements of Financial Condition. The Corporation's exposure to credit loss, in the event of non-performance by the counterparty to these financial instruments, is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in entering into financial instruments with off-balance sheet risk as it does for on-balance sheet instruments. For a discussion on commitments and derivative financial instruments, see Note 6 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.

Comparison of Financial Condition at September 30, 2026 and June 30, 2026

Total assets remained virtually unchanged at $1.21 billion at September 30, 2026 from June 30, 2026. The increases in cash and cash equivalents and loans held for investment were mostly offset by the decrease in investment securities.

Total cash and cash equivalents, primarily excess cash deposited with the FRB of San Francisco, increased $4.0 million, or eight percent, to $53.2 million at September 30, 2026 from $49.2 million at June 30, 2026. The increase was primarily attributable to changes in earning assets and funding sources, and reflects management's proactive strategy to manage liquidity in response to prevailing economic conditions.

Investment securities, comprised of held to maturity and available for sale, decreased $5.3 million, or six percent, to $85.2 million at September 30, 2026, from $90.5 million at June 30, 2026. The decrease was primarily the result of scheduled and accelerated principal payments on mortgage-backed and other securities during the first three months of fiscal 2027, with no purchases or sales of investment securities during the period. For further analysis on investment securities, see Note 4 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.

Loans held for investment increased $4.0 million to $1.04 billion at September 30, 2026 from $1.03 billion at June 30, 2026, due to increases in single-family and commercial real estate loans, partly offset by a decrease in multi-family loans. During the first three months of fiscal 2027, the Corporation originated $45.4 million of loans held for investment, consisting primarily of single-family and multi-family loans located throughout California, compared to $29.6 million originated during the first three months of fiscal 2026. The Corporation did not purchase any loans during the first three months of fiscal 2027 or 2026. Total loan principal payments during the first three months of fiscal 2027 were $40.8 million, up 18 percent from $34.5 million during the comparable period in fiscal 2026, reflecting elevated payoff and amortization activity. Single-family loans held for investment at September 30, 2026 and June 30, 2026 totaled $582.4 million and $565.9 million, representing approximately 56 percent and 55 percent of loans held for investment, respectively. Multi-family loans held for investment at September 30, 2026 and June 30, 2026 totaled $381.6 million and

$395.9 million, respectively, representing approximately 37 percent and 38 percent of loans held for investment, respectively. Commercial real estate loans held for investment at September 30, 2026 and June 30, 2026 totaled $69.1 million and $66.7 million, respectively, representing approximately seven percent and six percent of loans held for investment, respectively.

Loans pledged to the FRB San Francisco decreased $2.3 million, or one percent, to $298.1 million at September 30, 2026 from $300.4 million at June 30, 2026, while loans pledged to the FHLB-San Francisco increased $10.7 million, or two percent, to $652.0 million at September 30, 2026 from $641.3 million at June 30, 2026. Total loans pledged across both facilities represented approximately 92 percent of loans held for investment at both September 30, 2026 and June 30, 2026.

The tables below describe the geographic dispersion of gross real estate secured loans held for investment at September 30, 2026 and June 30, 2026, as a percentage of the total dollar amount of loans outstanding (dollars in thousands):

As of September 30, 2026:


		Inland				Southern				Other				Other
		Empire⁽¹⁾				California⁽²⁾				California				States				Total
Loan Category		Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent
Single-family		$	145,220	25	%	$	178,906	31	%	$	258,136	44	%	$	180	-	%	$	582,442	100	%
Multi-family			45,218	12	%		210,258	55	%		126,079	33	%		-	-	%		381,555	100	%
Commercial real estate			11,766	17	%		40,240	58	%		17,069	25	%		-	-	%		69,075	100	%
Total		$	202,204	20	%	$	429,404	41	%	$	401,284	39	%	$	180	-	%	$	1,033,072	100	%

(1)	Comprised of Riverside and San Bernardino counties.

(2)	Other than the Inland Empire.

As of June 30, 2026:


		Inland				Southern				Other				Other
		Empire⁽¹⁾				California⁽²⁾				California				States				Total
Loan Category		Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent
Single-family		$	143,066	25	%	$	175,434	31	%	$	247,246	44	%	$	184	-	%	$	565,930	100	%
Multi-family			47,591	12	%		222,311	56	%		125,980	32	%		-	-	%		395,882	100	%
Commercial real estate			11,859	18	%		36,837	55	%		18,035	27	%		-	-	%		66,731	100	%
Total		$	202,516	20	%	$	434,582	42	%	$	391,261	38	%	$	184	-	%	$	1,028,543	100	%

(1)	Comprised of Riverside and San Bernardino counties.

(2)	Other than the Inland Empire.

For further analysis on loans held for investment, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.

Total deposits decreased $12.7 million, or one percent, to $897.7 million at September 30, 2026 from $910.4 million at June 30, 2026, reflecting continued competitive pressures for deposits in the Bank's market area as customers sought higher-yielding alternatives.

Core deposit balances, consisting of noninterest-bearing and interest-bearing transaction accounts, decreased by $11.2 million, or two percent, to $545.9 million at September 30, 2026, from $557.1 million at June 30, 2026. Time deposits (including brokered certificates of deposit) decreased $1.4 million to $351.8 million from $353.2 million over the same period, attributable primarily to a decrease in brokered certificates of deposit as the Bank actively managed deposit pricing and funding costs. At September 30, 2026, total brokered certificates of deposit were $158.0 million, down $3.4 million, or two percent, from $161.4 million at June 30, 2026. Excluding brokered certificates of deposit, retail time deposits represented 22 percent of total deposits at September 30, 2026, compared to 21 percent at June 30, 2026.

Total uninsured deposits were approximately $188.6 million (of which, $60.3 million were collateralized) and $178.6 million (of which, $61.2 million were collateralized) at September 30, 2026 and June 30, 2026, respectively. Uninsured

deposits are based on estimated amounts of uninsured deposits as of the reported period. Such estimates are based on the same methodologies and assumptions used for regulatory reporting requirements.

Total borrowings increased $15.0 million, or 10 percent, to $172.0 million at September 30, 2026 from $157.0 million at June 30, 2026. The increase in borrowings was primarily due to the use of additional FHLB - San Francisco advances to offset deposit outflows and fund growth in loans held for investment. At September 30, 2026 and June 30, 2026, borrowings were primarily comprised of short-term and long-term FHLB - San Francisco advances used for liquidity and interest rate risk management purposes.

Total stockholders' equity declined $783,000, or one percent, to $125.4 million at September 30, 2026 from $126.2 million at June 30, 2026. The decrease was primarily due to $1.7 million of stock repurchases and $880,000 of cash dividends paid to shareholders, partly offset by net income of $1.6 million and $228,000 related to stock-based compensation and stock option exercises. The Corporation repurchased 86,431 shares of its common stock in the open market at a weighted average price of $18.30 per share during the first three months of fiscal 2027 pursuant to its publicly announced stock repurchase program. In addition, the Corporation purchased 5,852 shares of distributed restricted stock in settlement of employees' withholding tax obligations at $18.02 per share. For further analysis on stock repurchases, see Note 10 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.

Comparison of Operating Results for the Quarters ended September 30, 2026 and 2025

Net income for the first quarter of fiscal 2027 was $1.6 million, down $108,000 or six percent from $1.7 million in the same period of fiscal 2026. The decrease was attributable to a $777,000 provision for credit losses in contrast to a $626,000 recovery of credit losses in the same period last year, partly offset by an $840,000 increase in net interest income.

The efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, was 72.05 percent for the first quarter of fiscal 2027, compared to 78.35 percent in the same period last year. The improvement primarily reflected an increase in net interest income, which contributed to an 8.5 percent increase in net interest income and noninterest income combined, while noninterest expense decreased slightly.

Return on average assets was 0.52 percent in the first quarter of fiscal 2027, down three basis points from 0.55 percent in the same period last year. Return on average stockholders' equity was 4.93 percent in the first quarter of fiscal 2027, down from 5.17 percent in the same period last year. Diluted earnings per share for the first quarter of fiscal 2027 were $0.25, unchanged from the same period last year, as the decrease in net income was offset by fewer shares outstanding due to share repurchases.

Net Interest Income:

For the Quarters Ended September 30, 2026 and 2025. Net interest income increased $840,000, or nine percent, to $9.8 million for the first quarter of fiscal 2027 from $8.9 million in the same quarter last year. The increase was due to a higher net interest margin, partly offset by a lower average balance of interest-earning assets. The net interest margin during the first quarter of fiscal 2027 increased 32 basis points to 3.32 percent from 3.00 percent in the same quarter last year. The increase was primarily driven by an increase in the average yield of interest-earning assets and a decrease in the average cost of interest-bearing liabilities. The increase in yield of the interest-earning assets was largely attributable to increases in the average yields of loans receivable and FHLB - San Francisco stock and other equity investments. The higher yield on FHLB - San Francisco stock reflected a $307,000 special cash dividend received in July 2026. The special dividend contributed approximately 10 basis points to the net interest margin for the quarter. The decline in the cost of interest-bearing liabilities was largely attributable to a reduction in the average cost of borrowings, partly offset by an increase in the average cost of deposits. The average balance of interest-earning assets decreased $14.6 million, or one percent, to $1.18 billion in the first quarter of fiscal 2027 from $1.19 billion in the same quarter last year as the average balance of loans receivable and investment securities declined, while the average balance of interest-earning deposits increased.

Interest Income:

For the Quarters Ended September 30, 2026 and 2025. Total interest income was $14.7 million for the first quarter of fiscal 2027, up $581,000 or four percent from $14.1 million in the same period last year. The increase was primarily due to increased interest income on loans receivable and FHLB - San Francisco stock and other equity investments.

Interest income on loans receivable increased $318,000, or two percent, to $13.4 million in the first quarter of fiscal 2027 from $13.1 million in the same quarter last year. The increase was due to a higher average yield, partly offset by a lower average balance. The average yield on loans receivable increased 17 basis points to 5.22 percent in the first quarter of fiscal 2027 from an average yield of 5.05 percent in the same quarter last year. The increase in the average loan yield was primarily due to the effect of adjustable rate loan repricing, partly offset by an increase in net deferred loan cost amortization. For the last 12-month period, approximately $270.6 million of adjustable-rate loans repriced to a weighted average rate of 7.12 percent, up 99 basis points from 6.13 percent prior to repricing. Net deferred loan cost amortization in the first quarter of fiscal 2027 increased 26 percent to $429,000 from $340,000 in the same quarter last year, reflecting elevated loan payoff activity. The average balance of loans receivable decreased $8.1 million, or one percent, to $1.03 billion in the first quarter of fiscal 2027 from $1.04 billion in the same quarter last year. Total loans originated for investment in the first quarter of fiscal 2027 were $45.4 million, up 53 percent from $29.6 million in the same quarter last year; while loan principal payments received in the first quarter of fiscal 2027 were $40.8 million, up 18 percent from $34.5 million in the same quarter last year.

Interest income on investment securities decreased $74,000, or 17 percent, to $356,000 in the first quarter of fiscal 2027 from $430,000 for the same quarter last year. This decrease was attributable to a lower average balance, partly offset by a higher average yield. The average balance of investment securities decreased $20.3 million, or 19 percent, to $88.4 million in the first quarter of fiscal 2027 from $108.7 million in the same quarter last year. The decrease in the average balance of investment securities was primarily the result of scheduled and accelerated principal payments on mortgage-backed and other securities. The average yield on investment securities increased three basis points to 1.61 percent in the first quarter of fiscal 2027 from 1.58 percent for the same quarter last year. The increase in the average yield was primarily attributable to lower premium amortization ($46,000 compared to $74,000 in the same quarter last year) and, to a lesser extent, the upward repricing of adjustable-rate mortgage-backed securities.

The Bank received $480,000 of cash dividends from FHLB - San Francisco stock and other equity investments in the first quarter of fiscal 2027, up $269,000 or 127 percent from the $211,000 in the same quarter last year. The increase was due primarily to the $307,000 special cash dividend received from FHLB - San Francisco stock in July 2026.

Interest income on interest-earning deposits, primarily cash deposited at the FRB of San Francisco, was $442,000 in the first quarter of fiscal 2027, up $68,000 or 18 percent from $374,000 in the same quarter last year. The increase was due to a higher average balance, partly offset by a lower average yield. The average balance of interest-earning deposits increased $13.5 million, or 40 percent, to $47.0 million in the first quarter of fiscal 2027 from $33.5 million in the same quarter last year due to management's proactive strategy to manage liquidity. The average yield earned on interest-earning deposits in the first quarter of fiscal 2027 was 3.68 percent, down 69 basis points from 4.37 percent in the same quarter last year, due primarily to decreases in the interest rates paid on excess reserves as the Federal Reserve reduced the federal funds rate, prior to the increase in September 2026.

Interest Expense:

For the Quarters Ended September 30, 2026 and 2025. Total interest expense decreased $259,000 or five percent to $5.0 million in the first quarter of fiscal 2027 as compared to $5.2 million in the same quarter last year. The decrease was attributable to lower interest expense on borrowings, partly offset by higher interest expense on deposits.

Interest expense on deposits for the first quarter of fiscal 2027 was $3.4 million, a $364,000 or 12 percent increase compared to $3.0 million in the same quarter last year. The increase was attributable to a higher average balance and, to a lesser extent, a higher average cost of deposits. The average balance of deposits increased $20.9 million or two percent to $905.9 million in the first quarter of fiscal 2027 from $885.0 million in the same quarter last year, due to an increase in time deposits which was partly offset by decreases in transaction accounts. The average balance of time deposits (including brokered certificates of deposit) increased $42.7 million, or 14 percent, to $352.3 million in the first quarter of fiscal 2027

from $309.6 million in the same quarter last year, while the average balance of transaction accounts was $553.7 million in the first quarter of fiscal 2027, down $21.7 million, or four percent, from $575.4 million in the same quarter last year. The average cost of deposits was 1.47 percent for the first quarter of fiscal 2027, up 13 basis points from 1.34 percent in the same quarter last year, primarily due to a shift in the deposit mix toward higher-cost time deposits, partially offset by a decline in the average rate paid on time deposits to 3.39 percent from 3.54 percent in the same quarter last year. The decline in time deposit rates reflects the Bank's active management of deposit pricing in response to the declining rate environment, as maturing higher-rate certificates of deposit were renewed or replaced at lower prevailing market rates. The average balance of time deposits accounted for 39 percent of total average deposits in the first quarter of fiscal 2027, compared to 35 percent in the same quarter last year.

Interest expense on borrowings, consisting primarily of FHLB - San Francisco advances, for the first quarter of fiscal 2027 decreased $623,000, or 28 percent, to $1.6 million from $2.2 million in the same quarter last year. The decrease was primarily the result of a lower average balance and, to a lesser extent, a lower average cost of borrowings. The average balance of borrowings decreased $33.8 million or 18 percent to $159.1 million in the first quarter of fiscal 2027 from $192.9 million in the same quarter last year. The average cost of borrowings decreased 58 basis points to 4.01 percent in the first quarter of fiscal 2027 from 4.59 percent in the same quarter last year, reflecting the declining interest rate environment and the maturation and replacement of higher-rate advances at lower prevailing market rates.

The following table sets forth certain information for the periods regarding average balances of assets and liabilities as well as the total dollar amounts of interest income on average interest-earning assets and interest expense on average interest-bearing liabilities and average yields and costs thereof. Yields and costs for the periods indicated are derived by dividing income or expense, annualized, by the average daily balance of corresponding assets or liabilities, respectively, for the periods presented.

Average Balance Sheets


	Quarter Ended						Quarter Ended
	September 30, 2026						September 30, 2025
	Average				Yield/		Average				Yield/
(Dollars In Thousands)	Balance		Interest		Cost		Balance		Interest		Cost
Interest-earning assets:
Loans receivable, net⁽¹⁾	$	1,031,417	$	13,449	5.22	%	$	1,039,533	$	13,131	5.05	%
Investment securities		88,395		356	1.61	%		108,699		430	1.58	%
FHLB - San Francisco stock and other equity investments		10,668		480	18.00	%		10,286		211	8.21	%
Interest-earning deposits		46,971		442	3.68	%		33,512		374	4.37	%

Total interest-earning assets		1,177,451		14,727	5.00	%		1,192,030		14,146	4.75	%

Noninterest-earning assets		30,129						30,366

Total assets	$	1,207,580					$	1,222,396

Interest-bearing liabilities:
Checking and money market accounts⁽²⁾	$	333,943	$	58	0.07	%	$	345,303	$	51	0.06	%
Savings accounts		219,738		279	0.50	%		230,087		171	0.29	%
Time deposits		352,250		3,013	3.39	%		309,561		2,764	3.54	%

Total deposits⁽³⁾		905,931		3,350	1.47	%		884,951		2,986	1.34	%

Borrowings		159,054		1,607	4.01	%		192,853		2,230	4.59	%

Total interest-bearing liabilities		1,064,985		4,957	1.85	%		1,077,804		5,216	1.92	%

Noninterest-bearing liabilities		14,883						14,579

Total liabilities		1,079,868						1,092,383

Stockholders' equity		127,712						130,013
Total liabilities and stockholders' equity	$	1,207,580					$	1,222,396

Net interest income			$	9,770					$	8,930

Interest rate spread⁽⁴⁾					3.15	%					2.83	%
Net interest margin⁽⁵⁾					3.32	%					3.00	%
Ratio of average interest- earning assets to average interest-bearing liabilities					110.56	%					110.60	%
Return on average assets					0.52	%					0.55	%
Return on average equity					4.93	%					5.17	%

(1)	Includes the average balance of non-performing loans of $506 thousand and $1.4 million and net deferred loan cost amortization of $429 thousand and $340 thousand for the quarters ended September 30, 2026 and 2025, respectively.

(2)	Includes the average balance of noninterest-bearing checking accounts of $82.7 million and $81.3 million during the quarters ended September 30, 2026 and 2025, respectively.

(3)	Includes the average balance of uninsured deposits of approximately $175.7 million and $144.5 million in the quarters ended September 30, 2026 and 2025, respectively.

(4)	Represents the difference between the weighted-average yield on all interest-earning assets and the weighted-average rate on all interest-bearing liabilities.

(5)	Represents net interest income as a percentage of average interest-earning assets.

The following table sets forth the effects of changing rates and volumes on interest income and expense for the quarters ended September 30, 2026 and 2025. Information is provided with respect to the effects attributable to changes in volume (changes in volume multiplied by prior rate), the effects attributable to changes in rate (changes in rate multiplied by prior volume) and the effects attributable to changes that cannot be allocated between rate and volume.

Rate/Volume Variance


	Quarter Ended September 30, 2026 Compared
	To Quarter Ended September 30, 2025
	Increase (Decrease) Due to
(In Thousands)	Rate		Volume		Rate/Volume		Net
Interest-earning assets:
Loans receivable⁽¹⁾	$	423	$	(102)	$	(3)	$	318
Investment securities		8		(80)		(2)		(74)
FHLB - San Francisco stock and other equity investments		252		8		9		269
Interest-earning deposits		(56)		147		(23)		68
Total net change in income on interest-earning assets		627		(27)		(19)		581

Interest-bearing liabilities:
Checking and money market accounts		9		(2)		-		7
Savings accounts		121		(8)		(5)		108
Time deposits		(116)		381		(16)		249
Borrowings		(281)		(391)		49		(623)
Total net change in expense on interest-bearing liabilities		(267)		(20)		28		(259)
Net increase (decrease) in net interest income	$	894	$	(7)	$	(47)	$	840

(1)	For purposes of calculating volume, rate and rate/volume variances, non-performing loans were included in the weighted-average balance outstanding.

Provision for (Recovery of) Credit Losses:

For the Quarters Ended September 30, 2026 and 2025. During the first quarter of fiscal 2027, the Corporation recorded a provision for credit losses of $777,000 in contrast to a $626,000 recovery of credit losses recorded during the same period last year. The provision was primarily due to the impact of a longer expected average life of the loan portfolio, attributable to increasing mortgage rates during the period, which decreased expected loan prepayments. The provision was partly offset by other favorable factors, including lower historical loss rates and improved forward-looking economic indicators. This compared to the recovery in the same quarter of fiscal 2026 that was primarily due to a decline in the expected life of the loan portfolio attributable to a decline in mortgage interest rates.

The following chart quantifies the factors contributing to the changes in the ACL on loans held for investment ("LHFI") for the quarters ended September 30, 2026 and 2025.

The changes in the ACL on LHFI for the quarter ended September 30, 2026:

The changes in the ACL on LHFI for the quarter ended September 30, 2025:

At September 30, 2026, the ACL on loans held for investment was $6.6 million, all of which was comprised of collectively evaluated allowances. This represents a 13 percent increase from the ACL on loans held for investment of $5.9 million at June 30, 2026, which was also entirely comprised of collectively evaluated allowances. The ACL on loans as a percentage of gross loans held for investment was 0.64 percent at September 30, 2026, up from 0.57 percent at June 30, 2026.

Management believes the ACL on loans is sufficient to absorb expected losses in loans held for investment as of September 30, 2026, and continues to monitor economic conditions, borrower credit quality, and prepayment activity, which could impact the allowance in future periods. See "Asset Quality" below and Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding the ACL on LHFI.

Non-Interest Income:

For the Quarters Ended September 30, 2026 and 2025. Non-interest income decreased $9,000, or one percent, to $804,000 in the first quarter of fiscal 2027 from $813,000 in the same period last year, primarily due to decreases in loan servicing and other fees (mainly due to a lower fair value of unsaleable loans), deposit account fees and card and processing fees, partly offset by an increase in other non-interest income (mainly due to a higher gain on other equity investments).

Non-Interest Expense:

For the Quarters Ended September 30, 2026 and 2025. Non-interest expense decreased $15,000 to $7.6 million in the first quarter of fiscal 2027 from the same quarter last year, primarily due to a $111,000 or two percent decrease in salaries and employee benefits (mainly lower compensation expenses and retirement expenses), partially offset by $103,000 or 13 percent increase in other operating expenses.

Provision for Income Taxes:

For the Quarters Ended September 30, 2026 and 2025. The income tax provision was $605,000 for the first quarter of fiscal 2027, down 43 percent from $1.1 million in the same quarter last year, primarily due to lower pre-tax income and a lower effective tax rate. The effective tax rate in the first quarter of fiscal 2027 was 27.8 percent as compared to 38.5 percent in the same quarter last year. The higher effective tax rate in the first quarter last year was due primarily to the adjustment to the expected tax benefits related to the expiration of non-qualified stock options.

The income tax provision reflects accruals for taxes at the applicable rates for federal income tax and California franchise tax based upon reported pre-tax income, adjusted for the effect of all permanent differences between income for tax and financial reporting purposes, such as non-deductible stock-based compensation and earnings from bank-owned life insurance policies, among others. Therefore, there are fluctuations in the effective income tax rate from period to period based on the relationship of net permanent differences to income before tax.

Asset Quality

Non-performing assets were comprised of three non-performing single-family loans and one multi-family loan at September 30, 2026, compared to three non-performing single-family loans and one multi-family loan at June 30, 2026. These non-performing loans, net of the ACL, were secured by collateral located in California and totaled $504,000 at September 30, 2026, down slightly from $505,000 at June 30, 2026. Non-performing loans as a percentage of LHFI at September 30, 2026 was 0.04 percent, unchanged from June 30, 2026. No interest accruals were made for non-performing loans. There were no accruing loans 90 days or more past due, and no real estate owned at either September 30, 2026 or June 30, 2026. For further analysis on non-performing loans, see the tables below and Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.

The following table sets forth information with respect to the Corporation's non-performing assets, net of ACL, at the dates indicated:


		At September 30,			At June 30,
(Dollars In Thousands)		2026			2026
Loans on non-performing status
Mortgage loans:
Single-family		$	50		$	50
Multi-family			454			455
Total			504			505

Accruing loans past due 90 days or more			-			-


Total non-performing loans			504			505

Real estate owned, net			-			-
Total non-performing assets		$	504		$	505

Non-performing loans as a percentage of LHFI, net of ACL			0.05	%		0.05	%

Non-performing loans as a percentage of total assets			0.04	%		0.04	%

Non-performing assets as a percentage of total assets			0.04	%		0.04	%

The following table summarizes classified assets, which is comprised of classified loans, net of ACL and real estate owned, if any, at the dates indicated:


		At September 30, 2026					At June 30, 2026
(Dollars In Thousands)		Balance			Count		Balance			Count
Special mention loans:
Mortgage loans:
Single-family		$	178		1		$	183		1
Multi-family			607		1			609		1
Total special mention loans			785		2			792		2

Substandard loans:
Mortgage loans:
Single-family			50		3			50		3
Multi-family			2,124		2			455		1
Commercial real estate			1,167		1			1,168		1
Total substandard loans			3,341		6			1,673		5

Total classified loans			4,126		8			2,465		7

Real estate owned			-		-			-		-

Total classified assets		$	4,126		8		$	2,465		7

Total classified assets as a percentage of total assets			0.34	%				0.20	%

A decline in real estate values subsequent to the time of origination of the Corporation's real estate secured loans could result in higher loan delinquency levels, foreclosures, provision for credit losses and net charge-offs. Real estate values and real estate markets are beyond the Corporation's control and are generally affected by changes in national, regional or

local economic conditions and other factors. These factors include fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes, fires and national disasters particular to California where substantially all of the Corporation's real estate collateral is located. If real estate values decline, the value of the real estate collateral securing the Corporation's loans as set forth in the table could be significantly overstated. The Corporation's ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and it would be more likely to suffer losses on defaulted loans. The Corporation generally does not update the loan-to-value ratio on its loans held for investment by obtaining new appraisals or broker price opinions (nor does the Corporation intend to do so in the future as a result of the costs and inefficiencies associated with completing the task) unless a specific loan has demonstrated deterioration in which case individually evaluated allowances are established, if required.

Loan Volume Activities

The following table provides details related to the volume of loan originations, sales and principal payments for the quarters indicated:


		For the Quarter Ended
		September 30,
(In Thousands)		2026			2025
Loans originated for sale:
Wholesale originations		$	1,249		$	2,060
Total loans originated for sale			1,249			2,060

Loans sold:
Servicing retained			(1,249)			(2,060)
Total loans sold			(1,249)			(2,060)

Loans originated for investment:
Mortgage loans:
Single-family			32,721			19,124
Multi-family			8,605			8,504
Commercial real estate			4,090			2,012
Total loans originated for investment			45,416			29,640

Loan principal payments			(40,821)			(34,532)
(Decrease) increase in other items, net⁽¹⁾			(582)			923

Net increase (decrease) in LHFI		$	4,013		$	(3,969)

(1)	Includes net changes in undisbursed loan funds, deferred loan fees or costs, ACL, fair value of LHFI and advance payments of escrows.

Liquidity and Capital Resources

The Corporation's primary sources of funds are deposits, principal and interest payments on loans and investment securities, proceeds from the maturity of loans and investment securities, FHLB - San Francisco advances, the discount window facility at the FRB of San Francisco, and 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 three months of fiscal 2027 and 2026, the Corporation originated loans held for investment of $45.4 million and $29.6 million, respectively, with no loan purchases during either period. At September 30, 2026, the Corporation had loan

origination commitments totaling $20.1 million, undisbursed lines of credit totaling $618,000 and no undisbursed loan funds. The Corporation anticipates having sufficient funds available to meet its current loan funding commitments. During the first three months of fiscal 2027 and 2026, total loan repayments were $40.8 million and $34.5 million, respectively.

The Corporation's primary financing activity is gathering deposits and, when needed, borrowings, principally FHLB - San Francisco advances. During the first three months of fiscal 2027, total deposits decreased $12.7 million, or one percent, to $897.7 million, primarily due to a decline in transaction accounts. Time deposits, including brokered certificates of deposit, declined slightly to $351.8 million at September 30, 2026 from $353.2 million at June 30, 2026. At September 30, 2026, time deposits with a principal amount of $250,000 or less and scheduled to mature in one year or less were $225.9 million and total time deposits with a principal amount of more than $250,000 and scheduled to mature in one year or less were $102.2 million. Historically, the Corporation has been able to retain most of its time deposits as they mature.

The Corporation maintains an adequate level of liquidity to ensure the availability of funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. At September 30, 2026, total cash and cash equivalents were $53.2 million, or four percent of total assets, to meet short-term liquidity needs. Depending on market conditions and the pricing of deposit products, the Bank may utilize FHLB - San Francisco advances for part of its liquidity needs. As of September 30, 2026, borrowings with the FHLB - San Francisco totaled $172.0 million. Financing availability at the FHLB - San Francisco is limited to 35 percent of total assets, resulting in a remaining borrowing capacity of $239.1 million with available collateral of $340.0 million at September 30, 2026. In addition, the Bank had a $175.1 million discount window facility at the FRB of San Francisco, collateralized by investment securities and single-family loans with a total balance of $304.4 million. As of September 30, 2026, the Bank also had a $50.0 million federal funds borrowing arrangement with its correspondent bank. No advances were outstanding under either the FRB discount window or the correspondent bank facility as of September 30, 2026.

The Bank maintains borrowing relationships with both the FHLB-San Francisco and the FRB of San Francisco, and regularly reviews and updates its available borrowing capacity to ensure funds can be accessed on a timely basis to meet liquidity needs. Collateral pledged to both facilities is monitored and maintained at levels sufficient to support the Bank's contingency liquidity requirements. Total aggregate borrowing capacity available under these facilities was approximately $464.2 million at September 30, 2026.

Regulations require the Bank to maintain adequate liquidity to assure safe and sound operations. The Bank's average total liquidity ratio (defined as the ratio of average qualifying liquid assets to average deposits and borrowings) for the quarter ended September 30, 2026 was 8.0 percent, up from 7.1 percent for the quarter ended June 30, 2026.

On January 22, 2026, the Board of Directors authorized a stock repurchase plan for up to five percent of the Corporation's common stock, or 318,875 shares. The Corporation could purchase shares periodically in the open market or through privately negotiated transactions, subject to market conditions, the Corporation's capital requirements, available cash, and other relevant factors. The plan expires on January 22, 2027. As of September 30, 2026, a total of 88,174 shares remained available for future purchase under the Corporation's January 2026 repurchase program. On October 22, 2026, the Board of Directors authorized a new stock repurchase plan for up to 305,477 shares, or approximately five percent of the Corporation's outstanding common stock. The new plan will commence upon the earlier of the completion of the January 2026 plan or its expiration on January 22, 2027, and will remain in effect for one year following the commencement of the plan. Repurchases under the new plan will be subject to market conditions, the Corporation's capital requirements, available cash, and other relevant factors.

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. Future dividend payments are subject to the Board's discretion and applicable regulatory restrictions. The Corporation currently pays quarterly cash dividends on its common stock which may be modified, suspended, or terminated at any time. Our current quarterly common stock dividend rate is $0.14 per share, which is intended to balance the Corporation's objectives of supporting the Bank's operations and returning cash to shareholders. Assuming continued cash dividend payments during fiscal 2027 at $0.14 per share, our average total dividend paid each quarter would be approximately $868,000 based on the number of outstanding shares at September 30, 2026. At September 30, 2026, the Corporation (on an unconsolidated basis) had liquid assets of $13.7 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 regarding capital components, risk weighting and other factors.

At September 30, 2026, the Bank exceeded all regulatory capital requirements. The Bank was categorized as "well-capitalized" at September 30, 2026 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):


							Regulatory Requirements
							Minimum for Capital					Minimum to Be
		Actual					Adequacy Purposes					Well Capitalized
		Amount			Ratio		Amount			Ratio⁽¹⁾		Amount			Ratio

Provident Savings Bank, F.S.B.:

As of September 30, 2026
Tier 1 leverage capital (to adjusted average assets)		$	111,698		9.25	%	$	48,295		4.00	%	$	60,369		5.00	%
CET1 capital (to risk-weighted assets)		$	111,698		17.36	%	$	45,046		7.00	%	$	41,829		6.50	%
Tier 1 capital (to risk-weighted assets)		$	111,698		17.36	%	$	54,699		8.50	%	$	51,482		8.00	%
Total capital (to risk-weighted assets)		$	118,378		18.40	%	$	67,570		10.50	%	$	64,352		10.00	%

As of June 30, 2026
Tier 1 leverage capital (to adjusted average assets)		$	122,754		10.30	%	$	47,691		4.00	%	$	59,614		5.00	%
CET1 capital (to risk-weighted assets)		$	122,754		19.41	%	$	44,274		7.00	%	$	41,112		6.50	%
Tier 1 capital (to risk-weighted assets)		$	122,754		19.41	%	$	53,762		8.50	%	$	50,599		8.00	%
Total capital (to risk-weighted assets)		$	128,657		20.34	%	$	66,412		10.50	%	$	63,249		10.00	%

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

In addition to the minimum Tier 1, CET1 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 September 30, 2026, 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 30, 2026, the Bank paid a $13.0 million cash dividend to the Holding Company.

Supplemental Information


	At		At		At
	September 30,		June 30,		September 30,
	2026		2026		2025

Loans serviced for others (in thousands)	$	32,443	$	31,792	$	36,032

Book value per share	$	20.24	$	20.15	$	19.72

Provident Financial Holdings Inc. published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 18:16 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]