About Provident Financial Holdings

Provident Financial Holdings, Inc. operates as the bank holding company for Provident Savings Bank, F.S.B. that provides various financial services. The company 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. The business activities of the company consist of community banking, investment services and trustee services for real estate transactions. The company’s community banking operations primarily consist of accepting deposits from customers within the communities surrounding its full-service offices and investing those funds in single-family, multi-family, commercial real estate, construction, commercial business, consumer and other mortgage loans. Through its subsidiary, Provident Financial Corp, the company conducts trustee services for its real estate transactions and in the past has held real estate for investment. Market Area The company is headquartered in Riverside, California and operates 12 full-service banking offices in Riverside County and one full-service banking office in San Bernardino County. The company considers Riverside and Western San Bernardino counties to be its primary market for deposits. The company is the largest independent community bank headquartered in Riverside County and it has the eleventh largest deposit market share of all banks and the third largest of community banks in Riverside County. The company’s market area consists primarily of suburban and urban communities. Lending Activities The lending activity of the company is consisted of the origination of single-family, multi-family and commercial real estate loans and to a lesser extent, construction, commercial business, consumer and other mortgage loans to be held for investment. Single-Family Mortgage Loans: One of the company’s primary lending activity is the origination and purchase of adjustable and fixed rate mortgage loans to be held for investment secured by first trust deed mortgages on owner-occupied, single-family (one to four units) residences in the communities where the bank’s branches are located and surrounding areas in Southern and Northern California. The company has underwriting standards that generally conform with the standards of the government sponsored entities (GSE), which include Fannie Mae and Freddie Mac. The company lends on residential properties classified as single-family unit, planned unit developments and condominiums. Underwriting standards and guidelines may change at any time given changes in real estate market conditions or changes to GSE policies and guidelines. For additional protection, the company purchases lender-paid mortgage insurance for certain single-family mortgage loans. The company’s non-traditional single-family residential loans include loans to borrowers who provided limited or no documentation of their income or stated income loans, negative amortization loans (a loan in which accrued interest exceeding the required monthly loan payment is added to loan principal up to 115% of the original loan amount), more than 30-year amortization loans, and loans to borrowers with a FICO score below 660 (these loans are considered subprime by the OCC). Including these low FICO score loans, as of June 30, 2022, the company’s single-family residential borrowers had a weighted average FICO score of 759 at the time of loan origination. The company offers fixed rate loan products in Riverside and San Bernardino counties and adjustable rate mortgage (ARM) loans throughout California. Substantially all of the loans originated by the company meet GSE underwriting standards based on credit and collateral. The company offers several ARM products, which adjust semi-annually after an initial fixed period ranging from five to ten years subject to a limitation on semi-annual and lifetime changes. Multi-Family and Commercial Real Estate Mortgage Loans: Multi-family mortgage loans originated by the bank are predominately adjustable rate loans, including hybrid ARM loans, with a term to maturity of 10 to 30 years and a 25 to 30-year amortization schedule. Commercial real estate loans originated by the bank are also predominately adjustable rate loans, including hybrid ARM loans, with a term to maturity of 10 to 30 years and a 25 to 30-year amortization schedule. Rates on multi-family and commercial real estate ARM loans generally adjust monthly, quarterly, semi-annually or annually at a specific margin over the respective interest rate index, subject to period interest rate caps and life-of-loan interest rate caps. The company’s commercial real estate loan portfolio generally consists of loans secured by small office buildings, light industrial buildings, warehouses, and small retail centers. Properties securing multi-family and commercial real estate loans are primarily located in Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Francisco and Santa Clara counties. The company originates multi-family and commercial real estate loans in amounts typically ranging from $350,000 to $6.0 million. As of June 30, 2022, the company had 63 commercial real estate and multi-family loans. The company obtains appraisals on all properties that secure multi-family and commercial real estate loans. Underwriting of multi-family and commercial real estate loans includes, among other considerations, a thorough analysis of the cash flows generated by the property to support the debt service and the financial resources, experience and the income level of the borrowers and guarantors. Construction Loans: The company originates from time to time two types of construction loans: short-term construction loans and construction/permanent loans. Short-term construction loans include three types of loans: custom construction, tract construction, and speculative construction. The company provides construction financing for single-family, multi-family and commercial real estate properties. From time to time the company makes lot loans to individuals to finance land acquisition prior to the start of construction or tract construction loans to subdivision builders. Commercial Business Loans: The company has a Business Banking Department that primarily serves businesses located within the Inland Empire. Commercial business loans are generally made to customers who are well known to the company and are generally secured by accounts receivable, inventory, business equipment and/or other assets. The company’s commercial business loans may be structured as term loans or as lines of credit. Consumer Loans: The company offers open-ended lines of credit on unsecured basis. Investment Portfolio As of December 31, 2021, the company’s investment portfolio included U.S. government agency mortgage-backed securities (MBS); U.S. government sponsored enterprise MBS; and private issue collateralized mortgage obligations (CMO). Deposit Accounts Substantially all of the company’s depositors are residents of the state of California. Deposits are attracted from within the company’s market area by offering a broad selection of deposit instruments, including checking, savings, money market and time deposit accounts. Regulation The company, as a savings and loan holding company, is required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of the Federal Reserve Board (FRB), its primary regulator. The company is also subject to the rules and regulations of the Securities and Exchange Commission (SEC) under the federal securities laws. The bank, as a federally chartered savings institution, is subject to regulation, examination, and supervision by the Office of the Comptroller of the Currency (OCC), as its primary federal regulator; and the Federal Deposit Insurance Corporation (FDIC), as its insurer of deposits. The bank's relationship with its depositors and borrowers is regulated by federal consumer protection laws, which must be complied with by the bank. The bank is a member of the FHLB System and its deposits are insured up to applicable limits by the FDIC. The bank must file reports with the OCC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the OCC to evaluate the bank’s safety and soundness and compliance with various regulatory requirements. The company, as a savings and loan holding company, is required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of the FRB, its primary regulator. The company is also subject to the rules and regulations of the SEC under the federal securities laws. The bank is required to file periodic reports with the OCC and is subject to periodic examinations by the OCC. The bank is a member of the FHLB – San Francisco, which is one of 11 regional FHLBs, each of which serves as a reserve or central bank for its members within its assigned region. The FHLB - San Francisco is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans or advances to members in accordance with policies and procedures, established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency. As a member of the FHLB - San Francisco, the bank is required to purchase and maintain stock in the FHLB – San Francisco. The bank’s authority to engage in transactions with ‘affiliates’ is limited by Sections 23A and 23B of the Federal Reserve Act as implemented by the Federal Reserve Board’s Regulation W. The bank’s deposits are federally insured up to applicable limits by the FDIC. The bank has been a member of the Federal Home Loan Bank (FHLB) – San Francisco since 1956. The bank received a rating of satisfactory when it was last examined for Community Reinvestment Act compliance. The bank is required to meet a qualified thrift lender (QTL) test to avoid certain restrictions on its operations. The bank is subject to a broad array of federal and state consumer protection laws and regulations that govern almost every aspect of its business relationships with consumers. While not exhaustive, these laws and regulations include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices, and various regulations that implement some or all of the foregoing. The company’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (Exchange Act). The company is subject to information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act. History Provident Financial Holdings, Inc. was founded in 1956. The company, a Delaware corporation, was incorporated in 1996.