Capital

12 Months Ended

Jun. 30, 2019

Banking and Thrift [Abstract]

Capital

Note 10: Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements.  Under 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 weightings and other factors.

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank and Provident Financial Holdings, Inc. became subject to new capital adequacy requirements which were fully phased-in on January 1, 2019. Since the Provident Financial Holdings, Inc. has 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 capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital.

The Bank changes in capital requirements adopted by the OCC required a ratio for common equity Tier 1 (“CET1”) capital, increased the Tier1 leverage and Tier 1 capital ratios, changed the risk-weightings of certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over the required capital ratios and changed what qualifies as capital for purposes of meeting these various capital requirements. Failure to meet minimum requirements can initiate certain mandatory and possibly additional discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements. The Bank is required to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before payment of dividends, repurchase of shares or payment of discretionary bonuses.

In addition to the minimum CET1, Tier 1 and total capital ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. As of June 30, 2019, the capital conservation buffer required a minimum of 2.50% of risk weighted assets.

For calendar 2019, the minimum requirements call for a Tier1 leverage ratio of 4.00%, a ratio of common equity Tier 1 capital ("CET1") to total risk-weighted assets (“CET1 risk-based ratio”) of 7.00%, a Tier 1 capital ratio of 8.50%, and a total capital ratio of 10.50%.

Under the standards, in order to be considered well-capitalized, the Bank must have a Tier1 leverage ratio of 5%, a CET1 capital ratio of 6.5%, a Tier 1 capital ratio of 8%, and a total capital ratio of 10%.

At June 30, 2019, the Bank exceeded all regulatory capital requirements. The Bank was categorized as "well-capitalized" at June 30, 2019 under the regulations of the OCC.

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

						Regulatory Requirements
	Actual					Minimum for Capital Adequacy Purposes					Minimum to Be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Provident Savings Bank, F.S.B.:
As of June 30, 2019
Tier 1 leverage capital (to adjusted average assets)	$	115,009		10.50	%	$	43,824		4.00	%	$	54,779		5.00	%
CET1 capital (to risk-weighted assets)	$	115,009		18.00	%	$	44,730		7.00	%	$	41,535		6.50	%
Tier 1 capital (to risk-weighted assets)	$	115,009		18.00	%	$	54,314		8.50	%	$	51,119		8.00	%
Total capital (to risk-weighted assets)	$	122,225		19.13	%	$	67,094		10.50	%	$	63,899		10.00	%
As of June 30, 2018
Tier 1 leverage capital (to adjusted average assets)	$	116,369		9.96	%	$	46,716		4.00	%	$	58,394		5.00	%
CET1 capital (to risk-weighted assets)	$	116,369		16.81	%	$	44,125		6.38	%	$	44,990		6.50	%
Tier 1 capital (to risk-weighted assets)	$	116,369		16.81	%	$	54,507		7.88	%	$	55,372		8.00	%
Total capital (to risk-weighted assets)	$	123,911		17.90	%	$	68,350		9.88	%	$	69,215		10.00	%

At June 30, 2019, the Bank exceeded all regulatory capital requirements. The Bank was categorized as "well-capitalized" at June 30, 2019 under the regulations of the OCC.

The ability of the Corporation to pay dividends to stockholders depends primarily on the ability of the Bank to pay dividends to the Corporation.  The Bank may not declare or pay cash dividends on or repurchase any of its shares of common stock, if the effect would cause stockholders’ equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration and payment would otherwise violate regulatory requirements.

Generally, savings institutions, such as the Bank, that before and after the proposed distribution are well-capitalized, may make capital distributions during any calendar year up to 100% of net income for the year-to-date plus retained net income for the two preceding years.  However, an institution deemed to be in need of more than normal supervision or in troubled condition by the OCC may have its dividend authority restricted by the OCC.  If the Bank, however, proposes to make a capital distribution when it does not meet its capital requirements (or will not following the proposed capital distribution) or that will exceed these net income-based limitations, it must obtain the OCC's approval prior to making such distribution. In addition, the Bank must file a prior written notice of a dividend with the Federal Reserve Board.   The Federal Reserve Board or the OCC may object to a capital distribution based on safety and soundness concerns.  Additional restrictions on Bank dividends may apply if the Bank fails the QTL test.  In fiscal 2019 and 2018, the Bank declared $7.5 million and $5.0 million of cash dividends to its parent, the Corporation, respectively.