Capital

12 Months Ended

Jun. 30, 2024

Capital

Capital

Note 9: 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.

For a bank holding company such as the Corporation with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis. The FRB expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations. If the Corporation was subject to regulatory guidelines for bank holding companies at June 30, 2024, it would have exceeded all regulatory capital requirements.

The Bank is subject to capital regulations which establish minimum required capital ratios for Tier 1 leverage, common equity Tier 1 (“CET1”), Tier 1 risk-based and total risk-based capital. Additionally, a capital conservation buffer is required over the required minimum capital ratios, and capital regulations also defines what qualifies as capital for purposes of meeting the 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.

In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% 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.

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(1)				Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
Provident Savings Bank, F.S.B.:
As of June 30, 2024(2)
Tier 1 leverage capital (to adjusted average assets)	$	126,601	10.02	%	$	50,555	4.00	%	$	63,194	5.00	%
CET1 capital (to risk-weighted assets)	$	126,601	19.29	%	$	45,934	7.00	%	$	42,653	6.50	%
Tier 1 capital (to risk-weighted assets)	$	126,601	19.29	%	$	55,777	8.50	%	$	52,496	8.00	%
Total capital (to risk-weighted assets)	$	133,723	20.38	%	$	68,900	10.50	%	$	65,620	10.00	%
As of June 30, 2023
Tier 1 leverage capital (to adjusted average assets)	$	125,979	9.59	%	$	52,521	4.00	%	$	65,651	5.00	%
CET1 capital (to risk-weighted assets)	$	125,979	18.50	%	$	47,674	7.00	%	$	44,269	6.50	%
Tier 1 capital (to risk-weighted assets)	$	125,979	18.50	%	$	57,890	8.50	%	$	54,485	8.00	%
Total capital (to risk-weighted assets)	$	131,967	19.38	%	$	71,511	10.50	%	$	68,106	10.00	%

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

(2) The Bank elected to recognize the full $824 thousand adjustment to retained earnings resulting from the adoption of CECL on July 1, 2023 instead of over the permitted three-year phase-in option.

At June 30, 2024, the Bank exceeded all regulatory capital requirements. The Bank was categorized as "well-capitalized" at June 30, 2024 under the regulations of the Office of the Comptroller of the Currency (“OCC”).

The ability of Provident Financial Holdings to pay dividends to stockholders depends primarily on the ability of the Bank to pay dividends to Provident Financial Holdings. Provident Financial Holdings and 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 are well-capitalized before and after the proposed distribution 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 classified as 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 the 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 FRB. The FRB 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 Qualified Thrift Lender test. In fiscal 2024 and 2023, the Bank declared and paid $7.0 million and $9.5 million of cash dividends to its parent, Provident Financial Holdings, respectively.