Provident Financial Holdings (PROV) risk factors, FY2025 10-K

Risks Related to Macroeconomic Conditions

1. 01Our business may be adversely affected by downturns in the national economy and the regional economies on which we depend
2. 02Monetary policy, inflation, deflation, and other external economic factors could adversely impact our financial performance and operations

Risks Related to our Lending Activities

1. 03Our business may be adversely affected by credit risk associated with residential property
2. 04Our multi-family and commercial real estate loans involve higher principal amounts than other loans and repayment of these loans may be dependent on factors outside our control or the control of our borrowers
3. 05payments upon maturity, which would require the borrower to either sell or refinance the underlying property to make the balloon payment at maturity, thus increasing the risk of default or non-payment
4. 06We occasionally purchase loans in bulk or “pools.” We may experience lower yields or losses on loan “pools” because the assumptions we use when purchasing loans in bulk may not prove correct
5. 07Our allowance for credit losses may not be sufficient to absorb losses in our loan portfolio
6. 08Bank regulatory agencies also periodically review our ACL and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on their judgment about information available to them at the time of their examination
7. 09Non-performing assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future

Risks Related to Market and Interest Rate Changes

1. 10Fluctuating interest rates can adversely affect our profitability
2. 11We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially affected
3. 12In addition, most of our mortgage loans have adjustable interest rates. As a result, these loans may experience a higher rate of default in a rising interest rate environment
4. 13Certain hedging strategies that we may use to manage investment in mortgage servicing assets, mortgage loans held for sale and interest rate lock commitments may be ineffective to offset any adverse changes in the fair value of these assets due to changes in interest rates and market liquidity
5. 14We may incur losses on our securities portfolio as a result of changes in interest rates

Risks Related to Regulatory, Legal and Compliance Matters

1. 15We are subject to an extensive body of accounting rules and best practices. Periodic changes to such rules may change the treatment and recognition of critical financial line items and affect our profitability
2. 16regulatory changes could necessitate retrospective application, which might result in the restatement of prior period financial statements
3. 17Non-compliance with the USA Patriot Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions
4. 18If our enterprise risk management framework is not effective at mitigating risk and loss, we could suffer unexpected losses and our results of operations could be materially adversely affected
5. 19Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations
6. 20Our litigation related costs may increase

Risks Related to Cybersecurity, Data and Fraud

1. 21We are subject to certain risks in connection with our use of technology
2. 22Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes

Risks Related to Our Business and Industry Generally

1. 23Ineffective liquidity management could adversely affect our financial results and condition
2. 24We rely on other companies to provide key components of our business infrastructure
3. 25Managing reputational risk is important to attracting and maintaining customers, investors and employees
4. 26Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be exceedingly high
5. 27The financial services market is undergoing rapid technological changes, and if we are unable to stay current with those changes, we will not be able to effectively compete
6. 28Earthquakes, fires, mudslides and other natural disasters in our primary market area may result in material losses because of damage to collateral properties and borrowers' inability to repay loans
7. 29Any breach of representations and warranties made by us to our loan purchasers or credit default on our loan sales may require us to repurchase or substitute such loans we have sold
8. 30Having net deferred tax asset or liability, the full value of which we may not be able to realize
9. 31Regulatory changes to diversity, equity and inclusion (“DEI”) and environmental, social and governance (“ESG”) practices could impact our reputation, compliance costs, and operations
10. 32We rely on dividends from the Bank for substantially all of our revenue at the holding company level