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What changed in PROVIDENT FINANCIAL HOLDINGS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PROVIDENT FINANCIAL HOLDINGS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+456 added−455 removedSource: 10-K (2023-09-05) vs 10-K (2022-09-02)

Top changes in PROVIDENT FINANCIAL HOLDINGS INC's 2023 10-K

456 paragraphs added · 455 removed · 349 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

178 edited+55 added−30 removed199 unchanged
Biggest changeAny material increase in the allowance for loan losses may adversely affect the Bank’s financial condition and results of operations. ​ 16 Table of Contents The following table shows certain credit ratios at and for the periods indicated and each component of the ratio’s calculations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For The Year Ended June 30, ​ (Dollars In Thousands) 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as a percentage of total gross loans held for investment at period end ​ ​ 0.59 % ​ 0.88 % ​ 0.91 % Allowance for loan losses ​ $ 5,564 ​ $ 7,587 ​ $ 8,265 ​ Total gross loans held for investment ​ $ 937,970 ​ $ 852,082 ​ $ 904,466 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-performing loans as a percentage of net loans held for investment at period end ​ ​ 0.15 % ​ 1.02 % ​ 0.55 % Total non-performing loans, net ​ $ 1,423 ​ $ 8,646 ​ $ 4,924 ​ Total loans held for investment, net ​ $ 939,992 ​ $ 850,960 ​ $ 902,796 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as a percentage of gross non-performing loans at period end ​ ​ 368.97 % ​ 80.56 % ​ 154.40 % Allowance for loan losses ​ $ 5,564 ​ $ 7,587 ​ $ 8,265 ​ Total gross non-performing loans ​ $ 1,508 ​ $ 9,418 ​ $ 5,353 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net recoveries (charge-offs) to average loans receivable during the period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Single-family: ​ ​ 0.15 % ​ 0.01 % ​ 0.02 % Net recoveries ​ $ 439 ​ $ 31 ​ $ 69 ​ Average loans receivable ​ $ 301,698 ​ $ 270,083 ​ $ 329,033 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Multi-family: ​ ​ 0.00 % ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ $ - ​ Average loans receivable ​ $ 473,487 ​ $ 484,374 ​ $ 472,010 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ 0.00 % ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ $ - ​ Average loans receivable ​ $ 90,896 ​ $ 101,768 ​ $ 107,966 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Construction: ​ ​ 0.00 % ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ $ - ​ Average loans receivable ​ $ 3,417 ​ $ 6,249 ​ $ 5,732 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business loans: ​ ​ 0.00 % ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ $ - ​ Average loans receivable ​ $ 627 ​ $ 795 ​ $ 471 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumer loans: ​ ​ 0.00 % ​ (1.22) % ​ 0.87 % Net (charge-offs) recoveries ​ $ - ​ $ (1) ​ $ 1 ​ Average loans receivable ​ $ 73 ​ $ 82 ​ $ 115 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans: ​ ​ 0.05 % ​ 0.00 % ​ 0.01 % Total net recoveries ​ $ 439 ​ $ 30 ​ $ 70 ​ Total average loans receivable ​ $ 870,328 ​ $ 863,507 ​ $ 915,353 ​ ​ ​ 17 Table of Contents Investment Securities Activities ​ Federally chartered savings institutions are permitted under federal and state laws to invest in various types of liquid assets, including U.S.
Biggest changeFuture adjustments to the allowance for loan losses may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory and other conditions beyond the control of the Bank. 17 Table of Contents The following table shows certain credit ratios at and for the periods indicated and each component of the ratio’s calculations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For The Year Ended June 30, ​ (Dollars In Thousands) 2023 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as a percentage of total gross loans held for investment at period end ​ ​ 0.55 % ​ 0.59 % Allowance for loan losses ​ $ 5,946 ​ $ 5,564 ​ Total gross loans held for investment ​ $ 1,074,164 ​ $ 937,970 ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-performing loans as a percentage of net loans held for investment at period end ​ ​ 0.12 % ​ 0.15 % Total non-performing loans, net ​ $ 1,300 ​ $ 1,423 ​ Total loans held for investment, net ​ $ 1,077,629 ​ $ 939,992 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as a percentage of gross non-performing loans at period end ​ ​ 418.14 % ​ 368.97 % Allowance for loan losses ​ $ 5,946 ​ $ 5,564 ​ Total gross non-performing loans ​ $ 1,422 ​ $ 1,508 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net recoveries (charge-offs) to average loans receivable during the period: ​ ​ ​ ​ ​ ​ ​ Mortgage loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Single-family: ​ ​ 0.00 % ​ 0.15 % Net recoveries ​ $ 8 ​ $ 439 ​ Average loans receivable ​ $ 471,347 ​ $ 301,698 ​ ​ ​ ​ ​ ​ ​ ​ ​ Multi-family: ​ ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ Average loans receivable ​ $ 464,511 ​ $ 473,487 ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ Average loans receivable ​ $ 89,060 ​ $ 90,896 ​ ​ ​ ​ ​ ​ ​ ​ ​ Construction: ​ ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ Average loans receivable ​ $ 2,606 ​ $ 3,417 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other: ​ ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ Average loans receivable ​ $ 111 ​ $ 130 ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business loans: ​ ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ Average loans receivable ​ $ 1,290 ​ $ 627 ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumer loans: ​ ​ 0.00 % ​ 0.00 % Net (charge-offs) recoveries ​ $ - ​ $ - ​ Average loans receivable ​ $ 75 ​ $ 73 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans: ​ ​ 0.00 % ​ 0.05 % Total net recoveries ​ $ 8 ​ $ 439 ​ Total average loans receivable ​ $ 1,029,000 ​ $ 870,328 ​ 18 Table of Contents The distribution of our allowance for losses on loans at the dates indicated is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ ​ ​ ​ ​ Loans in ​ ​ ​ ​ Loans in ​ ​ ​ ​ ​ ​ Each ​ ​ ​ ​ Each ​ ​ ​ ​ ​ ​ Category ​ ​ ​ ​ Category ​ ​ ​ ​ ​ ​ to Total ​ ​ ​ ​ to Total ​ (Dollars In Thousands) ​ Amount ​ Loans ​ Amount ​ Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans: ​ ​ Single-family ​ $ 1,720 48.30 % $ 1,383 40.33 % Multi-family ​ 3,270 42.93 ​ 3,282 49.54 ​ Commercial real estate ​ 868 8.43 ​ 816 9.64 ​ Construction ​ 15 0.18 ​ 23 0.34 ​ Other ​ 2 0.01 ​ 3 0.01 ​ Commercial business loans ​ 67 0.14 ​ 52 0.13 ​ Consumer loans ​ 4 0.01 ​ 5 0.01 ​ Total allowance for loan losses ​ $ 5,946 100.00 % $ 5,564 100.00 % ​ Effective July 1, 2023, the Corporation will be required to adopt Accounting standard update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, commonly referred to as “CECL.” Upon adoption of ASU 2016-13 on July 1, 2023, we expect to recognize a reduction to our opening retained earnings of approximately $825,000, net of deferred taxes and other immaterial adjustments, resulting from a pretax increase to our allowance for credit losses of approximately $1.2 million.
Bank regulators have issued guidance stating that a FICO score of 660 and below is indicative of a “subprime” borrower. The Bank currently 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.
Bank regulators have issued guidance stating that a FICO score of 660 and below is indicative of a “subprime” borrower. The Bank currently lends on residential properties classified as single-family units, 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.
Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years. ​ The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank.
Assessments for institutions of less than $10 billion in assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years. ​ The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank.
These reserves may be in the form of cash or non interest-bearing deposits with the regional Federal Reserve Bank. Interest-bearing checking accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any non-personal time deposits at a bank.
These reserves may be in the form of cash or noninterest-bearing deposits with the regional Federal Reserve Bank. Interest-bearing checking accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any non-personal time deposits at a bank.
Disbursements are based on periodic on-site inspections by independent inspectors and Bank personnel. At inception, the Bank also requires borrowers to deposit funds into the loan-in-process account covering the difference between the actual cost of construction and the loan amount. The Bank regularly monitors the construction loan portfolio, economic conditions and housing inventory. The Bank’s property inspectors perform periodic inspections.
Disbursements are based on periodic on-site inspections by independent inspectors and/or Bank personnel. At inception, the Bank also requires borrowers to deposit funds into the loan-in-process account covering the difference between the actual cost of construction and the loan amount. The Bank regularly monitors the construction loan portfolio, economic conditions and housing inventory. The Bank’s property inspectors perform periodic inspections.
The Bank is subject to consumer protection regulations issued by the CFPB, but as a financial institution with assets of less than $10.0 billion, the Bank is generally subject to supervision and enforcement by the OCC with respect to compliance with consumer financial protection laws and CFPB regulations. ​ 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.
The Bank is subject to consumer protection regulations issued by the CFPB, but as a financial institution with assets of less than $10.0 billion in assets, the Bank is generally subject to supervision and enforcement by the OCC with respect to compliance with consumer financial protection laws and CFPB regulations. ​ 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.
The Bank has been a member of the Federal Home Loan Bank (“FHLB”) – San Francisco since 1956. ​ The Bank 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 Bank has been a member of the Federal Home Loan Bank (“FHLB”) – San Francisco since 1956. ​ The Bank 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”).
Under current law, a savings institution will not be required to recapture its pre-1988 bad debt reserve unless the Bank makes a “non-dividend distribution” as defined below. Currently, the Corporation uses the specific charge-off method to account for bad debt deductions for income tax purposes. ​ Distributions .
Under current law, a savings institution will not be required to recapture its pre-1988 bad debt reserve unless the Bank makes a “non-dividend distribution” as defined below. Currently, the Bank uses the specific charge-off method to account for bad debt deductions for income tax purposes. ​ Distributions .
In the case of a tract or speculative construction loan, the Bank reviews the experience and expertise of the builder. The Bank obtains credit reports, financial statements and tax returns on the borrowers and guarantors, an independent appraisal of the project, and any other expert report necessary to evaluate the proposed project.
In the case of a tract or speculative construction loan, the Bank also reviews the experience and expertise of the builder. The Bank obtains credit reports, financial statements and tax returns on the borrowers and guarantors, an independent appraisal of the project, and any other expert report necessary to evaluate the proposed project.
The FRB has promulgated regulations implementing the “source of strength” doctrine that require holding companies, including savings and loan holding companies, to act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.
The FRB has promulgated regulations implementing the “source of strength” doctrine that require holding companies, including savings and loan holding companies, to act as a source of financial and managerial strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.
Since the enactment of the CERCLA, this “secured creditor exemption” has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan. ​ To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potential hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property. ​ Privacy Regulations.
Since the enactment of the CERCLA, this “secured creditor exemption” has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan. ​ To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potentially hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property. ​ Privacy Regulations.
The FRB policy statement also indicates that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. ​ In addition, a savings and loan holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding twelve months, is equal to 10% or more of its consolidated net worth.
The FRB policy statement also indicates that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. ​ In addition, a savings and loan holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of its consolidated net worth.
The methodology is set forth in a formal policy and takes into consideration the need for a collectively evaluated allowance for groups of homogeneous loans and an individually evaluated allowance that are tied to individual problem loans.
The methodology is set forth in a formal policy and takes into consideration the need for a collectively evaluated allowance for groups of homogeneous loans and an individually evaluated allowance that is tied to individual problem loans.
The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), is a federal statute, generally imposes strict liability on all prior and present "owners and operators" of sites containing hazardous waste.
The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), is a federal statute, that generally imposes strict liability on all prior and present "owners and operators" of sites containing hazardous waste.
At June 30, 2022, the Bank’s largest lending relationship to a single borrower or group of borrowers consisted of four multi-family loans totaling $5.2 million, which were performing according to their original payment terms. ​ Effective July 1, 2019, the OCC issued a final rule implementing a section of the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”) which permits an eligible federal savings bank with assets of $20.0 billion or less as of December 31, 2017 to elect to operate with the business powers of a national bank, generally subject to the same limitations and restrictions, without converting to a national bank charter.
At June 30, 2023, the Bank’s largest lending relationship to a single borrower or group of borrowers consisted of four multi-family loans totaling $5.1 million, which were performing according to their original payment terms. ​ Effective July 1, 2019, the OCC issued a final rule implementing a section of the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”) which permits an eligible federal savings bank with assets of $20.0 billion or less as of December 31, 2017 to elect to operate with the business powers of a national bank, generally subject to the same limitations and restrictions, without converting to a national bank charter.
The programs are limited to a maximum, semi-annual increase or decrease of one percentage point with a maximum lifetime increase of five percentage points. The rate may not fall below the margin.
The programs are limited to a maximum semi-annual increase or decrease of one percentage point with a maximum lifetime increase of five percentage points and the rate may not fall below the margin.
As insurer, the FDIC imposes deposit insurance premiums in the form of assessments to maintain the DIF and is authorized to conduct examinations of and to require reporting by FDIC insured institutions.
As an insurer, the FDIC imposes deposit insurance premiums in the form of assessments to maintain the DIF and is authorized to conduct examinations of and to require reporting by FDIC insured institutions.
In the event that the Bank makes “non-dividend distributions” to the Corporation that are considered as made from the reserve for losses on qualifying real estate property loans, to the extent the reserve for such losses exceeds the amount that would have been allowed under the experience method or from the supplemental reserve for losses on loans (“Excess Distributions”), then an amount based on the amount distributed will be included in the Bank’s taxable income.
In the event that the Bank makes “non-dividend distributions” to Provident that are considered as made from the reserve for losses on qualifying real estate property loans, to the extent the reserve for such losses exceeds the amount that would have been allowed under the experience method or from the supplemental reserve for losses on loans (“Excess Distributions”), then an amount based on the amount distributed will be included in the Bank’s taxable income.
In evaluating an application for the Corporation to acquire control of a savings institution, the FRB would consider the financial and managerial resources and future prospects of the Corporation and the target institution, the effect of the acquisition on the risk to the DIF, the convenience and the needs of the community, including performance under the CRA and competitive factors. ​ The FRB may not approve any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions; (i) supervisory acquisitions and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions.
In evaluating an application for the Corporation to acquire 31 Table of Contents control of a savings institution, the FRB would consider the financial and managerial resources and future prospects of the Corporation and the target institution, the effect of the acquisition on the risk to the DIF, the convenience and the needs of the community, including performance under the CRA and competitive factors. ​ The FRB may not approve any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions; (i) supervisory acquisitions and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions.
Weiant was a Senior Vice President of Professional Business Bank (June 2006 to June 2007) where he was responsible for commercial lending in the Los Angeles and Inland Empire regions of Southern California. ​ 33 Table of Contents Gwendolyn L. Wertz joined the Bank as Senior Vice President of Retail Banking on February 3, 2014.
Weiant was a Senior Vice President of Professional Business Bank (June 2006 to June 2007) where he was responsible for commercial lending in the Los Angeles and Inland Empire regions of Southern California. ​ 35 Table of Contents Gwendolyn L. Wertz joined the Bank as Senior Vice President of Retail Banking on February 3, 2014.
The following table sets forth information at June 30, 2022 regarding the dollar amount of principal payments becoming contractually due during the periods indicated for loans held for investment. Demand loans, loans having no stated schedule of principal payments, loans having no stated maturity, and overdrafts are reported as becoming due within one year.
The following table sets forth information at June 30, 2023 regarding the dollar amount of principal payments becoming contractually due during the periods indicated for loans held for investment. Demand loans, loans having no stated schedule of principal payments, loans having no stated maturity, and overdrafts are reported as becoming due within one year.
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. ​ In order to be considered well-capitalized under the prompt corrective action regulations, the Bank must maintain a Tier 1 leverage capital ratio of 5%, a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8% and a total 25 Table of Contents risk-based capital ratio of 10% and the Bank must not be subject to any of certain mandates by the OCC requiring it as an individual institution to meet any specified capital level. ​ EGRRCPA required the federal banking agencies, including the OCC, to establish a “community bank leverage ratio” of between 8% and 10% for institutions with assets of less than $10.0 billion.
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. ​ In order to be considered well-capitalized under the prompt corrective action regulations, the Bank must maintain a minimum Tier 1 leverage capital ratio of 5%, a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8% and a total risk-based capital ratio of 10% and the Bank must not be subject to any of certain mandates by the OCC requiring it as an individual institution to meet any specified capital level. ​ EGRRCPA required the federal banking agencies, including the OCC, to establish a “community bank leverage ratio” of between 8% and 10% for institutions with assets of less than $10.0 billion.
As of June 30, 2022 and 2021, there were no outstanding borrowings under the discount window facility or the federal funds facility with the correspondent bank at both dates. ​ As a member of the FHLB – San Francisco, the Bank is required to maintain a minimum investment in FHLB – San Francisco stock.
As of June 30, 2023 and 2022, there were no outstanding borrowings under the discount window facility or the federal funds facility with the correspondent bank at both dates. ​ As a member of the FHLB – San Francisco, the Bank is required to maintain a minimum investment in FHLB – San Francisco stock.
We believe that our average tenure of over eight years reflects the engagement of our employees in this talent management philosophy.
We believe that our average employee tenure of over eight years reflects the engagement of our employees in this talent management philosophy.
Our 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).
Our 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 6 Table of Contents 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).
To mitigate the risks involved with non-QM loans, the Bank has implemented systems, processes, procedural and product changes, and maintains its underwriting standards, to ensure that the “ability-to-repay” requirements are adequately addressed. ​ A decline in real estate values subsequent to the time of origination of real estate secured loans could result in higher loan delinquency levels, foreclosures, provisions for loan losses and net charge-offs.
To mitigate the risks involved with non-QM loans, the Bank has implemented systems, processes, procedural and product changes, and maintains its underwriting standards, to ensure that the “ability-to-repay” requirements are adequately addressed. ​ 7 Table of Contents A decline in real estate values subsequent to the time of origination of real estate secured loans could result in higher loan delinquency levels, foreclosures, provisions for loan losses and net charge-offs.
The Bank did not sell any participation loans in fiscal 2022 or fiscal 2021. ​ Commercial Business Loans . The Bank has a Business Banking Department that primarily serves businesses located within the Inland Empire. Commercial business loans allow the Bank to diversify its lending and increase the average loan yield.
The Bank did not sell any participation loans in fiscal 2023 or fiscal 2022. ​ Commercial Business Loans . The Bank has a Business Banking Department that primarily serves businesses located within the Inland Empire. Commercial business loans allow the Bank to diversify its lending and increase the average loan yield.
In managing the real estate owned properties for quick disposition, the Bank completes the necessary repairs and maintenance to the individual properties before listing for sale, obtains new appraisals and broker price opinions 13 Table of Contents (“BPO”) to determine current market listing prices, and engages local realtors who are most familiar with real estate sub-markets, among other techniques, which generally results in the quick disposition of real estate owned. ​ Asset Classification.
In managing the real estate owned properties for quick disposition, the Bank completes the necessary repairs and maintenance to the individual properties before listing for sale, obtains new appraisals and broker price opinions (“BPO”) to determine current market listing prices, and engages local realtors who are most familiar with real estate sub-markets, among other techniques, which generally results in the quick disposition of real estate owned. ​ Asset Classification.
A federal savings bank that makes the so-called “covered savings association” election must divest any activities or investments that are not permitted for a national bank. The Bank had not made such an election as of June 30, 2022. ​ Federal Home Loan Bank System.
A federal savings bank that makes the so-called “covered savings association” election must divest any activities or investments that are not permitted for a national bank. The Bank had not made such an election as of June 30, 2023. ​ Federal Home Loan Bank System.
Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans. The Bank had no non-performing consumer loans at both June 30, 2022 and 2021.
Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans. The Bank had no non-performing consumer loans at both June 30, 2023 and 2022.
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. 7 Table of Contents ​ Multi-family and commercial real estate loans afford the Bank an opportunity to price the loans with higher interest rates than those generally available from single-family mortgage 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. ​ Multi-family and commercial real estate loans afford the Bank an opportunity to price the loans with higher interest rates than those generally available from single-family mortgage loans.
“Control” of a savings association or savings and loan holding company is deemed to exist if a company has voting control, directly or indirectly of more than 25% of any class of the savings 29 Table of Contents association’s voting stock or controls in any manner the election of a majority of the directors of the savings association or savings and loan holding company, and may be presumed under other circumstances, including, but not limited to, holding in certain cases 10% or more of a class of voting securities.
“Control” of a savings association or savings and loan holding company is deemed to exist if a company has voting control, directly or indirectly of more than 25% of any class of the savings association’s voting stock or controls in any manner the election of a majority of the directors of the savings association or savings and loan holding company, and may be presumed under other circumstances, including, but not limited to, holding in certain cases 10% or more of a class of voting securities.
As of the effective date of the legislation, the Bank had no post 1987 additions to its bad debt tax reserves. As of June 30, 2022, the Bank’s total pre-1988 bad debt reserve for tax purposes was approximately $9.0 million.
As of the effective date of the legislation, the Bank had no post 1987 additions to its bad debt tax reserves. As of June 30, 2023, the Bank’s total pre-1988 bad debt reserve for tax purposes was approximately $9.0 million.
In addition, the Bank’s loans held for investment may include single-family, commercial and multi-family real estate loans with a balance exceeding the current 14 Table of Contents market value of the collateral which are not classified because they are performing and have borrowers who have sufficient resources to support the repayment of the loan. ​ Allowance for Loan Losses.
In addition, the Bank’s loans held for investment may include single-family, commercial and multi-family real estate loans with a balance exceeding the current market value of the collateral which are not classified because they are performing and have borrowers who have sufficient resources to support the repayment of the loan. ​ Allowance for Loan Losses.
We cannot predict what assessment rates will be in the future. ​ Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
We cannot predict what assessment rates will be in the future. ​ 26 Table of Contents Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
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 FRB’s Regulation W. The term “affiliates” for these purposes generally mean any company that controls or is under common control with an institution except subsidiaries of the 26 Table of Contents institution.
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 FRB’s Regulation W. The term “affiliates” for these purposes generally mean any company that controls or is under common control with an institution except subsidiaries of the institution.
During fiscal 2022 and 2021, the Bank had no charge-offs or recoveries and no construction loans were non-performing or 30-89 days delinquent at both June 30, 2022 and June 30, 2021. ​ Participation Loan Purchases and Sales.
During fiscal 2023 and 2022, the Bank had no charge-offs or recoveries, and no construction loans were non-performing or 30-89 days delinquent at both June 30, 2023 and June 30, 2022. ​ Participation Loan Purchases and Sales.
Construction loans, however, are generally considered to involve a higher degree of risk than single-family mortgage loans because of the inherent difficulty in estimating both a property’s value at completion of the project and the cost of the project. The nature of these loans is such that they are generally more difficult to evaluate and monitor.
Construction loans, however, are generally considered to involve a higher degree of risk than single-family mortgage loans because of the inherent difficulty in estimating both a property’s value at completion 9 Table of Contents of the project and the cost of the project. The nature of these loans is such that they are generally more difficult to evaluate and monitor.
Accordingly, all operations are considered by management to be one operating segment and one reportable segment as contained in the Consolidated Statements of Operations to the Corporation’s audited consolidated financial statements included in Item 8 of this Form 10-K. 2 Table of Contents ​ Internet Website ​ The Corporation maintains a website at www.myprovident.com.
Accordingly, all operations are considered by management to be one operating segment and one reportable segment as contained in the Consolidated Statements of Operations to the Corporation’s audited consolidated financial statements included in Item 8 of this Form 10-K. ​ Internet Website ​ The Corporation maintains a website at www.myprovident.com.
In fiscal 2022 and 2021, the FHLB – San Francisco distributed cash dividends to the Bank totaling $489,000 and $418,000, respectively. ​ ​ Subsidiary Activities ​ Federal savings institutions generally may invest up to 3% of their assets in service corporations, provided that at least one-half of any amount in excess of 1% is used primarily for community, inner-city and community development projects.
In fiscal 2023 and 2022, the FHLB – San Francisco distributed cash dividends to the Bank totaling $556,000 and $489,000, respectively. ​ ​ Subsidiary Activities ​ Federal savings institutions generally may invest up to 3% of their assets in service corporations, provided that at least one-half of any amount in excess of 1% is used primarily for community, inner-city and community development projects.
Failure to comply with these laws and regulations 28 Table of Contents can subject the Bank to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages and the loss of certain contractual rights. ​ Savings and Loan Holding Company Regulation ​ General.
Failure to comply with these laws and regulations can subject the Bank to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages and the loss of certain contractual rights. ​ Savings and Loan Holding Company Regulation ​ General.
Thus, any dividends to the Corporation that would reduce amounts appropriated to the Bank’s bad debt reserve and deducted for federal income tax purposes would create a tax liability for the Bank.
Thus, any dividends to Provident that would reduce amounts appropriated to the Bank’s bad debt reserve and deducted for federal income tax purposes would create a tax liability for the Bank.
The Bank’s OCC annual assessments for the fiscal years ended June 30, 2022 and 2021 were $221,000 and $218,000, respectively. ​ The Bank's general permissible lending limit for loans to one borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus).
The Bank’s OCC annual assessments for the fiscal years ended June 30, 2023 and 2022 were $198,000 and $221,000, respectively. ​ The Bank's general permissible lending limit for loans to one borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus).
The allowance for loan losses for non-performing loans is determined by applying Accounting Standards Codification (“ASC”) 310, “Receivables.” For restructured loans that are less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their restructuring period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method.
The allowance for loan losses for non-performing loans is determined by applying ASC 310, “Receivables.” For restructured loans that are less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their restructuring period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method.
Borrowings through the FHLB – San Francisco and repurchase agreements may be used to compensate for declines in the availability of funds from other sources. ​ Deposit Accounts. Substantially all of the Bank’s depositors are residents of the State of California.
Borrowings through the FHLB – San 20 Table of Contents Francisco and repurchase agreements may be used to compensate for declines in the availability of funds from other sources. ​ Deposit Accounts. Substantially all of the Bank’s depositors are residents of the State of California.
Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss.
Doubtful assets have the weaknesses of substandard assets with the additional 14 Table of Contents characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss.
Institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.
Institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies 28 Table of Contents and no savings institution may purchase the securities of any affiliate other than a subsidiary.
At June 30, 2022, the Bank had no loans or group of loans to related borrowers with outstanding balances in excess of this amount.
At June 30, 2023, the Bank had no loans or group of loans to related borrowers with outstanding balances in excess of this amount.
The Bank’s five largest lending relationships at June 30, 2022 consisted of: four multi-family loans totaling $5.2 million to one group of borrowers; eight single-family loans and one multi-family loan totaling $5.2 million to one group of borrowers; two multi-family loans totaling $4.4 million to one group of borrowers; three multi-family loans totaling $4.3 million to one group of borrowers; and one multi-family loan totaling $4.2 million to one group of borrowers.
The Bank’s five largest lending relationships at June 30, 2023 consisted of: four multi-family loans totaling $5.1 million to one group of borrowers; eight single-family loans totaling $4.5 million to one group of borrowers; two multi-family loans totaling $4.3 million to one group of borrowers; three multi-family loans totaling $4.2 million to one group of borrowers; and one multi-family loan totaling $4.2 million to one group of borrowers.
During both fiscal 2022 and 2021, the Bank had no charge-offs or recoveries on non-performing multi-family and commercial real estate loans. At June 30, 2022 and 2021, there were no non-performing or 30 to 89 days delinquent multi-family and commercial real estate loans at both dates.
During both fiscal 2023 and 2022, the Bank had no charge-offs or recoveries on non-performing multi-family and commercial real estate loans. At June 30, 2023 and 2022, there were no non-performing or 30 to 89 days delinquent multi-family and commercial real estate loans.
Prior to approval of any construction loan, an independent fee appraiser inspects the site and the Bank reviews the existing or proposed improvements, identifies the market for the proposed project, and 8 Table of Contents analyzes the pro-forma data and assumptions on the project.
Prior to approval of any construction loan, an independent fee appraiser inspects the site and the Bank reviews the existing or proposed improvements, identifies the market for the proposed project, and analyzes the pro-forma data and assumptions on the project.
The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on the Bank and the Corporation. ​ ​ 23 Table of Contents Federal Regulation of Savings Institutions ​ Office of the Comptroller of the Currency.
The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on the Bank and the Corporation. ​ Federal Regulation of Savings Institutions ​ Office of the Comptroller of the Currency.
These contributions have in the past adversely affected the level of dividends paid by the FHLB - San Francisco and could continue to do so in the future. These contributions also could have an adverse effect on the value of 24 Table of Contents FHLB - San Francisco stock in the future.
These contributions have in the past adversely affected the level of dividends paid by the FHLB - San Francisco and could continue to do so in the future. These contributions also could have an adverse effect on the value of FHLB - San Francisco stock in the future.
The ratio is derived by dividing the original loan balance by the lower of the original appraised value or purchase price of the real estate collateral. Currently, the maximum LTV ratio is 90% for purchase and rate and term refinances and 75% for cash-out refinances. The maximum loan amount offered is $1.5 million.
The ratio is derived by dividing the original loan balance by the lower of the original appraised value or purchase price of the real estate collateral. Currently, the maximum LTV ratio is 90% for purchase and rate and term refinances and 75% for cash-out refinances. The maximum loan amount offered on single-family homes is $1.5 million.
Wertz 56 — Senior Vice President ​ ​ ​ Retail Banking Division ​ (1) As of June 30, 2022. ​ Biographical Information ​ Set forth below is certain information regarding the executive officers of the Corporation and the Bank. There are no family relationships among or between the executive officers. ​ Craig G.
Wertz 57 — Senior Vice President ​ ​ ​ Retail Banking Division ​ (1) As of June 30, 2023. ​ Biographical Information ​ Set forth below is certain information regarding the executive officers of the Corporation and the Bank. There are no family relationships among or between the executive officers. ​ Craig G.
At June 30, 2022, the Corporation’s net state tax rate was 7.7%. Bad debt deductions are available in computing California franchise taxes using the specific charge-off method. The Bank and its California subsidiaries file California franchise tax returns on a combined basis. The Corporation will be treated as a general corporation subject to the general corporate tax rate.
At June 30, 2023, the Corporation’s net state tax rate was 8.9%. Bad debt deductions are available in computing California franchise taxes using the specific charge-off method. The Bank and its California subsidiaries file California franchise tax returns on a combined basis. The Corporation will be treated as a general corporation subject to the general corporate tax rate.
Through its subsidiary, Provident Financial Corp, the Bank conducts trustee services for the Bank’s real estate transactions and in the past has held real estate for investment. For additional information, see “Subsidiary Activities” in this Form 10-K. The activities of Provident Financial Corp are included in the Bank's operating segment results.
Through its subsidiary, PFC, the Bank conducts trustee services for the Bank’s real estate transactions and in the past has held real estate for investment. For additional information, see “Subsidiary Activities” in this Form 10-K. The activities of PFC are included in the Bank's operating segment results.
Ternes 62 President President ​ ​ ​ Chief Operating Officer Chief Operating Officer ​ ​ ​ Chief Financial Officer Chief Financial Officer ​ ​ ​ Corporate Secretary Corporate Secretary ​ ​ ​ David S. Weiant 63 — Senior Vice President ​ ​ ​ Chief Lending Officer ​ ​ ​ Gwendolyn L.
Ternes 63 President President ​ ​ ​ Chief Operating Officer Chief Operating Officer ​ ​ ​ Chief Financial Officer Chief Financial Officer ​ ​ ​ Corporate Secretary Corporate Secretary ​ ​ ​ David S. Weiant 64 — Senior Vice President ​ ​ ​ Chief Lending Officer ​ ​ ​ Gwendolyn L.
At June 30, 2022 and 2021, total non-performing single-family loans were $1.4 million and $7.9 million, net of allowances and charge-offs, and there were no loans past due 30 to 89 days at both dates. ​ The Bank has underwriting standards that generally conform with the standards of the government sponsored entities (“GSE”) which include Fannie Mae and Freddie Mac.
At June 30, 2023 and 2022, total non-performing single-family loans were $1.3 million and $1.4 million, respectively, net of allowances and charge-offs, and there were no loans past due 30 to 89 days at both dates. ​ The Bank has underwriting standards that generally conform with the standards of the government sponsored entities (“GSE”) which include Fannie Mae and Freddie Mac.
Turnover for employees as measured by terminated employees to the average total employees was 39.8% in fiscal 2022, up from 34.1% in fiscal 2021. ​ 32 Table of Contents EXECUTIVE OFFICERS ​ The following table sets forth information with respect to the executive officers of the Corporation and the Bank: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Position Name Age (1) Corporation Bank ​ ​ ​ ​ ​ ​ ​ Craig G.
Turnover for employees as measured by terminated employees to the average total employees was 41.4% in fiscal 2023, up from 39.8% in fiscal 2022. ​ 34 Table of Contents EXECUTIVE OFFICERS ​ The following table sets forth information with respect to the executive officers of the Corporation and the Bank: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Position Name Age (1) Corporation Bank ​ ​ ​ ​ ​ ​ ​ Craig G.
At June 30, 2022, the outstanding borrowings mature between 2022 and 2025 with a weighted average maturity of 16 months. ​ In addition to the total borrowings mentioned above, the Bank utilized its borrowing facility for letters of credit and credit enhancement for loans previously sold to the FHLB – San Francisco under the Mortgage Partnership Finance (“MPF”) program which have a recourse liability.
At June 30, 2023, the outstanding borrowings mature between 2023 and 2028 with a weighted average maturity of 12 months. ​ In addition to the total borrowings mentioned above, the Bank utilized its borrowing facility for letters of credit and credit enhancement for loans previously sold to the FHLB – San Francisco under the Mortgage Partnership Finance (“MPF”) program which have a recourse liability.
The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order or any condition imposed by, or written agreement with, the FRB.
The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order or any condition 32 Table of Contents imposed by, or written agreement with, the FRB.
Loans of this type have embedded interest rate risk if interest rates should rise during the initial fixed rate period. ​ Borrower demand for ARM loans versus fixed-rate mortgage loans is a function of the level of interest rates, the expectations of changes in the level of interest rates and the difference between the initial interest rates and fees charged for each type of loan.
Loans of this type have embedded interest rate risk if interest rates should rise during the initial fixed rate period or if rates should rise beyond the periodic or lifetime caps. ​ Borrower demand for ARM loans versus fixed-rate mortgage loans is a function of the level of interest rates, the expectations of changes in the level of interest rates and the difference between the initial interest rates and fees charged for each type of loan.
The Bank reviews its deposit composition and pricing on a weekly basis. ​ The Bank generally offers time deposits for terms not exceeding seven years. As illustrated in the following table, time deposits represented 13% of the Bank’s deposit portfolio at June 30, 2022, compared to 15% at June 30, 2021.
The Bank reviews its deposit composition and pricing on a weekly basis. ​ The Bank generally offers time deposits for terms not exceeding seven years. As illustrated in the following table, time deposits represented approximately 23% of the Bank’s deposit portfolio at June 30, 2023, compared to approximately 13% at June 30, 2022.
As of June 30, 2022 and 2021, the Bank maintained 90.8% and 90.3% of its portfolio assets in qualified thrift investments, respectively, and therefore, met the qualified thrift lender test at both dates. During fiscal 2022 and 2021, the Bank was in compliance with the QTL test as of each month end. ​ Capital Requirements.
As of June 30, 2023 and 2022, the Bank maintained 92.1% and 90.8% of its portfolio assets in qualified thrift investments, respectively, and therefore, met the qualified thrift lender test at both dates. During fiscal 2023 and 2022, the Bank was in compliance with the QTL test as of each month end. ​ Capital Requirements.
The Bank adjusts its allowance for loan losses by charging (crediting) its provision (recovery) for loan losses against the Bank’s operations. ​ The Bank has established a methodology for the determination of the provision for loan losses.
The Bank adjusts its allowance for loan losses by charging (crediting) its provision (recovery) for loan losses against the Bank’s operations. ​ 15 Table of Contents The Bank has established a methodology for the determination of the provision for loan losses.
As of June 30, 2022, a total of $78.6 million of single-family mortgage loans with a 79% weighted average LTV at the time of origination have lender-paid mortgage insurance providing a weighted average coverage ratio of 11% of the original loan amount. ​ Prior to fiscal 2009, many of the loans we originated for investment consisted of non-traditional single-family residential loans that do not conform to Fannie Mae or Freddie Mac underwriting guidelines as a result of the characteristics of the borrower or property, the loan terms, loan size or exceptions from agency underwriting guidelines.
As of June 30, 2023, a total of approximately $136.5 million of single-family mortgage loans with a 79% weighted average LTV at the time of origination have lender-paid mortgage insurance providing a weighted average coverage ratio of approximately 12% of the original loan amount. ​ Prior to fiscal 2009, many of the loans we originated for investment consisted of non-traditional single-family residential loans that do not conform to Fannie Mae or Freddie Mac underwriting guidelines as a result of the characteristics of the borrower or property, the loan terms, loan size or exceptions from agency underwriting guidelines.
However, Congress acted to protect secured creditors by 27 Table of Contents providing that the term "owner and operator" excludes a person whose ownership is limited to protecting its security interest in the site.
However, Congress acted to protect secured creditors by providing that the term "owner and operator" excludes a person whose ownership is limited to protecting its security interest in the site.
A troubled debt restructuring is a loan which the Bank, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Bank would not otherwise consider. ​ The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to: ​ ● A reduction in the stated interest rate; ● An extension of the maturity at an interest rate below market; ● A reduction in the accrued interest; and ● Extensions, deferrals, renewals and rewrites. ​ To qualify for restructuring, a borrower must provide evidence of their creditworthiness such as, current financial statements, their most recent income tax returns, current paystubs, current W-2s, and most recent bank statements, among other documents, which are then verified by the Bank.
A troubled debt restructuring is a loan which the Bank, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Bank would not otherwise consider. ​ The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to: ​ ● A reduction in the stated interest rate and/or accrued interest; ● An extension of the maturity date, typically longer than 6 months; ● A reduction principal loan balance; and ● Extensions, deferrals, renewals and rewrites. ​ To qualify for restructuring, a borrower must provide evidence of their creditworthiness such as, current financial statements, their most recent income tax returns, current paystubs, current W-2s, and most recent bank statements, among other documents, which are then verified by the Bank.
The Bank originates multi-family and commercial real estate loans in amounts typically ranging from $350,000 to $6.0 million. At June 30, 2022, the Bank had 63 commercial real estate and multi-family loans with principal balances greater than $1.5 million totaling $138.1 million. The Bank obtains appraisals on all properties that secure multi-family and commercial real estate loans.
The Bank originates multi-family and commercial real estate loans in amounts typically ranging from $350,000 to $6.0 million. At June 30, 2023, the Bank had 61 commercial real estate and multi-family loans with principal balances greater than $1.5 million totaling $134.5 million. The Bank obtains appraisals on all properties that secure multi-family and commercial real estate loans.
The Bank also considers the effect that the proposed investment would have on the Bank’s risk-based capital requirements and interest rate risk sensitivity. ​ At June 30, 2022 and 2021, the Bank’s investment securities portfolio was $188.4 million and $226.9 million, respectively, which primarily consisted of federal agency and GSE obligations.
The Bank also considers the effect that the proposed investment would have on the Bank’s risk-based capital requirements and interest rate risk sensitivity. ​ At June 30, 2023 and 2022, the Bank’s investment securities portfolio was $156.6 million and $188.4 million, respectively, which primarily consisted of federal agency and GSE obligations.
The Bank’s investment in its service corporations did not exceed these limits at June 30, 2022 and 2021. ​ The Bank has three wholly owned subsidiaries: Provident Financial Corp (“PFC”), Profed Mortgage, Inc., and First Service Corporation. PFC’s current activities include: (i) acting as trustee for the Bank’s real estate transactions and (ii) holding real estate for investment, if any.
The Bank’s investment in its service corporations did not exceed these limits at June 30, 2023 and 2022. ​ The Bank has three wholly owned subsidiaries: PFC, Profed Mortgage, Inc., and First Service Corporation. PFC’s current activities include: (i) acting as trustee for the Bank’s real estate transactions and (ii) holding real estate for investment, if any.
Each credit program has its own interest rate, maturity, terms and conditions. Depending on the program, limitations on the amount of advances are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit.
Advances are made pursuant to several different credit programs. Each credit program has its own interest rate, maturity, terms and conditions. Depending on the program, limitations on the amount of advances are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit.
In addition, the Bank pledged investment securities totaling $4.7 million and $1.6 million at June 30, 2022 and 2021, respectively, to collateralize its FHLB – San Francisco advances under the Securities-Backed Credit (“SBC”) facility.
In addition, the Bank pledged investment securities totaling $4.2 million and $4.7 million at June 30, 2023 and 2022, respectively, to collateralize its FHLB – San Francisco advances under the Securities-Backed Credit (“SBC”) facility.
By assessing the probable estimated losses inherent in the loans held 15 Table of Contents for investment on a quarterly basis, the Bank is able to adjust specific and inherent loss estimates based upon the most recent information that has become available. ​ At June 30, 2022, the Bank had an allowance for loan losses of $5.6 million, or 0.59% of gross loans held for investment, compared to an allowance for loan losses at June 30, 2021 of $7.6 million, or 0.88% of gross loans held for investment.
By assessing the probable estimated losses inherent in the loans held for investment on a quarterly basis, the Bank is able to adjust specific and inherent loss estimates based upon the most recent information that has become available. ​ At June 30, 2023, the Bank had an allowance for loan losses of $5.9 million, or 0.55% of gross loans held for investment, compared to an allowance for loan losses at June 30, 2022 of $5.6 million, or 0.59% of gross loans held for investment.
Advances from the FHLB – San Francisco are typically secured by the Bank’s single-family residential, multi-family and commercial real estate mortgage loans. Total mortgage loans pledged to the FHLB – San Francisco were $570.4 million at June 30, 2022 as compared to $607.0 million at June 30, 2021.
Advances from the FHLB – San Francisco are typically secured by the Bank’s single-family residential, multi-family and commercial real estate mortgage loans. Total mortgage loans pledged to the FHLB – San Francisco were $967.6 million at June 30, 2023 as compared to $570.4 million at June 30, 2022.
The increase in the single-family loans in fiscal 2022 was primarily attributable to new loans originated and purchased for investment that exceeded loan principal payments. During fiscal 2022, the Bank had net recoveries of $439,000 in non-performing single-family loans, as compared to net recoveries of $31,000 during fiscal 2021.
The increase in the single-family loans in fiscal 2023 was primarily attributable to new loans originated for investment that exceeded loan principal payments. During fiscal 2023, the Bank had net recoveries of $8,000 in non-performing single-family loans, as compared to net recoveries of $439,000 during fiscal 2022.
Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours. Compliance with the new rule is required by May 1, 2022.
Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours.
Fiscal 2017 and fiscal years thereafter remain subject to federal examination, while the California state tax returns for fiscal 2016 and fiscal years thereafter are subject to examination by state taxing authorities. ​ State Taxation ​ California.
Fiscal 2020 and fiscal years thereafter remain subject to federal examination, while the California state tax returns for fiscal 2019 and fiscal years thereafter are subject to examination by state taxing authorities. ​ State Taxation ​ California.
The following discussion of tax matters is intended only as 30 Table of Contents a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Corporation. ​ Tax Bad Debt Reserves.
The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Corporation. ​ Tax Bad Debt Reserves.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis standard will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for credit losses at inception of the loan.
Biggest changeAny increases in the allowance for loan losses will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition and results of operations. ​ Finally, beginning on July 1, 2023, the Bank is required to adopt the CECL standard to determine estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses at inception of the loan.
A return of recessionary conditions or adverse economic conditions in California may reduce our rate of growth, affect our customers' ability to repay loans and adversely impact our capital, liquidity, financial condition and earnings. General economic conditions, including inflation, unemployment and money supply fluctuations, also may adversely affect our profitability.
A return of recessionary conditions or adverse economic conditions in California may reduce our rate of growth, affect our customers' ability to repay loans and adversely impact our capital, liquidity, financial condition and earnings. General economic conditions, including inflation, unemployment and money supply fluctuations, may also adversely affect our profitability.
Our non-performing assets adversely affect our net income in various ways: ​ ● we record interest income only on a cash basis for non-performing loans except for non-performing loans under the cost recovery method where interest is applied to the principal of the loan as a recovery of the charge-offs, if any, and we do not record interest income for REO; ● we must provide for probable loan losses through a current period charge to the provision for loan losses; ● non-interest expense increases when we write down the value of properties in our REO portfolio to reflect changing market values or recognize other-than-temporary impairment (“OTTI”) on non-performing investment securities; ● there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees related to our REO; and ● the resolution of non-performing assets requires the active involvement of management, which can divert them from more profitable activity. ​ If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations. ​ If our investments in real estate are not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation reserves, our earnings could be reduced. ​ We obtain updated valuations in the form of appraisals and broker price opinions when a loan has been foreclosed upon and the property is taken in as REO and at certain other times during the REO holding period.
Our non-performing assets adversely affect our net income in various ways: ​ ● we record interest income only on a cash basis for non-performing loans except for non-performing loans under the cost recovery method where interest is applied to the principal of the loan as a recovery of the charge-offs, if any, and we do not record interest income for REO; ● we must provide for probable loan losses through a current period charge to the provision for loan losses; ● non-interest expense increases when we write down the value of REO properties to reflect changing market values or recognize other-than-temporary impairment (“OTTI”) on non-performing investment securities; ● there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees related to REO; and ● the resolution of non-performing assets requires the active involvement of management, which can divert them from more profitable activity. ​ If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations. ​ If our investments in real estate are not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation reserves, our earnings could be reduced. ​ We obtain updated valuations in the form of appraisals and broker price opinions when a loan has been foreclosed upon and the property is taken in as REO and at certain other times during the REO holding period.
In addition to possibly sustaining damage to our own properties, if there is a major earthquake, fire, mudslide, or other natural disaster, we face the risk that many of our borrowers may experience uninsured property losses, or sustained job interruption and/or loss which may materially impair their ability to meet the terms of their loan obligations. ​ ​ 44 Table of Contents Any 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. ​ We have previously engaged in bulk loan sales pursuant to agreements that generally require us to repurchase or substitute loans in the event of a breach of a representation or warranty made by us to the loan purchaser.
In addition to possibly sustaining damage to our own properties, if there is a major earthquake, fire, mudslide, or other natural disaster, we face the risk that 46 Table of Contents many of our borrowers may experience uninsured property losses, or sustained job interruption and/or loss which may materially impair their ability to meet the terms of their loan obligations. ​ Any 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. ​ We have previously engaged in bulk loan sales pursuant to agreements that generally require us to repurchase or substitute loans in the event of a breach of a representation or warranty made by us to the loan purchaser.
These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by, or other adverse events affecting, the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets.
These factors include, but are not limited to, rating agency actions in respect to the securities, defaults by, or other adverse events affecting, the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets.
We are not aware that we have experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of 41 Table of Contents a cyber-security breach or other act, however, some of our customers may have been affected by these breaches, which could increase their risks of identity theft, debit and card fraud and other fraudulent activity that could involve their accounts with us. ​ Security breaches in our internet banking activities could further expose us to possible liability and damage our reputation.
We are not aware that we have experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a cyber-security breach or other act, however, some of our customers may have been affected by these breaches, which 43 Table of Contents could increase their risks of identity theft, debit and card fraud and other fraudulent activity that could involve their accounts with us. ​ Security breaches in our internet banking activities could further expose us to possible liability and damage our reputation.
Accordingly, charge-offs on multi-family and commercial real estate loans may be larger on a per loan basis than those incurred with our single-family residential loan portfolio. ​ We 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. ​ In order to achieve our loan growth objectives and/or improve earnings, we may purchase loans, either individually, through participations, or in bulk.
Accordingly, charge-offs on multi-family and commercial real estate loans may be larger on a per loan basis than those incurred within the single-family residential loan portfolio. ​ We 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. ​ In order to achieve our loan growth objectives and/or improve earnings, we may purchase loans, either individually, through participations, or in bulk.
Disruptions or failures in the physical infrastructure or operating systems that support our business and customers, or cyber-attacks or security breaches of the networks, systems or devices that our customers use to access our products and services could result in 43 Table of Contents customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition. ​ Managing reputational risk is important to attracting and maintaining customers, investors and employees. ​ Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers.
Disruptions or failures in the physical infrastructure or operating systems that support our business and customers, or cyber-attacks or security breaches of the networks, systems or devices that our customers use to access our products and services could result in customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition. ​ Managing reputational risk is important to attracting and maintaining customers, investors and employees. ​ Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers.
For example, if we purchase pools of loans at a premium and some of the loans are prepaid before we expected we will earn less interest income on the purchase than expected.
For example, if we purchase pools of loans at a premium and some of the loans are prepaid before we modeled, we will earn less interest income on the purchase than expected.
We may use derivative instruments to economically hedge mortgage servicing rights, mortgage loans held for sale and interest rate lock commitments to offset changes in fair value resulting from changing interest rate environments. Our hedging strategies are susceptible to prepayment risk, basis risk, market volatility and changes in the shape of the yield curve, among other factors.
We may use derivative instruments to economically hedge mortgage servicing assets, mortgage loans held for sale and interest rate lock commitments to offset changes in fair value resulting from changing interest rate environments. Our hedging strategies are susceptible to prepayment risk, basis risk, market volatility and changes in the shape of the yield curve, among other factors.
Residential loans with high loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. ​ Our 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. ​ We originate multi-family residential and commercial real estate loans for individuals and businesses for various purposes, which are secured by residential and non-residential properties.
Residential loans 37 Table of Contents with high loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. ​ Our 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. ​ We originate multi-family and commercial real estate loans for individuals and businesses for various purposes, which are secured by residential and non-residential properties.
These potential negative events may cause us to incur losses, adversely affect our capital and liquidity and damage our financial condition and business operations. ​ A few of our residential mortgage loans are secured by liens on mortgage properties in which the borrowers have little or no equity because either we originated a first mortgage with an 80% loan-to-value ratio and a concurrent second mortgage for a combined loan-to-value ratio of up to 100% or because of a decline in home values in our market areas.
These potential negative events may cause us to incur losses, adversely affect our capital and liquidity and damage our financial condition and business operations. ​ A few of our legacy residential mortgage loans are secured by properties in which the borrowers have little or no equity because either we originated a first mortgage with an 80% loan-to-value ratio and a concurrent second mortgage for a combined loan-to-value ratio of up to 100% or because of a decline in home values in our market areas.
Any claims asserted against us in the future by one of our loan purchasers may result in liabilities or legal expenses that could have a material adverse effect on our results of operations and financial condition. During fiscal 2022 and 2021, the Bank did not repurchase any loans.
Any claims asserted against us in the future by one of our loan purchasers may result in liabilities or legal expenses that could have a material adverse effect on our results of operations and financial condition. During fiscal 2023 and 2022, the Bank did not repurchase any loans.
In the event the Bank is unable to pay dividends to us, we may not be able to pay dividends on our common stock. Also, our right to participate in a distribution of assets upon a subsidiary's liquidation or reorganization is subject to the prior claims of the subsidiary's creditors. ​ 45 Table of Contents ​ Item 1B.
In the event the Bank is unable to pay dividends to us, we may not be able to pay dividends on our common stock. Also, our right to participate in a distribution of assets upon a subsidiary's liquidation or reorganization is subject to the prior claims of the subsidiary's creditors. ​ ​ 47 Table of Contents ​ Item 1B.
The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements because of changes in the vendor’s organizational structure, financial condition, support for existing products and services, strategic focus or for any other reason, could be disruptive to our operations, which in turn could have a material negative impact on our financial condition and results of operations.
The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements because of changes in the vendor’s organizational structure, financial condition, support for existing products and services, strategic focus or for any other reason, could be disruptive 45 Table of Contents to our operations, which in turn could have a material negative impact on our financial condition and results of operations.
Changes in agreements or relationships between the United States and other countries may also affect these businesses. ​ A deterioration in economic conditions in the market areas we serve as a result of COVID-19 or other factors could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations: ​ ● an increase in loan delinquencies, problem assets and foreclosures; ● we may increase our allowance for loan losses; ● the slowing of sales of foreclosed assets; ● a decline in demand for our products and services; ● a decline in the value of collateral for loans may in turn reduce customers' borrowing power, and the value of assets and collateral associated with existing loans; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and ● a decrease in the amount of our low cost or non interest-bearing deposits. ​ A decline in California economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse.
Changes in agreements or relationships between the United States and other countries may also affect these businesses. ​ A deterioration in economic conditions in the market areas we serve as a result of inflation, a recession, the effects of COVID-19 variants or other factors, could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations: ​ ● an increase in loan delinquencies, problem assets and foreclosures; ● an increase in our allowance for loan losses; ● the slowing of sales of foreclosed assets; ● a decline in demand for our products and services; ● a decline in the value of collateral for loans may in turn reduce customers' borrowing power, and the value of assets and collateral associated with existing loans; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and ● a decrease in the amount of our low cost or noninterest-bearing deposits. ​ A decline in California economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse.
For additional information concerning the effect of interest rates on our loan portfolio, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-K. ​ 39 Table of Contents Certain hedging strategies that we may use to manage investment in mortgage servicing rights, 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.
For additional information concerning the effect of interest rates on our loan portfolio, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-K. ​ Certain 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.
We cannot assure that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely.
We cannot ensure that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely.
For the year ended June 30, 2022, we did not incur any other-than-temporary impairments on our securities portfolio. ​ Risks Related to Regulatory, Legal and Compliance Matters ​ Non-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. ​ The USA Patriot and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities.
For the year ended June 30, 2023, we did not incur any other-than-temporary impairments on our securities portfolio. ​ 41 Table of Contents Risks Related to Regulatory, Legal and Compliance Matters ​ Non-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. ​ The USA Patriot and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities.
Repayment on these loans are dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions.
Repayment on these loans typically is dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions.
Our success in growing through purchases of loan “pools” depends on our ability to price loan “pools” properly and on the general economic conditions within the geographic areas where the underlying properties of our loans are located. ​ 36 Table of Contents Acquiring loans through bulk purchases may involve acquiring loans of a type or in geographic areas where management may not have substantial prior experience.
Our success in growing our loan portfolio through purchases of loan “pools” depends on our ability to price loan “pools” properly and on the general economic conditions within the geographic areas where the underlying properties of our loans are located. ​ Acquiring loans through bulk purchases may involve acquiring loans of a type or in geographic areas where management may not have substantial prior experience.
We may be exposed to a greater risk of loss to the extent that bulk purchases contain such loans. ​ Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio. ​ Lending money is a substantial part of our business and each loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment.
We may be exposed to a greater risk of loss to the extent that bulk purchases contain such loans. ​ 38 Table of Contents Our allowance for loan losses may not be sufficient to absorb losses in our loan portfolio. ​ Lending money is a substantial part of our business and each loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment.
Further, there can be no assurance that the Bank’s loan workout and other activities will not expose the Bank to additional legal actions, including lender liability or environmental claims. ​ Risks Related to Cybersecurity, Data and Fraud ​ We are subject to certain risks in connection with our use of technology. ​ Our security measures may not be sufficient to mitigate the risk of a cyber attack.
Further, there can be no assurance that the our loan workouts and other activities will not expose us to additional legal actions, including lender liability or environmental claims. ​ Risks Related to Cybersecurity, Data and Fraud ​ We are subject to certain risks in connection with our use of technology. ​ Our security measures may not be sufficient to mitigate the risk of a cyber attack.
If charge-offs in future periods exceed the allowance for loan losses, we may need additional provisions to increase the allowance for loan losses to appropriate levels.
If charge-offs in future periods exceed the allowance for loan losses, we may need additional provisions to increase the allowance for loan losses.
As is the case with many financial institutions, our emphasis on increasing the development of core deposits, those deposits bearing no or a relatively low rate of interest with no stated maturity date, has resulted in our having a significant amount of these deposits bearing a relatively low rate of interest and having a shorter duration than our assets.
As is the case with many financial institutions, our emphasis on increasing core deposits, those deposits bearing no or a relatively low rate of interest with no stated maturity date, has resulted in our having a significant amount of these deposits, which have a shorter duration than our assets.
When we purchase loans in bulk, we perform certain due diligence procedures and typically require customary limited indemnities.
In addition, when we purchase loans, we perform certain due diligence procedures and typically require customary limited indemnities.
Recessionary conditions or declines in the volume of single-family real estate sales and/or the sales prices as well as 35 Table of Contents elevated unemployment rates may result in higher than expected loan delinquencies or problem assets, and a decline in demand for our products and services.
Higher market interest rates, recessionary conditions or declines in the volume of single-family real estate sales and/or the sales prices as well as elevated unemployment rates, may result in higher than expected loan delinquencies or problem assets, and a decline in demand for our products and services.
Additionally, the Bank did not have any claims or settlements for previously sold loans during fiscal 2022, as compared to fiscal 2021 when the Bank settled a repurchase claim for previously sold loans for $175,000. ​ Our assets as of June 30, 2022 include a deferred tax asset, the full value of which we may not be able to realize. ​ We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities.
Additionally, the Bank did not have any claims or settlements for previously sold loans during fiscal 2023 and 2022. ​ Our assets as of June 30, 2023 include a deferred tax asset, the full value of which we may not be able to realize. ​ We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities.
As a result, these loans may experience a higher rate of default in a rising interest rate environment. ​ Changes in interest rates also affect the value of our interest-earning assets and, in particular, our securities portfolio. Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates.
As a result, these loans may experience a higher rate of default in a rising interest rate environment. ​ Changes in interest rates also affect the value of our securities portfolio available for sale. Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates.
Any of these occurrences could have a material adverse effect on our financial condition and results of operations. ​ The board of directors oversees the risk management process, including the risk of cybersecurity, and engages with management on cybersecurity issues. ​ Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes. ​ As a bank, we are susceptible to fraudulent activity that may be committed against us or our customers, which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our customer’s information, misappropriation of assets, privacy breaches against our customers, litigation or damage to our reputation.
Any of these occurrences could have a material adverse effect on our financial condition and results of operations. ​ Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes. ​ We are susceptible to fraudulent activity that may be committed against us or our customers, which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our customer’s information, misappropriation of assets, privacy breaches against our customers, litigation or damage to our reputation.
At June 30, 2022, we had $555.1 million or 59.2% of total loans held for investment in multi-family and commercial real estate mortgage loans. These loans typically involve higher principal amounts than other types of loans and some of our commercial borrowers have more than one loan outstanding with us.
At June 30, 2023, we had $551.7 million or 51% of total loans held for investment in multi-family and commercial real estate loans. These loans typically involve higher principal amounts than other types of loans and some of our commercial borrowers have more than one loan outstanding with us.
The FOMC has indicated further increases are to be expected this year. If the FOMC further increases the targeted federal funds rates, overall interest rates will likely rise, which will positively impact our net interest income but may negatively impact both the housing market by reducing refinancing activity and new home purchases and the U.S. economy.
If the FOMC further increases the targeted federal funds rates, overall interest rates will likely rise, which will negatively impact our net interest income and may negatively impact both the housing market by reducing refinancing activity and new home purchases and the U.S. economy.
At June 30, 2022, the net deferred tax asset was approximately $1.4 million, a decrease from $2.5 million at the prior fiscal year end.
At June 30, 2023, the net deferred tax asset was approximately $218,000, a decrease from $1.4 million at the prior fiscal year end.
Such balloon payments may require the borrower to either sell or refinance the underlying property to make the payment, which may increase the risk of default or non-payment. ​ A secondary market for many types of multi-family and commercial real estate loans is not readily liquid, so we have less opportunity to mitigate credit risk by selling part or all of our interest in these loans.
In addition, many of our multi-family and commercial real estate loans are not fully amortizing and contain large balloon payments upon maturity, which would require the borrower to either sell or refinance the underlying property to make the ballon payment at maturity, thus increasing the risk of default or non-payment. ​ A secondary market for many types of multi-family and commercial real estate loans is not readily liquid, so we have less opportunity to mitigate credit risk by selling part or all of our interest in these loans.
The implementation of a substitute index or indices for the calculation of interest rates under our loan agreements with our borrowers may result in our incurring significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with customers over the appropriateness or comparability to LIBOR of the substitute index or indices, which could have an adverse effect on our results of operations.
Notwithstanding the foregoing, the implementation of a substitute index or indices for the calculation of interest rates under our loan agreements with our existing borrowings may result in our incurring significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with clients and creditors over the appropriateness or comparability to LIBOR of the substitute index or indices, which could have an adverse effect on our results of operations. ​ Ineffective liquidity management could adversely affect our financial results and condition. ​ Liquidity is essential to our business.
While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur. ​ ​ 42 Table of Contents Risks Related to our Business and Industry Generally ​ We will be required to transition from the use of the LIBOR interest rate index in the future.
While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur. ​ ​ 44 Table of Contents Risks Related to Our Business and Industry Generally ​ We are required to transition from the use of the LIBOR interest rate index starting July 1, 2023. ​ The LIBOR index was discontinued on June 30, 2023.
If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially affected. ​ A sustained increase in market interest rates could adversely affect our earnings.
We 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. 40 Table of Contents ​ A sustained increase in market interest rates could adversely affect our earnings.
At June 30, 2022, we had $78.6 million in time deposits that mature within one year, $125.1 million in non interest-bearing checking accounts and $709.3 million in interest-bearing checking, savings and money market accounts. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment.
At June 30, 2023, we had $166.5 million in time deposits that mature within one year, $103.0 million in noninterest-bearing checking accounts and $626.6 million in interest-bearing checking, savings and money market accounts. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment.
Management also recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our allowance may be insufficient to absorb losses without significant additional provisions.
Management also recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our allowance may be insufficient to absorb losses without significant additional provisions. ​ Bank regulatory agencies also periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.
The expenses of some legal proceedings will adversely affect the Bank’s results of operations until they are resolved.
Our involvement in litigation may increase significantly. The expenses of some legal proceedings will adversely affect the our results of operations until they are resolved.
Weakness in the global economy and global supply chain issues have adversely affected many businesses operating in our markets that are dependent upon international trade and it is not known how changes in tariffs being imposed on international trade may also affect these businesses.
Weakness in the global economy and global supply chain issues have adversely affected many businesses operating in our markets that are dependent upon international trade.
If our risk management framework proves ineffective, we could 40 Table of Contents suffer unexpected losses and our business, financial condition, results of operations or growth prospects could be materially adversely affected.
If our risk management framework proves ineffective, we could suffer unexpected losses and our business, financial condition, results of operations or growth prospects could be materially adversely affected. We may also be subject to potentially adverse regulatory consequences. ​ Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations.
Further, included in our single-family residential loan portfolio, which comprised 40.3% of our total loan portfolio at June 30, 2022, were $20.3 million or 2.2% of total loans held for investment that were non-traditional single-family loans, which include negative amortization and more than 30-year amortization loans, stated income loans and low FICO score loans, all of which have a higher risk of default and loss than conforming residential mortgage loans.
In addition, deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the provision for loan losses and our allowance for loan losses. ​ Further, included in our single-family residential loan portfolio, which comprised 48% of our total loan portfolio at June 30, 2023, were $20.6 million or 4% of total loans held for investment that were non-traditional single-family loans, which include negative amortization and more than 30-year amortization loans, stated income loans and low FICO score loans, all of which have a higher risk of default and loss than conforming residential mortgage loans.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the FRB.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the FRB. Beginning in March 2022, in response to high inflation, the Federal Open Market Committee (“FOMC”) commenced increasing the target range for the federal funds rates by implementing multiple increases.
If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected. ​ Risks Related to our Lending Activities ​ Our business may be adversely affected by credit risk associated with residential property. ​ At June 30, 2022, $378.2 million, or 40.3% of our loans held for investment, were secured by single-family residential real property.
Risks Related to our Lending Activities ​ Our business may be adversely affected by credit risk associated with residential property. ​ At June 30, 2023, $518.8 million, or 48% of our loans held for investment, were secured by single-family residential real property.
The Corporation purchased $6.4 million of single-family loans and $16.9 million of multi-family and single-family loans to be held for investment in fiscal 2022 and 2021, respectively.
We did not purchase any loans in fiscal 2023, as compared to the purchase of $6.4 million of single-family loans to be held for investment in fiscal 2022.
The uncertain future development of this crisis could materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels. ​ Our business may be adversely affected by downturns in the national economy and the regional economies on which we depend. ​ As of June 30, 2022, approximately 69% of our real estate loans were secured by collateral and made to borrowers located in Southern California with the balance located predominantly throughout the rest of California.
If any of the circumstances described in the following risk factors actually occur to a significant degree, the value of our common stock could decline, and you could lose all or part of your investment. ​ Risks Related to Macroeconomic Conditions ​ Our business may be adversely affected by downturns in the national economy and the regional economies on which we depend. ​ As of June 30, 2023, approximately 68% of our real estate loans were secured by collateral and made to borrowers located in Southern California with the balance located predominantly throughout the rest of California.
We may also be subject to potentially adverse regulatory consequences. ​ Our litigation related costs may increase. ​ The Bank is subject to a variety of legal proceedings that have arisen in the ordinary course of the Bank's business. The Bank's involvement in litigation may increase significantly.
Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations. 42 Table of Contents ​ Our litigation related costs may increase. ​ We are subject to a variety of legal proceedings that have arisen in the ordinary course of the Bank's business.
Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior. ​ We rely on dividends from the Bank for substantially all of our revenue at the holding company level. ​ We are an entity separate and distinct from our principal subsidiary, the Bank, and derive substantially all of our revenue at the holding company level in the form of dividends from that subsidiary.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. ​ We rely on dividends from the Bank for substantially all of our revenue at the holding company level. ​ We are an entity separate and distinct from our principal subsidiary, the Bank, and derive substantially all of our revenue at the holding company level in the form of dividends from that subsidiary.
Any increases in the provision for loan losses will result in a decrease in net income and may have a material adverse effect on our financial condition, results of operations and capital. ​ If our non-performing assets increase, our earnings will be adversely affected. ​ At June 30, 2022 and 2021, our non-performing assets were $1.4 million and $8.6 million, or 0.12% and 0.73% of total assets, respectively.
The adoption of CECL will change the allowance calculation methodology from a historical incurred loss model to an expected future loss model, which will require us to increase our allowance for credit losses. 39 Table of Contents If our non-performing assets increase, our earnings will be adversely affected. ​ At June 30, 2023 and 2022, our non-performing assets were $1.3 million and $1.4 million, or 0.10% and 0.12% of total assets, respectively.
Removed
If any of the circumstances described in the following risk factors actually occur to a significant degree, the value of our common stock could decline, and you could lose all or part of your investment. ​ Risks Related to Macroeconomic Conditions ​ The COVID-19 pandemic has adversely impacted our ability to conduct business and is expected to adversely impact our financial results and those of our customers.
Added
If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected. ​ 36 Table of Contents External economic factors, such as changes in monetary policy and inflation and deflation, may have an adverse effect on our business, financial condition and results of operations.
Removed
The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic. ​ The COVID-19 pandemic continues to negatively impact economic and commercial activity and financial markets, both globally and within the United States.
Added
Our financial condition and results of operations are affected by credit policies of monetary authorities, particularly the FRB. Actions by monetary and fiscal authorities, including the FRB, could lead to inflation, deflation, or other economic phenomena that could adversely affect our financial performance.
Removed
In our market areas, stay-at-home orders, travel restrictions and closure of non-essential businesses and similar orders imposed across the United States to restrict the spread of COVID-19 in 2020 resulted in significant business and operational disruptions, including business closures, supply chain disruptions, and significant layoffs and furloughs.
Added
Inflation has risen sharply since the end of 2021 and throughout 2022 at levels not seen for over 40 years. Inflationary pressures, while dissipating, have remain elevated throughout the first half of 2023.
Removed
Although local jurisdictions have subsequently lifted stay-at-home orders and moved to the opening of businesses, worker shortages, vaccine and testing requirements, new variants of COVID-19 and other health and safety recommendations have impacted the ability of businesses to return to pre-pandemic levels of activity and employment.
Added
Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
Removed
While the overall economy has improved, disruptions to supply chains continue and significant inflation has been seen in the market.
Added
Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition.
Removed
If these effects continue for a prolonged period or result in sustained economic stress or recession, many of the risk factors identified in our Form 10-K could be exacerbated, including the following risks of COVID-19, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations of the Corporation: ● effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating our financial reporting and internal controls; ● declines in demand for loans and other banking services and products, as well as a decline in the credit quality of our loan portfolio, owing to the effects of COVID-19 in the markets served by us; ● if the economy is unable to remain open in an efficient manner, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; ● collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; ● our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect net income; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments; ● higher operating costs, increased cybersecurity risks and potential loss of productivity as the result of an increase in the number of employees working remotely; ● increasing or protracted volatility in the price of the Company’s common stock, which may also impair our goodwill; and ● risks to the capital markets that may impact the performance of our investment securities portfolio, as well as limit our access to capital markets and other funding sources. 34 Table of Contents ​ Because there have been no comparable recent global pandemics that resulted in similar global impact, we do not yet know the full extent of COVID-19’s effects on our business, operations, or the global economy as a whole.
Added
Furthermore, a prolonged period of inflation could cause wages and other costs to the Corporation to increase, which could adversely affect our results of operations and financial condition. Virtually all of our assets and liabilities are monetary in nature.
Removed
Any future development will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic, possible future virus variants, the effectiveness of any work-from-home arrangements, third party providers’ ability to support our operations, and any actions taken by governmental authorities and other third parties in response to the pandemic.
Added
As a result, interest rates tend to have a more significant impact on our performance than general levels of inflation or deflation. Interest rates do not necessarily move in the same direction or by the same magnitude as the prices of goods and services.
Removed
In addition, many of our multi-family and commercial real estate loans are not fully amortizing and contain large balloon payments upon maturity.
Added
The economic impact of the COVID-19 pandemic could continue to affect our financial condition and results of operations. The COVID-19 pandemic has adversely impacted the global and national economy and certain industries and geographies in which our clients operate.
Removed
In determining the amount of the allowance for loan losses, we review our loans, losses, and delinquency experience, and evaluate economic conditions and make significant estimates of current credit risks and future trends, all of which may undergo material changes.
Added
Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on the business of the Corporation, its clients, employees and third-party service providers. The extent of such impact will depend on future developments, which are highly uncertain.
Removed
Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the provision for loan losses and our allowance for loan losses.
Added
Additionally, the responses of various governmental and nongovernmental authorities and consumers to the pandemic may have material long-term effects on the Corporation and its clients which are difficult to quantify in the near-term or long-term.
Removed
Furthermore, the Financial Accounting Standards Board (“FASB”) has adopted a new accounting standard, ASC 326 Current Expected Credit Losses (“CECL”), that will be effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019, however, the FASB board in July 2019 extended the adoption date for certain SEC registrants, including the Corporation, to fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022.
Added
We could be subject to a number of risks as the result of the COVID-19 pandemic, any of which could have a material, adverse effect on our business, financial condition, liquidity, results of operations, ability to execute our growth strategy, and ability to pay dividends.
Removed
This will change the current method of calculating allowances for credit losses that are probable, which may require us to increase our allowance for loan losses, and may greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for credit losses.
Added
These risks include, but are not limited to, changes in demand for our products and services; increased loan losses or other impairments in our loan portfolios and increases in our allowance for loan losses; a decline in collateral for our loans, especially real estate; unanticipated unavailability of employees; increased cyber security risks as employees work remotely; a prolonged weakness in economic conditions resulting in a reduction of future projected earnings could necessitate a valuation allowance against our current outstanding deferred tax assets; a triggering event leading to impairment testing on our goodwill or core deposit and customer relationships intangibles, which could result in an impairment charge; and increased costs as the Corporation and our regulators, customers and vendors adapt to evolving pandemic conditions.
Removed
The federal banking regulators (the FRB, 37 Table of Contents the OCC and the FDIC) have adopted regulations that apply to smaller reporting companies, such as the Corporation, beginning in 2023.
Added
As of June 30, 2023, the target range for the federal funds rate was 5.00% to 5.25%. Subsequently, on July 26, 2023, the FOMC raised its targeted range an additional 25 basis points to a range of 5.25% to 5.50% (a 22-year high) as economic conditions remain relatively resilient and inflation remains elevated.
Removed
In addition, a decline in national and local economic conditions, including as a result of the COVID-19 pandemic, and results of the bank regulatory agencies periodic review of our allowance for loan losses or other factors may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs.
Added
More importantly, going forward, the Fed has left the door open for further rate hikes before calendar year-end, although the pace remains unclear.
Removed
In March 2020, in response to the COVID-19 pandemic, the Federal Open Market Committee (“FOMC”) of the FRB reduced the targeted federal funds rate 150 basis points to a range of 0.00% to 0.25%. The reduction in the targeted federal funds rate resulted in a decline in overall interest rates which has negatively impacted our net interest income.
Added
The effects of climate change continue to create an alarming level of concern for the state of the global environment. As a result, the global business community has increased its political and social awareness surrounding the issue, and the United States has entered into international agreements in an attempt to reduce global temperatures, such as reentering the Paris Agreement.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties ​ At June 30, 2022, the net book value of the Bank’s property (including land and buildings) and its furniture, fixtures and equipment was $6.9 million. The Bank’s home office is located in Riverside, California.
Biggest changeItem 2. Properties ​ At June 30, 2023, the net book value of the Corporation’s property (including land and buildings) and its furniture, fixtures and equipment was $7.1 million. The Corporation’s home office is located in Riverside, California.
Including the home office, the Bank has 13 retail banking offices, 12 of which are located in Riverside County in the cities of Riverside (5), Moreno Valley, Hemet, Sun City, Rancho Mirage, Corona, Temecula and Blythe. One office is located in Redlands, San Bernardino County, California.
Including the home office, the Corporation has 13 retail banking offices, 12 of which are located in Riverside County in the cities of Riverside (5), Moreno Valley, Hemet, Sun City, Rancho Mirage, Corona, Temecula and Blythe. One office is located in Redlands, San Bernardino County, California.
The Bank owns six of the retail banking offices and has seven leased retail banking offices. The leases expire from 2023 to 2026. In the opinion of management, all properties are adequately covered by insurance, are in a good state of repair and are appropriately designed for their present and future use. ​ ​
The Corporation owns six of the retail banking offices and has seven leased retail banking offices. The leases expire from 2024 to 2028. In the opinion of management, all properties are adequately covered by insurance, are in a good state of repair and are appropriately designed for their present and future use. ​ ​

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. ​ Mine Safety Disclosures 46 ​ ​ ​ PART II ​ ​ Item 5. ​ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. ​ [Reserved] 48 Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations: 49 ​ ​ General 50 ​ ​ Critical Accounting Policies 50 ​ ​ Executive Summary and Operating Strategy 52 ​ ​ Comparison of Financial Condition at June 30, 2022 and 2021 53 ​ ​ Comparison of Operating Results for the Years Ended June 30, 2022 and 2021 54 ​ ​ Average Balances, Interest and Average Yields/Costs 59 ​ ​ Rate/Volume Variance 60 ​ ​ Liquidity and Capital Resources 61 ​ ​ Impact of New Accounting Pronouncements 62 Item 7A. ​ Quantitative and Qualitative Disclosures about Market Risk 62 Item 8. ​ Financial Statements and Supplementary Data 66
Biggest changeItem 4. ​ Mine Safety Disclosures 48 ​ ​ ​ PART II ​ ​ Item 5. ​ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 48 Item 6. ​ [Reserved] 50 Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations: 51 ​ ​ General 52 ​ ​ Critical Accounting Estimates 52 ​ ​ Executive Summary and Operating Strategy 54 ​ ​ Comparison of Financial Condition at June 30, 2023 and 2022 55 ​ ​ Comparison of Operating Results for the Fiscal Years Ended June 30, 2023 and 2022 56 ​ ​ Average Balances, Interest and Average Yields/Costs 60 ​ ​ Rate/Volume Variance 60 ​ ​ Liquidity and Capital Resources 61 ​ ​ Impact of New Accounting Pronouncements 63 Item 7A. ​ Quantitative and Qualitative Disclosures about Market Risk 63 Item 8. ​ Financial Statements and Supplementary Data 67

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the quarter and fiscal year ended June 30, 2022, the Corporation did not sell any securities that were not registered under the Securities Act of 1933. ​ The table below sets forth information regarding the Corporation’s purchases of its common stock during the fourth quarter of fiscal 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (d) Maximum ​ ​ ​ ​ ​ ​ ​ (c) Total Number of ​ Number of Shares ​ ​ ​ ​ ​ ​ ​ Shares Purchased as ​ that May Yet Be ​ ​ (a) Total Number of ​ (b) Average Price ​ Part of Publicly ​ Purchased Under Period ​ Shares Purchased ​ Paid per Share ​ Announced Plan ​ the Plan (1) April 1, 2022 – April 30, 2022 35,488 ​ $ 15.90 35,488 364,259 May 1, 2022 – May 31, 2022 — ​ $ — — 364,259 June 1, 2022 – June 30, 2022 — ​ $ — — 364,259 Total 35,488 ​ $ 15.90 35,488 364,259 ​ (1) Represents the remaining shares available for future purchases under the April 2022 stock repurchase plan. ​ 47 Table of Contents Performance Graph ​ The following graph compares the cumulative total shareholder return on the Corporation’s common stock with the cumulative total return of the Nasdaq Stock Index (U.S.
Biggest changeThe stock repurchase program does not obligate the Corporation to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time. ​ The table below sets forth information regarding the Corporation’s purchases of its common stock during the fourth quarter of fiscal 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (d) Maximum ​ ​ ​ ​ ​ ​ ​ (c) Total Number of ​ Number of Shares ​ ​ ​ ​ ​ ​ ​ Shares Purchased as ​ that May Yet Be ​ ​ (a) Total Number of ​ (b) Average Price ​ Part of Publicly ​ Purchased Under Period ​ Shares Purchased (1) ​ Paid per Share ​ Announced Plan ​ the Plan (2) April 1, 2023 – April 30, 2023 11,305 ​ $ 13.61 11,305 101,733 May 1, 2023 – May 31, 2023 49,166 ​ $ 12.10 16,121 85,612 June 1, 2023 – June 30, 2023 24,072 ​ $ 12.24 24,072 61,540 Total 84,543 ​ $ 12.34 51,498 61,540 ​ (1) The shares repurchase in May 2023 includes 33,045 shares of distributed restricted stock in settlement of employees' withholding tax obligations.
The Board of Directors has declared quarterly cash dividends on the Corporation’s common stock for consecutive quarters since September 30, 2002. On July 28, 2022, the Corporation declared a quarterly cash dividend of $0.14 per share with a record date August 18, 2022 and the dividend is payable on September 8, 2022.
The Board of Directors has declared quarterly cash dividends on the Corporation’s common stock for consecutive quarters since September 30, 2002. On April 27, 2023, the Corporation declared a quarterly cash dividend of $0.14 per share with a record date May 18, 2023 and the dividend was payable on June 8, 2023.
Under Delaware law, dividends may be paid either out of surplus or, if there is no surplus, out of net profits for the current fiscal year and/or the preceding fiscal year in which the dividend is declared. ​ The Corporation repurchases its common stock consistent with Board-approved stock repurchase plans.
Under Delaware law, dividends may be paid either out of surplus or, if there is no surplus, out of 48 Table of Contents net profits for the current fiscal year and/or the preceding fiscal year in which the dividend is declared.
Total return assumes the reinvestment of all dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 PROV ​ $ 100.00 ​ $ 102.15 ​ $ 115.75 ​ $ 76.25 ​ $ 102.04 ​ $ 90.67 NASDAQ Stock Index ​ $ 100.00 ​ $ 114.84 ​ $ 125.17 ​ $ 133.88 ​ $ 193.41 ​ $ 165.89 NASDAQ Bank Index ​ $ 100.00 ​ $ 110.88 ​ $ 110.35 ​ $ 85.27 ​ $ 147.41 ​ $ 120.38 ​ (1) Assumes that the value of the investment in the Corporation’s common stock and each index was $100 on June 30, 2017 and that all dividends were reinvested. ​ For additional information, see Part III, Item 12 of this Form 10-K for information regarding the Corporation’s Equity Compensation Plans, which is incorporated into this Item 5 by reference. ​ ​
Total return assumes the reinvestment of all dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 PROV ​ $ 100.00 ​ $ 113.32 ​ $ 74.65 ​ $ 99.90 ​ $ 88.76 ​ $ 79.48 NASDAQ Stock Index ​ $ 100.00 ​ $ 108.99 ​ $ 116.58 ​ $ 168.41 ​ $ 144.45 ​ $ 172.01 NASDAQ Bank Index ​ $ 100.00 ​ $ 99.52 ​ $ 76.90 ​ $ 132.95 ​ $ 108.57 ​ $ 105.21 ​ (1) Assumes that the value of the investment in the Corporation’s common stock and each index was $100 on June 30, 2018 and that all dividends were reinvested. ​ Securities Authorized for Issuance under Equity Compensation Plans ​ See Part III, Item 12 of this Form 10-K for information regarding the Corporation’s Equity Compensation Plans, which is incorporated into this Item 5 by reference. ​ ​
At June 30, 2022, there were 7,285,184 shares of common stock issued and outstanding held by 429 shareholders of record, and there were approximately 1,813 persons or entities that hold stock in nominee or “street name” accounts with brokers. ​ The Corporation’s cash dividend payout policy is reviewed regularly by management and the Board of Directors.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Market Information and Holders ​ The common stock of Provident Financial Holdings, Inc. is listed on the NASDAQ Global Select Market under the symbol “PROV.” At June 30, 2023, there were 7,043,170 shares of common stock issued and outstanding held by 402 shareholders of record, and there were approximately 1,868 persons or entities that hold stock in nominee or “street name” accounts with brokers. ​ Dividends ​ The Corporation’s cash dividend payout policy is reviewed regularly by management and the Board of Directors.
The timing, volume and price of purchases are made at our discretion, and are contingent upon our overall financial condition, as well as general market and other conditions.
On April 27, 2023, the Board of Directors of the Corporation announced an extension of its existing stock repurchase plan through April 28, 2024 or until completed, whichever occurs first. The timing, volume and price of purchases are made at our discretion, and are contingent upon our overall financial condition, as well as general market and other conditions.
Removed
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ The common stock of Provident Financial Holdings, Inc. is listed on the NASDAQ Global Select Market under the symbol PROV.
Added
No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in future periods. Dividends on common stock from Provident depend substantially upon receipt of dividends from the Bank, which is Provident’s predominant source of income.
Removed
During the quarter ended June 30, 2022, the Corporation purchased 35,488 shares of the Corporation’s common stock with an average cost 46 Table of Contents of $15.90 per share pursuant to its April 2020 stock repurchase that expired on April 27, 2022.
Added
Management’s projections show an expectation that cash dividends will continue for the foreseeable future. ​ Purchases of Equity Securities by the Issuer and Affiliated Purchasers ​ On April 28, 2022, the Board of Directors of the Corporation announced a stock repurchase plan which authorized 364,259 shares for repurchase over a one year period.
Removed
For the fiscal year ended June 30, 2022, the Corporation purchased 257,285 shares of the Corporation’s common stock at an average cost of $16.73 per share pursuant to its April 2020 stock repurchase plan.
Added
(2) Represents the remaining shares available for future purchases under the April 2022 stock repurchase plan. ​ 49 Table of Contents Performance Graph ​ The following graph compares the cumulative total shareholder return on the Corporation’s common stock with the cumulative total return of the Nasdaq Stock Index (U.S. Stock) and Nasdaq Bank Index.
Removed
The Board of Directors approved a new stock repurchase plan on April 28, 2022 which authorized 364,259 shares for repurchase, all of which remain available for purchase at June 30, 2022. The repurchase plan terminates on April 28, 2023, unless completed sooner.
Removed
The stock repurchase program does not obligate the Corporation to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time. ​ During the quarter ended June 30, 2022, there were no stock options exercised and no restricted common stock vested, while 2,000 shares of restricted stock were forfeited.
Removed
For the fiscal year ended June 30, 2022, there were no stock options exercised, while 1,000 shares of restricted common stock were awarded and vested and 6,500 shares of restricted stock were forfeited.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYields and costs for the periods indicated are derived by dividing income or expense by the average monthly balance of assets or liabilities, respectively, for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ (Dollars In Thousands) ​ Balance ​ Interest ​ Cost ​ Balance ​ Interest ​ Cost ​ Balance ​ Interest ​ Cost Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ Loans receivable, net (1) ​ $ 870,328 ​ $ 32,161 3.70 % $ 863,507 ​ $ 32,856 3.80 % $ 915,353 ​ $ 39,145 4.28 % Investment securities ​ 206,876 ​ 1,906 0.92 % 205,628 ​ 1,849 0.90 % 86,761 ​ 2,120 2.44 % FHLB – San Francisco stock ​ 8,172 ​ 489 5.98 % 8,008 ​ 418 5.22 % 8,155 ​ 534 6.55 % Interest-earning deposits ​ 74,897 ​ 174 0.23 % 74,952 ​ 78 0.10 % 71,766 ​ 657 0.90 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-earning assets ​ 1,160,273 ​ 34,730 2.99 % 1,152,095 ​ 35,201 3.06 % 1,082,035 ​ 42,456 3.92 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non interest-earning assets ​ 32,787 ​ ​ 30,916 ​ ​ 31,720 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,193,060 ​ ​ $ 1,183,011 ​ ​ $ 1,113,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Checking and money market accounts (2) ​ $ 505,726 ​ 220 0.04 % $ 470,129 ​ 268 0.06 % $ 396,399 ​ 424 0.11 % Savings accounts ​ 324,292 ​ 172 0.05 % 289,848 ​ 208 0.07 % 261,432 ​ 496 0.19 % Time deposits ​ 131,479 ​ 752 0.57 % 154,374 ​ 1,269 0.82 % 186,317 ​ 2,023 1.09 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deposits (3) ​ 961,497 ​ 1,144 0.12 % 914,351 ​ 1,745 0.19 % 844,148 ​ 2,943 0.35 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Borrowings ​ 86,883 ​ 1,991 2.29 % 125,589 ​ 2,817 2.24 % 127,882 ​ 3,112 2.43 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-bearing liabilities ​ 1,048,380 ​ 3,135 0.30 % 1,039,940 ​ 4,562 0.44 % 972,030 ​ 6,055 0.62 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non interest-bearing liabilities ​ 17,272 ​ ​ 18,158 ​ ​ 18,968 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ 1,065,652 ​ ​ 1,058,098 ​ ​ 990,998 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ 127,408 ​ ​ 124,913 ​ ​ 122,757 ​ ​ Total liabilities and stockholders’ equity ​ $ 1,193,060 ​ ​ $ 1,183,011 ​ ​ $ 1,113,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ $ 31,595 ​ ​ $ 30,639 ​ ​ $ 36,401 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate spread (4) ​ ​ 2.69 % ​ 2.62 % ​ 3.30 % Net interest margin (5) ​ ​ 2.72 % ​ 2.66 % ​ 3.36 % Ratio of average interest- earning assets to average interest-bearing liabilities ​ ​ 110.67 % ​ 110.78 % ​ 111.32 % ​ (1) Includes non-performing loans, as well as net deferred loan costs of $1.8 million, $2.5 million and $1.1 million for the years ended June 30, 2022, 2021 and 2020, respectively.
Biggest changeYields and costs for the periods indicated are derived by dividing income or expense by the average monthly balance of assets or liabilities, respectively, for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ ​ 2023 ​ 2022 ​ ​ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ (Dollars In Thousands) ​ Balance ​ Interest ​ Cost ​ Balance ​ Interest ​ Cost ​ Interest-earning assets: ​ ​ ​ ​ Loans receivable, net (1) ​ $ 1,029,000 ​ $ 42,191 4.10 % $ 870,328 ​ $ 32,161 3.70 % Investment securities ​ 172,005 ​ 2,169 1.26 % 206,876 ​ 1,906 0.92 % FHLB – San Francisco stock ​ 8,488 ​ 556 6.55 % 8,172 ​ 489 5.98 % Interest-earning deposits ​ 26,214 ​ 1,076 4.05 % 74,897 ​ 174 0.23 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-earning assets ​ 1,235,707 ​ 45,992 3.72 % 1,160,273 ​ 34,730 2.99 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-earning assets ​ 32,763 ​ ​ 32,787 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,268,470 ​ ​ $ 1,193,060 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Checking and money market accounts (2) ​ $ 479,921 ​ 227 0.05 % $ 505,726 ​ 220 0.04 % Savings accounts ​ 318,795 ​ 168 0.05 % 324,292 ​ 172 0.05 % Time deposits ​ 162,144 ​ 2,751 1.70 % 131,479 ​ 752 0.57 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deposits (3) ​ 960,860 ​ 3,146 0.33 % 961,497 ​ 1,144 0.12 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Borrowings ​ 159,742 ​ 5,861 3.67 % 86,883 ​ 1,991 2.29 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-bearing liabilities ​ 1,120,602 ​ 9,007 0.80 % 1,048,380 ​ 3,135 0.30 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing liabilities ​ 17,307 ​ ​ 17,272 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ 1,137,909 ​ ​ 1,065,652 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ 130,561 ​ ​ 127,408 ​ ​ Total liabilities and stockholders’ equity ​ $ 1,268,470 ​ ​ $ 1,193,060 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ $ 36,985 ​ ​ $ 31,595 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate spread (4) ​ ​ 2.92 % ​ 2.69 % Net interest margin (5) ​ ​ 2.99 % ​ 2.72 % Ratio of average interest- earning assets to average interest-bearing liabilities ​ ​ 110.27 % ​ 110.67 % ​ (1) Includes non-performing loans of $1.1 million and $4.2 million, as well as net deferred loan costs of $959 thousand and $1.8 million for the fiscal years ended June 30, 2023 and 2022, respectively.
In addition to the payment history described above, multi-family, commercial real estate, construction and commercial business loans must also demonstrate a combination of corroborating characteristics to be upgraded, such as: satisfactory cash flow, satisfactory guarantor support, and additional collateral support, among others. ​ To qualify for restructuring, a borrower must provide evidence of their creditworthiness such as, current financial statements, their most recent income tax returns, current paystubs, current W-2s, and most recent bank statements, among other documents, which are then verified by the Corporation.
In addition to the payment history described above, multi-family, commercial real estate, construction and commercial business loans must also demonstrate a combination of corroborating characteristics to be upgraded, such as: satisfactory cash flow, satisfactory guarantor support, and additional collateral support, among others. ​ To qualify for restructuring, a borrower must provide evidence of their creditworthiness such as, current financial statements, their most recent income tax returns, current paystubs, current W-2s, and most recent bank statements, among other documents, which are then verified by the Bank.
Based on published guidance with respect to restructured loans from certain banking regulators and to conform to general practices within the banking industry, the Corporation may determine that it is appropriate to maintain certain restructured loans on accrual status because there is reasonable assurance of repayment and performance, consistent with the modified terms based upon a current, well-documented credit evaluation. ​ Other restructured loans are classified as “Substandard” and placed on non-performing status.
Based on published guidance with respect to restructured loans from certain banking regulators and to conform to general practices within the banking industry, the Bank may determine that it is appropriate to maintain certain restructured loans on accrual status because there is reasonable assurance of repayment and performance, consistent with the modified terms based upon a current, well-documented credit evaluation. ​ Other restructured loans are classified as “Substandard” and placed on non-performing status.
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 consolidated financial statements.
The preparation of these financial statements requires management to make estimates 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 consolidated financial statements.
The Corporation re-underwrites the loan with the borrower’s updated financial information, new credit report, current loan balance, new interest rate, remaining loan term, updated property value and modified payment schedule, among other considerations, to determine if the borrower qualifies. ​ Interest is not accrued on any loan when its contractual payments are more than 90 days delinquent or if the loan is deemed impaired.
The Bank re-underwrites the loan with the borrower’s updated financial information, new credit report, current loan balance, new interest rate, remaining loan term, updated property value and modified payment schedule, among other considerations, to determine if the borrower qualifies. ​ Interest is not accrued on any loan when its contractual payments are more than 90 days delinquent or if the loan is deemed impaired.
The information contained in this section should be read in conjunction with the audited Consolidated Financial Statements and accompanying selected Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Critical Accounting Policies ​ The discussion and analysis of the Corporation’s financial condition and results of operations is based upon the Corporation’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
The information contained in this section should be read in conjunction with the audited Consolidated Financial Statements and accompanying selected Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Critical Accounting Estimates ​ The discussion and analysis of the Corporation’s financial condition and results of operations is based upon the Corporation’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
For additional information, see Note 8, "Income Taxes," of the Notes to Consolidated Financial Statements, contained in Item 8 of this Form 10-K. ​ ​ 58 Table of Contents Average Balances, Interest and Average Yields/Costs ​ 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 from average interest-earning assets and interest expense on average interest-bearing liabilities and average yields and costs thereof.
For additional information, see Note 8, "Income Taxes," of the Notes to Consolidated Financial Statements, contained in Item 8 of this Form 10-K. ​ ​ 59 Table of Contents Average Balances, Interest and Average Yields/Costs ​ 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 from average interest-earning assets and interest expense on average interest-bearing liabilities and average yields and costs thereof.
A loan may be returned to accrual status at such time as the loan is brought fully current as to both principal and interest, and, in management’s judgment, such loan is considered to be fully collectible on a timely basis. However, the Corporation’s policy also allows management to continue the recognition of interest income on certain non-performing loans.
A loan may be returned to accrual status at such time as the loan is brought fully current as to both principal and interest, and, in management’s judgment, such loan is considered to be fully collectible on a timely basis. However, the Bank’s policy also allows management to continue the recognition of interest income on certain non-performing loans.
The loans may be upgraded and placed on accrual status once there is a sustained period of payment performance (usually six months or, for loans that have been restructured more than once, 12 months) and there is a reasonable assurance that the payments will continue; and if the borrower has demonstrated satisfactory contractual payments beyond 12 consecutive months, the loan is no 51 Table of Contents longer categorized as a restructured loan.
The loans may be upgraded and placed on accrual status once there is a sustained period of payment performance (usually six months or, for loans that have been restructured more than once, 12 months) and there is a reasonable assurance that the payments will continue; and if the borrower has demonstrated satisfactory contractual payments beyond 12 consecutive months, the loan is no longer categorized as a restructured loan.
The Corporation also applies qualitative loss 50 Table of Contents factors by assessing general economic indicators such as gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices, as well as peer group data, reflecting the effect of events that have occurred but are not yet evidenced in the historical data.
The Corporation also applies qualitative loss factors by assessing general economic indicators such as gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices, as well as peer group data, reflecting the effect of events that have occurred but are not yet evidenced in the historical data.
These policies relate to the methodology for the recognition of interest income, determination of the provision and allowance for loan losses, the estimated fair value of derivative financial instruments and the valuation of mortgage servicing rights and real estate owned.
These policies relate to the methodology for the recognition of interest income, determination of the provision and allowance for loan losses, the estimated fair value of derivative financial instruments and the valuation of mortgage servicing assets and real estate owned.
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, bank-owned life insurance policies and certain California tax-exempt loans, among others.
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 bank-owned life insurance policies, among others.
Investment services and trustee services contribute a very small percentage of gross revenue. ​ Provident Financial Corp 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.
Investment services and trustee services contribute a very small percentage of 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.
Management considers the accounting estimate related to the allowance for loan losses a critical accounting estimate because it is highly susceptible to change from period to period, requiring management to make assumptions about probable incurred losses inherent in the loans held for investment at the date of the Consolidated Statements of Financial Condition.
Management considers the accounting 52 Table of Contents estimate related to the allowance for loan losses a critical accounting estimate because it is highly susceptible to change from period to period, requiring management to make assumptions about probable incurred losses inherent in the loans held for investment at the date of the Consolidated Statements of Financial Condition.
For purposes of calculating volume, rate and rate/volume variances, non-performing loans were included in the weighted-average balance outstanding. ​ ​ 60 Table of Contents Liquidity and Capital Resources ​ The Corporation's primary sources of funds are deposits, proceeds from principal and interest payments on loans, proceeds from the maturity and sale of investment securities, proceeds from FHLB - San Francisco advances, and access to the discount window facility at the Federal Reserve Bank of San Francisco.
For purposes of calculating volume, rate and rate/volume variances, non-performing loans were included in the weighted-average balance outstanding. ​ Liquidity and Capital Resources ​ The Corporation's primary sources of funds are deposits, proceeds from principal and interest payments on loans, proceeds from the maturity and sale of investment securities, proceeds from FHLB - San Francisco advances, access to the discount window facility at the Federal Reserve Bank of San Francisco and access to the correspondent bank’s federal funds facility.
For additional information on borrowings, see Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Total stockholders’ equity increased $1.4 million or 1% to $128.7 million at June 30, 2022 from $127.3 million at June 30, 2021, primarily as a result of net income and the amortization of stock-based compensation benefits in fiscal 2022, partly offset by stock repurchases (see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K) and quarterly cash dividends paid to shareholders. ​ ​ Comparison of Operating Results for the Years Ended June 30, 2022 and 2021 ​ General.
For additional information on borrowings, see Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Total stockholders’ equity increased $1.0 million or 1% to $129.7 million at June 30, 2023 from $128.7 million at June 30, 2022, primarily as a result of net income and the amortization of stock-based compensation in fiscal 2023, partly offset by stock repurchases (see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K) and quarterly cash dividends paid to shareholders. ​ Comparison of Operating Results for the Fiscal Years Ended June 30, 2023 and 2022 ​ General.
Also, to a lesser extent, the Corporation makes 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.
Also, to a lesser extent, the Bank originates 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.
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 Corporation’s full service offices and investing those funds in single-family, multi-family and commercial real estate loans.
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. 54 Table of Contents ​ 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.
In light of these risks, uncertainties and 49 Table of Contents assumptions, the forward-looking statements discussed in this document might not occur, and you should not put undue reliance on any forward-looking statements.
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.
Since the holding company 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. ​ At June 30, 2022, the Bank exceeded all regulatory capital requirements.
Since the holding company has less than $3.0 billion in assets, the capital guidelines apply on a bank only basis, and the FRB expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations. ​ At June 30, 2023, the Bank exceeded all regulatory capital requirements.
The decrease in the liquidity ratio was due primarily to the decrease in average qualifying liquid assets and the increase in average deposits and borrowings during the quarter ended June 30, 2022 in comparison to the quarter ended June 30, 2021.
The decrease in the liquidity ratio was due primarily to the decrease in average qualifying liquid assets and the increase in average borrowings during the quarter ended June 30, 2023 in comparison to the quarter ended June 30, 2022.
For non-performing commercial real estate loans, an individually evaluated allowance is calculated based on the loan's fair value and if the fair value is higher than the individual loan balance, no allowance is required. ​ A restructured loan is a loan which the Corporation, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Corporation would not otherwise consider. ​ The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to: ​ ● A reduction in the stated interest rate; ● An extension of the maturity at an interest rate below market; ● A reduction in the accrued interest; and ● Extensions, deferrals, renewals and rewrites. ​ The Corporation measures the allowance for loan losses of restructured loans based on the difference between the original loan’s carrying amount and the present value of expected future cash flows discounted at the original effective yield of the loan.
For non-performing commercial real estate loans, an individually evaluated allowance is calculated based on the loan's fair value and if the fair value is higher than the individual loan balance, no allowance is required. ​ A restructured loan is a loan which the Bank, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Bank would not otherwise consider. ​ The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to: ​ ● A reduction in the stated interest rate and/or accrued interest; ● An extension of the maturity date, typically longer than 6 months; ● A reduction in the principal loan balance; and ● Extensions, deferrals, renewals and rewrites. ​ 53 Table of Contents The Bank measures the allowance for loan losses of restructured loans based on the difference between the original loan’s carrying amount and the present value of expected future cash flows discounted at the original effective yield of the loan.
These risks could cause our actual results for fiscal 2023 and beyond to differ materially from those expressed 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. ​ 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. upon the Bank’s conversion completed on June 27, 1996.
These factors could cause our actual results for the fiscal 2024 and beyond to differ materially from those expressed 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. ​ General ​ Provident, a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company of the Bank upon the Bank’s conversion completed on June 27, 1996.
The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. ​ Based on our current capital allocation objectives, during fiscal 2023 we project expending approximately $989,000 to $1.9 million of cash for capital investment in property, plant and equipment.
The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. ​ Based on our current capital allocation objectives, during fiscal 2024 we project expending approximately $1.8 million to $2.7 million for capital investment in property, plant and equipment.
At June 30, 2022 and 2021, the Bank had loan origination commitments totaling $43.4 million and $21.9 million, respectively, with undisbursed loan funds of $3.4 million and $4.5 million, respectively. The Bank anticipates that it will have sufficient funds available to meet its current loan origination commitments. ​ The Bank's primary financing activity is gathering deposits.
At June 30, 2023 and 2022, the Bank had loan origination commitments totaling $2.4 million and $43.4 million, with undisbursed loan funds of $2.0 million and $3.4 million, respectively. The Bank anticipates that it will have sufficient funds available to meet its current loan origination commitments. ​ The Bank's primary financing activity is gathering deposits.
While the Corporation’s long-term strategy is for moderate growth, management recognizes that growth may be affected by the COVID-19 pandemic and its impact to general economic conditions. ​ Investment services operations primarily consist of selling alternative investment products such as annuities and mutual funds to the Bank’s depositors.
While the Corporation’s long-term strategy is for moderate growth, management recognizes that growth may be affected 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.
The Bank's average liquidity ratio (defined as the ratio of average qualifying liquid assets to average deposits and borrowings) for the quarter ended June 30, 2022 decreased to 24.3% from 32.0% during the same quarter ended June 30, 2021.
The Bank's average liquidity ratio (defined as the ratio of average qualifying liquid assets to average deposits and borrowings) for the quarter ended June 30, 2023 decreased to 18.1% from 24.3% during the same quarter ended June 30, 2022.
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 transfer fees and overdraft protection fees, among others. ​ 52 Table of Contents During the next three years, subject to market conditions, the Corporation intends to improve its community banking business by moderately increasing total assets (by increasing single-family, multi-family, commercial real estate, construction and commercial business loans).
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 transfer fees and overdraft protection fees, among others. ​ The Corporation intends to improve its community banking business by moderately increasing total assets by increasing single-family, multi-family, commercial real estate, construction and commercial business loans.
During the fiscal years ended June 30, 2022 and 2021, the Bank originated loans held for investment of $299.8 million and $215.0 million, respectively. In addition, the Bank purchased loans held for investment from other financial institutions in fiscal 2022 and 2021 of $6.4 million and $16.9 million, respectively.
During the fiscal years ended June 30, 2023 and 2022, the Bank originated loans held for investment of $237.1 million and $299.8 million, respectively. In addition, the Bank purchased loans held for investment from other financial institutions in fiscal 2023 and fiscal 2022 of $0 and $6.4 million, respectively.
For additional information on deposits, see Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Borrowings, consisting of FHLB – San Francisco advances decreased $16.0 million, or 16%, to $85.0 million at June 30, 2022 from $101.0 million at June 30, 2021.
For additional information on deposits, see Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Borrowings, consisting of FHLB – San Francisco advances increased $150.0 million, or 176%, to $235.0 million at June 30, 2023 from $85.0 million at June 30, 2022.
Depending on market conditions and the pricing of deposit products and FHLB - San Francisco advances, the Bank may continue to rely on FHLB - San Francisco advances for part of its liquidity needs. As of June 30, 2022, the remaining financing availability at FHLB - San Francisco was $310.3 million and the remaining available collateral was $310.5 million.
Depending on market conditions and the pricing of deposit products and FHLB - San Francisco advances, the Bank may continue to rely on FHLB - San Francisco advances for part of its liquidity needs. As of June 30, 2023, the remaining financing availability at the FHLB - San Francisco was $287.9 million and the remaining available collateral was $468.6 million.
The Bank conducts its business operations as Provident Bank and through its subsidiary, Provident Financial Corp.
The Bank conducts its business operations as Provident Bank and through its subsidiary, PFC.
For further details on risk factors and uncertainties, see “Safe-Harbor Statement” included above in this Item 7, and Item 1A, "Risk Factors.” ​ ​ Comparison of Financial Condition at June 30, 2022 and 2021 ​ Total assets increased slightly to $1.19 billion at June 30, 2022 from $1.18 billion at June 30, 2021.
For further details on risk factors and uncertainties, see “Safe-Harbor Statement” included above in this Item 7, and Item 1A, "Risk Factors.” ​ Comparison of Financial Condition at June 30, 2023 and 2022 ​ Total assets increased $145.9 million, or 12%, to $1.33 billion at June 30, 2023 from $1.19 billion at June 30, 2022.
Factors which could cause actual results to differ materially include, but are not limited to the following: potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, generally, resulting from the ongoing novel coronavirus of 2019 (“COVID-19”) and any governmental or societal responses thereto; the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the residential and commercial real estate markets and may lead to increased losses and non-performing assets and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our reserve; changes in general economic conditions, including the effects of inflation, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; the future of LIBOR, and the transition away from LIBOR toward new interest rate benchmarks; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; results of examinations of the Corporation by the FRB or of the Bank by the OCC or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to enter into a formal enforcement action or to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements and restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in banking, securities and tax law, and in regulatory policies and principles, or the interpretation of regulatory capital or other rules, and including changes as a result of COVID-19; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; our ability to attract and retain deposits; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common stock; adverse changes in the securities markets; the inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; war or terrorist activities; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks detailed in this report and in the Corporation’s other reports filed with or furnished to the U.S.
Factors which could cause actual results to differ materially include, but are not limited to the following: potential adverse impacts to economic conditions in our local market areas, other markets where the Corporation has lending relationships, or other aspects of the Corporation's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as supply chain disruptions; higher inflation and the impact of current and future monetary policies of the FRB in response thereto; liquidity issues, including our ability to borrow funds or raise additional capital, if necessary; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the residential and commercial real estate markets and may lead to increased losses and non-performing assets and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our reserve; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; the transition from LIBOR to new interest rate benchmarks; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; results of examinations of the Corporation by the FRB or of the Bank by the OCC or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to enter into a formal enforcement action or to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements and restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in banking, securities and tax law, and in regulatory policies and principles, or the interpretation of regulatory capital or other rules, and other governmental initiatives affecting the financial services industry; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; our ability to attract and retain deposits; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies and non-financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common stock; the quality and composition of our securities portfolio and the impact of any adverse changes in the securities markets; the inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services; and other risks detailed in this report and in the Corporation’s other reports filed with or furnished to the SEC. 51 Table of Contents Forward-looking statements are based upon management’s beliefs and assumptions at the time they are made.
Our current quarterly common stock dividend rate is $0.14 per share, as approved by our Board of Directors, which we believe is a dividend rate per share 61 Table of Contents which enables us to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of our cash to our shareholders. ​ The Bank, as a federally-chartered, federally insured savings bank, is subject to the capital requirements established by the OCC.
Our current quarterly common stock dividend rate is $0.14 per share, as approved by our Board of Directors, which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of our cash to our shareholders.
The balance of multi-family, commercial real estate, construction and commercial business loans, net of undisbursed loan funds, decreased 4% to $559.5 million at June 30, 2022 from $583.6 million at June 30, 2021, and represented 60% and 68% of loans held for investment, respectively.
The balance of multi-family, commercial real estate, construction and commercial business loans, net of undisbursed loan funds, decreased $4.3 million, or 1%, to $555.2 million at June 30, 2023 from $559.5 million at June 30, 2022, and represented 52% and 60% of loans held for investment, respectively.
The Bank generally maintains sufficient cash and cash equivalents to meet short-term liquidity needs. At June 30, 2022, total cash and cash equivalents were $23.4 million, or 2.0% of total assets.
The Bank generally maintains sufficient cash and cash equivalents to meet short-term liquidity needs. At June 30, 2023, total cash and cash equivalents were $65.8 million, or 4.9% of total assets.
The Corporation's efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, improved to 71% in fiscal 2022 from 73% in fiscal 2021.
The Corporation's efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, improved slightly to 69% in fiscal 2023 from 71% in fiscal 2022 as a result of the increase in net interest income.
As such, management is required to make many subjective assumptions and judgments regarding the Corporation’s income tax exposures, including judgments in determining the amount and timing of recognition of the resulting deferred tax assets and liabilities, including projections of future taxable income. Interpretations of and guidance surrounding income tax laws and regulations change over time.
Laws and regulations in this area are voluminous and are often ambiguous. As such, management is required to make many subjective assumptions and judgments regarding the Corporation’s income tax exposures, including judgments in determining the amount and timing of recognition of the resulting deferred tax assets and liabilities, including projections of future taxable income.
For additional information on loans held for investment, see Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Total deposits increased $17.5 million, or 2%, to $955.5 million at June 30, 2022 from $938.0 million at June 30, 2021.
For additional information on loans held for investment, see Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Total deposits decreased $4.9 million, or 1%, to $950.6 million at June 30, 2023 from $955.5 million at June 30, 2022.
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. ​ 57 Table of Contents The provision for income taxes was $3.8 million for fiscal 2022, representing an effective tax rate of 29.3%, as compared to $2.6 million in fiscal 2021, representing an effective tax rate of 25.8%.
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. ​ The provision for income taxes was $3.8 million for fiscal 2023, representing an effective tax rate of 30.8%, similar to $3.8 million in fiscal 2022, representing an effective tax rate of 29.3%.
The net interest margin increased six basis points to 2.72% in fiscal 2022 from 2.66% in fiscal 2021, due primarily to a 14 basis points decrease in the average cost of interest-bearing liabilities, partly offset by a six basis points decrease in the average yield on interest-earning assets.
The net interest margin increased 27 basis points to 2.99% in fiscal 2023 from 2.72% in fiscal 2022, due primarily to a 73 basis points increase in the average yield on interest-earning assets, partly offset by a 50 basis points increase in the average cost of interest-bearing liabilities.
The decrease in interest expense on deposits was attributable to a lower average cost, particularly for time deposits, partly offset by an increase in average balance. The average cost of deposits decreased seven basis points to 0.12% in fiscal 2022 from 0.19% in fiscal 2021.
The increase in interest expense on deposits was attributable to a higher average cost, particularly for time deposits, partly offset by a decrease in average balance. The average cost of deposits increased 21 basis points to 0.33% in fiscal 2023 from 0.12% in fiscal 2022.
In addition, the Bank has secured a $153.9 million discount window facility at the Federal Reserve Bank of San Francisco, collateralized by investment securities with a fair market value of $163.7 million. The Bank also has a federal funds facility with its correspondent bank for $50.0 million which matures on June 30, 2023.
In addition, the Bank has secured a $139.0 million discount window facility at the Federal Reserve Bank of San Francisco, collateralized by investment securities. The Bank 61 Table of Contents also has a federal funds facility with its correspondent bank for $50.0 million which matures on June 30, 2024.
For additional information on investment securities, see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Loans held for investment increased $89.0 million, or 10% to $940.0 million at June 30, 2022 from $851.0 million at June 30, 2021.
For additional information on investment securities, see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ 55 Table of Contents Loans held for investment, net increased $137.6 million, or 15% to $1.08 billion at June 30, 2023 from $940.0 million at June 30, 2022.
During the fiscal years ended June 30, 2022 and 2021, the net increase in deposits was $17.5 million and $45.0 million, respectively. On June 30, 2022, time deposits that are scheduled to mature in one year or less were $78.6 million.
During the fiscal years ended June 30, 2023 and 2022, the net (decrease) increase in deposits was $(4.9 million) and $17.5 million, respectively. On June 30, 2023, time deposits scheduled to mature in one year or less were $166.5 million.
(5) Represents net interest income as a percentage of average interest-earning assets. ​ ​ 59 Table of Contents Rate/Volume Variance ​ The following tables set forth the effects of changing rates and volumes on interest income and expense of the Corporation for the period presented.
(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. ​ Rate/Volume Variance ​ The following table sets forth the effects of changing rates and volumes on interest income and expense of the Corporation for the period presented.
Actual results may differ from these estimates under different assumptions or conditions. ​ The allowance for loan losses involves significant judgment and assumptions by management, which has a material impact on the carrying value of net loans held for investment.
The allowance for loan losses involves significant judgment and assumptions by management, which has a material impact on the carrying value of net loans held for investment.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ Safe-Harbor Statement ​ Certain matters in this Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ Safe-Harbor Statement ​ Certain matters discussed in this Form 10-K 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.
The Corporation is regulated by the FRB. At June 30, 2022, the Corporation had total assets of $1.19 billion, total deposits of $955.5 million and total stockholders’ equity of $128.7 million. The Corporation has not engaged in any significant activity other than holding the stock of the Bank.
Provident is regulated by the FRB. At June 30, 2023, the Corporation, on a consolidated basis, had total assets of $1.33 billion, total deposits of $950.6 million and total stockholders’ equity of $129.7 million. Provident has not engaged in any significant activity other than holding the stock of the Bank.
As of June 30, 2022, there were no outstanding borrowings under the discount window facility or the federal funds facility with its correspondent bank. ​ Regulations require the Bank to maintain adequate liquidity to assure safe and sound operations.
As of June 30, 2023, there were no outstanding borrowings under the discount window facility or the federal funds facility with its correspondent bank. The total available borrowing capacity across all sources totals approximately $476.9 million at June 30, 2023. ​ Regulations require the Bank to maintain adequate liquidity to assure safe and sound operations.
The increase was primarily attributable to an increase in loans held for investment, partly offset by decreases in cash and cash equivalents and investment securities. ​ Total cash and cash equivalents, primarily excess cash deposited with the Federal Reserve Bank of San Francisco, decreased $46.9 million, or 67%, to $23.4 million at June 30, 2022 from $70.3 million at June 30, 2021.
The increase was primarily attributable to an increase in loans held for investment and, to a lesser extent, an increase in cash and cash equivalents, partly offset by a decrease in investment securities. ​ Total cash and cash equivalents, primarily excess cash deposited with the Federal Reserve Bank of San Francisco, increased $42.4 million, or 181%, to $65.8 million at June 30, 2023 from $23.4 million at June 30, 2022.
The average balance of interest-earning assets increased $8.2 million, or 1%, to $1.16 billion in fiscal 2022 from $1.15 billion in fiscal 2021. The average balance of interest-bearing liabilities increased $8.4 million or 1% to $1.05 billion during fiscal 2022 as compared to $1.04 billion during fiscal 2021. ​ Interest Income.
The average balance of interest- 56 Table of Contents earning assets increased $75.4 million, or 7%, to $1.24 billion in fiscal 2023 from $1.16 billion in fiscal 2022. The average balance of interest-bearing liabilities increased $72.2 million, or 7%, to $1.12 billion during fiscal 2023 as compared to $1.05 billion during fiscal 2022. ​ Interest Income.
The balance of cash and cash equivalents at June 30, 2022 was consistent with the Corporation’s strategy of adequately managing credit and liquidity risk. ​ Total investment securities (held to maturity and available for sale) decreased $38.5 million, or 17%, to $188.4 million at June 30, 2022 from $226.9 million at June 30, 2021.
The increase was consistent with the Corporation’s strategy of adequately managing credit and liquidity risk. ​ Total investment securities (held to maturity and available for sale) decreased $31.9 million, or 17%, to $156.5 million at June 30, 2023 from $188.4 million at June 30, 2022. The decrease was the result of scheduled and accelerated principal payments on investment securities.
The Corporation recorded net income of $9.1 million, or $1.22 per diluted share, for the fiscal year ended June 30, 2022, up $1.5 million, or 20%, from $7.6 million, or $1.00 per per diluted share, for the fiscal year ended June 30, 2021.
The Corporation recorded net income of $8.6 million, or $1.19 per diluted share, for the fiscal year ended June 30, 2023, down $501,000, or 6%, from $9.1 million, or $1.22 per diluted share, for the fiscal year ended June 30, 2022.
In addition, the Corporation intends to decrease the percentage of time deposits in its deposit base and to increase the percentage of lower cost checking and savings accounts. This strategy is intended to improve core revenue through a higher net interest margin and ultimately, coupled with the growth of the Corporation, an increase in net interest income.
This strategy is intended to improve core revenue through a higher net interest margin and ultimately, coupled with the growth of the Corporation, an increase in net interest income.
This increase was primarily a result of increases in both the average yield and the average balance. The average yield on investment securities increased two basis points to 0.92% for fiscal 2022 from 0.90% for fiscal 2021.
This increase was primarily a result of an increase in the average yield, partly offset by a decrease in the average balance. The average yield on investment securities increased 34 basis points to 1.26% for fiscal 2023 from 0.92% for fiscal 2022.
(2) Includes the average balance of non interest-bearing checking accounts of $119.5 million, $116.1 million and $90.0 million in the years ended June 30, 2022, 2021 and 2020, respectively. (3) Includes the average balance of uninsured deposits of $169.2 million, $152.9 million and $122.3 million in the years ended June 30, 2022, 2021 and 2020, respectively.
(2) Includes the average balance of noninterest-bearing checking accounts of $112.9 million and $119.5 million in the fiscal years ended June 30, 2023 and 2022, respectively. (3) Includes the average balance of uninsured deposits of $170.2 million and $169.2 million in the fiscal years ended June 30, 2023 and 2022, respectively.
Total loan principal payments in fiscal 2022 were $221.3 million, down 21% from $281.5 million in fiscal 2021. There was no REO acquired in the settlement of loans in both fiscal 2022 and fiscal 2021.
Total loan principal payments in fiscal 2023 were $102.3 million, down 54% from $221.3 million in fiscal 2022, due primarily to the mortgage interest rate increases during fiscal 2023. There was no REO acquired in the settlement of loans in both fiscal 2023 and fiscal 2022.
Return on average assets in fiscal 2022 increased to 0.76% from 0.64% in fiscal 2021 and return on average stockholders' equity in fiscal 2022 increased to 7.14% from 6.05% in fiscal 2021. ​ Net Interest Income. Net interest income increased $956,000, or 3%, to $31.6 million in fiscal 2022 from $30.6 million in fiscal 2021.
Return on average assets in fiscal 2023 decreased to 0.68% from 0.76% in fiscal 2022 and return on average stockholders' equity in fiscal 2023 decreased to 6.58% from 7.14% in fiscal 2022. ​ Net Interest Income. Net interest income increased $5.4 million, or 17%, to $37.0 million in fiscal 2023 from $31.6 million in fiscal 2022.
In fiscal 2022, the Corporation originated $299.8 million of loans held for investment, consisting primarily of single-family, multi-family and commercial real estate loans, up 39% from $215.0 million, consisting primarily of single-family and multi-family loans, for fiscal 2021.
In fiscal 2023, the Bank originated $237.1 million of loans held for investment, down 21% from $299.8 million during fiscal 2022, in both years consisting primarily of single-family, multi-family and commercial real estate loans.
The higher provision for income taxes in fiscal 2022 in comparison to fiscal 2021 was due primarily to a higher net income before provision for income taxes, while the higher effective tax rate in fiscal 2022 was attributable to no tax benefits from the exercise of stock options and the non-taxable treatment of the lower ERTC for state tax purposes in fiscal 2022 as compared to fiscal 2021. ​ The Corporation’s effective tax rate may differ from the estimated tax rates described above due to discrete items such as further adjustments to net deferred tax assets, excess tax benefits derived from stock option exercises and non-taxable earnings from bank owned life insurance, among other items.
The higher effective tax rate in fiscal 2023 was attributable primarily to a decrease in the tax benefit realized from the equity incentive awards with the share price lower 58 Table of Contents at vesting and distribution than the fair value estimated on the grant date, while the effective tax rate in fiscal 2022 was impacted by the non-taxable treatment of the lower ERTC for state tax purposes (not replicated in fiscal 2023). ​ The Corporation’s effective tax rate may differ from the estimated tax rates described above due to discrete items such as further adjustments to net deferred tax assets, excess tax benefits derived from stock option exercises and non-taxable earnings from bank owned life insurance, among other items.
Under the prompt corrective action provisions, minimum ratios of 5.0% for Tier 1 Leverage Capital, 6.5% for CET1 Capital, 8.0% for Tier 1 Risk-based Capital and 10.0% for Total Risk-based Capital are required to be deemed “well capitalized.” As of June 30, 2022, the Bank exceeded the capital ratios needed to be considered well capitalized with Tier 1 Leverage Capital, CET1 Capital, Tier 1 Risk-based Capital and Total Risk-based Capital ratios of 10.5%, 19.6%, 19.6% and 20.5%, respectively. ​ Impact of New Accounting Pronouncements ​ Various elements of the Corporation's accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments.
Under the prompt corrective action provisions, minimum ratios of 5.0% for Tier 1 Leverage Capital, 6.5% for CET1 Capital, 8.0% for Tier 1 Risk-based Capital and 62 Table of Contents 10.0% for Total Risk-based Capital are required to be deemed “well capitalized.” As of June 30, 2023, the Bank exceeded the capital ratios needed to be considered well capitalized with Tier 1 Leverage Capital, CET1 Capital, Tier 1 Risk-based Capital and Total Risk-based Capital ratios of 9.6%, 18.5%, 18.5% and 19.4%, respectively.
The increase in non-interest expense was primarily attributable to increases in salaries and employee benefits and equipment expense, partly offset by decreases in premises and occupancy expense, professional expense and other non-interest expenses. ​ Salaries and employee benefits expense increased $676,000, or 4%, to $15.8 million in fiscal 2022 from $15.2 million in fiscal 2021.
The increase in non-interest expense was primarily attributable to increases in salaries and employee benefits and premises and occupancy expenses. ​ Salaries and employee benefits expense increased $1.9 million, or 12%, to $17.7 million in fiscal 2023 from $15.8 million in fiscal 2022.
At both June 30, 2022 and June 30, 2021, there was no REO. ​ Management believes that, based on currently available information, the allowance for loan losses is sufficient to absorb potential losses inherent in loans held for investment at June 30, 2022 under the incurred loss methodology. ​ Classified assets, comprised soley of loans, were $1.6 million at June 30, 2022, comprised of $224,000 in the special mention category and $1.4 million in the substandard category.
At both June 30, 2023 and June 30, 2022, there was no REO or accruing loans 90 days or more past due. ​ Management believes, based on currently available information, the allowance for loan losses is sufficient to absorb potential losses inherent in loans held for investment at June 30, 2023 under the incurred loss methodology.
The balance of single-family loans held for investment increased $109.9 million, or 41%, to $378.2 million at June 30, 2022, from $268.3 53 Table of Contents million at June 30, 2021.
The balance of single-family loans held for investment increased $140.6 million, or 37%, to $518.8 million at June 30, 2023, from $378.2 million at June 30, 2022.
The recovery from the allowance for loan losses in fiscal 2022 was primarily due to an improvement in the forecasted economic metrics utilized in the qualitative component adjustment to the allowance for loan losses reflecting improved general economic conditions and recoveries from the allowance for loan losses from non-performing loans and classified loans that were upgraded or paid off, partly offset by an increase in loans held for investment.
The provision reflected in fiscal 2023 was primarily due to a higher outstanding balance of loans held for investment, while the recovery from the allowance for loan losses in fiscal 2022 was primarily due to an improvement in the qualitative component adjustment to the allowance for loan losses reflecting improved general economic conditions and recoveries from the allowance for loan losses from non-performing loans and classified loans that were upgraded or paid off, partly offset by an increase in loans held for investment. ​ Non-performing assets, comprised solely of non-performing loans (net of the collectively evaluated allowances and individually evaluated allowances) during fiscal 2023 and fiscal 2022, was $1.3 million at June 30, 2023, down $123,000 or 9% from $1.4 million at June 30, 2022.
Therefore, management considers its accounting for income taxes a critical accounting policy. ​ 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.
As such, changes in management’s subjective assumptions and judgments can materially affect amounts recognized in the Consolidated Statements of Financial Condition and Consolidated Statements of Operations. ​ 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.
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 future results to differ materially from historical performance and these forward-looking statements.
There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements.
Total non-interest income was $4.7 million in fiscal 2022, an increase of $143,000 or 3% from $4.6 million in fiscal 2021.
Total non-interest expense was $28.3 million in fiscal 2023, an increase of $2.4 million or 9% from $25.9 million in fiscal 2022.
These differences result in deferred tax assets and liabilities, which are included in the Corporation’s Consolidated Statements of Financial Condition. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous.
Management accounts for income taxes by estimating future tax effects of temporary differences between the tax and book basis of assets and liabilities considering the provisions of enacted tax laws. These differences result in deferred tax assets and liabilities, which are included in the Corporation’s Consolidated Statements of Financial Condition. The application of income tax law is inherently complex.
The average cost of interest-bearing liabilities was 0.30% during fiscal 2022, down 14 basis point from 0.44% during fiscal 2021, while the average balance of interest-bearing liabilities was $1.05 billion during fiscal 2022, up $8.4 million or 1% from $1.04 billion during fiscal 2021. ​ Interest expense on deposits for fiscal 2022 was $1.1 million as compared to $1.7 million for fiscal 2021, a decrease of $601,000, or 34%.
The average cost of interest-bearing liabilities was 0.80% during fiscal 2023, up 50 basis point from 0.30% during fiscal 2022, and the average balance of interest-bearing liabilities was $1.12 billion during fiscal 2023, up $72.2 million or 7% from $1.05 billion during fiscal 2022. ​ Interest expense on deposits for fiscal 2023 was $3.1 million compared to $1.1 million for fiscal 2022, an increase of $2.0 million, or 175%.
The increase in net income in fiscal 2022 compared to fiscal 2021 was primarily attributable to a $956,000 increase in net interest income and a $1.8 million increase in the recovery from the allowance for loan losses.
The decrease in net income in fiscal 2023 compared to fiscal 2022 was primarily attributable to a $2.8 million increase in the provision for loan losses as a result of a $374,000 provision for loan losses recorded during fiscal 2023 compared to a $2.5 million recovery from the allowance for loan losses during fiscal 2022, a $2.4 million increase in non-interest expense and a $641,000 decrease in non-interest income, partly offset by a $5.4 million increase in net interest income.
During fiscal 2022, the Corporation recorded a recovery from the allowance for loan losses of $2.5 million, as compared to a recovery from the allowance for loan losses of $708,000 during fiscal 2021.
The average cost of borrowings was 3.67% in fiscal 2023, up 138 basis points from 2.29% in fiscal 2022. ​ Provision (Recovery) for Loan Losses. During fiscal 2023, the Corporation recorded a provision for loan losses of $374,000, compared to a recovery from the allowance for loan losses of $2.5 million during fiscal 2022.
This is referred to as the cash basis method under which the accrual of interest is suspended and interest income is recognized only when collected.
This is referred to as the cash basis method under which the accrual of interest is suspended and interest income is recognized only when collected. This policy applies to non-performing loans that are considered to be fully collectible but the timely collection of payments is in doubt. ​ Provision for Income Taxes.
The increase in the average yield of investment securities was primarily attributable to purchases of new investment securities during fiscal 2022 with a higher average yield than the existing portfolio, repricings of adjustable rate mortgage-backed securities to a higher yield and a lower premium amortization ($1.6 million compared to $2.0 million) resulting from lower principal payments.
The increase in the average yield of investment securities was primarily attributable to a lower premium amortization resulting from lower principal payments. Total premium amortization in fiscal 2023 was $791,000, down $760,000, or 49%, from $1.6 million in fiscal 2022.
The decrease in interest expense on borrowings was due primarily to a lower average balance, partly offset by a slightly higher average cost. The average balance of borrowings decreased $38.7 million, or 31%, to $86.9 million during fiscal 2022 from $125.6 million during fiscal 2021.
The increase in interest expense on borrowings was due to a higher average balance and a higher average cost. The average balance of borrowings increased $72.8 million, or 84%, 57 Table of Contents to $159.7 million during fiscal 2023 from $86.9 million during fiscal 2022.
The increase in cash dividends was due primarily to a higher average yield (5.98% vs. 5.22%) and, to a lesser extent, a higher average balance of FHLB-San Francisco stock owned ($8.2 million vs. $8.0 million). ​ Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, increased $96,000, or 123%, to $174,000 in fiscal 2022 from $78,000 in fiscal 2021, due to a higher average yield.
During fiscal 2023, the Bank purchased $1.3 million of required FHLB - San Francisco stock as a result of its increased borrowings. ​ Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, increased $902,000, or 518%, to $1.1 million in fiscal 2023 from $174,000 in fiscal 2022, due to a higher average yield, partly offset by a lower average balance.
The average yield increased 13 basis points to 0.23% in fiscal 2022 from 0.10% in fiscal 2021, resulting from increases in the targeted federal funds interest rate in the second half of fiscal 2022. ​ Interest Expense.
The average yield increased 382 basis points to 4.05% in fiscal 2023 from 0.23% in fiscal 2022, resulting from increases in the targeted federal funds interest rate during fiscal 2023. ​ Interest Expense. Total interest expense for fiscal 2023 was $9.0 million compared to $3.1 million for fiscal 2022, an increase of $5.9 million or 187%.
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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, 2022 Compared ​ ​ To Year Ended June 30, 2021 ​ ​ Increase (Decrease) Due to (In Thousands) ​ Rate ​ Volume ​ Rate/Volume ​ Net Interest-earning assets: ​ ​ ​ ​ Loans receivable (1) ​ $ (947) ​ $ 259 ​ $ (7) ​ $ (695) Investment securities ​ 46 ​ 11 ​ — ​ 57 FHLB – San Francisco stock ​ 61 ​ 9 ​ 1 ​ 71 Interest-bearing deposits ​ 96 ​ — ​ — ​ 96 Total net change in income on interest-earning assets ​ (744) ​ 279 ​ (6) ​ (471) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ Checking and money market accounts ​ (62) ​ 21 ​ (7) ​ (48) Savings accounts ​ (53) ​ 24 ​ (7) ​ (36) Time deposits ​ (386) ​ (188) ​ 57 ​ (517) Borrowings ​ 60 ​ (867) ​ (19) ​ (826) Total net change in expense on interest-bearing liabilities ​ (441) ​ (1,010) ​ 24 ​ (1,427) Net (decrease) increase in net interest income ​ $ (303) ​ $ 1,289 ​ $ (30) ​ $ 956 ​ (1) Includes non-performing loans.
Information is provided with respect to the effects attributable to changes in volume (changes in 60 Table of Contents 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, 2023 Compared ​ ​ To Year Ended June 30, 2022 ​ ​ Increase (Decrease) Due to (In Thousands) ​ Rate ​ Volume ​ Rate/Volume ​ Net Interest-earning assets: ​ ​ ​ ​ Loans receivable (1) ​ $ 3,524 ​ $ 5,871 ​ $ 635 ​ $ 10,030 Investment securities ​ 703 ​ (321) ​ (119) ​ 263 FHLB – San Francisco stock ​ 46 ​ 19 ​ 2 ​ 67 Interest-bearing deposits ​ 2,874 ​ (112) ​ (1,860) ​ 902 Total net change in income on interest-earning assets ​ 7,147 ​ 5,457 ​ (1,342) ​ 11,262 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ Checking and money market accounts ​ 20 ​ (10) ​ (3) ​ 7 Savings accounts ​ — ​ (4) ​ — ​ (4) Time deposits ​ 1,477 ​ 175 ​ 347 ​ 1,999 Borrowings ​ 1,197 ​ 1,668 ​ 1,005 ​ 3,870 Total net change in expense on interest-bearing liabilities ​ 2,694 ​ 1,829 ​ 1,349 ​ 5,872 Net increase (decrease) in net interest income ​ $ 4,453 ​ $ 3,628 ​ $ (2,691) ​ $ 5,390 ​ (1) Includes non-performing loans.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor transaction accounts (checking, money market and savings deposits) that have no contractual maturity, the table presents estimated principal cash flows and, as applicable, the Corporation's historical experience, management's judgment and statistical analysis concerning their most likely withdrawal behaviors. ​ The following table represents the interest rate gap analysis of the Corporation's assets and liabilities as of June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Term to Contractual Repricing, Estimated Repricing, or Contractual ​ ​ Maturity (1) ​ ​ As of June 30, 2022 ​ ​ ​ Greater than Greater than Greater than ​ ​ ​ ​ 12 months or ​ 1 year to 3 ​ 3 years to ​ 5 years or ​ ​ ​ (Dollars In Thousands) ​ less years 5 years non-sensitive ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing Assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 15,567 ​ $ — ​ $ — ​ $ 7,847 ​ $ 23,414 ​ Investment securities ​ 11,657 ​ — ​ — ​ 176,764 ​ 188,421 ​ Loans held for investment ​ 234,257 ​ 177,477 ​ 203,393 ​ 324,865 ​ 939,992 ​ FHLB - San Francisco stock ​ 8,239 ​ — ​ — ​ — ​ 8,239 ​ Other assets ​ 2,966 ​ — ​ — ​ 24,006 ​ 26,972 ​ Total assets ​ 272,686 ​ 177,477 ​ 203,393 ​ 533,482 ​ 1,187,038 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing Liabilities and Equity: ​ ​ ​ ​ ​ ​ Checking deposits - non interest-bearing ​ — ​ — ​ — ​ 125,089 ​ 125,089 ​ Checking deposits - interest bearing ​ 50,368 ​ 100,736 ​ 100,736 ​ 83,948 ​ 335,788 ​ Savings deposits ​ 66,716 ​ 133,432 ​ 133,433 ​ — ​ 333,581 ​ Money market deposits ​ 19,949 ​ 19,948 ​ — ​ — ​ 39,897 ​ Time deposits ​ 78,644 ​ 34,490 ​ 6,738 ​ 1,277 ​ 121,149 ​ Borrowings ​ 35,000 ​ 50,000 ​ — ​ — ​ 85,000 ​ Other liabilities ​ 211 ​ — ​ — ​ 17,673 ​ 17,884 ​ Stockholders' equity ​ — ​ — ​ — ​ 128,650 ​ 128,650 ​ Total liabilities and stockholders' equity ​ 250,888 ​ 338,606 ​ 240,907 ​ 356,637 ​ 1,187,038 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing gap positive (negative) ​ $ 21,798 ​ $ (161,129) ​ $ (37,514) ​ $ 176,845 ​ $ — ​ Cumulative repricing gap: ​ ​ ​ ​ ​ ​ Dollar amount ​ $ 21,798 ​ $ (139,331) ​ $ (176,845) ​ $ — ​ $ — ​ Percent of total assets ​ 2 % (12) % (15) % — % — % ​ (1) Cash and cash equivalents are presented as estimated repricing; investment securities and loans held for investment are presented as contractual maturities or contractual repricing (without consideration for prepayments); FHLB - San Francisco stock is presented as contractual repricing; transaction accounts (checking, savings and money market deposits) are presented as estimated repricing; while time deposits (without consideration for early withdrawals) and borrowings are presented as contractual maturities. ​ 64 Table of Contents The static gap analysis under 12 months or less duration shows a positive position in the "Cumulative repricing gap - dollar amount" category, indicating more assets are sensitive to repricing than liabilities in the short term.
Biggest changeFor transaction accounts (checking, money market and savings deposits) that have no contractual 64 Table of Contents maturity, the table presents estimated principal cash flows and, as applicable, the Corporation's historical experience, management's judgment and statistical analysis concerning their most likely withdrawal behaviors. ​ The following table represents the interest rate gap analysis of the Corporation's assets and liabilities as of June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Term to Contractual Repricing, Estimated Repricing, or Contractual ​ ​ Maturity (1) ​ ​ As of June 30, 2023 ​ ​ ​ Greater than Greater than Greater than ​ ​ ​ ​ 12 months or ​ 1 year to 3 ​ 3 years to ​ 5 years or ​ ​ ​ (Dollars In Thousands) ​ less years 5 years non-sensitive ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing Assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 59,121 ​ $ — ​ $ — ​ $ 6,728 ​ $ 65,849 ​ Investment securities ​ 8,693 ​ — ​ — ​ 147,799 ​ 156,492 ​ Loans held for investment ​ 251,618 ​ 185,194 ​ 223,215 ​ 417,602 ​ 1,077,629 ​ FHLB - San Francisco stock ​ 9,505 ​ — ​ — ​ — ​ 9,505 ​ Other assets ​ 3,711 ​ — ​ — ​ 19,762 ​ 23,473 ​ Total assets ​ 332,648 ​ 185,194 ​ 223,215 ​ 591,891 ​ 1,332,948 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing Liabilities and Equity: ​ ​ ​ ​ ​ ​ Checking deposits - noninterest-bearing ​ — ​ — ​ — ​ 103,006 ​ 103,006 ​ Checking deposits - interest bearing ​ 45,431 ​ 90,862 ​ 90,862 ​ 75,717 ​ 302,872 ​ Savings deposits ​ 58,041 ​ 116,082 ​ 116,081 ​ — ​ 290,204 ​ Money market deposits ​ 16,776 ​ 16,775 ​ — ​ — ​ 33,551 ​ Time deposits ​ 166,501 ​ 46,984 ​ 5,647 ​ 1,806 ​ 220,938 ​ Borrowings ​ 150,009 ​ 80,000 ​ 5,000 ​ — ​ 235,009 ​ Other liabilities ​ 1,737 ​ — ​ — ​ 15,944 ​ 17,681 ​ Stockholders' equity ​ — ​ — ​ — ​ 129,687 ​ 129,687 ​ Total liabilities and stockholders' equity ​ 438,495 ​ 350,703 ​ 217,590 ​ 326,160 ​ 1,332,948 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing gap positive (negative) ​ $ (105,847) ​ $ (165,509) ​ $ 5,625 ​ $ 265,731 ​ $ — ​ Cumulative repricing gap: ​ ​ ​ ​ ​ ​ Dollar amount ​ $ (105,847) ​ $ (271,356) ​ $ (265,731) ​ $ — ​ $ — ​ Percent of total assets ​ (8) % (20) % (20) % — % — % ​ (1) Cash and cash equivalents are presented as estimated repricing; investment securities and loans held for investment are presented as contractual maturities or contractual repricing (without consideration for prepayments); FHLB - San Francisco stock is presented as contractual repricing; transaction accounts (checking, savings and money market deposits) are presented as estimated repricing; while time deposits (without consideration for early withdrawals) and borrowings are presented as contractual maturities. ​ The static gap analysis under “12 months or less” duration, “Greater than 1 year to 3 years” duration and “Greater than 3 years to 5 years” duration show negative positions in the "Cumulative repricing gap - dollar amount" category, indicating more liabilities are sensitive to repricing than assets in the short and intermediate terms.
The calculation is intended to illustrate the change in NPV that would occur in the event of an immediate change in interest rates of -100, +100, +200 and +300 basis points (“bp”) with no effect given to steps that management might take to counter the effect of the interest rate movement.
The calculation is intended to illustrate the change in NPV that would occur in the event of an immediate change in interest rates of -300, -200, -100, +100, +200 and +300 basis points (“bp”) with no effect given to steps that management might take to counter the effect of the interest rate movement.
In addition, the Corporation maintains an investment portfolio, which is largely comprised of U.S. government agency MBS and U.S. government sponsored enterprise MBS and CMOs with contractual maturities of up to 30 years that reprice frequently or have a relatively short-average life.
In addition, the Corporation maintains an investment portfolio, which is largely comprised of U.S. government agency MBS and U.S. government sponsored enterprise MBS and CMO with contractual maturities of up to 30 years that reprice frequently or have a relatively short-average life.
Furthermore, the gap analysis provides a static view of interest rate risk exposure at a specific point in time without taking into account redirection of cash flows activity and deposit fluctuations. ​ The extent to which the net interest margin will be impacted by changes in prevailing interest rates will depend on a number of factors, including how quickly interest-earning assets and interest-bearing liabilities react to interest rate changes.
Furthermore, the gap analysis provides a static view of 65 Table of Contents interest rate risk exposure at a specific point in time without taking into account redirection of cash flows activity and deposit fluctuations. ​ The extent to which the net interest margin will be impacted by changes in prevailing interest rates will depend on a number of factors, including how quickly interest-earning assets and interest-bearing liabilities react to interest rate changes.
Management views non interest-bearing deposits to be the least sensitive to changes in market interest rates and these accounts are therefore characterized as long-term funding. Interest-bearing checking deposits are considered more sensitive, followed by increased sensitivity for savings and money market deposits.
Management views noninterest-bearing deposits to be the least sensitive to changes in market interest rates and these accounts are therefore characterized as long-term funding. Interest-bearing checking deposits are considered more sensitive, followed by increased sensitivity for savings and money market deposits.
For information regarding the sensitivity to interest rate risk of the Corporation's interest-earning assets and interest-bearing liabilities, see “Interest Rate Risk” below and Item 1, “Business - Lending Activities - Maturity of Loans Held for Investment,” “- Investment Securities Activities,” and “- Deposit Activities and Other Sources of Funds - Time Deposits by Maturities” in this Form 10-K. ​ Interest Rate Risk.
For information regarding the sensitivity to interest rate risk of the Corporation's interest-earning assets and interest-bearing liabilities, see “Interest Rate Risk” below and Item 1, “Business - Lending Activities - Maturity of Loans Held for Investment,” “- Investment Securities Activities,” and “- Deposit Activities and Other Sources of Funds - Time Deposits by Remaining Maturity” in this Form 10-K. ​ Interest Rate Risk.
Therefore, the model results that the Corporation discloses should be thought of as a risk management tool to compare the trends of the Corporation’s current disclosure to previous disclosures, over time, within the context of the actual performance of the treasury yield curve. ​ ​
Therefore, 66 Table of Contents the model results that the Corporation discloses should be thought of as a risk management tool to compare the trends of the Corporation’s current disclosure to previous disclosures, over time, within the context of the actual performance of the treasury yield curve. ​ ​
As a result, the relationship between interest-earning assets and interest-bearing liabilities, as shown in the previous table, is only a general indicator of interest rate sensitivity and the effect of changing interest rates on net interest income is likely to be different from that predicted solely on the basis of the interest rate sensitivity analysis set forth in the previous table. ​ The Corporation also models the sensitivity of net interest income for the 12-month period subsequent to any given month-end assuming a dynamic balance sheet accounting for, among other items: ​ ● The Corporation’s current balance sheet and repricing characteristics; ● Forecasted balance sheet growth consistent with the business plan; ● Current interest rates and yield curves and management estimates of projected interest rates; ● Embedded options, interest rate floors, periodic caps and lifetime caps; ● Repricing characteristics for market rate sensitive instruments; ● Loan, investment, deposit and borrowing cash flows; ● Loan prepayment estimates for each type of loan; and ● Immediate, permanent and parallel movements in interest rates of plus 300, 200 and 100, minus 100 and minus 200 basis points. ​ The following table describes the results of the analysis at June 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2022 ​ At June 30, 2021 Basis Point (bp) ​ Change in ​ Basis Point (bp) ​ Change in Change in Rates ​ Net Interest Income ​ Change in Rates ​ Net Interest Income +300 bp 3.32% ​ +300 bp 4.55% ​ +200 bp 2.14% ​ +200 bp 2.06% ​ +100 bp 1.05% ​ +100 bp 0.23% ​ -100 bp -0.09% ​ -100 bp 0.22% ​ -200 bp ​ -3.28% ​ -200 bp ​ 0.15% ​ ​ At June 30, 2022 and 2021, the Corporation was asset sensitive as its interest-earning assets at those dates are expected to reprice more quickly than its interest-bearing liabilities during the subsequent 12-month period.
As a result, the relationship between interest-earning assets and interest-bearing liabilities, as shown in the previous table, is only a general indicator of interest rate sensitivity and the effect of changing interest rates on net interest income is likely to be different from that predicted solely on the basis of the interest rate sensitivity analysis set forth in the previous table. ​ The Corporation also models the sensitivity of net interest income for the 12-month period subsequent to any given month-end assuming a dynamic balance sheet accounting for, among other items: ​ ● The Corporation’s current balance sheet and repricing characteristics; ● Forecasted balance sheet growth consistent with the business plan; ● Current interest rates and yield curves and management estimates of projected interest rates; ● Embedded options, interest rate floors, periodic caps and lifetime caps; ● Repricing characteristics for market rate sensitive instruments; ● Loan, investment, deposit and borrowing cash flows; ● Loan prepayment estimates for each type of loan; and ● Immediate, permanent and parallel movements in interest rates of plus 300, 200 and 100, minus 100, minus 200 and minus 300 basis points. ​ The following table describes the results of the analysis at June 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2023 ​ At June 30, 2022 Basis Point (bp) ​ Change in ​ Basis Point (bp) ​ Change in Change in Rates ​ Net Interest Income ​ Change in Rates ​ Net Interest Income +300 bp -10.56% ​ +300 bp 3.32% ​ +200 bp -5.26% ​ +200 bp 2.14% ​ +100 bp -1.95% ​ +100 bp 1.05% ​ -100 bp 1.25% ​ -100 bp -0.09% ​ -200 bp -0.59% ​ -200 bp -3.28% ​ -300 bp ​ -3.33% ​ -300 bp ​ -7.71% ​ ​ At June 30, 2023, the Corporation was liability sensitive as its interest-bearing liabilities are expected to reprice more quickly than its interest-earning assets during the subsequent 12-month period.
Therefore, in a rising interest rate environment, the model projects an increase in net interest income over the subsequent 12-month period.
Therefore, in a rising interest rate environment, the model projects a decrease in net interest income over the subsequent 12-month period.
The Corporation relies on retail deposits as its primary source of funds while utilizing FHLB - San Francisco 62 Table of Contents advances as a secondary source of funding. Management believes retail deposits, unlike brokered deposits, reduce the effects of interest rate fluctuations because they generally represent a more stable source of funds.
The Corporation relies on retail deposits as its primary source of funds while utilizing brokered certificates of deposit and FHLB - San Francisco advances as secondary sources of funding. Management believes retail deposits, unlike brokered certificates of deposit, reduce the effects of interest rate fluctuations because they generally represent a more stable source of funds.
However, past experience has shown that immediate, permanent and parallel movements in interest rates will not 65 Table of Contents necessarily occur.
However, past experience has shown that immediate, permanent and parallel movements in interest rates will not necessarily occur.
(3) Calculated as the change in the NPV ratio (NPV as a Percentage of Portfolio Value Assets) from the base case amount assuming the indicated change in interest rates (expressed in basis points). ​ The following table is derived from the internal interest rate risk model and represents the change in the NPV at a -100 basis point rate shock at June 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2022 At June 30, 2021 ​ (-100 bp rate shock) (-100 bp rate shock) ​ Pre-Shock NPV Ratio: NPV as a % of PV Assets 8.87 % ​ 12.54 % ​ Post-Shock NPV Ratio: NPV as a % of PV Assets 8.54 % ​ 11.25 % ​ Sensitivity Measure: Change in NPV Ratio -33 bp -129 bp ​ ​ The pre-shock NPV ratio decreased 367 basis points to 8.87 percent at June 30, 2022 from 12.54 percent at June 30, 2021 and the post-shock NPV ratio decreased 271 basis points to 8.54 percent at June 30, 2022 from 11.25 percent at June 30, 2021.
(3) Calculated as the change in the NPV ratio (NPV as a Percentage of Portfolio Value Assets) from the base case amount assuming the indicated change in interest rates (expressed in basis points). ​ The following table is derived from the internal interest rate risk model and represents the change in the NPV at a -200 basis point rate shock at June 30, 2023 and -100 basis point rate shock at June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2023 At June 30, 2022 ​ (-200 bp rate shock) (-100 bp rate shock) ​ Pre-Shock NPV Ratio: NPV as a % of PV Assets 9.29 % ​ 8.87 % ​ Post-Shock NPV Ratio: NPV as a % of PV Assets 8.37 % ​ 8.54 % ​ Sensitivity Measure: Change in NPV Ratio -92 bp -33 bp ​ ​ The pre-shock NPV ratio increased 42 basis points to 9.29% (-200 basis point rate shock) at June 30, 2023 from 8.87% (-100 basis point rate shock) at June 30, 2022, while the post-shock NPV ratio decreased 17 basis points to 8.37% (-200 basis point rate shock) at June 30, 2023 from 8.54% (-100 basis point rate shock) at June 30, 2022.
The decrease of the NPV ratios was primarily attributable to increases in market interest rates and a $7.5 million cash dividend distribution from the Bank to the Corporation in September 2021, partly offset by the net income in fiscal 2022 and amortization of stock-based compensation expense. ​ As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables.
The decrease of the NPV ratios was primarily attributable to increases in market interest rates and a $9.5 million cash dividend distribution from the Bank to the Corporation in September 2022, partly offset by the net income in fiscal 2023 and amortization of stock-based compensation.
In a falling interest rate environment, the results project a decrease in net interest income over the subsequent 12-month period, except for the -100 and -200 basis point scenarios at June 30, 2021. ​ Management believes that the assumptions used to complete the analysis described in the table above are reasonable.
Therefore, in a rising interest rate environment, the model projects an increase in net interest income over the subsequent 12-month period. In a falling interest rate environment, the results project a decrease in net interest income over the subsequent 12-month period. ​ Management believes that the assumptions used to complete the analysis described in the table above are reasonable.
It is also possible that, 63 Table of Contents as a result of an interest rate increase, the higher mortgage payments required from ARM borrowers could result in an increase in delinquencies and defaults.
It is also possible that, as a result of an interest rate increase, the higher mortgage payments required from ARM borrowers could result in an increase in delinquencies and defaults. Accordingly, the data presented in the tables in this section should not be relied upon as indicative of actual results in the event of changes in interest rates.
Removed
As of June 30, 2022, the targeted federal funds rate range was 1.50% to 1.75%, making an immediate change of minus 300 basis points or more unlikely. ​ The following table sets forth as of June 30, 2022 the estimated changes in NPV based on the indicated interest rate environment (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net ​ ​ Portfolio NPV as Percentage ​ ​ Basis Points ("bp") ​ Portfolio ​ NPV ​ Value of ​ of Portfolio Value ​ Sensitivity ​ Change in Rates ​ Value ​ Change (1) ​ Assets ​ Assets (2) ​ Measure (3) ​ +300 bp ​ $ 197,876 ​ $ 94,639 ​ $ 1,251,834 15.81 % +694 bp +200 bp ​ $ 171,305 ​ $ 68,068 ​ $ 1,227,494 13.96 % +509 bp +100 bp ​ $ 140,221 ​ $ 36,984 ​ $ 1,198,690 11.70 % +283 bp - ​ $ 103,237 ​ $ — ​ $ 1,164,038 8.87 % — ​ -100 bp ​ $ 99,176 ​ $ (4,061) ​ $ 1,161,691 8.54 % (33) bp -200 bp ​ $ 124,158 ​ $ 20,921 ​ $ 1,189,093 ​ 10.44 % 157 bp ​ (1) Represents the increase (decrease) of the NPV at the indicated interest rate change in comparison to the NPV at June 30, 2022 (“base case”).
Added
As of June 30, 2023, the targeted federal funds rate range was 5.00% to 5.25%. ​ 63 Table of Contents The following table sets forth as of June 30, 2023 the estimated changes in NPV based on the indicated interest rate environment (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net ​ ​ Portfolio NPV as Percentage ​ ​ Basis Points ("bp") ​ Portfolio ​ NPV ​ Value of ​ of Portfolio Value ​ Sensitivity ​ Change in Rates ​ Value ​ Change (1) ​ Assets ​ Assets (2) ​ Measure (3) ​ +300 bp ​ $ 120,984 ​ $ (2,323) ​ $ 1,313,259 9.21 % -8 bp +200 bp ​ $ 122,265 ​ $ (1,041) ​ $ 1,318,205 9.28 % -1 bp +100 bp ​ $ 122,413 ​ $ (894) ​ $ 1,322,085 9.26 % -3 bp - ​ $ 123,307 ​ $ — ​ $ 1,326,784 9.29 % — ​ -100 bp ​ $ 122,456 ​ $ (850) ​ $ 1,328,869 9.22 % -7 bp -200 bp ​ $ 110,492 ​ $ (12,814) ​ $ 1,320,843 8.37 % -92 bp -300 bp ​ $ 117,969 ​ $ (5,337) ​ $ 1,332,337 ​ 8.85 % -44 bp ​ (1) Represents the decrease of the NPV at the indicated interest rate change in comparison to the NPV at June 30, 2023 (“base case”).
Removed
Accordingly, the data presented in the tables in this section should not be relied upon as indicative of actual results in the event of changes in interest rates.
Added
The sensitivity measure increased to 92 basis points at June 30, 2023 from 33 basis points at June 30, 2022. ​ As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables.
Added
In a falling interest rate environment, the results project an increase in net interest income over the subsequent 12-month period at the -100 basis point scenario and a decrease in net interest income over the subsequent 12-month period for the -200 and -300 basis point scenarios. ​ At June 30, 2022, the Corporation was asset sensitive as its interest-earning assets were expected to reprice more quickly than its interest-bearing liabilities during the subsequent 12-month period.

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