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What changed in PROVIDENT FINANCIAL HOLDINGS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PROVIDENT FINANCIAL HOLDINGS INC's 2023 and 2024 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 2024 report.

+479 added−492 removedSource: 10-K (2024-08-30) vs 10-K (2023-09-05)

Top changes in PROVIDENT FINANCIAL HOLDINGS INC's 2024 10-K

479 paragraphs added · 492 removed · 371 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

199 edited+66 added−60 removed173 unchanged
Biggest changeThe average life of mortgage loans tends to increase, however, when current market interest rates are substantially higher than the interest rates on existing loans held for investment and, conversely, decrease when the interest rates on existing loans held for investment are substantially higher than current market interest rates, as borrowers are generally less inclined to refinance their loans when market rates increase and more inclined to refinance their loans when market rates decrease. ​ The table below describes the geographic dispersion of real estate secured loans held for investment (gross) at June 30, 2023 and 2022, as a percentage of the total dollar amount outstanding (dollars in thousands): ​ As of June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inland ​ Southern ​ Other ​ Other ​ ​ ​ ​ ​ ​ ​ Empire ​ California (1) ​ California ​ States ​ Total Loan Category ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % Single-family $ 149,569 29 % $ 174,421 34 % $ 194,570 37 % $ 261 — % $ 518,821 100 % Multi-family ​ 61,672 13 % 272,178 59 % 127,263 28 % — — % 461,113 100 % Commercial real estate ​ 16,586 18 % 49,183 54 % 24,789 28 % — — % 90,558 100 % Construction ​ 590 30 % 1,116 58 % 230 12 % — — % 1,936 100 % Other ​ — — % 106 100 % — — % — — % 106 100 % Total ​ $ 228,417 21 % $ 497,004 47 % $ 346,852 32 % $ 261 — % $ 1,072,534 100 % ​ (1) Other than the Inland Empire. ​ 5 Table of Contents As of June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inland ​ Southern ​ Other ​ Other ​ ​ ​ ​ ​ ​ ​ Empire ​ California (1) ​ California ​ States ​ Total Loan Category ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % Single-family $ 126,638 33 % $ 112,549 30 % $ 138,767 37 % $ 280 — % $ 378,234 100 % Multi-family ​ 63,764 14 % 275,642 59 % 124,993 27 % 277 — % 464,676 100 % Commercial real estate ​ 20,450 23 % 41,127 45 % 28,852 32 % — — % 90,429 100 % Construction ​ 3,157 98 % 59 2 % — — % — — % 3,216 100 % Other ​ — — % 123 100 % — — % — — % 123 100 % Total ​ $ 214,009 23 % $ 429,500 46 % $ 292,612 31 % $ 557 — % $ 936,678 100 % ​ (1) Other than the Inland Empire. ​ Single-Family Mortgage Loans .
Biggest change(2) Other than the Inland Empire. ​ 5 Table of Contents As of June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inland ​ Southern ​ Other ​ Other ​ ​ ​ ​ ​ ​ ​ Empire (1) ​ California (2) ​ California ​ States ​ Total Loan Category ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % Single-family $ 149,569 29 % $ 174,421 34 % $ 194,570 37 % $ 261 — % $ 518,821 100 % Multi-family ​ 61,672 13 % 272,178 59 % 127,263 28 % — — % 461,113 100 % Commercial real estate ​ 16,586 18 % 49,183 54 % 24,789 28 % — — % 90,558 100 % Construction ​ 590 30 % 1,116 58 % 230 12 % — — % 1,936 100 % Other ​ — — % 106 100 % — — % — — % 106 100 % Total ​ $ 228,417 21 % $ 497,004 47 % $ 346,852 32 % $ 261 — % $ 1,072,534 100 % ​ (1) Comprised of Riverside and San Bernardino counties.
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.
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 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.
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.
To mitigate the risks involved with non-QM loans, the Bank has implemented systems, processes, 7 Table of Contents 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 credit losses and net charge-offs.
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.
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 a 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.
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.
At June 30, 2024, the Bank’s largest lending relationship to a single borrower or group of borrowers consisted of four multi-family loans totaling $5.0 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.
On October 18, 2022, the FDIC adopted a final rule to increase its initial base insurance assessment rate schedules by two basis points to improve the likelihood that the reserve ratio of the DIF would be restored to at least 1.35 percent by September 30, 2028.
On October 18, 2022, the FDIC adopted a final rule to increase its initial base insurance assessment rate schedules by two basis points to improve the likelihood that the reserve ratio of the DIF would be restored to at least 1.35% by September 30, 2028.
Commercial lines of credit are typically made for the purpose of providing working capital and are usually approved with a term of one year or less. ​ Commercial business loans involve greater risk than residential mortgage loans and involve risks that are different from those associated with residential and commercial real estate loans.
Commercial lines of credit are typically made for the purpose of providing working capital and are typically approved with a term of one year or less. ​ Commercial business loans involve greater risk than residential mortgage loans and involve risks that are different from those associated with residential and commercial real estate loans.
The capital standards require the maintenance of the following minimum capital ratios: (i) a Tier 1 leverage ratio of 4%, (ii) a CET1 capital ratio of 4.5%; (iii) a Tier 1 capital ratio of 6%; and (iv) a total capital ratio of 8%. ​ Mortgage servicing rights and deferred tax assets over designated percentages of CET1 are also deducted from capital.
The capital standards require the maintenance of the following minimum capital ratios: (i) a Tier 1 leverage ratio of 4%, (ii) a CET1 capital ratio of 4.5%; (iii) a Tier 1 capital ratio of 6%; and (iv) a total capital ratio of 8%. ​ Mortgage servicing assets and deferred tax assets over designated percentages of CET1 are also deducted from capital.
Because of the Bank’s asset size, the Bank was given a one-time option to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt, equity securities and interest-only strips in its capital calculations.
Because of the Bank’s asset size, the Bank was given a one-time option to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt securities and interest-only strips in its capital calculations.
In addition, the Bank must file a prior written notice of a dividend with the FRB. The FRB or the OCC may object to a capital distribution based on safety and soundness concerns. Further restrictions on Bank dividends may apply if the Bank fails the QTL test.
In addition, the Bank must file a prior written notice of a dividend with the FRB. The FRB or the OCC may object to a capital distribution based on safety and soundness concerns. Further restrictions on Bank’s dividends may apply if the Bank fails the QTL test.
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.
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 often substantially exceed the value of the collateral property. ​ Privacy and Cybersecurity Regulations.
Subject to a narrow exception, the OCC is required to appoint a receiver or conservator for a savings institution that is "critically undercapitalized." OCC regulations also require that a capital restoration plan be filed with the OCC within 45 days of the date a savings institution receives notice that it is "undercapitalized," "significantly undercapitalized" or "critically undercapitalized." In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion.
Subject to a narrow exception, the OCC is required to appoint a receiver or conservator for a savings institution that is "critically undercapitalized." OCC regulations also require that a capital restoration plan be filed with the OCC within 45 days of the date a savings institution receives notice that it is "undercapitalized," "significantly undercapitalized" or "critically undercapitalized." Numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion.
Prior to joining the Bank, Ms. Wertz was with CommerceWest Bank where she was responsible for the management of commercial banking activities, treasury management and specialty banking. Prior to that she was with Opportunity Bank, N.A. where she was responsible for the commercial treasury sales and service team. Ms.
Wertz was with CommerceWest Bank where she was responsible for the management of commercial banking activities, treasury management and specialty banking. Prior to that she was with Opportunity Bank, N.A. where she was responsible for the commercial treasury sales and service team. Ms.
The Bank’s Loan Committee, comprised of the Chief Executive Officer, Chief Lending Officer, Chief Financial Officer, Senior Vice President – Single-Family Division and Vice President - Loan Administration, approves all construction loans over $1.0 million.
The Bank’s Loan Committee, comprised of the Chief Executive Officer, Chief Lending Officer, Senior Vice President – Single-Family Division and Vice President - Loan Administration, approves all construction loans over $1.0 million.
In addition, Tier 1 capital includes accumulated other comprehensive income, which includes all unrealized gains and losses on available for sale debt, equity securities and interest-only strips.
In addition, Tier 1 capital includes accumulated other comprehensive income, which includes all unrealized gains and losses on available for sale debt securities and interest-only strips.
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.
These reserves may be in the form of cash or noninterest-bearing deposits with the regional FRB. 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.
One of the Bank’s primary lending activity is the origination and purchase of adjustable and fixed rate mortgage loans to be held for investment secured by first trust deed mortgages on owner-occupied, single-family (one to four units) residences in the communities where the Bank’s branches are located and surrounding areas in Southern and Northern California.
One of the Bank’s primary lending activities is the origination and purchase of adjustable and fixed rate mortgage loans to be held for investment, secured by first trust deed mortgages on owner-occupied, single-family (one to four units) residences in the communities where the Bank’s branches are located and surrounding areas in Southern and Northern California.
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.
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.
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 FRB policy statement also indicates that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. 33 Table of Contents ​ 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 OCC also may take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. ​ As of June 30, 2023, the most recent notification from the OCC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.
The OCC also may take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. ​ As of June 30, 2024, the most recent notification from the OCC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.
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.
The following table sets forth information at June 30, 2024 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.
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).
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).
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.
The Bank did not sell any participation loans in fiscal 2024 or fiscal 2023. ​ 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 states vary in the extent to which they permit interstate savings and loan holding company acquisitions. ​ Acquisition of the Company.
The states vary in the extent to which they permit interstate savings and loan holding company acquisitions. ​ Acquisition of the Corporation.
When a property is acquired, it is recorded at its fair market value less the estimated cost of sale. Subsequent declines in value are charged to operations. As of both June 30, 2023 and 2022, there was no REO property.
When a property is acquired, it is recorded at its fair market value less the estimated cost of sale. Subsequent declines in value are charged to operations. As of both June 30, 2024 and 2023, there was no REO property.
Other than an investor’s own internet access charges, the Corporation makes available free of charge through that website the Corporation’s annual report, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after these materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
Other than an investor’s own internet access charges, the Corporation makes available free of charge through that website the Corporation’s annual report, quarterly reports on Form 10-Q and current reports on Form 8-K, including amendments to these reports, if any, as soon as reasonably practicable after these materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
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.
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, 2024. ​ Federal Home Loan Bank System.
The real estate collateral for these loans are primarily located in Southern and Northern California. At June 30, 2023, all of these loans were performing in accordance with their repayment terms. ​ 3 Table of Contents Loans Held For Investment Analysis .
The real estate collateral for these loans are primarily located in Southern and Northern California. At June 30, 2024, all of these loans were performing in accordance with their repayment terms. ​ 3 Table of Contents Loans Held For Investment Analysis .
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.
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, 2024, the Bank’s total pre-1988 bad debt reserve for tax purposes was approximately $9.0 million.
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.
During both fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on multi-family and commercial real estate loans. At June 30, 2024 and 2023, there were no non-performing or 30 to 89 days delinquent multi-family and commercial real estate loans.
This competition may limit the Bank’s growth and profitability in the future. ​ Reportable Segments ​ Management monitors the revenue and expense components of the various products and services the Bank offers, but operations are managed and financial performance is evaluated on a Corporation-wide basis in comparison to a business plan which is developed each year.
This competition may limit the Bank’s growth and profitability in the future. ​ 2 Table of Contents Reportable Segments ​ Management monitors the revenue and expense components of the various products and services the Bank offers, but operations are managed and financial performance is evaluated on a Corporation-wide basis in comparison to a business plan which is developed each year.
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.
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 and/or guarantor who have sufficient resources to support the repayment of the loan. ​ Allowance for Credit Losses.
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.
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.
Although commercial business loans are often collateralized by equipment, inventory, accounts receivable or other business assets including real estate, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because accounts receivable may not be collectible and inventories and equipment may be obsolete or of limited use.
Although commercial business loans are often collateralized by equipment, inventory, accounts receivable or other business assets including real estate, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because accounts receivable may not be collectible and inventories and equipment may be obsolete or of limited 10 Table of Contents use.
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.
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.
Savings institutions also must conduct the activities of subsidiaries in accordance with existing regulations and orders. With respect to subsidiaries generally, the OCC may determine that investment by a savings institution in, or the activities of, a subsidiary must be restricted or eliminated based on safety and soundness or legal reasons. ​ Transactions with Affiliates.
Savings institutions also must conduct the activities of subsidiaries in accordance with existing regulations and orders. With respect to subsidiaries generally, the OCC may determine that investment by a savings institution in, or the activities of, a subsidiary must be restricted or eliminated based on safety and soundness or legal reasons. 29 Table of Contents ​ Transactions with Affiliates.
Factors considered in determining classification include, but are not limited to, expected future cash flows, collateral value, the financial condition of the borrower and current economic conditions.
Factors considered in determining classification include, but are not limited to, expected future cash flows, collateral value, the financial condition of the borrower and/or guarantor and current economic conditions.
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.
In fiscal 2024 and 2023, the FHLB – San Francisco distributed cash dividends to the Bank totaling $793,000 and $556,000, 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.
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 Bank’s OCC annual assessments for the fiscal years ended June 30, 2024 and 2023 were $179,000 and $198,000, 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).
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.
At June 30, 2024, the outstanding borrowings mature between 2024 and 2028 with a weighted average maturity of 13 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 Bank believes that the internal monitoring system helps reduce many of the risks inherent in its construction loans. ​ Construction loans afford the Bank the opportunity to achieve higher interest rates and fees with shorter terms to maturity than its single-family mortgage loans.
The Bank believes that the internal monitoring system helps reduce many of the risks inherent in its construction loans. ​ 9 Table of Contents Construction loans afford the Bank the opportunity to achieve higher interest rates and fees with shorter terms to maturity than its single-family mortgage loans.
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.
At June 30, 2024, the Corporation’s net state tax rate was 8.5%. 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.
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.
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.
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.
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.
At June 30, 2023, the Bank had no loans or group of loans to related borrowers with outstanding balances in excess of this amount.
At June 30, 2024, the Bank had no loans or group of loans to related borrowers with outstanding balances in excess of this amount.
Ternes to serve as President of the Bank and the Corporation, while continuing to serve as Chief Operating Officer, Chief Financial Officer and Corporate Secretary. Prior to joining the Bank, Mr.
Ternes to serve as President of Provident and the Bank, while continuing to serve as Chief Operating Officer, Chief Financial Officer and Corporate Secretary. Prior to joining the Bank, Mr.
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.
At June 30, 2024 and 2023, total non-performing single-family loans were $2.6 million and $1.3 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.
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.
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 31% of the Bank’s deposit portfolio at June 30, 2024, compared to approximately 23% at June 30, 2023.
The construction phase of a construction/permanent loan generally lasts nine to 12 months and the interest rate charged is generally fixed at a margin above prime rate and with a loan-to-value ratio of up to 75% of the appraised value of the completed property.
The construction phase generally lasts 12 to 18 months and the interest rate charged is generally fixed at a margin above prime rate and with a loan-to-value ratio of up to 75% of the appraised value of the completed property.
(2) Includes uninsured deposits of approximately $140.1 million and $173.7 million at June 30, 2023 and 2022, respectively. The amounts of uninsured deposits are based on estimated amounts of uninsured deposits as of the reported period. Such estimates are based on the same methodologies and assumptions used for regulatory reporting requirements. ​ Time Deposits by Rates .
(2) Includes uninsured deposits of approximately $122.7 million and $140.1 million at June 30, 2024 and 2023, respectively. The amounts of uninsured deposits are based on estimated amounts of uninsured deposits as of the reported period. Such estimates are based on the same methodologies and assumptions used for regulatory reporting requirements. ​ Time Deposits by Rates .
The FDIC has the authority to recommend to the OCC that enforcement action be taken with respect to a particular savings institution. If the OCC does not take action, the FDIC has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations. ​ Standards for Safety and Soundness.
The FDIC has the authority to recommend to the OCC that enforcement action be taken with respect to a particular savings institution. If the OCC does not take action, the FDIC has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations. ​ 30 Table of Contents Standards for Safety and Soundness.
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.
During fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on construction loans, and no construction loans were non-performing or 30-89 days delinquent at both June 30, 2024 and June 30, 2023. ​ Participation Loan Purchases and Sales.
The Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations. 30 Table of Contents ​ Other Consumer Protection Laws and Regulations. The Consumer Financial Protection Bureau (“CFPB”) exercises broad regulatory, supervisory and enforcement authority with respect to both new and existing consumer financial protection laws.
The Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations. ​ Other Consumer Protection Laws and Regulations. The Consumer Financial Protection Bureau (“CFPB”) exercises broad regulatory, supervisory and enforcement authority with respect to both new and existing consumer financial protection laws.
At June 30, 2023, there was one land loan of $106,000 (reported as other mortgage loans) and one tract construction loan for $1.1 million, net undisbursed loan funds of $567,000, as compared to one land loan for $123,000 (reported as other mortgage loans) and one tract construction loan for $59,000, net undisbursed loan funds of $1.6 million at June 30, 2022. ​ Speculative construction loans are made to home builders and are termed “speculative” because the home builder does not have, at the time of loan origination, a signed sale contract with a home buyer who has a commitment for permanent financing with either the Bank or another lender for the finished home.
At June 30, 2024, there was one land loan of $95,000 (reported as other mortgage loans) and no tract construction loans; as compared to one land loan for $106,000 (reported as other mortgage loans) and one tract construction loan for $1.1 million, net of undisbursed loan funds of $567,000 at June 30, 2023. ​ Speculative construction loans are made to home builders and are termed “speculative” because the home builder does not have, at the time of loan origination, a signed sale contract with a home buyer who has a commitment for permanent financing with either the Bank or another lender for the finished home.
Ternes joined the Bank and the Corporation as Senior Vice President and Chief Financial Officer on November 1, 2000 and was appointed Secretary of the Corporation and the Bank in April 2003. Effective January 1, 2008, Mr.
Ternes joined Provident and the Bank as Senior Vice President and Chief Financial Officer on November 1, 2000 and was appointed Secretary in April 2003. Effective January 1, 2008, Mr.
In exchange for the additional risk to us associated with these loans, these borrowers generally are required to pay a higher interest rate, and depending on the credit history, a lower loan-to-value ratio was generally required than for a conforming loan.
In exchange for the additional risk to us associated with these loans, these borrowers generally are required to pay a higher interest rate, and 6 Table of Contents depending on the credit history, a lower loan-to-value ratio was generally required than for a conforming loan.
The Bank contributed $40,000 to the Foundation in both fiscal 2023 and 2022. ​ Subsequent Event ​ On July 27, 2023, the Corporation announced that the Provident Board of Directors declared a cash dividend of $0.14 per share.
The Bank contributed $40,000 to the Foundation in both fiscal 2024 and 2023. ​ Subsequent Event ​ On July 25, 2024, the Corporation announced that the Provident Board of Directors declared a cash dividend of $0.14 per share.
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.
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 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.
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 new purchases and limited cash-out refinances and 75% for cash-out refinances. The maximum loan amount offered on single-family homes is $1.5 million.
In determining whether the Bank’s assets expose the Bank to sufficient risk to warrant classification, the Bank may consider various factors, including the payment history of the borrower, the loan-to-value ratio, and the debt coverage ratio of the property securing the loan.
In determining whether the Bank’s assets expose the Bank to sufficient risk to warrant classification, the Bank may consider various factors, including the payment history of the borrower, the loan-to-value ratio, the reserves of the borrower and guarantors, and the debt coverage ratio of the property securing the loan, among other factors.
Multiple savings and loan holding companies may engage in activities permitted for financial holding companies, and certain other activities including acting as a trustee under a deed of trust and real estate investments. ​ If the Bank fails the QTL test, the Corporation must, within one year of that failure, register as, and become subject to the restrictions applicable to bank holding companies.
Multiple savings and loan holding companies may engage in activities permitted for financial holding companies, and certain other activities including acting as a trustee under a deed of trust and real estate investments. ​ 32 Table of Contents If the Bank were to fail the QTL test, the Corporation must, within one year of that failure, register as, and become subject to the restrictions applicable to bank holding companies.
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.
As of June 30, 2024 and 2023, the Bank maintained 92.3% and 92.1% of its portfolio assets in qualified thrift investments, respectively, and therefore, met the qualified thrift lender test at both dates. During fiscal 2024 and 2023, the Bank was in compliance with the QTL test as of each month end. ​ Capital Requirements.
There was $68,000 of state tax expense from stock-based compensation in fiscal 2023. ​ Delaware. As a Delaware holding company not earning income in Delaware, the Corporation is exempted from Delaware corporate income tax, but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.
There was $22,000 adjustment to state tax expense from stock-based compensation in fiscal 2024. ​ Delaware. As a Delaware holding company not earning income in Delaware, the Corporation is exempted from Delaware corporate income tax, but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate allowance for credit loss for regulatory purposes.
Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is secondary and oftentimes an insufficient source of repayment. At 10 Table of Contents June 30, 2023 and 2022, there were no non-performing commercial business loans.
Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is secondary and oftentimes an insufficient source of repayment. At June 30, 2024 and 2023, there were no non-performing commercial business loans.
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.
As of June 30, 2024 and 2023, there were no outstanding borrowings under 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.
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.
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. ​ Gwendolyn L. Wertz joined the Bank as Senior Vice President of Retail Banking on February 3, 2014. Prior to joining the Bank, Ms.
In an effort to expand production and diversify risk, the Bank purchases loans and loan participations, with collateral primarily in California, which allows for greater geographic distribution outside of the Bank’s primary lending areas. The Bank generally purchases between 50% and 100% of the total loan amount.
To expand production and diversify risk, the Bank purchases loans and loan participations, primarily with collateral located in California, which allows for greater geographic distribution outside of the Bank’s primary lending areas. The Bank typically purchases between 50% and 100% of the total loan amount.
Wertz has more than 30 years of experience with financial institutions including the last 15 years in senior management roles. Her experience includes depository growth initiatives, operations, compliance and deposit acquisition management. ​ ​
Wertz has more than 35 years of experience with financial institutions including the last 20 years in senior management roles. Her experience includes depository growth initiatives, operations, compliance and deposit acquisition management. ​ ​
At June 30, 2023, there were $230,000 of custom construction/permanent loans, net undisbursed loan funds of $1.2 million as compared to $3.1 million of custom construction/permanent loans, net undisbursed loan funds of $1.3 million at June 30, 2022. ​ Construction loans under $1.0 million are approved by Bank personnel specifically designated to approve construction loans.
At June 30, 2024, there were $984,000 of custom construction/permanent loans, net of undisbursed loan funds of $403,000 as compared to $230,000 of custom construction/permanent loans, net of undisbursed loan funds of $1.2 million at June 30, 2023. ​ Construction loans under $1.0 million are approved by Bank personnel specifically designated to approve construction 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, 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 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, 2024 and 2023, the Bank’s investment securities portfolio was $131.9 million and $156.6 million, respectively, which primarily consisted of federal agency and GSE obligations.
This compares to June 30, 2022 when the Bank had one custom short-term single-family construction loans totaling $90,000, net undisbursed loan funds of $455,000. ​ From time to time the Bank makes lot loans to individuals to finance land acquisition prior to the start of construction or tract construction loans to subdivision builders.
This compares to June 30, 2023 when the Bank had one custom short-term single-family construction loan totaling $496,000, net of undisbursed loan funds of $49,000. ​ From time to time the Bank makes lot loans to individuals to finance land acquisition prior to the start of construction or tract construction loans to subdivision builders.
The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the allowance for loan losses.
The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the ACL.
The business activities of the Bank consist of community banking, investment services and trustee services for real estate transactions. ​ The Bank’s community banking operations primarily consist of accepting deposits from customers within the communities surrounding its full-service offices and investing those funds in single-family, multi-family, commercial real estate, construction, commercial business, consumer and other mortgage loans.
The business activities of the Bank consist of community banking, investment services and trustee services for real estate transactions. ​ The Bank’s community banking operations primarily consist of accepting deposits from customers within the communities surrounding its full-service offices and investing those funds in the origination of single-family, multi-family and commercial real estate loans and, to a lesser extent, construction, commercial business, consumer and other mortgage loans to be held for investment.
A portion of the allowance for loan losses established to cover probable losses related to assets classified substandard or doubtful may be included in determining an institution’s regulatory capital.
A portion of the ACL established to cover probable losses related to assets classified substandard or doubtful may be included in determining an institution’s regulatory capital.
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.
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.
During fiscal 2023, the Bank declared and paid $9.5 million of cash dividends to Provident while Provident declared and paid $4.0 million of cash dividends to shareholders. ​ Excise Tax on Stock Repurchases. The Inflation Reduction Act of 2022 imposed a one percent excise tax on the value of corporate share repurchases (net of issuance).
During fiscal 2024, the Bank declared and paid $7.0 million of cash dividends to Provident, while Provident declared and paid $3.9 million of cash dividends to shareholders. ​ Excise Tax on Stock Repurchases. The Inflation Reduction Act of 2022 imposed a one percent excise tax on the value of corporate share repurchases (net of issuance).
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.
In addition, the Bank pledged investment securities totaling $3.9 million and $4.2 million at June 30, 2024 and 2023, respectively, to collateralize its FHLB – San Francisco advances under the Securities-Backed Credit (“SBC”) facility.
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.
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 $774.1 million at June 30, 2024 as compared to $967.6 million at June 30, 2023.
During fiscal 2023 and 2022, the Bank was required to purchase $1.3 million and $84,000 of FHLB – San Francisco capital stock, respectively, and the Bank did not redeem any capital stock during both periods. In fiscal 2023 and 2022, the FHLB – San Francisco distributed cash dividends to the Bank totaling $556,000 and $489,000, respectively.
During fiscal 2024 and 2023, the Bank was required to purchase $63,000 and $1.3 million of FHLB – San Francisco capital stock, respectively, and the Bank did not redeem any capital stock during both periods. In fiscal 2024 and 2023, the FHLB – San Francisco distributed cash dividends to the Bank totaling $793,000 and $556,000, respectively.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe amount of this allowance is determined by management through periodic reviews and consideration of several factors, including, but not limited to: ​ ● our collectively evaluated allowance, based on our historical default and loss experience and certain macroeconomic factors based on management's expectations of future events; ● our individually evaluated allowance, based on our evaluation of non-performing loans and the underlying fair value of collateral or based on discounted cash flow for restructured loans; and ● an unallocated reserve to provide for other credit losses inherent in our loan portfolio that may not have been contemplated in the other loss factors. ​ The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.
Biggest changeThe amount of this allowance is determined by management through periodic reviews and consideration of several factors, including, but not limited to: ● our collective allowance, for loans evaluated on a pool basis with similar risk characteristics based on our and peer life of loan historical loss experience, certain qualitative factors consisting of macroeconomic conditions and external factors as regulatory requirements, and reasonable and supportable forecasts relating to management’s expectations of future events; and ● our individual allowance, for evaluation of individual loans that do not share similar risk characteristics based on the present value of the expected future cash flows or the fair value of the underlying collateral. ​ The determination of the appropriate ACL involves a significant degree of subjectivity, relying on substantial estimates of both current credit risks and future trends, all of which are subject to potential material changes.
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.
Further, there can be no assurance that 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.
In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. ​ Breaches of information security also may occur through intentional or unintentional acts by those having access to our systems or our customers’ or counterparties’ confidential information, including employees.
In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. ​ Breaches of information security may also occur through intentional or unintentional acts by those having access to our systems, our customers’ or counterparties’ confidential information, including employees.
Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements.
Accordingly, our operations are exposed to the risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements.
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.
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 balloon 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 net deferred tax asset results primarily from (1) deferred loan costs, (2) provisions for loan losses recorded for financial reporting purposes, which were in the past significantly larger than net loan charge-offs deducted for tax reporting proposes and (3) deferred compensation, among others. ​ We regularly review our deferred tax assets for recoverability based on our history of earnings, expectations for future earnings and expected timing of reversals of temporary differences.
The net deferred tax asset results primarily from (1) deferred loan costs, (2) provisions for credit losses recorded for financial reporting purposes, which were in the past significantly larger than net loan charge-offs deducted for tax reporting proposes and (3) deferred compensation, among others. ​ We regularly review our deferred tax assets for recoverability based on our history of earnings, expectations for future earnings and expected timing of reversals of temporary differences.
Any decline in available funding in amounts adequate to finance our activities or on terms which are acceptable could adversely impact our ability to originate loans, invest in securities, meet our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could, in turn, have a material adverse effect on our business, financial condition and results of operations.
Any decline in available funding in amounts adequate to finance our activities on acceptable terms could adversely impact our ability to originate loans, invest in securities, meet our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could, in turn, have a material adverse effect on our business, financial condition and results of operations.
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.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, due 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.
When we determine the purchase price we are willing to pay to purchase loans in bulk, management makes certain assumptions about, among other things, how fast borrowers will prepay their loans, the real estate market, our ability to collect loans successfully and, if necessary, our ability to dispose of any real estate that may be acquired through foreclosure.
When we determine the purchase price we are willing to pay to purchase loans in bulk, management makes certain assumptions about, among other things, how fast borrowers will prepay their loans, the real estate market, our ability to collect on loans successfully and, if necessary, our ability to dispose of any real estate that may be acquired through foreclosure.
We could also suffer significant reputational damage. ​ Further, our cardholders use their debit and credit cards to make purchases from third parties or through third party processing services. As such, we are subject to risk from data breaches of such third party’s information systems or their payment processors. Such a data security breach could compromise our account information.
We could also suffer significant reputational damage. ​ Further, our cardholders use their debit and credit cards to make purchases from third parties or through third party processing services. As such, we are subject to risk from data breaches of such third party’s information systems or their payment processors. Such a data security breach could compromise our customer’s account information.
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.
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 the purchased 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.
Any compromise of our security could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data.
Any compromise of our security could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on internet security systems to provide the security and authentication necessary to effect secure transmission of data.
We believe the recorded net deferred tax asset at June 30, 2023 is fully realizable based on our expected future earnings; however, expected future earnings may not be realized, which could impact our deferred tax assets. ​ Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. ​ Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.
We believe the recorded net deferred tax asset at June 30, 2024 is fully realizable based on our expected future earnings; however, expected future earnings may not be realized, which could impact our deferred tax assets. ​ Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. ​ Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.
Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation. ​ Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high. ​ We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations.
Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation. ​ Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be exceedingly high. ​ We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations.
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.
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. ​ 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.
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.
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 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.
An inability to raise funds through deposits, borrowings or other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy in general.
An inability to raise funds through deposits, borrowings or other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities on terms acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy in general.
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.
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 and commercial real estate loans for individuals and businesses for various purposes, which are secured by residential and non-residential properties.
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.
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 2024 and 2023, the Bank did not repurchase any loans.
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.
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.
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.
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. ​ 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.
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.
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. ​ A sustained increase in market interest rates could adversely affect our earnings.
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.
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. 42 Table of Contents ​ Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations.
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.
Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses.
If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, any additional capital we obtain may result in the dilution of the interests of existing holders of our common stock.
If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, any additional capital we obtain may dilute the interests of existing holders of our common stock.
The Corporation is continuously working to install new and upgrade its existing information technology systems and provide employee awareness training around ransomware, phishing, malware, and other cyber risks to further protect the Corporation against cyber risks and security breaches. ​ There continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts.
We are continuously working to install new, and upgrade our existing, information technology systems and provide employee awareness training around ransomware, phishing, malware, and other cyber risks to further protect the Corporation against cyber risks and security breaches. ​ There continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts.
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.
Additionally, the Bank did not have any claims or settlements for previously sold loans during fiscal 2024 and 2023. ​ ​ 46 Table of Contents Our assets as of June 30, 2024 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.
Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability.
Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and 44 Table of Contents business, could subject us to additional regulatory scrutiny, or could expose us to legal liability.
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.
If any of the circumstances described in the following risk factors actually occur, 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, 2024, approximately 66% 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.
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.
Repayment on these loans typically is dependent upon income generated, or expected to be generated, by the property securing the loan 38 Table of Contents in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions.
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.
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 FOMC commenced increasing the target range for the federal funds rates by implementing multiple increases.
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.
However, if the FOMC further increases the targeted federal funds rate, overall interest rates will likely continue to 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.
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.
Changes in agreements or relationships between the United States and other countries may also affect these businesses. ​ A deterioration in economic conditions in our market areas 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 ACL; ● 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. ​ 37 Table of Contents 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.
We may also incur other costs related to data security breaches, such as replacing cards associated with compromised card accounts or credit monitoring services.
We may also incur other costs related to data security breaches, such as replacing cards 43 Table of Contents associated with compromised card accounts or credit monitoring services.
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.
Risks Related to our Lending Activities ​ Our business may be adversely affected by credit risk associated with residential property. ​ At June 30, 2024, $518.1 million, or 49% of our loans held for investment, were secured by single-family residential real property.
We have policies and procedures in place to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective.
We have policies and procedures in place to protect 45 Table of Contents our reputation and promote ethical conduct, but these policies and procedures may not be fully effective.
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.
At June 30, 2024, we had $528.5 million or 50% 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.
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.
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. Inflation has risen sharply since the end of 2021 and, while dissipating, remains elevated.
The process for determining whether impairment of a security is other-than-temporary usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security to assess the probability of receiving all contractual principal and interest payments on the security.
The process usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security to assess the probability of receiving all contractual principal and interest payments on the security.
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.
These factors include, but are not limited to, actions taken by rating agencies regarding the securities, defaults by the issuer, adverse events affecting either the issuer or the underlying securities, and shifts in market interest rates along with continued instability in the capital markets.
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.
At June 30, 2024, we had $245.7 million in time 40 Table of Contents deposits that mature within one year, $95.6 million in noninterest-bearing checking accounts and $518.8 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.
Failure to comply with these regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. Several banking institutions have received large fines for non-compliance with these laws and regulations.
Failure to comply with these regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions.
Accordingly, we are, and will continue to be, dependent upon dividends from the Bank to pay the principal of and interest on our indebtedness, to satisfy our other cash needs and to pay dividends on our common stock. The Bank's ability to pay dividends is subject to its ability to earn net income and to meet certain regulatory requirements.
Accordingly, we are, and will continue to be, dependent upon dividends from the Bank to pay the principal of and interest on our indebtedness, to satisfy our other cash needs, to pay for share buybacks and to pay dividends on our common stock.
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.
At June 30, 2024, the net deferred tax asset was approximately $606,000, an increase from $218,000 at the prior fiscal year end.
Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
Factors beyond our control can significantly impact the fair value of securities within our portfolio, potentially leading to adverse changes in their value.
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.
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 involvement in litigation may increase significantly. The expenses of some legal proceedings will adversely affect our results of operations until they are resolved.
There can be no assurance that the declines in market value will not result in other-than-temporary impairments of these assets, and would lead to accounting charges that could have a material adverse effect on our net income and capital levels.
Despite our efforts to evaluate these factors, there can be no assurance that the declines in market value will not result in credit losses on these assets. Such credit losses could lead to accounting charges that might materially impact our net income and capital levels.
While the Corporation selects third-party vendors carefully, it does not control their actions.
While we select our third-party vendors carefully, we do not control their actions.
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.
We may be exposed to a greater risk of loss to the extent that bulk purchases contain such loans. ​ Our allowance for credit losses may not be sufficient to absorb losses in our loan portfolio. ​ Our business relies significantly on the creditworthiness of our customers.
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.
Inaccuracies in our estimations could lead to an insufficient ACL, necessitating increases through provisions for credit losses, adversely impacting our recorded income. ​ 39 Table of Contents Further, included in our single-family residential loan portfolio, which comprised 49% of our total loan portfolio at June 30, 2024, were $17.7 million or 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.
Any of these factors, among others, could cause other-than-temporary impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could have a material effect on our business, financial condition and results of operations.
These influences could result in impairments that are not just temporary, leading to realized and/or unrealized losses in future periods. Such developments could also lead to declines in other comprehensive income, thereby potentially affecting our business, financial condition, and results of operations in a significant manner.
Any increase in our charge-offs, as required by the bank regulators, may have a material adverse effect on our financial condition and results of operations. ​ Risks Related to Market and Interest Rate Changes ​ Fluctuating interest rates can adversely affect our profitability. ​ Our earnings and cash flows are largely dependent upon our net interest income.
In addition, the resolution of non-performing assets often requires a significant time commitment from management, diverting their attention from other aspects of our operations. ​ Risks Related to Market and Interest Rate Changes ​ Fluctuating interest rates can adversely affect our profitability. ​ Our earnings and cash flows are largely dependent upon our net interest income.
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.
While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur. ​ Risks Related to Our Business and Industry Generally ​ Ineffective liquidity management could adversely affect our financial results and condition. ​ Liquidity is essential to our business.
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.
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. In fiscal 2024 and 2023, the Bank paid cash dividends to its holding company totaling $7.0 million and $9.5 million, respectively. ​ ​ Item 1B. Unresolved Staff Comments ​ None. ​ ​
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.
As of June 30, 2024, the FOMC target range for the federal funds rate was 5.25% to 5.50% as economic conditions remained relatively resilient and inflation remained elevated. As inflation eases, the FOMC has indicated rate decreases may be expected during the second half of 2024, although to date that has not been the case.
Any 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.
Any increases in the ACL will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition, results of operations, liquidity and capital. ​ Non-performing assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future. ​ Non-performing assets, consisting of non-performing loans and real estate acquired through foreclosure, adversely affect our earnings in various ways.
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.
Conversely, periods with stable or declining loan levels might seem relatively more profitable as income accrues gradually for loans where losses had been previously recognized. ​ As a result of the change in methodology from the incurred loss model to the CECL model, on July 1, 2024, the Corporation recorded a one-time, net of tax charge of $824,000 to retained earnings, a $1.2 million increase to the ACL for credit losses for loans, and no change to the ACL on unfunded loan commitments. ​ 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.
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.
Additionally, as we acknowledge the potential impact of significant portfolio growth, new loan products, and refinancing activities, these actions may result in portfolios consisting of unseasoned loans that may not perform as anticipated, elevating the risk of an inadequate allowance to absorb losses without additional provisions.
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.
As is the case with many financial institutions, we attempt to increase our proportion of deposits comprising either no or relatively low-interest-bearing accounts, which has been challenging over the last couple of years.
Removed
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.
Added
We did not purchase any loans in fiscal 2024 and 2023.
Removed
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.
Added
To account for potential defaults and nonperformance in our loan portfolio, we maintain an ACL on loans using the CECL methodology. This allowance represents management's best estimate of the lifetime expected credit losses in our loan portfolio.
Removed
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.
Added
A material decrease in the credit quality of our loan portfolio, significant changes in the risk profile of markets, industries, or customer groups, or inadequacy in the ACL could have a materially adverse impact on our business, financial condition, liquidity, capital, and results of operations. ​ Bank regulatory agencies also periodically review our ACL and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on their judgment about information available to them at the time of their examination. ​ If charge-offs in future periods exceed the ACL, we may need additional provisions to increase the ACL.
Removed
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.
Added
We reverse accrued interest on non-performing loans and do not record interest income on foreclosed assets. Additionally, non-performing loans increase our loan administration costs and costs also increase due to the improvement, maintenance and repairs of the foreclosed assets.
Removed
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.
Added
Upon foreclosure or similar proceedings, we record the repossessed asset at the estimated fair value, less costs to sell, which may result in a write-down or loss.
Removed
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.
Added
A significant increase in the level of non-performing assets from current levels would also increase our risk profile and may impact the capital levels our regulators believe are appropriate in light of the increased risk profile.
Removed
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.
Added
While we attempt to reduce problem assets through various means such as collection efforts, asset sales, workouts and modifications, a decline in the value of the underlying collateral or in the borrower’s performance or financial condition could adversely affect our business, results of operations and financial condition.
Removed
This risk is affected by, among other things: ​ ● cash flow of the borrower and/or the project being financed; ● the changes and uncertainties as to the future value of the collateral, in the case of a collateralized loan; ● the duration of the loan; ● the character and creditworthiness of a particular borrower; and ● changes in economic and industry conditions. ​ We maintain an allowance for loan losses, which is a reserve established through a provision (recovery) for loan losses charged (credited) to expense, which we believe is appropriate to provide for probable losses in our loan portfolio.
Added
We evaluate individual investment securities quarterly for expected credit losses based on Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses,” since the adoption on July 1, 2023.
Removed
If our estimates are incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in the need for additions to our allowance through an increase in the provision for loan losses, which is charged against income.
Added
There were no ACL on investment securities held to maturity at adoption of ASC 326 or at June 30, 2024 and there were no impairment on investment securities available for sale at June 30, 2024. ​ 41 Table of Contents Risks Related to Regulatory, Legal and Compliance Matters ​ We are subject to an extensive body of accounting rules and best practices.
Removed
If charge-offs in future periods exceed the allowance for loan losses, we may need additional provisions to increase the allowance for loan losses.
Added
Periodic changes to such rules may change the treatment and recognition of critical financial line items and affect our profitability. ​ Our business operations are significantly influenced by the extensive body of accounting regulations in the United States.
Removed
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe 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. ​ ​
Biggest changeIn 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 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.
Item 2. Properties ​ At June 30, 2024, the net book value of the Corporation’s properties (including land and buildings) and its furniture, fixtures and equipment was $8.0 million. The Corporation’s home office is located in Riverside, California.
Added
The Corporation owns six of the retail banking offices and has seven leased retail banking offices. The lease term maturity dates range from 2024 to 2029, some of which has remaining extension options.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Corporation is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, operations or cash flows. ​ ​ Item 4. Mine Safety Disclosures ​ Not applicable. ​ ​ PART II ​
Biggest changeThe Corporation is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, operations or cash flows. ​ ​ 48 Table of Contents Item 4. Mine Safety Disclosures ​ Not applicable. ​ PART II ​

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
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
Biggest changeItem 4. ​ Mine Safety Disclosures 49 ​ ​ ​ PART II ​ ​ Item 5. ​ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 49 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 53 ​ ​ Comparison of Financial Condition at June 30, 2024 and 2023 54 ​ ​ Comparison of Operating Results for the Fiscal Years Ended June 30, 2024 and 2023 55 ​ ​ Average Balances, Interest and Average Yields/Costs 59 ​ ​ Rate/Volume Variance 60 ​ ​ Liquidity and Capital Resources 60 ​ ​ Impact of New Accounting Pronouncements 62 Item 7A. ​ Quantitative and Qualitative Disclosures about Market Risk 62 Item 8. ​ Financial Statements and Supplementary Data 66

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−2 removed2 unchanged
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.
Biggest changeThe September 2023 stock repurchase plan terminates on September 28, 2024, unless completed sooner or extended. ​ The table below sets forth information regarding the Corporation’s purchases of its common stock during the fourth quarter of fiscal 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Number of Shares ​ ​ ​ ​ ​ ​ ​ Shares Purchased as ​ that May Yet Be ​ ​ Total Number of ​ Average Price ​ Part of Publicly ​ Purchased Under Period ​ Shares Purchased ​ Paid per Share ​ Announced Plan ​ the Plan (1) April 1, 2024 – April 30, 2024 18,351 ​ $ 13.52 18,351 219,241 May 1, 2024 – May 31, 2024 18,494 ​ $ 12.71 18,494 200,747 June 1, 2024 – June 30, 2024 11,631 ​ $ 12.64 11,631 189,116 Total 48,476 ​ $ 13.00 48,476 189,116 ​ (1) Represents the remaining shares available for future purchases under the September 2023 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.
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.
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.
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.
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 August 15, 2024, there were 400 shareholders of record, and there were approximately 1,917 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 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.
The Board of Directors has declared quarterly cash dividends on the Corporation’s common stock for consecutive quarters since September 30, 2002. On April 25, 2024, the Corporation declared a quarterly cash dividend of $0.14 per share with a record date of May 16, 2024 and the dividend was paid on June 6, 2024.
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.
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 September 28, 2023, the Board approved a stock repurchase plan, authorizing the purchase of up to 350,353 shares of the Corporation’s outstanding common stock over a one-year period.
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. ​ ​
Total return assumes the reinvestment of all dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 PROV ​ $ 100.00 ​ $ 65.88 ​ $ 88.15 ​ $ 78.33 ​ $ 70.14 ​ $ 71.83 NASDAQ Stock Index ​ $ 100.00 ​ $ 106.96 ​ $ 154.52 ​ $ 132.54 ​ $ 157.83 ​ $ 195.09 NASDAQ Bank Index ​ $ 100.00 ​ $ 77.27 ​ $ 133.59 ​ $ 109.09 ​ $ 105.72 ​ $ 144.54 ​ (1) Assumes that the value of the investment in the Corporation’s common stock and each index was $100 on June 30, 2019 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. ​ ​
Removed
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.
Added
Simultaneously, the Board canceled the remaining 25,428 shares available for purchase under the prior repurchase plan. The Corporation may purchase the shares from time to time in the open market or through privately negotiated transactions depending on market conditions, the capital requirements of the Corporation, and available cash that can be allocated to the stock repurchase program, among other considerations.
Removed
(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.

Item 7. Management's Discussion & Analysis

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

89 edited+19 added−28 removed30 unchanged
Biggest changeFactors 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.
Biggest changeFactors which could cause actual results to differ materially from the results anticipated or implied by our forward-looking statements include, but are not limited to: ● adverse economic conditions in our local market areas or other markets where we have lending relationships ● effects of employment levels, labor shortages, inflation, a recession or slowed economic growth; ● changes in the interest rate environment, including the past increases in the Federal Reserve benchmark rate and the duration of such increased levels, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; ● the impact of inflation and the Federal Reserve monetary policy; ● the effects of any Federal government shutdown; ● credit risks of lending activities, including loan delinquencies, write-offs, changes in our ACL, and provision for credit losses; ● increased competitive pressures; ● quality and composition of our securities portfolio and the impact of adverse changes in the securities markets; ● quality and composition of our securities portfolio and the impact of adverse changes in the securities markets; ● fluctuations in deposits; ● secondary market conditions for loans and our ability to sell loans in the secondary market; ● liquidity issues, including our ability to borrow funds or raise additional capital, if necessary; ● expectations regarding key growth initiatives and strategic priorities; ● 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; ● results of examinations of us by regulatory authorities, which may the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or our bank subsidiary which could require us to increase our ACL, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings; ● legislative and regulatory changes, including changes in banking, securities and tax law, in regulatory policies and principles, or the interpretation of regulatory capital or other rules; ● use of estimates in determining the fair value of assets, which may prove incorrect; ● disruptions or security breaches, or other adverse events, failures or interruptions in or attacks on our information technology systems or on the our third-party vendors; ● staffing fluctuations in response to product demand or corporate implementation strategies; ● our ability to pay dividends on our common stock; ● environmental, social and governance goals; ● effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest and other external events; ● and other factors described in this Form 10-K and in Quarterly Reports on Form 10-Q and other reports filed with and furnished to the Securities and Exchange Commission (“SEC”), which are available on our website at www.myprovident.com and on the SEC’s website at www.sec.gov . ​ 51 Table of Contents Forward-looking statements are based upon management’s beliefs and assumptions at the time they are made.
For additional information regarding our commitments, see Note 13, "Commitments and Contingencies," of the Notes to Consolidated Financial Statements, contained in Item 8 of this Form 10-K. ​ Provident is a separate legal entity from the Bank and, on a stand-alone level, must provide for its own liquidity and pay its own operating expenses and cash dividends and stock repurchases.
For additional information regarding our commitments, see Note 13, "Commitments and Contingencies," of the Notes to Consolidated Financial Statements, contained in Item 8 of this Form 10-K. ​ Provident is a separate legal entity from the Bank and, on a stand-alone level, must provide for its own liquidity and pay its own operating expenses, cash dividends and stock repurchases.
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.
These factors could cause our actual results for the fiscal 2025 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.
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.
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.
The Bank's activities include attracting deposits, offering banking services and originating and purchasing single-family, multi-family, commercial real estate, construction and, to a lesser extent, other mortgage, commercial business and consumer loans. Deposits are collected primarily from 13 banking locations located in Riverside and San Bernardino counties in California.
The Bank's activities include attracting deposits, offering banking services and originating and purchasing single-family, multi-family, commercial real estate, construction and, to a lesser extent, other mortgage (generally land loans), commercial business and consumer loans. Deposits are collected primarily from 13 banking locations located in Riverside and San Bernardino counties in California.
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.
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 Bank’s full service offices and investing those funds in single-family, multi-family and commercial real estate loans.
The Bank augments its liquidity by maintaining sufficient borrowing capacity at the FHLB - San Francisco, Federal Reserve Bank of San Francisco and its correspondent bank. ​ We incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets.
The Bank augments its liquidity by maintaining sufficient borrowing capacity at the FHLB - San Francisco, FRB of San Francisco and its correspondent bank. ​ We incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets.
While maturities and scheduled amortization of loans and investment securities are a relatively predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. ​ The primary investing activity of the Bank has been the origination and purchase of loans held for investment.
While maturities and scheduled amortization of loans and investment securities are a relatively predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. ​ The primary investing activity of the Bank has been the origination and, to a lesser extent, purchase of loans held for investment.
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 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 Bank’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 FRB 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 $1.0 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.
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 slightly to $129.9 million at June 30, 2024 from $129.7 million at June 30, 2023, primarily as a result of net income and the amortization of stock-based compensation in fiscal 2024, 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, 2024 and 2023 ​ General.
Assuming continued payment during fiscal 2024 at this rate of $0.14 per share, our average total dividend paid each quarter would be approximately $986,000 based on the number of our current outstanding shares as of June 30, 2023.
Assuming continued payment during fiscal 2025 at this rate of $0.14 per share, our average total dividend paid each quarter would be approximately $959,000 based on the number of our current outstanding shares as of June 30, 2024.
At June 30, 2023, Provident (on an unconsolidated basis) had liquid assets of approximately $3.7 million. ​ The Bank, as a federally-chartered, federally insured savings bank, is subject to the capital requirements established by the OCC.
At June 30, 2024, Provident (on an unconsolidated basis) had liquid assets of approximately $3.4 million. ​ The Bank, as a federally-chartered, federally insured savings bank, is subject to the capital requirements established by the OCC.
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.
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. 61 Table of Contents ​ At June 30, 2024, the Bank exceeded all regulatory capital requirements.
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.
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 plans to enhance its community banking business by moderately increasing its total assets, focusing on expanding single-family, multi-family, commercial real estate, construction, and commercial business loans.
See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements. ​ Allowance for loan losses.
See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements. ​ 52 Table of Contents ​ Allowance for Credit Losses.
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.
Provision for Income Taxes. 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.
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.
These policies relate to the methodology for the recognition of interest income, determination of the provision for credit losses and the ACL, the estimated fair value of derivative financial instruments, the valuation of mortgage servicing assets and real estate owned and the provision for income taxes.
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.
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, 2024, 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 10.0%, 19.3%, 19.3% and 20.4%, respectively.
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.
While the Corporation’s long-term strategy targets moderate growth, management acknowledges that this growth may be influenced 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, 2023 decreased to 18.1% from 24.3% during the same quarter ended June 30, 2022.
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, 2024 decreased to 16.6% from 18.1% during the same quarter ended June 30, 2023.
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.
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 $3.5 million, or 1%, to $238.5 million at June 30, 2024 from $235.0 million at June 30, 2023.
Provident’s primary sources of funds consist of capital raised through dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. During fiscal 2023, the Corporation purchased 302,719 shares of the Corporation’s common stock with a weighted average cost of $14.01 per share.
Provident’s primary sources of funds consist of capital raised through dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. During fiscal 2024, the Corporation purchased 197,349 shares of the Corporation’s common stock with a weighted average cost of $13.05 per share.
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.
Provident is regulated by the FRB. At June 30, 2024, the Corporation, on a consolidated basis, had total assets of $1.27 billion, total deposits of $888.3 million and total stockholders’ equity of $129.9 million. Provident has not engaged in any significant activity other than holding the stock of the Bank.
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.
The decrease in the liquidity ratio was due primarily to the decrease in average qualifying liquid assets which exceeded the decrease in average deposits and borrowings during the quarter ended June 30, 2024 in comparison to the quarter ended June 30, 2023.
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 decrease 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 $24.6 million, or 16%, to $131.9 million at June 30, 2024 from $156.5 million at June 30, 2023. The decrease was the result of scheduled and accelerated principal payments on investment securities.
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 Bank generally maintains sufficient cash and cash equivalents to meet short-term liquidity needs. At June 30, 2024, total cash and cash equivalents were $51.4 million, or 4.0% of total assets.
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%.
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 $3.0 million for fiscal 2024, representing an effective tax rate of 29.2%, down $788,000 or 21% from $3.8 million in fiscal 2023, representing an effective tax rate of 30.8%.
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.
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, 2024 and 2023 ​ Total assets decreased $60.7 million, or 5%, to $1.27 billion at June 30, 2024 from $1.33 billion at June 30, 2023.
(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.
(2) Includes the average balance of noninterest-bearing checking accounts of $97.3 million and $112.9 million in the fiscal years ended June 30, 2024 and 2023, respectively. (3) Includes the average balance of uninsured deposits of $135.7 million and $170.2 million in the fiscal years ended June 30, 2024 and 2023, respectively.
(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.
(5) Represents net interest income as a percentage of average interest-earning assets. ​ 59 Table of Contents 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.
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 balance of multi-family, commercial real estate, construction and commercial business loans, net of undisbursed loan funds, decreased $22.6 million, or 4%, to $532.6 million at June 30, 2024 from $555.2 million at June 30, 2023, and represented 51% and 52% of loans held for investment, respectively.
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.
The lower effective tax rate in fiscal 2024 was attributable primarily to the decreased tax benefit in fiscal 2023 from the equity incentive awards with the share price lower at vesting and distribution than the fair value estimated at the grant date, which was not replicated in fiscal 2024. ​ 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.
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.
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.
As of June 30, 2023, there are 61,540 shares available for purchase under the Corporation’s existing stock repurchase plan.
As of June 30, 2024, there are 189,116 shares available for purchase under the Corporation’s existing stock repurchase plan.
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.
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 2025 we project expenditures of ranging from $270,000 to $1.5 million for capital investment in premises and equipment.
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.
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, net decreased $24.7 million, or 2%, to $1.05 billion at June 30, 2024 from $1.08 billion at June 30, 2023.
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 preparation of these financial statements requires management to make difficult, subjective or complex 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 and, therefore, management considers the following to be critical accounting estimates.
Total retail deposits, defined as total deposits excluding brokered certificates of deposit, decreased by $111.3 million, or 12% to $844.2 million at June 30, 2023 from $955.5 million at June 30, 2022, due primarily to the decline of deposit balances related to a number of customers seeking higher interest rates elsewhere.
Total retail deposits, defined as total deposits excluding brokered certificates of deposit, decreased by $87.7 million, or 10% to $756.5 million at June 30, 2024 from $844.2 million at June 30, 2023, due primarily to the decline of transaction account balances related to some customers seeking higher interest rates elsewhere.
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.
The Corporation recorded net income of $7.4 million, or $1.06 per diluted share, for the fiscal year ended June 30, 2024, down $1.2 million, or 14%, from $8.6 million, or $1.19 per diluted share, for the fiscal year ended June 30, 2023.
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.
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. ​ FHLB – San Francisco and other equity investments increased $603,000, or 6%, to $10.1 million at June 30, 2024 from $9.5 million at June 30, 2023.
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 average cost of interest-bearing liabilities was 1.74% during fiscal 2024, up 94 basis points from 0.80% during fiscal 2023, and the average balance of interest-bearing liabilities was $1.14 billion during fiscal 2024, up $16.8 million or 2% from $1.12 billion during fiscal 2023. ​ Interest expense on deposits for fiscal 2024 was $9.7 million compared to $3.1 million for fiscal 2023, an increase of $6.6 million or 213%.
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.
The decrease in net income was primarily attributable to a $2.1 million decrease in net interest income, a $270,000 increase in non-interest expense and a $134,000 decrease in non-interest income, partly offset by a $437,000 change in the provision for credit losses resulting from a $63,000 recovery of credit losses recorded during fiscal 2024 compared to a $374,000 provision for credit losses during fiscal 2023.
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 average balance of interest-earning assets increased $18.6 million, or 2%, to $1.25 billion in fiscal 2024 from $1.24 billion in fiscal 2023. The average balance of interest-bearing liabilities increased $16.8 million, or 2%, to $1.13 billion during fiscal 2024 as compared to $1.12 billion during fiscal 2023. ​ Interest Income.
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.
The Corporation's efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, increased to 73% in fiscal 2024 from 69% in fiscal 2023 due to both an increase in non-interest expenses and a decline in revenues.
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.
In fiscal 2024, the Bank originated $75.5 million of loans held for investment, down 68% from $237.1 million during fiscal 2023. In both years these loans consisted primarily of single-family, multi-family and commercial real estate loans. The Bank did not purchase any loans in fiscal 2024 or 2023.
The increase was primarily due to new advances to fund the increase of loans held for investment. The weighted-average maturity of the Corporation’s FHLB – San Francisco advances was approximately 12 months at June 30, 2023, down from 16 months at June 30, 2022.
The increase was primarily due to new advances to augment the decrease in deposits. The weighted average maturity of the Corporation’s FHLB – San Francisco advances was approximately 13 months at June 30, 2024, up from 12 months at June 30, 2023.
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.
Return on average assets in fiscal 2024 decreased to 0.57% from 0.68% in fiscal 2023 and return on average stockholders' equity in fiscal 2024 decreased to 5.62% from 6.58% in fiscal 2023. ​ Net Interest Income. Net interest income decreased $2.1 million, or 6%, to $34.9 million in fiscal 2024 from $37.0 million in fiscal 2023.
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.
Total non-interest expense was $28.5 million in fiscal 2024, an increase of $270,000 or 1% from $28.3 million in fiscal 2023.
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 designed to improve core revenue by achieving a higher net interest margin and, combined with the Corporation’s growth, ultimately increase net interest income.
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.
During the fiscal years ended June 30, 2024 and 2023, the Bank originated loans held for investment of $75.5 million and $237.1 million, respectively. The Bank did not purchase any loans held for investment from other financial institutions in fiscal 2024 or 2023.
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 increase in the average yield of investment securities was primarily attributable to a lower premium amortization resulting from lower principal payments.
In addition, the Corporation intends to decrease the percentage of retail time deposits in its deposit base and to increase the percentage of lower cost checking and savings accounts and to diversify the deposit instruments, including the use of brokered certificates of deposit and State of California’s time deposits, subject to market conditions and the Corporation’s funding needs.
Additionally, the Corporation aims to reduce the percentage of retail time deposits in its deposit base while increasing the proportion of lower-cost checking and savings accounts. To diversify its deposit instruments, the Corporation will consider utilizing brokered certificates of deposit and the State of California’s time deposits, subject to market conditions and its funding 53 Table of Contents needs.
Yields 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.
Yields 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, ​ ​ 2024 ​ 2023 ​ ​ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ (Dollars In Thousands) ​ Balance ​ Interest ​ Cost ​ Balance ​ Interest ​ Cost ​ Interest-earning assets: ​ ​ ​ ​ Loans receivable, net (1) ​ $ 1,069,616 ​ $ 50,194 4.69 % $ 1,029,000 ​ $ 42,191 4.10 % Investment securities ​ 144,466 ​ 2,060 1.43 % 172,005 ​ 2,169 1.26 % FHLB - San Francisco and other equity investments ​ 9,601 ​ 802 8.35 % 8,488 ​ 556 6.55 % Interest-earning deposits ​ 30,610 ​ 1,674 5.38 % 26,214 ​ 1,076 4.05 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-earning assets ​ 1,254,293 ​ 54,730 4.36 % 1,235,707 ​ 45,992 3.72 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-earning assets ​ 30,655 ​ ​ 32,763 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,284,948 ​ ​ $ 1,268,470 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Checking and money market accounts (2) ​ $ 407,938 ​ 290 0.07 % $ 479,921 ​ 227 0.05 % Savings accounts ​ 260,249 ​ 313 0.12 % 318,795 ​ 168 0.05 % Time deposits ​ 247,863 ​ 9,063 3.66 % 162,144 ​ 2,751 1.70 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deposits (3) ​ 916,050 ​ 9,666 1.06 % 960,860 ​ 3,146 0.33 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Borrowings ​ 221,368 ​ 10,141 4.58 % 159,742 ​ 5,861 3.67 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-bearing liabilities ​ 1,137,418 ​ 19,807 1.74 % 1,120,602 ​ 9,007 0.80 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing liabilities ​ 16,731 ​ ​ 17,307 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ 1,154,149 ​ ​ 1,137,909 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ 130,799 ​ ​ 130,561 ​ ​ Total liabilities and stockholders’ equity ​ $ 1,284,948 ​ ​ $ 1,268,470 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ $ 34,923 ​ ​ $ 36,985 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate spread (4) ​ ​ 2.62 % ​ 2.92 % Net interest margin (5) ​ ​ 2.78 % ​ 2.99 % Ratio of average interest- earning assets to average interest-bearing liabilities ​ ​ 110.28 % ​ 110.27 % ​ (1) Includes the average balance of non-performing loans of $2.1 million and $1.1 million, as well as net deferred loan costs of $955 thousand and $959 thousand for the fiscal years ended June 30, 2024 and 2023, respectively.
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 balance of single-family loans held for investment decreased slightly to $518.1 million at June 30, 2024, from $518.8 million at June 30, 2023.
When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Corporation may make. 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.
You should not place undue reliance on these statements as they are subject to various risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Corporation may make.
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 decrease was primarily attributable to decreases in loans held for investment, investment securities and cash and cash equivalents. ​ Total cash and cash equivalents, primarily excess cash deposited with the FRB of San Francisco, decreased $14.4 million, or 22%, to $51.4 million at June 30, 2024 from $65.8 million at June 30, 2023.
Outstanding brokered certificates of deposit as of June 30, 2023 totaled $106.4 million. As of June 30, 2023 and 2022, the percentage of transaction accounts to total deposits was 77% and 87%, respectively. Noninterest-bearing deposits as a percentage of total deposits decreased to 11% at June 30, 2023 from 13% at June 30, 2022.
Brokered certificates of deposit increased $25.4 million, or 24%, to $131.8 million at June 30, 2024 from $106.4 million at June 30, 2023. As of June 30, 2024 and 2023, the percentage of transaction accounts to total deposits was 69% and 77%, respectively.
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 total available borrowing capacity across all sources totals approximately $519.9 million at June 30, 2024. ​ Regulations require the Bank to maintain adequate liquidity to assure safe and sound operations.
There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements.
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.
Transaction accounts decreased $104.8 million, or 13%, to $729.6 million at June 30, 2023 from $834.4 million at June 30, 2022, while time deposits increased $99.8 million, or 82%, to $220.9 million at June 30, 2023 from $121.1 million at June 30, 2022. The increase in time deposits was primarily attributable to the utilization of brokered certificates of deposit.
Transaction accounts decreased $115.1 million, or 16%, to $614.5 million at June 30, 2024 from $729.6 million at June 30, 2023, while time deposits increased $53.0 million, or 24%, to $273.9 million at June 30, 2024 from $220.9 million at June 30, 2023. The increase in time deposits includes the increased utilization of brokered certificates of deposit.
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.
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 60 Table of Contents of its liquidity needs.
Total interest income increased $11.3 million, or 33%, to $46.0 million for fiscal 2023 from $34.7 million for fiscal 2022. The increase was primarily attributable to increases in all interest-earning asset categories, primarily loans receivable. ​ Interest income on loans receivable increased $10.0 million, or 31%, to $42.2 million in fiscal 2023 from $32.2 million in fiscal 2022.
Total interest income increased $8.7 million, or 19%, to $54.7 million for fiscal 2024 from $46.0 million for fiscal 2023. The increase was primarily attributable to an increase of interest income from loans receivable. ​ Interest income on loans receivable increased $8.0 million, or 19%, to $50.2 million in fiscal 2024 from $42.2 million in fiscal 2023.
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.
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, which include both retail and brokered deposits. During the fiscal years ended June 30, 2024 and 2023, the net decrease in deposits was $62.2 million and $4.9 million, respectively.
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.
The increase in non-interest expense was primarily attributable to increases in premises and occupancy expenses, equipment expense, deposit insurance premiums and regulatory assessments, partly offset by decreases in salaries and employee benefits and other operating expenses. ​ Salaries and employee benefits expense decreased $95,000, or 1%, to $17.6 million in fiscal 2024 from $17.7 million in fiscal 2023.
This increase was primarily attributable to a higher interest expense on borrowings and, to a lesser extent, a higher interest expense on deposits, particularly time deposits.
Total interest expense for fiscal 2024 was $19.8 million compared to $9.0 million for fiscal 2023, an increase of $10.8 million or 120%. This increase was primarily attributable to a higher interest expense on deposits, particularly time deposits and, to a lesser extent, a higher interest expense on borrowings.
The average balance of time deposits increased by $30.6 million, or 23%, to $162.1 million in fiscal 2023 from $131.5 million in fiscal 2022. ​ Interest expense on borrowings, consisting of FHLB - San Francisco advances, for fiscal 2023 increased $3.9 million, or 194%, to $5.9 million as compared to $2.0 million in fiscal 2022.
The average balance of brokered certificates of deposit in fiscal 2024 was $118.8 million with the average cost of 5.17% compared to the average balance of $48.7 million with the average cost of 3.97% in fiscal 2023. ​ Interest expense on borrowings, consisting of FHLB - San Francisco advances, for fiscal 2024 increased $4.2 million, or 71%, to $10.1 million as compared to $5.9 million in fiscal 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.
The Bank also has a federal funds facility with its correspondent bank for $50.0 million which matures on June 30, 2025. As of June 30, 2024, there were no outstanding borrowings under the discount window facility or the federal funds facility with its correspondent bank.
The average cost of transaction accounts remained at 0.05% in fiscal 2023 compared to fiscal 2022, while the average cost of time deposits in fiscal 2023 was 1.70%, up 113 basis points, from 0.57% in fiscal 2022. The average balance of deposits decreased slightly to $960.9 million during fiscal 2023 from $961.5 million during fiscal 2022.
The average cost of time deposits in fiscal 2024 was 3.66%, up 196 basis points, from 1.70% in fiscal 2023, while the average cost of transaction accounts was 0.09% in fiscal 2024, up four basis points from 0.05% in fiscal 2023.
Commencing July 1, 2023, the Corporation will be calculating its allowance for credit losses on loans in accordance with the CECL methodology. For additional information, see Item 1, “Business - “Asset Quality” in this Form 10-K. ​ Non-Interest Income.
For additional information, see Item 1, “Business - “Asset Quality” in this Form 10-K. ​ Non-Interest Income.
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%.
The average yield increased 133 basis points to 5.38% in fiscal 2024 from 4.05% in fiscal 2023, resulting from increases in the targeted federal funds interest rate since March 2022 to July 2023. The average balance of interest-earning deposits increased $4.4 million, or 17%, to $30.6 million in fiscal 2024 from $26.2 million in fiscal 2023. ​ Interest Expense.
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.
Management attributes the decrease in loan originations to the higher interest rate environment and overall uncertainty in the economy. Total loan principal payments in fiscal 2024 were $99.9 million, down 2% from $102.3 million in fiscal 2023. There was no REO in both fiscal 2024 and 2023.
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.
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, 2024 Compared ​ ​ To Year Ended June 30, 2023 ​ ​ Increase (Decrease) Due to (In Thousands) ​ Rate ​ Volume ​ Rate/Volume ​ Net Interest-earning assets: ​ ​ ​ ​ Loans receivable (1) ​ $ 6,098 ​ $ 1,665 ​ $ 240 ​ $ 8,003 Investment securities ​ 285 ​ (347) ​ (47) ​ (109) FHLB – San Francisco and other equity investments ​ 153 ​ 73 ​ 20 ​ 246 Interest-bearing deposits ​ 362 ​ 178 ​ 58 ​ 598 Total net change in income on interest-earning assets ​ 6,898 ​ 1,569 ​ 271 ​ 8,738 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ Checking and money market accounts ​ 113 ​ (36) ​ (14) ​ 63 Savings accounts ​ 215 ​ (29) ​ (41) ​ 145 Time deposits ​ 3,175 ​ 1,457 ​ 1,680 ​ 6,312 Borrowings ​ 1,457 ​ 2,262 ​ 561 ​ 4,280 Total net change in expense on interest-bearing liabilities ​ 4,960 ​ 3,654 ​ 2,186 ​ 10,800 Net increase (decrease) in net interest income ​ $ 1,938 ​ $ (2,085) ​ $ (1,915) ​ $ (2,062) ​ (1) Includes non-performing loans.
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.
The average balance of borrowings increased $61.7 million, or 39%, to $221.4 million during fiscal 2024 from $159.7 million during fiscal 2023 and the average cost of borrowings was 4.58% in fiscal 2024, up 91 basis points from 3.67% in fiscal 2023. ​ Provision for (Recovery of) Credit Losses.
The average balance of investment securities decreased $34.9 million, or 17%, to $172.0 million in fiscal 2023 from $206.9 million in fiscal 2022 as a result of scheduled and accelerated principal payments on mortgage-backed securities. ​ During fiscal 2023, the Bank received $556,000 of cash dividends from its FHLB - San Francisco stock, an increase of $67,000 or 14% from the $489,000 of cash dividends received in fiscal 2022, resulting in an average yield of 6.55% on FHLB stock during 2023 compared to 5.98% during 2022.
The average balance of investment securities decreased $27.5 million, or 16%, to $144.5 million in fiscal 2024 from $172.0 million in fiscal 2023 as a result of scheduled and accelerated principal payments on mortgage-backed securities. The average yield on investment securities increased 17 basis points to 1.43% for fiscal 2024 from 1.26% for fiscal 2023.
During fiscal 2023, the Bank did not purchase any investment securities, while in fiscal 2022, the Bank purchased $19.0 million of government sponsored enterprise mortgage-backed securities and collateralized mortgage obligations. The Bank did not sell any investment securities during fiscal 2023 and 2022.
During fiscal 2024 and 2023, the Bank did not purchase or sell any investment securities.
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 interest expense on borrowings was due to a higher average balance and, to a lesser extent, a higher average cost.
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.
On June 30, 2024, time deposits scheduled to mature in one year or less were $245.7 million.
The increase in salaries and employee benefits expense was primarily due to a $1.2 million Employee Retention Tax Credit (“ERTC”) recorded in fiscal 2022 and not replicated in fiscal 2023, a $1.0 million increase in incentive compensation, a $387,000 increase in stock-based compensation resulting from the true-up adjustments associated with the vesting of the equity incentive awards, a $350,000 decrease in deferred loan fees recoveries (ASC 310), partly offset by a $1.3 million recovery from the Bank’s obligations for the supplemental executive retirement plans. ​ Premises and occupancy expense increased $258,000, or 8%, to $3.4 million in fiscal 2023 from $3.2 million in fiscal 2022.
The decrease in salaries and employee benefits expense was primarily attributable to a decrease in incentive compensation, partly offset by increases in the supplemental executive retirement plans and compensation costs. ​ Premises and occupancy expense increased $139,000, or 4%, to $3.6 million in fiscal 2024 from $3.4 million in fiscal 2023.
This increase was attributable to a higher average loan balance and, to a lesser extent, a higher average loan yield. The average balance of loans receivable increased $158.7 million, or 18%, to $1.03 billion during fiscal 2023 from $870.3 million during fiscal 2022.
The increase was attributable to a higher average loan yield and, to a lesser extent, a higher average loan balance.
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.
This decrease resulted from interest expense on interest-bearing liabilities increasing at a faster pace than interest income earned on interest-earning assets. Net interest margin decreased 21 basis points to 2.78% in fiscal 2024 from 2.99% in fiscal 2023, due to the decline in net interest income coupled with an increase in average interest earning assets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

14 edited+1 added−1 removed20 unchanged
Biggest changeAs 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.
Biggest changeResults are 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 security, deposit and borrowing cash flows; ● Loan prepayment estimates for each type of loan; and ● Immediate, permanent and parallel movements in interest rates of +300, +200 +100, and -100, -200 and -300 bp. ​ The following table describes the results of the analysis at June 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2024 ​ At June 30, 2023 Basis Point (bp) ​ Change in ​ Basis Point (bp) ​ Change in Change in Rates ​ Net Interest Income ​ Change in Rates ​ Net Interest Income +300 bp -8.12% ​ +300 bp -10.56% ​ +200 bp -3.45% ​ +200 bp -5.26% ​ +100 bp -0.51% ​ +100 bp -1.95% ​ -100 bp -0.67% ​ -100 bp 1.25% ​ -200 bp -1.15% ​ -200 bp -0.59% ​ -300 bp ​ -1.86% ​ -300 bp ​ -3.33% ​ ​ At June 30, 2024, the Corporation was close to neutral with regard to the sensitivity of net interest income as projected net interest income declines slightly under rising or declining interest rates during the subsequent 12-month period. ​ 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.
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.
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 NPV presented in the foregoing tables is not intended to present the fair market value of the Corporation, nor does it represent amounts that would be available for distribution to shareholders in the event of the liquidation of the Corporation. ​ The Corporation measures and evaluates the potential effects of interest rate movements through an interest rate sensitivity "gap" analysis.
Furthermore, the NPV presented in the foregoing tables is not intended to present the fair market value of the Corporation, nor does it represent amounts that would be available for distribution to shareholders in the event of the liquidation of the Corporation. ​ 63 Table of Contents The Corporation measures and evaluates the potential effects of interest rate movements through an interest rate sensitivity "gap" analysis.
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.
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, - 62 Table of Contents 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.
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. ​ ​
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. ​ ​
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.
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 64 Table of Contents for savings and money market deposits.
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.
The sensitivity measure increased to 95 basis points at June 30, 2024 from 92 basis points at June 30, 2023. ​ As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables.
It is not uncommon for rates on certain assets or liabilities to lag behind changes in the market rates of interest. Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest sensitivities to vary.
It is not uncommon for rates on certain assets or liabilities to lag behind changes in the market rates of interest. Additionally, prepayments of loans and early withdrawals of time deposits could cause interest sensitivities to vary.
However, past experience has shown that immediate, permanent and parallel movements in interest rates will not necessarily occur.
However, past experience has shown that immediate, permanent and parallel movements in interest rates will not 65 Table of Contents 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 -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.
(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 bp rate shock at June 30, 2024 and -200 bp rate shock at June 30, 2023 which has been determined to be the most detrimental to the interest rate risk of the Corporation in a -200, -100, +100 and +200 bp rate shock scenario: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2024 At June 30, 2023 ​ (+200 bp rate shock) (-200 bp rate shock) ​ Pre-Shock NPV Ratio: NPV as a % of PV Assets 10.12 % ​ 9.29 % ​ Post-Shock NPV Ratio: NPV as a % of PV Assets 9.17 % ​ 8.37 % ​ Sensitivity Measure: Change in NPV Ratio -95 bp -92 bp ​ ​ The pre-shock NPV ratio increased 83 basis points to 10.12% at June 30, 2024 from 9.29% at June 30, 2023, and the post-shock NPV ratio increased 80 basis points to 9.17% (+200 basis point rate shock) at June 30, 2024 from 8.37% (-200 basis point rate shock) at June 30, 2023.
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.
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. ​ Management believes that the assumptions used to complete the analysis described in the table above are reasonable.
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.
The increase of the NPV ratios was primarily attributable to the net income in fiscal 2024 and amortization of stock-based compensation, partly offset by a $7.0 million cash dividend distribution from the Bank to the Corporation in September 2023, an $824,000 CECL adoption charged to equity, and increases in market interest rates.
For 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.
For 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, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Term to Contractual Repricing, Estimated Repricing, or Contractual ​ ​ Maturity (1) ​ ​ As of June 30, 2024 ​ ​ ​ 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 ​ $ 45,058 ​ $ — ​ $ — ​ $ 6,318 ​ $ 51,376 ​ Investment securities ​ 7,176 ​ — ​ — ​ 124,724 ​ 131,900 ​ Loans held for investment ​ 273,678 ​ 199,276 ​ 245,557 ​ 334,468 ​ 1,052,979 ​ FHLB - San Francisco and other equity investments ​ 10,108 ​ — ​ — ​ — ​ 10,108 ​ Other assets ​ 4,287 ​ — ​ — ​ 21,550 ​ 25,837 ​ Total assets ​ 340,307 ​ 199,276 ​ 245,557 ​ 487,060 ​ 1,272,200 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing Liabilities and Equity: ​ ​ ​ ​ ​ ​ Checking deposits - noninterest-bearing ​ — ​ — ​ — ​ 95,627 ​ 95,627 ​ Checking deposits - interest bearing ​ 38,194 ​ 76,387 ​ 76,387 ​ 63,656 ​ 254,624 ​ Savings deposits ​ 47,776 ​ 95,551 ​ 95,551 ​ — ​ 238,878 ​ Money market deposits ​ 12,662 ​ 12,662 ​ — ​ — ​ 25,324 ​ Time deposits ​ 245,713 ​ 23,383 ​ 3,545 ​ 1,254 ​ 273,895 ​ Borrowings ​ 145,500 ​ 78,000 ​ 15,000 ​ — ​ 238,500 ​ Other liabilities ​ 1,783 ​ — ​ — ​ 13,628 ​ 15,411 ​ Stockholders' equity ​ — ​ — ​ — ​ 129,941 ​ 129,941 ​ Total liabilities and stockholders' equity ​ 491,628 ​ 285,983 ​ 190,483 ​ 304,106 ​ 1,272,200 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing gap positive (negative) ​ $ (151,321) ​ $ (86,707) ​ $ 55,074 ​ $ 182,954 ​ $ — ​ Cumulative repricing gap: ​ ​ ​ ​ ​ ​ Dollar amount ​ $ (151,321) ​ $ (238,028) ​ $ (182,954) ​ $ — ​ $ — ​ Percent of total assets ​ (12) % (19) % (14) % — % — % ​ (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 and other equity investments are presented as contractual repricing; transaction accounts (checking, savings and money market deposits) are presented as estimated repricing; and 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.
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”).
As of June 30, 2024, the targeted federal funds rate range was 5.25% to 5.50%. ​ The following table sets forth as of June 30, 2024 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 ​ $ 99,797 ​ $ (29,127) ​ $ 1,233,560 8.09 % (203) bp +200 bp ​ $ 114,840 ​ $ (14,084) ​ $ 1,252,262 9.17 % (95) bp +100 bp ​ $ 124,386 ​ $ (4,538) ​ $ 1,265,538 9.83 % (29) bp - ​ $ 128,924 ​ $ — ​ $ 1,273,858 10.12 % — ​ -100 bp ​ $ 136,297 ​ $ 7,373 ​ $ 1,285,088 10.61 % 49 bp -200 bp ​ $ 128,436 ​ $ (488) ​ $ 1,281,017 10.03 % (9) bp -300 bp ​ $ 129,438 ​ $ 514 ​ $ 1,286,155 ​ 10.06 % (6) bp ​ (1) Represents the (decrease) increase of the NPV at the indicated interest rate change in comparison to the NPV at June 30, 2024 (“base case”).
Removed
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.
Added
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.

Other PROV 10-K year-over-year comparisons