Provident Financial (US:PROV)2025-08-29 19:07PART I Item 1. Business The Corporation operates as a holding company for Provident Savings Bank, F.S.B., providing community banking, investment, and trustee services in Southern California, with consolidated assets of $1.25 billion at June 30, 2025 - The Corporation's core business is community banking via Provident Savings Bank, F.S.B., serving Southern California's Inland Empire region14 Consolidated Financial Highlights (June 30, 2025 vs. 2024) | Metric | June 30, 2025 | June 30, 2024 | | :--------------------- | :------------ | :------------ | | Total Assets | $1.25 billion | $1.27 billion | | Total Deposits | $888.8 million | $888.3 million | | Stockholders' Equity | $128.5 million | $129.9 million | General Provident Financial Holdings, Inc. is the holding company for Provident Savings Bank, F.S.B., providing community banking, investment, and trustee services, with $1.25 billion in assets at June 30, 2025 - The Corporation primarily operates through its wholly-owned subsidiary, Provident Savings Bank, F.S.B., regulated by the OCC and FDIC1213 - The Bank's activities encompass community banking, investment services, and real estate trustee services, generating revenue from loan interest, investments, and banking fees1415 Consolidated Financial Position (June 30, 2025) | Metric | Amount (Millions) | | :------------------- | :---------------- | | Total Assets | $1,250 | | Total Deposits | $888.8 | | Stockholders' Equity | $128.5 | Subsequent Event The Board declared a cash dividend of $0.14 per share on July 24, 2025, payable September 4, 2025 - A cash dividend of $0.14 per share was declared on July 24, 2025, scheduled for payment on September 4, 202517 Market Area The Bank operates 13 offices in Southern California's Inland Empire, facing a 5.9% unemployment rate and modest economic growth, with slight declines in the housing market - The Bank's primary market is Southern California's Inland Empire, operating 13 full-service banking offices in Riverside and San Bernardino counties18 Unemployment Rates (June 2025 vs. June 2024) | Region | June 2025 | June 2024 | | :------------- | :-------- | :-------- | | Inland Empire | 5.9% | 5.3% | | California | 5.4% | 5.2% | | Nationwide | 4.1% | 4.1% | - Inland Empire economic growth is projected to modestly increase in 2025, outperforming California but not the national economy, supported by consumer credit and logistics20 California Housing Market Data (June 2025 vs. June 2024) | Metric | June 2025 | June 2024 | YoY Change | | :-------------------------------- | :---------- | :---------- | :--------- | | Seasonally Adjusted Annualized Sales | 264,260 | 264,960 | -0.3% | | Median Home Price | $899,560 | $900,720 | -0.1% | Competition The Bank faces intense competition from larger financial institutions and non-banking entities with superior resources, potentially limiting its growth and profitability - The Bank operates in a highly competitive market, facing larger national and regional commercial banks, credit unions, and non-banking entities2223 - Larger competitors possess superior financial and marketing resources, potentially constraining the Bank's future growth and profitability24 Reportable Segments The Corporation evaluates financial performance on a company-wide basis, thus operating as a single reportable segment - The Corporation operates as a single operating and reportable segment, with financial performance assessed on a corporation-wide basis25 Internet Website The Corporation provides SEC filings (10-K, 10-Q, 8-K) free of charge on its website, though this information is not incorporated into the Form 10-K - The Corporation provides SEC filings (10-K, 10-Q, 8-K) free of charge on its website (www.myprovident.com) and through the SEC's website (www.sec.gov)[26](index=26&type=chunk) Lending Activities The Bank primarily originates single-family, multi-family, and commercial real estate loans, with net loans of $1.05 billion (84% of assets) at June 30, 2025, and a 62% increase in originations for fiscal 2025 - The Bank's lending focuses on single-family, multi-family, and commercial real estate loans, with net loans held for investment at $1.05 billion (84% of total assets) as of June 30, 202527 Composition of Loans Held for Investment (June 30, 2025 vs. 2024) | Loan Type | June 30, 2025 (Millions) | June 30, 2025 (Percent) | June 30, 2024 (Millions) | June 30, 2024 (Percent) | | :-------------------- | :----------------------- | :---------------------- | :----------------------- | :---------------------- | | Single-family | $544.4 | 52.23% | $518.1 | 49.30% | | Multi-family | $423.4 | 40.62% | $445.2 | 42.36% | | Commercial real estate| $72.8 | 6.98% | $83.3 | 7.93% | | Construction | $0.4 | 0.04% | $2.7 | 0.26% | | Other | $0.1 | 0.01% | $0.1 | 0.01% | | Commercial business | $1.3 | 0.12% | $1.4 | 0.13% | | Consumer | $0.1 | —% | $0.1 | 0.01% | | Total Gross Loans | $1,042.4 | 100.00% | $1,050.8 | 100.00% | Loan Originations for Investment (Fiscal Year Ended June 30) | Loan Type | 2025 (Millions) | 2024 (Millions) | | :-------------------- | :-------------- | :-------------- | | Single-family | $92.5 | $40.9 | | Multi-family | $25.1 | $22.1 | | Commercial real estate| $3.8 | $9.8 | | Construction | $0.7 | $1.5 | | Commercial business | $0.6 | $1.3 | | Total | $122.7 | $75.5 | Loan Servicing The Bank services $34.4 million in loans for other investors, earning fees, with servicing assets amortized and an impairment reserve of $151,000 at June 30, 2025 - The Bank services loans for other investors, earning fees for payment collection and loan management75 Loan Servicing Portfolio and Impairment Reserve (June 30) | Metric | June 30, 2025 (Millions) | June 30, 2024 (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | | Loans serviced for others | $34.4 | $34.6 | | Servicing assets carrying value | $0.3 | $0.3 | | Servicing assets fair value | $0.1 | $0.1 | | Required impairment reserve | $0.2 | $0.2 | Asset Quality Asset quality improved in fiscal 2025, with non-performing assets decreasing to $1.4 million (0.11% of total assets) and ACL on loans decreasing by 9% to $6.4 million Non-Performing Assets (June 30) | Metric | June 30, 2025 (Millions) | June 30, 2024 (Millions) | | :----------------------------------------- | :----------------------- | :----------------------- | | Total non-performing assets, net | $1.4 | $2.6 | | Non-performing loans as % of net loans | 0.14% | 0.25% | | Non-performing assets as % of total assets | 0.11% | 0.20% | Allowance for Credit Losses (ACL) on Loans (June 30) | Metric | June 30, 2025 (Millions) | June 30, 2024 (Millions) | | :----------------------------------------- | :----------------------- | :----------------------- | | ACL on loans | $6.4 | $7.1 | | ACL on loans as % of gross loans | 0.62% | 0.67% | - The Bank reported no charge-offs or recoveries across all loan categories in fiscal years 2025 and 2024385464707290 Investment Securities Activities The Bank's investment portfolio decreased by 16% to $111.0 million at June 30, 2025, with $10.4 million in unrealized losses primarily due to interest rate changes, not credit risk - The Bank's investment policy prioritizes liquidity, complements lending, and seeks favorable returns while managing interest rate and credit risk93 Investment Securities Portfolio (June 30) | Metric | June 30, 2025 (Millions) | June 30, 2024 (Millions) | YoY Change | | :-------------------------------- | :----------------------- | :----------------------- | :--------- | | Total Investment Securities | $111.0 | $131.9 | -16% | | Unrealized Holding Losses | $10.4 | $15.8 | -34.2% | - Unrealized losses stem from interest rate changes, not credit quality, as most securities are U.S. government-guaranteed GSE obligations, intended to be held to maturity or cost recovery98101506509 Deposit Activities and Other Sources of Funds Deposits and loan repayments are primary funding sources, supplemented by FHLB, FRB, and correspondent bank borrowings, with total deposits at $888.8 million and $474.8 million in available borrowing capacity at June 30, 2025 - Deposits and loan repayments serve as primary funding sources, supplemented by FHLB, FRB, and correspondent bank borrowings102 Deposit Composition (June 30, 2025 vs. 2024) | Deposit Type | June 30, 2025 (Millions) | June 30, 2024 (Millions) | YoY Change (Millions) | | :------------------ | :----------------------- | :----------------------- | :-------------------- | | Transaction accounts| $576.5 | $614.5 | $(38.1) | | Time deposits | $312.3 | $273.9 | $38.4 | | Total Deposits | $888.8 | $888.3 | $0.4 | Borrowings and Available Capacity (June 30, 2025) | Source | Outstanding (Millions) | Available Capacity (Millions) | | :-------------------------- | :--------------------- | :---------------------------- | | FHLB – San Francisco | $213.0 | $282.3 | | FRB of San Francisco | $0 | $142.5 | | Correspondent Bank | $0 | $50.0 | | Total Available Capacity| | $474.8 | Subsidiary Activities The Bank has three wholly-owned subsidiaries, with Provident Financial Corp active in trustee services and real estate, and a total investment of $14,000 at June 30, 2025 - The Bank's wholly-owned subsidiaries include Provident Financial Corp (PFC), Profed Mortgage, Inc., and First Service Corporation121 - PFC acts as a trustee for real estate transactions and holds real estate for investment, while other subsidiaries are inactive121 Bank's Investment in Subsidiaries (June 30) | Metric | June 30, 2025 (Thousands) | June 30, 2024 (Thousands) | | :-------------------------- | :------------------------ | :------------------------ | | Total Investment in Subsidiaries | $14 | $8 | Regulation The Corporation and Bank are extensively regulated by federal agencies, covering operations, capital, and consumer protection, with the Bank 'well capitalized' and meeting QTL requirements at June 30, 2025 - The Bank is extensively regulated by the OCC, FDIC, and FRB, covering operations, lending limits, deposit insurance, capital requirements, and consumer protection124 Key Regulatory Compliance Metrics (June 30) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Qualified Thrift Lender (QTL) Test | 93.0% | 92.3% | | OCC Annual Assessments (Thousands) | $167 | $179 | | FDIC Annual Assessments (Thousands)| $573 | $601 | - The Bank was categorized as 'well capitalized' at June 30, 2025, exceeding all minimum regulatory capital requirements150376 - The Corporation adopted the CECL accounting standard on July 1, 2023, resulting in a one-time $824,000 net-of-tax charge to retained earnings148309 Taxation The Corporation is subject to federal and state income taxation, with the Bank holding a $9.0 million pre-1988 bad debt reserve and paying $43,000 in excise tax on stock repurchases in fiscal 2025 - The Bank's bad debt deductions are based on specific charge-offs, holding a pre-1988 bad debt reserve of approximately $9.0 million for tax purposes187 Tax-Related Financials (Fiscal Year Ended June 30) | Metric | 2025 (Thousands) | 2024 (Thousands) | | :-------------------------------- | :--------------- | :--------------- | | Excise Tax on Stock Repurchases | $43 | $26 | | Bank Cash Dividends to Provident | $9,000 | $7,000 | | Provident Cash Dividends to Shareholders | $3,800 | $3,887 | - The Corporation's net state tax rate in California was 8.6% at June 30, 2025, and it is exempt from Delaware corporate income tax194195 Employees and Human Capital As of June 30, 2025, the Bank had 163 full-time equivalent employees with an average tenure of 8.5 years, and a diverse workforce, though turnover slightly increased to 24.3% Employee Demographics and Tenure (June 30, 2025) | Metric | Value | | :-------------------- | :---- | | Full-time equivalent employees | 163 | | Female workforce | 69.8% | | Male workforce | 30.2% | | Average employee tenure | 8.5 years | Employee Turnover Rate (Fiscal Year Ended June 30) | Metric | 2025 | 2024 | | :------------- | :---- | :---- | | Turnover Rate | 24.3% | 23.3% | - The Bank offers market-competitive compensation, benefits, and development opportunities to attract and retain talent, fostering high employee loyalty197198199 Executive Officers The executive leadership team includes Donavon P. Ternes (President/CEO) and Peter C. Fan (SVP/CFO), alongside other experienced officers leading key banking divisions - Donavon P. Ternes serves as President and Chief Executive Officer for both the Corporation and the Bank201203 - Peter C. Fan was appointed Senior Vice President, Chief Financial Officer, and Corporate Secretary effective May 12, 2025201204 - Other key executive officers include Robert 'Scott' Ritter (SVP, Single-Family Division), David S. Weiant (SVP, Chief Lending Officer), and Gwendolyn L. Wertz (SVP, Retail Banking Division)201205206207 Item 1A. Risk Factors The Corporation faces significant risks from macroeconomic conditions, lending activities, interest rate fluctuations, extensive regulations, cybersecurity threats, and reliance on Bank dividends - Economic downturns, especially in Southern California, can adversely affect the business due to concentrated real estate loans209 - Lending activities, particularly single-family (52% of loans) and multi-family/commercial real estate (48% of loans), carry significant credit risk from economic shifts or natural disasters like wildfires216218229 - Fluctuating interest rates, monetary policy, and inflation can negatively impact net interest income, securities portfolio value, and overall profitability215233237 - Extensive regulatory requirements (accounting, AML, cybersecurity, DEI/ESG) pose compliance and reputational risks, with non-compliance potentially leading to fines or sanctions241244271273 - Cybersecurity threats, data breaches, fraud, and third-party vendor reliance are significant operational risks, potentially causing financial losses, reputational damage, and increased regulatory scrutiny251252259 Risks Related to Macroeconomic Conditions The Corporation's performance is highly vulnerable to Southern California's economic conditions, with 64% of real estate loans concentrated there, and faces risks from policy changes and geopolitical tensions - Approximately 64% of real estate loans are concentrated in Southern California, making the Corporation highly vulnerable to regional economic downturns209 - Economic deterioration could lead to higher loan delinquencies, increased ACL, slower foreclosed asset sales, and decreased demand for products and services213 - U.S. immigration policy changes and global geopolitical tensions could disrupt regional industries, increase costs, and impair borrowers' repayment abilities210211215 Risks Related to our Lending Activities The Bank's lending activities face significant credit risk from single-family (52%) and multi-family/commercial real estate (48%) loans, with potential for insufficient ACL and increased defaults from California wildfires - Single-family residential loans (52% of portfolio) are highly sensitive to regional economic conditions, with non-traditional loans carrying higher default risk216217225 - Multi-family and commercial real estate loans (48% of portfolio) involve higher principal, are less liquid, and depend on property income, increasing credit risk and potential default losses218219221 - The Allowance for Credit Losses (ACL) relies on subjective estimates; inaccuracies could lead to an insufficient allowance and negatively impact net income224 - California wildfires pose ongoing risks, potentially increasing loan defaults, reducing repayment capacity, and impairing collateral values, requiring increased loan loss provisions229 Risks Related to Market and Interest Rate Changes The Corporation's profitability is highly sensitive to interest rate fluctuations, which can impact net interest income, deposit costs, mortgage default risk, and the fair value of the securities portfolio - Net interest income is highly sensitive to interest rate fluctuations, influenced by economic conditions and FRB policies233 - Rising interest rates can increase deposit retention costs, reduce net interest income, and potentially increase default rates on adjustable-rate mortgage (ARM) loans235236 - Interest rate changes directly impact the fair value of the securities portfolio, with unrealized losses on available-for-sale securities affecting stockholders' equity237240 Risks Related to Regulatory, Legal and Compliance Matters The Corporation faces extensive regulatory, legal, and compliance risks, including CECL-driven earnings volatility, anti-money laundering non-compliance, evolving climate/DEI/ESG policies, and reliance on restricted Bank dividends - The CECL model, adopted July 1, 2023, introduces increased earnings volatility due to its reliance on macroeconomic forecasts for credit loss estimation243 - Non-compliance with anti-money laundering laws (USA Patriot Act, Bank Secrecy Act) can result in significant fines, sanctions, and reputational harm244 - Evolving federal policies on climate change and DEI/ESG initiatives may lead to reputational harm, increased compliance costs, litigation, or limitations on federal program participation271272273 - The Corporation's holding company revenue substantially depends on Bank dividends, which are subject to regulatory restrictions and the Bank's financial performance274 Risks Related to Cybersecurity, Data and Fraud The Corporation faces significant cybersecurity, data breach, and fraud risks, with potential for financial losses and reputational damage, exacerbated by reliance on third-party vendors - Cybersecurity threats, including breaches, fraudulent access, and malware, pose significant risks to the Corporation's information systems and confidential data251 - Data breaches involving third-party processors or payment systems can lead to liability for fraudulent transactions, fines, and reputational damage252 - Reliance on external vendors for key business infrastructure components exposes the Corporation to risks of operational disruption from vendor failures or difficulties258262 Risks Related to Our Business and Industry Generally The Corporation faces risks from ineffective liquidity management, reputational damage, the need for additional capital, rapid technological changes, natural disasters in California, and potential loan repurchase obligations - Ineffective liquidity management, due to funding disruptions or economic downturns, could significantly impair the Corporation's ability to finance operations and meet obligations261 - Maintaining a strong reputation is vital; negative publicity or misconduct could result in customer loss, litigation, and increased regulation263 - The Corporation may need to raise additional capital for growth or losses, but availability and cost are uncertain, potentially leading to dilution or adverse regulatory action264265 - Rapid technological changes in financial services require substantial investment; failure to keep pace could result in a competitive disadvantage266 - Geographic concentration in California exposes the Corporation to material losses from natural disasters affecting collateral values and borrower repayment capacity267 Item 1B. Unresolved Staff Comments The Corporation has no unresolved staff comments from the SEC - There are no unresolved staff comments275 Item 1C. Cybersecurity The Corporation integrates cybersecurity risk management into its overall framework, with dedicated IT risk management, third-party experts, and Board oversight, as disclosed in this Form 10-K - Cybersecurity risk management is a fundamental part of the Corporation's overall risk framework, involving processes, assessments, and controls to identify and mitigate risks276 - The information technology risk management department is led by a Chief Information Officer (CIO) and an Information Security Officer (ISO) with extensive cybersecurity expertise278 - The Board of Directors, particularly the Audit Committee, oversees cybersecurity risk management, receiving regular reports to guide decisions and resource allocation280 Item 2. Properties At June 30, 2025, the Corporation's net book value of properties was $9.3 million, operating 13 retail banking offices (six owned, seven leased) in Southern California Properties and Equipment Net Book Value (June 30, 2025) | Metric | Amount (Millions) | | :-------------------------------- | :---------------- | | Net Book Value of Properties, etc. | $9.3 | - The Corporation operates 13 retail banking offices in Riverside and San Bernardino counties, with six owned and seven leased281 Item 3. Legal Proceedings The Corporation is involved in routine legal proceedings but none are expected to have a material adverse effect on its financial condition, operations, or cash flows - The Corporation is involved in routine legal proceedings, but none are expected to have a material adverse effect on its financial condition, operations, or cash flows282283 Item 4. Mine Safety Disclosures This item is not applicable to the Corporation - Mine Safety Disclosures are not applicable to the Corporation285 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Corporation's common stock trades on NASDAQ under 'PROV', with 405 shareholders of record, and a stock repurchase plan authorized for up to 334,773 shares - The Corporation's common stock trades on the NASDAQ Global Select Market under the symbol 'PROV'287 - The Board of Directors has declared quarterly cash dividends on common stock since September 30, 2002, with future payments subject to financial and regulatory factors288 Stock Repurchase Activity (Q4 Fiscal 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Remaining Under Plan | | :----------------------------- | :--------------------- | :--------------------------- | :-------------------------- | | April 1, 2025 – April 30, 2025 | 32,672 | $14.37 | 260,460 | | May 1, 2025 – May 31, 2025 | 32,824 | $15.45 | 227,636 | | June 1, 2025 – June 30, 2025 | 10,608 | $15.59 | 217,028 | | Total | 76,104 | $15.00 | 217,028 | Cumulative Total Shareholder Return (Indexed to $100 on June 30, 2020) | Date | PROV | NASDAQ Stock Index | NASDAQ Bank Index | | :--------- | :----- | :----------------- | :---------------- | | 6/30/2020 | $100.00 | $100.00 | $100.00 | | 6/30/2021 | $133.88 | $144.47 | $172.87 | | 6/30/2022 | $118.93 | $123.91 | $141.17 | | 6/30/2023 | $106.52 | $147.56 | $136.81 | | 6/30/2024 | $109.06 | $182.40 | $187.05 | | 6/30/2025 | $140.40 | $210.65 | $249.72 | Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Net income decreased by 15% to $6.3 million in fiscal 2025, driven by higher expenses and lower non-interest income, while total assets decreased by 2% to $1.25 billion Net Income and EPS (Fiscal Year Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | YoY Change (Millions) | | :-------------------- | :-------------- | :-------------- | :-------------------- | | Net Income | $6.3 | $7.4 | $(1.1) |\n| Diluted EPS | $0.93 | $1.06 | $(0.13) | Key Performance Ratios (Fiscal Year Ended June 30) | Metric | 2025 | 2024 | | :-------------------- | :---- | :---- | | Efficiency Ratio | 79% | 73% | | Return on Average Assets | 0.50% | 0.57% | | Return on Average Stockholders' Equity | 4.79% | 5.62% | - The Corporation's operating strategy focuses on moderate asset growth, expanding diverse loan types, and optimizing the deposit mix towards lower-cost accounts to improve net interest margin316 - Critical accounting estimates, including ACL and Provision for Income Taxes, involve significant management judgment and assumptions that can materially impact financial statements307308311 General Provident Financial Holdings, Inc. operates as a single business segment through Provident Savings Bank, F.S.B., offering banking services and loans in California, facing risks from economic and regulatory changes - Provident Financial Holdings, Inc. operates as a single business segment through its subsidiary, Provident Savings Bank, F.S.B.303 - The Bank's activities include deposit gathering, banking services, and originating various loan types, primarily in California303 Consolidated Financial Position (June 30, 2025) | Metric | Amount (Millions) | | :------------------- | :---------------- | | Total Assets | $1,250 | | Total Deposits | $888.8 | | Stockholders' Equity | $128.5 | Critical Accounting Estimates Critical accounting estimates, primarily for ACL and income taxes, involve significant judgment, with CECL adoption on July 1, 2023, resulting in a $1.2 million ACL increase and an $824,000 net-of-tax charge - Critical accounting estimates primarily relate to the Allowance for Credit Losses (ACL) on loans and investment securities, and the Provision for Income Taxes307 - The Corporation adopted ASC 326 (CECL) on July 1, 2023, resulting in a one-time $1.2 million increase to its ACL and an $824,000 net-of-tax charge to retained earnings309 - The ACL is maintained at a level sufficient for expected losses based on historical experience, current conditions, and reasonable forecasts, with quarterly adjustments310 - Income tax accounting involves subjective assumptions and judgments regarding deferred tax assets and liabilities, with future realization dependent on projected taxable income311 Executive Summary and Operating Strategy Provident Savings Bank focuses on community banking in Southern California, aiming for moderate asset growth by expanding loans and optimizing deposits to improve net interest margin, while managing economic and wildfire risks - The Corporation's operating strategy aims for moderate growth by expanding its loan portfolio and optimizing its deposit mix towards lower-cost accounts316 - The primary goal is to enhance core revenue by achieving a higher net interest margin and increasing net interest income316 - The California economic environment, including real estate values and the office sector, poses heightened risks, mitigated by the Bank's prudent risk management and underwriting319 - Ongoing California wildfire risks could elevate credit risk, potentially requiring higher provisions for loan losses, despite no material direct impact from recent events320 Comparison of Financial Condition at June 30, 2025 and 2024 At June 30, 2025, total assets decreased by 2% to $1.25 billion, driven by reductions in investment securities and loans, while deposits remained stable and borrowings decreased Key Financial Condition Changes (June 30, 2025 vs. 2024) | Metric | June 30, 2025 (Millions) | June 30, 2024 (Millions) | YoY Change (Millions) | YoY Change (%) | | :-------------------------- | :----------------------- | :----------------------- | :-------------------- | :------------- | | Total Assets | $1,250 | $1,272 | $(26.6) | -2% | | Cash & Cash Equivalents | $53.1 | $51.4 | $1.7 | 3% | | Investment Securities | $111.0 | $131.9 | $(20.9) | -16% | | Loans Held for Investment, net | $1,050 | $1,053 | $(7.2) | -1% | | Total Deposits | $888.8 | $888.3 | $0.4 | 0% | | Borrowings | $213.1 | $238.5 | $(25.4) | -11% | | Total Stockholders' Equity | $128.5 | $129.9 | $(1.4) | -1% | - Loan originations for investment increased by 62% to $122.7 million in fiscal 2025, driven by higher loan prepayments325 - Transaction accounts decreased by 6%, while time deposits increased by 14%, shifting the deposit mix327 Comparison of Operating Results for the Fiscal Years Ended June 30, 2025 and 2024 Net income decreased by 15% to $6.3 million in fiscal 2025, primarily due to increased non-interest expense and decreased non-interest income, despite higher net interest income and credit loss recovery Net Income and EPS (Fiscal Year Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | YoY Change (Millions) | | :-------------------- | :-------------- | :-------------- | :-------------------- | | Net Income | $6.3 | $7.4 | $(1.1) | | Diluted EPS | $0.93 | $1.06 | $(0.13) | Net Interest Income and Margin (Fiscal Year Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | YoY Change (Millions) | YoY Change (bps) | | :-------------------- | :-------------- | :-------------- | :-------------------- | :--------------- | | Net Interest Income | $35.5 | $34.9 | $0.5 | | | Net Interest Margin | 2.93% | 2.78% | | 15 | Non-Interest Income and Expense (Fiscal Year Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | YoY Change (Millions) | YoY Change (%) | | :-------------------- | :-------------- | :-------------- | :-------------------- | :------------- | | Non-Interest Income | $3.5 | $3.9 | $(0.4) | -10% | | Non-Interest Expense | $30.8 | $28.5 | $2.3 | 8% | Provision for (Recovery of) Credit Losses (Fiscal Year Ended June 30) | Metric | 2025 (Thousands) | 2024 (Thousands) | | :-------------------------------- | :--------------- | :--------------- | | Recovery of Credit Losses | $(666) | $(63) | Average Balances, Interest and Average Yields/Costs In fiscal 2025, average interest-earning assets and interest-bearing liabilities both decreased by 3%, while net interest margin improved by 15 bps to 2.93% due to higher loan yields Average Balances, Interest, and Yields/Costs (Fiscal Year Ended June 30) | Metric | 2025 Average Balance (Millions) | 2025 Interest (Millions) | 2025 Yield/Cost | 2024 Average Balance (Millions) | 2024 Interest (Millions) | 2024 Yield/Cost | | :-------------------------------- | :------------------------------ | :----------------------- | :-------------- | :------------------------------ | :----------------------- | :-------------- | | Loans receivable, net | $1,051.4 | $52.5 | 5.00% | $1,069.6 | $50.2 | 4.69% | | Investment securities | $121.4 | $1.9 | 1.53% | $144.5 | $2.1 | 1.43% | | Total interest-earning assets | $1,212.1 | $56.6 | 4.67% | $1,254.3 | $54.7 | 4.36% | | Total deposits | $881.7 | $11.2 | 1.27% | $916.1 | $9.7 | 1.06% | | Borrowings | $216.3 | $9.9 | 4.59% | $221.4 | $10.1 | 4.58% | | Total interest-bearing liabilities| $1,098.0 | $21.2 | 1.93% | $1,137.4 | $19.8 | 1.74% | | Net interest income | | $35.5 | | | $34.9 | | | Interest rate spread | | | 2.74% | | | 2.62% | | Net interest margin | | | 2.93% | | | 2.78% | Rate/Volume Variance Net interest income increased by $546,000 in fiscal 2025, driven by a positive rate variance of $2.815 million, offsetting a negative volume variance of $2.191 million Rate/Volume Variance on Net Interest Income (Fiscal Year Ended June 30, 2025 vs. 2024) | (In Thousands) | Rate (Increase/Decrease) | Volume (Increase/Decrease) | Rate/Volume (Increase/Decrease) | Net (Increase/Decrease) | | :----------------------------------------- | :----------------------- | :------------------------- | :------------------------------ | :---------------------- | | Total net change in income on interest-earning assets | $3,180 | $(1,218) | $(68) | $1,894 | | Total net change in expense on interest-bearing liabilities | $365 | $973 | $10 | $1,348 | | Net increase (decrease) in net interest income | $2,815 | $(2,191) | $(78) | $546 | Liquidity and Capital Resources The Bank's liquidity is sourced from deposits, loan repayments, and borrowings, with $53.1 million in cash and $474.8 million in available borrowing capacity, and remains 'well capitalized' at June 30, 2025 - The Bank's primary liquidity sources are deposits, loan repayments, and investment securities, supplemented by FHLB, FRB, and correspondent bank borrowings363 Available Borrowing Capacity (June 30, 2025) | Source | Available Capacity (Millions) | | :-------------------------- | :---------------------------- | | FHLB – San Francisco | $282.3 | | FRB of San Francisco | $142.5 | | Correspondent Bank | $50.0 | | Total Available Capacity| $474.8 | - The Bank's average liquidity ratio decreased to 8.9% in Q4 fiscal 2025 from 16.6% in Q4 fiscal 2024, but management deems it sufficient369 - The Bank was 'well capitalized' at June 30, 2025, with Tier 1 Leverage Capital of 10.1%, CET1 Capital of 19.5%, Tier 1 Risk-based Capital of 19.5%, and Total Risk-based Capital of 20.5%376 Item 7A. Quantitative and Qualitative Disclosures about Market Risk The Corporation manages interest rate risk through its Asset-Liability Committee, using an internal model to assess NPV sensitivity, and was asset sensitive at June 30, 2025, with an improved NPV ratio of 12.15% - The Corporation's primary market risk is interest rate risk, managed by aligning repricing mismatches between assets and liabilities377378 Estimated Changes in Net Portfolio Value (NPV) at June 30, 2025 (Millions) | Basis Points Change in Rates | NPV Change | NPV as Percentage of Portfolio Value Assets | | :--------------------------- | :--------- | :------------------------------------------ | | +300 bp | $(18.9) | 10.91% | | +200 bp | $(5.7) | 11.82% | | +100 bp | $1.0 | 12.25% | | - | $0 | 12.15% | | -100 bp | $(1.5) | 12.02% | | -200 bp | $(13.1) | 11.17% | | -300 bp | $(13.2) | 11.14% | - At June 30, 2025, the Corporation was asset sensitive, projecting increased net interest income in a rising rate environment (except at +300 bp) and decreased income in a falling rate environment over the next 12 months395396 Net Interest Income Sensitivity to Rate Changes (Fiscal Year Ended June 30) | Basis Point (bp) Change in Rates | 2025 Change in Net Interest Income | 2024 Change in Net Interest Income | | :------------------------------- | :--------------------------------- | :--------------------------------- | | +300 bp | -1.35% | -8.12% | | +200 bp | +2.01% | -3.45% | | +100 bp | +2.23% | -0.51% | | -100 bp | -1.80% | -0.67% | | -200 bp | -3.24% | -1.15% | | -300 bp | -6.38% | -1.86% | Item 8. Financial Statements and Supplementary Data This section incorporates the Consolidated Financial Statements and accompanying Notes by reference into this Form 10-K - The Consolidated Financial Statements and Notes are incorporated by reference400 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure401 Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2025, with no material changes during the quarter - The Corporation's disclosure controls and procedures were deemed effective at a reasonable assurance level as of June 30, 2025402 - No material changes occurred in the Corporation's internal control over financial reporting during the quarter ended June 30, 2025402 - Management concluded that the Corporation's internal control over financial reporting was effective as of June 30, 2025, based on the COSO framework406 - The Corporation complied with federal laws and regulations pertaining to insider loans and dividend restrictions during the fiscal year ended June 30, 2025407 Item 9B. Other Information This section contains no additional information Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the Corporation - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable411 PART III Item 10. Directors, Executive Officers and Corporate Governance Information on Directors, Executive Officers, and Corporate Governance is incorporated by reference from the Proxy Statement, including the Code of Ethics and Audit Committee details - Information on Directors, Executive Officers, and Corporate Governance is incorporated by reference from the Proxy Statement413414 - The Corporation maintains a Code of Ethics for all directors, officers, and employees, available on its website415 - The Audit Committee comprises three independent directors, with Judy A. Carpenter designated as the audit committee financial expert416 - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025418 Item 11. Executive Compensation Executive and director compensation information is incorporated by reference from the Corporation's Proxy Statement - Executive and director compensation information is incorporated by reference from the Proxy Statement420 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference from the Proxy Statement, with 373,650 securities to be issued under equity compensation plans at a weighted average exercise price of $15.51 - Security ownership information for beneficial owners and management is incorporated by reference from the Proxy Statement421 - The Corporation is not aware of any arrangements that could lead to a change in control421 Equity Compensation Plan Information (June 30, 2025) | Plan Category | Securities to Be Issued Upon Exercise | Weighted Average Exercise Price | Securities Remaining Available | | :-------------------------- | :------------------------------------ | :------------------------------ | :----------------------------- | | 2010 Equity Incentive Plan | 15,000 | $20.19 | — | | 2013 Equity Incentive Plan | 104,650 | $18.16 (Stock Options) | — | | 2022 Equity Incentive Plan | 254,000 | $13.25 (Stock Options) | 119,000 | | Total | 373,650 | $15.51 | 119,000 | Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the Corporation's Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement424425 Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the Corporation's Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the Proxy Statement426 PART IV Item 15. Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed as part of this Form 10-K, with many incorporated by reference from previous SEC filings - The Consolidated Financial Statements are included starting on page 79 of this Form 10-K428 - Financial statement schedules are omitted as the required information is inapplicable428 - A detailed list of exhibits, including corporate governance documents, compensation agreements, and equity plans, is provided, with many incorporated by reference429430 Item 16. Form 10-K Summary This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided432