Provident Financial (PROV) - 2022 Q1 - Quarterly Report

PART 1 - FINANCIAL INFORMATION ITEM 1 - Financial Statements This section presents Provident Financial Holdings, Inc.'s unaudited interim condensed consolidated financial statements and notes for the quarter ended September 30, 2021 Condensed Consolidated Statements of Financial Condition This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at September 30, 2021, and June 30, 2021 Condensed Consolidated Statements of Financial Condition (In Thousands) | (In Thousands, Except Share Information) | September 30, 2021 | June 30, 2021 | | :-------------------------------------- | :------------------ | :------------- | | Assets | | | | Cash and cash equivalents | $88,249 | $70,270 | | Investment securities - held to maturity, at cost | $205,821 | $223,306 | | Investment securities - available for sale, at fair value | $3,316 | $3,587 | | Loans held for investment, net | $859,035 | $850,960 | | Total assets | $1,192,281 | $1,183,596 | | Liabilities | | | | Non interest-bearing deposits | $120,883 | $123,179 | | Interest-bearing deposits | $835,859 | $814,794 | | Total deposits | $956,742 | $937,973 | | Borrowings | $90,000 | $100,983 | | Total liabilities | $1,064,046 | $1,056,316 | | Stockholders' equity | | | | Total stockholders' equity | $128,235 | $127,280 | | Total liabilities and stockholders' equity | $1,192,281 | $1,183,596 | - Total assets increased by $8.7 million (1%) to $1.19 billion at September 30, 2021, primarily driven by increases in cash and cash equivalents and loans held for investment, partially offset by a decrease in investment securities[10][153] - Total deposits increased by $18.7 million (2%) to $956.7 million, mainly due to increases in transaction accounts, partly offset by a decrease in higher-cost time deposits[10][159] - Total stockholders' equity increased by $955,000 (1%) to $128.2 million, primarily from net income, partly offset by cash dividends and stock repurchases[10][161] Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net income for the quarters ended September 30, 2021, and 2020 Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Information) | (In Thousands, Except Per Share Information) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :------------------------------------------- | :------------------------- | :------------------------- | | Total interest income | $8,746 | $9,519 | | Total interest expense | $858 | $1,353 | | Net interest income | $7,888 | $8,166 | | (Recovery) provision for loan losses | $(339) | $220 | | Net interest income, after (recovery) provision for loan losses | $8,227 | $7,946 | | Total non-interest income | $1,069 | $1,159 | | Total non-interest expense | $5,668 | $6,985 | | Income before income taxes | $3,628 | $2,120 | | Provision for income taxes | $961 | $635 | | Net income | $2,667 | $1,485 | | Basic earnings per share | $0.35 | $0.20 | | Diluted earnings per share | $0.35 | $0.20 | | Cash dividends per share | $0.14 | $0.14 | - Net income for Q1 fiscal 2022 increased by $1.2 million (80%) to $2.7 million, compared to $1.5 million in Q1 fiscal 2021[12][163] - Diluted earnings per share rose to $0.35 in Q1 fiscal 2022 from $0.20 in Q1 fiscal 2021, a 75% increase[12][164] - Net interest income decreased by $278,000 (3%) to $7.9 million, primarily due to a lower net interest margin, despite a higher average interest-earning asset balance[12][165] Condensed Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income components for the quarters ended September 30, 2021, and 2020 Condensed Consolidated Statements of Comprehensive Income (In Thousands) | (In Thousands) | For the Quarter Ended Sep 30, 2021 | For the Quarter Ended Sep 30, 2020 | | :------------- | :--------------------------------- | :--------------------------------- | | Net income | $2,667 | $1,485 | | Other comprehensive loss, before income tax benefit | $(9) | $(7) | | Income tax benefit | $(3) | $(2) | | Other comprehensive loss | $(6) | $(5) | | Total comprehensive income | $2,661 | $1,480 | - Total comprehensive income increased to $2.66 million for the quarter ended September 30, 2021, from $1.48 million in the prior year, reflecting the increase in net income[14] Condensed Consolidated Statements of Stockholders' Equity This statement outlines changes in stockholders' equity, including net income, dividends, and stock repurchases, for the quarter ended September 30, 2021 Changes in Stockholders' Equity (In Thousands) | (In Thousands) | Balance at June 30, 2021 | Net Income | Other Comprehensive Loss | Purchase of Treasury Stock | Cash Dividends | Balance at Sep 30, 2021 | | :------------- | :----------------------- | :--------- | :----------------------- | :------------------------- | :------------- | :---------------------- | | Total Equity | $127,280 | $2,667 | $(6) | $(851) | $(1,056) | $128,235 | - Stockholders' equity increased by $955,000 from June 30, 2021, to September 30, 2021, primarily due to net income of $2.67 million, partially offset by $1.06 million in cash dividends and $851,000 in treasury stock purchases[16][161] - Cash dividends of $0.14 per share were paid in both the quarter ended September 30, 2021, and September 30, 2020[16][17] Condensed Consolidated Statements of Cash Flows This statement summarizes cash flows from operating, investing, and financing activities for the quarters ended September 30, 2021, and 2020 Condensed Consolidated Statements of Cash Flows (In Thousands) | (In Thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | | :------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $3,047 | $3,048 | | Net cash used for investing activities | $9,053 | $(58,215) | | Net cash provided by financing activities | $5,879 | $5,600 | | Net increase (decrease) in cash and cash equivalents | $17,979 | $(49,567) | | Cash and cash equivalents at end of year | $88,249 | $66,467 | - Net cash provided by investing activities significantly improved to $9.05 million in Q1 fiscal 2022 from a net use of $58.22 million in Q1 fiscal 2021, primarily due to a net decrease in loans held for investment and principal payments from investment securities[20] - Net cash provided by financing activities increased to $5.88 million, driven by a net increase in deposits, partially offset by repayments of borrowings and treasury stock purchases[20] - Cash and cash equivalents at the end of the period increased by $17.98 million to $88.25 million, a significant reversal from a $49.57 million decrease in the prior year[20] Notes to Unaudited Interim Condensed Consolidated Financial Statements These notes provide additional detail and context for the interim condensed consolidated financial statements Note 1: Basis of Presentation This note describes the basis for preparing the unaudited interim condensed consolidated financial statements - The unaudited interim condensed consolidated financial statements reflect all necessary adjustments for a fair statement of operations and should be read in conjunction with the Corporation's Annual Report on Form 10-K for the year ended June 30, 2021[22] Note 2: Accounting Standard Updates ("ASU") This note addresses recent accounting standard updates and their impact on the financial statements - There have been no material accounting standard updates or changes in their adoption status since the Corporation's Annual Report on Form 10-K for the year ended June 30, 2021[23] Note 3: Earnings Per Share This note details the computation of basic and diluted earnings per share for the reporting periods Basic and Diluted EPS Computations (In Thousands, Except Earnings Per Share) | (In Thousands, Except Earnings Per Share) | For the Quarter Ended Sep 30, 2021 | For the Quarter Ended Sep 30, 2020 | | :---------------------------------------- | :--------------------------------- | :--------------------------------- | | Net income – numerator | $2,667 | $1,485 | | Weighted-average shares (basic) | 7,530 | 7,436 | | Adjusted weighted-average shares (diluted) | 7,575 | 7,457 | | Basic earnings per share | $0.35 | $0.20 | | Diluted earnings per share | $0.35 | $0.20 | - As of September 30, 2021, 116,000 shares from outstanding stock options and 101,250 shares from restricted stock awards were excluded from diluted EPS computation due to their anti-dilutive effect[25] Note 4: Investment Securities This note provides information on the Corporation's investment securities, including held-to-maturity and available-for-sale portfolios Investment Securities Summary (In Thousands) | (In Thousands) | September 30, 2021 | June 30, 2021 | | :------------- | :----------------- | :------------ | | Held to maturity (Amortized Cost) | $205,821 | $223,306 | | Available for sale (Fair Value) | $3,316 | $3,587 | | Total investment securities | $209,137 | $226,893 | - Total investment securities decreased by $17.8 million (8%) to $209.1 million at September 30, 2021, primarily due to scheduled and accelerated principal payments on mortgage-backed securities[31][155] - The Corporation held investments with unrealized losses of $1.1 million at September 30, 2021, an increase from $810,000 at June 30, 2021, primarily due to changes in interest rates[32][34] - No impairment losses were recorded as the Corporation did not intend to sell securities and expected to recover amortized cost prior to sale[35] Note 5: Loans Held for Investment This note details the composition of loans held for investment, allowance for loan losses, and asset quality metrics Loans Held for Investment, Gross (In Thousands) | (In Thousands) | September 30, 2021 | June 30, 2021 | | :------------- | :----------------- | :------------ | | Single-family | $274,970 | $268,272 | | Multi-family | $489,550 | $484,408 | | Commercial real estate | $91,779 | $95,279 | | Construction | $2,574 | $3,040 | | Total loans held for investment, gross | $859,959 | $852,082 | - Loans held for investment, net, increased by $8.0 million (1%) to $859.0 million at September 30, 2021, primarily due to increases in single-family and multi-family loans[37][156] Allowance for Loan Losses (In Thousands) | (Dollars in Thousands) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :--------------------- | :------------------------- | :------------------------- | | Allowance at beginning of period | $7,587 | $8,265 | | (Recovery) provision for loan losses | $(339) | $220 | | Net recoveries (charge-offs) | $165 | $5 | | Balance at end of period | $7,413 | $8,490 | | Allowance for loan losses as a percentage of gross loans held for investment | 0.86% | 0.95% | - The Corporation recorded a recovery from the allowance for loan losses of $339,000 in Q1 fiscal 2022, compared to a provision of $220,000 in Q1 fiscal 2021, reflecting improved credit quality and non-performing loan payoffs[46][180] - Non-performing loans, net of allowance, decreased by 23% to $6.6 million at September 30, 2021, from $8.6 million at June 30, 2021[52][54][181][191] - As of September 30, 2021, only one single-family forbearance loan remained with an outstanding balance of $308,000, representing 0.04% of total loans, indicating a significant reduction in COVID-19 related payment relief[58][150] Note 6: Derivative and Other Financial Instruments with Off-Balance Sheet Risks This note describes the Corporation's commitments to extend credit and other off-balance sheet financial instruments Commitments to Extend Credit (In Thousands) | Commitments (In Thousands) | September 30, 2021 | June 30, 2021 | | :------------------------- | :----------------- | :------------ | | Undisbursed loan funds – Construction loans | $3,763 | $4,479 | | Undisbursed lines of credit – Commercial business loans | $441 | $460 | | Undisbursed lines of credit – Consumer loans | $415 | $425 | | Commitments to extend credit on loans to be held for investment | $22,508 | $21,887 | | Total | $27,127 | $27,251 | - Total commitments to extend credit were $27.1 million at September 30, 2021, slightly down from $27.25 million at June 30, 2021[74] Recourse Liability (In Thousands) | Recourse Liability (In Thousands) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :-------------------------------- | :------------------------- | :------------------------- | | Balance, beginning of the period | $200 | $270 | | Provision for recourse liability | $0 | $100 | | Balance, end of the period | $200 | $370 | - The recourse liability for loans sold to FHLB – San Francisco and other investors remained at $200,000 at September 30, 2021, with no new provision for recourse liability during the quarter[78][79][80] Note 7: Fair Value of Financial Instruments This note explains the methodologies and disclosures for fair value measurements of financial instruments - The Corporation measures financial assets and liabilities at fair value on a recurring basis, including investment securities available for sale, loans held for investment at fair value, and interest-only strips[87] Fair Value Measurement at September 30, 2021 (In Thousands) | (In Thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------- | :------ | :------ | :------ | :---- | | Investment securities - available for sale | $0 | $3,166 | $150 | $3,316 | | Loans held for investment, at fair value | $0 | $0 | $1,577 | $1,577 | | Interest-only strips | $0 | $0 | $9 | $9 | | Total assets | $0 | $3,166 | $1,736 | $4,902 | - Non-performing loans and mortgage servicing assets are measured at fair value on a nonrecurring basis, with non-performing loans totaling $6.62 million and mortgage servicing assets at $132,000 at September 30, 2021[87][99] - Valuation techniques for Level 3 assets include market comparable pricing for CMOs, relative value analysis for loans held for investment, discounted cash flow for restructured non-performing loans and mortgage servicing assets, and relative value analysis for other non-performing loans[100] Note 8: Reclassification Adjustment of Accumulated Other Comprehensive Income ("AOCI") This note details changes in accumulated other comprehensive income and related reclassification adjustments Changes in AOCI (In Thousands, Net of Statutory Taxes) | (Dollars In Thousands, Net of Statutory Taxes) | For the Quarter Ended Sep 30, 2021 | | :--------------------------------------------- | :--------------------------------- | | Beginning balance at June 30, 2021 | $72 | | Other comprehensive loss before reclassifications | $(6) | | Ending balance at September 30, 2021 | $66 | - AOCI decreased from $72,000 at June 30, 2021, to $66,000 at September 30, 2021, primarily due to other comprehensive loss of $6,000[114] Note 9: Revenue From Contracts With Customers This note disaggregates non-interest income from contracts with customers, excluding interest income - The largest portion of the Corporation's revenue is from interest income, which is outside the scope of ASC 606. All revenue within ASC 606 is recognized as non-interest income[115] Non-Interest Income Disaggregation (In Thousands) | Type of Services (In Thousands) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :------------------------------ | :------------------------- | :------------------------- | | Loan servicing and other fees | $186 | $405 | | Deposit account fees | $312 | $310 | | Card and processing fees | $405 | $364 | | Other | $166 | $80 | | Total non-interest income | $1,069 | $1,159 | - Total non-interest income decreased by $90,000 (8%) to $1.07 million, primarily due to a 54% decrease in loan servicing and other fees, driven by lower loan prepayment fees[118][185][186] Note 10: Leases This note provides information on the Corporation's operating lease assets, liabilities, and related expenses - The Corporation accounts for leases under ASC 842, recording liabilities for future lease obligations and right-of-use assets for underlying leased assets[123] Operating Lease Information (In Thousands) | (In Thousands) | As of Sep 30, 2021 | As of Jun 30, 2021 | | :------------- | :----------------- | :----------------- | | Operating lease right of use assets | $1,904 | $2,117 | | Operating lease liabilities | $1,970 | $2,192 | | Premises and occupancy expenses from operating leases (Qtr Ended Sep 30, 2021) | $200 | $199 | | Equipment expenses from operating leases (Qtr Ended Sep 30, 2021) | $23 | $12 | - Total lease expenses for the quarter ended September 30, 2021, were $223,000, an increase from $211,000 in the prior year[126] - The weighted average remaining lease term is 3.6 years with a weighted average discount rate of 2.01% as of September 30, 2021[128] Note 11: Stock Repurchases This note details the Corporation's common stock repurchase activities during the reporting period - During Q1 fiscal 2022, the Corporation repurchased 49,764 shares of common stock at a weighted average cost of $17.10 per share under its April 2020 stock repurchase plan[130][162] - As of September 30, 2021, 217,069 shares remained available for purchase under the plan, which expires on April 27, 2022[130][205] Note 12: Subsequent Events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On October 28, 2021, the Board of Directors declared a quarterly cash dividend of $0.14 per share, payable on December 9, 2021, to shareholders of record on November 18, 2021[131] ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Corporation's financial condition, operating results, and strategic initiatives General This section provides an overview of Provident Financial Holdings, Inc.'s operations and primary business activities - Provident Financial Holdings, Inc. operates through its wholly-owned subsidiary, Provident Savings Bank, F.S.B., a federally chartered stock savings bank headquartered in Riverside, California[132][134] Key Financials at September 30, 2021 (In Millions) | Metric | Amount (Millions) | | :--------------- | :---------------- | | Total assets | $1.19 | | Total deposits | $956.7 | | Stockholders' equity | $128.2 | - The Bank's primary activities include attracting deposits from 13 banking locations in Riverside and San Bernardino counties, California, and originating/purchasing various types of loans, primarily in Southern and Northern California[135] Safe-Harbor Statement This statement addresses forward-looking information and associated risks and uncertainties within the report - This section contains forward-looking statements subject to various risks and uncertainties, including the impact of the COVID-19 pandemic, credit risks, interest rate fluctuations, regulatory changes, and real estate market conditions[138][140] Critical Accounting Policies This section confirms no significant changes to the Corporation's critical accounting policies during the quarter - There have been no significant changes to the Corporation's critical accounting policies during the three months ended September 30, 2021, as previously disclosed in the 2021 Annual Report on Form 10-K[142] Executive Summary and Operating Strategy This section outlines the Corporation's core business, strategic goals, and outlook for net interest income and margin - The Corporation's core business is community banking, focusing on deposits and investing in single-family, multi-family, and commercial real estate loans, with net interest income as the primary revenue source[143][144] - The strategic goal for the next three years is to moderately increase total assets by growing various loan categories and to improve core revenue by decreasing time deposits and increasing lower-cost checking and savings accounts to enhance net interest margin[145] - Despite recent economic improvements, management anticipates continued compression in net interest income and net interest margin for the remainder of calendar 2021 and potentially longer[145] COVID-19 Impact to the Corporation This section details the ongoing impact of the COVID-19 pandemic on the Corporation's operations and loan portfolio - As of September 30, 2021, all Bank branches are operating with normal hours, and most employees have returned to routine working environments[148] - Only one single-family forbearance loan, with an outstanding balance of $308,000 (0.04% of total loans), remained under a COVID-19 related forbearance agreement, and there were no pending requests for payment relief[150] Off-Balance Sheet Financing Arrangements This section discusses the Corporation's off-balance sheet activities, including commitments and derivative instruments - The Corporation engages in off-balance sheet activities, including commitments to extend credit and derivative financial instruments, which involve credit and interest-rate risk[152] - For detailed information on commitments and derivative financial instruments, refer to Note 6 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements[152] Comparison of Financial Condition at September 30, 2021 and June 30, 2021 This section analyzes changes in the Corporation's assets, liabilities, and equity between September 30, 2021, and June 30, 2021 - Total assets increased by $8.7 million (1%) to $1.19 billion, driven by a $17.9 million increase in cash and cash equivalents and an $8.0 million increase in loans held for investment, partially offset by a $17.8 million decrease in investment securities[153][154][155][156] - Loans held for investment increased by $8.0 million (1%) to $859.0 million, with $60.9 million in originations (primarily single-family and multi-family loans) and $53.9 million in principal payments during Q1 fiscal 2022[156] - Total deposits increased by $18.7 million (2%) to $956.7 million, with transaction accounts rising by $23.8 million (3%) and time deposits decreasing by $4.9 million (3%), reflecting a strategic shift towards lower-cost deposits[159] - Total borrowings decreased by $11.0 million (11%) to $90.0 million due to maturities of long-term borrowings[160] Comparison of Operating Results for the Quarter Ended September 30, 2021 and 2020 This section compares the Corporation's financial performance for the quarters ended September 30, 2021, and 2020 Key Operating Results Comparison (Q1 FY2022 vs Q1 FY2021) | Metric | Q1 FY2022 (Sep 30, 2021) | Q1 FY2021 (Sep 30, 2020) | Change (YoY) | | :------------------------- | :----------------------- | :----------------------- | :----------- | | Net Income | $2.7 million | $1.5 million | +80% | | Diluted EPS | $0.35 | $0.20 | +75% | | Efficiency Ratio | 63% | 75% | -12 pp | | Return on Average Assets | 0.89% | 0.50% | +39 bps | | Return on Average Equity | 8.39% | 4.78% | +361 bps | | Net Interest Income | $7.9 million | $8.2 million | -3% | | (Recovery) Provision for Loan Losses | $(339) thousand | $220 thousand | Improvement | | Total Non-Interest Expense | $5.7 million | $7.0 million | -19% | | Salaries and Employee Benefits | $3.1 million | $4.4 million | -30% | - The efficiency ratio improved to 63% from 75%, and return on average assets increased to 0.89% from 0.50% year-over-year[164] - Net interest income decreased by $278,000 (3%) due to a 13 basis point reduction in net interest margin to 2.71%, as the decrease in average yield on interest-earning assets outpaced the decrease in average cost of interest-bearing liabilities[165] - Total non-interest expense decreased by $1.3 million (19%), primarily due to a $1.2 million credit from the Employee Retention Tax Credit (ERTC) which reduced salaries and employee benefits expense[187][188] - The effective income tax rate decreased to 26.5% from 30.0%, attributable to the non-taxable treatment of the ERTC for state tax purposes[190] Asset Quality This section reviews the Corporation's asset quality, including non-performing loans and the allowance for loan losses Non-Performing Assets (In Thousands) | (In Thousands) | At Sep 30, 2021 | At Jun 30, 2021 | | :------------- | :-------------- | :-------------- | | Total non-performing loans | $6,616 | $8,646 | | Real estate owned, net | $0 | $0 | | Total non-performing assets | $6,616 | $8,646 | | Non-performing loans as a percentage of loans held for investment, net of allowance for loan losses | 0.77% | 1.02% | | Non-performing assets as a percentage of total assets | 0.55% | 0.73% | - Non-performing loans, net of allowance and fair value adjustments, decreased by 23% to $6.6 million at September 30, 2021, from $8.6 million at June 30, 2021[191] - Total restructured loans remained at $7.9 million, but the portion classified as non-performing decreased to $5.1 million (65%) from $7.0 million (89%) at June 30, 2021[194] - The allowance for loan losses was $7.4 million at September 30, 2021, representing 0.86% of gross loans held for investment, deemed sufficient by management[183][184] Loan Volume Activities This section details the Corporation's loan origination, purchase, and payment volumes for the reporting periods Loan Origination and Purchase Volume (In Thousands) | (In Thousands) | Quarter Ended Sep 30, 2021 | Quarter Ended Sep 30, 2020 | | :------------- | :------------------------- | :------------------------- | | Loans originated for investment | $60,938 | $39,108 | | Loans purchased for investment | $0 | $8,938 | | Mortgage loan principal payments | $(53,859) | $(66,323) | | Net increase (decrease) in loans held for investment | $8,075 | $(17,843) | - Loans originated for investment increased to $60.9 million in Q1 fiscal 2022 from $39.1 million in Q1 fiscal 2021, primarily in single-family and multi-family mortgages[199] - The Corporation did not purchase any loans for investment in Q1 fiscal 2022, compared to $8.9 million in Q1 fiscal 2021[199] Liquidity and Capital Resources This section discusses the Corporation's funding sources, liquidity position, and regulatory capital adequacy - Primary funding sources include deposits, loan payments, investment security maturities/sales, and FHLB – San Francisco advances[200] - Total cash and cash equivalents were $88.2 million (7% of total assets) at September 30, 2021, with $305.8 million in remaining FHLB borrowing facility and a $189.8 million discount window facility at the Federal Reserve Bank[204] Bank Capital Ratios at September 30, 2021 | Capital Ratio (Provident Savings Bank, F.S.B.) | Actual Ratio | Minimum for Capital Adequacy | Minimum to Be Well Capitalized | | :--------------------------------------------- | :----------- | :--------------------------- | :----------------------------- | | Tier 1 leverage capital | 9.81% | 4.00% | 5.00% | | CET1 capital | 18.90% | 7.00% | 6.50% | | Tier 1 capital | 18.90% | 8.50% | 8.00% | | Total capital | 20.12% | 10.50% | 10.00% | - The Bank exceeded all regulatory capital requirements and was categorized as 'well-capitalized' at September 30, 2021[208] - The Bank paid a cash dividend of $7.5 million to the Corporation in Q1 fiscal 2022, while the Corporation paid $1.1 million in cash dividends to its shareholders[212] Supplemental Information This section provides additional financial metrics, including loans serviced for others and book value per share Supplemental Information (In Thousands) | Metric | At Sep 30, 2021 | At Jun 30, 2021 | At Sep 30, 2020 | | :------------------------- | :-------------- | :-------------- | :-------------- | | Loans serviced for others | $46,454 | $50,448 | $77,562 | | Book value per share | $17.12 | $16.88 | $16.75 | - Loans serviced for others decreased to $46.45 million at September 30, 2021, from $50.45 million at June 30, 2021[213] - Book value per share increased to $17.12 at September 30, 2021, from $16.88 at June 30, 2021[213] ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk This section details the Corporation's strategies and analyses for managing market risk, particularly interest rate risk - The Corporation aims to reduce exposure to fluctuating interest rates by managing the repricing mismatch between interest-earning assets and interest-bearing liabilities, primarily by increasing the interest-rate sensitivity of assets through new loan originations with adjustable rates[214][215] - The Corporation uses an internal interest rate risk model to analyze NPV sensitivity under various interest rate scenarios (+/- 100, +200, +300 basis points)[217] NPV Sensitivity to Interest Rate Changes (September 30, 2021) | Basis Points Change in Rates | NPV Change (In Thousands) | NPV as Percentage of Portfolio Value Assets | | :--------------------------- | :------------------------ | :------------------------------------------ | | +300 bp | $107,227 | 19.44% | | +200 bp | $79,535 | 17.68% | | +100 bp | $45,118 | 15.41% | | -100 bp | $(23,627) | 10.55% | - At September 30, 2021, the Corporation was asset sensitive, projecting an increase in net interest income in a rising interest rate environment and a smaller increase in a falling rate environment over the subsequent 12-month period[234] ITEM 4 - Controls and Procedures This section confirms the effectiveness of disclosure controls and reports on internal control over financial reporting - The Corporation's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2021[238] - No material changes occurred in the Corporation's internal control over financial reporting during the quarter ended September 30, 2021[239] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section states that the Corporation is not a party to any material legal proceedings - The Corporation is not involved in any legal proceedings that are believed to have a material adverse effect on its financial condition, operations, or cash flows[242] Item 1A. Risk Factors This section confirms no material changes to the risk factors previously disclosed in the annual report - No material changes in risk factors have occurred since the Corporation's Annual Report on Form 10-K for the year ended June 30, 2021[243] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Corporation's common stock repurchase activities during the quarter Equity Securities Purchases (Q1 FY2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan | Maximum Number of Shares that May Yet Be Purchased Under the Plan | | :--------------------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------- | :---------------------------------------------------------------- | | July 1, 2021 – July 31, 2021 | — | $— | — | 266,833 | | August 1, 2021 – August 31, 2021 | 25,674 | $17.17 | 25,674 | 241,159 | | September 1, 2021 – September 30, 2021 | 24,090 | $17.02 | 24,090 | 217,069 | | Total | 49,764 | $17.10 | 49,764 | 217,069 | - The Corporation repurchased 49,764 shares of its common stock at a weighted average cost of $17.10 per share during the quarter ended September 30, 2021[245] - As of September 30, 2021, 217,069 shares remained available for purchase under the April 2020 stock repurchase plan, which expires on April 27, 2022[245] Item 3. Defaults Upon Senior Securities This item is marked as not applicable, indicating no defaults upon senior securities during the reporting period - This item is not applicable for the reporting period[247] Item 4. Mine Safety Disclosures This item is marked as not applicable, indicating no mine safety disclosures are required for the Corporation - This item is not applicable for the reporting period[248] Item 5. Other Information This item is marked as not applicable, indicating no other material information to disclose that is not covered elsewhere in the report - This item is not applicable for the reporting period[249] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications, and XBRL-formatted financial statements - The exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Form of Certificate of Common Stock, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and XBRL-formatted financial statements[252]