PROV 10-K & 10-Q changes, risk factors and insider trading

As of June 30, 2025,2026, approximately 64%62% 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. Accordingly, our financial performance is closely tied to economic conditions in these areas. A downturn in local or regional economic conditions, as a result of inflation, risingelevated or volatile interest rates, unemployment, recessions, natural disasters, or other adverse events, could materially affect our business, financial condition, and results of operations.

Changes in U.S. immigration policies,policies particularlyor thosetheir that could lead to mass deportations,enforcement may disrupt key industries in our region such as agriculture, construction, and manufacturing. These disruptions could exacerbate labor shortages, reduce productivity, and cause financial instability among affected businesses, impairing the repayment abilities of borrowers in these sectors.

We occasionallymay from time to time purchase loans in bulk or “pools.” We may experience lower yields or losses on loan “pools” because the assumptions we use when purchasing loans in bulk may not prove correct.

In order to achieve our loan growth objectives and/or improve earnings, we may purchase loans, either individually, through participations, or in bulk. We did not purchase any loans in fiscal 2025 and 2024. 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. In addition, when we purchase loans, we perform certain due diligence procedures and typically require customary limited indemnities. To the extent that our underlying assumptions prove to be inaccurate or the basis for those assumptions change, the purchase price paid for “pools” of loans may prove to have been excessive, resulting in a lower yield or a loss of some or all of the loan principal. For example, if we purchase pools of loans at a premium and some of the loans are prepaid before we modeled,modeled prepayment, we will earn less interest income on the purchase than expected. 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. We may be exposed to a greater risk of loss to the extent that bulk purchases contain such loans. We did not purchase any loans in fiscal year 2026 and 2025, but we may do so in the future.

Included in our single-family residential loan portfolio, which comprised 52%55% of our total loan portfolio at June 30, 2025,2026, were $16.9$14.8 million or 2%1% 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. Additionally, as we acknowledge the potential impact of significant portfolio growth, new loan products, and refinancing activities, these actionsactivities 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. 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.

Non-performing assets, consisting of non-performing loans and real estate acquired through foreclosure, adversely affect our earnings in various ways. We reverse accrued interest on non-performing loans and do not record interest income on foreclosed assets. Additionally, non-performing loansassets increase our loan administration costs, includingas increasedwell as costs related to the improvement, maintenance and repairs of the foreclosed assets. 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. 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. 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. 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.

Factors beyond our control can significantlymay impact the fair value of securities within our portfolio, potentially leading to adverse changes in their value. 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. These influences could result in impairmentscredit thatlosses areor notother justimpairment temporary,charges, 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. We evaluate individual investment securities quarterly for expected credit losses based on ASC 326, “Financial Instruments – Credit Losses,” since the adoption on July 1, 2023. 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. 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.

We are subject to an extensive body of accounting rulesrules, standards and bestreporting practices.requirements. Periodic changes to such rulesrules, standards or reporting requirements may change the treatment and recognition of critical financial line items and affect our profitability.

One such significant change in fiscal 2024 was the implementation of the CECL model, which we adopted on July 1, 2023. Under the CECL model, financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, are presented at the net amount expected to be collected. ThisBecause forward-lookingCECL approachrequires inestimates estimatingof lifetime expected credit losses contrastsbased starkly with the prior, "incurred loss" model, which delays recognition until a loss is probable. CECL mandates consideringon historical experience, current conditions, and reasonable forecastsand affectingsupportable collectability, leading to periodic adjustments of financial asset values. However, this forward-looking methodology, reliant on macroeconomic variables, introduces the potential for increased earnings volatility due to unexpectedforecasts, changes in theseeconomic indicatorsconditions, betweenborrower periods.performance, Ancollateral additionalvalues, consequenceor other assumptions may require significant changes to our allowance for credit losses and could increase earnings volatility. In addition, future changes in accounting standards or regulatory interpretations could require us to modify our methodologies or financial reporting, which could materially affect our financial condition and results of CECL is an accounting asymmetry between loan-related income, recognized periodically based on the effective interest method, and credit losses, recognized upfront at origination. This asymmetry might create the perception of reduced profitability during loan expansion periods due to the immediate recognition of expected credit losses. 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.operations.

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. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Additionally, any perceivedactual or actualalleged failure to preventcomply with these requirements could result in enforcement actions, civil money launderingpenalties, restrictions on our operations, reputational harm, or terroristlimitations financingon activitiesobtaining couldregulatory significantly damage our reputation.approvals. These outcomes could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing stockholder value. We have established processes and procedures intended to identify, measure, monitor, report, analyze, and control the types of risk to which we are subject to.exposed. These risks include, among others, liquidity, credit, market, interest rate, operational, legal and compliance, and reputational risk. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. We alsocannot maintain a compliance program to identify, measure, assess, and report on our adherence to applicable laws, policies, and procedures. While we assess and improve these programs on an ongoing basis, there can be no assuranceassure that our risk management orand compliance programs, along with other related controls, will effectively mitigate risk under all circumstances,circumstances or that itwe will adequatelyidentify mitigateall any risk or lossrisks to us.which However,we asare exposed. As with any risk management framework, there are inherent limitations to our risk management strategiesstrategies, asincluding theythe possibility that risks may exist,exist or develop in the future, including risksfuture that we have not appropriately anticipated or identified.identified.. If our risk management framework proves ineffective, we could suffer unexpected losses and our business, financial condition, results of operationsoperations, or growth prospects could be materially adversely affected. We may also be subject to potentially adverse regulatory consequences.

Our security measures may not be sufficient to mitigate the risk of a cybercyberattack attack.or other security breach, which could result in financial losses, business disruption, regulatory consequences and reputational damage. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software, networks and networksother technologies may be vulnerable to breaches, fraudulent or unauthorized access, denial or degradation of service attacks, misuse, computer viruses, malware or other malicious codecode, cyberattacks and cyber-attacksother security threats. These threats may arise from external attacks or from intentional or unintentional acts by persons who have access to our systems or our customers’ or counterparties’ confidential information, including employees. If one or more of these events occur, they could compromise confidential or personally identifiable information, result in fraudulent transactions or misappropriation of assets, or otherwise cause interruptions or malfunctions in our operations or the operations of our customers or counterparties. We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. WeThe increasing sophistication of cyber criminals, advances in computer capabilities, and vulnerabilities in third-party technologies, including browsers and operating systems, may beincrease requiredthese to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. We could also suffer significant reputational damage.risks.

Further, our cardholders use their debit and credit cards to make purchases from third parties or through third partythird-party processing services. As such, we are subject to risk from data breaches of such third party’sparties’ information systems or their payment processors. Such a data security breach could compromise our customer’scustomers’ account information. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for losses associated with reimbursing our customers for such fraudulent transactions on customers’customers' card accounts, as well as costs incurred by payment card issuing banks and other third partiesparties, or may be subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. We may also incur other costs related to data security breaches, such as replacing cards associated with compromised card accounts or credit monitoring services. 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.

Our reliance on third-party service providers and our dependence on information systems could expose us to system failures, interruptions and security measuresbreaches maythat notcould protectadversely usaffect fromour system failures or interruptions.business. While we have established policies and procedures to prevent or limit the impact of systemssystem failures and interruptions, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition, weWe outsource certain aspects of our data processing and other operational functions to certain third-party providers. While we select our third-party vendors carefully, we do not control their actions. If our third-party providers encounter difficultiesdifficulties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher transaction volumes, cyber-attackscyberattacks and security breachesbreaches, or if we otherwise have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected, and our ability to deliver products and services to our customers and otherwise conduct business operations could be adversely impacted. Replacing these third-party vendors could also entail significant delays and expense. Threats to information security also exist in the processing of customer information through various other vendors and their personnel. We cannot ensure that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely. We may not be insured against all types of losses as a result of thirdthird-party party failuresfailures, and insurance coverage may be inadequate to cover all losses resulting from breaches, system failures or other disruptions. If any of ourReplacing third-party servicevendors providerscould experiencealso financial,entail operationalsignificant ordelays technologicaland difficulties,expense, or if there is any other disruption in our relationships with them,and we may not be requiredable to identify alternative sources of such services, and we cannot assure that we could negotiate terms that are as favorable to us,us or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all. Further,Any thesystem occurrencefailure, ofinterruption, anysecurity systems failurebreach or interruptionother disruption involving us or a third-party service provider could damage our reputation andreputation, result in a loss of customers andor business, could subject us to additional regulatory scrutiny,scrutiny or could expose us to legal liability.liability, Anyor ofotherwise theseadversely occurrences could have a material adverse effect onaffect our financial condition and results of operations.

We are susceptible to fraudulent activity that may be committed against us or our customers, which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our customer’scustomers’ information, misappropriation of assets, privacy breaches againstinvolving our customers, litigation or damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Nationally, reported incidents of fraudFraud and other financial crimes have increased.become increasingly prevalent and sophisticated, particularly as criminals use technology and other methods to target financial institutions and their customers. We have also experienced losses due to apparent fraud and other financial crimes. WhileSuch weactivity could result in additional financial losses, increased operating costs, regulatory scrutiny, litigation, reputational damage or loss of customer confidence, any of which could have policiesa material adverse effect on our business, financial condition and proceduresresults designedof to prevent such losses, there can be no assurance that such losses will not occur.operations.

Liquidity is essential to our business. We rely on a number of different sources in order to meet our potential liquidity demands. Our primary sources of liquidity are increases in deposit accounts, cash flows from loan payments and our securities portfolio. Borrowings also provide us with a source of funds to meet liquidity demands. 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. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the California markets in which our loans are concentrated, negative operating results, or adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry or deterioration in credit markets. 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. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —- Liquidity and Capital Resources” of this Form 10-K.

Earthquakes,Natural fires, mudslidesdisasters and otherclimate-related natural disastersrisks in our primary market area may result in material losses because of damage to collateral properties and borrowers' inability to repay loans.

Since our geographic concentration is in California, we are subjectexposed to natural disasters and severe weather events, including earthquakes, fires,wildfires, mudslides, flooding, droughts and otherextreme naturalheat. disasters.These events may damage real property securing our loans, disrupt the operations of our borrowers and adversely affect regional and local economic activity, our customers and the communities in which we operate. Climate change may contribute to an increase in the frequency or severity of certain weather-related events, including wildfires, droughts, flooding and extreme heat, which could increase the risk of losses associated with these events. A major earthquakeearthquake, wildfire, mudslide or other natural disaster may disrupt our business operations for an indefinite period of time and could result in material losses,losses. althoughConsistent wewith havegeneral notpractice experiencedamong any losseslenders in manyour years as a result of earthquake damage or other natural disaster. Although we are in an earthquake pronemarket area, we andgenerally other lenders in the market area maydo not require earthquake insurance as a condition of making a loan.loan, and properties securing our loans may not be insured against earthquake damage. 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 manysome of our borrowers may experience uninsured or underinsured property losses, business interruptions, or sustained job interruptioninterruptions and/or losslosses whichthat may materially impair their ability to meet the terms of their loan obligations.

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. Any misrepresentation during the mortgage loan origination process or, in some cases, upon any fraud or early payment default on such mortgage loans, may require us to repurchase or substitute 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 2025year 2026 and 2024,2025, the Bank did not repurchase any loans. Additionally, the Bank did not have any claims or settlements for previously sold loans during fiscal 2025year 2026 and 2024.2025.

In MarchJanuary 2025, the federal government issued an executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” rescinding prior directives that promoted DEI initiatives, including Executive Order 11246 applicable to federal contractors. This order signals a shift in regulatory priorities, directing agencies to scrutinize DEI practices for consistency with federal nondiscrimination laws. TheChanges evolvingin regulatoryfederal environmentand state laws, regulations and policies relating to DEI and ESG may materially affect financialour institutions,employment thoughpractices, thevendor scoperelationships, training programs, disclosures and enforcementother approachbusiness remain uncertain.practices.

As a financial services provider, we face ongoing scrutiny from regulators, investors, and the public regarding ESG and DEI commitments. Changes in federal policy may prompt reassessment of our employment practices, vendor policies, training programs, and disclosures. InstitutionsCalifornia engagedmay inimpose governmentadditional contractingrequirements relating to employment practices, diversity, reporting or federalother programsDEI- and ESG-related matters, which could faceincrease increasedour compliance risks.obligations. Any required changes to our DEI or ESG strategies,practices or disclosures could increase operational complexitycomplexity, compliance costs and legal exposure. Moreover, some states continue to enforce affirmative action or diversity reporting requirements, adding compliance challenges.

Failure to adapt effectively to these shifting requirements could lead to reputational harm, regulatory investigations, litigation, or limitations on federal program participation. Conversely,At reducingthe same time, changes to our DEI commitmentsor ESG practices or policies could negatively affect our reputationrelationships with investors,employees, ratingscustomers, agencies, employees,investors and communities. ESG ratings downgrades may also impact our cost of capital and access to funding. Given the unsettled regulatory landscape, we continuously monitor developments and strive to align our practices with legal obligations and stakeholder expectations. However,Failure uncertaintyto remains,appropriately andrespond misalignmentto changes in applicable laws, regulations or stakeholder expectations could adversely affect our brand,reputation, employee morale,relationships, clientcustomer relationships, and financial results.condition or results of operations.

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. 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. The Bank's ability to pay dividends is subject to its ability to earn net income and to meet certain regulatory requirements. In the event the Bank is unable to pay dividends to us, we may not be able to pay dividends on our common stock or conduct share buybacks. 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 2025year 2026 and 2024,2025, the Bank paid cash dividends to its holding company totaling $9.0$10.5 million and $7.0$9.0 million, respectively.

Forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur, and you should not put undue reliance on any forward-looking statements. These factors could cause our actual results for fiscal 2026year 2027 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding the financial condition and results of operations of the Corporation. The information contained in this section should be read in conjunction with the audited Consolidated Financial Statements and accompanying selected Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

These estimates involve significant uncertainty and are based on historical experience, current conditions, and other factors management believes to be reasonable under the circumstances. We evaluate these estimates on an ongoing basis and discuss them with the Audit Committee of our Board of Directors. For a summary of our significant accounting policies, see Note 1— – Organization and Summary of Significant Accounting Policies in Item 8 of this Annual Report on Form 10-K.

Allowance for Credit Losses. The ACL involves significant judgment and assumptions by management, which hashave a material impact on the carrying value of financial assets. The Corporation adopted ASC 326 using the prospective transition approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. ResultsThe Corporation adopted ASC 326 effective July 1, 2023, and results for reporting periods beginning on or after Julythat 1, 2023date are presented under CECL.the CECL methodology.

As required by ASC 326, on July 1, 2023 the Corporation implemented CECL and recognized a $1.2 million one-time increase to its ACL and a net of tax charge of $824,000 to retained earnings. Under ASC 326, the ACL is a valuation account that is deducted from the related loan’s amortized cost basis to present the net amount expected to be collected on the loans. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

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. Also, to a lesser extent, the Bank originatesmay originate construction, commercial business, consumer and other mortgage loans. The primary source of income in community banking is net interest income, which is the difference between the interest income earned on loans and investment securities, and the interest expense paid on interest-bearing deposits and borrowed funds. 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,multi-family and commercial real estate, construction, and commercial businessestate loans. 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 funding base, the Corporation will consider utilizing brokered certificates of deposit and public funds, subject to market conditions and funding needs. 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. 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.

Total cash and cash equivalents, primarily excess cash deposited with the FRB of San Francisco, increaseddecreased $1.7$3.9 million, or 3%,7%, to $49.2 million at June 30, 2026 from $53.1 million at June 30, 2025 from $51.4 million at June 30, 2024. The increase was consistent with the Corporation’s strategy of adequately managing credit and liquidity risk.2025.

Total investment securities (held to maturity and available for sale) decreased $20.9$20.5 million, or 16%,18%, to $90.5 million at June 30, 2026 from $111.0 million at June 30, 2025 from $131.9 million at June 30, 2024.2025. The decrease was primarily the result of scheduled and accelerated principal payments on investment securities. During fiscal year 2026, the Bank did not purchase or sell any investment securities, while during fiscal year 2025, the Bank purchased $981,000 of investment securities and did not sell any investment securities; while during fiscal 2024, the Bank did not purchase or sell any investment securities. 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 $7.2$13.1 million, or 1%, to $1.03 billion at June 30, 2026 from $1.05 billion at June 30, 2025 as compared to June 30, 2024.2025. Total loan principal payments in fiscal 2025year 2026 were $133.3$176.8 million, up 33% from $99.9$133.3 million in fiscal 2024,year 2025, while the Bank originated $122.7$162.3 million of loans held for investment in fiscal 2025,year 2026, up 62%32% from $75.5$122.7 million in fiscal 2024.year 2025. In both years these loans consisted primarily of single-family, multi-family and commercial real estate mortgage loans. The Bank did not purchase any loans in fiscal 2025year 2026 or 2024.2025. Management attributes the increase in loan originations to the decision to increaseprice ormore maintaincompetitively theand totalmake balancechanges ofto loansunderwriting heldrequirements formore investmentconsistent with market competitors in response to higher loan prepayments in fiscal 2025.year 2026. The balance of multi-family, commercial real estate, construction and commercial business loans, net of undisbursed loan funds, decreased $34.7$35.3 million, or 7%, to $462.6 million at June 30, 2026, from $497.9 million at June 30, 2025, from $532.6 million at June 30, 2024, representing 48%45% and 51%48% of loans held for investment, respectively. The decrease was primarily attributable to a $27.5 million decrease in multi-family loans and a $6.0 million decrease in commercial real estate loans. The balance of single-family loans held for investment increased $26.3$21.5 million, or 5%,4%, to $565.9 million at June 30, 2026, from $544.4 million at June 30, 2025, from $518.1 million at June 30, 2024.2025. There was no REO inat fiscalJune 202530, 2026 and 2024.2025. 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 stock and other equity investments increased $190,000,$311,000, or 2%,3%, to $10.6 million at June 30, 2026, from $10.3 million at June 30, 2025, from $10.1 million at June 30, 2024.2025. The increase was primarily due to a higherVisa, Inc. (NYSE:V) (“VISA”) stock conversion. In May 2026, the Bank converted its class B2 VISA stock to class B3 VISA stock and class C VISA stock. Subsequently, the Bank recorded the class C VISA stock at its fair value adjustmenton its Consolidated Statements of other equity investments, which consist solely of 1,297 shares of VISA Class C stock.Condition. As of June 30, 20252026 and 2024,2025, the fair value of these other equity investments (consisting of the VISA class C stock) was $730,000$1.0 million and $540,000,$730,000, respectively. The Bank did not purchase additional FHLB - San Francisco stock during fiscal 2025,year while2026 inand fiscal 2024, the Bank purchased $63,000 of FHLB - San Francisco stock.2025.

Total deposits increased $21.6 million, or 2%, to $910.4 million at June 30, 2026 from $888.8 million at June 30, 20252025. fromTime $888.3deposits increased $40.9 million, or 13%, to $353.2 million at June 30, 2024. Transaction accounts decreased $38.0 million, or 6%, to $576.5 million at June 30, 20252026 from $614.5 million at June 30, 2024, while time deposits increased $38.4 million, or 14%, to $312.3 million at June 30, 2025; fromwhile $273.9transaction accounts decreased $19.4 million, or 3%, to $557.1 million at June 30, 2024.2026 from $576.5 million at June 30, 2025. Time deposits included brokered certificates of deposit of $131.0$161.4 million as of June 30, 2025,2026, downup slightly$30.4 million, or 23%, from $131.8$131.0 million at June 30, 2024.2025. As of June 30, 20252026 and 2024,2025, the percentage of transaction accounts to total deposits was 65%61% and 69%,65%, respectively. Total retail deposits, defined as total deposits excluding brokered certificates of deposit, increaseddecreased $8.8 million, or 1%, to $749.0 million at June 30, 2026 from $757.8 million at June 30, 2025 from $756.5 million at June 30, 2024.2025. This increasedecrease was due primarily to the increase in retail time deposits, which was largely offset by the declinedecrease in transaction account balances as some customers sought higher interest rates elsewhere.elsewhere, partly offset by the increase in retail time deposits. 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 primarily of FHLB – San Francisco advances, decreased $25.4$56.1 million, or 11%,26%, to $157.0 million at June 30, 2026 from $213.1 million at June 30, 2025 from $238.5 million at June 30, 2024.2025. The decrease was primarily due to scheduled maturities that were not fully renewed.replaced. The weighted average maturity of the Corporation’sBank’s FHLB – San Francisco advances was approximately 12 months at June 30, 2026, up from 10 months at June 30, 2025, down from 13 months at June 30, 2024.2025. 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 decreased $1.4$2.3 million, or 1%,2%, to $126.2 million at June 30, 2026 from $128.5 million at June 30, 2025 from $129.9 million at June 30, 2024,2025, primarily as a result of 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, partly offset by net income and the amortization of stock-based compensation in fiscal 2025.compensation.

General. The Corporation recorded net income of $6.7 million, or $1.03 per diluted share, for the fiscal year ended June 30, 2026, up $400,000, or 6%, from $6.3 million, or $0.93 per diluted share, for the fiscal year ended June 30, 2025, down $1.1 million, or 15%, from $7.4 million, or $1.06 per diluted share, for the fiscal year ended June 30, 2024.2025. The decreaseincrease in net income was primarily attributable to a $2.3 million$859,000 increase in non-interestnet expenseinterest income and a $410,000$195,000 decreaseincrease in non-interest income, partly offset by a $666,000$113,000 lower recovery of credit losses recorded during fiscal 2025 as compared to a $63,000 recovery of credit losses during fiscal 2024, and a $546,000$178,000 increase in netnon-interest interest income.expense. The Corporation's efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, increasedimproved to 77% in fiscal year 2026 from 79% in fiscal 2025year from 73% in fiscal 2024 due primarily to an increase in non-interest expenses.2025. Return on average assets in fiscal 2025year 2026 was 0.55%, up from 0.50% compared to 0.57% in fiscal 2024,year 2025, and return on average stockholders' equity in fiscal 2025year 2026 was 4.79%,5.17%, comparedup tofrom 5.62%4.79% in fiscal 2024.year 2025.

Net Interest Income. Net interest income increased $546,000,$859,000, or 2%, to $36.3 million in fiscal 2026 from $35.5 million in fiscal 2025 from $34.9 million in fiscal 2024.2025. This increase reflects highera loan17-basis-point yieldsincrease andin the repricinginterest rate spread, primarily reflecting lower funding costs, partly offset by a decrease in the average balance of adjustable-rateinterest-earning loans, which outpaced increases in interest expense on deposits and borrowings.assets. The net interest margin increased 1516 basis points to 3.09% in fiscal 2026 from 2.93% in fiscal 2025 from 2.78% in fiscal 2024.2025. The average balance of interest-earning assets decreased $42.2$35.3 million, or 3%, to $1.18 billion in fiscal 2026 from $1.21 billion in fiscal 2025 from $1.25 billion in fiscal 2024.2025. The average balance of interest-bearing liabilities decreased $39.4$34.2 million, or 3%, to $1.06 billion during fiscal 2026 as compared to $1.10 billion during fiscal 2025 as compared to $1.14 billion during fiscal 2024.2025.

Interest Income. Total interest income increaseddecreased $1.9 million,$735,000, or 3%,1%, to $55.9 million in fiscal 2026 from $56.6 million in fiscal 2025 from $54.7 million in fiscal 2024.2025. The increasedecrease was primarily attributable to ana increasedecrease in the average balance of interestinterest-earning incomeassets, onpartly loansoffset receivable.by higher average yields.

Interest income on loans receivable increaseddecreased $2.3 million,$519,000, or 5%,1%, to $52.0 million in fiscal year 2026 from $52.5 million in fiscal 2025year from $50.2 million in fiscal 2024.2025. The increasedecrease was attributable to a higherlower average loan yield,balance, partly offset by a lowerhigher average loan balance.yield. The average balance of loans receivable decreased $15.3 million, or 1%, to $1.04 billion during fiscal year 2026 from $1.05 billion during fiscal year 2025. The weighted average loan yield during fiscal 2025year 2026 increased 31two basis points to 5.00%5.02% from 4.69%5.00% in fiscal 2024,year 2025, reflecting new loans being originated at higher interest rates and adjustable rateadjustable-rate loans repricing higher due to overall higher market interest rates. TheTotal loan originated for investment in fiscal year 2026 was $162.3 million at a weighted average balanceloan rate of loans6.19%, receivablewhile decreasedtotal $18.2loan million,payoffs was $144.1 million at a weighted average rate of 6.54%. The net deferred loan cost amortization was $1.9 million in fiscal year 2026, up $499,000 or 2%,35% from $1.4 million in fiscal year 2025. Total adjustable-rate loans that repriced in fiscal year 2026 was $256.8 million with a weighted average rate increase of 59 basis points to $1.05 billion during fiscal 20256.98% from $1.07 billion during fiscal 2024.6.39%.

Interest income on investment securities decreased $202,000,$245,000, or 10%,29%, to $1.6 million in fiscal year 2026 from $1.9 million in fiscal 2025year from $2.1 million in fiscal 2024,2025, due to a decrease in the average balance, partly offset by an increase in the average yield. The average balance of investment securities decreased $23.1$20.4 million, or 16%,17%, to $101.0 million in fiscal year 2026 from $121.4 million in fiscal year 2025 from $144.5 million in fiscal 2024 mainly as a result of scheduled and accelerated principal payments on mortgage-backed securities. The average yield on investment securities increased 10seven basis points to 1.60% for fiscal year 2026 from 1.53% for fiscal 2025year from 1.43% for fiscal 2024.2025. The increase in the average yield of investment securities was primarily attributable to a lower premium amortization resulting from lower principal payments. The total premium amortization in fiscal 2025year 2026 was $374,000,$249,000, down $158,000,$125,000, or 30%,33%, from $532,000$374,000 in fiscal 2024.year 2025.

During fiscal 2025,year 2026, the Bank received $845,000$1.1 million of cash dividends from the FHLB - San Francisco stock and other equity investments, an increase of $43,000,$245,000, or 5%,29%, from the $802,000$845,000 of cash dividends received in fiscal 2024,year 2025, resulting in an average yield of 10.58% during fiscal year 2026 compared to 8.27% during fiscal 2025year compared2025. The increase in cash dividends was primarily due to 8.35%a during$274,000 fiscalspecial 2024.cash dividend received from the FHLB – San Francisco in February 2026. The average balance of these investments was $10.3 million during fiscal year 2026, up 1% from $10.2 million during fiscal 2025,year up 6% from $9.6 million during fiscal 2024.2025.

Interest income on interest-earning deposits, primarily cash deposited at the FRB of San Francisco, decreased $296,000,$215,000, or 18%,16%, to $1.2 million in fiscal year 2026 from $1.4 million in fiscal 2025year from $1.7 million in fiscal 2024,2025, due primarily to a lower average yield and, to a lesser extent, a lower average balance.yield. The average yield decreased 6977 basis points to 3.92% in fiscal year 2026 from 4.69% in fiscal 2025year from 5.38% in fiscal 2024,2025, resulting from decreases in the targeted federal funds interest rates during fiscal 2025.year 2026. The average balance of interest-earning deposits decreasedincreased $1.6 million,$294,000, or 5%,1%, to $29.3 million in fiscal year 2026 from $29.0 million in fiscal 2025year from $30.6 million in fiscal 2024.2025.

Interest Expense. Total interest expense for fiscal 2025year 2026 was $21.2$19.6 million compared to $19.8$21.2 million for fiscal 2024,year an2025, increasea decrease of $1.4$1.6 million or 7%.8%. This increasedecrease was primarily attributable to a higherlower interest expense on deposits, particularly time deposits,borrowings, partly offset by a lowerhigher interest expense on borrowings.deposits. The average cost of interest-bearing liabilities was 1.93%1.84% during fiscal 2025,year up2026, 19down nine basis points from 1.74%1.93% during fiscal 2024,year while2025 and the average balance of interest-bearing liabilities was $1.10$1.06 billion during fiscal 2025,year 2026, down $39.4$34.2 million, or 3%, from $1.14$1.10 billion during fiscal 2024.year 2025.

Interest expense on borrowings, consisting primarily of FHLB - San Francisco advances, for fiscal 20252026 decreased $212,000,$2.2 million, or 2%,22%, to $9.9$7.7 million as compared to $10.1$9.9 million in fiscal 2024.2025. The decrease in interest expense on borrowings was due to a lower average balance,balance partlyand, offset byto a higherlesser extent, a lower average cost. The average balance of borrowings decreased $5.1$36.3 million, or 2%,17%, to $180.0 million during fiscal 2026 from $216.3 million during fiscal 20252025, from $221.4 million during fiscal 2024 andwhile the average cost of borrowings wasdecreased 4.59% in fiscal 2025, up one29 basis pointpoints to 4.30% from 4.58% in fiscal 2024.4.59%.

Provision for (Recovery of) Credit Losses. During fiscal 2025,2026, the Corporation recorded a net recovery of credit losses of $666,000,$553,000, compared to a net recovery of $63,000$666,000 during fiscal 2024.2025. The increase in the recovery of credit losses in fiscal 20252026 was primarily due to improved qualitative factors related to the single-family residential loans and lower historical loss rates,rates partiallyand offseta byshorter anexpected increaselife of the loans held for investment, reflecting changes in theexpected balance of single-family loans.prepayments.

At June 30, 2025,2026, the ACL on loans held for investment was $6.4$5.9 million, comprised of allallowances for collectively evaluated allowances,loans, down 9% from $7.1$6.4 million at June 30, 2024.2025. The ACL on loans as a percentage of gross loans held for investment was 0.57% at June 30, 2026, compared to 0.62% at June 30, 2025, compared to 0.67% at June 30, 2024.2025. The decrease in the ACL on loans was due primarily to the recovery of credit losses recorded in fiscal 2025.2026 and changes in the composition of the loan portfolio.

Non-Interest Expense.Income. Total non-interest expenseincome was $30.8$3.7 million in fiscal 2025,year 2026, an increase of $2.3 million$195,000 or 8%6% from $28.5$3.5 million in fiscal 2024.year The2025, increase in non-interest expense wasdue primarily attributable to increases in salariesloan servicing and employeeother benefits, equipment expensefees and other non-interest expenses.income.

EquipmentLoan expenseservicing and other fees increased $233,000,$164,000, or 18%,39%, to $1.5 million$583,000 in fiscal 2025year 2026 from $1.3 million$419,000 in fiscal 2024,year 2025, due primarily to higher softwareloan licenseprepayment and maintenance costs.fees.

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 FranciscoFrancisco, and access to the correspondent bank’s federal funds facility. 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. During the fiscal years ended June 30, 20252026 and 2024,2025, the Bank originated loans held for investment of $122.7$162.3 million and $75.5$122.7 million, respectively.respectively, an increase of $39.6 million, or 32%, in fiscal 2026. The Bank did not purchase any loans held for investment from other financial institutions in fiscal 20252026 or 2024.2025. At June 30, 20252026 and 2024,2025, the Bank had loan origination commitments totaling $6.1$11.8 million and $9.4$6.1 million, with undisbursed loan funds of $582,000$0 and $435,000,$582,000, 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, which include both retail and brokered certificates of deposit. During the fiscal year ended June 30, 2025,2026, the netBank’s deposits increased $21.6 million, compared to an increase of $424,000 during fiscal 2025. The increase in deposits during fiscal 2026 was $424,000,primarily comparedattributable to thegrowth netin decreasetime ofdeposits, $62.2particularly millionretail time deposits. On an average balance basis, time deposits increased $33.2 million, or 12%, during fiscal 2024.2026, Onwhile the average balance of retail time deposits increased $37.0 million, or 25%, to $185.5 million. At June 30, 2025,2026, time deposits scheduled to mature in one year or less were $278.3$317.1 million. Historically, the Bank has been able to retain a significant percentage of its time deposits as they mature by adjusting deposit rates based upon the current interest rate environment.

The Bank must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. The Bank generally maintains sufficient cash and cash equivalents to meet short-term liquidity needs. At June 30, 2025,2026, total cash and cash equivalents were $53.1$49.2 million, or 4.3%4.1% of total assets. 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, 2025,2026, the remaining financing availability at the FHLB - San Francisco was $282.3$255.9 million and the remaining available collateral was $364.9$343.6 million. In addition, the Bank has a $142.5$187.5 million discount window facility at the FRB of San Francisco, collateralized by $24.8$18.8 million of investment securities and $227.0$300.4 million of loans held for investment. The Bank also has a federal funds facility with a correspondent bank for $50.0 million which matures on March 31, 2026.2027. As of June 30, 2025,2026, there were no outstanding borrowings under the discount window facility or the federal funds facility with the correspondent bank.facility. The total availableaggregate borrowing capacity acrossavailable allunder sourcesthese facilities was approximately $474.8$493.4 million at June 30, 2025.2026.

Regulations require the Bank to maintain adequate liquidity to assure safe and sound operations. 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, 20252026 decreased to 8.9%7.1% from 16.6%8.9% during the same quarter ended June 30, 2024.2025. The decrease in the liquidity ratio was due primarily to thea decrease in average qualifying liquid assets whichthat exceeded the decrease in average deposits and borrowings during the quarter ended June 30, 20252026 in comparisoncompared to the same quarter endedin June 30, 2024.2025. Despite the decrease,decrease in the liquidity ratio, the Bank continues to maintain sufficient liquidity, supported by borrowing capacity at the FHLB – San Francisco, the FRB of San Francisco, and its correspondent bank, and management believes the current liquidity position is adequate to meet operational needs and regulatory requirements. Management believes that, given these sources and ongoing liquidity management practices, the Bank is well-positioned to meet funding requirements. Management will continue to adjust the balance of liquid assets and funding sources as necessary to maintain adequate liquidity and support the Bank’s operations and lending activities.

Based on our current capital allocation objectives, during fiscal 2026 we projectexpect expenditures ranging from $532,000 to $1.1 million for capital investment in premises and equipment.equipment to range from $335,000 to $1.2 million during fiscal 2027. 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. 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 2025,2026, the Corporation purchased 285,170344,473 shares of the Corporation’s common stock with a weighted average cost of $15.04$16.20 per share. As of June 30, 2025,2026, there are 217,028174,605 shares available for purchase under the Corporation’s existing stock repurchase plan. The Corporation purchases 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. In addition, wethe Corporation currently expectexpects to continue our current practice of paying quarterly cash dividends on ourits common stockstock, subject to ourthe Board of Directors' discretion to modify or terminate thissuch practicedividends at any time and for any reason without prior notice. Our current quarterly common stock dividend rate is $0.14 per share, as approved by our Board of Directors, which wemanagement believe is a dividend rate per share whichbelieves enables usthe Corporation to balance our multipleits objectives of managing and investing in the Bank,Bank and returning a substantial portion of ourits cash flow to our shareholders. Assuming continued payment during fiscal 20262027 at this rate of $0.14 per share, our average total dividend paid each quarter would be approximately $921,000$877,000 based on the number of our current outstanding shares as of June 30, 2025.2026. At June 30, 2025,2026, Provident (on an unconsolidated basis) had liquid assets of approximately $3.4$3.5 million.

The Bank, as a federally-chartered, federally insured savings bank, is subject to the capital requirements established by the OCC. Under the OCC's capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators aboutregarding capital components, risk weighting and other factors. In addition, Provident Financial Holdings, Inc., as a savings and loan holding company registered with the FRB, is required by the FRB to maintain capital adequacy that generally parallels the OCC 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.

Provident Financial Holdings, Inc., a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company of Provident Savings Bank, F.S.B. (the “Bank") upon the Bank’s conversion from a federal mutual to a federal stock savings bank (“Conversion”). The Conversion was completed on June 27, 1996. Provident Financial Holdings, Inc. is regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve”). At DecemberMarch 31, 2025,2026, Provident Financial Holdings, Inc., on a consolidated basis, had total assets of $1.23$1.22 billion, total deposits of $872.4$892.9 million and total stockholders’ equity of $127.5$126.6 million. Provident Financial Holdings, Inc. has not engaged in any significant activity other than holding the stock of the Bank. Accordingly, the information set forth in this report, including financial statements and related data, relates primarily to the Bank and its subsidiaries. As used in this report, the terms “we,” “our,” “us,” and “Corporation” refer to Provident Financial Holdings, Inc. and its consolidated subsidiaries, unless the context indicates otherwise.

The Corporation began paying quarterly cash dividends during the quarter ended September 30, 2002. On OctoberJanuary 23,22, 2025,2026, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.14 per share for shareholders of record as of the close of business on NovemberFebruary 13,12, 2025.2026. This dividend was paid on DecemberMarch 4,5, 2025.2026. Future dividend declarations and payments will be subject to the Board of Directors’ discretion, considering factors such as the Corporation’s financial condition, operational results, tax implications, capital requirements, industry standards, legal restrictions, economic conditions, and other relevant factors, including regulatory limitations that affect the Bank’s ability to pay dividends to the Corporation. Under Delaware law, dividends may be paid from surplus or, in the absence of surplus, from net profits of the current fiscal year and/or the preceding fiscal year in which the dividend is declared.

There are a number of important factors that could cause future results to differ materially from historical performance and those expressexpressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to:

The California economic environment presents heightened risk to the Corporation, particularly with respect to real estate values and loan delinquencies. Because the majority of the Corporation’s loans are secured by real estate located in California, significant declines in California property values could limit the Corporation’s ability to recover on defaulted loans through the sale of the underlying collateral. Within commercial real estate, the office sector continues to face elevated risk, driven by higher vacancy rates, slower leasing activity, and downward pressure on rental rates in certain California markets. These trends may negatively affect collateral values and the repayment capacity of the borrowers. In response, the Bank has evaluated its existing loans collateralized by office space for outsized concentrations and has implemented tighter underwriting standards for such collateral. At DecemberMarch 31, 2025,2026, our commercial real estate portfolio totaled $70.9$69.9 million, including office properties of various types, totaling approximately $36.7$36.1 million or 51.851.6 percent of the total commercial real estate portfolio and 3.5 percent of the total loan portfolio. While current credit performance within the office segment remains satisfactory, management continues to monitor the portfolio closely in light of evolving market conditions.

Comparison of Financial Condition at DecemberMarch 31, 20252026 and June 30, 2025

Total assets decreased onetwo percent to $1.23$1.22 billion at DecemberMarch 31, 20252026 from $1.25 billion at June 30, 2025. The decrease was primarily attributable to decreases in investment securities and loans held for investment.investment and investment securities.

Total cash and cash equivalents, primarily excess cash deposited with the FRB of San Francisco, increased $1.3$4.0 million, or twoeight percent, to $54.4$57.1 million at DecemberMarch 31, 20252026 from $53.1 million at June 30, 2025. The increase was primarily attributable to the changes in its earning assets and funding sources, and reflects management’s proactive strategy to manage liquidity in response to prevailing economic conditions.

Investment securities (held to maturity and available for sale) decreased $10.7$15.7 million, or 1014 percent, to $100.3$95.3 million at DecemberMarch 31, 2025,2026, from $111.0 million at June 30, 2025. The decrease was primarily the result of scheduled and accelerated principal payments on mortgage-backed and other securities during the first sixnine months of fiscal 2026, with no purchases or sales of investment securities during the period. For further analysis on investment securities, see Note 4 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.

Loans held for investment decreased $8.1$16.1 millionmillion, or two percent, to $1.04$1.03 billion at DecemberMarch 31, 20252026 from $1.05 billion at June 30, 2025, predominantly due to a decrease in multi-family loans, partly offset by an increase in single-family loans. During the first sixnine months of fiscal 2026, the Corporation originated $71.8$115.9 million of loans held for investment, consisting primarily of single-family and multi-family loans located throughout California, compared to $65.4$93.3 million originated during the first sixnine months of fiscal 2025. The Corporation did not purchase any loans during the first sixnine months of fiscal 2026 or 2025. Total loan principal payments during the first sixnine months of fiscal 2026 were $81.2$133.2 million, up 1946 percent from $68.4$91.4 million during the comparable period in fiscal 2025, reflecting elevated payoff and amortization activity. Single-family loans held for investment at DecemberMarch 31, 20252026 and June 30, 2025 totaled $553.3$548.4 million and $544.4 million, representing approximately 5453 percent and 52 percent of loans held for investment, respectively. Multi-family loans held for investment at DecemberMarch 31, 20252026 and June 30, 2025 totaled $408.3$407.4 million and $423.4 million, respectively, representing approximately 40 percent and 41 percent of loans held for investment, respectively. Commercial real estate loans held for investment at DecemberMarch 31, 20252026 and June 30, 2025 totaled $70.9$69.9 million and $72.8 million, respectively, each representing approximately seven percent of loans held for investment.

The tables below describe the geographic dispersion of gross real estate secured loans held for investment at DecemberMarch 31, 20252026 and June 30, 2025, as a percentage of the total dollar amount of loans outstanding:

As of DecemberMarch 31, 20252026:

Total deposits decreasedincreased $16.4$4.1 million, or twoless than one percent, to $872.4$892.9 million at DecemberMarch 31, 20252026 from $888.8 million at June 30, 2025, reflecting continued competitive pressures for deposits in the Bank’s market area as customers sought higher-yielding alternatives.

Core deposit balances, consisting of noninterest-bearing and interest-bearing transaction accounts, decreased by $17.7$7.2 million, or threeone percent, to $558.8$569.3 million at DecemberMarch 31, 2025,2026, from $576.5 million at June 30, 2025. Time deposits (including brokered certificates of deposit) increased $1.4$11.3 million to $313.7$323.6 million from $312.3 million over the same period, attributable primarily to an increase in retail time deposits as the Bank actively managed deposit pricing and funding costs. At DecemberMarch 31, 2025,2026, total brokered certificates of deposit were $129.2$134.4 million, downup $1.8$3.4 million, or onethree percent, from $131.0 million at June 30, 2025. Excluding brokered certificates of deposit, retail time deposits represented 21 percent of total deposits at DecemberMarch 31, 2025,2026, compared to 20 percent at June 30, 2025.

Total uninsured deposits were approximately $166.4$194.1 million (of which, $52.6$61.2 million were collateralized) and $158.7 million (of which, $54.0 million were collateralized) at DecemberMarch 31, 20252026 and June 30, 2025, respectively. 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.

Total borrowings remaineddecreased virtually29.0 unchangedmillion, or 14 percent, to $184.1 million at March 31, 2026 from $213.1 million at December 31, 2025 and June 30, 2025. The decrease in borrowings was primarily due to the decreases in loans held for investment and investment securities. At DecemberMarch 31, 20252026 and June 30, 2025, borrowings were primarily comprised of short-term and long-term FHLB - San Francisco advances used for liquidity and interest rate risk management purposes.

Total stockholders’ equity declined $1.0$1.9 million, or onetwo percent, to $127.5$126.6 million at DecemberMarch 31, 2025,2026 from $128.5 million at June 30, 2025. The decrease was primarily due to $1.8$2.7 million of cash dividends paid to shareholders and $2.6$4.1 million of stock repurchases, partly offset by net income of $3.1$4.5 million and the amortization of stock-based compensation of $251,000$370,000 in the first sixnine months of fiscal 2026. The Corporation repurchased 162,967254,499 shares of its common stock in the open market at a weighted average price of $15.78$15.93 per share during the first sixnine months of fiscal 2026 pursuant to its publicly announced stock repurchase program.programs. For further analysis on stock repurchases, see Note 10 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10 Q.10-Q.

Comparison of Operating Results for the Quarters and SixNine Months ended DecemberMarch 31, 20252026 and 20242025

ForNet income for the firstthird six monthsquarter of fiscal 2026, net income2026 was $3.1$1.4 million, updown $345,000$503,000 or 1227 percent from $2.8$1.9 million in the same period of fiscal 2025. The increasedecrease was primarily attributable to a $673,000$326,000 higherprovision for credit losses in contrast to a $391,000 recovery of credit losses in the prior period and a $479,000$194,000 increasedecrease in net interestnon-interest income, partly offset by a $266,000$217,000 increasedecrease in non-interest expense.

The efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, was 80.7777.35 percent for the secondthird quarter of fiscal 2026, ancompared improvementto from 81.1577.64 percent in the same period last year. For the first sixnine months of fiscal 2026, the efficiency ratio was 79.5778.83 percent, compared to 80.1179.26 percent for the same period of fiscal 2025. The improvement of the efficiency ratios during the current quarter and first six months of fiscal 2026 compared to the same periods last year was due to the increase in total income outpacing the increase in non-interest expenses.

Return on average assets was 0.470.45 percent in the secondthird quarter of fiscal 2026, updown 1914 basis points from 0.280.59 percent in the same period last year. For the first sixnine months of fiscal 2026, return on average assets was 0.510.49 percent, updown sixone basis pointspoint from 0.450.50 percent in the same period last year.

Return on average stockholders’ equity was 4.444.21 percent in the secondthird quarter of fiscal 2026, updown from 2.665.71 percent in the same period last year. For the first sixnine months of fiscal 2026, return on average stockholders’ equity was 4.814.61 percent, updown from 4.224.72 percent in the same period last year.

Diluted earnings per share for the secondthird quarter of fiscal 2026 were $0.22,$0.21, updown 6925 percent from $0.13$0.28 in the same period last year. For the first sixnine months of fiscal 2026, diluted earnings per share were $0.47,$0.68, up 15 percentunchanged from $0.41 in the same period last year.

For the Quarters Ended DecemberMarch 31, 20252026 and 2024.2025. Net interest income increaseddecreased $165,000,$49,000, or twoone percent, to $8.9$9.2 million for the secondthird quarter of fiscal 2026 fromas $8.8compared million into the same quarter last year. The increasedecrease was due to a higher net interest margin, partly offset by a lower average balance of interest-earning assets.assets, Thepartly net interest margin during the second quarter of fiscal 2026 increased 12 basis points to 3.03 percent from 2.91 percent in the same quarter last year. The increase was primarily drivenoffset by a higher averagenet yieldinterest on interest-earning assets, which increased seven basis points to 4.73 percent from 4.66 percent, and a lower average cost of interest-bearing liabilities, which decreased five basis points to 1.87 percent from 1.92 percent, with the combined impact reflecting the relative composition of assets and liabilities.margin. The average balance of interest-earning assets decreased $24.5$47.5 million, or twofour percent, to $1.18$1.17 billion in the secondthird quarter of fiscal 2026 from $1.20$1.22 billion in the same quarter last year as the average balance of both investment securities and loans receivable declined, partly offset by an increase in the average balance of interest-earning deposits.declined. Similarly, the average balance of interest-bearing liabilities decreased $23.5$46.3 million, or twofour percent, to $1.07$1.06 billion in the secondthird quarter of fiscal 2026 from $1.09$1.11 billion in the same quarter last year primarily reflecting decreases in the average balance of transaction accountsborrowings and borrowings,transaction accounts, partly offset by an increase in the average balance of time deposits. The net interest margin during the third quarter of fiscal 2026 increased 11 basis points to 3.13 percent from 3.02 percent in the same quarter last year. The increase was primarily driven by a lower average cost of interest-bearing liabilities, which decreased 11 basis points to 1.80 percent from 1.91 percent, while the average yield of interest-earning assets remained at 4.73 percent. The decline in the cost of interest-bearing liabilities was largely attributable to a 41 basis point reduction in the average cost of borrowings, reflecting both lower FHLB advance balances and a declining rate environment, partly offset by a seven basis point increase in the average cost of deposits driven by a shift in mix toward higher-cost time deposits.

For the SixNine Months Ended DecemberMarch 31, 20252026 and 2024.2025. Net interest income increased $479,000$430,000 or threetwo percent to $17.9$27.0 million for the first sixnine months of fiscal 2026 from $17.4$26.6 million in the same period in fiscal 2025, as a result of a higher net interest margin, partly offset by a lower average balance of interest-earning assets. The net interest margin was 3.013.05 percent in the first sixnine months of fiscal 2026, an increase of 1413 basis points from 2.872.92 percent in the same period of fiscal 2025. The weighted-average yield on interest-earning assets increased 10six basis points to 4.744.73 percent in the first sixnine months of fiscal 2026 from 4.644.67 percent in the same period last year, while the weighted-average cost of interest-bearing liabilities decreased fourseven basis points to 1.901.86 percent for the first sixnine months of fiscal 2026 as compared to 1.941.93 percent in the same period last year. The average balance of interest-earning assets decreased $23.8$31.6 million, or twothree percent, to $1.19$1.18 billion in the first sixnine months of fiscal 2026 from $1.21 billion in the comparable period of fiscal 2025, primarily reflecting decreases in the average balance of loansinvestment receivablesecurities and investmentloans securities, partly offset by an increase in interest-earning deposits.receivable. The average balance of interest-bearing liabilities decreased $23.5$31.0 million, or twothree percent, to $1.07 billion in the first sixnine months of fiscal 2026 from $1.10 billion in the same period last year primarily reflecting decreases in the average balance of transaction accountsborrowings and borrowings,transaction accounts, partly offset by an increase in the average balance of time deposits.

For the Quarters Ended DecemberMarch 31, 20252026 and 2024.2025. Total interest income decreasedwas $71,000, or one percent, to $14.0$13.9 million for the secondthird quarter of fiscal 20262026, down $569,000 or four percent from $14.4 million in the same quarterperiod of fiscal 2025. The decrease was due primarily to decreasesthe decrease in interestall incomeinterest-earning fromcategories, investmentexcept securitiesthe FHLB – San Francisco stock and interest-earningother deposits,equity partly offset by an increase in interest income from loans receivable.investments.

Interest income on loans receivable increaseddecreased $22,000$663,000, or five percent, to $13.1$12.7 million in the secondthird quarter of fiscal 2026 from $13.4 million in the same quarter of fiscal 2025. The increasedecrease was due to a higherlower average yield,yield partlyand, offsetto bya lesser extent, a lower average balance. The average yield on loans receivable increaseddecreased three15 basis points to 5.024.91 percent in the secondthird quarter of fiscal 2026 from an average yield of 4.995.06 percent in the same quarter last year. The higherlower average loan yield was due primarily to the upward repricing of adjustable-rate loans, partly offset by an increase in deferred loan cost amortization. Adjustable-rate loans of approximately $111.8 million repriced upward in the second quarter of fiscal 2026 by approximately 23 basis points, from a weighted average rate of 6.74 percent to 6.97 percent. Net deferred loan cost amortization in the secondthird quarter of fiscal 2026 increased 40174 percent to $534,000$656,000 from $381,000$239,000 in the same quarter last year.year, reflecting elevated loan payoff activity. The average balance of loans receivable decreased $5.6$21.9 million, or onetwo percent, to $1.04$1.03 billion in the secondthird quarter of fiscal 2026 from $1.05$1.06 billion in the same quarter last year. Total loans originated for investment in the secondthird quarter of fiscal 2026 were $42.1$44.2 million, up 1658 percent from $36.4$27.9 million in the same quarter last year; while loan principal payments received in the secondthird quarter of fiscal 2026 were $46.7$52.1 million, up 36127 percent from $34.3$23.0 million in the same quarter last year.

Interest income from investment securities decreased $60,000,$64,000, or 1314 percent, to $411,000$395,000 in the secondthird quarter of fiscal 2026 from $471,000$459,000 for the same quarter of fiscal 2025. This decrease was attributable to a lower average balance, partly offset by a higher average yield. The average balance of investment securities decreased $20.5$20.0 million, or 17 percent, to $103.3$98.4 million in the secondthird quarter of fiscal 2026 from $123.8$118.4 million in the same quarter last year. The decrease in the average balance of investment securities was primarily the result of scheduled and accelerated principal payments on mortgage-backed and other securities. The average yield on investment securities increased sevensix basis points to 1.591.61 percent in the secondthird quarter of fiscal 2026 from 1.521.55 percent for the same quarter last year. The increase in the average yield was primarily attributable to a lower premium amortization during($57,000 thecompared currentto quarter$86,000 in comparison to the same quarter last year ($66,000 vs. $97,000) due to lower total principal repayments ($5.1$4.9 million vs. $5.3 million), andwhich resulted in lower amortized purchase premiums and, to a lesser extent, the upward repricing of adjustable-rate mortgage-backed securities.

The Bank received $214,000$488,000 of cash dividends from FHLB – San Francisco stock and other equity investments in the secondthird quarter of fiscal 2026, slightlyup higher$275,000 thanor 129 percent from the $213,000 in the same quarter last year. The averageincrease balancewas ofdue primarily to the $274,000 special cash dividend received from FHLB – San Francisco stock in February 2026, which is not expected to recur at this level. Excluding the special dividend, the average yield on FHLB stock and other equity investments inwould have been approximately 8.35 percent, consistent with the secondprior quarteryear level of fiscal8.30 2026 was $10.3 million, up one percent from $10.2 million in the same quarter of fiscal 2025, while the average yield was 8.34 percent, down four basis points from 8.38 percent.percent..

Interest income from interest-earning deposits, primarily cash deposited at the FRB of San Francisco, was $253,000$272,000 in the secondthird quarter of fiscal 2026, down 12$117,000 or 30 percent from $287,000$389,000 in the same quarter of fiscal 2025. The decrease was due to a lower average yield,yield partly offset byand a higherlower average balance. The average yield earned on interest-earning deposits in the secondthird quarter of fiscal 2026 was 3.923.66 percent, down 8276 basis points from 4.744.42 percent in the same quarter last year, due primarily to decreases in the interest rates paid on excess reserves as the Federal Reserve reduced the federal funds rate. The average balance of interest-earning deposits increaseddecreased $1.6$5.5 million, or seven16 percent, to $25.3$29.7 million in the secondthird quarter of fiscal 2026 from $23.7$35.2 million in the same quarter last year due to management’s proactive strategy to manage liquidity in response to prevailing economic conditions.

For the SixNine Months Ended DecemberMarch 31, 20252026 and 2024.2025. Total interest income was $28.1$42.0 million for the first sixnine months of fiscal 2026, unchangeddown $569,000 or one percent from $42.5 million in the same period of fiscal 2025. The increasedecrease was due to the decrease in interestall incomeinterest-earning oncategories, loansexcept receivablethe wasFHLB offset– bySan decreasesFrancisco in interest income on investment securitiesstock and interest-earningother deposits.equity investments.

Interest income from loans receivable increaseddecreased $130,000$533,000 to $26.2$38.9 million in the first sixnine months of fiscal 2026 from $26.1$39.4 million for the same period of fiscal 2025. The increasedecrease was due to a higher average yield, partly offset by a lower average balance.balance, Thewhile the weighted average yield onremained loans receivable increased six basis points to 5.04 percent during the first six months of fiscal 2026 from 4.98 percent in the same period last year. The increase in the average yield on loans receivable was primarily attributable to loans repricing upward and new loan originations with a higher average yield, partly offset by an increase in net deferred loan cost amortization to $874,000 in the first six months of fiscal 2026 from $736,000 in the same period of fiscal 2025. Adjustable-rate loans of approximately $232.1 million repriced upward in the first six months of fiscal 2026 by approximately 24 basis points from an average yield of 6.92 percent to 7.16 percent.unchanged. The average balance of loans receivable decreased by $7.6$12.3 million, or one percent, to $1.04 billion for the first sixnine months of fiscal 2026 from $1.05 billion in the same period of fiscal 2025. Total loans originated for investment in the first sixnine months of fiscal 2026 were $71.8$115.9 million, up 1024 percent from $65.4$93.3 million in the same period last year. Loan principal payments received in the first sixnine months of fiscal 2026 were $81.2$133.2 million, up 1946 percent from $68.4$91.4 million in the same period last year. The average yield on loans receivable was unchanged at 5.00 percent during the first nine months of fiscal 2026 as compared to the same period last year. The interest rates on loans receivable that were repriced upward were virtually offset by an increase in net deferred loan cost amortization to $1.5 million in the first nine months of fiscal 2026 from $975,000 in the same period of fiscal 2025. Adjustable-rate loans of approximately $349.2 million repriced upward in the first nine months of fiscal 2026 by approximately 15 basis points to an average yield of 7.08 percent from 6.93 percent.

Interest income from investment securities decreased $112,000,$176,000, or 12 percent, to $841,000$1.2 million in the first sixnine months of fiscal 2026 from $953,000$1.4 million for the same period of fiscal 2025. This decrease was attributable to a lower average balance, partly offset by a higher average yield. The average balance of investment securities decreased $20.7$20.5 million, or 1617 percent, to $106.0$103.5 million in the first sixnine months of fiscal 2026 from $126.7$124.0 million in the same period of fiscal 2025. The decrease in the average balance of investment securities was primarily the result of scheduled and accelerated principal payments on mortgage-backed securities. The average yield on investment securities increased nineseven basis points to 1.59 percent in the first sixnine months of fiscal 2026 from 1.501.52 percent in the same period of fiscal 2025. The increase in the average yield was primarily attributable to lower premium amortization ($140,000$197,000 compared to $208,000$294,000 in the same period last year) attributable to lower principal repayments ($10.6$15.5 million vs. $11.1$16.3 million) which resulted in lower amortized purchase premiums and, to a lesser extent, the upward repricing of adjustable-rate mortgage-backed securities.

Cash dividends from FHLB – San Francisco stock and other equity investments received in the first sixnine months of fiscal 2026 were $425,000,$913,000, up $2,000$277,000 from $423,000$636,000 in the same period of fiscal 2025. The averageincrease balancewas ofdue primarily to the $274,000 special cash dividend received from FHLB – San Francisco stock in February 2026, which is not expected to recur at this level. Excluding the special dividend, the average yield on FHLB stock and other equity investments inwould have been approximately 8.30 percent, consistent with the firstprior sixyear monthslevel of fiscal 2026 was $10.3 million, up one percent from $10.1 million in the same period of fiscal 2025, and the average yield was 8.27 percent, down seven basis points from 8.348.33 percent.

Interest income from interest-earning deposits, primarily cash deposited at the FRB of San Francisco, was $627,000$899,000 in the first sixnine months of fiscal 2026, down three$137,000 or 13 percent from $647,000$1.0 million in the same period of fiscal 2025. The decrease was due to a lower average yield, partly offset by a higher average balance. The average yield earned on interest-earning deposits decreased 8979 basis points to 4.174.00 percent in the first sixnine months of fiscal 2026 from 5.064.79 percent in the comparable period last year, due primarily to decreases in the interest rates paid on excess reserves. The average balance of the interest-earning deposits in the first sixnine months of fiscal 2026 was $29.4$29.5 million, up 18$1.1 million or four percent, from $25.0$28.4 million in the same period of fiscal 2025 due to management’s proactive strategy to manage liquidity in response to prevailing economic conditions.

For the Quarters Ended DecemberMarch 31, 20252026 and 2024.2025. Total interest expense decreased $236,000$520,000 or four10 percent to $5.0$4.7 million in the secondthird quarter of fiscal 2026 as compared to $5.3$5.2 million in the same quarter last year. The decrease was attributable to a lower interest expense on borrowings, partly offset by a higher interest expense on deposits.

Interest expense on deposits for the secondthird quarter of fiscal 2026 was $2.9 million, a $251,000$136,000 or ninefive percent increase compared to $2.7 million in the same quarter last year. The increase was attributable to a higher average balancecost and,of todeposits, partly offset by a lesserslightly extent,lower aaverage higherbalance. The average cost of deposits.deposits was 1.33 percent for the third quarter of fiscal 2026, up seven basis points from 1.26 percent in the same quarter last year, primarily due to a shift in deposit mix towards higher-cost time deposits, partially offset by a decline in the average rate paid on time deposits to 3.36 percent from 3.62 percent in the same quarter last year. The decline in time deposit rates reflects the Bank’s active management of deposit pricing in response to the declining rate environment, as maturing higher-rate certificates of deposit were renewed or replaced at lower prevailing market rates. The average balance of time deposits accounted for 36 percent of total average deposits in the third quarter of fiscal 2026, compared to 33 percent in the same quarter last year. The average balance of deposits increaseddecreased $13.3 million, or two percent,slightly to $876.4$881.5 million in the secondthird quarter of fiscal 2026 from $863.1$885.0 million in the same quarter last year due to decreases in transaction accounts, partly offset by an increase in time deposits, partly offset by decreases in transaction accounts.deposits. The average balance of time deposits (including brokered certificates of deposit) increased $46.8$26.1 million, or 18nine percent, to $309.7$314.5 million in the secondthird quarter of fiscal 2026 from $262.9$288.4 million in the same quarter last year, while the average balance of transaction accounts was $566.6$566.9 million in the secondthird quarter of fiscal 2026, down $33.6$29.8 million, or sixfive percent, from $600.2$596.7 million in the same quarter last year. The average cost of deposits was 1.32 percent for the second quarter of fiscal 2026, up nine basis points from 1.23 percent in the same quarter last year, primarily due to a shift in deposit mix toward higher-cost time deposits, partially offset by a decline in the average rate paid on time deposits. Time deposits accounted for 35 percent of total deposits in the second quarter of fiscal 2026, compared to 30 percent in the same quarter last year.

Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the secondthird quarter of fiscal 2026 decreased $487,000,$656,000, or 1927 percent, to $2.1$1.8 million from $2.6$2.5 million in the same quarter last year. The decrease was primarily the result of a lower average balance and, to a lesser extent, a lower average cost of borrowings. The reduction in the average balance of FHLB advances is consistent with the decrease in the loan and investment securities portfolios during the period, which reduced the Corporation’s overall funding requirements. The average balance of borrowings decreased $36.7$42.8 million or 1619 percent to $190.0$179.0 million in the secondthird quarter of fiscal 2026 from $226.7$221.8 million in the same quarter last year. The average cost of borrowings decreased 1441 basis points to 4.394.11 percent in the secondthird quarter of fiscal 2026 from 4.534.52 percent in the same quarter last year.year, reflecting the declining interest rate environment and the maturation and replacement of higher-rate advances at lower prevailing market rates.

For the SixNine Months Ended DecemberMarch 31, 20252026 and 2024.2025. Total interest expense decreased $479,000,$999,000, or foursix percent to $10.2$14.9 million in the first sixnine months of fiscal 2026 from $10.7$15.9 million in the same period last year. The decrease was attributable to a lower interest expense on borrowings, partly offset by a higher interest expense on deposits.

Interest expense on deposits for the first sixnine months of fiscal 2026 was $5.9$8.8 million, ana eightseven percent increase from $5.5$8.2 million for the same period last year. The increase was attributable to a higher average balance and, to a lesser extent, a higher average cost of deposits. The average balance of deposits increased $8.9 million or one percent to $880.7 million in the first six months of fiscal 2026 from $871.8 million in the same period last year due primarily to an increase of $44.6 million in the average balance of time deposits, partly offset by a decrease of $35.7 million in the average balance of transaction accounts. The average cost of deposits was 1.33 percent, up eight basis points from 1.25 percent in the same period last year, primarily due to a shift in deposit mix towardtowards higher-cost time deposits,deposits partiallyand offsethigher bycost aof declinesavings indeposits. theThe average ratebalance paid onof time deposits. Time deposits accounted for 35 percent of total average deposits in the first sixnine months of fiscal 2026, compared to 3031 percent in the same period last year. The average balance of deposits increased $4.7 million or one percent to $880.9 million in the first nine months of fiscal 2026 from $876.2 million in the same period last year due primarily to an increase of $38.5 million in the average balance of time deposits, partly offset by a decrease of $33.8 million in the average balance of transaction accounts.

Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the first sixnine months of fiscal 2026 decreased $892,000,$1.6 million, or 1720 percent, to $4.3$6.1 million from $5.2$7.7 million in the same period last year. The decrease was primarily the result of a lower average balance and, to a lesser extent, a lower average cost.cost, consistent with the reduction in the loan and investment securities portfolios during the period, which reduced the Corporation’s overall funding requirements. The average balance of borrowings decreased by $32.3$35.8 million or 1416 percent to $191.4$187.3 million in the first sixnine months of fiscal 2026 from $223.7$223.1 million in the same period last year and the average cost of borrowings decreased 1422 basis points to 4.494.37 percent in the first sixnine months of fiscal 2026 from 4.634.59 percent in the same period last year.year, reflecting the declining interest rate environment and the maturity and replacement of higher-rate advances at lower prevailing market rates.

The following table sets forth the effects of changing rates and volumes on interest income and expense for the quarters and sixnine months ended DecemberMarch 31, 20252026 and 2024.2025. 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.

For the Quarters Ended DecemberMarch 31, 20252026 and 2024.2025. During the secondthird quarter of fiscal 2026, the Corporation recorded a recoveryprovision offor credit losses of $158,000$326,000 in contrast to a $586,000$391,000 provisionrecovery forof credit losses recorded during the same period last year. The recovery compared to the same quarter last yearprovision was primarily due to the impact of a shorterlonger expected average life of the loan portfolio, attributable to decliningincreasing mortgage rates,rates during the period, which increaseddecreased expected loan prepayments. The recoveryprovision was primarily concentrated in single-family mortgage loans,loans. withThis acompared smallerto contributionthe fromrecovery multi-familyin mortgagethe loans.same quarter of fiscal 2025 that was primarily due to an improvement in single-family residential qualitative factors.

The following chart quantifies the factors contributing to the changes in the ACL on loans held for investment (“LHFI”) for the quarters ended DecemberMarch 31, 20252026 and 2024.2025.

The changes in the ACL on LHFI for the quarter ended DecemberMarch 31, 20252026:

The changes in the ACL on LHFI for the quarter ended DecemberMarch 31, 20242025:

For the SixNine Months Ended DecemberMarch 31, 20252026 and 2024.2025. During the first sixnine months of fiscal 2026, the Corporation recorded a recovery of credit losses of $784,000,$458,000, compared to a recovery of credit losses of $111,000$502,000 in the same period of fiscal 2025. The higher recovery compared toin the samefirst periodnine lastmonths yearof fiscal 2026 was primarily due to the impact of a shorter expected average life of the loan portfolio, attributable to decliningdecreasing mortgage rates,rates during the period, which increased expected loan prepayments. The recovery in the the first nine months of fiscal 2026 was primarily concentrated in single-family mortgageloans. loans,This withcompared ato smallerthe contributionrecovery fromin multi-familythe mortgagesame loans.period of fiscal 2025 that was primarily due to an improvement in single-family residential qualitative factors.

The following chart quantifies the factors contributing to the changes in the ACL on loans held for investment (“LHFI”) for the sixnine months ended DecemberMarch 31, 20252026 and 2024.2025.

The changes in the ACL on LHFI for the sixnine months ended DecemberMarch 31, 20252026:

The changes in the ACL on LHFI for the sixnine months ended DecemberMarch 31, 20242025:

At DecemberMarch 31, 2025,2026, the ACL on loans held for investment was $5.6$5.9 million, all of which was comprised of collectively evaluated allowances. This represents aan 12eight percent decrease from the ACL on loans held for investment of $6.4 million at June 30, 2025, which was also entirely comprised of collectively evaluated allowances. The ACL on loans as a percentage of gross loans held for investment was 0.550.58 percent at DecemberMarch 31, 2025,2026, down from 0.62 percent at June 30, 2025.

Management believes the ACL on loans is sufficient to absorb expected losses in loans held for investment as of DecemberMarch 31, 2025,2026, and continues to monitor economic conditions, borrower credit quality, and prepayment activity, which could impact the allowance in future periods. See “Asset Quality” below and Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding the ACL on LHFI.

For the Quarters Ended DecemberMarch 31, 20252026 and 2024.2025. Non-interest income increaseddecreased by $72,000,$194,000, or nine21 percent, to $917,000$713,000 in the secondthird quarter of fiscal 2026 from $845,000$907,000 in the same period last year, due primarily to a $116,000,$168,000, or 19382 percent, increase in loan servicing and other fees due to higher loan prepayment fees, partly offset by modest decrease in eachother non-interest income resulting primarily from a decrease in unrealized gain of the other categoriesequity of non-interest income.investments.

For the SixNine Months Ended DecemberMarch 31, 20252026 and 2024.2025. Non-interest income decreased $14,000,$208,000, or oneeight percent, to $1.7$2.4 million in the first sixnine months of fiscal 2026 from $2.7 million in the same period last year, due primarily to decreasesa decrease in deposit account fees, card and processing fees and other non-interest income, partly offset by an increase in loan servicing and other fees. Other non-interest income decreased $98,000,$266,000, or 2646 percent, to $282,000$319,000 in the first sixnine months of fiscal 2026, dueattributable primarily to a $9,000 unrealized loss on other equity investmentsdecrease in contrast to a $110,000 unrealized gain on other equity investmentsinvestments. Loan servicing and other fees increased $148,000, or 49 percent, to $447,000 in the samefirst periodnine lastmonths year.of fiscal 2026, attributable primarily to higher loan prepayment fees resulting from higher loan payoffs.

For the Quarters Ended DecemberMarch 31, 20252026 and 2024.2025. Non-interest expense increaseddecreased $155,000,$217,000, or twothree percent, to $7.9$7.6 million in the secondthird quarter of fiscal 2026 from $7.8$7.9 million forin the same quarter last year. The increase wasyear, primarily due to increasesa decrease in other non-interest expense andattributable equipment expense, partly offset byto a decreasenon-recurring $239,000 litigation settlement expense recorded in premisesthe andthird occupancyquarter expenses.of fiscal 2025.

For the SixNine Months Ended DecemberMarch 31, 20252026 and 2024.2025. Non-interest expenses increased $266,000,$49,000, or twoless than one percent, to $15.6$23.2 million in the first sixnine months of fiscal 2026 from $15.3 million in the same period last year. The increase was primarily due to increases in salaries and employee benefits expense and equipment expense, partly offset by decreases in premises and occupancy expense, professional expense, sales and marketing expense, deposit insurance and regulatory assessment expense and other non-interest expenses.expense.