Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ ✓ ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
December 31, 2025
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File Number 000-28304
PROVIDENT FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
33-0704889
(State or other jurisdiction ofincorporation or organization)
(I.R.S. EmployerIdentification No.)
3756 Central Avenue, Riverside, California 92506
(Address of principal executive offices and zip code)
(951) 686-6060
(Registrant’s telephone number, including area code)
_________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.01 per share
PROV
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ⌧ Yes ◻ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧ Yes ◻ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ◻
Accelerated filer ◻
Non-accelerated filer ⌧
Smaller reporting company ⌧
Emerging growth company ◻
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
◻ Yes ⌧ No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of January 31, 2026, there were 6,375,020 shares of the registrant's common stock, $0.01 par value per share, outstanding.
PART 1 -
FINANCIAL INFORMATION
Page
ITEM 1 -
Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements ofProvident Financial Holdings, Inc. filed as a part of the report are as follows:
Condensed Consolidated Statements of Financial Conditionas of December 31, 2025 and June 30, 2025
1
Condensed Consolidated Statements of Operationsfor the Quarters and Six Months ended December 31, 2025 and 2024
2
Condensed Consolidated Statements of Comprehensive Incomefor the Quarters and Six Months ended December 31, 2025 and 2024
3
Condensed Consolidated Statements of Stockholders’ Equityfor the Quarters and Six Months ended December 31, 2025 and 2024
4
Condensed Consolidated Statements of Cash Flowsfor the Six Months ended December 31, 2025 and 2024
6
Notes to Unaudited Interim Condensed Consolidated Financial Statements
7
ITEM 2 -
Management’s Discussion and Analysis of Financial Condition and Results of Operations:
General
43
Safe-Harbor Statement
Critical Accounting Estimates
45
Executive Summary and Operating Strategy
Commitments and Derivative Financial Instruments
46
Comparison of Financial Condition at December 31, 2025 and June 30, 2025
Comparison of Operating Results for the Quarters and Six Months ended December 31, 2025 and 2024
48
Asset Quality
58
Loan Volume Activities
60
Liquidity and Capital Resources
Supplemental Information
62
ITEM 3 -
Quantitative and Qualitative Disclosures about Market Risk
ITEM 4 -
Controls and Procedures
67
PART II -
OTHER INFORMATION
Legal Proceedings
ITEM 1A -
Risk Factors
68
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
ITEM 5 -
Other Information
ITEM 6 -
Exhibits
69
SIGNATURES
70
Condensed Consolidated Statements of Financial Condition
(Unaudited)
In Thousands, Except Share and Per Share Information
December 31,
June 30,
2025
Assets
Cash and cash equivalents
$
54,370
53,090
Investment securities - held to maturity, at cost with no allowance for credit losses
98,899
109,399
Investment securities - available for sale, at fair value
1,404
1,607
Loans held for investment, net of allowance for credit losses of $5.6 million and $6.4 million, respectively; includes $1.0 million and $1.0 million of loans held at fair value, respectively; $642.3 million and $734.4 million pledged to Federal Home Loan Bank ("FHLB") - San Francisco, respectively; $310.0 million and $227.0 million pledged to Federal Reserve Bank ("FRB") - San Francisco, respectively
1,037,655
1,045,745
Accrued interest receivable
4,106
4,215
FHLB - San Francisco stock and other equity investments, includes $721 and $730 of other equity investments at fair value, respectively
10,289
10,298
Premises and equipment, net
9,836
9,324
Prepaid expenses and other assets
11,333
11,935
Total assets
1,227,892
1,245,613
Liabilities and Stockholders’ Equity
Liabilities:
Noninterest-bearing deposits
75,316
83,566
Interest-bearing deposits
797,118
805,206
Total deposits
872,434
888,772
Borrowings
213,060
213,073
Accounts payable, accrued interest and other liabilities
14,907
15,223
Total liabilities
1,100,401
1,117,068
Commitments and Contingencies (Notes 6 and 9)
Stockholders’ equity:
Preferred stock, $0.01 par value (2,000,000 shares authorized; none issued and outstanding)
—
Common stock, $0.01 par value, (40,000,000 and 40,000,000 shares authorized, 18,229,615 and 18,229,615 shares issued, and 6,414,751 and 6,577,718 shares outstanding, respectively)
183
Additional paid-in capital
99,434
99,149
Retained earnings
213,693
212,403
Treasury stock at cost (11,814,864 and 11,651,897 shares, respectively)
(185,836)
(183,207)
Accumulated other comprehensive income, net of tax
17
Total stockholders’ equity
127,491
128,545
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statements of Operations
In Thousands, Except Per Share Information
Quarter Ended
Six Months Ended
2024
Interest income:
Loans receivable, net
13,072
13,050
26,203
26,073
Investment securities
411
471
841
953
FHLB - San Francisco stock and other equity investments
214
213
425
423
Interest-earning deposits
253
287
627
647
Total interest income
13,950
14,021
28,096
Interest expense:
Checking and money market deposits
56
51
107
104
Savings deposits
197
117
368
229
Time deposits
2,672
2,506
5,436
5,165
2,101
2,588
4,331
5,223
Total interest expense
5,026
5,262
10,242
10,721
Net interest income
8,924
8,759
17,854
17,375
(Recovery of) provision for credit losses
(158)
586
(784)
(111)
Net interest income, after (recovery of) provision for credit losses
9,082
8,173
18,638
17,486
Non-interest income:
Loan servicing and other fees
176
322
164
Deposit account fees
273
282
538
580
Card and processing fees
286
300
588
620
Other
182
203
380
Total non-interest income
917
845
1,730
1,744
Non-interest expense:
Salaries and employee benefits
4,783
4,826
9,553
9,459
Premises and occupancy
851
1,798
1,868
Equipment
479
379
885
722
Professional
442
412
856
838
Sales and marketing
158
187
306
360
Deposit insurance premium and regulatory assessments
177
190
342
373
1,059
883
1,843
1,697
Total non-interest expense
7,949
7,794
15,583
15,317
Income before income taxes
2,050
1,224
4,785
3,913
Provision for income taxes
614
352
1,668
1,141
Net income
1,436
872
3,117
2,772
Basic earnings per share
0.22
0.13
0.48
0.41
Diluted earnings per share
0.47
Condensed Consolidated Statements of Comprehensive Income
In Thousands
For the Quarter Ended
For the Six Months Ended
Change in unrealized holding (loss) income on securities available for sale and interest-only strips
(1)
26
Income tax expense
(8)
Other comprehensive (loss) income
18
Total comprehensive income
1,435
873
2,790
Condensed Consolidated Statements of Stockholders' Equity
For the Quarters Ended December 31, 2025 and 2024:
Accumulated
Common
Additional
Comprehensive
Stock
Paid-In
Retained
Treasury
Income (Loss),
Shares
Amount
Capital
Earnings
Net of Tax
Total
Balance at September 30, 2025
6,511,011
99,306
213,163
(184,300)
128,370
Other comprehensive loss
Purchase of treasury stock
(96,260)
(1,536)
Amortization of restricted stock
102
Stock options expense
Cash dividends(1)
(906)
Balance at December 31, 2025
6,414,751
Income,
Balance at September 30, 2024
6,769,247
98,711
210,853
(180,155)
14
129,606
Other comprehensive income
(63,556)
(1,030)
Awards of restricted stock
(91)
91
111
16
(946)
Balance at December 31, 2024
6,705,691
98,747
210,779
(181,094)
15
128,630
For the Six Months Ended December 31, 2025 and 2024:
Balance at June 30, 2025
6,577,718
(162,967)
(2,595)
Forfeiture of restricted stock
34
(34)
205
(1,827)
(Loss) Income,
Balance at June 30, 2024
6,847,821
98,532
209,914
(178,685)
(3)
129,941
Purchase of treasury stock(1)
(165,955)
(2,494)
Distribution of restricted stock
23,825
(6)
266
Cash dividends(2)
(1,907)
5
Condensed Consolidated Statements of Cash Flows
(Unaudited - In Thousands)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities :
Depreciation and amortization
1,832
1,816
Recovery of credit losses
Net unrealized loss (gain) on other equity investments
9
(110)
Stock-based compensation
251
Provision for deferred income taxes
124
351
Decrease in accounts payable, accrued interest and other liabilities
(1,512)
(1,992)
Decrease (increase) in prepaid expenses and other assets
678
(143)
Net cash provided by operating activities
3,715
2,883
Cash flows from investing activities:
Net decrease (increase) in loans held for investment
8,006
(1,251)
Principal payments from investment securities - held to maturity
10,363
10,956
Principal payments from investment securities - available for sale
202
125
Purchase of premises and equipment
(231)
(188)
Net cash provided by investing activities
18,340
9,642
Cash flows from financing activities:
Net decrease in deposits
(16,338)
(20,833)
Proceeds from long-term borrowings
54,000
62,000
Repayments of long-term borrowings
(46,015)
(20,000)
Repayments of short-term borrowings, net
(8,000)
(35,000)
Treasury stock purchases
Withholding taxes on stock-based compensation
(128)
Cash dividends
Net cash used for financing activities
(20,775)
(18,362)
Net increase (decrease) in cash and cash equivalents
1,280
(5,837)
Cash and cash equivalents at beginning of period
51,376
Cash and cash equivalents at end of period
45,539
Supplemental information:
Cash paid for interest
10,751
11,340
Cash paid for income taxes
1,331
Note 1: Basis of Presentation
The unaudited interim condensed consolidated financial statements included herein reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations for the interim periods presented. All such adjustments are of a normal, recurring nature. The condensed consolidated statement of financial condition at June 30, 2025 is derived from the audited consolidated financial statements of Provident Financial Holdings, Inc. and its wholly-owned subsidiary, Provident Savings Bank, F.S.B. (the "Bank") (collectively, the "Corporation"). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") with respect to interim financial reporting. It is recommended that these unaudited interim condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (“2025 Annual Form 10-K”). The results of operations for the quarter and six months ended December 31, 2025 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2026.
Note 2: Accounting Standard Updates (“ASU”)
ASU 2025-08:
In November 2025, the Financial Accounting Standards Board (“FASB”) issued ASU 2025-08 to update ASC 326: Financial Instruments – Credit Losses to address concerns regarding complexity and lack of comparability in the accounting for purchased loans under the current credit loss standard (Topic 326). This ASU removes the previous distinction in accounting between purchased credit-deteriorated (“PCD”) assets and non-PCD assets by applying the gross-up accounting method; formerly used only for PCD assets, to most acquired loans. These loans will now be designated as purchased seasoned loans (“PSLs”). This change eliminates the Day-1 credit loss expense on PSLs, which the industry considered a double-count of expected losses on acquired performing loans, by recognizing expected credit losses at acquisition without immediate impact to earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. If an entity adopts the amendments in an interim reporting period, it should apply the amendments as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period. The Corporation is in the process of reviewing the impact of this ASU and has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.
ASU 2024-03:
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU 2024-03 requires public business entities (“PBEs”) to disclose disaggregated information about specific natural expense categories underlying certain income statement expense line items that are considered relevant expense captions because they include one or more of the five natural expense categories identified in this ASU. Such disclosures must be made on an annual and interim basis in a tabular format in the footnotes to the financial statements. The ASU requires entities to disaggregate any relevant expense caption presented on the face of the income statement within continuing operations into the following required natural expense categories, as applicable: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion and amortization recognized as part of oil- and gas-producing activities or other depletion expenses. This ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This ASU is effective for all PBEs for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Corporation is in the process of reviewing the impact of this ASU and has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.
ASU 2023-09:
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires PBEs to annually (a) disclose specific categories in the rate reconciliation and (b) provide additional information for reconciling items that meet a quantitative threshold of equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Corporation is in the process of reviewing the impact of this ASU and has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.
Note 3: Earnings Per Share
Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the earnings of the Corporation.
As of December 31, 2025 and 2024, there were outstanding stock options to purchase 229,000 shares and 223,000 shares of the Corporation’s common stock, respectively. As of December 31, 2025 and 2024, there were 89,000 and 95,000 outstanding stock options, respectively, excluded from the diluted EPS computation as their effect was anti-dilutive. As of
8
December 31, 2025 and 2024, there were outstanding restricted stock awards of 140,900 shares and 162,200 shares, respectively.
The following table provides the basic and diluted EPS computations for the quarters and six months ended December 31, 2025 and 2024, respectively.
(In Thousands, Except Earnings Per Share)
Numerator:
Net income – numerator for basic earnings per share and
diluted earnings per share - available to common
stockholders
Denominator:
Denominator for basic earnings per share:
Weighted-average shares
6,462
6,745
6,514
6,789
Less effect of dilutive shares:
Stock options
12
13
10
Restricted stock
57
35
54
33
Denominator for diluted earnings per share:
Adjusted weighted-average shares and assumed
conversions
6,531
6,793
6,578
6,828
Note 4: Investment Securities
The amortized cost and estimated fair value of investment securities as of December 31, 2025 and June 30, 2025 were as follows:
Gross
Estimated
Amortized
Unrealized
Fair
Carrying
Cost
Gains
(Losses)
Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS(1)
94,281
144
(8,197)
86,228
U.S. government sponsored enterprise CMO(2)
4,404
(56)
4,366
U.S. SBA securities(3)
(2)
212
Total investment securities - held to maturity
162
(8,255)
90,806
Available for sale
U.S. government agency MBS(1)
932
11
943
378
387
Private issue CMO(2)
74
Total investment securities - available for sale
1,384
20
Total investment securities
100,283
92,210
100,303
June 30, 2025
U.S. government sponsored enterprise MBS
104,549
127
(10,305)
94,371
U.S. government sponsored enterprise CMO
4,525
(108)
4,431
U.S. SBA securities
325
324
141
(10,414)
99,126
U.S. government agency MBS
1,072
1,082
436
446
Private issue CMO
79
1,587
110,986
161
100,733
111,006
In the second quarter of fiscal 2026 and 2025, the Corporation received MBS principal payments of $5.1 million and $5.3 million, respectively, and there were no purchases or sales of investment securities during both periods.
For the first six months of fiscal 2026 and 2025, the Corporation received MBS principal payments of $10.6 million and $11.1 million, respectively, and there were no purchases or sales of investment securities during these periods.
The Corporation held investments with an unrealized loss position of $8.3 million at December 31, 2025 and $10.4 million at June 30, 2025 as follows:
As of December 31, 2025
Unrealized Holding Losses
Less Than 12 Months
12 Months or More
Description of Securities
Losses
82,396
8,197
3,365
85,973
8,255
U.S government agency MBS
31
44
29
86,002
86,033
As of June 30, 2025
90,022
10,305
3,435
108
93,457
10,413
93,781
10,414
37
50
30
361
93,487
93,848
On a quarterly basis, the Corporation evaluates the allowance for credit losses for its investment securities held to maturity and the credit losses for its investment securities held for sale based on Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses.” At December 31, 2025, all of the $8.3 million of unrealized holding losses were in a loss position for 12 months or more; while at June 30, 2025, all $10.4 million of unrealized holding losses were in a loss position for 12 months or more, except $1,000 of unrealized holding losses that were in a loss position for less than 12 months. The unrealized losses on investment securities were attributable to changes in interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities, which are predominately U.S. government sponsored enterprise securities that are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. Therefore, the Corporation has determined that the unrealized losses are due to the fluctuating nature of interest rates, and not related to any potential credit risks within the investment portfolio. The Bank does not currently intend to sell any investment securities classified as held to maturity recorded at amortized cost or available for sale recorded at fair market value as prescribed by GAAP. As part of the Corporation’s monthly risk assessment, the Corporation prepares a number of stressed liquidity scenarios to determine if it is more likely than not that the Bank will be required to sell the investment securities before the recovery of its amortized cost basis. The results of these liquidity scenarios support the Corporation’s assessment that the Corporation has the ability to hold these held to maturity securities until maturity or available for sale securities until recovery of the amortized cost is realized and it is not more likely than not that the Corporation will be required to sell the securities prior to recovery of the amortized cost. There was no allowance for credit losses (“ACL”) on investment securities held to maturity and there was no impairment of investment securities available for sale at December 31, 2025 and June 30, 2025.
In order to maintain adequate liquidity, the Bank has established borrowing facilities with various counterparties. As of December 31, 2025, the Bank had a remaining borrowing capacity of $213.1 million at the FHLB of San Francisco and an estimated $193.3 million discount window facility at the FRB of San Francisco. In addition, the Bank also has an unsecured borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under the Federal Reserve discount window or correspondent bank facility as of December 31, 2025. The total remaining available borrowing capacity across all sources totaled approximately $456.4 million at December 31, 2025.
At June 30, 2025, the Bank had a remaining borrowing capacity of $282.3 million at the FHLB of San Francisco and an estimated $142.5 million discount window facility at the FRB of San Francisco. In addition, the Bank also had an unsecured borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under the Federal Reserve discount window or the correspondent bank facility as of June 30, 2025. The total remaining available borrowing capacity across all sources totaled approximately $474.8 million at June 30, 2025.
Contractual maturities of investment securities as of December 31, 2025 and June 30, 2025 were as follows:
Due in one year or less
152
150
Due after one through five years
17,682
16,951
4,921
4,760
Due after five through ten years
49,505
45,779
40,773
38,224
Due after ten years
31,560
27,926
63,636
56,074
1,288
1,307
1,483
1,501
96
97
106
Note 5: Loans Held for Investment
Loans held for investment, net of fair value adjustments, consisted of the following:
Mortgage loans:
Single-family
553,311
544,425
Multi-family
408,289
423,417
Commercial real estate
70,942
72,766
Construction
812
402
88
89
Commercial business loans
22
1,267
Consumer loans
Total loans held for investment, gross
1,033,522
1,042,423
Advance payments of escrows
196
293
Deferred loan costs, net
9,571
9,453
ACL on loans
(5,634)
(6,424)
Total loans held for investment, net
The following table sets forth information at December 31, 2025 regarding the dollar amount of loans held for investment that are contractually repricing during the periods indicated, segregated between adjustable rate loans and fixed rate loans. At both December 31, 2025 and June 30, 2025, fixed rate loans comprised 10 percent of loans held for investment. Adjustable rate loans that reprice when the index they are tied to reprices (e.g. prime rate index) and checking account overdrafts are reported as repricing within one year. The table does not include any estimate of prepayments which may cause the Corporation’s actual repricing experience to differ materially from that shown.
Adjustable Rate
After
Within
One Year
3 Years
5 Years
Through 3 Years
Through 5 Years
Through 10 Years
Fixed Rate
51,057
74,378
122,473
200,087
105,316
220,982
122,349
61,380
3,488
90
27,461
34,266
8,849
366
300,370
230,993
192,702
203,575
105,882
The following tables present the Corporation’s commercial real estate loans by property types and loan-to-value ( “LTV”) ratio as of December 31, 2025 and June 30, 2025:
Owner
Non-Owner
% of Total
Weighted
Occupied Loan
Commercial
Average
(Dollars in Thousands)
Balance
Real Estate
LTV (1)
Office
5,226
18,537
23,763
%
39
Mixed use (2)
272
15,410
15,682
Retail
8,333
Warehouse
1,312
7,175
8,487
Medical/dental office
2,485
3,782
6,267
41
Mobile home park
6,678
Restaurant/fast food
675
491
1,166
Automotive - non gasoline
566
Total commercial real estate
9,970
60,972
100
36
5,666
19,895
25,561
279
14,330
14,609
8,001
1,332
7,869
9,201
6,761
2,511
4,377
6,888
681
493
1,174
571
10,469
62,297
The following tables present the Corporation’s commercial real estate loans by geographic concentration as of December 31, 2025 and June 30, 2025:
Inland
Southern
Empire(1)
California(2)
California
Owner occupied:
244
4,802
92
180
Mixed use
945
72
367
28
267
2,218
Total owner occupied
511
8,640
87
819
Non-owner occupied:
4,248
23
11,777
63
2,512
1,023
6,517
42
7,870
1,015
3,720
3,598
472
3,911
2,792
4,694
347
1,637
25
1,220
32
1,901
661
Total non-owner occupied
12,672
21
29,230
19,070
13,183
19
37,870
53
19,889
630
4,852
86
184
959
271
2,240
901
8,732
83
836
3,837
13,488
2,570
449
6,297
7,584
1,026
3,296
3,679
1,064
3,992
2,813
4,754
1,656
1,713
1,993
671
12,843
30,481
49
18,973
13,744
39,213
19,809
27
Management continually evaluates the credit quality of the loan portfolio and conducts a quarterly review of the adequacy of the ACL. The two primary components that are used during the loan review process to determine the proper ACL levels are individually evaluated allowances and collectively evaluated allowances. The collectively evaluated allowance is based on a pooling method for groups of homogeneous loans sharing similar loan characteristics to calculate an allowance which reflects an estimate of lifetime expected credit losses using historical experience, current conditions, and reasonable and supportable forecasts. Loans identified to be individually evaluated may have an allowance that is based upon the appraised value of the collateral, less selling costs, or discounted cash flow with an appropriate default factor.
The Corporation adopted an internal risk rating policy which categorizes all loans held for investment into risk categories of pass, special mention, substandard, doubtful or loss based on relevant information about the ability of the borrower to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades with respect to credit quality of each loan is as follows:
The following table presents the Corporation’s recorded investment in loans by risk categories and gross charge-offs by year of origination as of December 31, 2025:
Term Loans by Year of Origination
Revolving
2023
2022
2021
Prior
Loans
Single-family:
Pass
77,817
43,555
48,171
188,867
138,365
56,001
-
552,776
Special Mention
Substandard
535
Total single-family
56,536
Current period gross charge-off
Multi-family:
31,744
21,550
23,237
67,545
81,549
181,182
406,807
461
1,021
1,482
Total multi-family
82,010
182,203
Commercial real estate:
5,913
5,033
12,332
22,470
3,828
21,366
Construction:
606
206
Total construction
Other:
Total other
Commercial business loans:
Total commercial business loans
Consumer loans:
Not graded
Total consumer loans
116,095
70,344
83,740
278,882
224,203
260,193
65
Total current period gross charge-offs
The following table presents the Corporation’s recorded investment in loans by risk categories by year of origination as of June 30, 2025:
39,385
55,276
52,083
194,501
141,614
60,282
543,146
1,217
61,561
13,412
21,687
27,255
73,495
83,224
201,660
420,733
467
2,217
2,684
83,691
203,877
2,149
5,429
12,609
22,750
3,889
24,936
71,762
1,004
25,940
40
55,159
82,598
91,947
290,746
229,194
291,467
Under ASC 326, the ACL is a valuation account that is deducted from the related loans’ 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. The Corporation’s ACL is calculated quarterly, with any difference between the calculated ACL and the recorded ACL recognized through an adjustment to the provision for (or recovery of) credit losses. Management estimates the quantitative portion of the collectively evaluated allowance for all loan categories using an average charge-off or loss rate methodology, and generally evaluates collectively evaluated loans by Call Report code to group and determine portfolio loan segments with similar risk characteristics. The Corporation primarily utilizes historical loss rates for the ACL calculation based on its own specific historical loss experience and, where appropriate, incorporates peer loss history to supplement its data set.
The expected loss rates are applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The prepayment assumptions applied to expected cash flow over the contractual life of the loans are estimated based on historical and bank-specific experience and the consideration of current and expected conditions and circumstances including the level of interest rates. The prepayment assumptions may be updated by management in the event that changing conditions impact management’s estimate or additional historical data gathered has resulted in the need for a reevaluation.
For its reasonable and supportable forecasting of current expected credit losses, the Corporation utilizes a regression model using forecasted economic metrics and historical loss data. The regression model utilized upon implementation of ASC 326 and as of December 31, 2025 and June 30, 2025, is based on reasonable and supportable 12-month forecasts of the National Unemployment Rate and the change in the Real Gross Domestic Product, after which it reverts to a historical loss rate. Management selected the National Unemployment Rate and the Real Gross Domestic Product as the drivers of the forward looking component of the collectively evaluated allowance, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts (including the quarterly Federal Open Market Committee forecast), and the widespread familiarity of these economic metrics.
Management recognizes that there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of the allowance on collectively evaluated loans. As current and expected conditions may vary compared with conditions over the historical lookback period, which is utilized in the calculation of the quantitative allowance, management considers whether additional or reduced allowance levels on collectively evaluated loans may be warranted, given the consideration of a variety of qualitative factors. The following qualitative factors (“Q-factors”) considered by management reflect the regulatory guidance on the Q-factors:
The qualitative portion of the Corporation’s allowance for collectively evaluated loans is determined based on management’s judgment in assessing the risk levels associated with each of the Q-factors presented above. The amount of qualitative allowance reflects management’s evaluation of the relative weighting assigned to each Q-factor and its estimated impact on credit losses.
Loans that do not share similar risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable or the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date, less selling costs.
Accrued interest receivable for loans is included in accrued interest receivable in the Condensed Consolidated Statements of Financial Condition. The Corporation elected not to measure an allowance for accrued interest receivable and instead elected to reverse accrued interest income on loans that are placed on non-performing status. Generally, a loan is placed on non-performing status when it becomes 90 days past due as to principal or interest, or after considering economic and business conditions and collection efforts, where the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. The Corporation believes this policy results in the timely reversal of potentially uncollectible interest.
Pursuant to ASU 2022-02, “Troubled Debt Restructurings and Vintage Disclosures,” the Corporation may agree to different types of modifications, including principal forgiveness, interest rate reductions, term extension, significant payment delay or any combination of the modifications noted above. During the quarters and six months ended December 31, 2025 and 2024, there were no loan modifications to borrowers experiencing financial difficulties.
Management believes the ACL on loans held for investment is maintained at a level sufficient to provide for expected losses on the Corporation’s loans held for investment based on historical loss experience, current conditions, and reasonable and supportable forecasts. The provision for (recovery of) credit losses is charged (credited) against operations on a quarterly basis, as necessary, to maintain the ACL at appropriate levels. Future adjustments to the ACL may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory, and other conditions beyond the Corporation’s control.
Non-performing loans are charged-off to their fair market values in the period the loans, or portions thereof, are deemed uncollectible. This generally occurs after the loan becomes 150 days delinquent for real estate secured first trust deed loans and 120 days delinquent for commercial business or real estate secured second trust deed loans. For loans that were previously modified from their original terms, re-underwritten and identified as modified loans, the charge-off occurs when the loan becomes 90 days delinquent. In cases where borrowers file bankruptcy, the charge-off occurs when the loan becomes 60 days delinquent. The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the ACL. For modified loans that are less than 90 days delinquent, the ACL is segregated into: (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their modification period, classified lower than pass, and containing an embedded loss component; or (b) collectively evaluated allowances based on the aggregated pooling method. For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method. For non-performing commercial real estate loans, an individually evaluated allowance is derived based on the loan's discounted cash flow fair value (for modified loans) or collateral fair value less estimated selling costs and if the fair value is higher than the loan balance, no allowance is required. A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current, the borrower(s) has demonstrated sustained payment performance (generally six consecutive payments) and future monthly principal and interest payments are expected to be collected on a timely basis.
The following table discloses additional details for the periods indicated on the Corporation’s ACL on loans held for investment:
ACL, beginning of period
5,780
6,329
6,424
7,065
(146)
(790)
(109)
Total recoveries
Total charge-offs
Net recoveries (charge-offs)
ACL, end of period
5,634
6,956
ACL on loans as a percentage of gross loans held for investment
0.55
0.66
Net (recoveries) charge-offs as a percentage of average loans receivable, net, during the period (annualized)
ACL on loans as a percentage of gross non-performing loans at the end of the period
565.66
269.40
The following tables denote the past due status of the Corporation's loans held for investment, including interest applied to principal, at the dates indicated.
30-89 Days Past
Total Loans Held for
Current
Due
Non-Accrual(1)
Investment
407,828
Total loans held for investment
1,032,525
996
543,496
929
422,951
466
55
1,041,026
1,395
The following tables summarize the Corporation’s ACL and recorded investment in gross loans, by portfolio type, at the dates and for the periods indicated.
Quarter Ended December 31, 2025
Single-
Multi-
(Dollars In Thousands)
family
Business
Consumer
ACL:
5,126
584
(92)
(55)
(4)
Recoveries
Charge-offs
5,034
529
Individually evaluated for impairment
Collectively evaluated for impairment
Loans held for investment:
1,033,061
0.91
0.07
2.34
1.14
Net (recoveries) charge-offs to average loans receivable, net during the period
Quarter Ended December 31, 2024
5,679
503
78
Provision for (recovery of) credit losses
582
(30)
6,261
549
59
742
532,398
433,724
77,984
1,480
4,371
1,050,106
533,140
1,050,848
1.17
0.08
3.24
2.22
0.85
24
Six Months Ended December 31, 2025
5,734
615
(700)
(86)
Six Months Ended December 31, 2024
6,295
595
66
(46)
(7)
(49)
The following tables identify the Corporation’s total recorded investment in non-performing loans, gross by type at the dates and for the periods indicated. Generally, a loan is placed on non-performing status when it becomes 90 days past due as to principal or interest or after considering economic and business conditions and collection efforts, where the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. In addition, interest income is not recognized on any loan where management has determined that collection is not reasonably assured. A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current, the borrower(s) has demonstrated sustained payment performance (generally six consecutive payments) and future monthly principal and interest payments are expected to be collected on a timely basis. Loans with a related allowance have been (a) collectively evaluated using a pooling method analysis or (b) individually evaluated using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell, to establish realizable value. This analysis may identify a specific allowance amount needed or may conclude that no allowance is needed.
At December 31, 2025
Unpaid
Net
Principal
Related
Recorded
ACL(1)
With a related allowance
Without a related allowance(2)
(25)
Total single-family loans
560
Total multi-family loans
Total non-performing loans
990
At June 30, 2025
553
420
395
980
955
948
1,446
1,421
1,414
At December 31, 2025, there were no commitments to lend additional funds to those borrowers whose loans were classified as non-performing.
For the quarters ended December 31, 2025 and 2024, the Corporation’s average recorded investment in non-performing loans was $946,000 and $2.4 million, respectively. The Corporation records payments on non-performing loans utilizing
the cash basis or cost recovery method of accounting during the periods when the loans are on non-performing status. For the quarters ended December 31, 2025 and 2024, the Bank received $34,000 and $19,000, respectively, in interest payments from non-performing loans, all of which was recognized as interest income for those periods. None of these payments were applied to reduce the loan balances under the cost recovery method.
For the six months ended December 31, 2025 and 2024, the Corporation’s average recorded investment in non-performing loans was $1.2 million and $2.4 million, respectively. For the six months ended December 31, 2025 and 2024, the Bank received $58,000 and $58,000, respectively, in interest payments from non-performing loans, all of which was recognized as interest income for those periods. None of these payments were applied to reduce the loan balances under the cost recovery method.
The following tables present the average recorded investment in non-performing loans and the related interest income recognized for the quarters and six months ended December 31, 2025 and 2024:
Quarter Ended December 31,
Interest
Income
Recognized
Without related ACL:
743
462
525
With related ACL:
421
1,688
946
2,431
Six Months Ended December 31,
129
795
735
463
1,633
52
1,198
2,428
During the quarters and six months ended December 31, 2025 and 2024, no properties were acquired in the settlement of loans and no previously foreclosed properties were sold. A new appraisal is obtained for each property at the time of
foreclosure, and fair value is derived by using the lower of the appraised value or the listing price of the property, net of estimated selling costs. Any initial loss upon repossession is recorded as a charge to the ACL prior to transferring the asset to real estate owned. Subsequent to transfer to real estate owned, if there is further deterioration in the property’s value, specific real estate owned loss reserves are established and charged to the Condensed Consolidated Statements of Operations. In addition, the Corporation records costs to carry real estate owned as real estate owned operating expenses as incurred. As of both December 31, 2025 and June 30, 2025, the Corporation held no real estate owned property.
The Bank adjusts the reserve for unfunded loan commitments through the provision for (recovery of) credit losses.
The following table provides information regarding the unfunded loan commitment reserve for the quarters and six months ended December 31, 2025 and 2024.
Balance, beginning of the period
(12)
(41)
Balance, end of the period
38
The method for calculating the unfunded loan commitment reserve is based on a historical funding rate applied to the undisbursed loan amount to estimate an average outstanding amount during the life of the loan commitment. The Corporation applies the same assumptions and methodologies by loan groupings to these unfunded loan commitments as it does for its funded loans held for investment to determine the reserve rate and the allowance. Assumptions are evaluated by management periodically as part of its procedures. The unfunded loan commitment reserve is recorded in accounts payable, accrued interest and other liabilities on the Condensed Consolidated Statements of Financial Condition.
Note 6: Derivative and Other Financial Instruments with Off-Balance Sheet Risks
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of originating loans or providing funds under existing lines of credit, loan sale commitments to third parties and option contracts. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying Condensed Consolidated Statements of Financial Condition. The Corporation’s exposure to credit loss, in the event of non-performance by the counterparty to these financial instruments, is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in entering into financial instruments with off-balance sheet risk as it does for on-balance sheet instruments. As of December 31, 2025 and June 30, 2025, the Corporation had commitments to extend credit on loans to be held for investment of $10.1 million and $6.1 million, respectively.
The following table provides information regarding unfunded loan commitments, which are comprised of undisbursed loan funds, undisbursed funds to borrowers on existing lines of credit with the Corporation and commitments to originate loans to be held for investment at the dates indicated below.
Commitments
Undisbursed loan funds – Construction loans
119
Undisbursed loan funds – Single-family loans(1)
Undisbursed lines of credit - Mortgage loans
Undisbursed lines of credit – Commercial business loans
2,208
Undisbursed lines of credit – Consumer loans
302
320
Commitments to extend credit on loans to be held for investment
10,087
6,061
11,461
9,179
In accordance with ASC 815, “Derivatives and Hedging,” and interpretations of the Derivatives Implementation Group of the FASB, the fair value of the commitments to extend credit on loans to be held for sale, loan sale commitments, to be announced MBS trades, put option contracts and call option contracts are recorded at fair value on the Condensed Consolidated Statements of Financial Condition. The Corporation does not apply hedge accounting to its derivative financial instruments; therefore, all changes in fair value are recorded in earnings. As of December 31, 2025 and June 30, 2025, there were no outstanding derivative financial instruments.
Loans previously sold to the FHLB – San Francisco under the Mortgage Partnership Finance (“MPF”) program have a recourse liability. The FHLB – San Francisco absorbs the first four basis points of loss by establishing a first loss account and a credit scoring process is used to calculate the maximum recourse amount for the Bank. All losses above the Bank’s maximum recourse amount are the responsibility of the FHLB – San Francisco. The FHLB – San Francisco pays the Bank a credit enhancement fee monthly to compensate the Bank for accepting the recourse obligation. As of December 31, 2025 and June 30, 2025, the Bank serviced $2.4 million and $2.6 million of loans under this program, respectively, and recorded a recourse liability of $6,000 at both dates.
Occasionally, the Bank is required to repurchase loans sold to Freddie Mac, Fannie Mae or other investors if it is determined that such loans do not meet the investor’s credit requirements, if any party involved in the loan misrepresented pertinent facts, committed fraud, or if the loans became 90-days past due within 120 days of the loan funding date. During the quarters and six months ended December 31, 2025 and 2024, the Bank did not repurchase any loans or settle any repurchase requests. In addition to the specific recourse liability for the MPF program, the Bank established a recourse liability of $17,000 as of both December 31, 2025 and June 30, 2025 for loans sold to other investors.
The following table shows the summary of the recourse liability for the quarters and six months ended December 31, 2025 and 2024:
Recourse Liability
Recovery for recourse liability
Net settlements in lieu of loan repurchases
Note 7: Fair Value of Financial Instruments
The Corporation adopted ASC 820, “Fair Value Measurements and Disclosures,” and elected the fair value option pursuant to ASC 825, “Financial Instruments.” ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 825 permits entities to elect to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the fair value option) at specified election dates. The Corporation elected the fair value option on loans held for investment which were previously originated for sale and other equity investments. At each subsequent reporting date, an entity is required to report unrealized gains and losses on items in earnings for which the fair value option has been elected. The objective of the fair value option is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.
The following table presents, as of the dates indicated, the difference between the fair value and the unpaid principal balance of loans held for investment and the base cost of other equity investments for which the Corporation has elected the fair value option:
Unpaid Principal
Fair Value
or Base Cost
(Loss) Gain
As of December 31, 2025:
Loans held for investment, at fair value
1,006
1,136
(130)
Other equity investments, at fair value
721
As of June 30, 2025:
1,018
1,158
(140)
730
ASC 820 establishes a three-level valuation hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date.
Level 2
Observable inputs other than Level 1 such as: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated to observable market data for substantially the full term of the asset or liability. Valuation techniques may include the use of discounted cash flow models and similar techniques.
Level 3
Unobservable inputs for the assets or liabilities that use significant assumptions, including assumptions of risks. These unobservable assumptions reflect the Corporation’s estimate of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of pricing models, discounted cash flow models and similar techniques.
ASC 820 requires the Corporation to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.
The Corporation’s financial assets and liabilities measured at fair value on a recurring basis consist of investment securities available for sale, loans held for investment at fair value, other equity investments and interest-only strips; while loans with individually evaluated allowances and mortgage servicing assets (“MSA”) are measured at fair value on a nonrecurring basis.
Investment securities - available for sale are primarily comprised of U.S. government agency MBS, U.S. government sponsored enterprise MBS and private issue CMO. The Corporation utilizes quoted prices in active markets for similar securities for its fair value measurement of MBS (Level 2) and broker price indications for similar securities in non-active markets for its fair value measurement of the private issue CMO (Level 3).
Loans held for investment at fair value are primarily single-family loans which have been transferred from loans held for sale. The fair value is determined by management estimates of the specific credit risk attributes of each loan, in addition to the quoted secondary-market prices which account for the interest rate characteristics of each loan (Level 3).
Loans with individually evaluated allowances that are recorded at fair value on a nonrecurring basis are loans which are inadequately protected by the current sound worth and paying capacity of the borrowers and/or of the collateral pledged. These loans are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. The fair value of a loan with an individually evaluated allowance is determined based on the discounted cash flow or current appraised value of the underlying collateral. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the collateral. For commercial real estate loans with an individually evaluated allowance, the
fair value is derived from the appraised value of its collateral. Loans with an individually evaluated allowance are reviewed and evaluated on at least a quarterly basis for additional allowance and adjusted accordingly, based on the same factors identified above (Level 3). This loss is not recorded directly as an adjustment to current earnings or other comprehensive income (loss), but rather as a component in determining the overall adequacy of the ACL. These adjustments to the estimated fair value of loans with an individually evaluated allowance may result in increases or decreases to the provision for (recovery of) credit losses recorded in current earnings.
The fair value of other equity investments is derived from quoted prices in active markets for the equivalent or similar investments (Level 2).
The Corporation uses the amortization method for its MSA, which amortizes the MSA in proportion to and over the period of estimated net servicing income and assesses the MSA for impairment based on fair value at each reporting date. The fair value of the MSA is derived using the present value method; which includes a third party’s prepayment projections of similar instruments, weighted average coupon rates, estimated servicing costs and discount interest rates (Level 3).
The fair value of interest-only strips is derived using the same assumptions that are used to value the related MSA (Level 3).
The Corporation’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Corporation’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
The following fair value hierarchy tables present information at the dates indicated about the Corporation’s assets and liabilities measured at fair value on a recurring basis:
Fair Value Measurement at December 31, 2025 Using:
Assets:
Investment securities - available for sale:
Investment securities - available for sale
1,330
Interest-only strips
2,051
1,085
3,136
Fair Value Measurement at June 30, 2025 Using:
1,528
2,258
1,103
3,361
The following tables summarize reconciliations of the beginning and ending balances during the periods shown of recurring fair value measurements recognized in the Condensed Consolidated Statements of Financial Condition using Level 3 inputs:
For the Quarter Ended December 31, 2025
Fair Value Measurement
Using Significant Other Unobservable Inputs
(Level 3)
Private
Loans Held For
Interest-
Issue
Investment, at
Only
CMO
fair value(1)
Strips
Beginning balance at September 30, 2025
75
1,010
1,090
Total gains or losses (realized/unrealized):
Included in earnings
Included in other comprehensive income
Purchases
Issuances
Settlements
(11)
Transfers in and/or out of Level 3
Ending balance at December 31, 2025
For the Quarter Ended December 31, 2024
Beginning balance at September 30, 2024
85
1,173
(5)
(16)
Ending balance at December 31, 2024
80
1,016
1,102
For the Six Months Ended December 31, 2025
Beginning balance at June 30, 2025
(22)
(27)
For the Six Months Ended December 31, 2024
Beginning balance at June 30, 2024
1,047
1,143
Total gains or losses (realized/ unrealized):
(10)
(21)
(31)
The following fair value hierarchy tables present information about the Corporation’s assets measured at fair value at the dates indicated on a nonrecurring basis:
Mortgage servicing assets
The following table presents additional information about valuation techniques and inputs used for assets and liabilities, which are measured at fair value and categorized within Level 3 as of December 31, 2025:
Impact to
Valuation
As of
from an
Range(1)
Increase in
Techniques
Unobservable Inputs
(Weighted Average)
Inputs(2)
Securities available-for sale: Private issue CMO
Market comparable pricing
Comparability adjustment
(0.9%) - 0.0% (0.2%)
Increase
Relative value analysis
Broker quotes
87.3% - 90.9% (89.5%)
Credit risk factor
0.9% - 1.1% (1.0%)
Decrease
MSAs
Discounted cash flow
Prepayment rate (CPR)
5.8% - 60.0% (12.9%)
Discount rate
9.0% - 10.5% (9.0%)
10.2% - 23.9% (20.1%)
9.0%
None
The significant unobservable inputs used in the fair value measurement of the Corporation’s assets and liabilities include the following: prepayment rates, discount rates and broker quotes, among others. Significant increases or decreases in any of these inputs in isolation could result in significantly lower or higher fair value measurement. The various unobservable inputs used to determine valuations may have similar or diverging impacts on valuation. For the six months ended December 31, 2025, there were no significant changes to the Corporation's valuation techniques and inputs that had, or are expected to have, a material impact on its consolidated financial position or results of operations.
The carrying amount and fair value of the Corporation’s other financial instruments as of December 31, 2025 and June 30, 2025 was as follows:
Financial assets:
Loans held for investment, not recorded at fair value
1,036,649
1,000,479
Investment securities - held to maturity
FHLB – San Francisco stock
9,568
Financial liabilities:
Deposits
873,075
213,559
1,044,727
996,332
889,115
213,505
Loans held for investment, not recorded at fair value: For loans that reprice frequently at market rates, the carrying amount approximates the fair value. For fixed-rate loans, the fair value is determined by either (i) discounting the estimated future cash flows of such loans over their estimated remaining contractual maturities using a current interest rate at which such loans would be made to borrowers, or (ii) quoted market prices.
Investment securities - held to maturity: The investment securities - held to maturity consist of U.S. SBA securities, U.S. government sponsored enterprise MBS and U.S. government sponsored enterprise CMO. For the U.S. SBA securities and U.S. government sponsored enterprise MBS and CMO, the Corporation utilizes quoted prices in active markets for similar securities for its fair value measurement (Level 2).
FHLB – San Francisco stock: FHLB – San Francisco stock is carried at cost or par value and represents its fair value. When redeemed, the Corporation will receive an amount equal to the par value of the stock.
Deposits: The fair value of time deposits is estimated using a discounted cash flow calculation. The discount rate is based upon observable inputs, including rates currently offered for deposits of similar remaining maturities. The fair value of transaction accounts (checking, money market and savings accounts) is equal to the carrying amounts payable on demand.
Borrowings: The fair value of borrowings has been estimated using a discounted cash flow calculation. The discount rate on such borrowings is based upon rates currently offered for borrowings of similar remaining maturities.
The Corporation has various processes and controls in place to ensure that fair value is reasonably estimated. The Corporation generally determines fair value of their Level 3 assets and liabilities by using internally developed models which primarily utilize discounted cash flow techniques and prices obtained from independent management services or brokers. The Corporation performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process.
While the Corporation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. For the six months ended December 31, 2025, there were no significant changes to the Corporation’s valuation techniques that had, or are expected to have, a material impact on its consolidated financial position or results of operations.
Note 8: Revenue From Contracts With Customers
In accordance with ASC 606, revenues are recognized when goods or services are transferred to the customer in exchange for the consideration the Corporation expects to be entitled to receive. The largest portion of the Corporation's revenue is from interest income, which is not in the scope of ASC 606. All of the Corporation's revenue from contracts with customers in the scope of ASC 606 is recognized in non-interest income.
If a contract is determined to be within the scope of ASC 606, the Corporation recognizes revenue as it satisfies a performance obligation. Payments from customers are generally collected at the time services are rendered, monthly,
quarterly or annually. For contracts with customers within the scope of ASC 606, revenue is either earned at a point in time or revenue is earned over time. Examples of revenue earned at a point in time are automated teller machine ("ATM") transaction fees, wire transfer fees, non-sufficient fund fees and interchange fees. Revenue is primarily based on the number and type of transactions that are generally derived from transactional information accumulated by the Corporation’s systems and is recognized immediately as the transactions occur or upon providing the service to complete the customer's transaction. The Corporation is generally the principal in these contracts, except for interchange fees, in which case the Corporation is acting as the agent and records revenue net of expenses paid to the principal. Examples of revenue earned over time, which generally occur on a monthly basis, are deposit account maintenance fees, investment advisory fees, merchant revenue, trust and investment management fees and safe deposit box fees. Revenue is generally derived from transactional information accumulated by the Corporation’s systems or those of third-parties and is recognized as the related transactions occur or services are rendered to the customer.
Disaggregation of Revenue:
The following table includes the Corporation's non-interest income disaggregated by type of services for the quarters and six months ended December 31, 2025 and 2024:
Type of Services
Loan servicing and other fees(1)
Other(2)
For the quarters and six months ended December 31, 2025 and 2024, substantially all the Corporation's revenues within the scope of ASC 606 are for performance obligations satisfied at a specified date.
Revenues recognized within the scope of ASC 606:
Deposit account fees: The Bank earns fees on its deposit accounts for various products and services provided to customers. These fees include account fees, non-sufficient fund fees, ATM fees and other similar charges. Fees are recognized concurrently with the related event and are recorded on a daily, monthly, quarterly or annual basis, depending on the type of service.
Card and processing fees: Debit interchange income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange fees from cardholder transactions through a third-party payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders' debit card. Certain expenses directly associated with the debit cards are recorded on a net basis with the interchange income.
Other fees: The Bank earns fees from asset management services, stop payment fees, wire transfer services, safe deposit boxes, merchant services, and other occasional or non-recurring services. Asset management fees are variable, since they are based on the underlying portfolio value, which is subject to market conditions and amounts invested by customers through a third-party provider. Asset management fees are recognized over the period that services are provided and when the portfolio values can be determined or reasonably estimated at the end of each month. These fees are recognized
concurrently with the related event and are recorded on daily, monthly, quarterly or annual basis, depending on the type of services.
Note 9: Leases
The Corporation accounts for its leases in accordance with ASC 842 which requires the Corporation to record liabilities for future lease obligations as well as assets representing the right to use the underlying leased assets. The Corporation's leases primarily represent future obligations to make payments for the use of buildings, space or equipment for its operations. Liabilities to make future lease payments are recorded in accounts payable, accrued interest and other liabilities for operating leases and borrowings for finance leases, while right-of-use assets are recorded in premises and equipment in the Corporation's Condensed Consolidated Statements of Financial Condition. At December 31, 2025, the Corporation's leases were classified as operating leases and finance leases; and the Corporation did not have any operating or finance leases with an initial term of 12 months or less ("short-term leases"). Liabilities to make future lease payments and right-of-use assets are recorded for operating leases and finance leases and do not include short-term leases. These liabilities and right-of-use assets are determined based on the total contractual base rents for each lease, which include options to extend or renew each lease, where applicable, and where the Corporation believes it has an economic incentive to extend or renew the lease. Since lease extensions are not reasonably certain, the Corporation generally does not recognize payments occurring during option periods in the calculation of its right-of-use lease assets and lease liabilities. The Corporation utilizes the FHLB – San Francisco rates as a discount rate for each of the remaining contractual terms at the adoption date as well as for future leases if the discount rate is not stated in the lease. For leases that contain variable lease payments, the Corporation assumes future lease payment escalations based on a lease payment escalation rate specified in the lease or the specified index rate observed at the time of lease commencement. Liabilities to make future lease payments are accounted for using the interest method, being reduced by periodic contractual lease payments net of periodic interest accretion. Right-of-use assets for operating leases are amortized over the lease term in amounts that represent the difference between straight-line lease expense and interest accretion on the related liability. For finance leases, right-of-use assets are amortized on a straight-line basis over the useful life of the underlying asset, while the interest accretion on the lease liability is recognized as interest expense in the Corporation’s Condensed Statements of Operations.
For the quarters ended December 31, 2025 and 2024, expenses associated with the Corporation’s leases totaled $177,000, and $203,000, respectively. For the six months ended December 31, 2025 and 2024, expenses associated with the Corporation’s leases totaled $351,000, and $419,000, respectively. Lease expenses for operating leases are recorded in premises and occupancy or equipment expense; while expenses for finance leases are recorded in equipment expense and interest expense on borrowings, as applicable, in the Condensed Consolidated Statements of Operations.
The following tables present supplemental information related to leases at the dates and for the periods indicated:
Condensed Consolidated Statements of Condition:
Operating Leases:
Premises and equipment - Operating lease right-of-use assets
2,383
1,651
Accounts payable, accrued interest and other liabilities – Operating lease liabilities
2,404
1,682
Finance Leases:
Premises and equipment at cost
84
Accumulated amortization
(18)
(9)
Premises and equipment - Finance lease right-of-use assets
Borrowings - Finance lease liabilities
73
Condensed Consolidated Statements of Operations:
Operating lease expense:
Premises and occupancy expenses from operating leases(1)
170
168
337
350
Equipment expenses from operating leases(1)
Total operating lease expense
419
Finance lease expense:
Equipment expenses from finance leases(1)
Interest on finance lease liabilities
Total finance lease expense
Total lease expense
December 31, 2024
Condensed Consolidated Statements of Cash Flows:
Operating cash used for operating leases, net
418
Operating cash used for finance leases, net
Financing cash used for finance leases, net
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
1,035
The following table provides information related to remaining minimum contractual lease payments and other information associated with the Corporation’s leases as of December 31, 2025:
Operating Leases
Finance Leases
Amount(1)
Fiscal Year Ending June 30,
Remainder of fiscal 2026
348
Fiscal 2027
703
Fiscal 2028
672
Fiscal 2029
377
Fiscal 2030
247
Thereafter
275
Total contract lease payments
2,622
Total liability to make lease payments
Difference in undiscounted and discounted future lease payments
218
Weighted average discount rate
4.08
4.50
Weighted average remaining lease term (years)
4.2
2.1
Note 10: Stock Repurchases
On January 23, 2025, the Corporation’s Board of Directors announced a stock repurchase plan, authorizing the purchase of up to 334,773 shares of the Corporation’s outstanding common stock over a one-year period.
During the second quarter of fiscal 2026, the Corporation purchased 96,260 shares of its common stock under the stock repurchase plans with a weighted average cost of $15.80 per share. For the first six months of fiscal 2026, the Corporation purchased 162,967 shares of its common stock under the existing stock repurchase plan with a weighted average cost of $15.78 per share. As of December 31, 2025, 54,061 shares or 16 percent of authorized common stock under this plan were available for purchase.
On January 22, 2026, subsequent to quarter-end, the Corporation’s Board of Directors announced a new stock repurchase program authorizing the repurchase of up to 318,875 shares of the Corporation’s outstanding common stock over a one-year period. The prior repurchase program, which was initiated on January 23, 2025, was terminated effective January 23, 2026. As a result, the 16,825 shares that remained available for repurchase under the prior program will no longer be eligible for repurchase.
Note 11: Segment Reporting
The Corporation operates as a single reportable segment, providing a broad range of banking and financial services to individuals, businesses, and institutional clients. These services include primarily commercial and consumer lending, deposit products, and to a lesser extent, loan servicing and wealth management services. The commercial and consumer lending primarily consists of single-family, multi-family and commercial real estate mortgage lending and, to a lesser extent, construction, commercial business, other mortgage and consumer lending. The Corporation’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM relies on the Senior Management Committee, which includes the Senior Vice President – Chief Financial Officer, Senior Vice President – Chief Lending Officer, Senior Vice President – Retail Banking, Senior Vice President – Single Family, and others, to provide detailed financial and operational reports. The CODM regularly evaluates the financial performance of the Corporation and allocates resources accordingly. Key financial performance metrics used by the CODM include net interest income, provision for (recovery of) credit losses, non-interest income, non-interest expenses, net income, diluted earnings per share, return on average assets, return on average equity, net interest margin, efficiency ratio, loans held for investment and deposit balance growth,
loans held for investment as a percentage of total deposits, core deposits as a percentage of total deposits, Tier 1 leverage capital ratio, non-performing assets as a percentage of loans held for investment, among others.
The following table presents the financial performance measures that the CODM reviews as of or for the periods indicated:
At or For the Quarter Ended December 31,
At or For the Six Months Ended December 31,
(Dollars In Thousands, Except Per Share Information)
Interest income
Interest expense
Non-interest income
Non-interest expense
Income before taxes
Return on average assets
0.28
0.51
0.45
Return on average equity
4.44
2.66
4.81
4.22
Net interest margin
3.03
2.91
3.01
2.87
Efficiency ratio
80.77
81.15
79.57
80.11
Loans held for investment growth
(0.40)
(0.77)
0.06
Deposit growth
(0.27)
0.42
(1.84)
(2.35)
Loans held for investment as a percentage of total deposits
118.94
121.45
Core deposits as a percentage of total deposits
64.05
68.34
Tier 1 leverage capital ratio
9.79
9.81
Non-performing assets as a percentage of total assets
0.20
Note 12: Subsequent Events
On January 22, 2026, the Corporation announced that the Board of Directors declared a quarterly cash dividend of $0.14 per share. Shareholders of the Corporation’s common stock at the close of business on February 12, 2026 are entitled to receive the cash dividend. The cash dividend will be payable on March 5, 2026.
On January 22, 2026, subsequent to quarter-end, the Corporation’s Board of Directors approved a new stock repurchase program authorizing the repurchase of up to five percent (5%) of the Corporation’s outstanding common stock, or approximately 318,875 shares. The Corporation plans to purchase the shares from time to time in the open market or through privately negotiated transactions over a one-year period, subject to market conditions, the capital requirements of the Corporation, available cash and other relevant factors. The prior repurchase program, which was initiated on January 23, 2025, was terminated effective January 23, 2026. As a result, the 16,825 shares that remained available for repurchase under the prior program will no longer be eligible for repurchase.
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 December 31, 2025, Provident Financial Holdings, Inc., on a consolidated basis, had total assets of $1.23 billion, total deposits of $872.4 million and total stockholders’ equity of $127.5 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 Bank, founded in 1956, is a federally chartered stock savings bank headquartered in Riverside, California. The Bank is regulated by the Office of the Comptroller of the Currency (“OCC”), its primary federal regulator, and the Federal Deposit Insurance Corporation (“FDIC”), the insurer of its deposits. The Bank’s deposits are federally insured up to applicable limits by the FDIC. The Bank has been a member of the FHLB System since 1956.
The Corporation operates in a single business segment through the Bank. The Bank’s activities include attracting deposits, offering banking services and originating and purchasing single-family, multi-family, commercial real estate, construction and, to a lesser extent, other mortgage, commercial business and consumer loans. Deposits are collected primarily from 13 banking locations located in Riverside and San Bernardino counties in California. Loans are primarily originated and purchased in California. There are various risks inherent in the Corporation’s business including, among others, the general business environment, interest rates, the California real estate market, the demand for loans, the prepayment of loans, the repurchase of loans previously sold to investors, the secondary market conditions to buy and sell loans, competitive conditions, legislative and regulatory changes, fraud and other risks.
The Corporation began paying quarterly cash dividends during the quarter ended September 30, 2002. On October 23, 2025, 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 November 13, 2025. This dividend was paid on December 4, 2025. 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.
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 Unaudited Interim Condensed Consolidated Financial Statements and accompanying selected Notes to Unaudited Interim Condensed Consolidated Financial Statements.
Certain matters discussed in this Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to the Corporation’s financial condition, liquidity, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements as they are subject to various risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Corporation may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Corporation.
There are a number of important factors that could cause future results to differ materially from historical performance and those express or implied by these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to:
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, except as may be required by law. 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 2026 and beyond to differ materially
from those expressed or implied 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.
The discussion and analysis of the Corporation’s financial condition and results of operations is based upon the Corporation’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.
The Corporation’s critical accounting estimates are described in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 - Organization and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (“2025 Annual Form 10-K”). There have not been any material changes in the Corporation’s critical accounting policies and estimates as compared to the disclosures contained in the Corporation’s 2025 Annual Form 10-K.
Provident Savings Bank, F.S.B., established in 1956, is a financial services company committed to serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank conducts its business operations as Provident Bank and through its subsidiary, Provident Financial Corp (“PFC”). The business activities of the Corporation, primarily through the Bank, consist of community banking and, to a lesser degree, investment services for customers and trustee services on behalf of the Bank.
Community banking operations primarily consist of accepting deposits from customers within the communities surrounding the Corporation’s full service offices and investing those funds in single-family, multi-family and commercial real estate loans. Also, to a lesser extent, the Corporation makes construction, commercial business, consumer and other mortgage loans. The primary source of income in community banking is net interest income, which is the difference between the interest income earned on loans and investment securities, and the interest expense paid on interest-bearing deposits and borrowed funds. Additionally, certain fees are collected from depositors, such as non-sufficient funds fees, deposit account service charges, ATM fees, IRA/KEOGH fees, safe deposit box fees, and wire transfer fees, among others.
The Corporation plans to enhance its community banking operations through moderate asset growth, with a strategic focus on expanding its single-family, multi-family, commercial real estate, construction, and commercial business lending portfolios. In parallel, the Corporation plans to improve the composition of its deposit base by reducing reliance on retail time deposits and increasing the proportion of lower-cost checking and savings accounts. To further diversify its funding sources, the Corporation utilizes brokered certificates of deposit and government deposits, as appropriate based on market conditions and funding requirements. This strategy is designed to strengthen core revenue by improving the net interest margin and, in conjunction with asset growth, increase overall net interest income. While the Corporation’s long-term strategy targets moderate and sustainable growth, management recognizes that the pace and success of this growth will be influenced by general economic conditions and other external factors.
Investment services operations primarily consist of selling alternative investment products such as annuities and mutual funds to the Bank’s depositors. PFC performs trustee services for the Bank’s real estate secured loan transactions and has in the past held, and may in the future hold, real estate for investment. Investment services and trustee services contribute a very small percentage of gross revenue.
There are a number of risks associated with the business activities of the Corporation, many of which are beyond the Corporation’s control as described in the 2025 Annual Form 10-K. The Corporation attempts to mitigate many of these
risks through prudent banking practices, such as interest rate risk management, credit risk management, operational risk management, and liquidity risk management.
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 December 31, 2025, our commercial real estate portfolio totaled $70.9 million, including office properties of various types, totaling approximately $36.7 million or 51.8 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.
The Corporation remains committed to prudent risk management practices to mitigate potential risks and support customers in navigating any financial challenges that may arise. For additional information, see “Asset Quality” below.
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, in the form of originating loans or providing funds under existing lines of credit, loan sale agreements to third parties and option contracts. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying Condensed Consolidated Statements of Financial Condition. The Corporation’s exposure to credit loss, in the event of non-performance by the counterparty to these financial instruments, is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in entering into financial instruments with off-balance sheet risk as it does for on-balance sheet instruments. For a discussion on commitments and derivative financial instruments, see Note 6 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.
Total assets decreased one percent to $1.23 billion at December 31, 2025 from $1.25 billion at June 30, 2025. The decrease was primarily attributable to decreases in investment securities and loans held for investment.
Total cash and cash equivalents, primarily excess cash deposited with the FRB of San Francisco, increased $1.3 million, or two percent, to $54.4 million at December 31, 2025 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 million, or 10 percent, to $100.3 million at December 31, 2025, 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 six 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 million to $1.04 billion at December 31, 2025 from June 30, 2025, predominantly due to a decrease in multi-family loans, partly offset by an increase in single-family loans. During the first six months of fiscal 2026, the Corporation originated $71.8 million of loans held for investment, consisting primarily of single-family and multi-family loans located throughout California, compared to $65.4 million originated during the first six months of fiscal 2025. The Corporation did not purchase any loans during the first six months of fiscal 2026 or 2025. Total loan principal payments during the first six months of fiscal 2026 were $81.2 million, up 19 percent from $68.4 million during
the comparable period in fiscal 2025, reflecting elevated payoff and amortization activity. Single-family loans held for investment at December 31, 2025 and June 30, 2025 totaled $553.3 million and $544.4 million, representing approximately 54 percent and 52 percent of loans held for investment, respectively. Multi-family loans held for investment at December 31, 2025 and June 30, 2025 totaled $408.3 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 December 31, 2025 and June 30, 2025 totaled $70.9 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 December 31, 2025 and June 30, 2025, as a percentage of the total dollar amount of loans outstanding:
States
Loan Category
Percent
145,973
180,589
226,528
221
50,138
230,935
127,216
209,294
450,294
373,633
1,033,442
143,217
179,162
221,819
227
50,450
243,790
129,177
207,411
462,656
370,805
1,041,099
For further analysis on loans held for investment, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.
Total deposits decreased $16.4 million, or two percent, to $872.4 million at December 31, 2025 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 million, or three percent, to $558.8 million at December 31, 2025, from $576.5 million at June 30, 2025. Time deposits (including brokered certificates of deposit) increased $1.4 million to $313.7 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 December 31, 2025, total brokered certificates of deposit were $129.2 million, down $1.8 million, or one percent, from $131.0 million at June 30, 2025. Excluding brokered certificates of deposit, retail time deposits represented 21 percent of total deposits at December 31, 2025, compared to 20 percent at June 30, 2025.
47
Total uninsured deposits were approximately $166.4 million (of which, $52.6 million were collateralized) and $158.7 million (of which, $54.0 million were collateralized) at December 31, 2025 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 remained virtually unchanged at $213.1 million at December 31, 2025 and June 30, 2025. At December 31, 2025 and June 30, 2025, borrowings were 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 million, or one percent, to $127.5 million at December 31, 2025, from $128.5 million at June 30, 2025. The decrease was primarily due to $1.8 million of cash dividends paid to shareholders and $2.6 million of stock repurchases, partly offset by net income of $3.1 million and the amortization of stock-based compensation of $251,000 in the first six months of fiscal 2026. The Corporation repurchased 162,967 shares of its common stock in the open market at a weighted average price of $15.78 per share during the first six months of fiscal 2026 pursuant to its publicly announced stock repurchase program. For further analysis on stock repurchases, see Note 10 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10 Q.
Net income for the second quarter of fiscal 2026 was $1.4 million, up $564,000 or 65 percent from $872,000 in the same period of fiscal 2025. The increase was attributable to a $158,000 recovery of credit losses in contrast to a $586,000 provision for credit losses in the prior period, a $165,000 increase in net interest income and a $72,000 increase in non-interest income, partly offset by a $155,000 increase in non-interest expense.
For the first six months of fiscal 2026, net income was $3.1 million, up $345,000 or 12 percent from $2.8 million in the same period of fiscal 2025. The increase was primarily attributable to a $673,000 higher recovery of credit losses and a $479,000 increase in net interest income, partly offset by a $266,000 increase 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 80.77 percent for the second quarter of fiscal 2026, an improvement from 81.15 percent in the same period last year. For the first six months of fiscal 2026, the efficiency ratio was 79.57 percent, compared to 80.11 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 0.47 percent in the second quarter of fiscal 2026, up 19 basis points from 0.28 percent in the same period last year. For the first six months of fiscal 2026, return on average assets was 0.51 percent, up six basis points from 0.45 percent in the same period last year.
Return on average stockholders’ equity was 4.44 percent in the second quarter of fiscal 2026, up from 2.66 percent in the same period last year. For the first six months of fiscal 2026, return on average stockholders’ equity was 4.81 percent, up from 4.22 percent in the same period last year.
Diluted earnings per share for the second quarter of fiscal 2026 were $0.22, up 69 percent from $0.13 in the same period last year. For the first six months of fiscal 2026, diluted earnings per share were $0.47, up 15 percent from $0.41 in the same period last year.
Net Interest Income:
For the Quarters Ended December 31, 2025 and 2024. Net interest income increased $165,000, or two percent, to $8.9 million for the second quarter of fiscal 2026 from $8.8 million in the same quarter last year. The increase was due to a higher net interest margin, partly offset by a lower average balance of interest-earning assets. The 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 driven by a higher average yield 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. The average balance of interest-earning assets decreased $24.5 million, or two percent, to $1.18 billion in the second quarter of fiscal 2026 from $1.20 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. Similarly, the average balance of interest-bearing liabilities decreased $23.5 million, or two percent, to $1.07 billion in the second quarter of fiscal 2026 from $1.09 billion in the same quarter last year primarily reflecting decreases in the average balance of transaction accounts and borrowings, partly offset by an increase in the average balance of time deposits.
For the Six Months Ended December 31, 2025 and 2024. Net interest income increased $479,000 or three percent to $17.9 million for the first six months of fiscal 2026 from $17.4 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 3.01 percent in the first six months of fiscal 2026, an increase of 14 basis points from 2.87 percent in the same period of fiscal 2025. The weighted-average yield on interest-earning assets increased 10 basis points to 4.74 percent in the first six months of fiscal 2026 from 4.64 percent in the same period last year, while the weighted-average cost of interest-bearing liabilities decreased four basis points to 1.90 percent for the first six months of fiscal 2026 as compared to 1.94 percent in the same period last year. The average balance of interest-earning assets decreased $23.8 million, or two percent, to $1.19 billion in the first six months of fiscal 2026 from $1.21 billion in the comparable period of fiscal 2025, primarily reflecting decreases in the average balance of loans receivable and investment securities, partly offset by an increase in interest-earning deposits. The average balance of interest-bearing liabilities decreased $23.5 million, or two percent, to $1.07 billion in the first six months of fiscal 2026 from $1.10 billion in the same period last year primarily reflecting decreases in the average balance of transaction accounts and borrowings, partly offset by an increase in the average balance of time deposits.
Interest Income:
For the Quarters Ended December 31, 2025 and 2024. Total interest income decreased $71,000, or one percent, to $14.0 million for the second quarter of fiscal 2026 from the same quarter of fiscal 2025. The decrease was due primarily to decreases in interest income from investment securities and interest-earning deposits, partly offset by an increase in interest income from loans receivable.
Interest income on loans receivable increased $22,000 to $13.1 million in the second quarter of fiscal 2026 from the same quarter of fiscal 2025. The increase was due to a higher average yield, partly offset by a lower average balance. The average yield on loans receivable increased three basis points to 5.02 percent in the second quarter of fiscal 2026 from an average yield of 4.99 percent in the same quarter last year. The higher 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 second quarter of fiscal 2026 increased 40 percent to $534,000 from $381,000 in the same quarter last year. The average balance of loans receivable decreased $5.6 million, or one percent, to $1.04 billion in the second quarter of fiscal 2026 from $1.05 billion in the same quarter last year. Total loans originated for investment in the second quarter of fiscal 2026 were $42.1 million, up 16 percent from $36.4 million in the same quarter last year; while loan principal payments received in the second quarter of fiscal 2026 were $46.7 million, up 36 percent from $34.3 million in the same quarter last year.
Interest income from investment securities decreased $60,000, or 13 percent, to $411,000 in the second quarter of fiscal 2026 from $471,000 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 million, or 17 percent, to $103.3 million in the second quarter of fiscal 2026 from $123.8 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 seven basis points to 1.59 percent in the second quarter of fiscal 2026 from 1.52 percent for the same quarter last year. The increase in the average yield was primarily attributable to a lower premium amortization during the current quarter in comparison to the same quarter last year ($66,000 vs. $97,000) due to lower total principal repayments ($5.1 million vs. $5.3 million) and the upward repricing of adjustable-rate mortgage-backed securities.
The Bank received $214,000 of cash dividends from FHLB – San Francisco stock and other equity investments in the second quarter of fiscal 2026, slightly higher than the $213,000 in the same quarter last year. The average balance of FHLB – San Francisco stock and other equity investments in the second quarter of fiscal 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.
Interest income from interest-earning deposits, primarily cash deposited at the FRB of San Francisco, was $253,000 in the second quarter of fiscal 2026, down 12 percent from $287,000 in the same quarter 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 in the second quarter of fiscal 2026 was 3.92 percent, down 82 basis points from 4.74 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 increased $1.6 million, or seven percent, to $25.3 million in the second quarter of fiscal 2026 from $23.7 million in the same quarter last year due to management’s proactive strategy to manage liquidity in response to prevailing economic conditions.
For the Six Months Ended December 31, 2025 and 2024. Total interest income was $28.1 million for the first six months of fiscal 2026, unchanged from the same period of fiscal 2025. The increase in interest income on loans receivable was offset by decreases in interest income on investment securities and interest-earning deposits.
Interest income from loans receivable increased $130,000 to $26.2 million in the first six months of fiscal 2026 from $26.1 million for the same period of fiscal 2025. The increase was due to a higher average yield, partly offset by a lower average balance. The average yield on 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. The average balance of loans receivable decreased by $7.6 million, or one percent, to $1.04 billion for the first six months of fiscal 2026 from $1.05 billion in the same period of fiscal 2025. Total loans originated for investment in the first six months of fiscal 2026 were $71.8 million, up 10 percent from $65.4 million in the same period last year. Loan principal payments received in the first six months of fiscal 2026 were $81.2 million, up 19 percent from $68.4 million in the same period last year.
Interest income from investment securities decreased $112,000, or 12 percent, to $841,000 in the first six months of fiscal 2026 from $953,000 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 million, or 16 percent, to $106.0 million in the first six months of fiscal 2026 from $126.7 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 nine basis points to 1.59 percent in the first six months of fiscal 2026 from 1.50 percent in the same period of fiscal 2025. The increase in the average yield was primarily attributable to lower premium amortization ($140,000 compared to $208,000) attributable to lower principal repayments ($10.6 million vs. $11.1 million) 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 six months of fiscal 2026 were $425,000, up $2,000 from $423,000 in the same period of fiscal 2025. The average balance of FHLB – San Francisco stock and other equity investments in the first six months 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 8.34 percent.
Interest income from interest-earning deposits, primarily cash deposited at the FRB of San Francisco, was $627,000 in the first six months of fiscal 2026, down three percent from $647,000 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 89 basis points to 4.17 percent in the first six months of fiscal 2026 from 5.06 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 six months of fiscal 2026 was $29.4 million, up 18 percent, from $25.0 million in the same
period of fiscal 2025 due to management’s proactive strategy to manage liquidity in response to prevailing economic conditions.
Interest Expense:
For the Quarters Ended December 31, 2025 and 2024. Total interest expense decreased $236,000 or four percent to $5.0 million in the second quarter of fiscal 2026 as compared to $5.3 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 second quarter of fiscal 2026 was $2.9 million, a $251,000 or nine percent increase compared to $2.7 million in the same quarter 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 $13.3 million, or two percent, to $876.4 million in the second quarter of fiscal 2026 from $863.1 million in the same quarter last year due to an increase in time deposits, partly offset by decreases in transaction accounts. The average balance of time deposits (including brokered certificates of deposit) increased $46.8 million, or 18 percent, to $309.7 million in the second quarter of fiscal 2026 from $262.9 million in the same quarter last year, while the average balance of transaction accounts was $566.6 million in the second quarter of fiscal 2026, down $33.6 million, or six percent, from $600.2 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 of FHLB – San Francisco advances, for the second quarter of fiscal 2026 decreased $487,000, or 19 percent, to $2.1 million from $2.6 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 average balance of borrowings decreased $36.7 million or 16 percent to $190.0 million in the second quarter of fiscal 2026 from $226.7 million in the same quarter last year. The average cost of borrowings decreased 14 basis points to 4.39 percent in the second quarter of fiscal 2026 from 4.53 percent in the same quarter last year.
For the Six Months Ended December 31, 2025 and 2024. Total interest expense decreased $479,000, or four percent to $10.2 million in the first six months of fiscal 2026 from $10.7 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 six months of fiscal 2026 was $5.9 million, an eight percent increase from $5.5 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 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 first six months of fiscal 2026, compared to 30 percent in the same period last year.
Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the first six months of fiscal 2026 decreased $892,000, or 17 percent, to $4.3 million from $5.2 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. The average balance of borrowings decreased by $32.3 million or 14 percent to $191.4 million in the first six months of fiscal 2026 from $223.7 million in the same period last year and the average cost of borrowings decreased 14 basis points to 4.49 percent in the first six months of fiscal 2026 from 4.63 percent in the same period last year.
The following table sets forth certain information for the periods regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities and average yields and costs thereof. Yields and costs for the periods indicated are derived by dividing income or expense, annualized, by the average daily balance of corresponding assets or liabilities, respectively, for the periods presented.
Average Balance Sheets
Yield/
Interest-earning assets:
Loans receivable, net(1)
1,041,187
5.02
1,046,797
4.99
103,262
1.59
123,826
1.52
FHLB – San Francisco stock and other equity investments
10,262
8.34
10,172
8.38
25,267
3.92
23,700
4.74
Total interest-earning assets
1,179,978
4.73
1,204,495
4.66
Noninterest-earning assets
30,550
30,273
1,210,528
1,234,768
Interest-bearing liabilities:
Checking and money market accounts(2)
339,714
364,038
Savings accounts
226,931
0.34
236,178
309,732
3.42
262,890
3.78
Total deposits(3)
876,377
2,925
1.32
863,106
2,674
1.23
189,977
4.39
226,707
4.53
Total interest-bearing liabilities
1,066,354
1.87
1,089,813
1.92
Noninterest-bearing liabilities
14,949
13,820
1,081,303
1,103,633
Stockholders’ equity
129,225
131,135
Interest rate spread(4)
2.86
2.74
Net interest margin(5)
Ratio of average interest- earning assets to average interest-bearing liabilities
110.66
110.52
1,040,360
5.04
1,047,964
4.98
105,980
126,698
1.50
10,274
8.27
10,146
29,390
4.17
25,015
5.06
1,186,004
1,209,823
4.64
30,458
30,127
1,216,462
1,239,950
342,508
367,654
228,509
0.32
239,101
0.19
309,647
3.48
265,089
3.87
880,664
5,911
1.33
871,844
5,498
1.25
191,415
4.49
223,723
4.63
1,072,079
1.90
1,095,567
1.94
14,764
13,066
1,086,843
1,108,633
129,619
131,317
2.84
2.70
110.63
110.43
The following table sets forth the effects of changing rates and volumes on interest income and expense for the quarters and six months ended December 31, 2025 and 2024. 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.
Rate/Volume Variance
Quarter Ended December 31, 2025 Compared
To Quarter Ended December 31, 2024
Increase (Decrease) Due to
Rate
Volume
Rate/Volume
Loans receivable(1)
(70)
(78)
(60)
(50)
Total net change in income on interest-earning assets
(127)
(71)
Checking and money market accounts
(237)
(43)
166
(81)
(419)
(487)
Total net change in expense on interest-bearing liabilities
(220)
(236)
Net increase (decrease) in net interest income
283
(145)
165
Six Months Ended December 31, 2025 Compared
To Six Months Ended December 31, 2024
321
(189)
130
(155)
(112)
(19)
(20)
258
(228)
156
139
(510)
869
(88)
(161)
(754)
(892)
(515)
(72)
(479)
773
(336)
Provision for (Recovery of) Credit Losses:
For the Quarters Ended December 31, 2025 and 2024. During the second quarter of fiscal 2026, the Corporation recorded a recovery of credit losses of $158,000 in contrast to a $586,000 provision for credit losses recorded during the same period last year. The recovery compared to the same quarter last year was primarily due to the impact of a shorter
expected average life of the loan portfolio, attributable to declining mortgage rates, which increased expected loan prepayments. The recovery was primarily concentrated in single-family mortgage loans, with a smaller contribution from multi-family mortgage loans.
The following chart quantifies the factors contributing to the changes in the ACL on loans held for investment (“LHFI”) for the quarters ended December 31, 2025 and 2024.
The changes in the ACL on LHFI for the quarter ended December 31, 2025:
The changes in the ACL on LHFI for the quarter ended December 31, 2024:
For the Six Months Ended December 31, 2025 and 2024. During the first six months of fiscal 2026, the Corporation recorded a recovery of credit losses of $784,000, compared to a recovery of credit losses of $111,000 in the same period of fiscal 2025. The higher recovery compared to the same period last year was primarily due to the impact of a shorter expected average life of the loan portfolio, attributable to declining mortgage rates, which increased expected loan prepayments. The recovery was primarily concentrated in single-family mortgage loans, with a smaller contribution from multi-family mortgage loans.
The following chart quantifies the factors contributing to the changes in the ACL on loans held for investment (“LHFI”) for the six months ended December 31, 2025 and 2024.
The changes in the ACL on LHFI for the six months ended December 31, 2025:
The changes in the ACL on LHFI for the six months ended December 31, 2024:
At December 31, 2025, the ACL on loans held for investment was $5.6 million, all of which was comprised of collectively evaluated allowances. This represents a 12 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 0.55 percent at December 31, 2025, 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 December 31, 2025, 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.
Non-Interest Income:
For the Quarters Ended December 31, 2025 and 2024. Non-interest income increased by $72,000, or nine percent, to $917,000 in the second quarter of fiscal 2026 from $845,000 in the same period last year, due to a $116,000, or 193 percent, increase in loan servicing and other fees due to higher loan prepayment fees, partly offset by modest decrease in each of the other categories of non-interest income.
For the Six Months Ended December 31, 2025 and 2024. Non-interest income decreased $14,000, or one percent, to $1.7 million in the first six months of fiscal 2026 from the same period last year, due primarily to decreases 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, or 26 percent, to $282,000 in the first six months of fiscal 2026, due primarily to a $9,000 unrealized loss on other equity investments in contrast to a $110,000 unrealized gain on other equity investments in the same period last year.
Non-Interest Expense:
For the Quarters Ended December 31, 2025 and 2024. Non-interest expense increased $155,000, or two percent, to $7.9 million in the second quarter of fiscal 2026 from $7.8 million for the same quarter last year. The increase was primarily due to increases in other non-interest expense and equipment expense, partly offset by a decrease in premises and occupancy expenses.
Other non-interest expense increased $176,000, or 20 percent, to $1.1 million from $883,000 in the same quarter last year, primarily due to a non-recurring $214,000 pre-litigation voluntary mediation settlement expense related to an employment matter.
Equipment expense increased $100,000, or 26 percent, to $479,000 from $379,000 in the same quarter last year, primarily due to software upgrades and maintenance; while premises and occupancy expenses decreased $66,000, or seven percent, to $851,000 from $917,000 in the same quarter last year, primarily due to lower building maintenance and depreciation expenses.
For the Six Months Ended December 31, 2025 and 2024. Non-interest expenses increased $266,000, or two percent, to $15.6 million in the first six months of fiscal 2026 from $15.3 million in the same period last year. The increase was primarily due to increases in equipment expense and other non-interest expenses.
Equipment expense increased $163,000, or 23 percent, to $885,000 in the first six months of fiscal 2026 from $722,000 in the same period of fiscal 2025, primarily due to software upgrades and maintenance.
Other operating expenses increased $146,000, or nine percent, to $1.8 million in the first six months of fiscal 2026 from $1.7 million in the same period last year. The increase was due primarily to the $214,000 non-recurring item described above.
Provision for Income Taxes:
For the Quarters Ended December 31, 2025 and 2024. The income tax provision was $614,000 for the second quarter of fiscal 2026, up 74 percent from $352,000 in the same quarter last year primarily due to a higher pre-tax income. The effective tax rate in the second quarter of fiscal 2026 was 30.0 percent as compared to 28.8 percent in the same quarter last year.
For the Six Months Ended December 31, 2025 and 2024. The income tax provision was $1.7 million for the first six months of fiscal 2026, up 46 percent from $1.1 million in the same period last year primarily due to a higher pre-tax income and a $251,000 adjustment recorded in the first quarter of fiscal 2026 related to the write-off of deferred tax assets associated with expired non-qualified stock options, which reduced the expected tax benefit. The effective tax rate in the first six months of fiscal 2026 and 2025 was 34.9 percent and 29.2 percent, respectively.
The income tax provision reflects accruals for taxes at the applicable rates for federal income tax and California franchise tax based upon reported pre-tax income, adjusted for the effect of all permanent differences between income for tax and financial reporting purposes, such as non-deductible stock-based compensation and earnings from bank-owned life insurance policies, among others. Therefore, there are fluctuations in the effective income tax rate from period to period based on the relationship of net permanent differences to income before tax.
Non-performing assets were comprised of four non-performing single-family loans and one multi-family loan at December 31, 2025, compared to seven non-performing single-family loans and one multi-family loan at June 30, 2025. These non-performing loans, net of the ACL, were secured by collateral located in California and totaled $990,000 at December 31, 2025, down 30 percent from $1.4 million at June 30, 2025. Non-performing loans as a percentage of LHFI at December 31, 2025 was 0.10 percent, compared to 0.14 percent at June 30, 2025. No interest accruals were made for non-performing loans. There were no accruing loans 90 days or more past due, and no real estate owned at either December 31, 2025 or June 30, 2025. For further analysis on non-performing loans, see the tables below and Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.
The following table sets forth information with respect to the Corporation’s non-performing assets, net of ACL, at the dates indicated:
At December 31,
At June 30,
Loans on non-performing status
Accruing loans past due 90 days or more
Real estate owned, net
Total non-performing assets
Non-performing loans as a percentage of LHFI, net of ACL
0.10
0.14
Non-performing loans as a percentage of total assets
0.11
The following table summarizes classified assets, which is comprised of classified loans, net of ACL and real estate owned, if any, at the dates indicated:
Count
Special mention loans:
1,003
Total special mention loans
1,065
Substandard loans:
1,233
1,481
2,680
Total substandard loans
2,010
Total classified loans
4,978
Real estate owned
Total classified assets
Total classified assets as a percentage of total assets
0.16
0.40
A decline in real estate values subsequent to the time of origination of the Corporation’s real estate secured loans could result in higher loan delinquency levels, foreclosures, provision for credit losses and net charge-offs. Real estate values and real estate markets are beyond the Corporation’s control and are generally affected by changes in national, regional or local economic conditions, and other factors. These factors include fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes, fires and national disasters particular to California where substantially all of the Corporation’s real estate collateral is located. If real estate values decline, the value of the real estate collateral securing the Corporation’s loans as set forth in the table could be significantly overstated. The Corporation’s ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and it would be more likely to suffer losses on defaulted loans. The Corporation generally does not update the loan-to-value ratio on its loans held for investment by obtaining new appraisals or broker price opinions (nor does the Corporation intend to do so in the future as a result of the costs and inefficiencies associated with completing the task) unless a specific loan has demonstrated deterioration in which case individually evaluated allowances are established, if required.
The following table provides details related to the volume of loan originations, sales and principal payments for the quarters and six months indicated:
Loans originated for sale:
Wholesale originations
1,203
2,060
3,355
Total loans originated for sale
Loans sold:
Servicing retained
(1,203)
(2,060)
(3,355)
Total loans sold
Loans originated for investment:
30,415
29,583
49,539
52,032
9,925
6,495
18,429
11,685
1,782
365
3,794
1,625
Total loans originated for investment
42,122
36,443
65,392
Loan principal payments
(46,667)
(34,340)
(81,199)
(68,371)
Increase in other items, net⁽¹⁾
424
2,867
1,347
3,603
Net (decrease) increase in LHFI
(4,121)
4,970
(8,090)
624
The Corporation’s primary sources of funds are deposits, proceeds from principal and interest payments on loans and investment securities, proceeds from the maturity of loans and investment securities, FHLB – San Francisco advances, access to the discount window facility at the FRB of San Francisco and access to a federal funds facility with its correspondent bank. 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 Corporation is the origination and purchase of loans held for investment. During the first six months of fiscal 2026 and 2025, the Corporation originated loans held for investment of $71.8 million and $65.4 million, respectively, with no loan purchases during either period. At December 31, 2025, the Corporation had loan origination commitments totaling $10.1 million, undisbursed lines of credit totaling $1.3 million and undisbursed loan funds totaling $119,000. The Corporation anticipates having sufficient funds available to meet its current loan funding commitments. During the first six months of fiscal 2026 and 2025, total loan repayments were $81.2 million and $68.4 million, respectively.
The Corporation’s primary financing activity is gathering deposits and, when needed, borrowings, principally FHLB – San Francisco advances. During the first six months of fiscal 2026, total deposits decreased $16.4 million, or two percent, to $872.4 million, primarily due to a decline in transaction accounts. Time deposits, including brokered certificates of deposit, were $313.7 million and $312.3 million at December 31, 2025 and June 30, 2025, respectively. At December 31, 2025, time deposits with a principal amount of $250,000 or less and scheduled to mature in one year or less were $191.2
million and total time deposits with a principal amount of more than $250,000 and scheduled to mature in one year or less were $93.4 million. Historically, the Corporation has been able to retain most of its time deposits as they mature.
The Corporation maintains an adequate level of liquidity to ensure the availability of funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. At December 31, 2025, total cash and cash equivalents were $54.4 million, or four percent of total assets, to meet short-term liquidity needs. Depending on market conditions and the pricing of deposit products, the Bank may rely on FHLB – San Francisco advances for part of its liquidity needs. As of December 31, 2025, borrowings with the FHLB – San Francisco totaled $213.1 million. Financing availability at the FHLB – San Francisco is limited to 35 percent of total assets, resulting in a remaining borrowing capacity of $213.1 million with available collateral of $294.2 million at December 31, 2025. In addition, the Bank had a $193.3 million discount window facility at the FRB of San Francisco, collateralized by investment securities and single-family loans with a total balance of $331.5 million. As of December 31, 2025, the Bank also had a $50 million federal funds borrowing arrangement with its correspondent bank. No advances were outstanding under either the FRB discount window or the correspondent bank facility as of December 31, 2025.
The Bank continues to maintain accounts with both the FHLB - San Francisco and FRB of San Francisco to ensure that borrowing capacity is continuously reviewed and updated and can be accessed promptly if required. This includes establishing accounts and pledging assets as needed to optimize available liquidity. The total remaining available borrowing capacity across all sources totaled approximately $456.4 million at December 31, 2025.
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 December 31, 2025 was 7.5 percent, down from 8.9 percent for the quarter ended June 30, 2025.
On January 23, 2025, the Board of Directors approved a stock repurchase plan (the “January 2025 stock repurchase program”) authorizing the purchase of up to 334,773 shares of the Corporation’s outstanding common stock over a one-year period. On January 22, 2026, the Board of Directors authorized a new stock repurchase plan for up to five percent of the Corporation’s common stock, or 318,875 shares. The Corporation plans to purchase shares periodically in the open market or through privately negotiated transactions over a one-year period, subject to market conditions, the Corporation’s capital requirements, available cash, and other relevant factors. The January 2025 stock repurchase program was canceled effective January 23, 2026, with 16,825 shares remaining unpurchased under that program.
Provident Financial Holdings is a separate legal entity from the Bank and, on a stand-alone level, must provide for its own liquidity and pay its own operating expenses and cash dividends. Provident Financial Holdings’ primary sources of funds consist of capital raised through dividends or capital distributions from the Bank, although there are general regulatory restrictions on the ability of the Bank to pay dividends. Future dividend payments are subject to the Board’s discretion and applicable regulatory restrictions. The Corporation currently pays quarterly cash dividends on its common stock which may be modified, suspended, or terminated at any time. Our current quarterly common stock dividend rate is $0.14 per share, which is intended to balance the Corporation’s objectives of supporting the Bank’s operations and returning cash to shareholders. Assuming continued cash dividend payments during fiscal 2026 at $0.14 per share, our average total dividend paid each quarter would be approximately $898,000 based on the number of outstanding shares at December 31, 2025. At December 31, 2025, the Corporation (on an unconsolidated basis) had liquid assets of $9.1 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 about components, risk weighting and other factors.
At December 31, 2025, the Bank exceeded all regulatory capital requirements. The Bank was categorized as "well-capitalized" at December 31, 2025 under the regulations of the OCC. As a bank holding company registered with the Federal Reserve, Provident Financial Holdings, Inc. is also subject to the capital adequacy requirements of the Federal Reserve. For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis, and the Federal Reserve expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations.
61
The Bank’s actual and required minimum capital amounts and ratios at the dates indicated are as follows (dollars in thousands):
Regulatory Requirements
Minimum for Capital
Minimum to Be
Actual
Adequacy Purposes
Well Capitalized
Ratio
Ratio(1)
Provident Savings Bank, F.S.B.:
Tier 1 leverage capital (to adjusted average assets)
118,513
48,413
4.00
60,516
5.00
CET1 capital (to risk-weighted assets)
18.67
44,434
7.00
41,260
6.50
Tier 1 capital (to risk-weighted assets)
53,955
8.50
50,781
8.00
Total capital (to risk-weighted assets)
124,185
19.56
66,650
10.50
63,477
10.00
125,198
10.11
49,536
61,921
19.50
44,941
41,731
54,571
51,361
131,654
20.51
67,411
64,201
In addition to the minimum Tier 1, CET1 and Total capital ratios, the Bank is required to maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum capital levels. Failure to maintain the required buffer could result in limitations on the Bank’s ability to pay dividends, repurchase shares, and pay discretionary bonuses, based on specified percentages of eligible retained income. At December 31, 2025, the Bank’s capital exceeded the conservation buffer.
If the Bank does not have the ability to pay dividends to the Corporation, the Corporation may be limited in its ability to pay dividends to its stockholders. The Bank may not declare or pay a cash dividend if the effect thereafter would cause its net worth to be reduced below the regulatory capital requirements imposed by federal regulation. On September 25, 2025, the Bank paid a $10.5 million cash dividend to the Holding Company.
At
Loans serviced for others (in thousands)
32,809
34,423
35,064
Book value per share
19.87
19.54
19.18
ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk.
One of the Corporation’s principal financial objectives is to achieve long-term profitability while reducing its exposure to fluctuating interest rates. The Corporation has sought to reduce the exposure of its earnings to changes in interest rates by attempting to manage the repricing mismatch between interest-earning assets and interest-bearing liabilities. The principal element in achieving this objective is to increase the interest rate sensitivity of the Corporation’s interest-earning assets by retaining for its portfolio new loan originations with interest rates subject to periodic adjustment to market conditions.
In addition, the Corporation maintains an investment portfolio, which is largely comprised of U.S. government sponsored enterprise MBS with contractual maturities of up to 30 years. The Corporation relies on retail deposits as its primary source of funds while utilizing FHLB – San Francisco advances, brokered certificates of deposit and government deposits as a secondary source of funding. Management believes retail deposits, unlike brokered certificates of deposit, reduces the effects of interest rate fluctuations because they generally represent a more stable source of funds. As part of its interest rate risk management strategy, the Corporation promotes transaction accounts and time deposits with terms up to seven years.
Using an internal interest rate risk model, the Corporation is able to analyze the Bank’s interest rate risk exposure by measuring the change in net portfolio value (“NPV”) over a variety of interest rate scenarios. NPV is defined as the net present value of expected future cash flows from assets, liabilities and off-balance sheet commitments, if any. The calculation is intended to illustrate the change in NPV that would occur in the event of an immediate change in interest rates of -300, -200, -100, +100, +200 and +300 basis points (“bp”) with no consideration given to steps that management might take to counter the effect of the interest rate movement. As of December 31, 2025, the targeted federal funds rate range was 3.50% to 3.75%.
The following table is derived from the internal interest rate risk model and represents the NPV based on the indicated changes in interest rates as of December 31, 2025 (dollars in thousands).
Portfolio
NPV as Percentage
Basis Points ("bp")
NPV
Value of
of Portfolio Value
Sensitivity
Change in Rates
Change(1)
Assets(2)
Measure(3)
+300 bp
147,009
(12,036)
1,248,188
11.78
-75
bp
+200 bp
158,144
(901)
1,262,382
12.53
+100 bp
162,748
3,703
1,270,091
12.81
Base Case
159,045
1,269,542
-100 bp
151,956
(7,089)
1,265,658
12.01
-52
-200 bp
138,120
(20,925)
1,255,077
11.00
-153
-300 bp
141,316
(17,729)
1,261,582
11.20
-133
The following table is derived from the interest rate risk model and represents the change in the NPV at a -200 basis point rate shock at December 31, 2025 and June 30, 2025, each of which scenarios were the most severe shock of plus or minus 200 basis point rate shocks.
(-200 bp rate shock)
Pre-Shock NPV Ratio: NPV as a % of PV Assets
12.15
Post-Shock NPV Ratio: NPV as a % of PV Assets
11.17
Sensitivity Measure: Change in NPV Ratio
-98
The Bank’s interest rate risk profile remained stable during the first six months of fiscal 2026, as evidenced by both the pre-shock and post-shock NPV ratios. The pre-shock NPV ratio increased 38 basis points to 12.53 percent at December 31, 2025 from 12.15 percent at June 30, 2025, while the post-shock NPV ratio decreased 17 basis points to 11.00 percent at December 31, 2025 from 11.17 percent at June 30, 2025. These changes were primarily attributable to the net income in the first six months of fiscal 2026 and the changes in market interest rates and the composition of the balance sheet, partly offset by a $10.5 million cash dividend distribution from the Bank to Provident Financial Holdings in September 2025. The Bank’s NPV sensitivity measure, which reflects the change in economic value of equity under a -200 basis point rate shock, increased to 153 basis points at December 31, 2025 from 98 basis points at June 30, 2025. The overall results
indicate a strong capital position and resilience to changes in interest rates, consistent with the Corporation’s risk management strategy.
As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag changes in market interest rates. Additionally, certain assets, such as adjustable-rate mortgage (“ARM”) loans, have features that restrict changes in interest rates on a short-term basis and over the life of the loan. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from time deposits could likely deviate significantly from those assumptions used when calculating the results described in the tables above. It is also possible that, as a result of an interest rate increase, the higher mortgage payments required from ARM loans could result in an increase in delinquencies and defaults. Accordingly, the data presented in the tables in this section should not be relied upon as indicative of actual results in the event of changes in interest rates. Furthermore, the NPV presented in the foregoing tables is not intended to present the fair market value of the Bank, nor does it represent amounts that would be available for distribution to shareholders in the event of the liquidation of the Bank.
The Corporation measures and evaluates the potential effects of interest rate movements through an interest rate sensitivity "gap" analysis. Interest rate sensitivity reflects the potential effect on net interest income when there is movement in interest rates. For loans held for investment, investment securities, deposits and borrowings with contractual maturities, the table presents contractual repricing or scheduled maturity. For transaction accounts (checking, money market and savings deposits) that have no contractual maturity, the table presents estimated principal cash flows and, as applicable, the Corporation’s historical experience, management’s judgment and statistical analysis concerning their most likely withdrawal behaviors.
64
The following table represents the interest rate gap analysis of the Corporation’s assets and liabilities as of December 31, 2025:
Term to Contractual Repricing, Estimated Repricing, or Contractual
Maturity(1)
Greater than
12 months or
1 year to 3
3 years to
5 years or
less
years
5 years
non-sensitive
Repricing Assets:
48,217
6,153
5,306
94,997
Loans held for investment
301,398
231,755
194,147
310,355
Other assets
21,169
25,275
369,316
432,674
Repricing Liabilities and Equity:
Checking deposits - noninterest-bearing
Checking deposits - interest bearing
35,163
70,325
58,605
234,418
45,075
90,150
225,375
Money market deposits
11,837
11,836
23,673
284,568
24,594
4,344
146
313,652
134,000
79,060
Other liabilities
13,881
Stockholders' equity
Total liabilities and stockholders' equity
511,669
275,965
164,819
275,439
Repricing gap (negative) positive
(142,353)
(44,210)
29,328
157,235
Cumulative repricing gap:
Dollar amount
(186,563)
(157,235)
Percent of total assets
(15)
(13)
The static gap analysis under “12 months or less” duration, “Greater than 1 year to 3 years” duration and “Greater than 3 years to 5 years” duration show negative positions in the "Cumulative repricing gap - dollar amount" category, indicating more liabilities are sensitive to repricing than assets in the short and intermediate terms. Management views noninterest-bearing deposits to be the least sensitive to changes in market interest rates and these accounts are therefore characterized as long-term funding. Interest-bearing checking deposits are considered more sensitive, followed by increased sensitivity for savings and money market deposits. For gap calculation purposes, certain interest-bearing deposit balances are assumed to reprice at the following estimated rates: interest-bearing checking deposits at 15% per year, savings deposits at 20% per year and money market deposits at 50% in the first and second years.
The gap results presented above could vary substantially if different assumptions are used or if actual experience differs from the assumptions used in the preparation of the gap analysis. Furthermore, the gap analysis provides a static view of
interest rate risk exposure at a specific point in time without taking into account redirection of cash flow activity and deposit fluctuations.
The impact of changes in prevailing interest rates on the Bank’s net interest margin will depend on how quickly interest-earning assets and interest-bearing liabilities adjust to rate changes. Rates on certain assets or liabilities may lag behind market rates, and factors such as loan prepayments or early deposit withdrawals can further affect cash flows. Management believes the results of the interest rate sensitivity analysis reflect the Bank’s current asset-liability positioning, but the projected changes in net interest income assume immediate and sustained shifts in market rates and do not include any actions management might take in response. Actual results could differ materially due to variations in customer behavior, market conditions, and competitive pressures.
The Bank also models the sensitivity of net interest income for the 12-month period subsequent to any given month-end assuming a dynamic balance sheet accounting for, among other items:
The following table describes the results of the sensitivity of the Bank’s net interest income analysis at December 31, 2025 and June 30, 2025.
Basis Point (bp)
Change in
Net Interest Income
-0.68%
-1.35%
+2.67%
+2.01%
+2.84%
+2.23%
-1.98%
-1.80%
-3.76%
-3.24%
-10.23%
-6.38%
At both December 31, 2025 and June 30, 2025, the Bank was in a slightly asset sensitive position as its interest-earning assets were expected to reprice more favorably than its interest-bearing liabilities during the subsequent 12-month period. Therefore, in a rising interest rate environment, the model projects an increase in net interest income over the subsequent 12-month period, with the exception of the +300 basis point scenario at December 31, 2025, where projected net interest income slightly declines due to embedded rate caps and other factors. In a falling interest rate environment, the results project a decrease in net interest income over the subsequent 12-month period.
Management believes the assumptions used in the analysis presented in the table above are reasonable. However, historical experience indicates that immediate, permanent, and parallel shifts in interest rates do not necessarily occur. While the analysis provides a tool to evaluate projected net interest income under changes in interest rates, actual results may differ significantly if actual experience varies from the assumptions, particularly with respect to the 12-month business plan and projected asset growth. The results of this model are intended as a risk management tool to evaluate trends in net interest income over time, in the context of actual Treasury yield curve performance, and should not be interpreted as a precise forecast.
ITEM 4 – Controls and Procedures.
(a) An evaluation of the Corporation’s disclosure controls and procedures (as defined in Section 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934 (the “Act”)) was carried out under the supervision and with the participation of the Corporation’s Chief Executive Officer (principal executive officer), Chief Financial Officer (principal financial and accounting officer) and the Corporation’s Disclosure Committee as of the end of the period covered by this quarterly report. In designing and evaluating the Corporation’s disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Also, because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been detected. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures as of December 31, 2025 were effective, at the reasonable assurance level, in ensuring that the information required to be disclosed by the Corporation in the reports it files or submits under the Act is (i) accumulated and communicated to the Corporation’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
(b) There have been no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended December 31, 2025, that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting. The Corporation does not expect that its internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
Periodically, there have been various claims and lawsuits involving the Corporation, such as claims to enforce liens, condemnation proceedings on properties in which the Corporation holds security interests, claims involving the making and servicing of real property loans, employment matters and other issues in the ordinary course of and incidental to the Corporation’s business. These proceedings and the associated legal claims are often contested and the outcome of individual matters is not always predictable. Additionally, in some actions, it is difficult to assess potential exposure because the Corporation is still in the early stages of the litigation.
The Corporation is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, operations or cash flows.
Item 1A. Risk Factors.
There have been no material changes in the risk factors previously disclosed in Part I, Item 1A of the Corporation’s 2025 Annual Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Maximum
Total Number of
Number of Shares
Shares Purchased as
that May Yet Be
Average Price
Part of Publicly
Purchased Under
Period
Shares Purchased
Paid per Share
Announced Plan
the Plan(1)
October 1, 2025 – October 31, 2025
36,781
15.82
113,540
November 1, 2025 – November 30, 2025
17,156
15.58
96,384
December 1, 2025 – December 31, 2025
42,323
15.87
54,061
96,260
15.80
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
Exhibits:
3.1
Amended and Restated Certificate of Incorporation of Provident Financial Holdings, Inc. as filed with the Delaware Secretary of State on November 24, 2009 (incorporated by reference to Exhibit 3.1 to the Corporation’s Quarterly Report on Form 10-Q filed on November 9, 2010)
3.2
Amended and Restated Bylaws of Provident Financial Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Corporation’s Form 8-K filed on November 30, 2022)
4.1
Form of Certificate of Provident’s Common Stock (incorporated by reference to the Corporation’s Registration Statement on Form S-1 (333-2230) filed on March 11, 1996)
Description of Capital Stock of Provident Financial Holdings, Inc. (incorporated by reference to Exhibit 4.2 to the Corporation’s Annual Report on Form 10-K for the year ended June 30, 2019)
10.1
Employment Agreement with Donavon P. Ternes (incorporated by reference to Exhibit 10.14 to the Corporation’s Form 8-K dated October 31, 2023)
10.2
Form of Severance Agreement with Avedis Demirdjian, Peter C. Fan, Glee A. Harris, Robert "Scott" Ritter, David S. Weiant and Gwendolyn L. Wertz (incorporated by reference to Exhibit 10.3 to the Corporation’s Form 8-K dated May 23, 2025)
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101
The following materials from the Corporation’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2025, formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Statements of Financial Condition; (2) Condensed Consolidated Statements of Operations; (3) Condensed Consolidated Statements of Comprehensive Income; (4) Condensed Consolidated Statements of Stockholders’ Equity; (5) Condensed Consolidated Statements of Cash Flows; and (6) Selected Notes to Condensed Consolidated Financial Statements.
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Provident Financial Holdings, Inc.
Date: February 6, 2026
/s/ Donavon P. Ternes
Donavon P. Ternes
President and Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)
/s/ Peter C. Fan
Peter C. Fan
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)