What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2021-02-08 · 352 added, 366 removed, 461 unchanged (61% of the section changed)

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The Corporation is regulated by the Federal Reserve Board (“FRB”).

At December 31, 2020, the Corporation had

total assets of $1.17 billion, total deposits of $910.0 million and total stockholders’ equity of $125.0 million.

The Corporation 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.

consolidated subsidiaries, unless the context indicates otherwise.

At March 31, 2021, the Corporation had total

assets of $1.19 billion, total deposits of $933.8 million and total stockholders’ equity of $125.8 million.

The Corporation 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.

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.

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The Corporation began to distribute quarterly cash dividends in the quarter ended September 30, 2002.

On October 29, 2020, the Corporation declared a quarterly cash dividend of $0.14 per share for

the Corporation’s shareholders of record at the close of business on November 19, 2020, which was paid on December 10, 2020.

On January 28, 2021, the Corporation declared a quarterly cash dividend of $0.14 per share for

the Corporation’s shareholders of record at the close of business on February 18, 2021, which was paid on March 11, 2021.

Future declarations or payments of dividends will be subject to the consideration of the Corporation’s Board of Directors,

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the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the

residential and commercial real estate markets and may lead to increased losses and non-performing assets and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our reserve;

changes in general economic conditions, either nationally or in our market areas;

changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest

margin and funding sources;

uncertainty regarding the future of the London

Interbank Offered Rate ("LIBOR"), and the potential transition away from LIBOR toward new interest rate benchmarks;

residential and commercial real estate markets and may lead to increased losses and non-

performing assets and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our reserve;

changes in general economic

conditions, either nationally or in our market areas;

changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources;

uncertainty regarding the future of the London Interbank Offered Rate ("LIBOR"), and the potential transition away from LIBOR toward new interest rate benchmarks;

fluctuations in the demand for loans, the number of unsold homes, land and other

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interpretation on accounting issues and details of the implementation of new accounting methods;

including as a result of the Coronavirus Aid, Relief, and Economic Security Act for 2020 (“CARES Act”), Interagency Statement and the Consolidated

Appropriations Act 2021;

including as a result of the Coronavirus Aid, Relief, and Economic Security Act for 2020 (“CARES Act”) as amended by the Consolidated Appropriations Act

2021 (“CAA”) and the related Revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (“Interagency Statement”);

war or terrorist activities;

and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services, including the CARES Act, Interagency Statement and

recent Covid-19 vaccination efforts, the Revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (“Interagency Statement”), and other risks detailed in this

report and in the Corporation’s other reports filed with or furnished to the SEC.

and other economic,

competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services, including as a result of COVID-19 and recent COVID-19 vaccination and economic stimulus efforts, and other risks detailed in

this report and in the Corporation’s other reports filed with or furnished to the SEC.

These developments could have an adverse impact on our financial position and our results of operations.

Forward-looking statements are based upon management’s beliefs

and assumptions at the time they are made.

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

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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

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 policies are described in the Corporation’s 2020 Annual Report on Form 10-K for the year ended June 30, 2020 in the Critical Accounting Policies section of

Management's Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 - Organization and Significant Accounting Policies.

There have been no significant changes during the six months ended December 31, 2020 to the

There have been no significant changes during the nine months ended March 31, 2021 to the

critical accounting policies as described in the Corporation’s 2020 Annual Report on Form 10-K for the period ended June 30, 2020.

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Since the majority of the Corporation’s

loans are secured by real estate located within California, significant declines in the value of California real estate may also inhibit the Corporation’s ability to recover on defaulted loans by selling the underlying real estate.

loans are secured by real estate located within California, significant

declines in the value of California real estate may also inhibit the Corporation’s ability to recover on defaulted loans by selling the underlying real estate.

COVID-19 Impact to the Corporation

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family members seeking counseling services for mental health and emotional support needs.

The Corporation also adheres to the Families First Coronavirus Response Act (FFCRA), which requires certain employers to provide employees with paid sick leave

or expanded family and medical leave for specified reasons related to COVID-19, providing additional flexibility to its employees to help navigate their individual challenges.

The Corporation also adheres to the Families First Coronavirus Response Act (“FFCRA”), which requires certain employers to provide employees with paid sick

leave or expanded family and medical leave for specified reasons related to COVID-19, providing additional flexibility to its employees to help navigate their individual challenges.

In addition, the Corporation adheres to the American Rescue Plan Act

of 2021 (“ARPA”) and California’s 2021 COVID-19 Supplemental Paid Sick Leave (“CSPSL”) legislation, which require certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to

COVID-19, providing additional flexibility to its employees to help navigate their individual challenges.

During the COVID-19 pandemic, taking care of customers and providing uninterrupted access to services are top priorities for the Corporation.

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For commercial and consumer customers, the Corporation has provided relief options, including payment

deferrals from 60 days to 180 days and fee waivers.

On December 27, 2020, the Consolidated Appropriations Act 2021 (H.R.

133) was signed into law.

Among other purposes, this act provides coronavirus emergency response and relief, including extending

relief offered under the CARES Act related to restructured loans as a result of COVID-19 through January 1, 2022 or 60 days after the end of the national emergency declared by the President, whichever is earlier.

As of December 31, 2020, the Corporation has six single-family forbearance loans, with outstanding balances of $1.8 million or 0.21 percent of total loans, and two multi-family loans with

outstanding balances of $763,000 or 0.09 percent of total loans that were modified in accordance with the CARES Act and Interagency Statement.

In addition, as of December 31, 2020, the Corporation had two pending requests for payment relief for a

single-family loan of $684,000 and a multi-family loan of $1.1 million.

deferrals from 60 days to one year and fee waivers.

On December 27, 2020, the CAA was signed into law.

Among other purposes, this act provides coronavirus emergency response and relief, including extending relief offered under the CARES Act related

to restructured loans as a result of COVID-19 through January 1, 2022 or 60 days after the end of the national emergency declared by the President, whichever is earlier.

As of March 31, 2021, the Corporation has five single-family forbearance loans, with outstanding balances of $1.8 million or 0.21 percent of total loans, one multi-family loan with an outstanding

balance of $308,000 or 0.04 percent of total loans and one commercial real estate loan with an outstanding balance of $945,000 or 0.11 percent of total loans that were modified in accordance with the CARES Act and Interagency Statement.

as of March 31, 2021, the Corporation had no pending requests for payment relief.

For additional information, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements

Interest income continues to be recognized during the payment deferrals, unless the loans are non-performing.

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The forbearance amount will be due and payable in full as a balloon payment at the end of the loan term or sooner if the loan becomes due and payable in full at an earlier date.

All loans modified due to COVID-19 will be separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further

All loans modified due to COVID-19 are separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further

modification should be granted and if a downgrade in risk rating is appropriate.

As of December 31, 2020, loan forbearance related to COVID-19 hardship requests are described below:

Forbearance Granted

Forbearance Completed (1)

Forbearance Remaining

(Dollars In Thousands)

Single-family loans

Multi-family loans

Commercial real estate loans

Total loan forbearance

Includes 16 single-family loans totaling $6.3 million which were subsequently extended and classified as restructured loans consistent with the Interagency Statement.

As of December 31, 2020, certain characteristics of loans in forbearance are described below:

(Dollars In Thousands)

Weighted Avg.

Single-family loans

Multi-family loans

Total loans in forbearance

Current loan balance in comparison to the original appraised value.

At time of loan origination, borrowers and/or guarantors.

At time of loan origination.

The Corporation believes the steps we are taking are necessary to effectively manage its portfolio and assist the borrowers through the ongoing uncertainty surrounding the duration, impact and

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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.

Comparison of Financial Condition at December 31, 2020 and June 30, 2020

Total assets decreased $6.1 million, or one percent, to $1.17 billion at December 31, 2020 from June 30, 2020.

The decrease was primarily attributable to decreases in cash and cash equivalents and

loans held for investment, partly offset by an increase in investment securities.

Total cash and cash equivalents, primarily excess cash deposited with the Federal Reserve Bank of San Francisco, decreased $42.0 million, or 36 percent, to $74.0 million at December 31, 2020 from

For a discussion on

commitments and derivative financial instruments, see Note 6 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

Comparison of Financial Condition at March 31, 2021 and June 30, 2020

Total assets increased $12.5 million, or one percent, to $1.19 billion at March 31, 2021 from June 30, 2020.

The increase was primarily attributable to an increase in investment securities, partly

offset by decreases in cash and cash equivalents and loans held for investment.

Total cash and cash equivalents, primarily excess cash deposited with the Federal Reserve Bank of San Francisco, decreased $44.4 million, or 38 percent, to $71.6 million at March 31, 2021 from

$116.0 million at June 30, 2020.

The decrease in the total cash and cash equivalents was primarily attributable to the utilization of cash to fund purchases of investment securities and to payoff borrowings.

Investment securities (held to maturity and available for sale) increased $84.0 million, or 68 percent, to $207.3 million at December 31, 2020 from $123.3 million at June 30, 2020.

The decrease in total cash and cash equivalents was primarily attributable to the utilization of cash to fund purchases of investment securities and to pay off borrowings.

Investment securities (held to maturity and available for sale) increased $120.0 million, or 97 percent, to $243.3 million at March 31, 2021 from $123.3 million at June 30, 2020.

The increase was

primarily the result of purchases of investment securities totaling $106.4 million, partly offset by scheduled and accelerated principal payments on mortgage-backed securities during the first six months of fiscal 2021.

primarily the result of purchases of investment securities totaling $158.0 million, partly offset by scheduled and accelerated principal payments on mortgage-backed securities during the first nine months of fiscal 2021.

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 $47.7 million, or five percent, to $855.1 million at December 31, 2020 from $902.8 million at June 30, 2020, primarily due to a decrease in single-family

During the first six months of fiscal 2021, the Corporation originated $66.1 million of loans held for investment, consisting primarily of single-family and multi-family loans and also purchased $11.5 million of multi-family loans held for

Loans held for investment decreased $62.5 million, or seven percent, to $840.3 million at March 31, 2021 from $902.8 million at June 30, 2020, primarily due to the decrease in single-family

During the first nine months of fiscal 2021, the Corporation originated $127.1 million of loans held for investment, consisting primarily of single-family and multi-family loans and also purchased $11.5 million of multi-family loans held for

investment that are located throughout California.

Total loan principal payments during the first six months of fiscal 2021 were $125.9 million, up nine percent from $116.0 million during

the comparable period in fiscal 2020.

The single-family loans held for investment balance at December 31, 2020 and June 30, 2020 was $257.9 million and $298.8 million, respectively, and represented

approximately 30 percent and 33 percent of loans held for investment, respectively.

The tables below describe the geographic dispersion of gross real estate secured loans held for investment at December 31, 2020 and June 30, 2020, as a percentage of the total dollar amount

As of December 31, 2020:

Total loan principal payments during the first nine months of fiscal 2021 were $201.6 million, up 17 percent from $171.7 million during the comparable period in fiscal 2020.

The single-family loans

held for investment balance at March 31, 2021 and June 30, 2020 was $254.4 million and $298.8 million, respectively, and represented approximately 30 percent and 33 percent of loans held for investment, respectively.

The tables below describe the geographic dispersion of gross real estate secured loans held for investment at March 31, 2021 and June 30, 2020, as a percentage of the total dollar amount

As of March 31, 2021:

California (1)

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Single-family

Commercial real

Commercial real estate

Other than the Inland Empire.

Total deposits increased $17.0 million, or two percent, to $910.0 million at December 31, 2020 from $893.0 million at June 30, 2020, primarily due to increases in transaction accounts resulting

Total deposits increased $40.8 million, or five percent, to $933.8 million at March 31, 2021 from $893.0 million at June 30, 2020, primarily due to increases in transaction accounts resulting

primarily from government assistance programs related to the COVID-19 pandemic, partly offset by a decrease in higher cost time deposits.

Transaction accounts increased $33.2 million, or five percent, to $756.2 million at December 31, 2020 from

$723.0 million at June 30, 2020, while time deposits decreased $16.2 million, or 10 percent, to $153.8 million at December 31, 2020 from $170.0 million at June 30, 2020.

The percentage of time deposits to total deposits decreased to 17 percent at

December 31, 2020 from 19 percent at June 30, 2020, primarily due to a managed run-off of higher cost time deposits consistent with the reduction in the Bank’s funding needs during the first six months of fiscal 2021.

Total borrowings decreased $25.0 million, or 18 percent, to $116.0 million at December 31, 2020 as compared to $141.0 million at June 30, 2020, due to repayments totaling $25.0 million of long-term

and short-term borrowings during the first six months of fiscal 2021.

At December 31, 2020, borrowings are primarily comprised of long-term FHLB - San Francisco advances used for interest rate risk management purposes.

Total stockholders’ equity increased $1.0 million, or one percent, to $125.0 million at December 31, 2020 from $124.0 million at June 30, 2020, primarily as a result of year-to-date net income of

$2.7 million and stock-based compensation of $490,000, partly offset by $2.1 million of quarterly cash dividends paid to shareholders during the first six months of fiscal 2021.

The Corporation did not repurchase any shares of its common stock under

its April 2020 plan during the six months ended December 31, 2020, but purchased 3,061 shares of distributed restricted stock in settlement of employee withholding tax obligations at an average cost of $12.01 per share.

Comparison of Operating Results for the Quarter and Six Months ended December 31, 2020 and 2019

The Corporation’s net income for the second quarter of fiscal 2021 was $1.2 million, down $1.2 million or 51 percent from $2.4 million in the same period of fiscal 2020.

Compared to the same

quarter last year, the decrease was primarily attributable to lower a decline of $2.0 million or 21 percent in net interest income and a $370,000 or 27 percent decrease in non-interest income, partly offset by lower a $638,000 or eight percent

decline in non-interest expense.

For the first six months of fiscal 2021, the Corporation’s net income was $2.7 million, a decrease of $2.3 million, or 46 percent, from $5.0 million in the same period of fiscal 2020.

the same period last year, the decrease in earnings was primarily attributable to a $3.4 million decrease in net-interest income, partly offset by a $1.2 million decrease in salaries and employee benefits expense.

Earnings for the quarter and six months ended December 31, 2020 reflect the continued impact of the COVID-19 pandemic which resulted in a substantial reduction in business activity or the closing of businesses in

Transaction accounts increased $64.4 million, or nine percent, to $787.4 million at March 31, 2021 from $723.0

million at June 30, 2020, while time deposits decreased $23.6 million, or 14 percent, to $146.4 million at March 31, 2021 from $170.0 million at June 30, 2020.

The percentage of time deposits to total deposits decreased to 16 percent at March 31,

2021 from 19 percent at June 30, 2020, primarily due to a managed run-off of higher cost time deposits consistent with the reduction in the Bank’s funding needs during the first nine months of fiscal 2021.

Total borrowings decreased $30.0 million, or 21 percent, to $111.0 million at March 31, 2021 as compared to $141.0 million at June 30, 2020, due to repayments of long-term and short-term

At March 31, 2021, borrowings are primarily comprised of long-term FHLB - San Francisco advances used for interest rate risk management purposes.

Total stockholders’ equity increased $1.8 million, or one percent, to $125.8 million at March 31, 2021 from $124.0 million at June 30, 2020, primarily as a result of year-to-date net income of $4.2

million, exercised stock options of $958,000 and stock-based compensation of $692,000, partly offset by $3.1 million of quarterly cash dividends paid to shareholders and $912,000 of stock repurchases.

The Corporation repurchased 54,707 shares of its

common stock under its April 2020 plan with an average cost of $16.66 per share and purchased 3,061 shares of distributed restricted stock in settlement of employee withholding tax obligations at an average cost of $12.01 per share during the first

nine months of fiscal 2021.

Comparison of Operating Results for the Quarter and Nine Months Ended March 31, 2021 and 2020

The Corporation’s net income for the third quarter of fiscal 2021 was $1.6 million, up $416,000 or 36 percent from $1.2 million in the same period of fiscal 2020.

Compared to the same quarter last

year, the increase was primarily attributable to a $1.1 million improvement in the provision for loan losses resulting in a recovery and lower non-interest expense (mainly, lower salaries and employee benefits expenses related to fewer employees and

reduced incentive compensation), partly offset by lower net interest income.

For the first nine months of fiscal 2021, the Corporation’s net income was $4.2 million, a decrease of $1.9 million, or 31 percent, from $6.1 million in the same period of fiscal 2020.

the same period last year, the decrease in earnings was primarily attributable to a $4.8 million decrease in net-interest income;

partly offset by lower non-interest expense as a result of a $2.0 million decrease in salaries and employee benefits

expenses and a $612,000 decrease in the provision for loan losses.

Earnings for the quarter and nine months ended March 31, 2021 reflect the continued impact of the COVID-19 pandemic which resulted in a substantial reduction in business activity or the closing of businesses in

California during these periods.

The Corporation’s efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, increased to 80 percent for the second quarter of fiscal 2021

The Corporation’s efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, increased to 80 percent for the third quarter of fiscal 2021

from 75 percent in the same period of fiscal 2020.

For the first six months of fiscal 2021, the Corporation’s efficiency ratio also increased to 78 percent from 68 percent for the same period of fiscal 2020.

Return on average assets was 0.40 percent in the second quarter of fiscal 2021, down 47 basis points from 0.87 percent in the same period last year.

For the first six months of fiscal 2021, return

on average assets was 0.45 percent, down 46 basis points from 0.91 percent in the same period last year.

Return on average equity was 3.77 percent in the second quarter of fiscal 2021, down from 7.81 percent in the same period last year.

For the first six months of fiscal 2021, return on average

equity was 4.27 percent, down from 8.13 percent for the same period last year.

Diluted earnings per share for the second quarter of fiscal 2021 were $0.16, down 48 percent from diluted earnings per share of $0.31 in the same period last year.

For the first six months of

fiscal 2021, diluted earnings per share were $0.36, down 45 percent from $0.65 in the same period last year.

For the first nine months of fiscal 2021, the Corporation’s efficiency ratio also increased to 78 percent from 71 percent for the same period of fiscal 2020.

Return on average assets was 0.53 percent in the third quarter of fiscal 2021, up 12 basis points from 0.41 percent in the same period last year.

For the first nine months of fiscal 2021, return on

average assets was 0.48 percent, down 26 basis points from 0.74 percent in the same period last year.

Return on average equity was 4.99 percent in the third quarter of fiscal 2021, up from 3.70 percent in the same period last year.

For the first nine months of fiscal 2021, return on average equity

was 4.51 percent, down from 6.64 percent for the same period last year.

Diluted earnings per share for the third quarter of fiscal 2021 were $0.21, up 40 percent from diluted earnings per share of $0.15 in the same period last year.

For the first nine months of fiscal

2021, diluted earnings per share were $0.56, down 30 percent from $0.80 in the same period last year.

Net Interest Income:

For the Quarter Ended December 31, 2020 and 2019.

Net interest income decreased by $2.0 million, or 21 percent, to $7.6 million for the second quarter of

fiscal 2021 from $9.6 million in the same period in fiscal 2020, as a result of a lower net interest margin, partly offset by a higher average interest-earning asset balance.

The net interest margin decreased 93 basis points to 2.66 percent in the

second quarter of fiscal 2021 from 3.59 percent in the same period of fiscal 2020, primarily due to a decrease in the average yield for all asset categories.

The decrease of the average yield was due primarily to the declines in interest rates on

adjustable rate instruments and interest-earning deposits following decreases to short-term rates over the last year, including the emergency 150 basis point reduction in the targeted Federal Funds Rate in March 2020 due to the COVID-19 pandemic.

weighted-average yield on interest-earning assets decreased by 108 basis points to 3.10 percent in the second

quarter of fiscal 2021 from 4.18 percent in the same quarter last year, and the weighted-average cost of interest-bearing liabilities decreased by 16 basis points to 0.49 percent for the second

quarter of fiscal 2021 as compared to 0.65 percent in the same quarter last year.

The average balance of interest-earning assets increased $75.0 million, or seven percent, to $1.15 billion in the second quarter of fiscal 2021 from $1.07 billion in

the comparable period of fiscal 2020, reflecting increases in the average balance of investment securities and interest-earning deposits, partly offset by a decrease in the average balance of loans receivable.

The average balance of interest-bearing

liabilities increased by $72.9 million, or eight percent, to $1.04 billion in the second quarter of fiscal 2021 from $964.6 million in the same quarter last year primarily reflecting increases in the average balance of interest-bearing deposits and,

to a lesser extent, the average balance of borrowings.

For the Six Months Ended December 31, 2020 and 2019.

Net interest income decreased by $3.4 million, or 18 percent, to $15.8 million for the first six months

For the Quarter Ended March 31, 2021 and 2020.

Net interest income decreased by $1.4 million, or 16 percent, to $7.5 million for the third quarter of fiscal

2021 from $8.9 million in the same period in fiscal 2020, as a result of a lower net interest margin, partly offset by a higher average interest-earning asset balance.

The net interest margin decreased 70 basis points to 2.60 percent in the third

quarter of fiscal 2021 from 3.30 percent in the same period of fiscal 2020, primarily due to a decrease in the average yield for all asset categories which exceed the decrease in interest-bearing liabilities.

The decrease of the average yield was due

primarily to the declines in interest rates on adjustable rate instruments and investment securities following decreases to short-term rates over the last year, including the emergency 150 basis point reduction in the targeted federal funds rate in

March 2020 due to the COVID-19 pandemic.

The weighted-average yield on interest-earning assets decreased by 93 basis points to 2.94 percent in the third quarter of fiscal 2021 from 3.87 percent in the same quarter last year, and the weighted-average

cost of interest-bearing liabilities decreased by 26 basis points to 0.38 percent for the third quarter of fiscal 2021 as compared to 0.64 percent in the same quarter last year.

The average balance of interest-earning assets increased $67.1 million,

or six percent, to $1.15 billion in the third quarter of fiscal 2021 from $1.08 billion in the comparable period of fiscal 2020, reflecting primarily purchases of investment securities, partly offset by a decrease in the average balance of loans

The average balance of interest-bearing liabilities increased by $64.5 million, or seven percent, to $1.03 billion in the third quarter of fiscal 2021 from $967.9 million in the same quarter last year primarily reflecting increases in the

average balance of transaction accounts, partly offset by decreases in the average balance of time deposits and borrowings.

For the Nine Months Ended March 31, 2021 and 2020.

Net interest income decreased by $4.8 million, or 17 percent, to $23.3 million for the first nine months

of fiscal 2021 from $28.1 million in the same period in fiscal 2020, as a result of a lower net interest margin, partly offset by a higher average interest-earning asset balance.

The net interest margin was 2.75 percent in the first six months of

The net interest margin was 2.70 percent in the first nine months of

fiscal 2021, a decrease of 81 basis points from 3.51 percent in the same period of fiscal 2020, primarily due to a decrease in the average yield on interest-earning assets, partly offset by a decrease in the average cost of interest-bearing

The weighted-average yield on interest-earning assets decreased by 99 basis points to 3.20 percent in the first six months of fiscal 2021 from 4.19 percent in the same quarter last year, and the weighted-average cost of interest-bearing

liabilities decreased by 14 basis points to 0.50 percent for the first six months of fiscal 2021 as compared to 0.64 percent in the same period last year.

The weighted-average yield on interest-earning assets decreased by 96 basis points to 3.12 percent in the first nine months of fiscal 2021 from 4.08 percent in the same period last year, and the weighted-average cost of interest-bearing

liabilities decreased by 18 basis points to 0.46 percent for the first nine months of fiscal 2021 as compared to 0.64 percent in the same period last year.

The average balance of interest-earning assets increased $80.2 million, or eight percent, to

$1.15 billion in the first six months of fiscal 2021 from $1.06 billion in the comparable period of fiscal 2020, primarily reflecting increases in the average balance of investment securities and interest earning deposits, partly offset by a decrease

in the average balance of loans receivable.

The average balance of interest-bearing liabilities increased by $85.2 million, or nine percent, to $1.04 billion in the first six months of fiscal 2021 from $953.6 million in the same period last year

primarily reflecting an increase in the average balance of transaction accounts.

$1.15 billion in the first nine months of fiscal 2021 from $1.07 billion in the comparable period of fiscal 2020, primarily reflecting increases in the average balance of both investment securities and interest earning deposits, partly offset by a

decrease in the average balance of loans receivable.

The average balance of interest-bearing liabilities increased by $78.4 million, or eight percent, to $1.04 billion

in the first nine months of fiscal 2021 from $958.3 million in the same period last year primarily reflecting an increase in the average balance of transaction accounts, partly offset by a decrease

in the average balance of time deposits.

Beginning in August 2019, the Federal Reserve reduced the targeted federal funds rate by 25 basis points three times in 2019 and by 150 basis points during the quarter ended March 2020 to a range

8 unchanged sentences

Interest Income:

For the Quarter Ended December 31, 2020 and 2019.

Total interest income decreased by $2.3 million, or 21 percent, to $8.9 million for the second quarter of

For the Quarter Ended March 31, 2021 and 2020.

Total interest income decreased by $2.0 million, or 19 percent, to $8.4 million for the third quarter of

fiscal 2021 as compared to $10.4 million for the same quarter of fiscal 2020.

The decrease was due to decreases in interest income from all interest-earning assets, mainly loans receivable.

Interest income on loans receivable decreased by $2.0 million, or 19 percent, to $8.3 million in the second quarter of fiscal 2021 from $10.3 million in the same quarter of fiscal 2020.

decrease was due to a lower average yield and, to a lesser extent, a lower average balance.

The average loans receivable yield during the second quarter of fiscal 2021 decreased 58 basis points to 3.84 percent from 4.42 percent during the same

quarter last year.

The decrease in the average yield on loans receivable was primarily attributable to loans repricing downward reflecting declines in the targeted Federal Funds Rate and the increase of net deferred loan costs to $521,000 in the

second quarter of fiscal 2021 from $12,000 in the same quarter of fiscal 2020.

A deferred loan fee of $378,000 was recognized in interest income as a result of a loan payoff in the second quarter of fiscal 2020 from a previously classified

non-performing loan that had been upgraded to pass and not replicated in the second quarter of fiscal

The average balance of loans receivable decreased by $65.6 million, or seven percent, to $868.5 million for the second quarter of fiscal 2021 from $934.1 million in the same quarter of fiscal

Interest income from investment securities decreased $119,000, or 21 percent, to $448,000 in the second quarter of fiscal 2021 from $567,000 for the same quarter of fiscal 2020.

Interest income on loans receivable decreased by $1.7 million, or 18 percent, to $7.9 million in the third quarter of fiscal 2021 from $9.6 million in the same quarter of fiscal 2020.

was due to a lower average yield and, to a lesser extent, a lower average balance.

The average loans receivable yield during the third quarter of fiscal 2021 decreased 41 basis points to 3.73 percent from 4.14 percent during the same quarter last

The decrease in the average yield on loans receivable was primarily attributable to loans repricing downward reflecting declines in the targeted federal funds rate and the increase of net deferred loan costs to $717,000 in the third quarter of

fiscal 2021 from $451,000 in the same quarter of fiscal 2020.

The average balance of loans receivable decreased by $86.1 million, or nine percent, to $843.4 million for the third quarter of fiscal 2021 from $929.5 million in the same quarter of

Interest income from investment securities decreased $26,000, or five percent, to $452,000 in the third quarter of fiscal 2021 from $478,000 for the same quarter of fiscal 2020.

This decrease was

attributable to a lower average yield, partly offset by a higher average balance.

The average investment securities yield decreased 174 basis points to 0.86 percent in the second quarter of fiscal 2021 from 2.60 percent in the same quarter of fiscal

The average investment securities yield decreased 162 basis points to 0.81 percent in the third quarter of fiscal 2021 from 2.43 percent in the same quarter of fiscal

The decrease in the average investment securities yield was primarily attributable to investment securities purchases at a lower average yield than the existing portfolio, a higher premium amortization between the quarters ($534,000 vs.

$99,000) and the downward repricing of adjustable rate mortgage-backed securities.

The average balance of investment securities increased $121.4 million, or 139 percent, to $208.5 million in the second quarter of fiscal 2021 from $87.1 million in the

The average balance of investment securities increased $143.7 million, or 183 percent, to $222.3 million in the third quarter of fiscal 2021 from $78.6 million in the

same quarter of fiscal 2020.

The increase in the average balance of investment securities was primarily attributable to purchases of investment securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities.

The FHLB – San Francisco cash dividend received in the second quarter of fiscal 2021 was $100,000, down $45,000 or 31 percent from the same quarter of fiscal 2020.

The FHLB – San Francisco cash dividend received in the third quarter of fiscal 2021 was $100,000, down $44,000 or 31 percent from the same quarter of fiscal 2020.

The average balance of FHLB – San

Francisco stock in the second quarter of fiscal 2021 decreased slightly to $8.0 million from $8.2 million in the same quarter of fiscal 2020 and the average yield decreased to 5.02 percent in the second quarter of fiscal 2021 from 7.07 percent in the

Francisco stock in the third quarter of fiscal 2021 decreased slightly to $8.0 million from $8.2 million in the same quarter of fiscal 2020 and the average yield decreased to 5.02 percent in the third quarter of fiscal 2021 from 7.03 percent in the

same quarter last year.

Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, was $17,000 in the second quarter of fiscal 2021, down 91 percent from

Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, was $18,000 in the third quarter of fiscal 2021, down 90 percent from $186,000

in the same quarter of fiscal 2020.

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 152 basis points to 0.10 percent in the second

quarter of fiscal 2021 from 1.62 percent in the comparable quarter last year, due primarily to decreases in the targeted Federal Funds Rate over the last year.

The average balance of the interest-earning deposits in the second quarter of fiscal 2021

was $64.9 million, an increase of $19.4 million or 43 percent, from $45.5 million in the same quarter of fiscal 2020.

For the Six Months Ended December 31, 2020 and 2019.

Total interest income decreased by $3.9 million, or 17 percent, to $18.4 million for the first six

The average yield earned on interest-earning deposits decreased 110 basis points to 0.10 percent in the third quarter of

fiscal 2021 from 1.20 percent in the comparable quarter last year,

due primarily to decreases in the targeted federal funds rate over the last year.

The average balance of the interest-earning deposits in the third quarter of fiscal 2021 was $71.7 million, an

increase of $9.8 million or 16 percent, from $61.9 million in the same quarter of fiscal 2020.

For the Nine Months Ended March 31, 2021 and 2020.

Total interest income decreased by $5.8 million, or 18 percent, to $26.9 million for the first nine

months of fiscal 2021 from $32.7 million in the same period of fiscal 2020.

The decrease was due to decreases in interest income from all interest-earning assets, mainly loans receivable.

Loans receivable interest income decreased $3.1 million, or 15 percent, to $17.3 million in the first six months of fiscal 2021 from $20.4 million for the same period of fiscal 2020.

Loans receivable interest income decreased $4.9 million, or 16 percent, to $25.1 million in the first nine months of fiscal 2021 from $30.0 million for the same period of fiscal 2020.

was due to a lower average yield and, to a lesser extent, a lower average balance.

The average loan yield during the first six months of fiscal 2021 decreased 52 basis points to 3.92 percent from 4.44 percent in the same period last year.

decrease in the average yield on loans receivable was primarily attributable to loans repricing downward reflecting declines in the targeted Federal Funds Rate and the increase of net deferred loan costs to $987,000 in the first six months of fiscal

2021 from $172,000 in the same period of fiscal 2020.

The higher net deferred loan costs was due primarily to higher loan prepayments during the periods and the prior period deferred loan fees of $520,000 which were recognized in interest income as a

result of three loan payoffs in the first six months of fiscal 2020 from a previously classified non-performing loans that had been upgraded to pass and not replicated in the first six months of fiscal 2021.

The average balance of loans receivable

decreased $38.0 million, or four percent, to $880.7 million for the first six months of fiscal 2021 from $918.7 million in the same period of fiscal 2020.

Interest income from investment securities decreased $255,000, or 22 percent, to $926,000 in the first six months of fiscal 2021 from $1.2 million for the same period of fiscal 2020.

This decrease

was attributable to a lower average yield, partly offset by a higher average balance.

The average investment securities yield decreased 156 basis points to 1.02 percent in the first six months of fiscal 2021 from 2.58 percent in the same period of

The decrease in the average investment securities yield was primarily attributable to a higher premium amortization ($890,000 compared to $227,000) and the purchases of investment securities during the last 12 months which had lower

average yields than the existing portfolio.

The average balance

of investment securities increased $90.8 million, or 99 percent, to $182.3 million in the first six months of fiscal 2021 from $91.5 million in the same period of fiscal 2020.

The increase in the

average balance of investment securities was primarily the result of purchases of mortgage-backed securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities.

The FHLB – San Francisco cash dividend received in the first six months of fiscal 2021 was $200,000, down 31 percent from $288,000 in the same period of fiscal 2020.

The average loan yield during the first nine months of fiscal 2021 decreased 48 basis points to 3.86 percent from 4.34 percent in the same period last year.

decrease in the average yield on loans receivable was primarily attributable to loans repricing downward reflecting declines in the targeted federal funds rate and the increase of net deferred loan costs to $1.7 million in the first nine months of

fiscal 2021 from $623,000 in the same period of fiscal 2020.

The higher net deferred loan costs was due primarily to higher loan prepayments during the periods and in the first nine months of fiscal 2020 deferred loan fees of $520,000 which were

recognized as interest income as a result of loan payoffs from previously classified non-performing loans.

The average balance of loans receivable decreased $53.8 million, or six percent, to $868.5 million for the first nine months of fiscal 2021

from $922.3 million in the same period of fiscal 2020.

Interest income from investment securities decreased $281,000, or 17 percent, to $1.4 million in the first nine months of fiscal 2021 from $1.7 million for the same period of fiscal 2020.

decrease was attributable to a lower average yield, partly offset by a higher average balance.

The average investment securities yield decreased 159 basis points to 0.94 percent in the first nine months of fiscal 2021 from 2.53 percent in the same

period of fiscal 2020.

The decrease in the average investment securities yield was primarily attributable to a higher premium amortization ($1.4 million compared to $326,000) and the purchases of investment securities during the last 12 months which

had lower average yields than the existing portfolio.

The average balance of investment securities increased $108.2 million, or 124 percent, to $195.5 million in the first nine months of fiscal 2021 from $87.3 million in the same period of fiscal

The increase in the average balance of investment securities was primarily the result of purchases of mortgage-backed securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities.

The FHLB – San Francisco cash dividend received in the first nine months of fiscal 2021 was $300,000, down 31 percent from $432,000 in the same period of fiscal 2020.

As a result, the average yield

decreased to 5.02 percent in the first six months of fiscal 2021 as compared to 7.03 percent in the comparable period last year.

Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, was $41,000 in the first six months of fiscal 2021, down 91 percent from

decreased to 5.02 percent in the first nine months of fiscal 2021 as compared to 7.03 percent in the comparable period last year.

Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, was $59,000 in the first nine months of fiscal 2021, down 90 percent from

$621,000 in the same period of fiscal 2020.

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 179 basis points to 0.10 percent in the first six

The average yield earned on interest-earning deposits decreased 151 basis points to 0.10 percent in the first nine

months of fiscal 2021 from 1.61 percent in the comparable quarter last year, due primarily to decreases in the targeted federal funds rate over the last year.

The average balance of the interest-earning deposits in the first six months of fiscal 2021

The average balance of the interest-earning deposits in the first nine months of fiscal

2021 was $76.6 million, an increase of $26.0 million or 51 percent, from $50.6 million in the same period of fiscal 2020.

Interest Expense:

For the Quarter Ended December 31, 2020 and 2019.

Total interest expense decreased by $311,000 or 20 percent to $1.3 million in the second quarter of fiscal

For the Quarter Ended March 31, 2021 and 2020.

Total interest expense decreased by $567,000 or 37 percent to $973,000 in the third quarter of fiscal 2021

from $1.5 million in the same quarter last year.

This decrease was primarily attributable to lower deposit expense.

Interest expense on deposits for the second quarter of fiscal 2021 was $468,000 as compared to $778,000 for the same period last year, a decrease of $310,000, or 40 percent.

This decrease was attributable to lower deposit expense and, to a lesser extent, lower borrowing expense.

Interest expense on deposits for the third quarter of fiscal 2021 was $380,000 as compared to $746,000 for the same period last year, a decrease of $366,000, or 49 percent.

The decrease in

interest expense on deposits was attributable to a lower average cost of deposits, partly offset by a higher average balance.

The average cost of deposits improved, decreasing by 16 basis points to 0.21 percent during the second quarter of fiscal

2021 from 0.37 percent during the same quarter last year.

The decrease in the average cost of deposits was attributable primarily to a lower percentage of time deposits to the total deposit balance and a 28 basis-point decrease in the average cost of

time deposits.

interest expense on deposits was attributable to a lower average cost

of deposits, partly offset by a higher average balance.

The average cost of deposits improved, decreasing by 19 basis points to 0.17 percent during the third quarter of fiscal 2021 from 0.36

percent during the same quarter last year.

The decrease in the average cost of deposits was attributable primarily to a lower percentage of time deposits to the total deposit balance and a 30 basis-point decrease in the average cost of time

The average cost of transaction accounts also decreased by 10 basis points.

The average balance of deposits increased $79.9 million, or 10 percent, to $916.7 million during the quarter ended March 31, 2021 from $836.9 million during the

same period last year.

The increase in the average balance was primarily attributable to increases in transaction accounts resulting primarily from government assistance programs related to the COVID-19 pandemic, partly offset by a decrease in higher

cost time deposits.

Strategically, the Corporation has been promoting transaction accounts and competing less aggressively for time deposits.

The average balance of transaction accounts to total deposits in the third quarter of fiscal 2021 was 84

percent, compared to 78 percent in the same period of fiscal 2020.

Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the third quarter of fiscal 2021 decreased $201,000, or 25 percent, to $593,000 from $794,000 for the same

period last year.

The decrease in interest expense on borrowings was the result of a lower average cost and, to a lesser extent, a lower average balance.

The average cost of borrowings decreased 36 basis points to 2.08 percent for the quarter ended

March 31, 2021 from 2.44 percent in the same quarter last year.

The decrease in the average cost of borrowings was primarily due to prepayments and maturities of borrowings.

The average balance of borrowings decreased $15.4 million, or 12 percent, to

$115.7 million during the quarter ended March 31, 2021 from $131.1 million during the same period last year.

For the Nine Months Ended March 31, 2021 and 2020.

Total interest expense decreased $1.0 million, or 22 percent to $3.6 million in the first nine months of

fiscal 2021 from $4.6 million in the same period last year.

This decrease was attributable primarily to lower deposit expense and, to a lesser extent, lower borrowing expense.

Interest expense on deposits for the first nine months of fiscal 2021 was $1.4 million as compared to $2.3 million in the same period last year, a decrease of $901,000 or 39 percent.

in interest expense on deposits was primarily attributable to a lower average cost, partly offset by a higher average balance of deposits.

The decrease in the average cost of deposits was attributable primarily to a lower percentage of time deposits

to the total deposit balance and a 26 basis-point decrease in the average cost of time deposits.

The average cost of transaction accounts also decreased by eight basis points.

The average balance of deposits increased $69.1 million, or eight percent, to $902.7 million during the quarter ended December 31, 2020 from $833.6 million

during the same period last year.

The average cost of deposits decreased 16 basis points to 0.21 percent

during the first nine months of fiscal 2021 from 0.37 percent during the same period last year.

The average balance of deposits increased $72.5 million, or nine percent, to $906.2 million during the nine months ended March 31, 2021 from $833.7

million during the same period last year.

decrease in higher cost time deposits.

Strategically, the Corporation has been promoting transaction accounts and competing less aggressively for time deposits.

The average balance of transaction accounts to total deposits in the second quarter of

fiscal 2021 was 83 percent, compared to 78 percent in the same period of fiscal 2020.

Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the second quarter of fiscal 2021 decreased slightly to $803,000 from $804,000 for the same period last

The average balance of transaction accounts to total deposits in the first nine months of fiscal 2021 was 83 percent, compared to 78 percent in the same period of fiscal 2020.

Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the first nine months of fiscal 2021 decreased $120,000, or five percent, to $2.2 million from $2.3

million in the same period last year.

The decrease in interest expense on borrowings was the result of a lower average cost, partly offset by a higher average balance.

The average cost of borrowings decreased seven basis points to 2.36 percent for the quarter ended December 31,

2020 from 2.43 percent in the same quarter last year.

The decrease in the average cost of borrowings was primarily due to new long-term borrowings obtained at a lower interest rate than prior borrowings, reflecting the decline in market rates over

the last year.

The average balance of borrowings increased $3.7 million, or three percent, to $134.8 million during the quarter ended December 31, 2020 from $131.1 million during the same period last year.

For the Six Months Ended December 31, 2020 and 2019.

Total interest expense decreased $454,000, or 15 percent to $2.6 million in the first six months of

fiscal 2021 from $3.1 million in the same period last year.

This decrease was attributable primarily to lower deposit expense, partly offset by higher borrowing expense.

Interest expense on deposits for the first six months of fiscal 2021 was $1.0 million as compared to $1.6 million in the same period last year, a decrease of $535,000 or 34 percent.

in interest expense on deposits was primarily attributable to a lower average cost and, partly offset by a higher average balance of deposits.

The decrease in the average cost of deposits was attributable primarily to a lower percentage of time

deposits to the total deposit balance and a 25 basis-point decrease in the average cost of time deposits.

The average cost of transaction accounts also decreased by seven basis points.

The average cost of deposits decreased 15 basis points to 0.22

percent during the first six months of fiscal 2021 from 0.37 percent during the same period last year.

The average balance of deposits increased $68.8 million, or eight percent, to $901.0 million during the six months ended December 31, 2020 from

$832.2 million during the same period last year.

The increase in the average balance was primarily attributable to increases in transaction accounts resulting primarily from government assistance programs related to the COVID-19 pandemic, partly

offset by a decrease in higher cost time deposits.

The average balance of transaction accounts to total deposits in the first six months of fiscal 2021 was 82 percent, compared to 77 percent in the same period of fiscal 2020.

Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the first six months of fiscal 2021 increased $81,000, or five percent, to $1.6 million from $1.5 million

in the same period last year.

The increase in interest expense on borrowings was the result of a higher average balance, partly offset by a lower average cost.

The average balance of borrowings increased by $16.4 million, or 14 percent, to $137.8

million during the six months ended December 31, 2020 from $121.4 million during the same period last year, primarily due to new long-term borrowings at a lower average cost.

The average cost of borrowings decreased 18 basis points to 2.31 percent

for the six months ended December 31, 2020 from 2.49 percent in the same period last year.

The following tables present the average balance sheets for the quarter and six months ended December 31, 2020 and 2019, respectively:

The average cost of borrowings decreased 24 basis points to 2.24 percent for the

nine months ended March 31, 2021 from 2.48 percent in the same period last year.

The average balance of borrowings increased by $5.9 million, or five percent, to $130.5 million during the nine months ended March 31, 2021 from $124.6 million during

the same period last year, primarily due to new long-term borrowings at a lower average cost, partly offset by prepayments and maturities.

The following tables present the average balance sheets for the quarter and nine months ended March 31, 2021 and 2020, respectively:

Average Balance Sheets

Quarter Ended

December 31, 2020

March 31, 2021

Quarter Ended

December 31, 2019

March 31, 2020

(Dollars In Thousands)

23 unchanged sentences

Return on average equity

Includes non-performing loans and net deferred loan cost amortization of $521 thousand and $12 thousand for the quarter ended December 31, 2020 and 2019, respectively.

Includes the average balance of non interest-bearing checking accounts of $111.7 million and $84.2 million during the quarter ended December 31, 2020 and 2019, respectively.

Includes non-performing loans and net deferred loan cost amortization of $717 thousand and $451 thousand for the quarter ended March 31, 2021 and 2020, respectively.

Includes the average balance of non interest-bearing checking accounts of $114.1 million and $85.6 million during the quarter ended March 31, 2021 and 2020, respectively.

Represents the difference between the weighted-average yield on all interest-earning assets and the weighted-average rate on all interest-bearing liabilities.

Represents net interest income before provision (recovery) for loan losses as a percentage of average interest-earning assets.

Six Months Ended

December 31, 2020

Six Months Ended

December 31, 2019

Nine Months Ended

March 31, 2021

Nine Months Ended

March 31, 2020

(Dollars In Thousands)

23 unchanged sentences

Return on average equity

Includes non-performing loans and net deferred loan cost amortization of $987 thousand and $172 thousand for the six months ended December 31, 2020 and 2019, respectively.

Includes the average balance of non interest-bearing checking accounts of $113.7 million and $82.7 million during the six months ended December 31, 2020 and 2019, respectively.

Includes non-performing loans and net deferred loan cost amortization of $1.7 million and $623 thousand for the nine months ended March 31, 2021 and 2020, respectively.

Includes the average balance of non interest-bearing checking accounts of $113.9 million and $83.7 million during the nine months ended March 31, 2021 and 2020, respectively.

Represents the difference between the weighted-average yield on all interest-earning assets and the weighted-average rate on all interest-bearing liabilities.

Represents net interest income before provision (recovery) for loan losses as a percentage of average interest-earning assets.

The following tables set forth the effects of changing rates and volumes on interest income and expense for the quarter and six months ended December 31, 2020 and 2019, respectively.

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.

The following tables set forth the effects of changing rates and volumes on interest income and expense for the quarter and nine months ended March 31, 2021 and 2020, respectively.

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, 2020 Compared

To Quarter Ended December 31, 2019

Quarter Ended March 31, 2021 Compared

To Quarter Ended March 31, 2020

Increase (Decrease) Due to

13 unchanged sentences

For purposes of calculating volume, rate and rate/volume variances, non-performing loans were included in the weighted-average balance outstanding.

Six Months Ended December 31, 2020 Compared

To Six Months Ended December 31, 2019

Nine Months Ended March 31, 2021 Compared

To Nine Months Ended March 31, 2020

Increase (Decrease) Due to

14 unchanged sentences

Provision (Recovery) for Loan Losses:

For the Quarter Ended December 31, 2020 and 2019.

During the second quarter of fiscal 2021, the Corporation recorded a provision for loan losses of $39,000,

as compared to a recovery from the allowance for loan losses of $22,000 in the same period of fiscal 2020.

The increase in provision for loan losses during this quarter reflects an increase in non-performing loans partly offset by the decrease in

loan balances.

For the Six Months Ended December 31, 2020 and 2019.

During the first six months of fiscal 2021, the Corporation recorded a provision for loan losses of

$259,000, as compared to a recovery from the allowance for loan losses of $203,000 in the same period of fiscal 2020.

The increase in provision for loan losses during this six-month period was primarily attributable to an increase in the qualitative

component established in our allowance for loan losses methodology in response to the deteriorating economic conditions and probable loan losses, including the potential effects from higher forecasted unemployment rates and lower gross domestic

product, as well as the impact on other economic conditions on the U.S.

and global economies from COVID-19.

Non-performing loans, net of the allowance for loan losses and fair value adjustments increased 109 percent to $10.3 million at December 31, 2020 from $4.9 million at June 30, 2020 and $3.4 million

at December 31, 2019.

Net loan recoveries in the second quarter of fiscal 2021 were $9,000 or 0.00 percent (annualized) of average loans receivable, as compared to net loan recoveries of $14,000 or 0.01 percent (annualized) of average loans

For the Quarter Ended March 31, 2021 and 2020.

During the third quarter of fiscal 2021, the Corporation recorded a recovery from the allowance for loan losses of $200,000, as

compared to a provision for loan losses of $874,000 in the same period of fiscal 2020 .

The recovery from the allowance for

loan losses for the third quarter of fiscal 2021 was due to a recovery within all loan categories with the exception of multi-family loans , which primarily reflects an improved economic outlook as of March 31, 2021, reducing the expected impact of the pandemic on the credit quality of the loan portfolio, and

declining loan balances;

while the provision for loan losses recorded in the third quarter of fiscal 2020 primarily reflected the deterioration in forecasted economic metrics at March 31, 2021 as a result of the COVID-19 pandemic, partly offset

by the decrease in loan balances.

For the Nine Months Ended March 31, 2021 and 2020.

During the first nine months of fiscal 2021, the Corporation recorded a provision for loan losses of

$59,000, down from $671,000 in the same period of fiscal 2020.

The decrease in provision for loan losses during this nine-month period was primarily attributable to the decrease in loan balances and an improvement in the forecasted economic metrics

utilized in the qualitative component adjustment to our allowance for loan losses during the first nine months of fiscal 2021.

Non-performing loans, net of the allowance for loan losses and fair value adjustments increased 100 percent to $9.8 million at March 31, 2021 from $4.9 million at June 30, 2020 and were $3.6

million at March 31, 2020.

Net loan recoveries in the third quarter of fiscal 2021 were $8,000 or 0.00 percent (annualized) of average loans receivable, as compared to net loan recoveries of $15,000 or 0.01 percent (annualized) of average loans

receivable in the same quarter of fiscal 2020.

For the first six months of fiscal 2021, the net loan recoveries were $14,000 or 0.00 percent (annualized) of average loans receivable as compared to net loan recoveries of $48,000 or 0.01 percent

For the first nine months of fiscal 2021, the net loan recoveries were $22,000 or 0.00 percent (annualized) of average loans receivable as compared to net loan recoveries of $63,000 or 0.01 percent

(annualized) of average loans receivable in the same period of fiscal 2020.

Total classified loans, net of the allowance for loan losses and fair value adjustments, were $14.9 million at December 31, 2020 as compared to $14.1 million at June 30, 2020

and $13.7 million at December 31, 2019.

Classified loans net of the allowance for loan losses and fair value adjustments at December 31, 2020 were comprised of $4.6 million of loans in the special mention category and $10.3 million of loans in the

Total classified loans, net of the allowance for loan losses and fair value adjustments, were $12.2 million at March 31, 2021 as compared to $14.1 million at June 30, 2020

and $15.1 million at March 31, 2020.

Classified loans net of the allowance for loan losses and fair value adjustments at March 31, 2021 were comprised of $2.5 million of loans in the special mention category and $9.7 million of loans in the

substandard category as compared to $8.6 million of loans in the special mention category and $5.5 million of loans in the substandard category at June 30, 2020.

3 unchanged sentences

See related discussion of “Asset Quality.”

At December 31, 2020, the allowance for loan losses was $8.5 million, comprised of collectively evaluated allowances of $7.9 million and individually evaluated allowances of $570,000;

in comparison

to the allowance for loan losses of $8.3 million at June 30, 2020, comprised of collectively evaluated allowances of $8.2 million and individually evaluated allowances of $100,000.

At March 31, 2021, the allowance for loan losses was $8.3 million, comprised of collectively evaluated allowances of $7.8 million and individually evaluated allowances of $572,000;

in comparison to

the allowance for loan losses of $8.3 million at June 30, 2020, comprised of collectively evaluated allowances of $8.2 million and individually evaluated allowances of $100,000.

The allowance for loan losses as a percentage of gross loans held for

investment was 0.99 percent at December 31, 2020 as compared to 0.91 percent at June 30, 2020.

Management considers, based on currently available information, the allowance for loan losses sufficient to absorb potential losses inherent in loans held

for investment.

investment was 0.98 percent at March 31, 2021 as compared to 0.91 percent at June 30, 2020.

Management considers, based on currently available information, the allowance for loan losses sufficient to absorb potential losses inherent in loans held for

For further analysis on the allowance for loan losses, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

A further decline in national and local economic conditions, as a result of the COVID-19

pandemic or other factors, could result in a material increase in the allowance for loan losses and may adversely affect the Corporation’s financial condition and results of operations.

A decline in national and local economic conditions, as a result of the COVID-19 pandemic or

other factors, could result in a material increase in the allowance for loan losses and may adversely affect the Corporation’s financial condition and results of operations.

Non-Interest Income:

For the Quarter Ended December 31, 2020 and 2019.

Total non-interest income decreased $370,000, or 28 percent, to $974,000 for the quarter ended December

For the Quarter Ended March 31, 2021 and 2020.

Total non-interest income increased $98,000, or nine percent, to $1.2 million for the quarter ended March 31,

2021 from $1.1 million for the same period last year.

The decrease was primarily attributable to decreases in loan servicing and other fees and deposit account fees.

Loan servicing and other fees decreased $247,000 or 67 percent to $120,000 in the second quarter of fiscal 2021 from $367,000 in the same quarter last year.

The decrease was due primarily to a

decrease in prepayment fees resulting from lower loan payoffs, particularly in multi-family loans.

Deposit account fees decreased $122,000 or 27 percent to $329,000 in the second quarter of fiscal 2021 from $451,000 in the same quarter last year.

The increase was primarily attributable to an increase in loan servicing and other fees, partly offset by a decrease in deposit account fees.

Loan servicing and other fees increased $224,000 or 171 percent to $355,000 in the third quarter of fiscal 2021 from $131,000 in the same quarter last year.

The increase was due primarily to a

recovery from servicing asset reserves attributable to lower loan prepayment estimates.

Deposit account fees decreased $105,000 or 25 percent to $318,000 in the third quarter of fiscal 2021 from $423,000 in the same quarter last year.

The decrease was due primarily to certain fees

that were waived related to accounts impacted by the COVID-19 pandemic and reduced transactions reflecting changes in spending habits due to the COVID-19 pandemic.

For the Six Months Ended December 31, 2020 and 2019.

Total non-interest income decreased $281,000, or 12 percent, to $2.1 million for the six months ended

December 31, 2020 from $2.4 million for the same period last year.

The decrease was primarily attributable to a decrease in deposit account fees.

Loan servicing and other fees increased $25,000 or five percent to $525,000 in the first six months of fiscal 2021 from $500,000 in the same period last year.

For the Nine Months Ended March 31, 2021 and 2020.

Total non-interest income decreased $183,000, or five percent, to $3.3 million for the nine months ended

March 31, 2021 from $3.5 million for the same period last year.

The decrease was primarily attributable to a decrease in deposit account fees, partly offset by an increase in loan servicing and other fees.

Loan servicing and other fees increased $249,000 or 39 percent to $880,000 in the first nine months of fiscal 2021 from $631,000 in the same period last year.

The increase was due primarily to an

increase in prepayment fees resulting from higher loan payoffs, particularly in multi-family loans.

Deposit account fees decreased $259,000 or 29 percent to $639,000 in the first six months of fiscal 2021 from $898,000 in the same period last year.

The decrease was due primarily to certain fees

that were waived related to accounts impacted by the COVID-19 pandemic and reduced transactions reflecting changes in spending habits due to the COVID-19 pandemic.

Deposit account fees decreased $364,000 or 28 percent to $957,000 in the first nine months of fiscal 2021 from $1.3 million in the same period last year.

The decrease was due primarily to certain

fees that were waived related to accounts impacted by the COVID-19 pandemic and reduced transactions reflecting changes in spending habits due to the COVID-19 pandemic.

Non-Interest Expense:

For the Quarter Ended December 31, 2020 and 2019.

Total non-interest expense in the quarter ended December 31, 2020 was $6.9 million, a decrease of

$638,000, or eight percent, as compared to $7.6 million in the quarter ended December 31, 2019.

The decrease was primarily attributable to a decrease in salaries and employee benefits expenses and other operating expenses, partly offset by higher

deposit insurance premiums and regulatory assessment expenses.

Salaries and employee benefits expense decreased $698,000, or 14 percent, to $4.3 million in the second quarter of fiscal 2021 from $5.0 million in the same period of fiscal 2020.

For the Quarter Ended March 31, 2021 and 2020.

Total non-interest expense in the quarter ended March 31, 2021 was $6.9 million, a decrease of $596,000, or

eight percent, as compared to $7.5 million in the quarter ended March 31, 2020.

The decrease was primarily attributable to a decrease in salaries and employee benefits expenses, partly offset by higher deposit insurance premiums and regulatory

assessment expenses.

Salaries and employee benefits expense decreased $725,000, or 15 percent, to $4.2 million in the third quarter of fiscal 2021 from $5.0 million in the same period of fiscal 2020.

The decrease was

due primarily to fewer employees and lower employee bonus and other incentive payments.

Total loan originations and purchases decreased $52.0 million, or 64 percent, to $29.6 million in the second quarter of fiscal 2021 from $81.6 million in the same

quarter of fiscal 2020.

Total full-time equivalent employees (“FTE”) were 166 at December 31, 2020, down 18 FTE or 10 percent from 184 FTE at December 31, 2019.

Deposit insurance premiums and regulatory assessment expenses were $141,000 in the second quarter of fiscal 2021, up 139 percent from $59,000 in the same quarter of fiscal 2020.

The increase was

due primarily to FDIC insurance premium credits applied in the second quarter of fiscal 2020, which were not replicated in the second quarter of fiscal 2021.

Other non-interest expenses decreased $104,000, or 13 percent, to $707,000 in the second quarter of fiscal 2021 from $811,000 in the same quarter of fiscal 2020.

The decrease in other non-interest

expenses was primarily attributable to reduced expenses reflecting lower loan originations and purchases.

For the Six Months Ended December 31, 2020 and 2019.

Total non-interest expense in the six months ended December 31, 2020 was $13.9 million, a decrease of

$891,000, or six percent, as compared to $14.8 million in the six months ended

December 31, 2019.

The decrease was primarily attributable to a decrease in salaries and employee benefits expenses, partly offset by higher deposit insurance premiums and regulatory assessment

Salaries and employee benefits expense decreased $1.3 million, or 13 percent, to $8.7 million in the first six months of fiscal 2021 from $10.0 million in the same period of fiscal 2020.

Total full-time equivalent employees (“FTE”) were 162 at March 31, 2021, down 21 FTE or 11 percent from 183 FTE at March 31, 2020;

while total loan originations

and purchases increased $32.3 million, or 112 percent, to $61.1 million in the third quarter of fiscal 2021 from $28.8 million in the same quarter of fiscal 2020.

Deposit insurance premiums and regulatory assessment expenses were $154,000 in the third quarter of fiscal 2021, up 185 percent from $54,000 in the same quarter of fiscal 2020.

The increase was due

primarily to FDIC insurance premium credits applied in the third quarter of fiscal 2020, which were not replicated in the third quarter of fiscal 2021.

For the Nine Months Ended March 31, 2021 and 2020.

Total non-interest expense in the nine months ended March 31, 2021 was $20.8 million, a decrease of $1.5

million, or seven percent, as compared to $22.3 million in the nine months ended March 31, 2020.

The decrease was primarily attributable to a decrease in salaries and employee benefits expenses, partly offset by higher deposit insurance premiums and

regulatory assessment expenses.

Salaries and employee benefits expense decreased $2.0 million, or 13 percent, to $13.0 million in the first nine months of fiscal 2021 from $15.0 million in the same period of fiscal 2020.

decrease was due primarily to fewer employees and lower employee bonus and other incentive payments.

Total loan originations and purchases decreased $97.4 million, or 56 percent, to $77.6 million in the first six months of fiscal 2021 from $175.0

Total loan originations and purchases decreased $65.2 million, or 32 percent, to $138.7 million in the first nine months of fiscal 2021 from $203.9

million in the same period of fiscal 2020.

Deposit insurance premiums and regulatory assessment expenses were $275,000 in the first six months of fiscal 2021, up 540 percent from $43,000 in the same period of fiscal 2020.

Deposit insurance premiums and regulatory assessment expenses were $429,000 in the first nine months of fiscal 2021, up 342 percent from $97,000 in the same period of fiscal 2020.

The increase was

due primarily to FDIC insurance premium credits applied in the first six months of fiscal 2020, which were not replicated in the same period of fiscal 2021.

due primarily to FDIC insurance premium credits applied in the first nine months of fiscal 2020, which were not replicated in the same period of fiscal 2021.

Provision for Income Taxes:

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are fluctuations in the effective income tax rate from period to period based on the relationship of net permanent differences to income before tax.

For the Quarter Ended December 31, 2020 and 2019.

The Corporation’s income tax provision was $481,000 for the second quarter of fiscal 2021, a 54 percent

decrease from $1.1 million in the same quarter last year, primarily reflecting lower pre-tax income.

The effective income tax rate for the quarter ended December 31, 2020 was 29.0 percent as compared to 30.5 percent for the quarter ended December 31,

The Corporation believes that the effective income tax rate applied in the second quarter of fiscal 2021 reflects its current income tax obligations.

For the Six Months Ended December 31, 2020 and 2019.

The Corporation’s income tax provision was $1.1 million for the first six months of fiscal 2021, a 47

percent decrease from $2.1 million in the same period last year, primarily reflecting lower pre-tax income.

The effective income tax rate for the six months ended December 31, 2020 and 2019 was 29.6 percent at both periods.

The Corporation believes

that the effective income tax rate applied in the first six months of fiscal 2021 reflects its current income tax obligations.

For the Quarter Ended March 31, 2021 and 2020.

The Corporation’s income tax provision was $386,000 for the third quarter of fiscal 2021, a 17 percent

decrease from $467,000 in the same quarter last year, primarily due to tax benefits attributable to the exercise of stock options, partly offset by higher net income before income taxes.

The effective income tax rate for the quarter ended March 31,

2021 was 19.8 percent as compared to 29.0 percent for the quarter ended March 31, 2020.

The Corporation believes that the effective income tax rate applied in the third quarter of fiscal 2021 reflects its current income tax obligations.

For the Nine Months Ended March 31, 2021 and 2020.

The Corporation’s income tax provision was $1.5 million for the first nine months of fiscal 2021, a 41

percent decrease from $2.6 million in the same period last year, primarily reflecting lower net income before income taxes and tax benefits attributable to the exercise of stock options.

The effective income tax rate for the nine months ended March

31, 2021 was 26.2 percent as compared to 29.6 percent for the nine months ended March 31, 2020.

The Corporation believes that the effective income tax rate applied in the first nine months of fiscal 2021 reflects its current income tax obligations.

Asset Quality

Non-performing assets were comprised solely of non-performing loans at both December 31, 2020 and June 30, 2020.

Non-performing loans, net of the allowance for loan losses and fair value

adjustments, consisting of loans with collateral located in California, was $10.3 million at December 31, 2020, up 109 percent from $4.9 million at June 30, 2020.

Non-performing loans as a percentage of loans held for investment at December 31, 2020

was 1.20%, up from 0.55% at June 30, 2020.

The non-performing loans at December 31, 2020 are comprised of 33 single-family loans.

No interest accruals were made for loans that were past due 90 days or more or if the loans were deemed

non-performing.

As of December 31, 2020, total restructured loans increased 215 percent, to $8.2 million from $2.6 million at June 30, 2020.

At both December 31, 2020 and June 30, 2020, all of these restructured

loans were classified as non-performing.

As of December 31, 2020, all of the restructured loans have a current payment status, consistent with their modified payment terms;

this compares to $1.2 million, or 44 percent, of restructured loans that had

a current payment status, consistent with their modified payment terms as of June 30, 2020.

Restructured loans which are performing in accordance with their modified terms and are not otherwise classified non-accrual are not included in

non-performing assets.

For further analysis on non-performing loans and restructured loans, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

There was no real estate owned at either December 31, 2020 or June 30, 2020.

Non-performing assets were comprised solely of non-performing loans at both March 31, 2021 and June 30, 2020.

Non-performing loans, net of the allowance for loan losses and fair value adjustments,

consisting of loans with collateral located in California, was $9.8 million at March 31, 2021, up 100 percent from $4.9 million at June 30, 2020.

Non-performing loans as a percentage of loans held for investment at March 31, 2021 was 1.16%, up from

0.55% at June 30, 2020.

The non-performing loans at March 31, 2021 are comprised of 29 single-family loans and one multi-family loan;

while the non-performing loans at June 30, 2020 are comprised of 18 single-family loans and one commercial business

No interest accruals were made for loans that were past due 90 days or more or if the loans were deemed non-performing.

As of March 31, 2021, total restructured loans increased 219 percent, to $8.3 million from $2.6 million at June 30, 2020.

At March 31, 2021, a total $8.1 million or 97 percent of these

restructured loans were classified as non-performing;

while at June 30, 2020, all of these restructured loans were classified as non-performing.

As of March 31, 2021, all of the restructured loans have a current payment status, consistent with their

modified payment terms;

this compares to $1.2 million, or 44 percent, of restructured loans that had a current payment status, consistent with their modified payment terms as of June 30, 2020.

Restructured loans which are performing in accordance

with their modified terms and not otherwise classified as non-accrual are not included in non-performing assets.

For further analysis on non-performing loans and restructured loans, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated

Financial Statements.

There was no real estate owned at either March 31, 2021 or June 30, 2020.

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, provisions for

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(In Thousands)

At December 31,

Loans on non-accrual status (excluding restructured loans):

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any, at the dates indicated:

At December 31,

(Dollars In Thousands)

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Loan Volume Activities

The following table is provided to disclose details related to the volume of loans originated and purchased for the quarter and six months indicated:

The following table is provided to disclose details related to the volume of loans originated and purchased for investment for the quarter and nine months indicated:

For the Quarter Ended

For the Six Months Ended

For the Nine Months Ended

(In Thousands)

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Mortgage loan principal payments

Increase in other items, net (1)

(Decrease) increase in other items, net (1)

Net (decrease) increase in loans held for investment

Includes net changes in undisbursed loan funds, deferred loan fees or costs, allowance for loan losses, fair value of loans held for investment, advance payments of escrows and

In addition to loans originated and purchased for investment discussed above, the Bank originated one single-family loan held for sale of $147,000 in the third quarter and first nine months of

fiscal 2021 which was subsequently sold and settled.

The Bank did not originate any loans held for sale in the third quarter and first nine months of fiscal 2020.

Liquidity and Capital Resources

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The primary investing activity of the Corporation is the origination and purchase of loans held for investment.

During the first six months of fiscal 2021 and 2020, the Corporation originated and

During the first nine months of fiscal 2021 and 2020, the Corporation originated and

purchased loans held for investment of $138.6 million and $203.9 million, respectively.

At December 31, 2020, the Corporation had loan origination commitments totaling $12.3 million, undisbursed lines of credit totaling $942,000 and undisbursed

At March 31, 2021, the Corporation had loan origination commitments totaling $37.8 million, undisbursed lines of credit totaling $946,000 and undisbursed

construction loan funds totaling $1.7 million.

The Corporation anticipates that it will have sufficient funds available to meet its current loan commitments.

During the first six months of fiscal 2021 and 2020, total loan repayments were $125.9

million and $116.0 million, respectively.

The Corporation

anticipates that it will have sufficient funds available to meet its current loan commitments.

During the first nine months of fiscal 2021 and 2020, total loan repayments were $201.6 million and

$171.7 million, respectively.

The Corporation’s primary financing activity is gathering deposits.

During the first six months of fiscal 2021, the net increase in deposits was $17.0 million or two percent, due to an increase in

transaction accounts, partly offset by a decrease in time

Time deposits decreased $16.2 million, or 10 percent, to $153.8 million at December 31, 2020 from $170.0 million at June 30, 2020.

At December 31, 2020, time deposits with a principal

During the first nine months of fiscal 2021, the net increase in deposits was $40.8 million or five percent, due to an increase

in transaction accounts, partly offset by a decrease in time deposits.

Time deposits decreased $23.6 million, or 14 percent, to $146.4 million at March 31, 2021 from $170.0 million at June 30, 2020.

At March 31, 2021, time deposits with a principal

amount of $250,000 or less and scheduled to mature in one year or less were $69.5 million and total time deposits with a principal amount of more than $250,000 and scheduled to mature in one year or less were $10.7 million.

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The Corporation generally maintains sufficient cash and cash equivalents to meet short-term liquidity needs.

At December 31, 2020, total cash and cash equivalents were $74.0 million, or six percent of

total assets.

At March 31, 2021, total cash and cash equivalents were $71.6 million, or six percent of total

Depending on market conditions and the pricing of deposit products and FHLB – San Francisco advances, the Bank may rely on FHLB – San Francisco advances for part of its liquidity needs.

As of December 31, 2020, total borrowings were

As of March 31, 2021, total borrowings were $111.0

million and the financing availability at FHLB – San Francisco was limited to 35 percent of total assets;

the remaining borrowing facility available was $280.3 million and the remaining available collateral was $340.6 million.

In addition, the

Bank has secured a $176.2 million discount window facility at the Federal Reserve Bank of San Francisco, collateralized by investment securities with a fair market value of $187.4 million.

As of December 31, 2020, the Bank also has a borrowing

arrangement in the form of a federal funds facility with its correspondent bank for $17.0 million that matures on June 30, 2021 which the Bank intends to renew upon maturity.

The Bank had no advances under its correspondent bank or discount window

facility as of December 31, 2020.

In addition, the Bank

has secured a $219.7 million discount window facility at the Federal Reserve Bank of San Francisco, collateralized by investment securities with a fair market value of $233.7 million.

As of March 31, 2021, the Bank also has a borrowing arrangement in

the form of a federal funds facility with its correspondent bank for $17.0 million that matures on June 30, 2021 which the Bank intends to renew upon maturity.

The Bank had no advances under its correspondent bank or discount window facility as of

March 31, 2021.

Regulations require thrifts 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, 2020 increased to 27.7 percent from 23.1 percent for the quarter ended June 30, 2020.

average deposits and borrowings) for the quarter ended March 31, 2021 increased to 30.5 percent from 23.1 percent for the quarter ended June 30, 2020.

The Bank, as a federally-chartered, federally insured savings bank, is subject to the capital requirements established by the OCC.

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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, 2020, the Bank exceeded all regulatory capital requirements.

The Bank was categorized "well-capitalized" at December 31, 2020 under the regulations of the OCC.

As a bank holding

company registered with the Federal Reserve, Provident Financial Holdings, Inc.

At March 31, 2021, the Bank exceeded all regulatory capital requirements.

The Bank was categorized "well-capitalized" at March 31, 2021 under the regulations of the OCC.

As a bank holding company

registered with the Federal Reserve, Provident Financial Holdings, Inc.

is 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.

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.

The Bank's actual and required minimum capital amounts and ratios at the dates indicated are as follows (dollars in thousands):

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Provident Savings Bank, F.S.B.:

As of December 31, 2020

As of March 31, 2021

Tier 1 leverage capital (to adjusted average assets)

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order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions.

As of December 31, 2020, the capital

conservation buffer required a minimum of 2.50% of risk weighted assets.

As of March 31, 2021, the capital conservation

buffer required a minimum of 2.50% of risk weighted assets.

The ability of the Corporation to pay dividends to stockholders depends primarily on the ability of the Bank to pay dividends to the Corporation.

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the effect thereof would cause its net worth to be reduced below the regulatory capital requirements imposed by federal regulation.

In the first six months of fiscal 2021, the Bank paid a cash dividend of $5.0 million to the Corporation, while the

In the first nine months of fiscal 2021, the Bank paid a cash dividend of $5.0 million to the Corporation, while the

Corporation paid $3.1 million of cash dividends to its shareholders.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis