PROVIDENT FINANCIAL HOLDINGS INC 10-K

Item 1. Business General Provident Financial Holdings, Inc. (the “Corporation”), a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company of Provident Savings Bank, F.S.B. (the “Bank”) upon the Bank’s conversion from a federal mutual to a federal stock savings bank (“Conversion”). The Conversion was completed on June 27, 1996. The Corporation is regulated by the Federal Reserve Board (“FRB”). At June 30, 2022, the Corporation had consolidated total assets of $1.19 billion, total deposits of $955.5 million and stockholders’ equity of $128.7 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 Annual Report on Form 10-K (“Form 10-K”), including the audited consolidated financial statements and related data, relates primarily to the Bank. ​ The Bank, founded in 1956, is a federally chartered stock savings bank headquartered in Riverside, California. The Bank is regulated by the Office of the Comptroller of the Currency (“OCC”), its primary federal regulator, and the Federal Deposit Insurance Corporation (“FDIC”), the insurer of its deposits. The Bank’s deposits are federally insured up to applicable limits by the FDIC. The Bank has been a member of the Federal Home Loan Bank (“FHLB”) – San Francisco since 1956. ​ The Bank is a financial services company committed to serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank conducts its business operations as Provident Bank, and through its subsidiary, Provident Financial Corp. The business activities of the Bank consist of community banking, investment services and trustee services for real estate transactions. ​ The Bank’s community banking operations primarily consist of accepting deposits from customers within the communities surrounding its full-service offices and investing those funds in single-family, multi-family, commercial real estate, construction, commercial business, consumer and other mortgage loans. Through its subsidiary, Provident Financial Corp, the Bank conducts trustee services for the Bank’s real estate transactions and in the past has held real estate for investment. For additional information, see “Subsidiary Activities” in this Form 10-K. The activities of Provident Financial Corp are included in the Bank's operating segment results. The Bank’s revenues are derived principally from interest earned on its loan and investment portfolios, and fees generated through its community banking activities. ​ On June 22, 2006, the Bank established the Provident Savings Bank Charitable Foundation (“Foundation”) in order to further its commitment to the local community. The specific purpose of the Foundation is to promote and provide for the betterment of youth, education, housing and the arts in the Bank’s primary market areas of Riverside and San Bernardino counties. The Foundation was funded with a $500,000 charitable contribution made by the Bank in the fourth quarter of fiscal 2006. The Bank contributed $40,000 to the Foundation in both fiscal 2022 and 2021. ​ The Corporation is actively monitoring and responding to the effects of the novel coronavirus of 2019 (“COVID-19”) pandemic. The Centers of Disease Control and Prevention (“CDC”) guidelines, as well as directives from federal, state, county and local officials, are being closely followed to make informed operational decisions. During the COVID-19 pandemic, the health, safety and well-being of its customers, employees and communities and providing uninterrupted access to services are top priorities for the Corporation. As of June 30, 2022, all banking branches are open with normal hours and substantially all employees have returned to their routine working environments. The Bank will continue to monitor branch access and occupancy levels in relation to cases and close contact scenarios and follow governmental restrictions and public health authority guidelines. ​ 1 Table of Contents Subsequent Event ​ On July 28, 2022, the Corporation announced that the Corporation’s Board of Directors declared a cash dividend of $0.14 per share. Shareholders of the Corporation’s common stock at the close of business on August 18, 2022 were entitled to receive the cash dividend, which will be payable on September 8, 2022. ​ Market Area ​ The Bank is headquartered in Riverside, California and operates 12 full-service banking offices in Riverside County and one full-service banking office in San Bernardino County. Management considers Riverside and Western San Bernardino counties to be the Bank’s primary market for deposits. The Bank is the largest independent community bank headquartered in Riverside County and it has the eleventh largest deposit market share of all banks and the third largest of community banks in Riverside County. ​ The large geographic area encompassing Riverside and San Bernardino counties is referred to as the “Inland Empire.” According to the 2020 Census Bureau population statistics, Riverside and San Bernardino Counties have the fourth and fifth largest populations in California, respectively. The Bank’s market area consists primarily of suburban and urban communities. Riverside and Western San Bernardino counties are relatively densely populated and are within the greater Los Angeles metropolitan area. According to the United States of America (“U.S.”) Department of Labor, Bureau of Labor Statistics, the unemployment rate in June 2022 for the Inland Empire was 4.0% and in the State of California was 4.2%, compared to 3.6% nationwide, reflecting improvement in the economy attributable to the reduced impact of the COVID-19 pandemic. The unemployment data reported in June 2021 was 7.9% in both the Inland Empire and California and 5.9% nationwide. Business activity in the Inland Empire has continued to grow, and in the context of recent increasingly uncertain economic environment, stands in stark contrast to growth trends in the nation. In the first quarter of calendar 2022, business activity in the Inland Empire expanded by 4.7% compared to 6.4% in the fourth quarter of calendar 2021. Although regional growth has slowed somewhat, it unambiguously outperformed the U.S. Gross Domestic Product, which declined by 1.5% in the first quarter of calendar 2022. Over calendar year 2022, the Inland Empire’s business activity is forecast to rise between 2.5% and 3.5%. Employment has continued to expand and the workforce in the region is larger than it was before the pandemic, something that is not true for the state as a whole. (Source: University of California – Riverside School of Business – Inland Empire Business Activity Index – Summer 2022 Edition). California home sales were 344,970 in June 2022, down 20.9% percent from June 2021, when 436,020 homes were sold on an annualized basis. The June 2022 statewide and Inland Empire median home price was $863,790 and $585,000, up 5.4% and up 11.4% from June 2021, respectively. (Source: California Association of Realtors – July 18, 2022 News Release). ​ Competition ​ The Bank faces significant competition in its market area in originating real estate loans and attracting deposits. The population growth in the Inland Empire has attracted numerous financial institutions to the Bank’s market area. The Bank’s primary competitors are large national and regional commercial banks as well as other community-oriented banks and savings institutions. The Bank also faces competition from credit unions and a large number of mortgage companies that operate within its market area, as well as unregulated or less regulated non-banking entities, operating locally and elsewhere. Many of these institutions are significantly larger than the Bank and therefore have greater financial and marketing resources than the Bank. This competition may limit the Bank’s growth and profitability in the future. ​ Reportable Segments ​ Management monitors the revenue and expense components of the various products and services the Bank offers, but operations are managed and financial performance is evaluated on a Corporation-wide basis in comparison to a business plan which is developed each year. Accordingly, all operations are considered by management to be one operating segment and one reportable segment as contained in the Consolidated Statements of Operations to the Corporation’s audited consolidated financial statements included in Item 8 of this Form 10-K. 2 Table of Contents ​ Internet Website ​ The Corporation maintains a website at www.myprovident.com. The information contained on that website is not included as a part of, or incorporated by reference into, this Form 10-K. Other than an investor’s own internet access charges, the Corporation makes available free of charge through that website the Corporation’s annual report, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after these materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC. This information is available at www.sec.gov. ​ Lending Activities ​ General. The lending activity of the Bank is comprised of the origination of single-family, multi-family and commercial real estate loans and, to a lesser extent, construction, commercial business, consumer and other mortgage loans to be held for investment. Additional lending activities have historically included originating saleable single-family loans, primarily fixed-rate first trust deed mortgages. The Bank’s net loans held for investment were $940.0 million at June 30, 2022, representing 79.2% of consolidated total assets. This compares to $851.0 million, or 71.9% of consolidated total assets, at June 30, 2021. ​ At June 30, 2022, the maximum amount that the Bank could have loaned to any one borrower and the borrower’s related entities under applicable regulations was $19.6 million, or 15% of the Bank’s unimpaired capital and surplus. At June 30, 2022, the Bank had no loans or group of loans to related borrowers with outstanding balances in excess of this amount. The Bank’s five largest lending relationships at June 30, 2022 consisted of: four multi-family loans totaling $5.2 million to one group of borrowers; eight single-family loans and one multi-family loan totaling $5.2 million to one group of borrowers; two multi-family loans totaling $4.4 million to one group of borrowers; three multi-family loans totaling $4.3 million to one group of borrowers; and one multi-family loan totaling $4.2 million to one group of borrowers. The real estate collateral for these loans is located in Southern and Northern California. At June 30, 2022, all of these loans were performing in accordance with their repayment terms. ​ Loans Held For Investment Analysis . The following table sets forth the composition of the Bank’s loans held for investment at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2022 ​ 2021 ​ (Dollars In Thousands) Amount Percent Amount Percent ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans: ​ ​ Single-family ​ $ 378,234 40.33 % $ 268,272 31.48 % Multi-family ​ 464,676 49.54 ​ 484,408 56.85 ​ Commercial real estate ​ 90,429 9.64 ​ 95,279 11.18 ​ Construction ​ 3,216 0.34 ​ 3,040 0.36 ​ Other ​ 123 0.01 ​ 139 0.02 ​ Total mortgage loans ​ 936,678 99.86 ​ 851,138 99.89 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business loans ​ 1,206 0.13 ​ 849 0.10 ​ Consumer loans ​ 86 0.01 ​ 95 0.01 ​ Total loans held for investment, gross ​ 937,970 100.00 % 852,082 100.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Advance payments of escrows ​ 47 ​ 157 ​ Deferred loan costs, net ​ 7,539 ​ 6,308 ​ Allowance for loan losses ​ (5,564) ​ (7,587) ​ Total loans held for investment, net ​ $ 939,992 ​ $ 850,960 ​ ​ 3 Table of Contents Maturity of Loans Held for Investment . The following table sets forth information at June 30, 2022 regarding the dollar amount of principal payments becoming contractually due during the periods indicated for loans held for investment. Demand loans, loans having no stated schedule of principal payments, loans having no stated maturity, and overdrafts are reported as becoming due within one year. The table does not include any estimate of prepayments, which can significantly shorten the average life of loans held for investment and may cause the Bank’s actual principal payment experience to differ materially from that shown below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After After ​ ​ ​ ​ ​ ​ ​ ​ ​ One Year ​ 5 Years ​ ​ ​ ​ ​ ​ ​ ​ Within ​ Through ​ Through ​ Beyond ​ ​ ​ (In Thousands) ​ One Year ​ 5 Years ​ 15 Years ​ 15 Years ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans: ​ ​ ​ ​ ​ Single-family ​ $ 54 ​ $ 856 ​ $ 27,809 ​ $ 349,515 ​ $ 378,234 Multi-family ​ — ​ — ​ 27,091 ​ 437,585 ​ 464,676 Commercial real estate ​ 2,398 ​ 21,771 ​ 57,624 ​ 8,636 ​ 90,429 Construction ​ 59 ​ 89 ​ — ​ 3,068 ​ 3,216 Other ​ 123 ​ — ​ — ​ — ​ 123 Commercial business loans ​ 915 ​ 24 ​ 267 ​ — ​ 1,206 Consumer loans ​ 86 ​ — ​ — ​ — ​ 86 Total loans held for investment, gross ​ $ 3,635 ​ $ 22,740 ​ $ 112,791 ​ $ 798,804 ​ $ 937,970 ​ The following table sets forth the dollar amount of all loans held for investment due after one year from June 30, 2022 which have fixed and floating or adjustable interest rates: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Floating or ​ ​ ​ ​ ​ ​ ​ ​ Adjustable ​ ​ (Dollars In Thousands) ​ Fixed-Rate ​ % (1) ​ Rate ​ % (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans: ​ ​ ​ Single-family ​ $ 97,358 26 % $ 280,822 74 % Multi-family ​ 173 — % 464,503 100 % Commercial real estate ​ 1,335 2 % 86,696 98 % Construction ​ 1,074 34 % 2,083 66 % Commercial business loans ​ 272 93 % 19 7 % Total loans held for investment, gross ​ $ 100,212 11 % $ 834,123 89 % ​ (1) As a percentage of each category. ​ Scheduled contractual principal payments of loans do not reflect the actual life of such assets. The average life of loans is generally substantially less than their contractual terms because of prepayments. In addition, due-on-sale clauses generally give the Bank the right to declare loans immediately due and payable in the event, among other things, the borrower sells the real property that secures the loan. The average life of mortgage loans tends to increase, however, when current market interest rates are substantially higher than the interest rates on existing loans held for investment and, conversely, decrease when the interest rates on existing loans held for investment are substantially lower than current market interest rates, as borrowers are generally less inclined to refinance their loans when market rates increase and more inclined to refinance their loans when market rates decrease. ​ ​ 4 Table of Contents The table below describes the geographic dispersion of real estate secured loans held for investment (gross) at June 30, 2022 and 2021, as a percentage of the total dollar amount outstanding (dollars in thousands): ​ As of June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inland ​ Southern ​ Other ​ Other ​ ​ ​ ​ ​ ​ ​ Empire ​ California (1) ​ California ​ States ​ Total Loan Category ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % Single-family $ 126,638 33 % $ 112,549 30 % $ 138,767 37 % $ 280 — % $ 378,234 100 % Multi-family ​ 63,764 14 % 275,642 59 % 124,993 27 % 277 — % 464,676 100 % Commercial real estate ​ 20,450 23 % 41,127 45 % 28,852 32 % — — % 90,429 100 % Construction ​ 3,157 98 % 59 2 % — — % — — % 3,216 100 % Other ​ — — % 123 100 % — — % — — % 123 100 % Total ​ $ 214,009 23 % $ 429,500 46 % $ 292,612 31 % $ 557 — % $ 936,678 100 % ​ (1) Other than the Inland Empire. ​ As of June 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inland ​ Southern ​ Other ​ Other ​ ​ ​ ​ ​ ​ ​ Empire ​ California (1) ​ California ​ States ​ Total Loan Category ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % ​ Balance ​ % Single-family $ 78,631 29 % $ 100,560 38 % $ 88,790 33 % $ 291 — % $ 268,272 100 % Multi-family ​ 68,350 14 % 304,534 63 % 111,232 23 % 292 — % 484,408 100 % Commercial real estate ​ 22,989 24 % 41,940 44 % 30,350 32 % — — % 95,279 100 % Construction ​ 279 9 % 2,761 91 % — — % — — % 3,040 100 % Other ​ — — % 139 100 % — — % — — % 139 100 % Total ​ $ 170,249 20 % $ 449,934 53 % $ 230,372 27 % $ 583 — % $ 851,138 100 % ​ (1) Other than the Inland Empire. ​ Single-Family Mortgage Loans . One of the Bank’s primary lending activity is the origination and purchase of adjustable and fixed rate mortgage loans to be held for investment secured by first trust deed mortgages on owner-occupied, single-family (one to four units) residences in the communities where the Bank’s branches are located and surrounding areas in Southern and Northern California. During fiscal 2022 the Bank originated $191.7 million and purchased $6.4 million of single-family loans to be held for investment, all of which were underwritten in accordance with the Bank’s origination guidelines. This compares to single-family loan originations of $120.7 million and purchases of $5.4 million during fiscal 2021. At June 30, 2022, total single-family loans held for investment increased 41% to $378.2 million, or 40.3% of the total loans held for investment, from $268.3 million, or 31.5% of the total loans held for investment, at June 30, 2021. The increase in the single-family loans in fiscal 2022 was primarily attributable to new loans originated and purchased for investment that exceeded loan principal payments. During fiscal 2022, the Bank had net recoveries of $439,000 in non-performing single-family loans, as compared to net recoveries of $31,000 during fiscal 2021. At June 30, 2022 and 2021, total non-performing single-family loans were $1.4 million and $7.9 million, net of allowances and charge-offs, and there were no loans past due 30 to 89 days at both dates. ​ The Bank has underwriting standards that generally conform with the standards of the government sponsored entities (“GSE”) which include Fannie Mae and Freddie Mac. Mortgage insurance is usually required for all loans exceeding 80% loan-to-value (“LTV”) based on the lower of the purchase price or appraised value at the time of loan origination. The Bank is not currently offering loans with LTV ratios greater than 90%. The ratio is derived by dividing the original loan balance by the lower of the original appraised value or purchase price of the real estate collateral. Currently, the maximum LTV ratio is 90% for purchase and rate and term refinances and 75% for cash-out refinances. The maximum loan amount offered is $1.5 million. The lowest FICO score currently offered is 690 for a purchase transaction and 720 for a cash-out transaction. The FICO score represents the creditworthiness of a borrower based on the borrower’s credit history, as 5 Table of Contents reported by an independent third party. A higher FICO score indicates a greater degree of creditworthiness. Bank regulators have issued guidance stating that a FICO score of 660 and below is indicative of a “subprime” borrower. The Bank currently lends on residential properties classified as single-family unit, planned unit developments and condominiums. Underwriting standards and guidelines may change at any time given changes in real estate market conditions or changes to GSE policies and guidelines. For additional protection, the Bank purchases lender-paid mortgage insurance for certain single-family mortgage loans. As of June 30, 2022, a total of $78.6 million of single-family mortgage loans with a 79% weighted average LTV at the time of origination have lender-paid mortgage insurance providing a weighted average coverage ratio of 11% of the original loan amount. ​ Prior to fiscal 2009, many of the loans we originated for investment consisted of non-traditional single-family residential loans that do not conform to Fannie Mae or Freddie Mac underwriting guidelines as a result of the characteristics of the borrower or property, the loan terms, loan size or exceptions from agency underwriting guidelines. In exchange for the additional risk to us associated with these loans, these borrowers generally are required to pay a higher interest rate, and depending on the credit history, a lower loan-to-value ratio was generally required than for a conforming loan. Our non-traditional single-family residential loans include loans to borrowers who provided limited or no documentation of their income or stated income loans, negative amortization loans (a loan in which accrued interest exceeding the required monthly loan payment is added to loan principal up to 115% of the original loan amount), more than 30-year amortization loans, and loans to borrowers with a FICO score below 660 (these loans are considered subprime by the OCC). Including these low FICO score loans, as of June 30, 2022, our single-family residential borrowers had a weighted average FICO score of 759 at the time of loan origination. As of June 30, 2022, these non-traditional loans totaled $20.3 million, comprising 5.4% of total single-family residential loans held for investment and 2.2% of total loans held for investment. At that date, stated income loans totaled $17.5 million, more than 30-year amortization loans totaled $4.3 million, low FICO score loans totaled $2.0 million, and negative amortization loans totaled $479,000 (the outstanding balances described may overlap more than one category). The Bank currently offers fixed rate loan products in Riverside and San Bernardino counties and adjustable rate mortgage (“ARM”) loans throughout California. Substantially all of the loans originated by the Bank meet GSE underwriting standards based on credit and collateral. The Bank offers several ARM products which adjust semi-annually after an initial fixed period ranging from five to ten years subject to a limitation on semi-annual and lifetime changes. Currently, the ARM programs have a rate consisting of an Index tied to the Secured Overnight Financing Rate (“SOFR”), plus a margin. The programs are limited to a maximum, semi-annual increase or decrease of one percentage point with a maximum lifetime increase of five percentage points. The rate may not fall below the margin. The portfolio currently consists of the following indices, plus a margin of between 2.00% and 3.25%, which are used to calculate the periodic interest rate changes: the London Interbank Offered Rate (“LIBOR”), SOFR, the 12-month average U.S. Treasury (“12 MAT”) or the weekly average yield on one-year U.S. Treasury securities adjusted to a constant maturity of one year (“CMT”). Loans based on the LIBOR and SOFR indices constitute a majority of the Bank’s loans held for investment. The majority of the ARM loans held for investment have five, seven, or 10-year fixed periods prior to the first adjustment and provide for fully amortizing loan payments throughout the term of the loan. Loans of this type have embedded interest rate risk if interest rates should rise during the initial fixed rate period. ​ Borrower demand for ARM loans versus fixed-rate mortgage loans is a function of the level of interest rates, the expectations of changes in the level of interest rates and the difference between the initial interest rates and fees charged for each type of loan. The relative amount of fixed-rate mortgage loans and ARM loans that can be originated at any time is largely determined by the demand for each product in a given interest rate and competitive environment. Recently, during the low-interest rate market environment, existing prior to calendar 2022, the production of ARM loans was significantly lower than fixed rate mortgages. ​ The retention of ARM loans, rather than fixed-rate loans, helps to reduce the Bank’s exposure to changes in interest rates. There is, however, unquantifiable credit risk resulting from the potential of increased interest charges to be paid by the borrower as a result of increases in interest rates. It is possible that, during periods of rising interest rates, the risk of default on ARM loans may increase as a result of the increase in the required payment from the borrower. Further, the risk of default may increase because ARM loans originated by the Bank occasionally provide, as a marketing incentive, for initial rates of interest below those rates that would apply if the adjustment index plus the applicable margin were initially used for pricing. Because of these characteristics, ARM loans are subject to increased risks of default or delinquency. 6 Table of Contents Additionally, while ARM loans allow the Bank to increase the sensitivity of its assets as a result of changes in interest rates, the extent of this interest rate sensitivity is limited by the periodic and lifetime interest rate adjustment limits. Furthermore, because loan indexes may not respond perfectly to changes in market interest rates, upward adjustments on loans may occur more slowly than increases in the Bank’s cost of interest-bearing liabilities, especially during periods of rapidly increasing interest rates. Conversely, downward adjustments on the Bank’s cost of funds typically lag adjustments on ARM loans which may occur more rapidly during periods of declining interest rates. For additional information concerning the effect of interest rates on our loan portfolio, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-K. ​ The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires lenders to make a reasonable, good faith determination of a borrower’s ability to repay any consumer closed-end credit transaction secured by a dwelling and to limit prepayment penalties. Increased risks of legal challenge, private right of action and regulatory enforcement actions result from these rules. The Bank may originate loans that do not meet the definition of a “qualified mortgage” (“QM”). To mitigate the risks involved with non-QM loans, the Bank has implemented systems, processes, procedural and product changes, and maintains its underwriting standards, to ensure that the “ability-to-repay” requirements are adequately addressed. ​ A decline in real estate values subsequent to the time of origination of real estate secured loans could result in higher loan delinquency levels, foreclosures, provisions for loan losses and net charge-offs. Real estate values and real estate markets are beyond the Bank’s control and are generally affected by changes in national, regional or local economic conditions and other factors. These factors include fluctuations in interest rates and the availability of loans to potential purchasers, housing supply and demand, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes, fires, droughts and other natural disasters particular to California where substantially all of our real estate collateral is located. If real estate values decline from the levels at the time of loan origination, the value of our real estate collateral securing the loans could be significantly reduced. Our ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and it would be more likely to suffer losses on defaulted loans. ​ Multi-Family and Commercial Real Estate Mortgage Loans . At June 30, 2022, multi-family mortgage loans were $464.7 million and commercial real estate loans were $90.4 million, or 49.5% and 9.6%, respectively, of loans held for investment. This compares to multi-family mortgage loans of $484.4 million and commercial real estate loans of $95.3 million, or 56.8% and 11.2%, respectively, of loans held for investment at June 30, 2021. Consistent with its strategy to diversify the composition of loans held for investment, the Bank has made the origination and purchase of multi-family and commercial real estate loans a priority. During fiscal 2022 the Bank originated $105.9 million, all of which were underwritten in accordance with the Bank’s origination guidelines, and did not purchase any multi-family and commercial real estate loans. This compares to loan originations of $88.8 million and loan purchases of $11.5 million during fiscal 2021. At June 30, 2022, the Bank had 634 multi-family and 121 commercial real estate loans in loans held for investment. This compares to 654 multi-family and 134 commercial real estate loans in loans held for investment at June 30, 2021. ​ Multi-family mortgage loans originated by the Bank are predominately adjustable rate loans, including hybrid ARM loans, with a term to maturity of 10 to 30 years and a 25 to 30-year amortization schedule. Commercial real estate loans originated by the Bank are also predominately adjustable rate loans, including hybrid ARM loans, with a term to maturity of 10 to 30 years and a 25 to 30-year amortization schedule. Rates on multi-family and commercial real estate ARM loans generally adjust monthly, quarterly, semi-annually or annually at a specific margin over the respective interest rate index, subject to period interest rate caps and life-of-loan interest rate caps. At June 30, 2022, $448.3 million, or 96.5%, of the Bank’s multi-family loans were secured by five to 36-unit projects. The Bank’s commercial real estate loan portfolio generally consists of loans secured by small office buildings, light industrial buildings, warehouses and small retail centers. Properties securing multi-family and commercial real estate loans are primarily located in Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Francisco and Santa Clara counties. The Bank originates multi-family and commercial real estate loans in amounts typically ranging from $350,000 to $6.0 million. At June 30, 2022, the Bank had 63 commercial real estate and multi-family loans with principal balances greater than $1.5 million totaling $138.1 million. The Bank obtains appraisals on all properties that secure multi-family and commercial real estate loans. Underwriting of multi-family and commercial real estate loans includes, among other considerations, a thorough analysis of the cash flows generated by the property to support the debt service and the financial resources, experience and the income level of the borrowers and guarantors. 7 Table of Contents ​ Multi-family and commercial real estate loans afford the Bank an opportunity to price the loans with higher interest rates than those generally available from single-family mortgage loans. However, loans secured by such properties are generally greater in amount, more difficult to evaluate and monitor and are more susceptible to default as a result of general economic conditions and, therefore, involve a greater degree of risk than single-family residential mortgage loans. Because payments on loans secured by multi-family and commercial real estate properties are often dependent on the successful operation and management of the properties, repayment of such loans may be impacted by adverse conditions in the real estate market or the economy. During both fiscal 2022 and 2021, the Bank had no charge-offs or recoveries on non-performing multi-family and commercial real estate loans. At June 30, 2022 and 2021, there were no non-performing or 30 to 89 days delinquent multi-family and commercial real estate loans at both dates. Non-performing loans and/or delinquent loans may increase if there is a general decline in California real estate markets and in the event poor general economic conditions prevail. ​ Construction Loans. The Bank originates from time to time two types of construction loans: short-term construction loans and construction/permanent loans. During fiscal 2022 and 2021, the Bank originated a total of $2.2 million and $5.4 million of construction loans (including undisbursed loan funds), respectively. As of June 30, 2022 and 2021, the Bank had short-term construction loans totaling $148,000 and $2.8 million, respectively, and construction/permanent loans totaling $3.1 million and $279,000 respectively, net of undisbursed loan funds of $1.3 million and $3.0 million, respectively. ​ Short-term construction loans include three types of loans: custom construction, tract construction, and speculative construction. The Bank provides construction financing for single-family, multi-family and commercial real estate properties. Custom construction loans are made to individuals who, at the time of application, have a contract executed with a builder to construct their residence. Custom construction loans are generally originated for a term of 12 to 18 months, with adjustable or fixed interest rates at the prime lending rate plus a margin and with loan-to-value ratios of up to 75% of the appraised value of the completed property. The owner secures long-term permanent financing at the completion of construction. At June 30, 2022, there were four custom single-family construction loans totaling $4.3 million with $1.3 million of undisbursed funds. This compares to June 30, 2021 when the Bank had two custom single-family construction loans totaling $1.7 million with $611,000 of undisbursed funds. ​ From time to time the Bank makes lot loans to individuals to finance land acquisition prior to the start of construction or tract construction loans to subdivision builders. These subdivisions are usually financed and built in phases. A thorough analysis of market trends and demand within the area are reviewed for feasibility. Tract construction may include the building and financing of model homes under a separate loan. At June 30, 2022, there was one land loan of $123,000 and one tract construction loan of $1.7 million with $1.6 million undisbursed funds, as compared to one land loan of $139,000 at June 30, 2021. ​ Speculative construction loans are made to home builders and are termed “speculative” because the home builder does not have, at the time of loan origination, a signed sale contract with a home buyer who has a commitment for permanent financing with either the Bank or another lender for the finished home. The home buyer may be identified during or after the construction period. The builder may be required to debt service the speculative construction loan for a significant period of time after the completion of construction until the homebuyer is identified. At both June 30, 2022 and 2021, there were no speculative construction loans. ​ Construction/permanent loans automatically roll from the construction to the permanent phase. The construction phase of a construction/permanent loan generally lasts nine to 12 months and the interest rate charged is generally fixed at a margin above prime rate and with a loan-to-value ratio of up to 75% of the appraised value of the completed property. At June 30, 2022, there were $3.1 million of construction/permanent loans as compared to $279,000 of construction/permanent loans at June 30, 2021. ​ Construction loans under $1.0 million are approved by Bank personnel specifically designated to approve construction loans. The Bank’s Loan Committee, comprised of the Chief Executive Officer, Chief Lending Officer, Chief Financial Officer, Senior Vice President – Single-Family Division and Vice President - Loan Administration, approves all construction loans over $1.0 million. Prior to approval of any construction loan, an independent fee appraiser inspects the site and the Bank reviews the existing or proposed improvements, identifies the market for the proposed project, and 8 Table of Contents analyzes the pro-forma data and assumptions on the project. In the case of a tract or speculative construction loan, the Bank reviews the experience and expertise of the builder. The Bank obtains credit reports, financial statements and tax returns on the borrowers and guarantors, an independent appraisal of the project, and any other expert report necessary to evaluate the proposed project. In the event of cost overruns, the Bank requires the borrower to deposit their own funds into a loan-in-process account, which the Bank disburses consistent with the completion of the subject property pursuant to a revised disbursement schedule. ​ The construction loan documents require that construction loan proceeds be disbursed in increments as construction progresses. Disbursements are based on periodic on-site inspections by independent inspectors and Bank personnel. At inception, the Bank also requires borrowers to deposit funds into the loan-in-process account covering the difference between the actual cost of construction and the loan amount. The Bank regularly monitors the construction loan portfolio, economic conditions and housing inventory. The Bank’s property inspectors perform periodic inspections. The Bank believes that the internal monitoring system helps reduce many of the risks inherent in its construction loans. ​ Construction loans afford the Bank the opportunity to achieve higher interest rates and fees with shorter terms to maturity than its single-family mortgage loans. Construction loans, however, are generally considered to involve a higher degree of risk than single-family mortgage loans because of the inherent difficulty in estimating both a property’s value at completion of the project and the cost of the project. The nature of these loans is such that they are generally more difficult to evaluate and monitor. If the estimate of construction costs proves to be inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of value upon completion proves to be inaccurate, the Bank may be confronted with a project whose value is insufficient to assure full repayment. Projects may also be jeopardized by disagreements between borrowers and builders and by the failure of builders to pay subcontractors. Loans to builders to construct homes for which no purchaser has been identified carry additional risk because the payoff for the loan depends on the builder’s ability to sell the property prior to the time that the construction loan matures. The Bank has sought to address these risks by adhering to strict underwriting policies, disbursement procedures and monitoring practices. In addition, because the Bank’s construction lending is in its primary market area, changes in the local or regional economy and real estate market could adversely affect the Bank’s construction loans held for investment. During fiscal 2022 and 2021, the Bank had no charge-offs or recoveries and no construction loans were non-performing or 30-89 days delinquent at both June 30, 2022 and June 30, 2021. ​ Participation Loan Purchases and Sales. In an effort to expand production and diversify risk, the Bank purchases loans and loan participations, with collateral primarily in California, which allows for greater geographic distribution outside of the Bank’s primary lending areas. The Bank generally purchases between 50% and 100% of the total loan amount. When the Bank purchases a participation loan, the lead lender will usually retain a servicing fee, thereby decreasing the loan yield. This servicing fee approximates the expense the Bank would incur if the Bank were to service the loan. All properties serving as collateral for loan participations are inspected by an employee of the Bank or a third-party inspection service prior to being approved by the Loan Committee and the Bank relies upon the same underwriting criteria required for those loans originated by the Bank. The Bank purchased $6.4 million of loans to be held for investment (solely single-family loans) in fiscal 2022, compared to $16.9 million of purchased loans to be held for investment (primarily single-family and multi-family loans) in fiscal 2021. The decline in loan purchases was due primarily to the uncertainty of the asset quality and fewer loans available for purchase during the COVID-19 pandemic. As of June 30, 2022, total loans serviced by other financial institutions were $11.4 million, as compared to $13.6 million at June 30, 2021. As of June 30, 2022, all loans serviced by others were performing according to their original contractual payment terms. As of June 30, 2021, all loans serviced by others were performing according to their original contractual payment terms, except for one loan of $365,000 that was in the non-performing category. ​ The Bank also sells participating interests in loans when it has been determined that it is beneficial to diversify the Bank’s risk. Participation sales enable the Bank to maintain acceptable loan concentrations and comply with the Bank’s loans to one borrower policy. Generally, selling a participating interest in a loan increases the yield to the Bank on the portion of the loan that is retained. The Bank did not sell any participation loans in fiscal 2022 or fiscal 2021. ​ Commercial Business Loans . The Bank has a Business Banking Department that primarily serves businesses located within the Inland Empire. Commercial business loans allow the Bank to diversify its lending and increase the average loan yield. As of June 30, 2022, commercial business loans were $1.2 million, or 0.1% of loans held for investment, up 42% 9 Table of Contents from $849,000, or 0.1% of loans held for investment at June 30, 2021. These loans represent secured and unsecured lines of credit and term loans secured by business assets. ​ Commercial business loans are generally made to customers who are well known to the Bank and are generally secured by accounts receivable, inventory, business equipment and/or other assets. The Bank’s commercial business loans may be structured as term loans or as lines of credit. Lines of credit are made at variable rates of interest equal to a negotiated margin above the prime rate and term loans are at a fixed or variable rate. The Bank may also require personal guarantees from financially capable parties associated with the business based on a review of personal financial statements. Commercial business term loans are generally made to finance the purchase of assets and have maturities of five years or less. Commercial lines of credit are typically made for the purpose of providing working capital and are usually approved with a term of one year or less. ​ Commercial business loans involve greater risk than residential mortgage loans and involve risks that are different from those associated with residential and commercial real estate loans. Real estate loans are generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral value and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable or other business assets including real estate, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because accounts receivable may not be collectible and inventories and equipment may be obsolete or of limited use. Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is secondary and oftentimes an insufficient source of repayment. At June 30, 2022 and 2021, there were no non-performing commercial business loans at both dates. During fiscal 2022 or 2021, the Bank had no charge-offs or recoveries on commercial business loans. ​ Consumer Loans. At June 30, 2022 and 2021, the Bank’s consumer loans were $86,000 and $95,000, respectively, or less than 0.1% of the Bank’s loans held for investment at these dates. The Bank offers open-ended lines of credit on unsecured basis. ​ Consumer loans potentially have a greater risk than residential mortgage loans, particularly in the case of loans that are unsecured. Consumer loan collections are dependent on the borrower’s ongoing financial stability, and thus are more likely to be adversely affected by job loss, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans. The Bank had no non-performing consumer loans at both June 30, 2022 and 2021. During fiscal 2022, the Bank had no net charge-offs on consumer loans, as compared to net charge-offs of $1,000 during fiscal 2021. ​ Loans Originations, Purchases, Sales and Repayments ​ Mortgage loans are primarily originated for investment. Prior to scaling back originations of saleable single-family fixed-rate mortgage loans during fiscal 2019, a large amount of single-family fixed-rate mortgage loans were originated for sale to institutional investors. Mortgage loans sold to investors generally were sold without recourse other than standard representations and warranties. Generally, mortgage loans sold to Fannie Mae and Freddie Mac were sold on a non-recourse basis and foreclosure losses are generally the responsibility of the purchaser and not the Bank, except in the case of Federal Housing Administration (“FHA”) and Veterans’ Administration (“VA”) loans used to form Government National Mortgage Association pools, which are subject to limitations on the FHA’s and VA’s loan guarantees. 10 Table of Contents The following table shows the Bank’s loan originations, purchases, sales and principal repayments during the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, (In Thousands) 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans originated for sale: ​ ​ ​ Retail originations ​ $ — ​ $ 147 ​ $ — Total loans originated for sale ​ — ​ 147 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans sold: ​ ​ ​ Servicing retained ​ — ​ (147) ​ — Total loans sold ​ — ​ (147) ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans originated for investment: ​ ​ ​ Mortgage loans: ​ ​ ​ Single-family ​ 191,672 ​ 120,699 ​ 36,427 Multi-family ​ 87,738 ​ 85,011 ​ 51,022 Commercial real estate ​ 18,187 ​ 3,818 ​ 14,468 Construction ​ 2,228 ​ 5,426 ​ 3,983 Other ​ — ​ — ​ 143 Consumer loans ​ — ​ — ​ 1 Total loans originated for investment ​ 299,825 ​ 214,954 ​ 106,044 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans purchased for investment: ​ ​ ​ Mortgage loans: ​ ​ ​ Single-family ​ 6,354 ​ 5,446 ​ 70,733 Multi-family ​ — ​ 11,463 ​ 71,344 Total loans purchased for investment ​ 6,354 ​ 16,909 ​ 142,077 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan principal repayments ​ (221,315) ​ (281,477) ​ (228,250) Increase (decrease) in other items, net (1) ​ 4,168 ​ (2,222) ​ 3,000 Net increase (decrease) in loans held for investment at fair value ​ $ 89,032 ​ $ (51,836) ​ $ 22,871 ​ (1) 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 repurchases. ​ Loan Servicing ​ The Bank receives fees from a variety of investors in return for performing the traditional services of collecting individual loan payments on loans sold by the Bank to such investors. At June 30, 2022, the Bank was servicing $37.7 million of loans for others, a 25% decrease from $50.4 million at June 30, 2021. The decrease was primarily attributable to loan prepayments. Loan servicing includes processing payments, accounting for loan funds and collecting and paying real estate taxes, hazard insurance and other loan-related items such as private mortgage insurance. After the Bank receives the gross mortgage payment from individual borrowers, it remits to the investor a predetermined net amount based on the loan sale agreement for that mortgage. ​ Servicing assets are amortized in proportion to and over the period of the estimated net servicing income and are carried at the lower of cost or fair value. The fair value of servicing assets is determined by calculating the present value of the estimated net future cash flows consistent with contractually specified servicing fees. The Bank periodically evaluates servicing assets for impairment, which is measured as the excess of cost over fair value. This review is performed on a disaggregated basis, based on loan type and interest rate. Generally, loan servicing becomes more valuable when interest rates rise (as prepayments typically decrease) and less valuable when interest rates decline (as prepayments typically increase). In estimating fair values at June 30, 2022 and 2021, the Bank used a weighted average Constant Prepayment Rate (“CPR”) of 10.85% and 21.82%, respectively, and a weighted-average discount rate of 9.05% and 9.10%, 11 Table of Contents respectively. The required impairment reserve against servicing assets at June 30, 2022 and 2021 was $119,000 and $176,000, respectively. In aggregate, servicing assets had a carrying value of $287,000 and a fair value of $168,000 at June 30, 2022, compared to a carrying value of $384,000 and a fair value of $208,000 at June 30, 2021. ​ Asset Quality ​ Delinquent Loans . When a mortgage loan borrower fails to make a required payment when due, the Bank initiates collection procedures. In most cases, delinquencies are cured promptly; however, if the loan remains delinquent on the 120th day for single-family loans or the 90th day for other loans, or sooner if the borrower is chronically delinquent, and after all reasonable means of obtaining the payment have been exhausted, foreclosure proceedings, according to the terms of the security instrument and applicable law, are initiated. Interest income is reduced by the full amount of accrued and uncollected interest on such loans. ​ As of June 30, 2022, total non-performing assets, net of allowance for loan losses and fair value adjustments, were $1.4 million, or 0.12% of total assets, which was primarily comprised of: seven single-family loans and no real estate owned (“REO”). As of June 30, 2022, all non-performing loans had a current payment status. This compares to total non-performing assets, net of allowance for loan losses and fair value adjustments, of $8.6 million, or 0.73% of total assets, with $7.7 million, or 89%, of non-performing loans with a current payment status at June 30, 2021 and no REO. ​ The following table sets forth information with respect to the Bank’s non-performing assets and troubled debt restructurings (“restructured loans”), net of allowance for loan losses and fair value adjustments, at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, (Dollars In Thousands) 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ Loans on non-performing status (excluding restructured loans): ​ ​ Mortgage loans: ​ ​ Single-family ​ $ 701 ​ $ 882 ​ Multi-family ​ — ​ 781 ​ Total ​ 701 ​ 1,663 ​ ​ ​ ​ ​ ​ ​ ​ ​ Accruing loans past due 90 days or more ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Restructured loans on non-performing status: ​ ​ ​ Mortgage loans: ​ ​ ​ Single-family ​ 722 ​ 6,983 ​ Total ​ 722 ​ 6,983 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total non-performing loans ​ 1,423 ​ 8,646 ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate owned, net ​ — ​ — ​ Total non-performing assets ​ $ 1,423 ​ $ 8,646 ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-performing loans as a percentage of loans held for investment, net ​ 0.15 % 1.02 % ​ ​ ​ ​ ​ ​ ​ ​ Non-performing loans as a percentage of total assets ​ 0.12 % 0.73 % ​ ​ ​ ​ ​ ​ ​ ​ Non-performing assets as a percentage of total assets ​ 0.12 % 0.73 % ​ The Bank assesses loans individually and classifies the loans as non-performing and substandard in accordance with regulatory requirements when the accrual of interest has been discontinued, loans have been restructured or management has serious doubts about the future collectability of principal and interest, even though the loans are currently performing. Factors considered in determining classification include, but are not limited to, expected future cash flows, collateral value, the financial condition of the borrower and current economic conditions. The Bank measures each non-performing loan 12 Table of Contents based on ASC 310, “Receivables,” establishes a collectively evaluated or individually evaluated allowance and charges off those loans or portions of loans deemed uncollectible. ​ Restructured Loans. A troubled debt restructuring is a loan which the Bank, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Bank would not otherwise consider. ​ The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to: ​ ● A reduction in the stated interest rate; ● An extension of the maturity at an interest rate below market; ● A reduction in the accrued interest; and ● Extensions, deferrals, renewals and rewrites. ​ To qualify for restructuring, a borrower must provide evidence of their creditworthiness such as, current financial statements, their most recent income tax returns, current paystubs, current W-2s, and most recent bank statements, among other documents, which are then verified by the Bank. The Bank re-underwrites the loan with the borrower’s updated financial information, new credit report, current loan balance, new interest rate, remaining loan term, updated property value and modified payment schedule, among other considerations, to determine if the borrower qualifies. ​ For the fiscal year ended June 30, 2022, there were no loans that were newly modified from their original terms, re-underwritten or identified as a restructured loan; three loans were upgraded to the pass category; seven loans were paid off; and no loans were converted to REO. For the fiscal year ended June 30, 2021, there were 20 loans (including 19 COVID-19 related forbearance loans downgraded when their monthly payment deferrals were extended beyond six months) that were newly modified from their original terms, re-underwritten or identified as restructured loans; while two loans were upgraded to the pass category; three loans were paid off; and no loans were converted to REO. ​ During the fiscal years ended June 30, 2022 and 2021, no restructured loans were in default within a 12-month period subsequent to their original restructuring. Additionally, during the fiscal year ended June 30, 2022, there were no loans that were extended beyond their maturity of the modification terms; while in fiscal year ended June 30, 2021, there were 12 restructured loans totaling $4.7 million that were extended beyond their initial modification terms. ​ As of June 30, 2022, the net outstanding balance of the Corporation’s 13 restructured loans was $4.5 million of which one loan totaling $722,000 was classified as substandard on non-accrual status. As of June 30, 2022, all of the restructured loans were current with respect to their payment status, consistent with their modified terms. As of June 30, 2021, the net outstanding balance of the Corporation’s 23 restructured loans was $7.9 million of which 20 loans totaling $7.0 million were classified as substandard on non-accrual status. As of June 30, 2021, $7.7 million, or 97 percent, of the restructured loans were current with respect to their payment status, consistent with their modified terms. The Bank upgrades restructured single-family loans to the pass category if the borrower has demonstrated satisfactory contractual payments for at least six consecutive months or 12 months for those loans that were restructured more than once and there is a reasonable assurance that the payments will continue. Once the borrower has demonstrated satisfactory contractual payments beyond 12 consecutive months, the loan is no longer categorized as a restructured loan. From March 2020 to March 2021, the Bank offered short-term loan modifications to assist borrowers during the COVID-19 pandemic. The Coronavirus Aid, Relief, and Economic Security Act for 2020, as amended (“CARES Act”) and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus ("Interagency Statement") provided that a short-term modification made in response to COVID-19 and which meets certain criteria does not need to be accounted for as a restructured loan. Accordingly, the Corporation does not account for such loan modifications as restructured loans. ​ Foreclosed Real Estate. Real estate acquired by the Bank as a result of foreclosure or by deed-in-lieu of foreclosure is classified as REO until it is sold. When a property is acquired, it is recorded at its fair market value less the estimated cost of sale. Subsequent declines in value are charged to operations. As of June 30, 2022 and 2021, there was no REO property at both dates. In managing the real estate owned properties for quick disposition, the Bank completes the necessary repairs and maintenance to the individual properties before listing for sale, obtains new appraisals and broker price opinions 13 Table of Contents (“BPO”) to determine current market listing prices, and engages local realtors who are most familiar with real estate sub-markets, among other techniques, which generally results in the quick disposition of real estate owned. ​ Asset Classification. The OCC has adopted various regulations regarding the problem assets of savings institutions. The regulations require that each institution review and classify its assets on a regular basis. In addition, in connection with examinations of institutions, OCC examiners have the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified as a loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. If an asset or portion thereof is classified as loss, the institution establishes an individually evaluated allowance and may subsequently charge-off the amount of the asset classified as loss. A portion of the allowance for loan losses established to cover probable losses related to assets classified substandard or doubtful may be included in determining an institution’s regulatory capital. Assets that do not currently expose the institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as special mention and are closely monitored by the Bank. ​ Classified assets improved 84% to $1.6 million at June 30, 2022 from $10.4 million at June 30, 2021. The aggregate amounts of the Bank’s classified assets are located in California. ​ The following table summarizes classified assets, which is comprised of classified loans, including loans classified by the Bank as special mention, net of allowance for loan losses, and REO at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2022 ​ At June 30, 2021 (Dollars In Thousands) ​ Balance ​ Count ​ Balance ​ Count ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special mention loans: ​ ​ Mortgage loans: ​ ​ Single-family ​ $ 224 1 ​ $ 1,767 4 Total special mention loans ​ 224 1 ​ 1,767 4 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Substandard loans: ​ ​ Mortgage loans: ​ ​ Single-family ​ 1,423 9 ​ 7,865 29 Multi-family ​ ​ — ​ — ​ ​ 781 ​ 1 Total substandard loans ​ 1,423 9 ​ 8,646 30 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total classified loans ​ 1,647 10 ​ 10,413 34 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate owned: ​ ​ Single-family ​ — — ​ — — Total real estate owned ​ — — ​ — — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total classified assets ​ $ 1,647 10 ​ $ 10,413 34 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total classified assets as a percentage of total assets ​ 0.14 % ​ 0.88 % ​ Not all of the Bank’s classified assets are delinquent or non-performing. In determining whether the Bank’s assets expose the Bank to sufficient risk to warrant classification, the Bank may consider various factors, including the payment history of the borrower, the loan-to-value ratio, and the debt coverage ratio of the property securing the loan. After consideration of these and other factors, the Bank may determine that the asset in question, though not currently delinquent, presents a risk of loss that requires it to be classified or designated as special mention. In addition, the Bank’s loans held for investment may include single-family, commercial and multi-family real estate loans with a balance exceeding the current 14 Table of Contents market value of the collateral which are not classified because they are performing and have borrowers who have sufficient resources to support the repayment of the loan. ​ Allowance for Loan Losses. The allowance for loan losses is maintained to cover losses inherent in the loans held for investment. In originating loans, the Bank recognizes that losses will be experienced and that the risk of loss will vary with, among other factors, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the collateral securing the loan. The responsibility for the review of the Bank’s assets and the determination of the adequacy of the allowance lies with the Internal Asset Review Committee (“IAR Committee”). The Bank adjusts its allowance for loan losses by charging (crediting) its provision (recovery) for loan losses against the Bank’s operations. ​ The Bank has established a methodology for the determination of the provision for loan losses. The methodology is set forth in a formal policy and takes into consideration the need for a collectively evaluated allowance for groups of homogeneous loans and an individually evaluated allowance that are tied to individual problem loans. The Bank’s methodology for assessing the appropriateness of the allowance consists of several key elements. ​ The allowance is calculated by applying loss factors to the loans held for investment. The loss factors are applied according to loan program type and loan classification. The loss factors for each program type and loan classification are established based on an evaluation of the historical loss experience, prevailing market conditions, concentration in loan types and other relevant factors consistent with ASC 450, “Contingency”. Homogeneous loans, such as residential mortgage, home equity and consumer installment loans are considered on a pooled loan basis. A factor is assigned to each pool based upon expected charge-offs for one year. The factors for larger, less homogeneous loans, such as construction and commercial real estate loans, are based upon loss experience tracked over business cycles considered appropriate for the loan type. ​ Collectively evaluated or individually evaluated allowances are established to absorb losses on loans for which full collectability may not be reasonably assured as prescribed in ASC 310. Estimates of identifiable losses are reviewed continually and, generally, a provision (recovery) for losses is charged (credited) against operations on a quarterly basis as necessary to maintain the allowance at an appropriate level. Management presents the minutes summarizing the actions of the IAR Committee to the Bank’s Board of Directors on a quarterly basis. ​ Non-performing loans are charged-off to their fair market values in the period the loans, or portion thereof, are deemed uncollectible, generally after the loan becomes 150 days delinquent for real estate secured first trust deed loans and 120 days delinquent for commercial business or real estate secured second trust deed loans. For restructured loans, the charge-off occurs when the loan becomes 90 days delinquent; and where borrowers file bankruptcy, the charge-off occurs when the loan becomes 60 days delinquent. The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the allowance for loan losses. The allowance for loan losses for non-performing loans is determined by applying Accounting Standards Codification (“ASC”) 310, “Receivables.” For restructured loans that are less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their restructuring period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method. For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method. For non-performing commercial real estate loans, an individually evaluated allowance is calculated based on the loan's fair value and if the fair value is higher than the loan balance, no allowance is required. ​ The IAR Committee meets quarterly to review and monitor conditions in the portfolio and to determine the appropriate allowance for loan losses. To the extent that any of these conditions are apparent by identifiable problem loans or portfolio segments as of the evaluation date, the IAR Committee’s estimate of the effect of such conditions may be reflected as an individually evaluated allowance applicable to such loans or portfolio segments. Where any of these conditions is not apparent by specifically identifiable problem loans or portfolio segments as of the evaluation date, the IAR Committee’s evaluation of the probable loss related to such condition is reflected in the general allowance. Pooled loan factors are adjusted to reflect current estimates of charge-offs for the subsequent 12 months. Loss activity is reviewed for non-pooled loans and the loss factors are adjusted, if necessary. By assessing the probable estimated losses inherent in the loans held 15 Table of Contents for investment on a quarterly basis, the Bank is able to adjust specific and inherent loss estimates based upon the most recent information that has become available. ​ At June 30, 2022, the Bank had an allowance for loan losses of $5.6 million, or 0.59% of gross loans held for investment, compared to an allowance for loan losses at June 30, 2021 of $7.6 million, or 0.88% of gross loans held for investment. A $2.5 million recovery from the allowance for loan losses was recorded in fiscal 2022, compared to a $708,000 recovery from the allowance for loan losses in fiscal 2021. The decrease in the allowance for loan losses was due primarily to improved asset quality at June 30, 2022 and improving general economic conditions as compared to June 30, 2021, partly offset by an increase in loans held for investment in fiscal 2022. Although management believes the best information available is used to make such provision (recovery), future adjustments to the allowance for loan losses may be necessary and results of operations could be significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations. ​ While the Bank believes that it has established its existing allowance for loan losses in accordance with GAAP, there can be no assurance that regulators, in reviewing the Bank’s loan portfolio, will not recommend that the Bank significantly increase its allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, including as a result of the COVID-19 pandemic, there can be no assurance that the existing allowance for loan losses is adequate or that substantial increases will not be necessary. Any material increase in the allowance for loan losses may adversely affect the Bank’s financial condition and results of operations. ​ 16 Table of Contents The following table shows certain credit ratios at and for the periods indicated and each component of the ratio’s calculations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For The Year Ended June 30, ​ (Dollars In Thousands) 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as a percentage of total gross loans held for investment at period end ​ ​ 0.59 % ​ 0.88 % ​ 0.91 % Allowance for loan losses ​ $ 5,564 ​ $ 7,587 ​ $ 8,265 ​ Total gross loans held for investment ​ $ 937,970 ​ $ 852,082 ​ $ 904,466 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-performing loans as a percentage of net loans held for investment at period end ​ ​ 0.15 % ​ 1.02 % ​ 0.55 % Total non-performing loans, net ​ $ 1,423 ​ $ 8,646 ​ $ 4,924 ​ Total loans held for investment, net ​ $ 939,992 ​ $ 850,960 ​ $ 902,796 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as a percentage of gross non-performing loans at period end ​ ​ 368.97 % ​ 80.56 % ​ 154.40 % Allowance for loan losses ​ $ 5,564 ​ $ 7,587 ​ $ 8,265 ​ Total gross non-performing loans ​ $ 1,508 ​ $ 9,418 ​ $ 5,353 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net recoveries (charge-offs) to average loans receivable during the period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Single-family: ​ ​ 0.15 % ​ 0.01 % ​ 0.02 % Net recoveries ​ $ 439 ​ $ 31 ​ $ 69 ​ Average loans receivable ​ $ 301,698 ​ $ 270,083 ​ $ 329,033 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Multi-family: ​ ​ 0.00 % ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ $ - ​ Average loans receivable ​ $ 473,487 ​ $ 484,374 ​ $ 472,010 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ 0.00 % ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ $ - ​ Average loans receivable ​ $ 90,896 ​ $ 101,768 ​ $ 107,966 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Construction: ​ ​ 0.00 % ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ $ - ​ Average loans receivable ​ $ 3,417 ​ $ 6,249 ​ $ 5,732 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business loans: ​ ​ 0.00 % ​ 0.00 % ​ 0.00 % Net charge-offs ​ $ - ​ $ - ​ $ - ​ Average loans receivable ​ $ 627 ​ $ 795 ​ $ 471 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumer loans: ​ ​ 0.00 % ​ (1.22) % ​ 0.87 % Net (charge-offs) recoveries ​ $ - ​ $ (1) ​ $ 1 ​ Average loans receivable ​ $ 73 ​ $ 82 ​ $ 115 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans: ​ ​ 0.05 % ​ 0.00 % ​ 0.01 % Total net recoveries ​ $ 439 ​ $ 30 ​ $ 70 ​ Total average loans receivable ​ $ 870,328 ​ $ 863,507 ​ $ 915,353 ​ ​ ​ 17 Table of Contents Investment Securities Activities ​ Federally chartered savings institutions are permitted under federal and state laws to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and government sponsored enterprises and of state and municipal governments, deposits at the FHLB, certificates of deposit of federally insured institutions, certain bankers’ acceptances, mortgage-backed securities and federal funds. Subject to various restrictions, federally chartered savings institutions may also invest a portion of their assets in commercial paper and corporate debt securities. Savings institutions such as the Bank are also required to maintain an investment in FHLB – San Francisco stock. ​ The investment policy of the Bank, established by the Board of Directors and implemented by the Bank’s Asset-Liability Committee, seeks to provide and maintain adequate liquidity, complement the Bank’s lending activities, and generate a favorable return on investment without incurring undue interest rate risk or credit risk. Investments are made based on certain considerations, such as credit quality, yield, maturity, liquidity and marketability. The Bank also considers the effect that the proposed investment would have on the Bank’s risk-based capital requirements and interest rate risk sensitivity. ​ At June 30, 2022 and 2021, the Bank’s investment securities portfolio was $188.4 million and $226.9 million, respectively, which primarily consisted of federal agency and GSE obligations. The Bank’s investment securities portfolio was classified as held to maturity and available for sale. The Corporation purchased held to maturity mortgage-backed securities and collateralized mortgage obligations totaling $19.0 million and $158.0 million of mortgage-backed securities during fiscal 2022 and 2021, respectively. At June 30, 2022 and 2021, our securities portfolio did not contain securities of any issuer with an aggregate book value in excess of 10% of our equity capital, excluding those issued by the United States government or its agencies or a GSE. ​ The following table sets forth the composition of the Bank’s investment portfolio at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2022 2021 ​ ​ ​ Estimated ​ ​ ​ Estimated ​ ​ ​ Amortized ​ Fair ​ ​ ​ Amortized ​ Fair ​ ​ ​ (Dollars In Thousands) ​ Cost ​ Value ​ Percent ​ Cost ​ Value ​ Percent ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to maturity securities: ​ ​ ​ ​ U.S. government sponsored enterprise MBS (1) ​ $ 180,492 ​ $ 166,610 95.53 % $ 220,448 ​ $ 221,847 97.17 % U.S. government sponsored enterprise CMO (2) ​ ​ 3,913 ​ ​ 3,763 ​ 2.16 ​ ​ — ​ ​ — ​ — ​ U.S. SBA securities (3) ​ 940 ​ 951 0.55 ​ 1,858 ​ 1,874 0.82 ​ Certificates of deposits ​ 400 ​ 400 0.23 ​ 1,000 ​ 1,000 0.44 ​ Total investment securities - held to maturity ​ $ 185,745 ​ $ 171,724 98.47 % $ 223,306 ​ $ 224,721 98.43 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ U.S. government agency MBS (1) ​ $ 1,698 ​ $ 1,698 0.97 % $ 2,146 ​ $ 2,222 0.97 % U.S. government sponsored enterprise MBS (1) ​ 865 ​ 865 0.50 ​ 1,197 ​ 1,211 0.53 ​ Private issue CMO (2) ​ 118 ​ 113 0.06 ​ 151 ​ 154 0.07 ​ Total investment securities - available for sale ​ $ 2,681 ​ $ 2,676 1.53 % $ 3,494 ​ $ 3,587 1.57 % Total investment securities ​ $ 188,426 ​ $ 174,400 100.00 % $ 226,800 ​ $ 228,308 100.00 % ​ (1) Mortgage-backed securities (“MBS”) (2) Collateralized mortgage obligations (“CMO”) (3) Small Business Administration ("SBA") ​ 18 Table of Contents The following table sets forth the outstanding balance, maturity and weighted average yield of the investment securities at June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due in ​ Due ​ ​ ​ Due ​ ​ ​ Due ​ ​ ​ ​ ​ ​ ​ One Year ​ After One to ​ ​ ​ After Five to ​ ​ ​ After ​ ​ ​ ​ ​ ​ ​ or Less (1) ​ Five Years (1) ​ ​ ​ Ten Years (1) ​ ​ ​ Ten Years (1) ​ Total (1) (Dollars in Thousands) ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield Held to maturity securities: ​ ​ ​ ​ ​ ​ U.S. government sponsored enterprise MBS ​ $ 1,027 2.31 % $ 9,947 2.83 % $ 77,167 1.17 % $ 92,351 1.35 % $ 180,492 1.36 % U.S. government sponsored enterprise CMO ​ ​ — ​ — ​ ​ 961 ​ 2.87 ​ ​ — ​ — ​ ​ 2,952 ​ 2.02 ​ ​ 3,913 ​ 2.23 ​ U.S. SBA securities ​ — — ​ — — ​ — — ​ 940 0.85 ​ 940 0.85 ​ Certificates of deposits ​ 400 0.73 ​ — — ​ — — ​ — — ​ 400 0.73 ​ Total investment securities -held to maturity ​ $ 1,427 1.87 % $ 10,908 2.83 % $ 77,167 1.17 % $ 96,243 1.37 % $ 185,745 1.37 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ ​ U.S. government agency MBS ​ $ — — % $ — — % $ — — % $ 1,698 1.90 % $ 1,698 1.90 % U.S. government sponsored enterprise MBS ​ — — ​ — — ​ 98 3.19 ​ 767 2.61 ​ 865 2.67 ​ Private issue CMO ​ — — ​ — — ​ — — ​ 113 3.02 ​ 113 3.02 ​ Total investment securities -available for sale ​ $ — — % $ — — % $ 98 3.19 % $ 2,578 2.16 % $ 2,676 2.20 % Total investment securities ​ $ 1,427 1.87 % $ 10,908 2.83 % $ 77,265 1.17 % $ 98,821 1.39 % $ 188,421 1.39 % ​ (1) The weighted average yields were calculated by multiplying each carrying value by its yield and dividing the sum of these results by the total carrying values. ​ The actual maturity and yield for MBS and CMO may differ from the stated maturity and stated yield due to scheduled amortization, prepayments and acceleration of premium amortization or discount accretion. ​ ​ Deposit Activities and Other Sources of Funds ​ General. Deposits and loan repayments are the major sources of the Bank’s funds for lending and other investment purposes. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows are influenced significantly by general interest rates and money market conditions. Borrowings through the FHLB – San Francisco and repurchase agreements may be used to compensate for declines in the availability of funds from other sources. ​ Deposit Accounts. Substantially all of the Bank’s depositors are residents of the State of California. Deposits are attracted from within the Bank’s market area by offering a broad selection of deposit instruments, including checking, savings, money market and time deposit accounts. Deposit account terms vary, differentiated by the minimum balance required, the time periods that the funds must remain on deposit and the interest rate, among other factors. In determining the terms of its deposit accounts, the Bank considers current interest rates, profitability to the Bank, interest rate risk characteristics, competition and its customers’ preferences and concerns. Generally, the Bank’s deposit rates are commensurate with the median rates of its competitors within a given market. The Bank may occasionally pay above-market interest rates to attract or retain deposits when less expensive sources of funds are not available. The Bank may also pay above-market interest rates in specific markets in order to increase the deposit base of a particular office or group of offices. The Bank reviews its deposit composition and pricing on a weekly basis. ​ The Bank generally offers time deposits for terms not exceeding seven years. As illustrated in the following table, time deposits represented 13% of the Bank’s deposit portfolio at June 30, 2022, compared to 15% at June 30, 2021. As of June 30, 2022 and 2021, there were no brokered deposits. The Bank attempts to reduce the overall cost of its deposit portfolio and to increase its franchise value by emphasizing transaction accounts, which are subject to a heightened degree of competition. For additional information, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. ​ 19 Table of Contents The following table sets forth information concerning the Bank’s weighted-average interest rate of deposits at June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ Minimum ​ ​ Percentage Average ​ ​ ​ ​ ​ Amount ​ Balance ​ of Total Interest Rate ​ Original Term ​ Deposit Account Type ​ (In Thousands) ​ (In Thousands) ​ Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transaction accounts: ​ ​ ​ —% ​ N/A Checking accounts – non interest-bearing ​ $ — ​ $ 125,089 13.09 % 0.04% ​ N/A Checking accounts – interest-bearing ​ $ — ​ 335,788 35.14 ​ 0.05% ​ N/A Savings accounts ​ $ — ​ 333,581 34.91 ​ 0.17% ​ N/A Money market accounts ​ $ — ​ 39,897 4.18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Time deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ 0.05% ​ 30 days or less Fixed-term, fixed rate ​ $ 1 ​ 20 — ​ 0.05% ​ 31 to 90 days Fixed-term, fixed rate ​ $ 1 ​ 6,027 0.63 ​ 0.05% ​ 91 to 180 days Fixed-term, fixed rate ​ $ 1 ​ 5,569 0.58 ​ 0.07% ​ 181 to 365 days Fixed-term, fixed rate ​ $ 1 ​ 31,014 3.25 ​ 0.17% ​ Over 1 to 2 years Fixed-term, fixed rate ​ $ 1 ​ 23,336 2.44 ​ 0.34% ​ Over 2 to 3 years Fixed-term, fixed rate ​ $ 1 ​ 11,470 1.20 ​ 1.02% ​ Over 3 to 5 years Fixed-term, fixed rate ​ $ 1 ​ 32,532 3.41 ​ 1.67% ​ Over 5 to 10 years Fixed-term, fixed rate ​ $ 1 ​ 11,181 1.17 ​ 0.11% ​ ​ ​ $ 955,504 100.00 % ​ Deposit Flows. The following table sets forth the balances (inclusive of interest credited) and changes in the dollar amount of deposits in the various types of accounts offered by the Bank at and between the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ Percent ​ ​ ​ ​ ​ ​ ​ Percent ​ ​ ​ ​ ​ ​ ​ ​ of ​ Increase ​ ​ ​ ​ of ​ Increase (Dollars In Thousands) ​ Amount ​ Total ​ (Decrease) ​ Amount ​ Total ​ (Decrease) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Checking accounts – non interest-bearing $ 125,089 13.09 % $ 1,910 $ 123,179 13.13 % $ 4,408 Checking accounts – interest-bearing ​ 335,788 35.14 ​ 8,400 ​ 327,388 34.90 ​ 36,925 Savings accounts ​ 333,581 34.91 ​ 26,282 ​ 307,299 32.76 ​ 33,530 Money market accounts ​ 39,897 4.18 ​ 227 ​ 39,670 4.23 ​ (319) Time deposits: ​ ​ ​ ​ Fixed-term, fixed rate which mature: ​ ​ ​ ​ Within one year ​ 78,644 8.23 ​ 1,939 ​ 76,705 8.18 ​ (13,871) Over one to two years ​ 20,600 2.16 ​ (17,087) ​ 37,687 4.02 ​ 3,692 Over two to five years ​ 20,628 2.16 ​ (5,018) ​ 25,646 2.74 ​ (18,825) Over five years ​ 1,277 0.13 ​ 878 ​ 399 0.04 ​ (536) Total ​ $ 955,504 100.00 % $ 17,531 ​ $ 937,973 100.00 % $ 45,004 ​ ​ 20 Table of Contents Time Deposits by Rates . The following table sets forth the aggregate balance of time deposits categorized by interest rates at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, (Dollars In Thousands) ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Below 1.00% ​ $ 89,617 $ 85,125 1.00 to 1.99% ​ 26,537 ​ 50,238 2.00 to 2.99% ​ 4,995 ​ 5,074 Total ​ $ 121,149 ​ $ 140,437 ​ Time Deposits by Remaining Maturity. The following table sets forth the aggregate dollar amount of time deposits at June 30, 2022 differentiated by interest rates and remaining maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Over One Over Two Over Three After ​ ​ ​ ​ One Year ​ to ​ to ​ to ​ Four ​ ​ ​ (Dollars In Thousands) ​ or Less ​ Two Years ​ Three Years ​ Four Years ​ Years ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Below 1.00 % ​ $ 59,673 ​ $ 14,339 ​ $ 8,478 ​ $ 2,875 ​ $ 4,252 ​ $ 89,617 1.00 to 1.99 % ​ 14,057 ​ 6,261 ​ 5,412 ​ 677 ​ 130 ​ 26,537 2.00 to 2.99 % ​ 4,914 ​ — ​ — ​ — ​ 81 ​ 4,995 Total ​ $ 78,644 ​ $ 20,600 ​ $ 13,890 ​ $ 3,552 ​ $ 4,463 ​ $ 121,149 ​ Time Deposits Insurance Coverage by the FDIC. The following tables set forth the time deposit FDIC insurance coverage by account and remaining maturity at June 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2022 Maturity Period Insured Uninsured Total (In Thousands) ​ ​ ​ Three months or less ​ $ 26,101 $ 2,407 $ 28,508 Over three to six months ​ 18,860 1,017 19,877 Over six to twelve months ​ 27,483 2,776 30,259 Over twelve months ​ 39,526 2,979 42,505 Total ​ $ 111,970 $ 9,179 $ 121,149 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2021 Maturity Period Insured Uninsured Total (In Thousands) ​ ​ ​ Three months or less ​ $ 24,482 $ 1,513 $ 25,995 Over three to six months ​ 21,913 898 22,811 Over six to twelve months ​ 27,290 609 27,899 Over twelve months ​ 58,382 5,350 63,732 Total ​ $ 132,067 $ 8,370 $ 140,437 ​ ​ ​ 21 Table of Contents Deposit Activity. The following table sets forth the deposit activity of the Bank at and for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended June 30, (In Thousands) 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 937,973 ​ $ 892,969 ​ $ 841,271 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net deposits before interest credited ​ 16,387 ​ 43,259 ​ 48,755 Interest credited ​ 1,144 ​ 1,745 ​ 2,943 Net increase in deposits ​ 17,531 ​ 45,004 ​ 51,698 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ending balance ​ $ 955,504 ​ $ 937,973 ​ $ 892,969 ​ ​ Borrowings. The FHLB – San Francisco functions as a central reserve bank providing credit for member financial institutions. As a member, the Bank is required to own capital stock in the FHLB – San Francisco and is authorized to apply for advances using such stock and certain of its mortgage loans and other assets (principally investment securities) as collateral, provided certain creditworthiness standards have been met. Advances are made pursuant to several different credit programs. Each credit program has its own interest rate, maturity, terms and conditions. Depending on the program, limitations on the amount of advances are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit. The Bank utilizes advances from the FHLB – San Francisco as an alternative to deposits to supplement its supply of lendable funds, to meet deposit withdrawal requirements and to help manage interest rate risk. The FHLB – San Francisco has, from time to time, served as the Bank’s primary borrowing source. ​ As of June 30, 2022 and 2021, the FHLB – San Francisco borrowing capacity was limited to 35% of the Bank’s total assets at both dates, amounting to $415.7 million and $416.2 million, respectively. Advances from the FHLB – San Francisco are typically secured by the Bank’s single-family residential, multi-family and commercial real estate mortgage loans. Total mortgage loans pledged to the FHLB – San Francisco were $570.4 million at June 30, 2022 as compared to $607.0 million at June 30, 2021. In addition, the Bank pledged investment securities totaling $4.7 million and $1.6 million at June 30, 2022 and 2021, respectively, to collateralize its FHLB – San Francisco advances under the Securities-Backed Credit (“SBC”) facility. At June 30, 2022 and 2021, the Bank had $85.0 million and $101.0 million of borrowings from the FHLB – San Francisco with a weighted-average interest rate of 2.20% and 2.19%, respectively. At June 30, 2022, the outstanding borrowings mature between 2022 and 2025 with a weighted average maturity of 16 months. ​ In addition to the total borrowings mentioned above, the Bank utilized its borrowing facility for letters of credit and credit enhancement for loans previously sold to the FHLB – San Francisco under the Mortgage Partnership Finance (“MPF”) program which have a recourse liability. The outstanding letters of credit were $18.0 million and $16.0 million at June 30, 2022 and 2021, respectively; while the outstanding MPF credit enhancement was $2.5 million at both June 30, 2022 and 2021. As of June 30, 2022 and 2021, the remaining financing availability was $310.3 million and $296.8 million, with remaining available collateral of $310.5 million and $343.1 million, respectively. In addition, as of June 30, 2022 and 2021, the Bank had secured a discount window facility of $153.9 million and $206.1 million at the Federal Reserve Bank of San Francisco, collateralized by investment securities with a fair market value of $163.7 million and $219.2 million, respectively. ​ At June 30, 2022, the Bank also has a federal funds facility with its correspondent bank for $50.0 million which matures on June 30, 2023. This compares to the federal funds facility with its correspondent bank of $17.0 million with maturity on June 30, 2022. As of June 30, 2022 and 2021, there were no outstanding borrowings under the discount window facility or the federal funds facility with the correspondent bank at both dates. ​ As a member of the FHLB – San Francisco, the Bank is required to maintain a minimum investment in FHLB – San Francisco stock. The Bank held the required investment at June 30, 2022 and 2021 of $8.2 million with no excess investment at both dates. ​ 22 Table of Contents During fiscal 2022 and 2021, the Bank purchased FHLB – San Francisco capital stock totaling $84,000 and $185,000, respectively, and did not redeem any of the capital stock during both periods. In fiscal 2022 and 2021, the FHLB – San Francisco distributed cash dividends to the Bank totaling $489,000 and $418,000, respectively. ​ ​ Subsidiary Activities ​ Federal savings institutions generally may invest up to 3% of their assets in service corporations, provided that at least one-half of any amount in excess of 1% is used primarily for community, inner-city and community development projects. The Bank’s investment in its service corporations did not exceed these limits at June 30, 2022 and 2021. ​ The Bank has three wholly owned subsidiaries: Provident Financial Corp (“PFC”), Profed Mortgage, Inc., and First Service Corporation. PFC’s current activities include: (i) acting as trustee for the Bank’s real estate transactions and (ii) holding real estate for investment, if any. Profed Mortgage, Inc., which formerly conducted the Bank’s mortgage banking activities, and First Service Corporation are currently inactive. At June 30, 2022 and 2021, the Bank’s investment in its subsidiaries was $7,000 and $10,000, respectively. ​ ​ REGULATION ​ The following is a brief description of certain laws and regulations which are applicable to the Corporation and the Bank. The description of these laws and regulations, as well as descriptions of laws and regulations contained elsewhere herein, does not purport to be complete and is qualified in its entirety by reference to the applicable laws and regulations. Legislation is introduced from time to time in the United States Congress (“Congress”) that may affect the Corporation’s and the Bank’s operations. In addition, the regulations governing the Corporation and the Bank may be amended from time to time by the OCC, FDIC, FRB and SEC, as appropriate. Any such legislation or regulatory changes in the future could adversely affect the operations and financial condition of the Corporation and the Bank. The Bank cannot predict whether any such changes may occur. ​ General ​ The Bank, as a federally chartered savings institution, is subject to extensive regulation, examination and supervision by the OCC, as its primary federal regulator, and the FDIC, as its insurer of deposits. The Bank's relationship with its depositors and borrowers is regulated by federal consumer protection laws, which must be complied with by the Bank. The Bank is a member of the FHLB System and its deposits are insured up to applicable limits by the FDIC. The Bank must file reports with the OCC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the OCC to evaluate the Bank’s safety and soundness and compliance with various regulatory requirements. This regulatory structure establishes a comprehensive framework of activities in which the Bank may engage and is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such policies, whether by the OCC, the FRB, the FDIC or Congress, could have a material adverse impact on the Corporation and the Bank and their operations. The Corporation, as a savings and loan holding company, is required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of the FRB, its primary regulator. The Corporation is also subject to the rules and regulations of the SEC under the federal securities laws. For additional information, see “Savings and Loan Holding Company Regulations” below in this Form 10-K. ​ Set forth below is a brief description of material regulatory requirements that are applicable to the Bank and the Corporation. The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on the Bank and the Corporation. ​ ​ 23 Table of Contents Federal Regulation of Savings Institutions ​ Office of the Comptroller of the Currency. The OCC has extensive authority over the operations of federal savings institutions. As part of this authority, the Bank is required to file periodic reports with the OCC and is subject to periodic examinations by the OCC. The OCC also has extensive enforcement authority over all federal savings institutions, including the Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease-and-desist or removal orders and initiate prompt corrective action orders. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the OCC. Except under certain circumstances, public disclosure of final enforcement actions by the OCC is required by law. ​ All federal savings institutions must pay assessments to the OCC, to fund the agency’s operations. The general assessments, paid on a semi-annual basis, are determined based on the savings institution’s total assets, including consolidated subsidiaries. The Bank’s OCC annual assessments for the fiscal years ended June 30, 2022 and 2021 were $221,000 and $218,000, respectively. ​ The Bank's general permissible lending limit for loans to one borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus). The Bank’s limits on loans to one borrower or group of related borrowers at June 30, 2022 and 2021 were $19.6 million and $19.4 million, respectively. At June 30, 2022, the Bank’s largest lending relationship to a single borrower or group of borrowers consisted of four multi-family loans totaling $5.2 million, which were performing according to their original payment terms. ​ Effective July 1, 2019, the OCC issued a final rule implementing a section of the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”) which permits an eligible federal savings bank with assets of $20.0 billion or less as of December 31, 2017 to elect to operate with the business powers of a national bank, generally subject to the same limitations and restrictions, without converting to a national bank charter. A federal savings bank that makes the so-called “covered savings association” election must divest any activities or investments that are not permitted for a national bank. The Bank had not made such an election as of June 30, 2022. ​ Federal Home Loan Bank System. The Bank is a member of the FHLB – San Francisco, which is one of 11 regional FHLBs, each of which serves as a reserve or central bank for its members within its assigned region. The FHLB - San Francisco is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans or advances to members in accordance with policies and procedures, established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB - San Francisco. In addition, all long-term advances are required to provide funds for residential home financing. At June 30, 2022 and 2021, the Bank had $85.0 million and $101.0 million of outstanding advances, respectively, from the FHLB – San Francisco with a remaining available credit facility of $310.3 million and $296.8 million, respectively, based on 35% of total assets for both dates, which is limited to available collateral. For additional information, see “Business – Deposit Activities and Other Sources of Funds – Borrowings” above in this Form 10-K. ​ As a member of the FHLB - San Francisco, the Bank is required to purchase and maintain stock in the FHLB – San Francisco. At June 30, 2022 and 2021, the Bank held $8.2 million of FHLB-San Francisco stock at both dates, which were in compliance with this membership requirement. During fiscal 2022 and 2021, the Bank was required to purchase $84,000 and $185,000 of FHLB – San Francisco capital stock, respectively, and the Bank did not redeem any capital stock during both periods. In fiscal 2022 and 2021, the FHLB – San Francisco distributed cash dividends to the Bank totaling $489,000 and $418,000, respectively. There is no guarantee in the future that the FHLB – San Francisco will pay cash dividends or redeem excess capital stock held by its members. ​ Under federal law, the FHLB - San Francisco is required to contribute to low and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low and moderate income housing projects. These contributions have in the past adversely affected the level of dividends paid by the FHLB - San Francisco and could continue to do so in the future. These contributions also could have an adverse effect on the value of 24 Table of Contents FHLB - San Francisco stock in the future. A reduction in value of the Bank's FHLB - San Francisco stock may result in a corresponding reduction in the Bank’s capital. ​ Insurance of Accounts and Regulation by the FDIC. The Deposit Insurance Fund (“DIF”) of the FDIC insures deposits up to $250,000 per account owner as defined by the FDIC, backed by the full faith and credit of the United States. As insurer, the FDIC imposes deposit insurance premiums in the form of assessments to maintain the DIF and is authorized to conduct examinations of and to require reporting by FDIC insured institutions. The Bank’s FDIC annual assessments for the fiscal years ended June 30, 2022 and 2021 were $322,000 and $334,000, respectively. ​ Under the FDIC’s risk-based assessment system, institutions deemed less risky of failure pay lower assessments. Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years. ​ The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank. We cannot predict what assessment rates will be in the future. ​ Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that may lead to termination of the Bank’s deposit insurance. ​ Qualified Thrift Lender Test. Like all savings institutions (subject to a narrow exception not applicable to the Bank), the Bank is required to meet a qualified thrift lender (“QTL”) test to avoid certain restrictions on its operations. This test requires a savings institution to have at least 65% of its total assets as defined by regulation, in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis. As an alternative, a savings institution may maintain 60% of its assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code of 1986 (“Code”), as amended. Under either test, such assets primarily consist of residential housing related loans and investments. ​ Any savings institution that fails to meet the QTL test is subject to certain operating restrictions and may be required to convert to a national bank charter, and a savings and loan holding company of such an institution may become regulated as a bank holding company. As of June 30, 2022 and 2021, the Bank maintained 90.8% and 90.3% of its portfolio assets in qualified thrift investments, respectively, and therefore, met the qualified thrift lender test at both dates. During fiscal 2022 and 2021, the Bank was in compliance with the QTL test as of each month end. ​ Capital Requirements. Federally insured savings institutions, such as the Bank, are required by the OCC to maintain minimum levels of regulatory capital, including a Tier 1 capital to adjusted average assets leverage ratio, a common equity Tier 1 (“CET1”) to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio and a total capital to risk-based assets ratio. The capital standards require the maintenance of the following minimum capital ratios: (i) a Tier 1 leverage ratio of 4%, (ii) a CET1 capital ratio of 4.5%; (iii) a Tier 1 capital ratio of 6%; and (iv) a total capital ratio of 8%. ​ Mortgage servicing rights and deferred tax assets over designated percentages of CET1 are also deducted from capital. In addition, Tier 1 capital includes accumulated other comprehensive income, which includes all unrealized gains and losses on available for sale debt, equity securities and interest-only strips. Because of the Bank’s asset size, the Bank was given a one-time option to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt, equity securities and interest-only strips in its capital calculations. The Bank elected to exercise this option to opt-out in order to reduce the impact of market volatility on its regulatory capital levels. ​ The Bank also must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. If the Bank does not have the ability to pay dividends to the Corporation, the Corporation may be limited in its ability to pay dividends to its stockholders. ​ In order to be considered well-capitalized under the prompt corrective action regulations, the Bank must maintain a Tier 1 leverage capital ratio of 5%, a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8% and a total 25 Table of Contents risk-based capital ratio of 10% and the Bank must not be subject to any of certain mandates by the OCC requiring it as an individual institution to meet any specified capital level. ​ EGRRCPA required the federal banking agencies, including the OCC, to establish a “community bank leverage ratio” of between 8% and 10% for institutions with assets of less than $10.0 billion. Institutions with a capital level at or exceeding the ratio and otherwise meeting the specified requirements, and electing the alternative framework, are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements. Final rules issued by the agencies established the community bank leverage ratio at 9% Tier 1 capital to adjusted average assets, effective January 1, 2020. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly Call Report. An institution that temporarily ceases to meet any qualifying criteria is provided with a two quarter grace period to regain compliance. Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable regulatory capital requirements. The Company did not opt in to the community bank leverage ratio framework for the year ended June 30, 2022. ​ As of June 30, 2022, the most recent notification from the OCC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. See Note 9 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ Prompt Corrective Action. An institution is considered adequately capitalized if it meets the minimum capital ratios described above. The OCC is required to take certain supervisory actions against undercapitalized savings institutions, the severity of which depends upon the institution's degree of undercapitalization. Subject to a narrow exception, the OCC is required to appoint a receiver or conservator for a savings institution that is "critically undercapitalized." OCC regulations also require that a capital restoration plan be filed with the OCC within 45 days of the date a savings institution receives notice that it is "undercapitalized," "significantly undercapitalized" or "critically undercapitalized." In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. “Significantly undercapitalized” and “critically undercapitalized” institutions are subject to more extensive mandatory regulatory actions. The OCC also may take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. ​ Limitations on Capital Distributions. OCC regulations impose various restrictions on savings institutions and on their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account. Generally, savings institutions, such as the Bank, that before and after the proposed distribution are well-capitalized, may make capital distributions during any calendar year up to 100% of net income for the year-to-date plus retained net income for the two preceding years, without regulatory approval. However, an institution deemed to be in need of more than normal supervision or in troubled condition by the OCC may have its dividend authority restricted by the OCC. If the Bank, however, proposes to make a capital distribution when it does not meet its capital requirements (or will not following the proposed capital distribution) or that will exceed these net income-based limitations, it must obtain the OCC's approval prior to making such distribution. In addition, the Bank must file a prior written notice of a dividend with the FRB. The FRB or the OCC may object to a capital distribution based on safety and soundness concerns. Further restrictions on Bank dividends may apply if the Bank fails the QTL test. In addition, as noted above, if the Bank does not have the required capital conservation buffer, its ability to pay dividends to the Corporation will be limited, which may limit the ability of the Corporation to pay dividends to its stockholders. ​ Activities of Savings Associations and Their Subsidiaries. When a savings institution establishes or acquires a subsidiary or elects to conduct any new activity through a subsidiary that the savings institution controls, the savings institution must file a notice or application with the OCC and in certain circumstances with the FDIC and receive regulatory approval or non-objection. Savings institutions also must conduct the activities of subsidiaries in accordance with existing regulations and orders. With respect to subsidiaries generally, the OCC may determine that investment by a savings institution in, or the activities of, a subsidiary must be restricted or eliminated based on safety and soundness or legal reasons. ​ Transactions with Affiliates. The Bank’s authority to engage in transactions with “affiliates” is limited by Sections 23A and 23B of the Federal Reserve Act as implemented by the FRB’s Regulation W. The term “affiliates” for these purposes generally mean any company that controls or is under common control with an institution except subsidiaries of the 26 Table of Contents institution. The Corporation and its non-savings institution subsidiaries are affiliates of the Bank. In general, transactions with affiliates must be on terms that are as favorable to the institution as comparable transactions with non-affiliates. In addition, certain types of transactions are restricted to an aggregate percentage of the institution’s capital. Institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary. FDIC-insured institutions are subject, with certain exceptions, to certain restrictions on extensions of credit to their parent holding companies or other affiliates, on investments in the stock or other securities of affiliates and on the taking of such stock or securities as collateral from any borrower. Collateral in specified amounts must be provided by affiliates in order to receive loans from an institution. In addition, these institutions are prohibited from engaging in certain tying arrangements in connection with any extension of credit or the providing of any property or service. ​ Community Reinvestment Act. Under the Community Reinvestment Act of 1977 (“CRA”), every FDIC-insured institution has a continuing and affirmative obligation consistent with safe and sound banking practices to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA requires that the Federal Reserve assess the Bank's record in meeting the credit needs of the communities it serves, especially low and moderate income neighborhoods. Under the CRA, institutions are assigned a rating of "outstanding," "satisfactory," "needs to improve," or "substantial non-compliance." The Bank received a rating of satisfactory when it was last examined for CRA compliance. ​ Anti-Money Laundering and Customer Identification. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) was signed into law on October 26, 2001. The USA Patriot Act and the Bank Secrecy Act requires financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts, and, effective in 2018, the beneficial owners of accounts. Bank regulators are directed to consider a holding company’s effectiveness in combating money laundering when reviewing mergers and acquisitions. ​ Regulatory and Criminal Enforcement Provisions. The OCC has primary enforcement responsibility over federally chartered savings institutions and has the authority to bring action against all “institution-affiliated parties,” including stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease-and-desist order to removal of officers or directors, receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide range of violations and can be nearly $2.0 million per day per violation in especially egregious cases. The FDIC has the authority to recommend to the OCC that enforcement action be taken with respect to a particular savings institution. If the OCC does not take action, the FDIC has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations. ​ Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted interagency guidelines prescribing standards for safety and soundness. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the OCC determines that a savings institution fails to meet any standard prescribed by the guidelines, the OCC may require the institution to submit an acceptable plan to achieve compliance with the standard. ​ Federal Reserve System. The FRB requires that all depository institutions maintain reserves on transaction accounts or non-personal time deposits. These reserves may be in the form of cash or non interest-bearing deposits with the regional Federal Reserve Bank. Interest-bearing checking accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any non-personal time deposits at a bank. Effective March 26, 2020, due to the COVID-19 pandemic, the FRB reduced reserve requirement ratios to 0%, which eliminated reserve requirements for all depository institutions. ​ Environmental Issues Associated with Real Estate Lending. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), is a federal statute, generally imposes strict liability on all prior and present "owners and operators" of sites containing hazardous waste. However, Congress acted to protect secured creditors by 27 Table of Contents providing that the term "owner and operator" excludes a person whose ownership is limited to protecting its security interest in the site. Since the enactment of the CERCLA, this “secured creditor exemption” has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan. ​ To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potential hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property. ​ Privacy Regulations. Federal regulations generally require that the Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter. In addition, the Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes. In addition, the California Consumer Privacy Act of 2018 (the "CCPA"), which became effective on January 1, 2020, gives California residents the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of personal information, and the right not to be discriminated against for exercising these rights. The CCPA also created a private right of action with statutory damages for data security breaches, thereby increasing potential liability associated with a data breach, which has triggered a number of class actions against other companies since January 1, 2020. Although the Bank may enjoy several fairly broad exemptions from the CCPA's privacy requirements, those exemptions do not extend to the private right of action for a data security breach. The CCPA, including any amendments thereto or final regulations implemented thereunder, as well as other similar state data privacy laws and regulations, may require the establishment by the Bank of certain regulatory compliance and risk management controls. In addition, on November 18, 2021, the federal banking agencies announced the adoption of a final rule providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents. Specifically, the new rule requires a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours. Compliance with the new rule is required by May 1, 2022. Non-compliance with federal or similar state privacy and cybersecurity laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm. The Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations. ​ Other Consumer Protection Laws and Regulations. The Consumer Financial Protection Bureau (“CFPB”) exercises broad regulatory, supervisory and enforcement authority with respect to both new and existing consumer financial protection laws. The Bank is subject to consumer protection regulations issued by the CFPB, but as a financial institution with assets of less than $10.0 billion, the Bank is generally subject to supervision and enforcement by the OCC with respect to compliance with consumer financial protection laws and CFPB regulations. ​ The Bank is subject to a broad array of federal and state consumer protection laws and regulations that govern almost every aspect of its business relationships with consumers. While not exhaustive, these laws and regulations include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans and providing other services. Failure to comply with these laws and regulations 28 Table of Contents can subject the Bank to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages and the loss of certain contractual rights. ​ Savings and Loan Holding Company Regulation ​ General. The Corporation is a unitary savings and loan holding company, subject to the regulatory oversight of the FRB. Accordingly, the Corporation is required to register and file reports with the FRB and is subject to regulation and examination by the FRB. In addition, the FRB has enforcement authority over the Corporation and its non-savings institution subsidiaries, which also permits the FRB to restrict or prohibit activities that are determined to present a serious risk to the Bank. The FRB has promulgated regulations implementing the “source of strength” doctrine that require holding companies, including savings and loan holding companies, to act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress. These and other FRB policies, as well as the capital conservation buffer may restrict the Corporation’s ability to pay dividends. ​ Capital Requirements. For a savings and loan holding company with less than $3.0 billion in consolidated assets that qualifies as a small bank holding company under the FRB’s Small Bank Holding Company Policy Statement, such as the Corporation, the capital regulations apply to its savings institution subsidiaries, but not the Corporation, unless the FRB determines otherwise in particular cases. For a description of the capital regulations, see “Federal Regulation of Savings Institutions - Capital Requirements” above. ​ Activities Restrictions. The Gramm-Leach-Bliley Act of 1999 (“GLBA”) provides that no company may acquire control of a savings association after May 4, 1999 unless it engages only in the financial activities permitted for financial holding companies under the law or for multiple savings and loan holding companies. The GLBA also specifies, subject to a grandfather provision, that existing savings and loan holding companies may only engage in such activities. The Corporation qualifies for the grandfathering and is therefore not restricted in terms of its activities. Upon any non-supervisory acquisition by the Corporation of another savings association as a separate subsidiary, the Corporation would become a multiple savings and loan holding company and would be limited to those activities permitted by FRB regulation. Multiple savings and loan holding companies may engage in activities permitted for financial holding companies, and certain other activities including acting as a trustee under a deed of trust and real estate investments. ​ If the Bank fails the QTL test, the Corporation must, within one year of that failure, register as, and become subject to the restrictions applicable to bank holding companies. For additional information, see “Federal Regulation of Savings Institutions – Qualified Thrift Lender Test” in this Form 10-K. ​ Mergers and Acquisitions. The Corporation must obtain approval from the FRB before acquiring more than 5% of the voting stock of another savings institution or savings and loan holding company or acquiring such an institution or holding company by merger, consolidation or purchase of its assets. In evaluating an application for the Corporation to acquire control of a savings institution, the FRB would consider the financial and managerial resources and future prospects of the Corporation and the target institution, the effect of the acquisition on the risk to the DIF, the convenience and the needs of the community, including performance under the CRA and competitive factors. ​ The FRB may not approve any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions; (i) supervisory acquisitions and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions. ​ Acquisition of the Company. Any company, except a bank holding company, that acquires control of a savings association or savings and loan holding company becomes a “savings and loan holding company” subject to registration, examination and regulation by the FRB and must obtain the prior approval of the FRB under the Savings and Loan Holding Company Act before obtaining control of a savings association or savings and loan holding company. A bank holding company must obtain the prior approval of the FRB under the Bank Holding Company Act before obtaining control or more than 5% of a class of voting stock of a savings association or savings and loan holding company and remains subject to regulation under the Bank Holding Company Act. The term “company” includes corporations, partnerships, associations, and certain trusts and other entities. “Control” of a savings association or savings and loan holding company is deemed to exist if a company has voting control, directly or indirectly of more than 25% of any class of the savings 29 Table of Contents association’s voting stock or controls in any manner the election of a majority of the directors of the savings association or savings and loan holding company, and may be presumed under other circumstances, including, but not limited to, holding in certain cases 10% or more of a class of voting securities. Control may be direct or indirect and may occur through acting in concert with one or more other persons. In addition, a savings and loan holding company must obtain FRB approval prior to acquiring voting control of more than 5% of any class of voting stock of another savings association or another savings association holding company. A similar provision limiting the acquisition by a bank holding company of 5% or more of a class of voting stock of any company is included in the Bank Holding Company Act. ​ Accordingly, the prior approval of the FRB would be required: ​ ● before any savings and loan holding company or bank holding company could acquire 5% or more of the common stock of the Corporation; and ● before any other company could acquire 25% or more of the common stock of the Corporation, and may be required for an acquisition of as little as 10% of such stock. ​ In addition, persons that are not companies are subject to the same or similar definitions of control with respect to savings and loan holding companies and savings associations and requirements for prior regulatory approval by the FRB in the case of control of a savings and loan holding company or by the OCC in the case of control of a savings association not obtained through control of a holding company of such savings association. ​ Federal Securities Laws. Provident Financial Holdings, Inc.’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Corporation is subject to information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act. ​ Dividends and Stock Repurchases. The FRB’s policy statement on the payment of cash dividends applicable to savings and loan holding companies expresses its view that a savings and loan holding company must maintain an adequate capital position and generally should not pay cash dividends unless the company’s net income for the past year is sufficient to fully fund the cash dividends and that the prospective rate of earnings appears consistent with the company’s capital needs, asset quality, and overall financial condition. The FRB policy statement also indicates that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. ​ In addition, a savings and loan holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding twelve months, is equal to 10% or more of its consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order or any condition imposed by, or written agreement with, the FRB. As discussed above, the capital conservation buffer requirements may also limit or preclude dividends payable by the Corporation. ​ COVID-19 Legislation. In response to the COVID-19 pandemic, the U.S. Congress and the federal banking agencies, though rulemaking, interpretive guidance and modifications to agency policies and procedures, have taken a series of actions to provide national emergency economic relief measures. As the on-going COVID-19 pandemic evolves, federal and state regulatory authorities continue to issue additional guidance with respect to COVID-19. In addition, it is possible that the U.S. Congress will enact supplementary COVID-19 response legislation. The Corporation continues to assess the impact of the CARES Act and The Consolidated Appropriations Act, 2021 (“CAA 2021”), and other statues, regulations and supervisory guidance related to the COVID-19 pandemic. ​ ​ TAXATION ​ Federal Taxation ​ General. The Corporation and the Bank report their income on a fiscal year basis using the accrual method of accounting and are subject to federal income taxation in the same manner as other corporations with some exceptions, including particularly the Bank’s reserve for bad debts discussed below. The following discussion of tax matters is intended only as 30 Table of Contents a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Corporation. ​ Tax Bad Debt Reserves. As a result of legislation enacted in 1996, the reserve method of accounting for bad debt reserves was repealed for tax years beginning after December 31, 1995. Due to such repeal, the Bank is no longer able to calculate its deduction for bad debts using the percentage-of-taxable-income or the experience method. Instead, the Bank is permitted to deduct as bad debt expense its specific charge-offs during the taxable year. In addition, the legislation required savings institutions to recapture into taxable income, over a six-year period, their post 1987 additions to their bad debt tax reserves. As of the effective date of the legislation, the Bank had no post 1987 additions to its bad debt tax reserves. As of June 30, 2022, the Bank’s total pre-1988 bad debt reserve for tax purposes was approximately $9.0 million. Under current law, a savings institution will not be required to recapture its pre-1988 bad debt reserve unless the Bank makes a “non-dividend distribution” as defined below. Currently, the Corporation uses the specific charge-off method to account for bad debt deductions for income tax purposes. ​ Distributions . In the event that the Bank makes “non-dividend distributions” to the Corporation that are considered as made from the reserve for losses on qualifying real estate property loans, to the extent the reserve for such losses exceeds the amount that would have been allowed under the experience method or from the supplemental reserve for losses on loans (“Excess Distributions”), then an amount based on the amount distributed will be included in the Bank’s taxable income. Non-dividend distributions include distributions in excess of the Bank’s current and accumulated earnings and profits, distributions in redemption of stock, and distributions in partial or complete liquidation. However, dividends paid out of the Bank’s current or accumulated earnings and profits, as calculated for federal income tax purposes, will not be considered to result in a distribution from the Bank’s bad debt reserve. Thus, any dividends to the Corporation that would reduce amounts appropriated to the Bank’s bad debt reserve and deducted for federal income tax purposes would create a tax liability for the Bank. The amount of additional taxable income attributable to an Excess Distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, if the Bank makes a “non-dividend distribution,” then approximately one and one-half times the amount distributed will be included in taxable income for federal income tax purposes. For additional information, see "Regulation - Federal Regulation of Savings Institutions - Limitations on Capital Distributions” in this Form 10-K for limits on the payment of dividends by the Bank. The Bank does not intend to pay dividends that would result in a recapture of any portion of its tax bad debt reserve. During fiscal 2022, the Bank declared and paid $7.5 million of cash dividends to the Corporation while the Corporation declared and paid $4.1 million of cash dividends to shareholders. ​ Tax Effect from Stock-Based Compensation. During fiscal 2022, there were no restricted common stock distributed to employees but 1,000 shares of restricted stock was distributed to non-employee members of the Corporation’s Board of Directors. Also, there were no non-qualified stock options exercised and no incentive stock options were exercised as disqualifying dispositions. As a result, there was no federal tax benefit effect from stock-based compensation in fiscal 2022. ​ Other Matters. The Internal Revenue Service has audited the Bank’s income tax returns through 1996 and the California Franchise Tax Board has audited the Bank through 1990. Also, the Internal Revenue Service completed a review of the Corporation’s income tax returns for fiscal 2006 and 2007; and the California Franchise Tax Board completed a review of the Corporation’s income tax returns for fiscal 2009 and 2010. Fiscal 2017 and fiscal years thereafter remain subject to federal examination, while the California state tax returns for fiscal 2016 and fiscal years thereafter are subject to examination by state taxing authorities. ​ State Taxation ​ California. The California franchise tax rate applicable to the Bank, equals the franchise tax rate applicable to corporations generally, plus an “in lieu” rate of 2%, which is approximately equal to personal property taxes and business license taxes paid by such corporations (but not generally paid by banks or financial corporations such as the Corporation). At June 30, 2022, the Corporation’s net state tax rate was 7.7%. Bad debt deductions are available in computing California franchise taxes using the specific charge-off method. The Bank and its California subsidiaries file California franchise tax returns on a combined basis. The Corporation will be treated as a general corporation subject to the general corporate tax rate. There was a no state tax benefit effect from stock-based compensation in fiscal 2022, as described above in the section entitled "Federal Taxation." 31 Table of Contents ​ Delaware. As a Delaware holding company not earning income in Delaware, the Corporation is exempted from Delaware corporate income tax, but is required to file an annual report with and pay an annual franchise tax to the State of Delaware. During fiscal 2022, the Corporation paid franchise taxes of $200,000. ​ ​ Employees and Human Capital ​ As of June 30, 2022, the Bank had 162 full-time equivalent employees, which consisted of 110 full-time, 69 prime-time and no part-time employees. The employees are not represented by a collective bargaining unit and management believes that its relationship with employees is good. ​ To facilitate talent attraction and retention, we strive to make the Bank an inclusive, safe and healthy workplace, with opportunities for our employees to grow and develop in their careers, supported by market-based compensation, benefits, health and welfare programs. At June 30, 2022, approximately 73 percent of our workforce was female and 27 percent male, and our average tenure was approximately 8.6 years, a decrease of approximately 15 percent from an average tenure of 10.1 years at June 30, 2021. The ethnicity of our workforce was 40.2% White, 5.2% Asian, 44.2% Hispanic or Latino, 5.2% two or more races, 0.6% American Indian or Alaskan Native, 0% Native Hawaiian or Pacific Islander and 4.6% African American or Black. As part of our compensation philosophy, we offer and maintain market competitive compensation programs for our employees in order to attract and retain superior talent. In addition to strong base wages, additional programs include quarterly or annual bonus opportunities, an Employee Stock Ownership Plan, a Corporation-matched 401(k) Plan, healthcare and insurance benefits, flexible spending accounts, accrued vacation and sick time, family leave, and an employee assistance program. The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety, and wellness of our employees. In support of our commitment, we provide our employees and their families with access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health by providing tools and resources to help them improve or maintain their health status; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families. In response to the COVID-19 pandemic, we implemented significant operating environment changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes implementing additional safety measures for employees completing essential on-site work. A core value of our talent management approach is to both develop talent from within and supplement with external hires. This approach has yielded loyalty and dedication in our employee base which in turn grows our business, our commitment to our communities, and our customers, while adding new employees and external ideas supports a continuous improvement mindset. We believe that our average tenure of over eight years reflects the engagement of our employees in this talent management philosophy. Turnover for employees as measured by terminated employees to the average total employees was 39.8% in fiscal 2022, up from 34.1% in fiscal 2021. ​ 32 Table of Contents EXECUTIVE OFFICERS ​ The following table sets forth information with respect to the executive officers of the Corporation and the Bank: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Position Name Age (1) Corporation Bank ​ ​ ​ ​ ​ ​ ​ Craig G. Blunden 74 Chairman and Chairman and ​ ​ ​ Chief Executive Officer Chief Executive Officer ​ ​ ​ Robert "Scott" Ritter 53 — Senior Vice President ​ ​ ​ Single-Family Division ​ ​ ​ Donavon P. Ternes 62 President President ​ ​ ​ Chief Operating Officer Chief Operating Officer ​ ​ ​ Chief Financial Officer Chief Financial Officer ​ ​ ​ Corporate Secretary Corporate Secretary ​ ​ ​ David S. Weiant 63 — Senior Vice President ​ ​ ​ Chief Lending Officer ​ ​ ​ Gwendolyn L. Wertz 56 — Senior Vice President ​ ​ ​ Retail Banking Division ​ (1) As of June 30, 2022. ​ Biographical Information ​ Set forth below is certain information regarding the executive officers of the Corporation and the Bank. There are no family relationships among or between the executive officers. ​ Craig G. Blunden has been associated with Provident Savings Bank since 1974, currently serving as Chairman and Chief Executive Officer of the Bank and the Corporation, positions he has held since 1991 and 1996, respectively. He served as President of the Bank from 1991 until June 2011 and as President of the Corporation from its formation in 1996 until June 2011. Mr. Blunden also serves on the Board of Directors of the Western Bankers Association. ​ Robert "Scott" Ritter joined the Bank as Senior Vice President on September 26, 2016 and currently oversees the single-family mortgage operations. Prior to joining the Bank, Mr. Ritter was the Chief Operating Officer at California Mortgage Advisors since November 2011 where he was responsible for overseeing all of California Mortgage Advisors' operations, including product development, underwriting, loan processing and information technology. Prior to that, he held positions with increasing responsibilities at mortgage banking firms such as Green Point Financial and its predecessor Headlands Mortgage Company, among others. ​ Donavon P. Ternes joined the Bank and the Corporation as Senior Vice President and Chief Financial Officer on November 1, 2000 and was appointed Secretary of the Corporation and the Bank in April 2003. Effective January 1, 2008, Mr. Ternes was appointed Executive Vice President and Chief Operating Officer, while continuing to serve as the Chief Financial Officer and Corporate Secretary of the Bank and the Corporation. Effective June 27, 2011, the Board of Directors of the Bank and the Corporation promoted Mr. Ternes to serve as President of the Bank and the Corporation, while continuing to serve as Chief Operating Officer, Chief Financial Officer and Corporate Secretary. Prior to joining the Bank, Mr. Ternes was the President, Chief Executive Officer, Chief Financial Officer and Director of Mission Savings and Loan Association, located in Riverside, California, holding those positions for over 11 years. ​ David S. Weiant joined the Bank as Senior Vice President and Chief Lending Officer on June 29, 2007. Prior to joining the Bank, Mr. Weiant was a Senior Vice President of Professional Business Bank (June 2006 to June 2007) where he was responsible for commercial lending in the Los Angeles and Inland Empire regions of Southern California. ​ 33 Table of Contents Gwendolyn L. Wertz joined the Bank as Senior Vice President of Retail Banking on February 3, 2014. Prior to joining the Bank, Ms. Wertz was with CommerceWest Bank where she was responsible for the management of commercial banking activities, treasury management and specialty banking. Prior to that she was with Opportunity Bank, N.A. where she was responsible for the commercial treasury sales and service team. Ms. Wertz has more than 30 years of experience with financial institutions including the last 15 years in senior management roles. Her experience includes depository growth initiatives, operations, compliance and deposit acquisition management. ​ ​