3 unchanged sentences
The Conversion was completed on June 27, 1996.
−Removed: The Corporation is regulated by the Board of Governors of the Federal Reserve System (“FRB”).
+Added: The Corporation is regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve”).
At June 30, 2024, the Corporation had consolidated total assets of $1.27 billion, total deposits of $888.3 million and stockholders’ equity of $129.9 million.
12 unchanged sentences
The business activities of the Bank consist of community banking, investment services and trustee services for real estate transactions.
−Removed: 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.
+Added: 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 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.
Through its subsidiary, PFC, the Bank conducts trustee services for the Bank’s real estate transactions and in the past has held real estate for investment.
10 unchanged sentences
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.
−Removed: Management considers Riverside and Western San Bernardino
−Removed: counties to be the Bank’s primary market for deposits.
−Removed: As of June 30, 2023, the Bank was the largest independent community bank headquartered in Riverside County and had the tenth largest deposit market share of all banks and the second largest of community banks in Riverside County.
−Removed: 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.
−Removed: The Bank’s market area consists primarily of suburban and urban communities.
−Removed: Riverside and Western San Bernardino counties are relatively densely populated and are within the greater Los Angeles metropolitan area.
−Removed: According to the United States of America (“U.S.”) Department of Labor, Bureau of Labor Statistics, the unemployment rate in June 2023 for the Inland Empire was 4.4% and in the State of California was 4.6%, compared to 3.6% nationwide.
−Removed: The unemployment data reported in June 2022 was 4.0% in the Inland Empire, 4.2% in the State of California and 3.6% nationwide.
−Removed: The Covid-19 Pandemic of 2020 saw our economy take one of its biggest negative shocks in its modern history.
−Removed: Social distancing made it nearly impossible to go to work, resulting in a significant decline in the labor force.
−Removed: Since then, work practices have slowly shifted to recover the loss.
−Removed: In Southern California, we have seen the labor force steadily increase in the Inland Empire, Orange County, and Los Angeles County.
−Removed: However, while the numbers have not reached pre-pandemic levels in Orange and Los Angeles Counties, they have recovered and are above pre-pandemic levels in the Inland Empire.
−Removed: There is hardly any other region in California that has added more jobs than Riverside County and San Bernardino County.
−Removed: We have outperformed all other regions in Southern California;
−Removed: and, in addition, Silicon Valley and San Francisco.
−Removed: From its peak in May 2020, the unemployment rate has decreased by 11.2%.
−Removed: The booming labor market is reflected in the relatively low unemployment rate for the region.
−Removed: Housing plays an important role in the Inland Empire economy.
−Removed: The low interest rate environment that prevailed for most of the last 20 years favored home buyers and builders alike.
−Removed: But interest rates have increased to their highest level in two decades as the Fed has fought to bring inflation down.
−Removed: This has had a chilling effect on home prices and home sales while creating new uncertainty for builders.
−Removed: The median price peaked in San Bernardino County at $495,000 in April 2022, while Riverside County saw a peak at $650,000 in May.
−Removed: The San Bernardino County median has since slid by nearly $30,000 compared to $55,000 for the Riverside County median.
−Removed: Home sales reached their high point in March 2022, but declined throughout the year and into 2023 as a result of higher mortgage rates.
−Removed: Home sales in February 2023 were 35% lower than a year ago in Riverside County and fell 42% in San Bernardino County.
−Removed: The ultra-low rates that were characteristic of the last few years will not be returning soon.
−Removed: With high rates and limited supply, the housing market faces a difficult year ahead.
−Removed: To simply rattle down further performance statistics for the Inland Empire at this point would be unproductive, meaning that in this section we want to go beyond what a recession would mean to the Inland Empire.
−Removed: Briefly, a national recession would cut back on the U.S.
−Removed: appetite for imports and thereby reduce container shipments with serious negative effects on the region’s logistics sector.
−Removed: To make matters worse, employment in the Greater Los Angeles area would also decrease, thereby affecting commuters from the Inland Empire directly.
−Removed: Since unemployment is measured by residency, we would observe increases in the Inland Empire unemployment rate first (think of a lake freezing from the periphery).
−Removed: Reduced spending by higher income commuters has secondary effects on the local economy, thereby lowering output and income of local firms and resulting in a further reduction of logistics employment as a result of fewer retail shipments.
−Removed: excerpts from the Lowe Institute of Political Economy - The State of the Region the Inland Empire 2023 – March 30, 2023).
−Removed: California home sales in June 2023 were 277,490 units, down 4.1 percent from 289,460 homes in May 2023 and down 19.7 percent from a year ago, when a revised 345,760 homes were sold on an annualized basis.
−Removed: Sales of existing single-family homes in California remained below 300,000 units for the ninth consecutive month.
−Removed: The yearly drop was the smallest since May 2022 and marked the first time in a year that sales dropped by less than 20 percent from a year ago.
−Removed: However, the smaller decline was due primarily to weaker sales last June, when sales dropped below 350,000 for the first time in two years.
−Removed: California’s median home price exceeded $800,000 in June for the third straight month, up 0.3 percent from May’s $836,110 to $838,260 in June.
−Removed: The statewide median price continued to rise and reached the highest level in ten months.
−Removed: Tight housing supply and more high-end homes being sold relative to prior months continued to put upward pressure on prices.
−Removed: Despite the improvement from early 2023, the median home price in California dipped 2.4% on a year-over-year basis for the eighth consecutive month from $858,800 in June 2022.
−Removed: The downward movement in home prices appears to be stabilizing, but more dips in the median price are expected in the coming months as rates will likely remain elevated for most, if not the entire third quarter, of 2023.
−Removed: excerpts from California Association of Realtors – July 19, 2023 News Release).
+Added: Management considers Riverside and Western San Bernardino counties to be the Bank’s primary market for deposits.
+Added: As of June 30, 2024, the Bank was the largest independent community bank headquartered in Riverside County and held the eighth largest deposit market share of all banks in the county, with the largest share among community banks.
+Added: The region encompassing Riverside and San Bernardino counties, known as the “Inland Empire,” is the Bank’s main market area.
+Added: According to the 2020 Census Bureau, these counties have the fourth and fifth largest populations in California, respectively, and are part of the greater Los Angeles metropolitan area, consisting primarily of suburban and urban communities.
+Added: The Inland Empire, with a population of approximately 4.7 million, is relatively densely populated.
+Added: Department of Labor’s Bureau of Labor Statistics reported an unemployment rate of 5.3% in the Inland Empire in June 2024, slightly higher than California’s rate of 5.2% and the national rate of 4.1%.
+Added: In June 2023, these rates were 4.4% in the Inland Empire, 4.6% in California, and 3.6% nationwide.
+Added: California’s home sales remained stagnant for the second consecutive month in June 2024, with a 30-year fixed mortgage rate above 7% throughout most of May 2024.
+Added: Closed escrow sales of existing single-family detached homes in California were at a seasonally adjusted annualized rate of 270,200 in June 2024, down 0.8% from the revised 272,410 homes sold in May 2024 and 2.7% from June 2023’s revised 277,690.
+Added: This sales pace has been below the 300,000 threshold for 21 consecutive months, with year-to-date home sales falling behind last year’s level by 0.5% in the first half of 2024.
+Added: After setting record highs in the past two months, the statewide median home price decreased by 0.8% from $908,040 in May 2024 to $900,720 in June 2024, marking the third month in a row above the $900,000 benchmark.
+Added: The June 2024 median home price was 7.5% higher than the $837,850 recorded in June 2023, marking the 12th consecutive month of annual price increases, although the smallest since January 2024.
+Added: The continued rise in million-dollar home sales in California contributed to median price growth, with the million-dollar-and-higher market segment increasing by 2.0% year-over-year in June 2024, while the sub-$500,000 segment declined by 21.0%.
+Added: Homes priced above $1 million now account for 36.3% of all sales, the largest share in at least five years.
+Added: (Source data from California Association of Realtors – July 17, 2024 News Release).
+Added: The Inland Empire, also known as the Riverside-San Bernardino-Ontario Metropolitan Statistical Area, is a large, two-county area where about 30% of the labor force commutes, with nearly 400,000 people traveling daily from the Inland Empire to coastal areas.
+Added: Over the past 20 years, the region has undergone significant changes, particularly in the health care and transportation and warehousing sectors, which have seen substantial employment growth.
+Added: Typically, the Inland Empire's unemployment rate is higher than those of California and the U.S.
+Added: except during specific recessions like the dot-com and COVID-19 periods.
+Added: The region performed better during the recovery from the 2020 recession, with the latest unemployment rate published by the Employment Development Department (EDD) for December 2023 at 5.1%.
+Added: The change in unemployment rate from February 2020 to December 2023 was 0.2% for the U.S., 0.5% for California, and 1.2% for the Inland Empire, indicating a higher increase in the Inland Empire, which is less desirable.
+Added: Conversely, the employment growth rate over the same period was 1.8% for the U.S., -1.2% for California, and 2.8% for the Inland Empire.
+Added: In 2023, the Inland Empire was a top performer in job creation compared to other California regions, with a 1.9% increase.
+Added: The Inland Empire also led the state in business creation during the recovery from the 2020 recession, with a significant acceleration starting in the second quarter of 2022 and reaching near-national levels by the second quarter of 2023.
+Added: (Source data from the Lowe Institute of Political Economy - The State of the Region the Inland Empire 2024 – March 2024).
The Bank faces significant competition in its market area in originating real estate loans and attracting deposits.
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The information contained on that website is not included as a part of, or incorporated by reference into, this Form 10-K.
−Removed: 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”).
+Added: 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, including amendments to these reports, if any, 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.
4 unchanged sentences
The Bank’s net loans held for investment were $1.05 billion at June 30, 2024, representing 83% of consolidated total assets.
−Removed: This compares to $940.0 million, or 79% of consolidated total assets, at June 30, 2022.
+Added: This compares to $1.08 billion, or 81% of consolidated total assets, at June 30, 2023.
At June 30, 2024, the maximum amount that the Bank could have loaned to any one borrower and the borrower’s related entities under applicable regulations was $20.1 million, or 15% of the Bank’s unimpaired capital and surplus.
3 unchanged sentences
eight single-family loans totaling $4.4 million to one group of borrowers;
−Removed: two multi-family loans totaling $4.3 million to one group of borrowers;
three multi-family loans totaling $4.1 million to one group of borrowers;
+Added: one multi-family loan totaling $4.1 million to one group of borrowers;
and one multi-family loan totaling $4.0 million to one group of borrowers.
13 unchanged sentences
Deferred loan costs, net
−Removed: Allowance for loan losses
+Added: ACL (1) on loans
Total loans held for investment, net
+Added: (1) Allowance for credit losses (“ACL”)
Maturity of Loans Held for Investment .
27 unchanged sentences
Commercial real estate
+Added: (1) Comprised of Riverside and San Bernardino counties.
(2) Other than the Inland Empire.
4 unchanged sentences
Commercial real estate
+Added: (1) Comprised of Riverside and San Bernardino counties.
(2) Other than the Inland Empire.
Single-Family Mortgage Loans .
−Removed: 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.
+Added: One of the Bank’s primary lending activities 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 2024, the Bank originated $40.9 million of single-family loans to be held for investment, all of which were underwritten in accordance with the Bank’s origination guidelines, and did not purchase any single-family loans.
−Removed: This compares to single-family loan originations of $191.7 million and purchases of $6.4 million during fiscal 2022.
−Removed: At June 30, 2023, total single-family loans held for investment increased 37% to $518.8 million, or 48% of the total loans held for investment, from $378.2 million, or 40% of the total loans held for investment, at June 30, 2022.
−Removed: The increase in the single-family loans in fiscal 2023 was primarily attributable to new loans originated for investment that exceeded loan principal payments.
−Removed: During fiscal 2023, the Bank had net recoveries of $8,000 in non-performing single-family loans, as compared to net recoveries of $439,000 during fiscal 2022.
+Added: This compares to single-family loan originations of $165.9 million and no loan purchases during fiscal 2023.
+Added: At June 30, 2024, total single-family loans held for investment decreased slightly to $518.1 million, or 49% of the total loans held for investment, from $518.8 million, or 48% of the total loans held for investment, at June 30, 2023.
+Added: The decrease in the single-family loans in fiscal 2024 was primarily attributable to loan principal payments that exceeded new loans originated for investment.
+Added: During fiscal 2024, the Bank did not have any recovery from non-performing single-family loans, as compared to net recoveries of $8,000 during fiscal 2023.
At June 30, 2024 and 2023, total non-performing single-family loans were $2.6 million and $1.3 million, respectively, net of allowances and charge-offs, and there were no loans past due 30 to 89 days at both dates.
3 unchanged sentences
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.
−Removed: Currently, the maximum LTV ratio is 90% for purchase and rate and term refinances and 75% for cash-out refinances.
+Added: Currently, the maximum LTV ratio is 90% for new purchases and limited cash-out refinances and 75% for cash-out refinances.
The maximum loan amount offered on single-family homes is $1.5 million.
+Added: A limited cash-out refinance transaction limits cash back to the borrower to the lesser of 2% of the new loan amount or $2,000.
The lowest FICO score currently offered for a purchase or no cash-out refinance transaction is 700, while the lowest FICO score for a cash-out refinance transaction is 720.
−Removed: A limited cash-out refinance transaction limits cash back to the borrower to the lesser of 2% of the new loan amount or $2,000.The FICO score represents the creditworthiness of a borrower based on the borrower’s credit history, as reported by an independent third party.
+Added: The FICO score represents the creditworthiness of a borrower based on the borrower’s credit history, as reported by an independent third party.
A higher FICO score indicates a greater degree of creditworthiness.
1 unchanged sentence
The Bank currently lends on residential properties classified as single-family units, planned unit developments and condominiums.
−Removed: Underwriting standards and guidelines may change at any time given changes in real estate market conditions or changes to GSE policies and guidelines.
−Removed: For additional protection, the Bank purchases lender-paid mortgage insurance for certain single-family mortgage loans.
−Removed: As of June 30, 2023, a total of approximately $136.5 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 approximately 12% of the original loan amount.
+Added: Underwriting standards and guidelines may change at any time, based on shifts in real estate market conditions or changes to GSE policies and guidelines.
+Added: To enhance protection, the Bank purchases lender-paid mortgage insurance for certain single-family mortgage loans.
+Added: As of June 30, 2024, a total of approximately $141.8 million of single-family mortgage loans, with a 79% weighted average LTV at the time of origination have lender-paid mortgage insurance.
+Added: This insurance provides a weighted average coverage ratio of approximately 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.
−Removed: 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.
−Removed: 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
−Removed: 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).
−Removed: As of June 30, 2023, these non-traditional loans totaled $20.6 million, comprising 4% of total single-family residential loans held for investment and 2% of total loans held for investment.
+Added: In exchange for the additional risk to us associated with these loans, these borrowers generally are required to pay a higher interest rate, and
+Added: depending on the credit history, a lower loan-to-value ratio was generally required than for a conforming loan.
+Added: 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).
+Added: As of June 30, 2024, these non-traditional loans totaled $17.7 million, comprising 3% of total single-family residential loans held for investment and 2% of total loans held for investment, with a weighted average seasoning of 16.1 years.
At that date, stated income loans totaled $13.0 million, more than 30-year amortization loans totaled $6.0 million, low FICO score loans totaled $1.7 million, and negative amortization loans totaled $402,000 (the outstanding balances described may overlap more than one category).
−Removed: The Bank currently offers fixed rate loan products in Riverside and San Bernardino counties and adjustable rate mortgage (“ARM”) loans throughout California.
−Removed: Substantially all of the loans originated by the Bank meet GSE underwriting standards based on credit and collateral.
−Removed: 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.
+Added: The Bank currently offers fixed-rate loans in Riverside and San Bernardino counties, along with adjustable-rate mortgage (“ARM”) loans throughout California.
+Added: Substantially all the loans originated by the Bank comply with GSE underwriting standards concerning credit and collateral.
+Added: The Bank's ARM products offer various options, with interest rates adjusting every six months after an initial fixed period of five to ten years.
+Added: These adjustments are limited by caps on semi-annual and lifetime rate changes.
Currently, the ARM programs have a rate consisting of an Index tied to the Secured Overnight Financing Rate (“SOFR”), plus a margin.
1 unchanged sentence
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:
−Removed: the London Interbank Offered Rate (“LIBOR”) that will be transitioned to another similar index starting July 1, 2023, SOFR, the 12-month average U.S.
+Added: 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”).
−Removed: Loans based on the LIBOR and SOFR indices constitute a majority of the Bank’s loans held for investment.
+Added: Loans based on the SOFR index 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.
2 unchanged sentences
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.
−Removed: 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.
10 unchanged sentences
The Bank may originate loans that do not meet the definition of a “qualified mortgage” (“QM”).
−Removed: 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.
−Removed: 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.
+Added: To mitigate the risks involved with non-QM loans, the Bank has implemented systems, processes,
+Added: procedural and product changes, and maintains its underwriting standards, to ensure that the “ability-to-repay” requirements are adequately addressed.
+Added: 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 credit 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.
6 unchanged sentences
Consistent with its strategy to diversify the composition of loans held for investment, the Bank has emphasized the origination and purchase of multi-family and commercial real estate loans.
−Removed: During fiscal 2023 the Bank originated $69.3 million and did not purchase any multi-family or commercial real estate loans.
−Removed: This compares to multi-family and commercial real estate loan originations of $105.9 million and no loan purchases during fiscal 2022.
−Removed: At June 30, 2023, the average outstanding multi-family per loan balance was approximately $734,000 and the average outstanding commercial real estate per loan balance was approximately $761,000.
−Removed: Multi-family 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.
−Removed: 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.
−Removed: 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 periodic interest rate caps and life-of-loan interest rate caps.
−Removed: At June 30, 2023, $443.8 million, or 96%, of the Bank’s multi-family loans were secured by five to 36-unit projects.
−Removed: 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.
−Removed: 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.
−Removed: The Bank originates multi-family and commercial real estate loans in amounts typically ranging from $350,000 to $6.0 million.
+Added: During fiscal 2024, the Bank originated $31.9 million in multi-family and commercial real estate loans but did not purchase any.
+Added: This is a decrease from fiscal 2023, when $69.3 million of such loans were originated and none were purchased.
+Added: As of June 30, 2024, the average outstanding loan balance was approximately $724,000 for multi-family loans and approximately $731,000 for commercial real estate loans.
+Added: The multi-family loans originated by the Bank are predominately adjustable-rate loans, including hybrid ARM loans, with terms ranging from 10 to 30 years and amortization schedules of 25 to 30 years.
+Added: Similarly, the Bank’s commercial real estate loans are mainly adjustable-rate loans, also including hybrid ARM loans, with the same maturity terms and amortization schedules.
+Added: The interest rates on multi-family and commercial real estate ARM loans generally adjust monthly, quarterly, semi-annually, or annually, based on a specific margin over the relevant interest rate index and are subject to periodic and lifetime interest rate caps.
+Added: At June 30, 2024, $428.4 million, or 96%, of the Bank’s multi-family loans were secured by projects with five to 36 units.
+Added: The Bank’s commercial real estate loan portfolio primarily consists of loans secured by small office buildings, light industrial buildings, warehouses, and small retail centers.
+Added: The properties securing these loans are mainly located in the counties of Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Francisco, and Santa Clara.
+Added: The Bank typically originates multi-family and commercial real estate loans in amounts ranging from $350,000 to $6.0 million.
At June 30, 2024, the Bank had 57 commercial real estate and multi-family loans with principal balances greater than $1.5 million, totaling $125.7 million.
−Removed: The Bank obtains appraisals on all properties that secure multi-family and commercial real estate loans.
−Removed: 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.
+Added: Appraisals are obtained for all properties securing multi-family and commercial real estate loans.
+Added: The underwriting process for these loans includes a thorough analysis of the property's cash flows to ensure adequate debt service coverage, as well as an evaluation of the financial resources, experience, and income levels of the borrowers and guarantors.
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.
1 unchanged sentence
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.
−Removed: During both fiscal 2023 and 2022, the Bank had no charge-offs or recoveries on non-performing multi-family and commercial real estate loans.
+Added: During both fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on multi-family and commercial real estate loans.
At June 30, 2024 and 2023, there were no non-performing or 30 to 89 days delinquent multi-family and commercial real estate loans.
4 unchanged sentences
During fiscal 2024 and 2023, the Bank originated a total of $1.5 million and $1.6 million of construction loans (including undisbursed loan funds), respectively.
−Removed: As of June 30, 2023 and 2022, the Bank had construction loans totaling $1.9 million and $3.2 million, net undisbursed loan funds of $1.9 million and $3.4 million, respectively, consisting of short-term construction loans totaling $1.7 million and $148,000, and construction/permanent loans totaling $230,000 and $3.1 million respectively.
+Added: As of June 30, 2024 and 2023, the Bank had construction loans totaling $2.7 million and $1.9 million, net of undisbursed loan funds of $435,000 and $1.9 million,
+Added: respectively.
+Added: On these dates, the loans consisted of bridge loans totaling $1.5 million and $0, short-term construction loans totaling $228,000 and $1.7 million, and construction/permanent loans totaling $984,000 and $230,000 respectively.
Short-term construction loans include three types of loans:
4 unchanged sentences
The owner secures long-term permanent financing at the completion of construction.
−Removed: At June 30, 2023, there was one custom short-term single-family construction loan for $496,000, net undisbursed loan funds of $49,000.
−Removed: This compares to June 30, 2022 when the Bank had one custom short-term single-family construction loans totaling $90,000, net undisbursed loan funds of $455,000.
+Added: At June 30, 2024, there were no custom short-term single-family construction loans.
+Added: This compares to June 30, 2023 when the Bank had one custom short-term single-family construction loan totaling $496,000, net of undisbursed loan funds of $49,000.
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.
2 unchanged sentences
Tract construction may include the building and financing of model homes under a separate loan.
−Removed: At June 30, 2023, there was one land loan of $106,000 (reported as other mortgage loans) and one tract construction loan for $1.1 million, net undisbursed loan funds of $567,000, as compared to one land loan for $123,000 (reported as other mortgage loans) and one tract construction loan for $59,000, net undisbursed loan funds of $1.6 million at June 30, 2022.
+Added: At June 30, 2024, there was one land loan of $95,000 (reported as other mortgage loans) and no tract construction loans;
+Added: as compared to one land loan for $106,000 (reported as other mortgage loans) and one tract construction loan for $1.1 million, net of undisbursed loan funds of $567,000 at June 30, 2023.
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.
1 unchanged sentence
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.
−Removed: At June 30, 2023, the speculative construction loans were $94,000, net undisbursed loan funds of $166,000, as compared to none at June 30, 2022.
+Added: At June 30, 2024, the Bank had one speculative construction loan of $228,000, net of undisbursed loan funds of $32,000, as compared to one construction loan of $94,000, net of undisbursed loan funds of $166,000 at June 30, 2023.
Construction/permanent loans automatically roll from the construction to the permanent phase.
−Removed: 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.
−Removed: At June 30, 2023, there were $230,000 of custom construction/permanent loans, net undisbursed loan funds of $1.2 million as compared to $3.1 million of custom construction/permanent loans, net undisbursed loan funds of $1.3 million at June 30, 2022.
+Added: The construction phase generally lasts 12 to 18 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.
+Added: At June 30, 2024, there were $984,000 of custom construction/permanent loans, net of undisbursed loan funds of $403,000 as compared to $230,000 of custom construction/permanent loans, net of undisbursed loan funds of $1.2 million at June 30, 2023.
Construction loans under $1.0 million are approved by Bank personnel specifically designated to approve construction loans.
−Removed: 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.
+Added: The Bank’s Loan Committee, comprised of the Chief Executive Officer, Chief Lending 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 analyzes the pro-forma data and assumptions on the project.
4 unchanged sentences
Disbursements are based on periodic on-site inspections by independent inspectors and/or Bank personnel.
−Removed: 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.
+Added: At inception, the Bank also requires borrowers to deposit funds into a 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.
2 unchanged sentences
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.
−Removed: 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
−Removed: of the project and the cost of the project.
+Added: 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.
5 unchanged sentences
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.
−Removed: During fiscal 2023 and 2022, the Bank had no charge-offs or recoveries, and no construction loans were non-performing or 30-89 days delinquent at both June 30, 2023 and June 30, 2022.
+Added: During fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on construction loans, and no construction loans were non-performing or 30-89 days delinquent at both June 30, 2024 and June 30, 2023.
Participation Loan Purchases and Sales.
−Removed: 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.
−Removed: The Bank generally purchases between 50% and 100% of the total loan amount.
−Removed: When the Bank purchases a participation loan, the lead lender will usually retain a servicing fee, thereby decreasing the loan yield.
−Removed: This servicing fee approximates the expense the Bank would incur if the Bank were to service the loan.
−Removed: 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.
−Removed: The Bank did not purchase any loans to be held for investment in fiscal 2023, compared to $6.4 million of purchased loans to be held for investment (solely single-family) in fiscal 2022.
−Removed: The decline in loan purchases was due primarily to the uncertainty of the asset quality and fewer loans available for purchase.
+Added: To expand production and diversify risk, the Bank purchases loans and loan participations, primarily with collateral located in California, which allows for greater geographic distribution outside of the Bank’s primary lending areas.
+Added: The Bank typically purchases between 50% and 100% of the total loan amount.
+Added: When purchasing a participation loan, the lead lender usually retains a servicing fee, which reduces the loan yield to approximately the cost the Bank would incur if it serviced the loan itself.
+Added: All properties serving as collateral for these loan participations are inspected by either a Bank employee or a third-party inspection service before being approved by the Loan Committee.
+Added: The Bank uses the same underwriting criteria for these purchases as it does for loans it originates.
+Added: The Bank did not purchase any loans to be held for investment in fiscal 2024 and 2023, due primarily to concerns over asset quality in light of the current economic climate and fewer loans available for purchase.
As of June 30, 2024 and 2023, there were $1.8 million and $10.6 million of loans serviced by other financial institutions, respectively.
−Removed: As of June 30, 2023 and 2022, all loans serviced by others were performing according to their original contractual payment terms.
+Added: As of June 30, 2024 and 2023, all loans serviced by others were performing according to their original contractual payment terms, except for one loan totaling $362,000 that was classified as non-performing as of June 30, 2024.
The Bank also sells participating interests in loans when it has been determined that it is beneficial to diversify the Bank’s risk.
5 unchanged sentences
Commercial business loans allow the Bank to diversify its lending and increase the average loan yield.
−Removed: As of June 30, 2023, commercial business loans were $1.6 million, up 30% from $1.2 million at June 30, 2022.
+Added: As of June 30, 2024, commercial business loans were $1.4 million, down from $1.6 million at June 30, 2023.
These loans represent secured and unsecured lines of credit and term loans secured by business assets.
4 unchanged sentences
Commercial business term loans are generally made to finance the purchase of assets and have maturities of five years or less.
−Removed: 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.
+Added: Commercial lines of credit are typically made for the purpose of providing working capital and are typically 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.
−Removed: 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.
+Added: 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
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.
−Removed: June 30, 2023 and 2022, there were no non-performing commercial business loans.
+Added: At June 30, 2024 and 2023, there were no non-performing commercial business loans.
During fiscal 2024 and 2023, the Bank had no charge-offs or recoveries on commercial business loans.
Consumer Loans.
−Removed: At June 30, 2023 and 2022, the Bank’s consumer loans were $65,000 and $86,000, respectively.
−Removed: The Bank offers open-ended lines of credit on unsecured basis.
+Added: At June 30, 2024, the Bank’s consumer loans were $65,000, unchanged from June 30, 2023.
+Added: The Bank offers open-ended lines of credit on an unsecured basis, primarily deposit overdraft lines of credit.
Consumer loans potentially have a greater risk than residential mortgage loans, particularly in the case of loans that are unsecured.
9 unchanged sentences
The following table shows the Bank’s loan originations, purchases, sales and principal repayments during the periods indicated.
+Added: No loans were purchased during the periods indicated:
Year Ended June 30,
11 unchanged sentences
Total loans originated for investment
−Removed: Loans purchased for investment:
−Removed: Mortgage loans:
−Removed: Single-family
−Removed: Total loans purchased for investment
Loan principal repayments
−Removed: Increase in other items, net (1)
−Removed: Net increase in loans held for investment
−Removed: (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.
+Added: (Decrease) increase in other items, net (1)
+Added: Net (decrease) increase in loans held for investment
+Added: (1) Includes net changes in undisbursed loan funds, deferred loan fees or costs, ACL, fair value of loans held for investment and advance payments of escrows.
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.
−Removed: At June 30, 2023, the Bank was servicing $32.6 million of loans for others, a 13% decrease from $37.7 million at June 30, 2022.
−Removed: The decrease was primarily attributable to scheduled principal payments and prepayments.
+Added: At June 30, 2024, the Bank was servicing $34.6 million of loans for others, a 6% increase from $32.6 million at June 30, 2023.
+Added: The increase was primarily attributable to new loans sold with servicing retained, partly offset by scheduled principal payments and 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.
5 unchanged sentences
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).
−Removed: In estimating fair values at June 30, 2023 and 2022, the Bank used a weighted average Constant Prepayment Rate (“CPR”) of 7.44% and 10.85%, respectively, and a weighted-average discount rate of 9.05% at both dates.
−Removed: The required impairment reserve against servicing assets at June 30, 2023 and 2022 was $165,000 and $119,000,
−Removed: respectively.
+Added: In estimating fair values at June 30, 2024 and 2023, the Bank used a weighted average Constant Prepayment Rate (“CPR”) of 9.59% and 7.44%, and a weighted average discount rate of 9.06% and 9.05%, respectively.
+Added: The required impairment reserve against servicing assets at June 30, 2024 and 2023 was $170,000 and $165,000, respectively.
In aggregate, servicing assets had a carrying value of $272,000 and a fair value of $102,000 at June 30, 2024, compared to a carrying value of $256,000 and a fair value of $91,000 at June 30, 2023.
5 unchanged sentences
Interest income is reduced by the full amount of accrued and uncollected interest on such loans.
−Removed: As of June 30, 2023, total non-performing assets, net of allowance for loan losses and fair value adjustments, were $1.3 million, or 0.10% of total assets, which was primarily comprised of six single-family loans.
−Removed: As of June 30, 2023, $175,000 or 13 percent of the total non-performing loans had a current payment status.
−Removed: This compares to total non-performing assets, net of allowance for loan losses and fair value adjustments, of $1.4 million, or 0.12% of total assets, all of which had a current payment status at June 30, 2022.
+Added: As of June 30, 2024, total non-performing assets, net of the ACL and fair value adjustments, were $2.6 million, or 0.20% of total assets, which was comprised of 10 single-family loans.
+Added: As of June 30, 2024, $1.1 million or 43% of the total non-performing loans had a current payment status.
+Added: In comparison, as of June 30, 2023, total non-performing assets, net of the ACL and fair value adjustments, were $1.3 million, or 0.10% of total assets, consisting of six single-family loans, with $175,000 or 13% having a current payment status.
The Bank had no real estate owned (“REO”) both at June 30, 2024 and 2023.
−Removed: 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:
+Added: The following table sets forth information with respect to the Bank’s non-performing assets, net of the ACL and fair value adjustments, at the dates indicated:
(Dollars In Thousands)
−Removed: Loans on non-performing status (excluding restructured loans):
+Added: Loans on non-performing status:
Mortgage loans:
1 unchanged sentence
Accruing loans past due 90 days or more
−Removed: Restructured loans on non-performing status:
−Removed: Mortgage loans:
−Removed: Single-family
Total non-performing loans
4 unchanged sentences
Non-performing assets as a percentage of total assets
−Removed: 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.
−Removed: 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.
−Removed: The Bank measures each non-performing loan based on Accounting Standards Codification (“ASC”) 310, “Receivables,” establishes a collectively evaluated or individually evaluated allowance and charges off those loans or portions of loans deemed uncollectible.
−Removed: Restructured Loans.
−Removed: 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.
−Removed: The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to:
−Removed: ● A reduction in the stated interest rate and/or accrued interest;
−Removed: ● An extension of the maturity date, typically longer than 6 months;
−Removed: ● A reduction principal loan balance;
−Removed: ● Extensions, deferrals, renewals and rewrites.
−Removed: 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.
−Removed: 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.
−Removed: For the fiscal year ended June 30, 2023, there were no loans that were newly modified from their original terms, re-underwritten or identified as a restructured loan;
−Removed: 11 loans were upgraded to the pass category;
−Removed: one loan was downgraded to the special mention category and subsequently upgraded back to the pass category;
−Removed: one loan was paid off;
−Removed: and no loans were converted to REO.
−Removed: 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;
−Removed: three loans were upgraded to the pass category;
−Removed: seven loans were paid off;
−Removed: and no loans were converted to REO.
−Removed: During the fiscal years ended June 30, 2023 and 2022, no restructured loans were in default within a 12-month period subsequent to their original restructuring.
−Removed: Additionally, during the fiscal year ended June 30, 2023 and 2022, there were no loans that were extended beyond their maturity of the modification terms.
−Removed: As of June 30, 2023, the net outstanding balance of the Bank’s restructured loans was $708,000, consisting of one loan classified as substandard on non-accrual status.
−Removed: As of June 30, 2023, the restructured loan was delinquent with respect to its payment status.
−Removed: 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.
−Removed: As of June 30, 2022, all of the restructured loans were current with respect to their payment status, consistent with their modified terms.
−Removed: 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.
−Removed: Once the borrower has demonstrated satisfactory contractual payments beyond six or 12 consecutive months, as the case may be, the loan is no longer categorized as a restructured loan.
+Added: 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 modified or management has serious doubts about the future collectability of principal and interest, even though the loans may be currently performing.
+Added: Factors considered in determining classification include, but are not limited to, expected future cash flows, collateral value, the financial condition of the borrower and/or guarantor and current economic conditions.
+Added: The Bank measures each non-performing loan based on Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses,” establishes a collectively evaluated or individually evaluated allowance, and charges off those loans or portions of loans deemed uncollectible.
+Added: Modified Loans to Borrowers Experiencing Financial Difficulty.
+Added: We occasionally modify loans to alleviate temporary difficulties in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize our potential losses.
+Added: We refer to these modifications as modified loans to troubled borrowers.
+Added: Modifications may include changes in the amortization terms of the loan, reductions in interest rates, acceptance of interest only payments, and, in very limited cases, reductions to the outstanding loan balance.
+Added: Such loans are typically placed on nonaccrual status
+Added: when there is doubt concerning the full repayment of principal and interest or the loan has been past due for a period of 120th day for single-family loans or the 90th day for other loans or sooner if other activities have taken place such as a notice of default has been issued, or if the borrower is chronically delinquent.
+Added: Such loans may be returned to accrual status when all contractual amounts past due have been brought current, and the borrower’s performance under the modified terms of the loan agreement and the ultimate collectability of all contractual amounts due under the modified terms is no longer in doubt.
+Added: In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, “Financial Instruments-Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures.” This ASU provides new guidance on the treatment of troubled debt restructurings (“TDR”) in relation to the adoption of the current expected credit loss methodology, or CECL model, for the accounting for credit losses (discussed below).
+Added: Previous accounting guidance related to TDRs is eliminated and new disclosure requirements are adopted in regards to loan modifications made to borrowers experiencing financial difficulties under the assumption that the CECL model will capture credit losses related to TDRs.
+Added: The required disclosures regarding gross write-offs for financing receivables by year of origination and loan modifications are presented under Note 3 of the Notes to Consolidated Financial Statements.
+Added: Subsequent to the adoption of ASC 326, the Bank no longer reports TDRs or classifies loans as TDRs given those loans previously recognized as TDRs have been incorporated into the CECL methodology in regard to credit loss reserves as of July 1, 2023.
+Added: As of June 30, 2024, there were no loan modifications for borrowers experiencing financial difficulties.
Foreclosed Real Estate.
11 unchanged sentences
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.
−Removed: Doubtful assets have the weaknesses of substandard assets with the additional
−Removed: 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.
+Added: 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.
−Removed: 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.
+Added: A portion of the ACL 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.
−Removed: The following table summarizes classified assets, which is comprised of classified loans located in California, including loans classified by the Bank as special mention, net of allowance for loan losses, and REO at the dates indicated:
+Added: The following table summarizes classified assets, which is comprised of classified loans located in California, including loans classified by the Bank as special mention, net of the ACL, and REO at the dates indicated:
At June 30, 2024
17 unchanged sentences
Not all of the Bank’s classified assets are delinquent or non-performing.
−Removed: 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.
+Added: 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, the reserves of the borrower and guarantors, and the debt coverage ratio of the property securing the loan, among other factors.
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.
−Removed: 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 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.
−Removed: Allowance for Loan Losses.
−Removed: The allowance for loan losses is maintained to cover losses inherent in the loans held for investment.
−Removed: 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.
−Removed: 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”).
−Removed: The Bank adjusts its allowance for loan losses by charging (crediting) its provision (recovery) for loan losses against the Bank’s operations.
−Removed: The Bank has established a methodology for the determination of the provision for loan losses.
+Added: 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 market value of the collateral which are not classified because they are performing and have borrowers and/or guarantor who have sufficient resources to support the repayment of the loan.
+Added: Allowance for Credit Losses.
+Added: On July 1, 2023, the Corporation adopted ASC 326 that replaced the incurred loss methodology with the current expected credit loss or CECL methodology.
+Added: CECL requires an estimate of expected credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and applies to financial assets measured at amortized cost, including loans held for investment, held-to-maturity investment securities and some off-balance sheet credit exposures such as unfunded loan commitments to extend credit.
+Added: Financial assets measured at amortized cost are presented at the net amount expected to be collected by using an ACL.
+Added: The responsibility for the review of the Bank’s assets and the determination of the adequacy of the ACL lies with the Internal Asset Review Committee (“IAR Committee”).
+Added: The Bank adjusts its ACL by charging (crediting) its provision for (recovery of) credit losses against the Bank’s operations.
+Added: The Bank has established a methodology for the determination of the provision for credit 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 is tied to individual problem loans.
−Removed: The Bank’s methodology for assessing the appropriateness of the allowance consists of several key elements.
−Removed: The allowance is calculated by applying loss factors to the loans held for investment.
−Removed: The loss factors are applied according to loan program type and loan classification.
−Removed: 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”.
−Removed: Homogeneous loans, such as residential mortgage, home equity and consumer installment loans are considered on a pooled loan basis.
−Removed: A factor is assigned to each pool based upon expected charge-offs for one year.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Management presents the minutes summarizing the actions of the IAR Committee to the Bank’s Board of Directors on a quarterly basis.
+Added: The Bank’s methodology for assessing the appropriateness of the ACL consists of several key elements.
+Added: Under ASC 326 , the ACL is a valuation account that is deducted from the related loan’s amortized cost basis to present the net amount expected to be collected on the loans.
+Added: The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.
+Added: The Bank’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL trued-up through an entry to the provision for credit losses.
+Added: Management calculates the quantitative portion of the collectively evaluated allowance for all loan categories using an average charge-off or loss rate methodology and generally evaluates collectively evaluated loans by Call Report code in order to group and determine portfolio loan segments with similar risk characteristics.
+Added: The Bank primarily utilizes historical loss rates for the CECL calculation based on its own specific historical losses and/or with peer loss history where applicable.
+Added: The expected loss rates are applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments.
+Added: The prepayment assumptions applied to expected cash flow over the contractual life of the loans are estimated based on historical and bank-specific experience and the consideration of current and expected conditions and circumstances including the level of interest rates.
+Added: The prepayment assumptions may be updated by management in the event that changing conditions impact management’s estimate or additional historical data gathered has resulted in the need for a reevaluation.
+Added: For its reasonable and supportable forecasting of current expected credit losses, the Bank utilizes a regression model using forecasted economic metrics and historical loss data.
+Added: The regression model utilized upon implementation of CECL on July 1, 2023 , and as of June 30, 2024, relied upon reasonable and supportable 12-month forecasts of the National Unemployment Rate and change in the Real Gross Domestic Product, after which it reverts to a historical loss rate.
+Added: Management selected the National Unemployment Rate and the Real Gross Domestic Product as the drivers of the forward look component of the collectively evaluated allowance, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts, including the quarterly Federal Open Market Committee (“FOMC”) forecast, and the widespread familiarity of these economic metrics.
+Added: Management recognizes that there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of allowance on collectively evaluated loans.
+Added: As current and expected conditions may vary compared with conditions over the historical lookback period, which is utilized in the calculation of the quantitative allowance, management considers whether additional or reduced allowance levels on collectively evaluated loans may be warranted, given the consideration of a variety of qualitative factors.
+Added: The following qualitative factors (“Q-factors”) considered by management reflect the regulatory guidance on the Q-factors:
+Added: ● Changes in the experience, ability, and depth of lending management and other relevant staff.
+Added: ● Changes in the value of underlying collateral for collateral-dependent loans.
+Added: ● The existence and effect of any concentrations of credit, and changes in the level of such concentrations.
+Added: ● Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments.
+Added: ● The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution's existing portfolio.
+Added: ● Changes in the volume and severity of past due loans, the volume of non-performing loans, and the volume and severity of adversely classified or graded loans.
+Added: ● Changes in the quality of the Bank’s loan review system.
+Added: ● Changes in the nature, volume and terms of loans in the portfolio.
+Added: ● Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.
+Added: The qualitative portion of the Bank’s allowance on collectively evaluated loans are calculated using management judgment, to determine risk categorizations in each of the Q-factors presented above.
+Added: The amount of qualitative allowance is also contingent upon the relative weighting of the Q-factors according to management’s judgment.
+Added: Loans that do not share similar risk characteristics are evaluated on an individual basis.
+Added: When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date, less selling costs.
+Added: Accrued interest receivable for loans is included in the accrued interest receivable line item on the Corporation’s Consolidated Statements of Financial Condition.
+Added: The Bank elected not to measure an allowance for accrued interest receivable and instead elected to reverse accrued interest income on loans that are placed on non-performing status.
+Added: A loan is deemed non-performing when the Bank has stopped accruing interest income, or it is 90 days or more delinquent.
+Added: Any outstanding interest receivable that has not been collected is reversed, disclosed accordingly;
+Added: and therefore, no allowance is established.
+Added: The Bank believes this policy results in the timely reversal of potentially uncollectible interest.
+Added: Management believes the ACL on loans held for investment is maintained at a level sufficient to provide for expected losses on the Corporation’s loans held for investment based on historical loss experience, current conditions, and reasonable and supportable forecasts.
+Added: The provision for (recovery of) credit losses is charged (credited) against operations on a quarterly basis, as necessary, to maintain the ACL at appropriate levels.
+Added: Future adjustments to the ACL may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory, and other conditions beyond the Corporation’s control.
Non-performing loans are charged-off to their fair market values in the period the loans, or 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.
−Removed: For restructured loans, the charge-off occurs when the loan becomes 90 days delinquent;
+Added: For loans that were previously modified from their original terms, were re-underwritten and identified as modified 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.
−Removed: 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.
−Removed: The allowance for loan losses for non-performing loans is determined by applying 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.
+Added: The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the ACL.
+Added: For modified loans that are less than 90 days delinquent, the ACL is segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their modification period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method.
For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method.
−Removed: 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.
−Removed: The IAR Committee meets quarterly to review and monitor conditions in the portfolio and to determine the appropriate allowance for loan losses.
−Removed: 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.
−Removed: 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.
−Removed: Pooled loan factors are adjusted to reflect current estimates of charge-offs for the subsequent 12 months.
−Removed: Loss activity is reviewed for non-pooled loans and the loss factors are adjusted, if necessary.
−Removed: By assessing the probable estimated losses inherent in the loans held 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.
−Removed: At June 30, 2023, the Bank had an allowance for loan losses of $5.9 million, or 0.55% of gross loans held for investment, compared to an allowance for loan losses at June 30, 2022 of $5.6 million, or 0.59% of gross loans held for investment.
−Removed: A $374,000 provision for loan losses was recorded in fiscal 2023, compared to a $2.5 million recovery from the allowance for loan losses in fiscal 2022.
−Removed: The increase in the allowance for loan losses was due primarily to an increase in loans held for investment in fiscal 2023.
−Removed: Management believes, based on currently available information, the allowance for loan losses is sufficient to absorb potential losses inherent in loans held for investment at June 30, 2023.
−Removed: The allowance for loan losses is maintained at a level sufficient to provide for estimated losses based on evaluating known and inherent risks in the loans held for investment portfolio and upon management's continuing analysis of the factors
−Removed: underlying the quality of the loans held for investment.
−Removed: These factors include changes in the size and composition of the loans held for investment, actual loan loss experience, current economic conditions, detailed analysis of individual loans for which full collectability may not be assured, and determination of the realizable value of the collateral securing the loans.
−Removed: Provisions (recoveries) for loan losses are charged (credited) against operations on a quarterly basis, as necessary, to maintain the allowance at appropriate levels.
−Removed: See “Comparison of Operating Results for the Fiscal Years Ended June 30, 2023 and 2022 – Provision (Recovery) for Loan Losses” below.
−Removed: Management believes that the amount maintained in the allowance will be adequate to absorb probable losses inherent in the loans held for investment.
−Removed: Although management believes it uses the best information available to make such determinations, there can be no assurance that regulators, in reviewing the Bank's loans held for investment, will not request the Bank to significantly increase its allowance for loan losses.
−Removed: Future adjustments to the allowance for loan losses may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory and other conditions beyond the control of the Bank.
+Added: For non-performing commercial real estate loans, an individually evaluated allowance is derived based on the loan's discounted cash flow fair value (for modified loans) or collateral fair value less estimated selling costs and if the fair value is higher than the loan balance, no allowance is required.
The following table shows certain credit ratios at and for the periods indicated and each component of the ratio’s calculations:
1 unchanged sentence
(Dollars In Thousands)
−Removed: Allowance for loan losses as a percentage of total gross loans held for investment at period end
−Removed: Allowance for loan losses
+Added: ACL on loans as a percentage of total gross loans held for investment at period end
Total gross loans held for investment
2 unchanged sentences
Total loans held for investment, net
−Removed: Allowance for loan losses as a percentage of gross non-performing loans at period end
−Removed: Allowance for loan losses
+Added: ACL on loans as a percentage of gross non-performing loans at period end
Total gross non-performing loans
19 unchanged sentences
Consumer loans:
−Removed: Net (charge-offs) recoveries
+Added: Net charge-offs
Average loans receivable
1 unchanged sentence
Total average loans receivable
−Removed: The distribution of our allowance for losses on loans at the dates indicated is summarized as follows:
+Added: The distribution of the ACL on loans at the dates indicated is summarized as follows:
(Dollars In Thousands)
4 unchanged sentences
Consumer loans
−Removed: Total allowance for loan losses
−Removed: Effective July 1, 2023, the Corporation will be required to adopt Accounting standard update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):
−Removed: Measurement of Credit Losses on Financial Instruments, commonly referred to as “CECL.” Upon adoption of ASU 2016-13 on July 1, 2023, we expect to recognize a reduction to our opening retained earnings of approximately $825,000, net of deferred taxes and other immaterial adjustments, resulting from a pretax increase to our allowance for credit losses of approximately $1.2 million.
−Removed: The increase is primarily related to the difference between the historical incurred loss methodology currently utilized, as compared to estimating lifetime credit losses as required by the CECL standard.
Investment Securities Activities
2 unchanged sentences
Subject to various restrictions, federally chartered savings institutions may also invest a portion of their assets in commercial paper and corporate debt securities.
−Removed: 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.
2 unchanged sentences
At June 30, 2024 and 2023, the Bank’s investment securities portfolio was $131.9 million and $156.6 million, respectively, which primarily consisted of federal agency and GSE obligations.
−Removed: The Bank did not purchase any investment securities during fiscal 2023, compared to $19.0 million of mortgage-backed securities purchased during fiscal 2022.
+Added: The Bank did not purchase any investment securities during fiscal 2024 and 2023.
At June 30, 2024 and 2023, the Bank’s 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.
5 unchanged sentences
SBA securities (3)
−Removed: Certificates of deposit
Total investment securities - held to maturity
7 unchanged sentences
(2) Collateralized mortgage obligations (“CMO”)
−Removed: (3) Small Business Administration ("SBA")
+Added: (3) Small Business Administration ("SBA")
The following table sets forth the outstanding balance, maturity and weighted average yield of the investment securities at June 30, 2024.
14 unchanged sentences
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.
+Added: As of June 30, 2024
+Added: Unrealized Holding Losses
+Added: Unrealized Holding Losses
+Added: Unrealized Holding Losses
+Added: (In Thousands)
+Added: Less Than 12 Months
+Added: 12 Months or More
+Added: Description of Securities
+Added: Held to maturity
+Added: government sponsored enterprise MBS
+Added: government sponsored enterprise CMO
+Added: SBA securities
+Added: Total investment securities - held to maturity
+Added: Available for sale
+Added: U.S government agency MBS
+Added: government sponsored enterprise MBS
+Added: Private issue CMO
+Added: Total investment securities - available for sale
+Added: Total investment securities
+Added: The Bank evaluates individual investment securities quarterly for impairment based on ASC 326 since the adoption on July 1, 2023.
+Added: At June 30, 2024, the Bank reported $15.8 million of unrealized holding losses, which were in a loss position for 12 months or more.
+Added: The unrealized losses on investment securities were attributable to changes in interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities, which are predominately GSE securities that are either explicitly or implicitly guaranteed by the U.S.
+Added: government and have a long history of no credit losses.
+Added: Therefore, the Corporation has determined that the unrealized losses are due to the fluctuating nature of interest rates, and not related to any potential credit risks within the investment portfolio.
+Added: The Bank does not currently intend to sell any investment securities classified as held to maturity or available for sale and as such, records the investment security at book value or fair market value as prescribed by accounting principles generally accepted in the U.S.
+Added: As a part of the Bank’s monthly risk assessment, it runs a number of stressed liquidity scenarios to determine if it is more likely than not that the Bank will be required to sell the investment security before the recovery of its amortized costs basis.
+Added: These liquidity scenarios support the Bank’s assessment that it has the ability to hold these held to maturity securities until maturity or available for sale securities until recovery of the amortized costs is realized and it is not more likely than not that the Bank will be required to sell the securities prior to recovery of the amortized costs.
+Added: There were no ACL on investment securities held to maturity and there was no impairment on investment securities available for sale at the adoption date of ASC 326 on July 1, 2023 and at June 30, 2024.
+Added: At June 30, 2024 and 2023, the Corporation did not hold any investment securities held to maturity or investment securities available for sale with the intent to sell and determined it had the ability to hold these investment securities until maturity.
+Added: As previously discussed, it also determined that it was more likely than not that the Bank would not be required to sell the securities prior to recovery of the amortized cost basis;
+Added: therefore, no impairment losses were recorded on investment securities available for sale and investment securities held to maturity for the fiscal years ended June 30, 2024 and 2023.
Deposit Activities and Other Sources of Funds
2 unchanged sentences
Borrowings through the FHLB – San
−Removed: Francisco and repurchase agreements may be used to compensate for declines in the availability of funds from other sources.
+Added: Francisco, Federal Reserve Bank (“FRB”) of San Francisco and the correspondent bank may be used to compensate for declines in the availability of funds from other sources.
Deposit Accounts.
9 unchanged sentences
As illustrated in the following table, time deposits represented approximately 31% of the Bank’s deposit portfolio at June 30, 2024, compared to approximately 23% at June 30, 2023.
−Removed: The time deposits included $106.4 million of brokered certificates of deposit at June 30, 2023, as compared to no brokered certificates of deposit at June 30, 2022.
+Added: The time deposits included $131.8 million and $106.4 million of brokered certificates of deposit at June 30, 2024 and 2023, respectively.
At June 30, 2024, the Bank had related party deposits of approximately $6.3 million, compared to $8.1 million at June 30, 2023.
41 unchanged sentences
Over five years
−Removed: (1) Includes brokered certificates of deposit of $106.4 million and $0 at June 30, 2023 and 2022, respectively.
+Added: (1) Includes brokered certificates of deposit of $131.8 million and $106.4 million at June 30, 2024 and 2023, respectively.
(2) Includes uninsured deposits of approximately $122.7 million and $140.1 million at June 30, 2024 and 2023, respectively.
43 unchanged sentences
The FHLB – San Francisco functions as a central reserve bank providing credit for member financial institutions.
−Removed: 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)
−Removed: as collateral, provided certain creditworthiness standards have been met.
+Added: 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.
2 unchanged sentences
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.
−Removed: The FHLB – San Francisco has, from time to time, served as the Bank’s primary borrowing source.
−Removed: As of June 30, 2023, the FHLB – San Francisco borrowing capacity was limited to 40% of the Bank’s total assets, amounting to $534.1 million, up from 35% of the Bank’s total assets, amounting to $415.7 million at June 30, 2022.
+Added: The FHLB – San Francisco has served as the Bank’s primary borrowing source.
+Added: As of June 30, 2024, the FHLB – San Francisco borrowing capacity was limited to 40% of the Bank’s total assets, amounting to $516.0 million, as compared to $534.1 million at June 30, 2023.
Advances from the FHLB – San Francisco are typically secured by the Bank’s single-family residential, multi-family and commercial real estate mortgage loans.
4 unchanged sentences
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.
+Added: The letters of credit are used to collateralize the local agency deposits.
The outstanding letters of credit were $16.0 million and $11.0 million at June 30, 2024 and 2023;
−Removed: while the outstanding MPF credit enhancement was $216,000 and $2.5 million at June 30, 2023 and 2022, respectively.
+Added: while the outstanding MPF credit enhancement was $216,000 at both June 30, 2024 and 2023.
As of June 30, 2024 and 2023, the remaining financing availability through the FHLB – San Francisco was $261.3 million and $287.9 million, with remaining available collateral of $367.4 million and $468.6 million, respectively.
−Removed: As of June 30, 2023 and 2022, the Bank also had secured a discount window facility of $139.0 million and $153.9 million at the Federal Reserve Bank of San Francisco, collateralized by investment securities.
−Removed: At June 30, 2023 and 2022, the Bank also has a federal funds facility with its correspondent bank for $50.0 million, which matures annually on June 30.
−Removed: As of June 30, 2023 and 2022, there were no outstanding borrowings under the discount window facility or the federal funds facility with the correspondent bank at both dates.
+Added: As of June 30, 2024 and 2023, the Bank also had secured a discount window facility of $208.6 million and $139.0 million at the FRB of San Francisco, respectively.
+Added: As of June 30, 2024, the Bank collateralized $126.6 million of investment securities and $178.6 million of loans held for investment.
+Added: This compared to a total of $150.3 million of investment securities collateralized under the discount window facility at June 30, 2023.
+Added: As of June 30, 2024 and 2023, there were no outstanding borrowings under the discount window facility at both dates.
+Added: At June 30, 2024 and 2023, the Bank also has a federal funds facility with its correspondent bank for $50.0 million, which matures annually on June 30th.
+Added: As of June 30, 2024 and 2023, there were no outstanding borrowings under 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 in stock at June 30, 2024 and 2023 of $9.6 million and $9.5 million with no excess investment, respectively.
−Removed: During fiscal 2023 and 2022, the Bank purchased FHLB – San Francisco capital stock totaling $1.3 million and $84,000, respectively, and did not redeem any of the capital stock during both periods.
+Added: During fiscal 2024 and 2023, the Bank purchased FHLB – San Francisco capital stock totaling $63,000 and $1.3 million, respectively, and did not redeem any of the capital stock during both periods.
In fiscal 2024 and 2023, the FHLB – San Francisco distributed cash dividends to the Bank totaling $793,000 and $556,000, respectively.
6 unchanged sentences
(i) acting as trustee for the Bank’s real estate transactions and (ii) holding real estate for investment, if any.
−Removed: Profed Mortgage, Inc., which formerly conducted the Bank’s mortgage banking activities, and First Service Corporation are currently inactive.
+Added: Profed Mortgage, Inc and First Service Corporation are currently inactive.
In fiscal 2024 and 2023, the Bank contributed capital of $0 and $10,000 to PFC, respectively.
−Removed: At June 30, 2023 and 2022, the Bank’s investment in its subsidiaries was $13,000 and $7,000, respectively.
+Added: At June 30, 2024 and 2023, the Bank’s investment in all its combined subsidiaries totaled $8,000 and $13,000, respectively.
The following is a brief description of certain laws and regulations which are applicable to the Corporation and the Bank.
10 unchanged sentences
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.
−Removed: 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.
+Added: 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 allowance for credit loss 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.
14 unchanged sentences
All federal savings institutions must pay assessments to the OCC, to fund the agency’s operations.
−Removed: The general assessments, paid on a semi-annual basis, are determined based on the savings institution’s total assets, including consolidated subsidiaries.
+Added: The general assessments, paid on a semi-annual basis, are determined based on the savings institution’s total assets, including
+Added: consolidated subsidiaries.
The Bank’s OCC annual assessments for the fiscal years ended June 30, 2024 and 2023 were $179,000 and $198,000, 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).
−Removed: The Bank’s limits on loans to one borrower or group of related
−Removed: borrowers at June 30, 2023 and 2022 were $19.8 million and $19.6 million, respectively.
+Added: The Bank’s limits on loans to one borrower or group of related borrowers at June 30, 2024 and 2023 were $20.1 million and $19.8 million, respectively.
At June 30, 2024, the Bank’s largest lending relationship to a single borrower or group of borrowers consisted of four multi-family loans totaling $5.0 million, which were performing according to their original payment terms.
7 unchanged sentences
All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB - San Francisco.
−Removed: In addition, all long-term advances are required to provide funds for residential home financing.
−Removed: At June 30, 2023 and 2022, the Bank had $235.0 million and $85.0 million of outstanding advances, respectively, from the FHLB – San Francisco with a remaining available credit facility of $287.9 million and $310.3 million, respectively, based on 40% and 35% of total assets, respectively, which is limited to available collateral.
+Added: At June 30, 2024 and 2023, the Bank had $238.5 million and $235.0 million of outstanding advances, respectively, from the FHLB – San Francisco with a remaining available credit facility of $261.3 million and $287.9 million, respectively, based on 40% 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.
1 unchanged sentence
At June 30, 2024 and 2023, the Bank held $9.6 million and $9.5 million of FHLB - San Francisco stock, respectively, which were in compliance with this membership requirement.
−Removed: During fiscal 2023 and 2022, the Bank was required to purchase $1.3 million and $84,000 of FHLB – San Francisco capital stock, respectively, and the Bank did not redeem any capital stock during both periods.
+Added: During fiscal 2024 and 2023, the Bank was required to purchase $63,000 and $1.3 million of FHLB – San Francisco capital stock, respectively, and the Bank did not redeem any capital stock during both periods.
In fiscal 2024 and 2023, the FHLB – San Francisco distributed cash dividends to the Bank totaling $793,000 and $556,000, respectively.
7 unchanged sentences
As an 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.
−Removed: On October 18, 2022, the FDIC adopted a final rule to increase its initial base insurance assessment rate schedules by two basis points to improve the likelihood that the reserve ratio of the DIF would be restored to at least 1.35 percent by September 30, 2028.
+Added: On October 18, 2022, the FDIC adopted a final rule to increase its initial base insurance assessment rate schedules by two basis points to improve the likelihood that the reserve ratio of the DIF would be restored to at least 1.35% by September 30, 2028.
The revised assessment rate schedules became effective January 1, 2023, with the first invoice payment date of June 30, 2023 for the assessment period of January 1, 2023 through March 31, 2023.
21 unchanged sentences
and (iv) a total capital ratio of 8%.
−Removed: Mortgage servicing rights and deferred tax assets over designated percentages of CET1 are also deducted from capital.
−Removed: 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.
−Removed: 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.
+Added: Mortgage servicing assets and deferred tax assets over designated percentages of CET1 are also deducted from capital.
+Added: In addition, Tier 1 capital includes accumulated other comprehensive income, which includes all unrealized gains and losses on available for sale debt securities and interest-only strips.
+Added: 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 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.
1 unchanged sentence
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.
−Removed: In order to be considered well-capitalized under the prompt corrective action regulations, the Bank must maintain a minimum 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 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.
+Added: In order to be considered well-capitalized under the prompt corrective action regulations, the Bank must maintain a minimum 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 risk-based capital ratio of 10% and the Bank must not be subject to 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.
−Removed: 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.
−Removed: A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly Call Report.
−Removed: An institution that temporarily ceases to meet any qualifying criteria is provided with a two quarter grace period to regain compliance.
+Added: Final rules issued by the agencies established the community bank leverage ratio at 9% of Tier 1 capital to adjusted average assets, effective January 1, 2020.
+Added: A qualifying institution may opt in or out of the community bank leverage ratio framework on its quarterly Call Report.
+Added: An institution that temporarily ceases to meet any qualifying criteria is provided with a two quarter grace
+Added: 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.
−Removed: The Company did not opt in to the community bank leverage ratio framework for the year ended June 30, 2023.
−Removed: The FASB has adopted a new accounting standard for accounting principles generally accepted in the U.S.
−Removed: GAAP") that became effective for the Corporation on July 1, 2023.
−Removed: This standard, referred to as Current Expected Credit Loss or
−Removed: CECL, requires FDIC-insured institutions and their holding companies (banking organizations) to recognize credit losses expected over the life of certain financial assets.
−Removed: CECL covers a broader range of assets than the current method of recognizing credit losses and generally results in earlier recognition of credit losses.
+Added: The Corporation did not opt in to the community bank leverage ratio framework for the year ended June 30, 2024.
+Added: The FASB has issued a new accounting standard, ASC 326, for U.S.
+Added: GAAP that was adopted by the Corporation on July 1, 2023.
+Added: This standard, referred to as Current Expected Credit Loss or CECL requires all entities holding leases that are not accounted for at fair value to recognize credit losses expected over the life of certain financial assets.
+Added: CECL covers a broader range of assets than the previous method of recognizing credit losses and generally results in earlier recognition of credit losses.
Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL.
1 unchanged sentence
The federal banking regulators (the FRB, the OCC and the FDIC) have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital.
+Added: The Bank elected to recognize the full $824,000 adjustment to retained earnings resulting from the adoption of CECL on July 1, 2023, instead of over the permitted three-year phase-in option.
Prompt Corrective Action.
1 unchanged sentence
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.
−Removed: Subject to a narrow exception, the OCC is required to appoint a receiver or conservator for a savings institution that is "critically undercapitalized."
−Removed: 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,"
−Removed: "significantly undercapitalized"
−Removed: or "critically undercapitalized."
−Removed: 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.
−Removed: “Significantly undercapitalized” and “critically undercapitalized” institutions are subject to more extensive mandatory regulatory actions.
+Added: 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." 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.
+Added: In addition, “significantly undercapitalized” and “critically undercapitalized” institutions are subject to even 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.
8 unchanged sentences
The FRB or the OCC may object to a capital distribution based on safety and soundness concerns.
−Removed: Further restrictions on Bank dividends may apply if the Bank fails the QTL test.
+Added: Further restrictions on Bank’s 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.
9 unchanged sentences
In addition, certain types of transactions are restricted to an aggregate percentage of the institution’s capital.
−Removed: Institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies
−Removed: and no savings institution may purchase the securities of any affiliate other than a subsidiary.
+Added: 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.
3 unchanged sentences
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.
−Removed: The CRA requires that the FRB assess the Bank's record in meeting the credit needs of the communities it serves, especially low and moderate income neighborhoods.
−Removed: Under the CRA, institutions are assigned a rating of "outstanding,"
−Removed: "satisfactory,"
−Removed: "needs to improve,"
−Removed: or "substantial non-compliance."
−Removed: The Bank received a rating of satisfactory when it was last examined for CRA compliance.
−Removed: On May 5, 2022, the federal bank regulatory agencies overhauled the CRA and jointly issued a proposal to strengthen and modernize regulations implementing the CRA.
−Removed: The proposed regulations included major changes from the current regulation and will be effective on the first day of the first calendar quarter that begins at least 60 days after the publication date of the final rules.
−Removed: The new rules as proposed are intended to:
−Removed: (1) provide expanded access to credit, investment, and basic banking services in low- and moderate-income communities;
−Removed: (2) address changes in the banking industry, including internet and mobile banking;
−Removed: (3) yield greater clarity, consistency, and transparency;
−Removed: (4) tailor CRA evaluations and data collection to bank size and type;
−Removed: and (4) maintain a unified approach amongst the regulating agencies.
+Added: The CRA requires that the OCC assess the Bank's record in meeting the credit needs of the communities it serves, especially low and moderate income neighborhoods.
+Added: While CRA modernization is underway and scheduled for implementation by 2026, the current evaluation system focuses on three tests:
+Added: (1) a lending test, to evaluate the institution's record of making loans in its assessment areas;
+Added: (2) an investment test, to evaluate the institution's record of investing in community development projects, affordable housing and programs benefiting low or moderate income individuals and businesses;
+Added: and (3) a service test, to evaluate the institution's delivery of banking services through its branches, ATM centers and other offices.
+Added: 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.
+Added: On October 24, 2023, the federal banking agencies, including the OCC, issued a final rule designed to strengthen and modernize regulations implementing the CRA.
+Added: The changes are designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type.
+Added: The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.
+Added: The Bank cannot predict the impact the changes to the CRA will have on its operations at this time.
Anti-Money Laundering and Customer Identification.
18 unchanged sentences
The FRB requires that all depository institutions maintain reserves on transaction accounts or non-personal time deposits.
−Removed: These reserves may be in the form of cash or noninterest-bearing deposits with the regional Federal Reserve Bank.
+Added: These reserves may be in the form of cash or noninterest-bearing deposits with the regional FRB.
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.
1 unchanged sentence
Environmental Issues Associated with Real Estate Lending.
−Removed: The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), is a federal statute, that generally imposes strict liability on all prior and present "owners and operators"
−Removed: of sites containing hazardous waste.
−Removed: However, Congress acted to protect secured creditors by providing that the term "owner and operator"
−Removed: excludes a person whose ownership is limited to protecting its security interest in the site.
+Added: The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), is a federal statute, that generally imposes strict liability on all prior and present "owners and operators" of sites containing hazardous waste.
+Added: However, Congress acted to protect secured creditors by 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.
−Removed: To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potentially 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.
−Removed: Privacy Regulations.
+Added: To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potentially hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which often substantially exceed the value of the collateral property.
+Added: Privacy and Cybersecurity 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.
−Removed: 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.
+Added: 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.
6 unchanged sentences
Compliance with the new rule was required by May 1, 2022.
−Removed: Further, on July 26, 2023, the SEC adopted final rules that require public companies to promptly disclose material cybersecurity incidents on Form 8-K and detailed information regarding their cybersecurity risk management and governance on an annual basis on Form 10-K.
−Removed: Companies will be required to report on Form 8-K any cybersecurity incident they determine to be material within four business days of making that determination.
−Removed: The Form 8-K must describe the incident’s material impact or reasonably likely material impact on the company, including its financial condition and results of operations.
−Removed: If any required information about the incident or its impact is not yet determined or is unavailable at the required time of the filing, the company must include a statement to this effect in the Form 8-K and file an amendment to the Form 8-K when that information becomes available.
−Removed: A company must make its materiality determination after it has discovered a cybersecurity incident “without unreasonable delay.” In addition to incident reporting, the new rules will require companies to describe their cybersecurity processes and governance.
−Removed: Smaller reporting companies, such as the Corporation, will have until June 15, 2024, before they must begin filing the new Form 8-K disclosure.
−Removed: Companies must provide disclosures about cybersecurity risk management and governance beginning with their Form 10-K for fiscal years ending on or after December 15, 2023.
+Added: In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance.
+Added: The new rules require registrants to disclose on Form 8-K any cybersecurity incident they determine to be material and to describe the material aspects of the incident's nature, scope, and timing, as well as its material impact or
+Added: reasonably likely material impact on the registrant.
+Added: The Corporation provided disclosures on its cybersecurity risk management and governance on this Form 10-K for fiscal years ended June 20, 2024 (See Part I, Item 1C - Cybersecurity).
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.
22 unchanged sentences
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.
−Removed: 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.
+Added: If the Bank were to fail 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.
1 unchanged sentence
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.
−Removed: In evaluating an application for the Corporation to acquire
−Removed: 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.
+Added: 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;
1 unchanged sentence
The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.
−Removed: Acquisition of the Company.
+Added: Acquisition of the Corporation.
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.
16 unchanged sentences
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 12 months, is equal to 10% or more of its consolidated net worth.
−Removed: 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
−Removed: imposed by, or written agreement with, the FRB.
+Added: 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.
18 unchanged sentences
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.
−Removed: 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.
+Added: 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.
6 unchanged sentences
Tax Effect from Stock-Based Compensation.
−Removed: During fiscal 2023, there were 93,750 shares of restricted common stock vested and distributed to employees but no shares of restricted stock was distributed to non-employee members of the Corporation’s Board of Directors.
−Removed: Also, there were no non-qualified stock options exercised and no incentive stock options were exercised as disqualifying dispositions.
−Removed: As a result, there was a $118,000 federal tax expense from stock-based compensation in fiscal 2023.
+Added: During fiscal 2024, there were no shares of restricted common stock vested and distributed to employees but there were 2,000 shares of restricted stock distributed to non-employee members of the Corporation’s Board of Directors.
+Added: Also, there were no non-qualified stock options exercised and no incentive stock options exercised as disqualifying dispositions, but there were 39,220 shares of non-qualified stock options that expired and/or were forfeited and 3,350 shares of restricted stock that were forfeited.
+Added: As a result, there was a $38,000 adjustment to federal tax expense from stock-based compensation in fiscal 2024.
Other Matters.
9 unchanged sentences
The Corporation will be treated as a general corporation subject to the general corporate tax rate.
−Removed: There was $68,000 of state tax expense from stock-based compensation in fiscal 2023.
+Added: There was $22,000 adjustment to state tax expense from stock-based compensation in fiscal 2024.
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.
13 unchanged sentences
A core value of our talent management approach is to both develop talent from within and supplement with external hires.
−Removed: 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.
+Added: 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
+Added: improvement mindset.
We believe that our average employee tenure of over eight years reflects the engagement of our employees in this talent management philosophy.
−Removed: Turnover for employees as measured by terminated employees to the average total employees was 41.4% in fiscal 2023, up from 39.8% in fiscal 2022.
+Added: Turnover for employees, as measured by terminated employees to the average total employees, was 23.3% in fiscal 2024, down from 41.4% in fiscal 2023.
EXECUTIVE OFFICERS
−Removed: The following table sets forth information with respect to the executive officers of the Corporation and the Bank:
+Added: The following table sets forth information with respect to the executive officers of the Provident and the Bank:
+Added: President and
+Added: President and
Chief Executive Officer
Chief Executive Officer
−Removed: Robert "Scott"
−Removed: Senior Vice President
−Removed: Single-Family Division
−Removed: Chief Operating Officer
−Removed: Chief Operating Officer
+Added: Senior Vice President and
+Added: Senior Vice President and
Chief Financial Officer
2 unchanged sentences
Corporate Secretary
+Added: Robert "Scott" Ritter
Senior Vice President
+Added: Single-Family Division
+Added: Senior Vice President
Chief Lending Officer
5 unchanged sentences
There are no family relationships among or between the executive officers.
−Removed: 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.
−Removed: 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.
−Removed: Blunden also serves on the Board of Directors of the Western Bankers Association.
−Removed: Robert "Scott"
−Removed: Ritter joined the Bank as Senior Vice President on September 26, 2016 and currently oversees the single-family mortgage operations.
+Added: Nguyen was appointed Senior Vice President, Chief Financial Officer and Corporate Secretary of Provident and the Bank effective January 2, 2024.
+Added: Nguyen's previous position was Vice President, Chief Accounting Officer, and Controller of the Bank since September 2022.
+Added: Prior to that, Ms.
+Added: Nguyen served the Bank as Vice President and Controller from her first employment date in October 2016 to September 2022.
+Added: Nguyen’s professional designations include Certified Public Accountant, Chartered Global Management Accountant, and Certified Management Accountant.
+Added: Her educational background includes a Master of Business Administration from California State University, San Marcos, and a Bachelor of Arts in Economics and a Bachelor of Science in Biochemistry/Cell Biology both from the University of California, San Diego.
+Added: Nguyen is also a member of the American Institute of Certified Public Accountants, the Institute of Management Accountants, and the Financial Managers Society.
+Added: 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.
1 unchanged sentence
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.
−Removed: 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.
+Added: Ternes was appointed President and Chief Executive Officer of Provident and the Bank effective January 2, 2024.
+Added: Ternes joined Provident and the Bank as Senior Vice President and Chief Financial Officer on November 1, 2000 and was appointed Secretary in April 2003.
Effective January 1, 2008, Mr.
−Removed: 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.
−Removed: Effective June 27, 2011, the Board of Directors of the Bank and the Corporation promoted Mr.
−Removed: 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.
+Added: Ternes was appointed Executive Vice President and Chief Operating Officer, while continuing to serve as the Chief Financial Officer and Corporate Secretary
+Added: of Provident and the Bank.
+Added: Effective June 27, 2011, the Boards of Directors of Provident and the promoted Mr.
+Added: Ternes to serve as President of Provident and the Bank, while continuing to serve as Chief Operating Officer, Chief Financial Officer and Corporate Secretary.
Prior to joining the Bank, Mr.
11 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.