UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



[ü ] X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	For the quarterly period ended	~~December~~ March 31, ~~2017~~2019



[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	For the transition period from ________________ to _________________

Commission File Number 000-28304

PROVIDENT FINANCIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



Delaware		33-0704889
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3756 Central Avenue, Riverside, California 92506

(Address of principal executive offices and zip code)

(951) 686-6060

(~~Registrant’s~~Registrant's telephone number, including area code)

_________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes ü[ ] No .

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). [X] Yesü [ ] No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting company,”" and ~~“emerging~~"emerging growth ~~company”~~company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐[ ] Accelerated filer ☒ [X]

Non-accelerated filer ☐[ ] Smaller reporting company ☐[X] Emerging growth company ☐[ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange ~~Act. ☐~~Act [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] Noü .

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.01 per share		PROV		The NASDAQ Stock Market LLC

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the ~~issuer’s~~issuer's classes of common stock, as of the latest practicable date.

As of May 3, 2019 there were 7,497,357 shares of the registrant's common stock, $0.01 par value per share, outstanding.



~~Title of class:~~		~~As of January 31, 2018~~
~~Common stock, $ 0.01 par value, per share~~		~~7,477,776 shares~~

PROVIDENT FINANCIAL HOLDINGS, INC.

Table of Contents



PART 1 -	FINANCIAL INFORMATION		Page

ITEM 1 -	Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements of Provident Financial Holdings, Inc. filed as a part of the report are as follows:
			~~Page~~
	Condensed Consolidated Statements of Financial Condition
		as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017~~2018	1
	Condensed Consolidated Statements of Operations
		for the Quarters and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018	2
	Condensed Consolidated Statements of Comprehensive Income
		for the Quarters and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018	3
	Condensed Consolidated Statements of ~~Stockholders’~~Stockholders' Equity
		for the Quarters and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018	4
	Condensed Consolidated Statements of Cash Flows
		for the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018	6
	Notes to Unaudited Interim Condensed Consolidated Financial Statements		7

ITEM 2 -	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations:

	General		46 50
	Safe-Harbor Statement		47 51
	Critical Accounting Policies		48 52
	Executive Summary and Operating Strategy		48 53
	Off-Balance Sheet Financing Arrangements and Contractual Obligations		49 55
	Comparison of Financial Condition at ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017~~ 2018		50 55
	Comparison of Operating Results
		for the Quarters and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~ 2018	52 57
	Asset Quality		61 68
	Loan Volume Activities		69 77
	Liquidity and Capital Resources		70 78
	Supplemental Information		72 80

ITEM 3 -	Quantitative and Qualitative Disclosures about Market Risk		72 80

ITEM 4 -	Controls and Procedures		75 84

PART II -	OTHER INFORMATION

ITEM 1 -	Legal Proceedings		76 85
ITEM 1A -	Risk Factors		77 85
ITEM 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		77 85
ITEM 3 -	Defaults Upon Senior Securities		78 86
ITEM 4 -	Mine Safety Disclosures		78 86
ITEM 5 -	Other Information		78 86
ITEM 6 -	Exhibits		78 86

SIGNATURES 1 2			81 89

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Financial Condition

(Unaudited)

In Thousands, Except Share Information


	December 31, 2017			June 30, 2017			March 31, 2019			June 30, 2018
Assets
Cash and cash equivalents	$	47,173		$	72,826		$	61,458		$	43,301
Investment securities – held to maturity, at cost	87,626			60,441				102,510			87,813
Investment securities – available for sale, at fair value	8,405			9,318				6,294			7,496
Loans held for investment, net of allowance for loan losses of $8,075 and $8,039, respectively; includes $5,157 and $6,445 at fair value, respectively	885,976			904,919
Loans held for investment, net of allowance for loan losses of $7,080 and $7,385, respectively; includes $5,239 and $5,234 at fair value, respectively								883,554			902,685
Loans held for sale, at fair value	96,589			116,548				30,500			96,298
Accrued interest receivable	3,147			2,915				3,386			3,212
Real estate owned, net	621			1,615				—			906
Federal Home Loan Bank (“FHLB”) – San Francisco stock	8,108			8,108
Federal Home Loan Bank ("FHLB") – San Francisco stock								8,199			8,199
Premises and equipment, net	7,816			6,641				8,395			8,696
Prepaid expenses and other assets	16,670			17,302				15,099			16,943

Total assets	$	1,162,131		$	1,200,633		$	1,119,395		$	1,175,549

Liabilities and Stockholders’ Equity
Liabilities and Stockholders' Equity

Liabilities:
Non interest-bearing deposits	$	77,144		$	77,917		$	90,875		$	86,174
Interest-bearing deposits	830,644			848,604				786,009			821,424
Total deposits	907,788			926,521				876,884			907,598

Borrowings	111,189			126,226				101,121			126,163
Accounts payable, accrued interest and other liabilities	22,454			19,656				20,181			21,331
Total liabilities	1,041,431			1,072,403				998,186			1,055,092

Commitments and Contingencies
Commitments and Contingencies (Notes 7 and 11)

Stockholders’ equity:
Stockholders' equity:
Preferred stock, $.01 par value (2,000,000 shares authorized; none issued and outstanding)	—			—				—			—
Common stock, $.01 par value (40,000,000 shares authorized; 17,976,615 and 17,949,365 shares issued; 7,474,776 and 7,714,052 shares outstanding, respectively)	180			180
Common stock, $.01 par value (40,000,000 shares authorized; 18,064,365 and 18,033,115 shares issued; 7,497,357 and 7,421,426 shares outstanding, respectively)								181			181
Additional paid-in capital	94,011			93,209				96,114			94,957
Retained earnings	189,610			192,754				191,103			190,616
Treasury stock at cost (10,501,839 and 10,235,313 shares, respectively)	(163,311		)	(158,142		)
Treasury stock at cost (10,567,008 and 10,611,689 shares, respectively)								(166,352	)		(165,507	)
Accumulated other comprehensive income, net of tax	210			229				163			210

Total stockholders’ equity	120,700			128,230
Total stockholders' equity								121,209			120,457

Total liabilities and stockholders’ equity	$	1,162,131		$	1,200,633
Total liabilities and stockholders' equity							$	1,119,395		$	1,175,549

The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

In Thousands, Except Per Share Information


	Quarter Ended December 31,						Six Months Ended December 31,						Quarter Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016			2019			2018			2019			2018
Interest income:
Loans receivable, net	$	9,735		$	10,116		$	19,892		$	20,596		$	10,011		$	9,933		$	30,516		$	29,825
Investment securities	319			128			576			212				592			382			1,381			958
FHLB – San Francisco stock	143			458			284			643				144			144			565			428
Interest-earning deposits	168			101			358			156				386			233			1,111			591
Total interest income	10,365			10,803			21,110			21,607				11,133			10,692			33,573			31,802

Interest expense:
Checking and money market deposits	112			105			215			203				102			96			327			311
Savings deposits	149			146			298			290				139			147			437			445
Time deposits	625			731			1,264			1,503				600			613			1,851			1,877
Borrowings	728			736			1,464			1,438				680			712			2,158			2,176
Total interest expense	1,614			1,718			3,241			3,434				1,521			1,568			4,773			4,809

Net interest income	8,751			9,085			17,869			18,173				9,612			9,124			28,800			26,993
(Recovery) provision for loan losses	(11		)	(350		)	158			(500		)
Net interest income, after (recovery) provision for loan losses	8,762			9,435			17,711			18,673
Provision (recovery) for loan losses														4			(505	)		(450	)		(347	)
Net interest income, after provision (recovery) for loan losses														9,608			9,629			29,250			27,340

Non-interest income:
Loan servicing and other fees	317			310			680			577				262			493			863			1,173
Gain on sale of loans, net	4,317			6,478			9,164			14,474				1,719			3,597			7,114			12,761
Deposit account fees	536			552			1,094			1,102				471			529			1,485			1,623
Loss on sale and operations of real estate owned acquired in the settlement of loans, net	(22		)	(63		)	(62		)	(166		)
Gain (loss) on sale and operations of real estate owned acquired in the settlement of loans, net														2			(19	)		(4	)		(81	)
Card and processing fees	373			361			754			725				373			372			1,163			1,126
Other	220			194			463			372				225			238			575			701
Total non-interest income	5,741			7,832			12,093			17,084				3,052			5,210			11,196			17,303

Non-interest expense:
Salaries and employee benefits	8,633			10,349			17,902			21,663
Salaries and employee benefits ⁽¹⁾														9,292			8,808			24,753			26,710
Premises and occupancy	1,260			1,235			2,574			2,524				1,286			1,255			3,905			3,829
Equipment	375			340			737			702				417			442			1,333			1,179
Professional expenses	521			630			1,041			1,135				513			400			1,371			1,441
Sales and marketing expenses	301			253			504			549				246			213			668			717
Deposit insurance premiums and regulatory assessments	218			177			402			425				124			189			461			591
Other⁽¹⁾	1,905			1,684			5,787			3,302
Other ⁽²⁾														1,122			1,132			3,088			6,919
Total non-interest expense	13,213			14,668			28,947			30,300				13,000			12,439			35,579			41,386

Income before income taxes	1,290			2,599			857			5,457
Provision for income taxes⁽²⁾	2,067			1,095			1,859			2,359
Net (loss) income	$	(777	)	$	1,504		$	(1,002	)	$	3,098
Income (loss) before income taxes														(340	)		2,400			4,867			3,257
Provision (benefit) for income taxes ⁽³⁾														(189	)		667			1,237			2,526
Net income (loss)													$	(151	)	$	1,733		$	3,630		$	731

Basic (loss) earnings per share	$	(0.10	)	$	0.19		$	(0.13	)	$	0.39
Diluted (loss) earnings per share	$	(0.10	)	$	0.18		$	(0.13	)	$	0.38
Basic earnings (loss) per share													$	(0.02	)	$	0.23		$	0.49		$	0.10
Diluted earnings (loss) per share													$	(0.02	)	$	0.23		$	0.48		$	0.09
Cash dividends per share	$	0.14		$	0.13		$	0.28		$	0.26		$	0.14		$	0.14		$	0.42		$	0.42

^.^.

⁽¹⁾ ~~Includes $650,000 of litigation expense accrual related to "McKeen-Chaplin" and "Neal" matters for the quarter ended December 31, 2017 and $3.4 million~~

⁽¹⁾	Includes $1.5 million of costs associated with staff reductions in mortgage banking operations during the quarter and nine months ended March 31, 2019.

~~of litigation expense accruals related to "McKeen-Chaplin," "Neal" and "Cannon" matters for the six months ended December 31, 2017.~~

⁽²⁾	Includes $3.4 million of litigation settlement expense for the nine months ended March 31, 2018.

⁽²⁾ ~~Includes a net tax charge of $1.8 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for the quarter and~~

⁽³⁾	Includes a net tax charge of $1.9 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for the nine months ended March 31, 2018.

~~six months ended December 31, 2017.~~

The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

In Thousands

													For the Quarters Ended March 31,						For the Nine Months Ended March 31,
													2019			2018			2019			2018
	For the Quarters Ended December 31,						For the Six Months Ended December 31,
	2017			2016			2017			2016
Net (loss) income	$	(777	)	$	1,504		$	(1,002	)	$	3,098
Net income (loss)													$	(151	)	$	1,733		$	3,630		$	731

Change in unrealized holding loss on securities available for sale	(80		)	(28		)	(78		)	(84		)		(9	)		(35	)		(67	)		(113	)
Reclassification adjustment for net loss on securities available for sale included in net loss	45			—			45			—
Reclassification adjustment for net income (loss) on securities available for sale included in net income (loss)														—			(2	)		—			43
Other comprehensive loss, before income taxes	(35		)	(28		)	(33		)	(84		)		(9	)		(37	)		(67	)		(70	)

Income tax benefit	(15		)	(12		)	(14		)	(35		)		(3	)		(13	)		(20	)		(27	)
Other comprehensive loss	(20		)	(16		)	(19		)	(49		)		(6	)		(24	)		(47	)		(43	)

Total comprehensive (loss) income	$	(797	)	$	1,488		$	(1,021	)	$	3,049
Total comprehensive income (loss)													$	(157	)	$	1,709		$	3,583		$	688

The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

In Thousands, Except Share Information

For the Quarters Ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~:2018:

																			Common Stock					Additional Paid-In		Retained			Treasury			Accumulated Other Comprehensive Income (Loss),
																			Shares			Amount		Capital		Earnings			Stock			Net of Tax			Total
	Common Stock				Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss), Net of Tax
	Shares		Amount		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total
Balance at September 30, 2017	7,609,552		$	180	$	93,669	$	191,451		$	(160,609	)	$	230		$	124,921
Balance at December 31, 2018																				7,506,855		$	181	$	95,913	$	192,306		$	(165,892	)	$	169		$	122,677

Net loss							(777		)							(777		)									(151	)								(151	)
Other comprehensive loss													(20		)	(20		)															(6	)		(6	)
Purchase of treasury stock	(140,526	)								(2,702		)				(2,702		)		(23,748	)									(460	)					(460	)
Exercise of stock options	5,750				84											84				11,250					164											164
Distribution of restricted stock																				3,000																—
Amortization of restricted stock					142											142									29											29
Stock options expense					116											116									8											8
Cash dividends⁽¹⁾							(1,064		)							(1,064		)									(1,052	)								(1,052	)

Balance at December 31, 2017	7,474,776		$	180	$	94,011	$	189,610		$	(163,311	)	$	210		$	120,700
Balance at March 31, 2019																				7,497,357		$	181	$	96,114	$	191,103		$	(166,352	)	$	163		$	121,209

⁽¹⁾~~Cash dividends of $0.14 per share were paid in the quarter ended December 31, 2017.~~

⁽¹⁾	Cash dividends of $0.14 per share were paid in the quarter ended March 31, 2019.

Common
Stock
Additional
Paid-In Capital Retained Earnings Treasury Stock
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax

Shares Amount Total
Balance at September 30, 2016 7,978,166
$ 178
$ 91,633
$ 192,227
$ (151,095 ) $ 280
$ 133,223

Net income 1,504
1,504
Other comprehensive loss (16 ) (16 )
Purchase of treasury stock (85,800 ) (1,659 ) (1,659 )
Exercise of stock options 22,750
1
267
268
Amortization of restricted stock 133
133
Awards of restricted stock (25 ) 25
—
Forfeiture of restricted stock 73
(73 ) —
Stock options expense 142
142
Tax effect from stock-based compensation (8 ) (8 )
Cash dividends⁽¹⁾
(1,032 ) (1,032 )

Balance at December 31, 2016 7,915,116
$ 179
$ 92,215
$ 192,699
$ (152,802 ) $ 264
$ 132,555

	Common Stock					Additional Paid-In		Retained			Treasury			Accumulated Other Comprehensive Income (Loss),
	Shares			Amount		Capital		Earnings			Stock			Net of Tax			Total
Balance at December 31, 2017		7,474,776		$	180	$	94,011	$	189,610		$	(163,311	)	$	210		$	120,700

Net income									1,733									1,733
Other comprehensive loss															(24	)		(24	)
Purchase of treasury stock ⁽¹⁾		(80,972	)									(1,475	)					(1,475	)
Exercise of stock options		56,500					416											416
Distribution of restricted stock		10,500																--
Amortization of restricted stock							167											167
Stock options expense							125											125
Cash dividends ⁽²⁾									(1,042	)								(1,042	)

Balance at March 31, 2018		7,460,804		$	180	$	94,719	$	190,301		$	(164,786	)	$	186		$	120,600

⁽¹⁾~~Cash dividends of $0.13 per share were paid in the quarter ended December 31, 2016.~~

⁽¹⁾	Includes the repurchase of 3,291 shares of distributed restricted stock in settlement of employee withholding tax obligations.

⁽²⁾	Cash dividends of $0.14 per share were paid in the quarter ended March 31, 2018.

The accompanying notes are an integral part of these condensed consolidated financial statements.

For the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016:~~2018:

Common
Stock
Additional
Paid-In Capital Retained Earnings Treasury Stock
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax

Shares Amount Total
Balance at June 30, 2017 7,714,052
$ 180
$ 93,209
$ 192,754
$ (158,142 ) $ 229
$ 128,230

Net loss (1,002 ) (1,002 )
Other comprehensive loss (19 ) (19 )
Purchase of treasury stock (266,526 ) (5,152 ) (5,152 )
Exercise of stock options 27,250

261
261
Amortization of restricted stock 291
291
Forfeitures of restricted stock 17
(17 ) —
Stock options expense 233

233
Cash dividends⁽¹⁾

(2,142 ) (2,142 )

Balance at December 31, 2017 7,474,776
$ 180
$ 94,011
$ 189,610
$ (163,311 ) $ 210
$ 120,700

	Common Stock					Additional Paid-In		Retained			Treasury			Accumulated Other Comprehensive Income (Loss),
	Shares			Amount		Capital		Earnings			Stock			Net of Tax			Total
Balance at June 30, 2018		7,421,426		$	181	$	94,957	$	190,616		$	(165,507	)	$	210		$	120,457

Net income									3,630									3,630
Other comprehensive loss															(47	)		(47	)
Purchase of treasury stock ⁽¹⁾		(44,819	)									(845	)					(845	)
Exercise of stock options		31,250					390											390
Distribution of restricted stock		89,500																—
Amortization of restricted stock							426											426
Stock options expense							341											341
Cash dividends ⁽²⁾									(3,143	)								(3,143	)

Balance at March 31, 2019		7,497,357		$	181	$	96,114	$	191,103		$	(166,352	)	$	163		$	121,209

⁽¹⁾~~Cash dividends of $0.28 per share were paid in the six months ended December 31, 2017.~~

Common
Stock
Additional
Paid-In Capital Retained Earnings Treasury Stock
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax

Shares Amount Total
Balance at June 30, 2016 7,975,250
$ 178
$ 90,802
$ 191,666
$ (149,508 ) $ 313
$ 133,451

Net income 3,098
3,098
Other comprehensive loss (49 ) (49 )
Purchase of treasury stock⁽¹⁾
(171,634 ) (3,321 ) (3,321 )
Exercise of stock options 23,750
1
284
285
Distribution of restricted stock 87,750
—
Amortization of restricted stock 495
495
Awards of restricted stock (161 ) 161
—
Forfeitures of restricted stock 134
(134 ) —
Stock options expense 482
482
Tax effect from stock-based compensation 179
179
Cash dividends⁽²⁾
(2,065 ) (2,065 )

Balance at December 31, 2016 7,915,116
$ 179
$ 92,215
$ 192,699
$ (152,802 ) $ 264
$ 132,555

⁽¹⁾Includes the repurchase of ~~25,598~~21,071 shares of distributed restricted stock in settlement of employee withholding tax ~~obligations.~~obligations^.

⁽²⁾Cash dividends of ~~$0.26~~$0.42 per share were paid in the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2019.

	Common Stock					Additional Paid-In		Retained			Treasury			Accumulated Other Comprehensive Income (Loss),
	Shares			Amount		Capital		Earnings			Stock			Net of Tax			Total
Balance at June 30, 2017		7,714,052		$	180	$	93,209	$	192,754		$	(158,142	)	$	229		$	128,230

Net income									731									731
Other comprehensive loss															(43	)		(43	)
Purchase of treasury stock ⁽¹⁾		(347,498	)									(6,627	)					(6,627	)
Exercise of stock options		83,750					677											677
Distribution of restricted stock		10,500																--
Amortization of restricted stock							458											458
Forfeitures of restricted stock							17					(17	)					—
Stock options expense							358											358
Cash dividends ⁽²⁾									(3,184	)								(3,184	)

Balance at March 31, 2018		7,460,804		$	180	$	94,719	$	190,301		$	(164,786	)	$	186		$	120,600

⁽¹⁾Includes the repurchase of 3,291 shares of distributed restricted stock in settlement of employee withholding tax obligations.

⁽²⁾Cash dividends of $0.42 per share were paid in the nine months ended March 31, 2018.

The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited - In Thousands)


	Six Months Ended December 31,						Nine Months Ended March 31,
	2017			2016			2019			2018
Cash flows from operating activities:
Net (loss) income	$	(1,002	)	$	3,098
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net income							$	3,630		$	731
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,582			1,334				2,045			2,229
Provision (recovery) for loan losses	158			(500		)
(Recovery) provision of losses on real estate owned	(552		)	76
Recovery from the allowance for loan losses								(450	)		(347	)
Recovery of losses on real estate owned								—			(552	)
Gain on sale of loans, net	(9,164		)	(14,474		)		(7,114	)		(12,761	)
Loss (gain) on sale of real estate owned, net	580			(33		)
(Gain) loss on sale of real estate owned, net								(9	)		564
Stock-based compensation	524			977				767			816
(Benefit) provision for deferred income taxes	(79		)	1,504
Tax effect from stock based compensation	—			(179		)
Increase in accounts payable, accrued interest and other liabilities	3,278			3,441
Increase in prepaid expenses and other assets	(306		)	(497		)
Provision (benefit) for deferred income taxes								553			(28	)
(Decrease) increase in accounts payable, accrued interest and other liabilities								(320	)		3,294
Decrease (increase) in prepaid expenses and other assets								446			(482	)
Loans originated for sale	(724,156		)	(1,189,253		)		(453,444	)		(944,349	)
Proceeds from sale of loans	753,571			1,230,321				526,090			983,504
Net cash provided by operating activities	24,434			35,815				72,194			32,619

Cash flows from investing activities:
Decrease (increase) in loans held for investment, net	17,548			(29,008		)
Decrease in loans held for investment, net								19,230			8,956
Maturity of investment securities held to maturity								800			200
Principal payments from investment securities held to maturity	10,837			6,252				24,093			17,882
Principal payments from investment securities available for sale	885			1,044				1,140			1,252
Purchase of investment securities held to maturity	(38,511		)	—				(40,282	)		(54,147	)
Proceeds from sale of real estate owned	1,587			857				915			2,223
Purchase of premises and equipment	(1,589		)	(185		)		(151	)		(2,713	)
Net cash used for investing activities	(9,243		)	(21,040		)
Net cash provided by (used for) investing activities								5,745			(26,347	)

Cash flows from financing activities:
(Decrease) increase in deposits, net	(18,733		)	2,289
Decrease in deposits, net								(30,714	)		(4,022	)
Repayments of short-term borrowings, net	(15,000		)	—				(15,000	)		(15,000	)
Repayments of long-term borrowings								(10,042	)		(10,050	)
Proceeds from long-term borrowings	—			20,000				—			10,000
Repayments of long-term borrowings	(37		)	(36		)
Exercise of stock options	261			285				390			677
Withholding taxes on stock based compensation	(41		)	(501		)		(428	)		(318	)
Tax effect from stock based compensation	—			179
Cash dividends	(2,142		)	(2,065		)		(3,143	)		(3,184	)
Treasury stock purchases	(5,152		)	(3,321		)		(845	)		(6,627	)
Net cash (used for) provided by financing activities	(40,844		)	16,830
Net cash used for financing activities								(59,782	)		(28,524	)

Net (decrease) increase in cash and cash equivalents	(25,653		)	31,605
Net increase (decrease) in cash and cash equivalents								18,157			(22,252	)
Cash and cash equivalents at beginning of period	72,826			51,206				43,301			72,826
Cash and cash equivalents at end of period	$	47,173		$	82,811		$	61,458		$	50,574
Supplemental information:
Cash paid for interest	$	3,252		$	3,411		$	4,796		$	4,816
Cash paid for income taxes	$	2,350		$	1,934		$	1,555		$	2,400
Transfer of loans held for sale to held for investment	$	521		$	1,584		$	1,360		$	1,122
Real estate acquired in the settlement of loans	$	700		$	1,298		$	—		$	1,659

The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENT FINANCIAL HOLDINGS, INC.

~~NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Unaudited Interim Condensed Consolidated Financial Statements

~~December~~March 31, ~~2017~~2019

Note 1: Basis of Presentation

The unaudited interim condensed consolidated financial statements included herein reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations for the interim periods presented. All such adjustments are of a normal, recurring nature. The condensed consolidated statement of financial condition at June 30, ~~2017~~2018 is derived from the audited consolidated financial statements of Provident Financial Holdings, Inc. and its wholly-owned subsidiary, Provident Savings Bank, F.S.B. (the ~~“Bank”~~"Bank") (collectively, the ~~“Corporation”~~"Corporation"). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ~~(“GAAP”~~("GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission ~~(“SEC”~~("SEC") with respect to interim financial reporting. It is recommended that these unaudited interim condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the ~~Corporation’s~~Corporation's Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2018. The results of operations for the quarter and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, ~~2018.~~2019.

Note 2: Accounting Standard Updates ~~(“ASU”~~("ASU")

There have been no accounting standard updates or changes in the status of their adoption that are ~~applicable~~significant to the Corporation as previously disclosed in Note 1 of the Corporation's Annual Report on Form 10-K for the year ended June 30, ~~2017, except~~2018, other than:

ASU 2014-09:

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, "Revenue from Contracts with Customers," which created FASB Accounting Standards Codification (ASC) Topic 606 ("ASC 606"). ASC 606 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASC 606 was effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. The Corporation adopted ASC 606 on July 1, 2018 using the modified retrospective approach. Therefore, the comparative information has not been adjusted and continues to be reported under superseded ASC 605. There was no cumulative effect adjustment as of July 1, 2018, and there were no material changes to the timing or amount of revenue recognized for the nine months ended March 31, 2019; however, additional disclosures were incorporated in the footnotes upon adoption. The majority of the Company's revenue is comprised of interest income from financial assets, which is explicitly excluded from the scope of ASC 606. The Corporation elected to apply the practical expedient pursuant to ASC 606 and therefore does not disclose information about remaining performance obligations that have an original expected term of one year or less and allows the Corporation to expense costs related to obtaining a contract as incurred when the original amortization period would have been one year or less. See Note 12 for additional discussion.

ASU 2018-11

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." This ASU introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard, ASC 606, Revenue From Contracts With Customers. The new leases standard represents a wholesale change to lease accounting and will most likely result in significant implementation challenges during the transition period and beyond. This ASU will be effective for annual periods beginning after December 15, 2018 (i.e., calendar periods beginning on January 1, 2019), and interim periods therein, early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which allows entities the option of initially applying the new leases standard at the adoption date (such as January 1, 2019, for calendar year- end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In January 2019, the FASB issued ASU ~~2016-09, "Compensation - Stock Compensation (Topic 718): Improvements~~2019-01, Codification Improvements. The amendments in this update include the following items: (i) determining the fair value of the underlying asset by lessors that are not manufacturers or dealers; (ii) requiring cash received from lessors from sales-type and direct financing leases to ~~Employee Share-Based Payment Accounting),"~~be presented in the cash flow statement within investing activities; and (iii) clarifying interim disclosure requirements. The effective date and transition requirements for the first and second items of this ASU are effective for annual periods, and interim periods within those annual periods, beginning ~~in fiscal 2018 which did~~after December 15, 2019 and early adoption is permitted. The effective date and transition requirements for the third item of this ASU are the same as ASU 2016-02. The Corporation plans to adopt these ASUs on July 1, 2019. Management is currently assessing the impact of these ASUs on the Corporation's financial position and results of operations but does not believe that adoption of these ASUs will have a material impact on its ~~condensed~~ consolidated financial statements.

ASU 2018-13

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies disclosure requirements on fair value measurements to improve their effectiveness. The guidance permits entities to consider materiality when evaluating fair value measurement disclosures and, among other modifications, requires certain new disclosures related to Level 3 fair value measurements. The guidance will be effective beginning January 1, 2020, with early adoption permitted. The guidance only affects disclosures in the notes to the consolidated financial statements and will not affect the Corporation's financial position or results of operations.

Note 3: Earnings (Loss) ~~Earnings~~ Per Share

Basic earnings (loss) ~~earnings~~ per share ~~(“EPS”~~("EPS") excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the earnings of the entity.

As of ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, there were outstanding options to purchase ~~585,500~~497,750 shares and ~~903,000~~529,000 shares of the ~~Corporation’s~~Corporation's common stock, respectively. Of those shares, as of ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, there were ~~585,500~~497,750 shares and ~~151,000~~26,000 shares, respectively, which were excluded from the diluted EPS computation as their effect was anti-dilutive. As of ~~December~~March 31, ~~2017,~~2019 and 2018, there were outstanding restricted stock awards of ~~109,000~~9,000 shares ~~with~~and 98,500 shares, respectively. The outstanding restricted stock had no dilutive effect infor the ~~second~~ quarter ~~of fiscal 2018; and as of December~~ended March 31, ~~2016, there~~2019 but they were ~~outstanding restricted stock awards of 105,000 shares which had a~~ dilutive ~~effect in~~for the ~~second~~comparable quarter ~~of fiscal 2017.~~

last year.

The following table provides the basic and diluted EPS computations for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.


											For the Quarters Ended March 31,					For the Nine Months Ended March 31,
(In Thousands, Except Earnings Per Share)	For the Quarters Ended December 31,					For the Six Months Ended December 31,					2019			2018		2019		2018
	2017			2016		2017			2016
Numerator:
Net (loss) income – numerator for basic earnings per share and diluted earnings per share - available to common stockholders	$	(777	)	$	1,504	$	(1,002	)	$	3,098
Net income (loss) – numerator for basic earnings per share and diluted earnings per share - available to common stockholders											$	(151	)	$	1,733	$	3,630	$	731

Denominator:
Denominator for basic earnings per share:
Weighted-average shares	7,566			7,954		7,630			7,951			7,507			7,457		7,481		7,573

Effect of dilutive shares:
Stock options	—			170		—			164			—			97		60		111
Restricted stock	—			21		—			35			—			62		14		53

Denominator for diluted earnings per share:
Adjusted weighted-average shares and assumed conversions	7,566			8,145		7,630			8,150			7,507			7,616		7,555		7,737

Basic (loss) earnings per share	$	(0.10	)	$	0.19	$	(0.13	)	$	0.39
Diluted (loss) earnings per share	$	(0.10	)	$	0.18	$	(0.13	)	$	0.38
Basic earnings (loss) per share											$	(0.02	)	$	0.23	$	0.49	$	0.10
Diluted earnings (loss) per share											$	(0.02	)	$	0.23	$	0.48	$	0.09

Note 4: Operating Segment Reports

The Corporation operates in two business segments: community banking through the Bank and mortgage banking through Provident Bank Mortgage ~~(“PBM”~~("PBM"), a division of the Bank. The Corporation expects to discontinue the operations of PBM by June 30, 2019. The Corporation estimates that it will incur costs of approximately $3.6 million to $4.0 million to complete the exit during the remainder of fiscal 2019, which amounts include costs for severance, retention, personnel, premises, occupancy, depreciation, and costs related to termination of data processing and other contractual arrangements. As of March 31, 2019, the total costs incurred for both the quarter and nine months ended March 31 2019 were approximately $1.6 million, comprised of

$1.5 million in salaries and employee benefits expenses, $81,000 in premises and occupancy expenses and $13,000 in equipment expenses. There were no costs incurred related to the exit prior to the quarter ended March 31, 2019.

The following tables set forth condensed consolidated statements of operations and total assets for the ~~Corporation’s~~Corporation's operating segments for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.


	For the Quarter Ended December 31, 2017									For the Quarter Ended March 31, 2019
(In Thousands)	Provident Bank			Provident Bank Mortgage			Consolidated Totals			Provident Bank			Provident Bank Mortgage			Consolidated Totals
Net interest income	$	8,217		$	534		$	8,751		$	9,431		$	181		$	9,612
Recovery from the allowance for loan losses	(11		)	—			(11		)
Net interest income, after recovery from the allowance for loan losses	8,228			534			8,762
Provision (recovery) for loan losses											74			(70	)		4
Net interest income, after provision (recovery) for loan losses											9,357			251			9,608

Non-interest income:
Loan servicing and other fees ⁽¹⁾	108			209			317				103			159			262
Gain on sale of loans, net ⁽²⁾	22			4,295			4,317
Gain (loss) on sale of loans, net ⁽²⁾											(1	)		1,720			1,719
Deposit account fees	536			—			536				471			—			471
Loss on sale and operations of real estate owned acquired in the settlement of loans, net	(22		)	—			(22		)
Gain on sale and operations of real estate owned acquired in the settlement of loans, net											2			—			2
Card and processing fees	373			—			373				373			—			373
Other	220			—			220				223			2			225
Total non-interest income	1,237			4,504			5,741				1,171			1,881			3,052

Non-interest expense:
Salaries and employee benefits	4,449			4,184			8,633				5,002			4,290			9,292
Premises and occupancy	822			438			1,260				847			439			1,286
Operating and administrative expenses⁽³⁾	1,189			2,131			3,320
Operating and administrative expenses											1,314			1,108			2,422
Total non-interest expense	6,460			6,753			13,213				7,163			5,837			13,000
Income (loss) before income taxes	3,005			(1,715		)	1,290				3,365			(3,705	)		(340	)
Provision (benefit) for income taxes⁽⁴⁾	2,532			(465		)	2,067
Provision (benefit) for income taxes											907			(1,096	)		(189	)
Net income (loss)	$	473		$	(1,250	)	$	(777	)	$	2,458		$	(2,609	)	$	(151	)
Total assets, end of period	$	1,065,204		$	96,927		$	1,162,131		$	1,088,716		$	30,679		$	1,119,395


⁽¹⁾	~~Includes an inter-company charge of~~ ~~$99~~ ~~credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.~~


⁽²⁾	~~Includes an inter-company charge of~~ ~~$79~~ ~~credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.~~


⁽³⁾	~~Includes $650,000 of litigation expense accrual for the second quarter of fiscal 2018, all of which was allocated to PBM.~~


⁽⁴⁾	~~Includes a net tax charge of $1.8 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for the quarter ended December 31, 2017.~~

For the Quarter Ended December 31, 2016
(In Thousands) Provident
Bank Provident
Bank
Mortgage Consolidated
Totals
Net interest income $ 7,821
$ 1,264
$ 9,085
Recovery from the allowance for loan losses (346 ) (4 ) (350 )
Net interest income after recovery from the allowance for loan losses 8,167
1,268
9,435

Non-interest income:
     Loan servicing and other fees ⁽¹⁾
250
60
310
     Gain on sale of loans, net ⁽²⁾
37
6,441
6,478
Deposit account fees 552
—
552
     Loss on sale and operations of real estate owned
        acquired in the settlement of loans, net
(58 ) (5 ) (63 )
Card and processing fees 361
—
361
Other 194
—
194
Total non-interest income 1,336
6,496
7,832

Non-interest expense:
Salaries and employee benefits 4,642
5,707
10,349
Premises and occupancy 792
443
1,235
Operating and administrative expenses 1,152
1,932
3,084
Total non-interest expense 6,586
8,082
14,668
Income (loss) before income taxes 2,917
(318 ) 2,599
Provision (benefit) for income taxes 1,228
(133 ) 1,095
Net income (loss) $ 1,689
$ (185 ) $ 1,504
Total assets, end of period $ 1,035,158
$ 156,997
$ 1,192,155


⁽¹⁾	~~Includes an inter-company charge of~~ ~~$128~~ ~~credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.~~


⁽²⁾	~~Includes an inter-company charge of~~ ~~$109~~ ~~credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.~~

For the Six Months Ended December 31, 2017
(In Thousands) Provident
Bank Provident
Bank
Mortgage Consolidated
Totals
Net interest income $ 16,767
$ 1,102
$ 17,869
Provision for loan losses 158
—
158
Net interest income, after provision for loan losses 16,609
1,102
17,711

Non-interest income:
     Loan servicing and other fees ⁽¹⁾
155
525
680
     Gain on sale of loans, net ⁽²⁾
22
9,142
9,164
Deposit account fees 1,094
—
1,094
     Loss on sale and operations of real estate owned
        acquired in the settlement of loans, net
(62 ) —
(62 )
Card and processing fees 754
—
754
Other 463
—
463
Total non-interest income 2,426
9,667
12,093

Non-interest expense:
Salaries and employee benefits 8,951
8,951
17,902
Premises and occupancy 1,649
925
2,574
Operating and administrative expenses⁽³⁾
3,440
5,031
8,471
Total non-interest expense 14,040
14,907
28,947
Income (loss) before income taxes 4,995
(4,138 ) 857
Provision (benefit) for income taxes⁽⁴⁾
3,343
(1,484 ) 1,859
Net income (loss) $ 1,652
$ (2,654 ) $ (1,002 )
Total assets, end of period $ 1,065,204
$ 96,927
$ 1,162,131


⁽¹⁾	Includes an inter-company charge of ~~$339~~$2 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.


⁽²⁾	Includes an inter-company charge of ~~$138~~$17 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

	For the Quarter Ended March 31, 2018
(In Thousands)	Provident Bank			Provident Bank Mortgage			Consolidated Totals
Net interest income	$	8,750		$	374		$	9,124
Recovery from the allowance for loan losses		(505	)		—			(505	)
Net interest income, after recovery from the allowance for loan losses		9,255			374			9,629

Non-interest income:
Loan servicing and other fees ⁽¹⁾		313			180			493
Gain (loss) on sale of loans, net ⁽²⁾		(1	)		3,598			3,597
Deposit account fees		529			—			529
Loss on sale and operations of real estate owned acquired in the settlement of loans, net		(19	)		—			(19	)
Card and processing fees		372			—			372
Other		238			—			238
Total non-interest income		1,432			3,778			5,210

Non-interest expense:
Salaries and employee benefits		4,763			4,045			8,808
Premises and occupancy		842			413			1,255
Operating and administrative expenses		1,050			1,326			2,376
Total non-interest expense		6,655			5,784			12,439
Income (loss) before income taxes		4,032			(1,632	)		2,400
Provision (benefit) for income taxes		1,252			(585	)		667
Net income (loss)	$	2,780		$	(1,047	)	$	1,733
Total assets, end of period	$	1,086,437		$	90,165		$	1,176,602

⁽³⁾

~~Includes~~ ~~$3.4 million~~ ~~of litigation accrual expense for the first six months of fiscal 2018, of which~~ ~~$2.1 million~~ ~~was allocated to PBM.~~


⁽⁴⁾	~~Includes a net tax charge of $1.8 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for the six months ended December 31, 2017.~~

For the Six Months Ended December 31, 2016
(In Thousands) Provident
Bank Provident
Bank
Mortgage Consolidated
Totals
Net interest income $ 15,396
$ 2,777
$ 18,173
Recovery from the allowance for loan losses (310 ) (190 ) (500 )
Net interest income, after recovery from the allowance for loan losses 15,706
2,967
18,673

Non-interest income:
     Loan servicing and other fees ⁽¹⁾
319
258
577
     Gain on sale of loans, net ⁽²⁾
38
14,436
14,474
Deposit account fees 1,102
—
1,102
     Loss on sale and operations of real estate owned
        acquired in the settlement of loans, net
(163 ) (3 ) (166 )
Card and processing fees 725
—
725
Other 372
—
372
Total non-interest income 2,393
14,691
17,084

Non-interest expense:
Salaries and employee benefits 9,536
12,127
21,663
Premises and occupancy 1,648
876
2,524
Operating and administrative expenses 2,299
3,814
6,113
Total non-interest expense 13,483
16,817
30,300
Income before income taxes 4,616
841
5,457
Provision for income taxes 2,005
354
2,359
Net income $ 2,611
$ 487
$ 3,098
Total assets, end of period $ 1,035,158
$ 156,997
$ 1,192,155


⁽¹⁾	Includes an inter-company charge of ~~$223~~$222 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.


⁽²⁾	Includes an inter-company charge of ~~$168~~$44 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

	For the Nine Months Ended March 31, 2019
(In Thousands)	Provident Bank			Provident Bank Mortgage			Consolidated Totals
Net interest income	$	27,956		$	844		$	28,800
Provision (recovery) for loan losses		(475	)		25			(450	)
Net interest income, after provision (recovery) for loan losses		28,431			819			29,250

Non-interest income:
Loan servicing and other fees ⁽¹⁾		87			776			863
Gain on sale of loans, net ⁽²⁾		33			7,081			7,114
Deposit account fees		1,485			—			1,485
Loss on sale and operations of real estate owned acquired in the settlement of loans, net		(4	)		—			(4	)
Card and processing fees		1,163			—			1,163
Other		573			2			575
Total non-interest income		3,337			7,859			11,196

Non-interest expense:
Salaries and employee benefits		14,138			10,615			24,753
Premises and occupancy		2,652			1,253			3,905
Operating and administrative expenses		3,307			3,614			6,921
Total non-interest expense		20,097			15,482			35,579
Income (loss) before income taxes		11,671			(6,804	)		4,867
Provision (benefit) for income taxes		3,249			(2,012	)		1,237
Net income (loss)	$	8,422		$	(4,792	)	$	3,630
Total assets, end of period	$	1,088,716		$	30,679		$	1,119,395

⁽¹⁾	Includes an inter-company charge of $428 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.

⁽²⁾	Includes an inter-company charge of $37 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

	For the Nine Months Ended March 31, 2018
(In Thousands)	Provident Bank			Provident Bank Mortgage			Consolidated Totals
Net interest income	$	25,517		$	1,476		$	26,993
Recovery from the allowance for loan losses		(347	)		—			(347	)
Net interest income, after recovery from the allowance for loan losses		25,864			1,476			27,340

Non-interest income:
Loan servicing and other fees ⁽¹⁾		468			705			1,173
Gain on sale of loans, net ⁽²⁾		21			12,740			12,761
Deposit account fees		1,623			—			1,623
Loss on sale and operations of real estate owned acquired in the settlement of loans, net		(81	)		—			(81	)
Card and processing fees		1,126			—			1,126
Other		701			—			701
Total non-interest income		3,858			13,445			17,303

Non-interest expense:
Salaries and employee benefits		13,714			12,996			26,710
Premises and occupancy		2,491			1,338			3,829
Operating and administrative expenses ⁽³⁾		4,490			6,357			10,847
Total non-interest expense		20,695			20,691			41,386
Income (loss) before income taxes		9,027			(5,770	)		3,257
Provision (benefit) for income taxes ⁽⁴⁾		4,595			(2,069	)		2,526
Net income (loss)	$	4,432		$	(3,701	)	$	731
Total assets, end of period	$	1,086,437		$	90,165		$	1,176,602

⁽¹⁾	Includes an inter-company charge of $561 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.

⁽²⁾	Includes an inter-company charge of $182 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

⁽³⁾	Includes $3.4 million of litigation settlement expense for the first nine months of fiscal 2018, of which $2.1 million was allocated to PBM.

⁽⁴⁾	Includes a net tax charge of $1.9 million resulting from the revaluation of net deferred tax assets consistent with the Tax Cuts and Jobs Act for the nine months ended December 31, 2017.

1213

Note 5: Investment Securities

The amortized cost and estimated fair value of investment securities as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017~~2018 were as follows:


As of December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
March 31, 2019											Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value		Carrying Value
(In Thousands)
Held to maturity:
Certificates of deposit	$	600	$	—	$	—	$	600	$	600
U.S. government sponsored enterprise MBS ⁽¹⁾	87,026		147		437		86,736		87,026		$	99,193	$	728	$	(163	)	$	99,758	$	99,193
U.S. SBA securities ⁽²⁾												2,917		—		(19	)		2,898		2,917
Certificate of deposits												400		—		—			400		400
Total investment securities - held to maturity	$	87,626	$	147	$	437	$	87,336	$	87,626	$	102,510	$	728	$	(182	)	$	103,056	$	102,510

Available for sale:
U.S. government agency MBS	$	4,678	$	181	$	—	$	4,859	$	4,859	$	3,677	$	119	$	—		$	3,796	$	3,796
U.S. government sponsored enterprise MBS	2,977		150		—		3,127		3,127			2,107		91		—			2,198		2,198
Private issue CMO ⁽²⁾	413		6		—		419		419
Private issue CMO ⁽³⁾												296		4		—			300		300
Total investment securities - available for sale	$	8,068	$	337	$	—	$	8,405	$	8,405	$	6,080	$	214	$	—		$	6,294	$	6,294
Total investment securities	$	95,694	$	484	$	437	$	95,741	$	96,031	$	108,590	$	942	$	(182	)	$	109,350	$	108,804


⁽¹⁾	Mortgage-Backed Securities ~~(“MBS”~~("MBS").

⁽²⁾	Small Business Administration ("SBA").

⁽²⁾⁽³⁾

Collateralized Mortgage Obligations ~~(“CMO”~~("CMO").

As of June 30, 2017

Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value

Carrying
Value
(In Thousands)
Held to maturity:
Certificates of deposit $ 600
$ —
$ —
$ 600
$ 600
U.S. government sponsored enterprise MBS 59,841
265
77
60,029
59,841
Total investment securities - held to maturity $ 60,441
$ 265
$ 77
$ 60,629
$ 60,441

Available for sale:
U.S. government agency MBS $ 5,197
$ 186
$ —
$ 5,383
$ 5,383
U.S. government sponsored enterprise MBS 3,301
173
—
3,474
3,474
Private issue CMO 456
5
—
461
461
Total investment securities - available for sale $ 8,954
$ 364
$ —
$ 9,318
$ 9,318
Total investment securities $ 69,395
$ 629
$ 77
$ 69,947
$ 69,759

June 30, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value		Carrying Value
(In Thousands)
Held to maturity:
U.S. government sponsored enterprise MBS	$	84,227	$	203	$	(762	)	$	83,668	$	84,227
U.S. SBA securities		2,986		—		(15	)		2,971		2,986
Certificate of deposits		600		—		—			600		600
Total investment securities - held to maturity	$	87,813	$	203	$	(777	)	$	87,239	$	87,813

Available for sale:
U.S. government agency MBS	$	4,234	$	150	$	—		$	4,384	$	4,384
U.S. government sponsored enterprise MBS		2,640		122		—			2,762		2,762
Private issue CMO		346		4		—			350		350
Total investment securities - available for sale	$	7,220	$	276	$	—		$	7,496	$	7,496
Total investment securities	$	95,033	$	479	$	(777	)	$	94,735	$	95,309

In the ~~second~~third quarters of fiscal ~~2018~~2019 and ~~2017,~~2018, the Corporation received MBS principal payments of ~~$5.8~~$8.6 million and ~~$3.2~~$7.4 million,, respectively, and there were no sales of investment securities during these periods. The Corporation purchased U.S. government sponsored enterprise MBS totaling ~~$28.4~~$26.2 million and $12.4 million, to be held to maturity, ~~during the second quarter of fiscal 2018 and no purchases were made during the second quarter of fiscal 2017.~~respectively. For the first ~~six~~nine months of fiscal ~~2018~~2019 and ~~2017,~~2018, the Corporation received MBS principal payments of ~~$11.7~~$25.2 million and ~~$7.3~~$19.1 million, respectively, and there were no sales of investment securities during these periods. In the first ~~six~~nine months of fiscal

2019 and 2018, the Corporation purchased U.S. government sponsored enterprise MBS totaling ~~$38.5~~$39.7 million and $50.9 million, to be held to maturity, ~~and none were~~respectively. In addition, the Corporation also purchased $3.0 million in U.S. SBA loan pool securities to be held to maturity in the third quarter and first ~~six~~nine months of fiscal ~~2017.~~

2018.

The Corporation held investments with an unrealized loss position of ~~$437,000~~$182,000 at ~~December~~March 31, ~~2017~~2019 and ~~$77,000~~$777,000 at June 30, ~~2017.~~2018.


As of December 31, 2017	Unrealized Holding Losses				Unrealized Holding Losses				Unrealized Holding Losses
As of March 31, 2019													Unrealized Holding Losses						Unrealized Holding Losses						Unrealized Holding Losses
(In Thousands)	Less Than 12 Months				12 Months or More				Total				Less Than 12 Months						12 Months or More						Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses		Value			Losses			Value			Losses			Value			Losses
Held to maturity:
U.S. government sponsored enterprise MBS	$	71,893	$	437	$	—	$	—	$	71,893	$	437		$	—		$	—		$	26,758		$	163		$	26,758		$	163
U.S. SBA securities															2,892			19			—			—			2,892			19
Total investment securities	$	71,893	$	437	$	—	$	—	$	71,893	$	437		$	2,892		$	19		$	26,758		$	163		$	29,650		$	182


As of June 30, 2017	Unrealized Holding Losses				Unrealized Holding Losses				Unrealized Holding Losses
As of June 30, 2018													Unrealized Holding Losses						Unrealized Holding Losses						Unrealized Holding Losses
(In Thousands)	Less Than 12 Months				12 Months or More				Total				Less Than 12 Months						12 Months or More						Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses		Value			Losses			Value			Losses			Value			Losses
Held to maturity:
U.S. government sponsored enterprise MBS	$	28,722	$	77	$	—	$	—	$	28,722	$	77		$	47,045		$	762		$	—		$	—		$	47,045		$	762
U.S. SBA securities															2,964			15			—			—			2,964			15
Total investment securities	$	28,722	$	77	$	—	$	—	$	28,722	$	77		$	50,009		$	777		$	—		$	—		$	50,009		$	777

The Corporation evaluates individual investment securities quarterly for other-than-temporary declines in market value. AsAt March 31, 2019, $163,000 of ~~December 31, 2017 and~~the $182,000 unrealized holding losses were 12 months or more; while at June 30, ~~2017,~~2018, all of the unrealized holding losses were ~~for a term of~~ less than 12 months. The Corporation does not believe that there ~~are~~were any other-than-temporary impairments on the investment securities at ~~December~~March 31, ~~2017~~2019 and ~~2016;~~2018; therefore, no impairment losses were recorded for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018.

Contractual maturities of investment securities as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017~~2018 were as follows:


	December 31, 2017				June 30, 2017				March 31, 2019				June 30, 2018
(In Thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value

Held to maturity:
Due in one year or less	$	600	$	600	$	600	$	600	$	200	$	200	$	600	$	600
Due after one through five years	11,036		11,002		4,698		4,708			35,345		35,259		24,961		24,569
Due after five through ten years	43,596		43,286		41,404		41,374			38,691		39,126		22,847		22,477
Due after ten years	32,394		32,448		13,739		13,947			28,274		28,471		39,405		39,593
Total investment securities - held to maturity	$	87,626	$	87,336	$	60,441	$	60,629	$	102,510	$	103,056	$	87,813	$	87,239

Available for sale:
Due in one year or less	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Due after one through five years	—		—		—		—			—		—		—		—
Due after five through ten years	—		—		—		—			—		—		—		—
Due after ten years	8,068		8,405		8,954		9,318			6,080		6,294		7,220		7,496
Total investment securities - available for sale	$	8,068	$	8,405	$	8,954	$	9,318	$	6,080	$	6,294	$	7,220	$	7,496
Total investment securities	$	95,694	$	95,741	$	69,395	$	69,947	$	108,590	$	109,350	$	95,033	$	94,735

Note 6: Loans Held for Investment

Loans held for investment, net of fair value adjustments, consisted of the following:


(In Thousands)	December 31, 2017			June 30, 2017			March 31, 2019			June 30, 2018
Mortgage loans:
Single-family	$	313,837		$	322,197		$	314,824		$	314,808
Multi-family	463,786			479,959				449,812			476,008
Commercial real estate	103,366			97,562				115,355			109,726
Construction	14,430			16,009
Commercial business loans	478			576
Consumer loans	144			129
Construction ⁽¹⁾								4,139			3,174
Other								167			167
Commercial business loans ⁽²⁾								483			500
Consumer loans ⁽³⁾								133			109
Total loans held for investment, gross	896,041			916,432				884,913			904,492

Undisbursed loan funds	(7,358		)	(9,015		)
Advance payments of escrows	46			61				225			18
Deferred loan costs, net	5,322			5,480				5,496			5,560
Allowance for loan losses	(8,075		)	(8,039		)		(7,080	)		(7,385	)
Total loans held for investment, net	$	885,976		$	904,919		$	883,554		$	902,685

⁽¹⁾	Net of $6.1 million and $4.3 million of undisbursed loan funds as of March 31, 2019 and June 30, 2018, respectively

⁽²⁾	Net of $950 and $495 of undisbursed lines of credit as of March 31, 2019 and June 30, 2018, respectively.

⁽³⁾	Net of $481 and $503 of undisbursed lines of credit as of March 31, 2019 and June 30, 2018, respectively.

The following table sets forth information at ~~December~~March 31, ~~2017~~2019 regarding the dollar amount of loans held for investment that are contractually repricing during the periods indicated, segregated between adjustable rate loans and fixed rate loans. Fixed-rate loans comprised ~~2 percent~~2% of loans held for investment at both ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017.~~2018. Adjustable rate loans having no stated repricing dates that reprice when the index they are tied to reprices (e.g. prime rate index) and checking account overdrafts are reported as repricing within one year. The table does not include any estimate of prepayments which may cause the ~~Corporation’s~~Corporation's actual repricing experience to differ materially from that shown.

	Adjustable Rate
(In Thousands)	Within One Year		After One Year Through 3 Years		After 3 Years Through 5 Years		After 5 Years Through 10 Years		Fixed Rate		Total
Mortgage loans:
Single-family	$	100,302	$	37,514	$	102,300	$	62,493	$	12,215	$	314,824
Multi-family		125,503		162,437		145,968		15,710		194		449,812
Commercial real estate		44,247		33,136		36,442		1,055		475		115,355
Construction		3,581		—		—		—		558		4,139
Other		—		—		—		—		167		167
Commercial business loans		75		—		—		—		408		483
Consumer loans		133		—		—		—		—		133
Total loans held for investment, gross	$	273,841	$	233,087	$	284,710	$	79,258	$	14,017	$	884,913

Adjustable Rate
(In Thousands) Within One Year After
One Year
Through 3 Years After
3 Years
Through 5 Years After
5 Years
Through 10 Years Fixed Rate Total
Mortgage loans:
Single-family $ 152,732
$ 23,887
$ 73,968
$ 51,007
$ 12,243
$ 313,837
Multi-family 117,609
169,374
160,034
14,216
2,553
463,786
Commercial real estate 27,941
38,106
31,511
5,220
588
103,366
Construction 12,527
—
—
—
1,903
14,430
Commercial business loans 46
—
—
—
432
478
Consumer loans 144
—
—
—
—
144
Total loans held for investment, gross $ 310,999
$ 231,367
$ 265,513
$ 70,443
$ 17,719
$ 896,041

The Corporation has developed an internal loan grading system to evaluate and quantify the ~~Bank’s~~Bank's loans held for investment portfolio with respect to quality and risk. Management continually evaluates the credit quality of the ~~Corporation’s~~Corporation's loan portfolio and conducts a quarterly review of the adequacy of the allowance for loan losses using quantitative and qualitative methods. The Corporation has adopted an internal risk rating policy in which each loan is rated for credit quality with a rating of pass, special mention, substandard, doubtful or loss. The two primary components that are used during the loan review process to determine the proper allowance levels are individually evaluated allowances and collectively evaluated allowances. Quantitative loan loss factors are developed by determining the historical loss experience, expected future cash flows, discount rates and collateral fair values, among ~~other components.~~others. Qualitative loan loss factors are developed by assessing general economic indicators such as

gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices. The Corporation assigns individual factors for the quantitative and qualitative methods for each loan category and each internal risk rating.

The Corporation categorizes all of the loans held for investment into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades is as follows:


▪	Pass - These loans range from minimal credit risk to average, but still acceptable, credit risk. The likelihood of loss is considered remote.


▪	Special Mention - A ~~Special Mention asset~~special mention loan has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the bank is currently protected and loss is considered unlikely and not imminent.

▪

Substandard - A substandard loan is inadequately protected by the current ~~sound~~net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.


▪	Doubtful - A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.


▪	Loss - A loss loan is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted.

The following tables summarize gross loans held for investment, net of fair value adjustments, by loan types and risk category at the dates indicated:


		December 31, 2017														March 31, 2019
(In Thousands)	(In Thousands)	Single-family		Multi-family		Commercial Real Estate		Construction		Commercial Business		Consumer		Total			Single- family		Multi- family		Commercial Real Estate		Construction		Other Mortgage		Commercial Business		Consumer		Total

Pass	Pass	$	302,868	$	463,786	$	103,366	$	10,734	$	402	$	144	$	881,300		$	304,403	$	445,927	$	115,355	$	3,394	$	167	$	430	$	133	$	869,809
Special Mention	Special Mention	2,842		—		—		926		—		—		3,768				3,347		3,885		—		—		—		—		—		7,232
Substandard	Substandard	8,127		—		—		2,770		76		—		10,973				7,074		—		—		745		—		53		—		7,872
	Total loans held for investment, gross	$	313,837	$	463,786	$	103,366	$	14,430	$	478	$	144	$	896,041
Total loans held for investment, gross																	$	314,824	$	449,812	$	115,355	$	4,139	$	167	$	483	$	133	$	884,913

	June 30, 2018
(In Thousands)		Single- family		Multi- family		Commercial Real Estate		Construction		Other Mortgage		Commercial Business		Consumer		Total

Pass		$	304,619	$	472,061	$	108,786	$	3,174	$	167	$	430	$	109	$	889,346
Special Mention			2,548		3,947		940		—		—		—		—		7,435
Substandard			7,641		—		—		—		—		70		—		7,711
Total loans held for investment, gross		$	314,808	$	476,008	$	109,726	$	3,174	$	167	$	500	$	109	$	904,492

June 30, 2017
(In Thousands) Single-family Multi-family Commercial Real Estate Construction Commercial Business Consumer Total

Pass $ 310,738
$ 479,687
$ 97,361
$ 16,009
$ 496
$ 129
$ 904,420
Special Mention 3,443
272
—
—
—
—
3,715
Substandard 8,016
—
201
—
80
—
8,297

Total loans held for
investment, gross
$ 322,197
$ 479,959
$ 97,562
$ 16,009
$ 576
$ 129
$ 916,432

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 and upon ~~management’s~~management's continuing analysis of the factors underlying the quality of the loans held for investment. 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. The provision (recovery) for (from) the allowance for loan losses is charged (credited) against operations on a quarterly basis, as necessary, to maintain the allowance at appropriate levels. Although management believes it uses the best information available to make such determinations, there can

be no assurance that regulators, in reviewing the ~~Corporation’s~~Corporation's loans held for investment, will not request a significant increase in its allowance for loan losses. 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 ~~Corporation’s~~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. For loans that were modified from their original terms, were re-underwritten and identified in the ~~Corporation’s~~Corporation's asset quality reports as troubled debt restructurings (“("restructured ~~loans”~~loans"), the charge-off occurs when the loan becomes 90 days delinquent; and where borrowers file bankruptcy, the charge-off occurs when the loan becomes 60 days delinquent. The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the allowance for loan losses. The allowance for loan losses for non-performing loans

is determined by applying Accounting Standards Codification ~~(“ASC”~~("ASC") 310,~~, “Receivables.”~~ "Receivables." For restructured loans that are less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their restructuring period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method. For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method. For non-performing commercial real estate loans, an individually evaluated allowance is derived based on the loan's discounted cash flow fair value (for restructured 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 summarizes the ~~Corporation’s~~Corporation's allowance for loan losses at ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017:~~2018:

(In Thousands)	March 31, 2019		June 30, 2018
Collectively evaluated for impairment:
Mortgage loans:
Single-family	$	2,514	$	2,632
Multi-family		3,300		3,492
Commercial real estate		1,042		1,030
Construction		63		47
Other		3		3
Commercial business loans		18		18
Consumer loans		8		6
Total collectively evaluated allowance		6,948		7,228

Individually evaluated for impairment:
Mortgage loans:
Single-family		123		151
Commercial business loans		9		6
Total individually evaluated allowance		132		157
Total loan loss allowance	$	7,080	$	7,385

(In Thousands) December 31, 2017 June 30, 2017
Collectively evaluated for impairment:
Mortgage loans:
Single-family $ 3,303
$ 3,515
Multi-family 3,295
3,420
Commercial real estate 933
879
Construction 504
96
Commercial business loans 17
21
Consumer loans 8
7
Total collectively evaluated allowance 8,060
7,938

Individually evaluated for impairment:
Mortgage loans:
Single-family —
86
Commercial business loans 15
15
Total individually evaluated allowance 15
101
Total loan loss allowance $ 8,075
$ 8,039

The following table is provided to disclose additional details for the periods indicated on the ~~Corporation’s~~Corporation's allowance for loan losses:


	For the Quarters Ended December 31,						For the Six Months Ended December 31,						For the Quarters Ended March 31,						For the Nine Months Ended March 31,
(Dollars in Thousands)	2017			2016			2017			2016			2019			2018			2019			2018

Allowance at beginning of period	$	8,063		$	8,725		$	8,039		$	8,670		$	7,061		$	8,075		$	7,385		$	8,039

(Recovery) provision for loan losses	(11		)	(350		)	158			(500		)
Provision (recovery) for loan losses														4			(505	)		(450	)		(347	)

Recoveries:
Mortgage loans:
Single-family	48			33			132			296				22			71			177			203
Multi-family	—			6			—			13
Consumer loans	—			—			—			1				1			—			2			—
Total recoveries	48			39			132			310				23			71			179			203

Charge-offs:
Mortgage loans:
Single-family	(25		)	(21		)	(254		)	(87		)		(6	)		(110	)		(31	)		(364	)
Consumer loans	—			(2		)	—			(2		)		(2	)		—			(3	)		—
Total charge-offs	(25		)	(23		)	(254		)	(89		)		(8	)		(110	)		(34	)		(364	)

Net recoveries (charge-offs)	23			16			(122		)	221
Net (charge-offs) recoveries														15			(39	)		145			(161	)
Balance at end of period	$	8,075		$	8,391		$	8,075		$	8,391		$	7,080		$	7,531		$	7,080		$	7,531

Allowance for loan losses as a percentage of gross loans held for investment at the end of the period	0.90		%	0.96		%	0.90		%	0.96		%		0.79	%		0.84	%		0.79	%		0.84	%
Net (recoveries) charge-offs as a percentage of average loans receivable, net, during the period (annualized)	(0.01		)%	(0.01		)%	0.02		%	(0.04		)%
Net charge-offs (recoveries) as a percentage of average loans receivable, net, during the period (annualized)														(0.01	)%		0.02	%		(0.02	)%		0.02	%

The following tables denote the past due status of the Corporation's gross loans held for investment, net of fair value adjustments, at the dates indicated.


		December 31, 2017								March 31, 2019
(In Thousands)	(In Thousands)	Current		30-89 Days Past Due		Non-Accrual ⁽¹⁾		Total Loans Held for Investment		Current		30-89 Days Past Due		Non-Accrual ⁽¹⁾			Total Loans Held for Investment, Gross

Mortgage loans:	Mortgage loans:
	Single-family	$	304,173	$	1,537	$	8,127	$	313,837
	Multi-family	463,786		—		—		463,786
	Commercial real estate	103,366		—		—		103,366
	Construction	14,430		—		—		14,430
Single-family										$	308,554	$	696		$	5,574		$	314,824
Multi-family											449,812		—			—			449,812
Commercial real estate											115,355		—			—			115,355
Construction											3,394		—			745			4,139
Other											167		—			—			167
Commercial business loans	Commercial business loans	402		—		76		478			430		—			53			483
Consumer loans	Consumer loans	144		—		—		144			130		3			—			133
	Total loans held for investment, gross	$	886,301	$	1,537	$	8,203	$	896,041
Total loans held for investment, gross										$	877,842	$	699		$	6,372		$	884,913

⁽¹⁾ All loans 90 days or greater past due are placed on non-accrual status.

	June 30, 2018
(In Thousands)	Current		30-89 Days Past Due		Non-Accrual ⁽¹⁾			Total Loans Held for Investment, Gross

Mortgage loans:
Single-family	$	307,863	$	804		$	6,141		$	314,808
Multi-family		476,008		—			—			476,008
Commercial real estate		109,726		—			—			109,726
Construction		3,174		—			—			3,174
Other		167		—			—			167
Commercial business loans		430		—			70			500
Consumer loans		108		1			—			109
Total loans held for investment, gross	$	897,476	$	805		$	6,211		$	904,492

June 30, 2017
(In Thousands) Current 30-89 Days Past Due
Non-Accrual ⁽¹⁾
Total Loans Held for Investment

Mortgage loans:
Single-family $ 313,146
$ 1,035
$ 8,016
$ 322,197
Multi-family 479,959
—
—
479,959
Commercial real estate 97,361
—
201
97,562
Construction 16,009
—
—
16,009
Commercial business loans 496
—
80
576
Consumer loans 129
—
—
129
Total loans held for investment, gross $ 907,100
$ 1,035
$ 8,297
$ 916,432

⁽¹⁾ All loans 90 days or greater past due are placed on non-accrual status.

The following tables summarize the ~~Corporation’s~~Corporation's allowance for loan losses and recorded investment in gross loans, by portfolio type, at the dates and for the periods indicated.

	Quarter Ended March 31, 2019
(In Thousands)		Single- family			Multi- family			Commercial Real Estate			Construction			Other			Commercial Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period		$	2,679		$	3,280		$	1,019		$	48		$	3		$	26		$	6		$	7,061
Provision (recovery) for loan losses			(58	)		20			23			15			—			1			3			4
Recoveries			22			—			—			—			—			—			1			23
Charge-offs			(6	)		—			—			—			—			—			(2			(8	)
Allowance for loan losses, end of period		$	2,637		$	3,300		$	1,042		$	63		$	3		$	27		$	8		$	7,080

Allowance for loan losses:
Individually evaluated for impairment		$	123		$	—		$	—		$	—		$	—		$	9		$	—		$	132
Collectively evaluated for impairment			2,514			3,300			1,042			63			3			18			8			6,948
Allowance for loan losses, end of period		$	2,637		$	3,300		$	1,042		$	63		$	3		$	27		$	8		$	7,080

Loans held for investment:
Individually evaluated for impairment		$	6,004		$	—		$	—		$	745		$	—		$	53		$	—		$	6,802
Collectively evaluated for impairment			308,820			449,812			115,355			3,394			167			430			133			878,111
Total loans held for investment, gross		$	314,824		$	449,812		$	115,355		$	4,139		$	167		$	483		$	133		$	884,913
Allowance for loan losses as a percentage of gross loans held for investment			0.84	%		0.73	%		0.90	%		1.52	%		1.80	%		5.59	%		6.02	%		0.79	%


		Quarter Ended December 31, 2017																					Quarter Ended March 31, 2018
(In Thousands)	(In Thousands)	Single-family			Multi-family			Commercial Real Estate			Construction			Commercial Business			Consumer			Total			Single- family			Multi- family			Commercial Real Estate			Construction			Commercial Business			Consumer			Total
Allowance for loan losses:	Allowance for loan losses:
Allowance at beginning of period	Allowance at beginning of period	$	3,579		$	3,431		$	875		$	140		$	31		$	7		$	8,063		$	3,303		$	3,295		$	933		$	504		$	32		$	8		$	8,075
(Recovery) provision for loan losses		(299		)	(136		)	58			364			1			1			(11		)
Provision (recovery) for loan losses																								(143	)		17			33			(410	)		(1	)		(1	)		(505	)
Recoveries	Recoveries	48			—			—			—			—			—			48				71			—			—			—			—			—			71
Charge-offs	Charge-offs	(25		)	—			—			—			—			—			(25		)		(110	)		—			—			—			—			—			(110	)
	Allowance for loan losses, end of period	$	3,303		$	3,295		$	933		$	504		$	32		$	8		$	8,075
Allowance for loan losses, end of period																							$	3,121		$	3,312		$	966		$	94		$	31		$	7		$	7,531

Allowance for loan losses:	Allowance for loan losses:
Individually evaluated for impairment	Individually evaluated for impairment	$	—		$	—		$	—		$	—		$	15		$	—		$	15		$	161		$	—		$	—		$	—		$	15		$	—		$	176
Collectively evaluated for impairment	Collectively evaluated for impairment	3,303			3,295			933			504			17			8			8,060				2,960			3,312			966			94			16			7			7,355
	Allowance for loan losses, end of period	$	3,303		$	3,295		$	933		$	504		$	32		$	8		$	8,075
Allowance for loan losses, end of period																							$	3,121		$	3,312		$	966		$	94		$	31		$	7		$	7,531

Loans held for investment:	Loans held for investment:
Individually evaluated for impairment	Individually evaluated for impairment	$	7,038		$	—		$	—		$	—		$	76		$	—		$	7,114		$	7,929		$	—		$	—		$	—		$	73		$	—		$	8,002
Collectively evaluated for impairment	Collectively evaluated for impairment	306,799			463,786			103,366			14,430			402			144			888,927				308,983			466,266			106,937			5,324			377			130			888,017
	Total loans held for investment, gross	$	313,837		$	463,786		$	103,366		$	14,430		$	478		$	144		$	896,041
Total loans held for investment, gross																							$	316,912		$	466,266		$	106,937		$	5,324		$	450		$	130		$	896,019
Allowance for loan losses as a percentage of gross loans held for investment	Allowance for loan losses as a percentage of gross loans held for investment	1.05		%	0.71		%	0.90		%	3.49		%	6.69		%	5.56		%	0.90		%		0.98	%		0.71	%		0.90	%		1.77	%		6.89	%		5.38	%		0.84	%

	Nine Months Ended March 31, 2019
(In Thousands)		Single- family			Multi- family			Commercial Real Estate			Construction			Other			Commercial Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period		$	2,783		$	3,492		$	1,030		$	47		$	3		$	24		$	6			$	7,385
Provision (recovery) for loan losses			(292	)		(192	)		12			16			—			3			3				(450	)
Recoveries			177			—			—			—			—			—			2				179
Charge-offs			(31	)		—			—			—			—			—			(3	)			(34	)
Allowance for loan losses, end of period		$	2,637		$	3,300		$	1,042		$	63		$	3		$	27		$	8			$	7,080

Allowance for loan losses:
Individually evaluated for impairment		$	123		$	—		$	—		$	—		$	—		$	9		$	—			$	132
Collectively evaluated for impairment			2,514			3,300			1,042			63			3			18			8				6,948
Allowance for loan losses, end of period		$	2,637		$	3,300		$	1,042		$	63		$	3		$	27		$	8			$	7,080

Loans held for investment:
Individually evaluated for impairment		$	6,004		$	—		$	—		$	745		$	—		$	53		$	—			$	6,802
Collectively evaluated for impairment			308,820			449,812			115,355			3,394			167			430			133				878,111
Total loans held for investment, gross		$	314,824		$	449,812		$	115,355		$	4,139		$	167		$	483		$	133			$	884,913
Allowance for loan losses as a percentage of gross loans held for investment			0.84	%		0.73	%		0.90	%		1.52	%		1.80	%		5.59	%		6.02	%			0.79	%

Quarter Ended December 31, 2016
(In Thousands) Single-family Multi-family Commercial Real Estate Construction Other Mortgage Commercial Business Consumer Total
Allowance for loan losses:
Allowance at beginning of
  period
$ 4,575
$ 3,186
$ 854
$ 53
$ 7
$ 42
$ 8
$ 8,725
(Recovery) provision for
  loan losses
(304 ) (36 ) (18 ) 12
(1 ) (5 ) 2
(350 )
Recoveries 33
6
—
—
—
—
—
39
Charge-offs (21 ) —
—
—
—
—
(2 ) (23 )

Allowance for loan losses,
  end of period
$ 4,283
$ 3,156
$ 836
$ 65
$ 6
$ 37
$ 8
$ 8,391

Allowance for loan losses:
Individually evaluated for
  impairment
$ 97
$ —
$ —
$ —
$ —
$ 15
$ —
$ 112
Collectively evaluated for
  impairment
4,186
3,156
836
65
6
22
8
8,279

Allowance for loan losses,
  end of period
$ 4,283
$ 3,156
$ 836
$ 65
$ 6
$ 37
$ 8
$ 8,391

Loans held for investment:
Individually evaluated for
  impairment
$ 7,844
$ 374
$ —
$ —
$ —
$ 85
$ —
$ 8,303
Collectively evaluated for
  impairment
308,751
448,091
98,044
16,872
265
525
184
872,732

Total loans held for
  investment, gross
$ 316,595
$ 448,465
$ 98,044
$ 16,872
$ 265
$ 610
$ 184
$ 881,035
Allowance for loan losses as
  a percentage of gross loans
  held for investment
1.35 % 0.70 % 0.85 % 0.39 % 2.26 % 6.07 % 4.35 % 0.96 %


		Six Months Ended December 31, 2017																					Nine Months Ended March 31, 2018
(In Thousands)	(In Thousands)	Single-family			Multi-family			Commercial Real Estate			Construction			Commercial Business			Consumer			Total			Single- family			Multi- family			Commercial Real Estate			Construction			Commercial Business			Consumer			Total
Allowance for loan losses:	Allowance for loan losses:
Allowance at beginning of period	Allowance at beginning of period	$	3,601		$	3,420		$	879		$	96		$	36		$	7		$	8,039		$	3,601		$	3,420		$	879		$	96		$	36		$	7		$	8,039
(Recovery) provision for loan losses		(176		)	(125		)	54			408			(4		)	1			158
Provision (recovery) for loan losses																								(319	)		(108	)		87			(2	)		(5	)		—			(347	)
Recoveries	Recoveries	132			—			—			—			—			—			132				203			—			—			—			—			—			203
Charge-offs	Charge-offs	(254		)	—			—			—			—			—			(254		)		(364	)		—			—			—			—			—			(364	)
	Allowance for loan losses, end of period	$	3,303		$	3,295		$	933		$	504		$	32		$	8		$	8,075
Allowance for loan losses, end of period																							$	3,121		$	3,312		$	966		$	94		$	31		$	7		$	7,531

Allowance for loan losses:	Allowance for loan losses:
Individually evaluated for impairment	Individually evaluated for impairment	$	—		$	—		$	—		$	—		$	15		$	—		$	15		$	161		$	—		$	—		$	—		$	15		$	—		$	176
Collectively evaluated for impairment	Collectively evaluated for impairment	3,303			3,295			933			504			17			8			8,060				2,960			3,312			966			94			16			7			7,355
	Allowance for loan losses, end of period	$	3,303		$	3,295		$	933		$	504		$	32		$	8		$	8,075
Allowance for loan losses, end of period																							$	3,121		$	3,312		$	966		$	94		$	31		$	7		$	7,531

Loans held for investment:	Loans held for investment:
Individually evaluated for impairment	Individually evaluated for impairment	$	7,038		$	—		$	—		$	—		$	76		$	—		$	7,114		$	7,929		$	—		$	—		$	—		$	73		$	—		$	8,002
Collectively evaluated for impairment	Collectively evaluated for impairment	306,799			463,786			103,366			14,430			402			144			888,927				308,983			466,266			106,937			5,324			377			130			888,017
	Total loans held for investment, gross	$	313,837		$	463,786		$	103,366		$	14,430		$	478		$	144		$	896,041
Total loans held for investment, gross																							$	316,912		$	466,266		$	106,937		$	5,324		$	450		$	130		$	896,019
Allowance for loan losses as a percentage of gross loans held for investment	Allowance for loan losses as a percentage of gross loans held for investment	1.05		%	0.71		%	0.90		%	3.49		%	6.69		%	5.56		%	0.90		%		0.98	%		0.71	%		0.90	%		1.77	%		6.89			5.38	%		0.84	%

Six Months Ended December 31, 2016
(In Thousands) Single-family Multi-family Commercial Real Estate Construction Other Mortgage Commercial Business Consumer Total
Allowance for loan losses:

Allowance at beginning of
  period
$ 4,933
$ 2,800
$ 848
$ 31
$ 7
$ 43
$ 8
$ 8,670
(Recovery) provision for loan
losses (859 ) 343
(12 ) 34
(1 ) (6 ) 1
(500 )
Recoveries 296
13
—
—
—
—
1
310
Charge-offs (87 ) —
—
—
—
—
(2 ) (89 )
Allowance for loan losses, end of period $ 4,283
$ 3,156
$ 836
$ 65
$ 6
$ 37
$ 8
$ 8,391

Allowance for loan losses:

Individually evaluated for
  impairment
$ 97
$ —
$ —
$ —
$ —
$ 15
$ —
$ 112
Collectively evaluated for
  impairment
4,186
3,156
836
65
6
22
8
8,279

Allowance for loan losses,
  end of period
$ 4,283
$ 3,156
$ 836
$ 65
$ 6
$ 37
$ 8
$ 8,391

Loans held for investment:
Individually evaluated for
  impairment
$ 7,844
$ 374
$ —
$ —
$ —
$ 85
$ —
$ 8,303
Collectively evaluated for
  impairment
308,751
448,091
98,044
16,872
265
525
184
872,732

Total loans held for
  investment, gross
$ 316,595
$ 448,465
$ 98,044
$ 16,872
$ 265
$ 610
$ 184
$ 881,035
Allowance for loan losses as
  a percentage of gross loans
  held for investment
1.35 % 0.70 % 0.85 % 0.39 % 2.26 % 6.07 % 4.35 % 0.96 %

The following tables identify the ~~Corporation’s~~Corporation's total recorded investment in non-performing loans by type at the dates and for the periods indicated. Generally, a loan is placed on non-accrual status when it becomes 90 days past due as to principal or interest or if the loan is deemed impaired, after considering economic and business conditions and collection efforts, where the ~~borrower’s~~borrower's financial condition is such that collection of the contractual principal or interest on the loan is doubtful. In addition, interest income is not recognized on any loan where management has determined that collection is not reasonably assured. A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current, the borrower(s) has demonstrated sustained payment performance and future monthly principal and interest payments are expected to be collected on a timely basis. Loans with a related allowance reserve have been individually evaluated for impairment using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell, to establish realizable value. This analysis may identify a specific impairment amount needed or may conclude that no reserve is needed. Loans that are not individually evaluated for impairment are included in pools of homogeneous loans for evaluation of related allowance reserves.


			At December 31, 2017												At March 31, 2019
			Unpaid										Net		Unpaid										Net
			Principal		Related			Recorded					Recorded		Principal		Related			Recorded					Recorded
(In Thousands)	(In Thousands)		Balance		Charge-offs			Investment		Allowance⁽¹⁾			Investment		Balance		Charge-offs			Investment		Allowance ⁽¹⁾			Investment

Mortgage loans:	Mortgage loans:
Single-family:
With a related allowance															$	1,813	$	—		$	1,813	$	(284	)	$	1,529
Without a related allowance ⁽²⁾																4,336		(539	)		3,797		—			3,797
Total single-family																6,149		(539	)		5,610		(284	)		5,326
	Single-family:
		With a related allowance	$	1,126	$	—		$	1,126	$	(240	)	$	886
		Without a related allowance⁽²⁾	7,951		(913		)	7,038		—			7,038
	Total single-family		9,077		(913		)	8,164		(240		)	7,924
Construction:
Without a related allowance ⁽³⁾																745		—			745		—			745
Total construction																745		—			745		—			745

Commercial business loans:	Commercial business loans:
	With a related allowance		76		—			76		(15		)	61
With a related allowance																53		—			53		(9	)		44
Total commercial business loans	Total commercial business loans		76		—			76		(15		)	61			53		—			53		(9	)		44

Total non-performing loans	Total non-performing loans		$	9,153	$	(913	)	$	8,240	$	(255	)	$	7,985	$	6,947	$	(539	)	$	6,408	$	(293	)	$	6,115

⁽¹⁾ Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan, and fair value credit adjustments.

⁽²⁾ There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

⁽³⁾ There was no related allowance for loan losses because the loans, net of undisbursed loan funds, have been charged-off to their fair value or the fair value of the collateral is higher than the net loan balance.

	At June 30, 2018
	Unpaid										Net
	Principal		Related			Recorded					Recorded
(In Thousands)	Balance		Charge-offs			Investment		Allowance ⁽¹⁾			Investment

Mortgage loans:
Single-family:
With a related allowance	$	1,333	$	—		$	1,333	$	(185	)	$	1,148
Without a related allowance ⁽²⁾		5,569		(724	)		4,845		—			4,845
Total single-family		6,902		(724	)		6,178		(185	)		5,993

Commercial business loans:
With a related allowance		70		—			70		(6	)		64
Total commercial business loans		70		—			70		(6	)		64

Total non-performing loans	$	6,972	$	(724	)	$	6,248	$	(191	)	$	6,057

At June 30, 2017
Unpaid Net
Principal Related Recorded Recorded
(In Thousands) Balance Charge-offs Investment
Allowance⁽¹⁾
Investment

Mortgage loans:
Single-family:
With a related allowance $ 1,821
$ —
$ 1,821
$ (325 ) $ 1,496

Without a related allowance⁽²⁾
7,119
(886 ) 6,233
—
6,233
Total single-family 8,940
(886 ) 8,054
(325 ) 7,729

Commercial real estate:

Without a related allowance⁽²⁾
201
—
201
—
201
Total commercial real estate 201
—
201
—
201

Commercial business loans:
With a related allowance 80
—
80
(15 ) 65
Total commercial business loans 80
—
80
(15 ) 65

Total non-performing loans $ 9,221
$ (886 ) $ 8,335
$ (340 ) $ 7,995

⁽¹⁾ Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan, and fair value

credit adjustments.

⁽²⁾ There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

At both ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, there were no commitments to lend additional funds to those borrowers whose loans were classified as ~~non-performing.~~non-performing, except for one construction loan with undisbursed loan funds of $1.2 million at March 31, 2019.

For the quarters ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, the ~~Corporation’s~~Corporation's average recorded investment in non-performing loans was ~~$8.2~~$6.4 million and ~~$10.6~~$7.6 million,, respectively. The Corporation records payments on non-performing loans utilizing the cash basis or cost recovery method of accounting during the periods when the loans are on non-performing status. For ~~both quarters~~the quarter ended ~~December~~March 31, ~~2017 and 2016,~~2019, the Bank received $63,000 in interest payments from non-performing loans, of which $30,000 were recognized as interest income ~~of $10,000~~ and ~~$34,000, respectively, was recognized, based on cash receipts from loan payments on non-performing loans and $80,000 and $68,000, respectively, was collected and~~the remaining $33,000 were applied to reduce the loan balances under the cost recovery method. ~~Forgone~~In comparison for the quarter ended March 31, 2018, the Bank received $121,000 in interest payments from non-performing loans, of which $70,000 were recognized as interest income ~~which would have been recorded had~~and the non-performing loans been current in accordance with their original terms, amounted to $35,000 and $37,000 for the quarters ended December 31, 2017 and 2016, respectively, and was not included in the results of operations.

For the six months ended December 31, 2017 and 2016, the Corporation’s average recorded investment in non-performing loans was $8.4 million and $11.0 million, respectively. For the six months ended December 31, 2017 and 2016, interest income of $170,000 and $103,000, respectively, was recognized, based on cash receipts from loan payments on non-performing loans and $174,000 and $136,000, respectively, was collected andremaining $51,000 were applied to reduce the loan balances under the cost recovery method. ~~Forgone~~

For the nine months ended March 31, 2019 and 2018, the Corporation's average recorded investment in non-performing loans was $6.7 million and $8.1 million, respectively. For the nine months ended March 31, 2019, the Bank received $458,000 in interest payments from non-performing loans, of which $321,000 were recognized as interest income ~~which would have been recorded had~~and the remaining $137,000 were applied to reduce the loan balances under the cost recovery method. In comparison for the nine months ended March 31, 2018, the Bank received $466,000 in interest payments from non-performing loans, ~~been current in accordance with their original terms, amounted~~of which $240,000 were recognized as interest income and the remaining $226,000 were applied to ~~$84,000 and $76,000 for~~reduce the ~~six months ended December 31, 2017 and 2016, respectively, and was not included in~~loan balances under the ~~results of operations.~~

cost recovery method.

The following tables present the average recorded investment in non-performing loans and the related interest income recognized for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016:~~2018:


			Quarter Ended December 31,								Quarter Ended March 31,
			2017				2016				2019				2018
			Average		Interest		Average		Interest		Average		Interest		Average		Interest
			Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
(In Thousands)	(In Thousands)		Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized

Without related allowances:	Without related allowances:
	Mortgage loans:
		Single-family	$	7,301	$	—	$	7,458	$	1
		Multi-family	—		—		375		—
Mortgage loans:
Single-family											$	2,785	$	—	$	6,397	$	49
Construction												745		—		—		—
			7,301		—		7,833		1			3,530		—		6,397		49

With related allowances:	With related allowances:
Mortgage loans:
Single-family												2,841		29		1,170		20
Commercial business loans												54		1		74		1
	Mortgage loans:											2,895		30		1,244		21
		Single-family	786		8		2,578		19
		Multi-family	—		—		92		12
	Commercial business loans		76		2		88		2
			862		10		2,758		33

	Total		$	8,163	$	10	$	10,591	$	34
Total											$	6,425	$	30	$	7,641	$	70


	Nine Months Ended March 31,
	2019				2018
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(In Thousands)	Investment		Recognized		Investment		Recognized

Without related allowances:
Mortgage loans:
Single-family	$	3,570	$	229	$	7,296	$	184
Commercial real estate		—		—		22		13
Construction		579		—		—		—
		4,149		229		7,318		197

With related allowances:
Mortgage loans:
Single-family		2,466		89		738		39
Commercial business loans		61		3		76		4
		2,527		92		814		43

Total	$	6,676	$	321	$	8,132	$	240

Six Months Ended December 31,
2017 2016
Average Interest Average Interest
Recorded Income Recorded Income
Investment Recognized Investment Recognized

Without related allowances:
Mortgage loans:
Single-family $ 7,659
$ 135
$ 7,771
$ 37
Multi-family —
—
377
—
Commercial real estate 34
13
—
—
7,693
148
8,148
37

With related allowances:
Mortgage loans:
Single-family 608
19
2,517
46
Multi-family —
—
279
17
Commercial business loans 77
3
91
3
685
22
2,887
66

Total $ 8,378
$ 170
$ 11,035
$ 103

For the quarter ended March 31, 2019, no new loans were restructured from their original terms and classified as restructured loans, while one restructured loan from pass category was downgraded to special mention. For the nine months ended March 31, 2019, no new loans were restructured from their original terms and classified as restructured loans, while one restructured loan was upgraded to the pass category, one restructured loan from the pass category was downgraded to special mention and one restructured loan was paid off. For the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017 and 2016,~~2018, there were notwo loans totaling $2.2 million that were newly modified from their original terms and re-underwritten or identified in the ~~Corporation’s~~Corporation's asset quality reports as restructured loans. During the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~ 2018, no restructured loans were in default within a 12-month period subsequent to their original restructuring. Additionally, during the ~~quarters and six~~quarter ended March 31, 2019, there was no loan whose modification was extended beyond the initial maturity of the modification; while during the nine months ended ~~December~~March 31, ~~2017~~2019, there was one loan whose modification was extended beyond the initial maturity of the modification. During the quarter and ~~2016,~~nine months ended March 31, 2018, there were no loans whose modification was extended beyond the initial maturity of the ~~modification, except for one commercial business loan with an outstanding balance of $85,000 which was extended for two years during the second quarter of fiscal 2017.~~modification. At both ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, there were no commitments to lend additional funds to those borrowers whose loans were restructured.

As of ~~December~~March 31, ~~2017, the Corporation held~~ 12 ~~restructured loans with a net outstanding balance of~~ ~~$4.4 million: two were classified as special mention on accrual status ($962,000); and 10 were classified as substandard ($3.5 million, all on non-accrual status). As of June 30, 2017,~~2019, the Corporation held 10 restructured loans with a net outstanding balance of ~~$3.6~~$4.6 million: one loan was classified as special mention ($440,000), one loan was classified as substandard and remains on accrual status ($1.4 million) and eight loans were classified as substandard on non-accrual status ($2.7 million). As of June 30, 2018, the Corporation held 11 restructured loans with a net outstanding balance of $5.2 million: one loan was classified as special mention on accrual status ($~~506,000)~~389,000); one loan was classified as substandard on accrual status ($1.4 million); and nine loans were classified as substandard ~~($3.1 million, all~~ on non-accrual ~~status)~~status ($3.4 million). Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Assets that do not currently expose the Corporation to sufficient risk to warrant adverse classification but possess weaknesses are designated as special mention and are closely monitored by the Corporation. As of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~ ~~$2.8~~2018, $2.9 million or ~~64 percent~~63%, and ~~$1.7~~$2.9 million or ~~46 percent,~~56%, respectively, of the restructured loans were current with respect to their modified payment terms.

The Corporation upgrades restructured single-family loans to the pass category if the borrower has demonstrated satisfactory contractual payments for at least six consecutive months; 12 months for those loans that were restructured more than once; and if the borrower has demonstrated satisfactory contractual payments beyond 12 consecutive months, the loan is no longer categorized as a restructured loan. In addition to the payment history described above, multi-family, commercial real estate, construction and commercial business loans ~~(which are sometimes referred to in this report as “preferred loans”)~~ must also demonstrate a combination of the following characteristics to be upgraded: satisfactory cash flow, satisfactory guarantor support, and additional collateral support, among ~~other characteristics.~~others.

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 Corporation. The Corporation re-underwrites the loan with the ~~borrower’s~~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.

The following table summarizes at the dates indicated the restructured loan balances, net of allowance for loan losses, by loan type and non-accrual versus accrual status:

At At
(In Thousands) December 31, 2017 June 30, 2017
Restructured loans on non-accrual status:
Mortgage loans:
Single-family $ 3,416
$ 3,061
Commercial business loans 61
65
Total 3,477
3,126

Restructured loans on accrual status:

Mortgage loans:

Single-family 962
506
Total 962
506

Total restructured loans $ 4,439
$ 3,632

	At		At
(In Thousands)	March 31, 2019		June 30, 2018
Restructured loans on non-accrual status:
Mortgage loans:
Single-family	$	2,669	$	3,328
Commercial business loans		44		64
Total		2,713		3,392

Restructured loans on accrual status:
Mortgage loans:
Single-family		1,865		1,788
Total		1,865		1,788

Total restructured loans	$	4,578	$	5,180

The following tables identify the ~~Corporation’s~~Corporation's total recorded investment in restructured loans by type at the dates and for the periods indicated.


			At December 31, 2017												At March 31, 2019
			Unpaid										Net		Unpaid										Net
			Principal		Related			Recorded					Recorded		Principal		Related			Recorded					Recorded
(In Thousands)	(In Thousands)		Balance		Charge-offs			Investment		Allowance⁽¹⁾			Investment		Balance		Charge-offs			Investment		Allowance ⁽¹⁾			Investment

Mortgage loans:	Mortgage loans:
	Single-family:
		Without a related allowance⁽²⁾	$	4,914	$	(536	)	$	4,378	$	—		$	4,378
	Total single-family		4,914		(536		)	4,378		—			4,378
Single-family:
With a related allowance															$	2,207	$	—		$	2,207	$	(123	)	$	2,084
Without a related allowance ⁽²⁾																2,818		(368	)		2,450		—			2,450
Total single-family																5,025		(368	)		4,657		(123	)		4,534

Commercial business loans:	Commercial business loans:
	With a related allowance		76		—			76		(15		)	61
With a related allowance																53		—			53		(9	)		44
Total commercial business loans	Total commercial business loans		76		—			76		(15		)	61			53		—			53		(9	)		44

Total restructured loans	Total restructured loans		$	4,990	$	(536	)	$	4,454	$	(15	)	$	4,439	$	5,078	$	(368	)	$	4,710	$	(132	)	$	4,578

⁽¹⁾ Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan.

⁽²⁾ There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.


			At June 30, 2017												At June 30, 2018
			Unpaid										Net		Unpaid										Net
			Principal		Related			Recorded					Recorded		Principal		Related			Recorded					Recorded
(In Thousands)	(In Thousands)		Balance		Charge-offs			Investment		Allowance⁽¹⁾			Investment		Balance		Charge-offs			Investment		Allowance ⁽¹⁾			Investment

Mortgage loans:	Mortgage loans:
	Single-family
		With a related allowance	$	485	$	—		$	485	$	(97	)	$	388
		Without a related allowance⁽²⁾	3,618		(439		)	3,179		—			3,179
	Total single-family		4,103		(439		)	3,664		(97		)	3,567
Single-family
With a related allowance															$	2,228	$	—		$	2,228	$	(151	)	$	2,077
Without a related allowance ⁽²⁾																3,450		(411	)		3,039		—			3,039
Total single-family																5,678		(411	)		5,267		(151	)		5,116

Commercial business loans:	Commercial business loans:
	With a related allowance		80		—			80		(15		)	65
With a related allowance																70		—			70		(6	)		64
Total commercial business loans	Total commercial business loans		80		—			80		(15		)	65			70		—			70		(6	)		64

Total restructured loans	Total restructured loans		$	4,183	$	(439	)	$	3,744	$	(112	)	$	3,632	$	5,748	$	(411	)	$	5,337	$	(157	)	$	5,180

⁽¹⁾ Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan.

⁽²⁾ There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

During the quarter ended ~~December~~March 31, ~~2017,~~ ~~one~~ ~~property was~~2019, no properties were acquired in the settlement of loans ~~while~~and no previously foreclosed upon properties were sold. This compares to the quarter ended ~~December~~March 31, ~~2016~~2018 when two properties were acquired in the settlement of loans, and one previously foreclosed upon property was sold. For the nine months ended March 31, 2019, no properties were acquired in the settlement of loans, while two previously foreclosed upon properties were sold. ~~For~~This compares to the ~~six~~nine months ended ~~December~~March 31, ~~2017, one property was acquired in the settlement of loans, while two previously foreclosed upon properties were sold. This compares~~

~~to the six months ended December 31, 2016~~2018 when three properties were acquired in the settlement of loans, ~~while~~and three previously foreclosed upon properties were sold. As of ~~December~~March 31, ~~2017,~~2019, there was ~~one~~no outstanding real estate owned ~~property~~property. This compares to two real estate owned properties located in California with a total net fair value of ~~$621,000. This compares to the real estate owned with a net fair value of $1.6 million~~$906,000 at June 30, ~~2017, comprised of one property located in California and one property located in Arizona.~~2018. A new appraisal was obtained on each of the properties at the time of foreclosure and fair value was derived by using the lower of the appraised value or the listing price of the property, net of selling costs. Any initial loss was recorded as a charge to the allowance for loan losses before being transferred to real estate owned. Subsequent to transfer to real estate owned, if there is further deterioration in real estate values, specific real estate owned loss reserves are established and charged to the statement of operations. In addition, the Corporation records costs to carry real estate owned as real estate operating expenses as incurred.

Note 7: Derivative and Other Financial Instruments with Off-Balance Sheet Risks

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of originating loans or providing funds under existing lines of credit, loan sale commitments to third parties and option contracts. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying Condensed Consolidated Statements of Financial Condition. The ~~Corporation’s~~Corporation's exposure to credit loss, in the event of non-performance by the counterparty to these financial instruments, is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in entering into financial instruments with off-balance sheet risk as it does for on-balance sheet instruments. As of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, the Corporation had commitments to extend credit (on loans to be held for investment and loans to be held for sale) of ~~$57.7~~$16.6 million and ~~$111.8~~$66.3 million,, respectively.

The following table provides information at the dates indicated regarding undisbursed funds on construction loans, undisbursed funds to borrowers on existing lines of credit with the Corporation as well as commitments to originate loans to be held for investment at the dates indicated below.


Commitments	December 31, 2017		June 30, 2017		March 31, 2019		June 30, 2018
(In Thousands)

Undisbursed loan funds – Construction loans	$	7,358	$	9,015	$	6,109	$	4,302
Undisbursed lines of credit – Commercial business loans	559		646			950		495
Undisbursed lines of credit – Consumer loans	525		562			481		503
Commitments to extend credit on loans to be held for investment	9,702		19,119			4,346		9,352
Total	$	18,144	$	29,342	$	11,886	$	14,652

The following table provides information regarding the allowance for loan losses for the undisbursed funds and commitments to extend credit on loans to be held for investment for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018.


	For the Quarters Ended December 31,					For the Six Months Ended December 31,						For the Quarters Ended March 31,					For the Nine Months Ended March 31,
(In Thousands)	2017			2016		2017			2016			2019		2018			2019			2018
Balance, beginning of the period	$	213		$	173	$	277		$	204		$	150	$	188		$	157		$	277
Recovery	(25		)	—		(89		)	(31		)
Provision (recovery)													1		(29	)		(6	)		(118	)
Balance, end of the period	$	188		$	173	$	188		$	173		$	151	$	159		$	151		$	159

In accordance with ASC 815, ~~“Derivatives~~"Derivatives and Hedging,”" and interpretations of the Derivatives Implementation Group of the FASB, the fair value of the commitments to extend credit on loans to be held for sale, loan sale commitments, to be announced ~~(“TBA”~~("TBA") MBS trades, put option contracts and call option contracts are recorded at fair value on the Condensed Consolidated Statements of Financial Condition. At ~~December~~March 31, ~~2017,~~ ~~$739,000~~2019, $240,000 was included in other assets and ~~$228,000~~$224,000 was included in other liabilities; at June 30, ~~2017,~~ ~~$1.5 million~~2018, $849,000 was included in other assets and ~~$38,000~~$464,000 was included in other liabilities. The Corporation does not apply hedge accounting to its derivative financial instruments; therefore, all changes in fair value are recorded in earnings.

The net impact of derivative financial instruments is recorded within the gain on sale of loans contained in the Condensed Consolidated Statements of Operations during the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016 were~~2018 was as follows:

	For the Quarters Ended March 31,						For the Nine Months Ended March 31,
Derivative Financial Instruments	2019			2018			2019			2018
(In Thousands)
Commitments to extend credit on loans to be held for sale	$	(264	)	$	266		$	(585	)	$	173
Mandatory loan sale commitments and TBAMBS trades		465			(281	)		216			(1,072	)
Option contracts, net		—			—			—			(37	)
Total net gain (loss)	$	201		$	(15	)	$	(369	)	$	(936	)

For the Quarters Ended
December 31, For the Six Months
Ended
December 31,
Derivative Financial Instruments 2017 2016 2017 2016
(In Thousands)
Commitments to extend credit on loans to be held for sale $ 29
$ (1,098 ) $ (93 ) $ (2,309 )
Mandatory loan sale commitments and TBAMBS trades
(582 ) 1,068
(791 ) 2,865
Option contracts, net —
366
(37 ) 344
Total net (loss) gain $ (553 ) $ 336
$ (921 ) $ 900

The outstanding derivative financial instruments and other loan sale agreements at the dates indicated were as follows:


	December 31, 2017						June 30, 2017					March 31, 2019						June 30, 2018
Derivative Financial Instruments	Amount			Fair Value			Amount			Fair Value		Amount			Fair Value			Amount			Fair Value
(In Thousands)
Commitments to extend credit on loans to be held for sale ⁽¹⁾	$	48,032		$	716		$	92,726		$	809	$	12,211		$	240		$	56,906		$	825
Best efforts loan sale commitments	(12,890		)	—			(17,225		)	—			(10,212	)		—			(29,502	)		—
Mandatory loan sale commitments and TBA MBS trades	(121,575		)	(205		)	(179,777		)	586			(28,817	)		(224	)		(117,759	)		(440	)
Option contracts, net	—			—			(3,000		)	37
Total	$	(86,433	)	$	511		$	(107,276	)	$	1,432	$	(26,818	)	$	16		$	(90,355	)	$	385


⁽¹⁾	Net of ~~30.6 percent~~18.6% at ~~December~~March 31, ~~2017~~2019 and ~~25.7 percent~~24.7% at June 30, ~~2017~~2018 of commitments which management has estimated may not fund.

Occasionally, the Corporation is required to repurchase loans sold to Freddie Mac, Fannie Mae or other institutional investors if it is determined that such loans do not meet the credit requirements of the investor, or if one of the parties involved in the loan misrepresented pertinent facts, committed fraud, or if such loans were 90-days past due within 120 days of the loan funding date. During the third quarter of fiscal 2019, the Corporation repurchased two loans totaling $446,000 pursuant to the recourse/repurchase covenants contained in the loan sale agreements. In comparison, the Corporation repurchased two loans totaling $602,000 from investors during the third quarter of fiscal 2018. During the first nine months of fiscal 2019, the Corporation repurchased five loans totaling $699,000, including two loans that were fully charged off ($25,000). In comparison, the Corporation repurchased two loans totaling $602,000 from investors during the first nine months of fiscal 2018. Additional repurchase requests may have been settled that did not result in the repurchase of the loan itself. The primary reasons for honoring the repurchase requests are borrower fraud, undisclosed liabilities on borrower applications, and documentation, verification and appraisal disputes. For the third quarters of fiscal 2019 and 2018, the Corporation did not record any provision for the recourse liability and did not settle any claims. For the first nine months of fiscal 2019 and 2018, the Corporation recorded a $33,000 recovery and a $22,000 recovery from the recourse liability, respectively, and did not settle any claims. As of March 31, 2019, the total recourse reserve for loans sold that are subject to repurchase decreased to $250,000, as compared to $283,000 at June 30, 2018 and $283,000 at March 31, 2018.

Beginning in 2008, in connection with the downturn in the real estate market, the Corporation implemented tighter underwriting standards to reduce potential loan repurchase requests, including requiring higher credit scores, generally lower debt-to-income ratios, and verification of income and assets, among other criteria. Despite management's diligent estimate of the recourse reserve, the Corporation is still subject to risks and uncertainties associated with potentially higher loan repurchase claims from investors, and there are no assurances that the current recourse reserve will be sufficient to cover all future recourse claims.

The following table shows the summary of the recourse liability for the quarters and nine months ended March 31, 2019 and 2018:

	For the Quarters Ended March 31,				For the Nine Months Ended March 31,
Recourse Liability	2019		2018		2019			2018
(In Thousands)

Balance, beginning of the period	$	250	$	283	$	283		$	305
Recovery from recourse liability		—		—		(33	)		(22	)
Net settlements in lieu of loan repurchases		—		—		—			—
Balance, end of the period	$	250	$	283	$	250		$	283

Note 8: Fair Value of Financial Instruments

The Corporation adopted ASC 820, ~~“Fair~~"Fair Value Measurements and Disclosures,”" and elected the fair value option pursuant to ASC 825, ~~“Financial Instruments”~~"Financial Instruments" on loans originated for sale by PBM. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 825 permits entities to elect to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the ~~“Fair~~"Fair Value ~~Option”~~Option") at specified election dates. At each subsequent reporting date, an entity is required to report unrealized gains and losses on items in earnings for which the fair value option has been elected. The objective of the Fair Value Option is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.

The following table describes the difference at the dates indicated between the aggregate fair value and the aggregate unpaid principal balance of loans held for investment at fair value and loans held for sale at fair value:


(In Thousands)	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Net Unrealized (Loss) Gain			Aggregate Fair Value		Aggregate Unpaid Principal Balance		Net Unrealized Gain (Loss)
As of December 31, 2017:
As of March 31, 2019:
Loans held for investment, at fair value	$	5,157	$	5,362	$	(205	)	$	5,239	$	5,417	$	(178	)
Loans held for sale, at fair value	$	96,589	$	93,449	$	3,140		$	30,500	$	29,565	$	935

As of June 30, 2017:
As of June 30, 2018:
Loans held for investment, at fair value	$	6,445	$	6,696	$	(251	)	$	5,234	$	5,546	$	(312	)
Loans held for sale, at fair value	$	116,548	$	112,940	$	3,608		$	96,298	$	93,791	$	2,507

ASC 820-10-65-4, ~~“Determining~~"Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,”" provides additional guidance for estimating fair value in accordance with ASC 820, ~~“Fair~~"Fair Value Measurements,”" when the volume and level of activity for the asset or liability have significantly decreased.

ASC 820 establishes a three-level valuation hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:



Level 1	-	Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date.
Level 2	-	Observable inputs other than Level 1 such as: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated to observable market data for substantially the full term of the asset or liability.
Level 3	-	Unobservable inputs for the asset or liability that use significant assumptions, including assumptions of risks. These unobservable assumptions reflect the ~~Corporation’s~~Corporation's estimate of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of pricing models, discounted cash flow models and similar techniques.

ASC 820 requires the Corporation to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.

The ~~Corporation’s~~Corporation's financial assets and liabilities measured at fair value on a recurring basis consist of investment securities available for sale, loans held for investment at fair value, loans held for sale at fair value, interest-only strips and derivative

financial instruments; while non-performing loans, mortgage servicing assets ("MSA") and real estate owned are measured at fair value on a nonrecurring basis.

Investment securities - available for sale are primarily comprised of U.S. government agency MBS, ~~and~~ U.S. government sponsored enterprise ~~MBS.~~MBS and privately issued CMO. The Corporation utilizes quoted prices in ~~active and less than~~ active markets for similar securities for its fair value measurement of MBS ~~and debt securities~~ (Level 2) and broker price indications for similar securities in non-active markets for its fair value measurement of the CMO (Level 3).

Derivative financial instruments are comprised of commitments to extend credit on loans to be held for sale, mandatory loan sale commitments, TBA MBS trades and option contracts. The fair value of TBA MBS trades is determined using quoted secondary-market prices (Level 2). The fair values of other derivative financial instruments are determined by quoted prices for a similar commitment or commitments, adjusted for the specific attributes of each commitment (Level 3).

Loans held for investment at fair value are primarily single-family loans which have been transferred from loans held for sale. The fair value is determined by the ~~quoted secondary-market prices which account for interest rate characteristics, and are then adjusted for~~ management estimates of the specific credit risk attributes of each loan, in addition to the quoted secondary-market prices which account for the interest rate characteristics of each loan (Level 3).

Loans held for sale at fair value are primarily single-family loans. The fair value is determined, when possible, using quoted secondary-market prices such as mandatory loan sale commitments. If no such quoted price exists, the fair value of a loan is determined by quoted prices for a similar loan or loans, adjusted for the specific attributes of each loan (Level 2).

Non-performing loans are loans which are inadequately protected by the current net worth and paying capacity of the borrowers or of the collateral pledged. The non-performing loans are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. The fair value of a non-performing loan is determined based on an observable market price or current appraised value of the underlying collateral. Appraised and reported values may be discounted based on ~~management’s~~management's historical knowledge, changes in market conditions from the time of valuation, and/or ~~management’s~~management's expertise and knowledge of the borrower. For non-performing loans which are restructured loans, the fair value is derived from discounted cash flow analysis (Level 3), except those which are in the process of foreclosure or 90 days delinquent for which the fair value is derived from the appraised value of its collateral (Level 2). For other non-performing loans which are not restructured loans, other than non-performing commercial real estate loans, the fair value is derived from relative value analysis: historical experience and management estimates by loan type for which collectively evaluated allowances are assigned (Level 3); or the appraised value of its collateral for loans which are in the process of foreclosure or where borrowers file bankruptcy (Level 2). For non-performing commercial real estate loans, the fair value is derived from the appraised value of its collateral (Level 2). Non-performing loans are reviewed and evaluated on at least a quarterly basis for additional allowance and adjusted accordingly, based on the same factors identified above. This loss is not recorded directly as an adjustment to current earnings or other comprehensive income (loss), but rather as a component in determining the overall adequacy of the allowance for loan losses. These adjustments to the estimated fair value of non-performing loans may result in increases or decreases to the provision for loan losses recorded in current earnings.

The Corporation uses the amortization method for its MSA, which amortizes the MSA in proportion to and over the period of estimated net servicing income and assesses the MSA for impairment based on fair value at each reporting date. The fair value of the MSA is derived using the present value method; which includes a third ~~party’s~~party's prepayment projections of similar instruments, weighted-average coupon rates, estimated servicing costs and ~~the estimated average life~~discount interest rates (Level 3).

The rights to future income from serviced loans that exceed contractually specified servicing fees are recorded as interest-only strips. The fair value of interest-only strips is derived using the same assumptions that are used to value the related MSA (Level 3).

The fair value of real estate owned is derived from the lower of the appraised value or the listing price, net of estimated selling costs (Level 2).

The ~~Corporation’s~~Corporation's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the ~~Corporation’s~~Corporation's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following fair value hierarchy tables present information at the dates indicated about the ~~Corporation’s~~Corporation's assets measured at fair value on a recurring basis:

	Fair Value Measurement at March 31, 2019 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	3,796	$	—	$	3,796
U.S. government sponsored enterprise MBS		—		2,198		—		2,198
Private issue CMO		—		—		300		300
Investment securities - available for sale		—		5,994		300		6,294

Loans held for investment, at fair value		—		—		5,239		5,239
Loans held for sale, at fair value		—		30,500		—		30,500
Interest-only strips		—		—		18		18

Derivative assets:
Commitments to extend credit on loans to be held for sale		—		—		240		240
Derivative assets		—		—		240		240
Total assets	$	—	$	36,494	$	5,797	$	42,291

Liabilities:
Derivative liabilities:
Mandatory loan sale commitments	$	—	$	—	$	7	$	7
TBA MBS trades		—		217		—		217
Derivative liabilities		—		217		7		224
Total liabilities	$	—	$	217	$	7	$	224


	Fair Value Measurement at December 31, 2017 Using:								Fair Value Measurement at June 30, 2018 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	4,859	$	—	$	4,859	$	—	$	4,384	$	—	$	4,384
U.S. government sponsored enterprise MBS	—		3,127		—		3,127			—		2,762		—		2,762
Private issue CMO	—		—		419		419			—		—		350		350
Investment securities - available for sale	—		7,986		419		8,405			—		7,146		350		7,496

Loans held for investment, at fair value	—		—		5,157		5,157			—		—		5,234		5,234
Loans held for sale, at fair value	—		96,589		—		96,589			—		96,298		—		96,298
Interest-only strips	—		—		26		26			—		—		23		23

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		737		737			—		—		849		849
TBA MBS trades	—		2		—		2
Derivative assets	—		2		737		739			—		—		849		849
Total assets	$	—	$	104,577	$	6,339	$	110,916	$	—	$	103,444	$	6,456	$	109,900

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	21	$	21	$	—	$	—	$	24	$	24
Mandatory loan sale commitments	—		—		24		24			—		—		32		32
TBA MBS trades	—		183		—		183			—		408		—		408
Derivative liabilities	—		183		45		228			—		408		56		464
Total liabilities	$	—	$	183	$	45	$	228	$	—	$	408	$	56	$	464

Fair Value Measurement at June 30, 2017 Using:
(In Thousands) Level 1 Level 2 Level 3 Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS $ —
$ 5,383
$ —
$ 5,383
U.S. government sponsored enterprise MBS —
3,474
—
3,474
Private issue CMO —
—
461
461
Investment securities - available for sale —
8,857
461
9,318

Loans held for investment, at fair value —
—
6,445
6,445
Loans held for sale, at fair value —
116,548
—
116,548
Interest-only strips —
—
31
31

Derivative assets:
Commitments to extend credit on loans to be held for sale —
—
847
847
Mandatory loan sale commitments —
—
47
47
TBAMBS trades
—
539
—
539
Option contracts —
—
37
37
Derivative assets —
539
931
1,470
Total assets $ —
$ 125,944
$ 7,868
$ 133,812

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale $ —
$ —
$ 38
$ 38
Derivative liabilities —
—
38
38
Total liabilities $ —
$ —
$ 38
$ 38

The following tables summarize reconciliations of the beginning and ending balances during the periods shown of recurring fair value measurements recognized in the Condensed Consolidated Statements of Financial Condition using Level 3 inputs:


	For the Quarter Ended December 31, 2017																	For the Quarter Ended March 31, 2019
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)																	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Loan Commit- ments to Originate ⁽²⁾		Manda- tory Commit- ments ⁽³⁾			Total			Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Loan Commitments to Originate ⁽²⁾			Mandatory Commitments ⁽³⁾				Total
Beginning balance at September 30, 2017	$	448		$	6,924		$	28		$	687	$	(4	)	$	8,083
Beginning balance at December 31, 2018																		$	310		$	4,995		$	21		$	504			$	(9	)	$	5,821
Total gains or losses (realized/unrealized):
Included in earnings	—			38			—			29		(20		)	47				—			87			—			(264	)			(3	)		(180	)
Included in other comprehensive loss	—			—			(2		)	—		—			(2		)		1			—			(3	)		—				—			(2	)
Purchases	—			—			—			—		—			—				—			—			—			—				—			—
Issuances	—			—			—			—		—			—				—			—			—			—				—			—
Settlements	(29		)	(1,805		)	—			—		—			(1,834		)		(11	)		(34	)		—			—				5			(40	)
Transfers in and/or out of Level 3	—			—			—			—		—			—				—			191			—			—				—			191
Ending balance at December 31, 2017	$	419		$	5,157		$	26		$	716	$	(24	)	$	6,294
Ending balance at March 31, 2019																		$	300		$	5,239		$	18		$	240			$	(7	)	$	5,790


⁽¹⁾	The valuation of loans held for investment at fair value includes the management estimates of the specific credit risk attributes of each loan, ~~(Level 3),~~ in addition to the quoted secondary-market prices which account for the interest rate ~~characteristics.~~characteristics of each loan.


⁽²⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽³⁾	Consists of mandatory loan sale commitments.


	For the Quarter Ended December 31, 2016																					For the Quarter Ended March 31, 2018
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)																					Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Loan Commit- ments to Originate ⁽²⁾			Manda- tory Commit- ments ⁽³⁾			Option Contracts			Total			Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Loan Commit- ments to Originate ⁽²⁾		Manda- tory Commit- ments ⁽³⁾			Total
Beginning balance at September 30, 2016	$	560		$	5,529		$	42		$	2,574		$	(24	)	$	22		$	8,703
Beginning balance at December 31, 2017																						$	419		$	5,157		$	26		$	716	$	(24	)	$	6,294
Total gains or losses (realized/unrealized):
Included in earnings	—			(139		)	—			(1,098		)	(250		)	366			(1,121		)		—			(118	)		—			266		(26	)		122
Included in other comprehensive income (loss)	—			—			(5		)	—			—			—			(5		)
Included in other comprehensive loss																							(2	)		—			(2	)		—		—			(4	)
Purchases	—			—			—			—			—			94			94				—			—			—			—		—			—
Issuances	—			—			—			—			—			—			—				—			—			—			—		—			—
Settlements	(22		)	(250		)	—			—			(6		)	(482		)	(760		)		(22	)		(43	)		—			—		—			(65	)
Transfers in and/or out of Level 3	—			824			—			—			—			—			824				—			—			—			—		—			—
Ending balance at December 31, 2016	$	538		$	5,964		$	37		$	1,476		$	(280	)	$	—		$	7,735
Ending balance at March 31, 2018																						$	395		$	4,996		$	24		$	982	$	(50	)	$	6,347


⁽¹⁾	The valuation of loans held for investment at fair value includes the management estimates of the specific credit risk attributes of each loan, ~~(Level 3),~~ in addition to the quoted secondary-market prices which account for the interest rate ~~characteristics.~~characteristics of each loan.


⁽²⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽³⁾	Consists of mandatory loan sale commitments.

	For the Nine Months Ended March 31, 2019
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Loan Commitments to Originate ⁽²⁾			Mandatory Commitments ⁽³⁾				Total
Beginning balance at June 30, 2018	$	350		$	5,234		$	23		$	825			$	(32	)	$	6,400
Total gains or losses (realized/unrealized):
Included in earnings		—			133			—			(585	)			18			(434	)
Included in other comprehensive loss		—			—			(5	)		—				—			(5	)
Purchases		—			—			—			—				—			—
Issuances		—			—			—			—				—			—
Settlements		(50	)		(789	)		—			—				7			(832	)
Transfers in and/or out of Level 3		—			661			—			—				—			661
Ending balance at March 31, 2019	$	300		$	5,239		$	18		$	240			$	(7	)	$	5,790

For the Six Months Ended December 31, 2017

Fair Value Measurement
Using Significant Other Unobservable Inputs
(Level 3)

(In Thousands)

Private
Issue
CMO
Loans Held For Investment, at fair value ⁽¹⁾

Interest-
Only
Strips
Loan
Commit-
ments to
Originate ⁽²⁾
Manda-
tory
Commit-
ments ⁽³⁾

Option
Contracts

Total
Beginning balance at June 30, 2017 $ 461
$ 6,445
$ 31
$ 809
$ 47
$ 37
$ 7,830
Total gains or losses (realized/unrealized):

Included in earnings —
46
—
(93 ) (73 ) (37 ) (157 )
Included in other comprehensive loss 1
—
(5 ) —
—
—
(4 )
Purchases —
—
—
—
—
—
—
Issuances —
—
—
—
—
—
—
Settlements (43 ) (1,856 ) —
—
2
—
(1,897 )
Transfers in and/or out of Level 3 —
522
—
—
—
—
522
Ending balance at December 31, 2017 $ 419
$ 5,157
$ 26
$ 716
$ (24 ) $ —
$ 6,294


⁽¹⁾	The valuation of loans held for investment at fair value includes the management estimates of the specific credit risk attributes of each loan, ~~(Level 3),~~ in addition to the quoted secondary-market prices which account for the interest rate ~~characteristics.~~characteristics of each loan.


⁽²⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽³⁾	Consists of mandatory loan sale commitments.

	For the Nine Months Ended March 31, 2018
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Loan Commit- ments to Originate ⁽²⁾		Manda- tory Commit- ments ⁽³⁾				Option Contracts			Total
Beginning balance at June 30, 2017	$	461		$	6,445		$	31		$	809		$	47		$	37		$	7,830
Total gains or losses (realized/unrealized):
Included in earnings		—			(72	)		—			173			(99	)		(37	)		(35	)
Included in other comprehensive loss		(1	)		—			(7	)		—			—			—			(8	)
Purchases		—			—			—			—			—			—			—
Issuances		—			—			—			—			—			—			—
Settlements		(65	)		(1,899	)		—			—			2			—			(1,962	)
Transfers in and/or out of Level 3		—			522			—			—			—			—			522
Ending balance at March 31, 2018	$	395		$	4,996		$	24		$	982		$	(50	)	$	—		$	6,347

For the Six Months Ended December 31, 2016

Fair Value Measurement
Using Significant Other Unobservable Inputs
(Level 3)

(In Thousands)

Private
Issue
CMO
Loans Held For Investment, at fair value ⁽¹⁾

Interest-
Only
Strips
Loan
Commit-
ments to
originate ⁽²⁾
Manda-
tory
Commit-
ments ⁽³⁾

Option
Contracts

Total
Beginning balance at June 30, 2016 $ 601
$ 5,159
$ 47
$ 3,785
$ (31 ) $ —
$ 9,561
Total gains or losses (realized/ unrealized):

Included in earnings —
(101 ) —
(2,309 ) (255 ) 344
(2,321 )
Included in other comprehensive
(loss) income
1
—
(10 ) —
—
—
(9 )
Purchases —
—
—
—
—
138
138
Issuances —
—
—
—
—
—
—
Settlements (64 ) (678 ) —
—
6
(482 ) (1,218 )
Transfers in and/or out of Level 3 —
1,584
—
—
—
—
1,584
Ending balance at December 31, 2016 $ 538
$ 5,964
$ 37
$ 1,476
$ (280 ) $ —
$ 7,735


⁽¹⁾	The valuation of loans held for investment at fair value includes the management estimates of the specific credit risk attributes of each loan, ~~(Level 3),~~ in addition to the quoted secondary-market prices which account for the interest rate ~~characteristics.~~characteristics of each loan.


⁽²⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽³⁾	Consists of mandatory loan sale commitments.

The following fair value hierarchy tables present information about the ~~Corporation’s~~Corporation's assets measured at fair value at the dates indicated on a nonrecurring basis:


	Fair Value Measurement at December 31, 2017 Using:								Fair Value Measurement at March 31, 2019 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	7,038	$	947	$	7,985	$	—	$	4,541	$	1,574	$	6,115
MSA	—		—		450		450
Mortgage servicing assets										—		—		456		456
Real estate owned, net	—		621		—		621			—		—		—		—
Total	$	—	$	7,659	$	1,397	$	9,056	$	—	$	4,541	$	2,030	$	6,571

	Fair Value Measurement at June 30, 2018 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	4,845	$	1,212	$	6,057
Mortgage servicing assets		—		—		135		135
Real estate owned, net		—		906		—		906
Total	$	—	$	5,751	$	1,347	$	7,098

Fair Value Measurement at June 30, 2017 Using:
(In Thousands) Level 1 Level 2 Level 3 Total
Non-performing loans $ —
$ 7,049
$ 946
$ 7,995
MSA —
—
407
407
Real estate owned, net —
1,615
—
1,615
Total $ —
$ 8,664
$ 1,353
$ 10,017

The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivative financial instruments, which are measured at fair value and categorized within Level 3 as of ~~December~~March 31, ~~2017:~~2019:

(Dollars In Thousands)	Fair Value As of March 31, 2019		Valuation Techniques	Unobservable Inputs	Range ⁽¹⁾ (Weighted Average)	Impact to Valuation from an Increase in Inputs ⁽²⁾

Assets:

Securities available - for sale: Private issue CMO	$	300	Market comparable pricing	Comparability adjustment	1.2% – 1.3% (1.2%)	Increase

Loans held for investment, at fair value	$	5,239	Relative value analysis	Broker quotes Credit risk factors	98.3% – 105.2% (101.1%) of par 1.2% - 100.0% (4.3%)	Increase Decrease

Non-performing loans	$	703	Discounted cash flow	Default rates	5.0%	Decrease
Non-performing loans	$	871	Relative value analysis	Loss severity	20.0% - 30.0% (21.3%)	Decrease

Mortgage servicing assets	$	456	Discounted cash flow	Prepayment speed (CPR) Discount rate	9.7% - 60.0% (21.7%) 9.0% - 10.5%(9.2%)	Decrease Decrease

Interest-only strips	$	18	Discounted cash flow	Prepayment speed (CPR) Discount rate	18.7% - 35.9% (34.3%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	240	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	99.0% – 103.4% (101.6%) of par 18.5% - 19.1% (18.6%)	Increase Decrease

Liabilities:

Mandatory loan sale commitments	$	7	Relative value analysis	TBA MBS broker quotes Roll-forward costs ⁽⁴⁾	102.3% - 105.7% (103.9%) of par 0.015%	Increase Increase

(Dollars In Thousands) Fair Value
As of
December 31,
2017
Valuation
Techniques
Unobservable Inputs
Range ⁽¹⁾
(Weighted Average)
Impact to
Valuation
from an
Increase in
Inputs ⁽²⁾

Assets:

Securities available - for sale: Private issue CMO $ 419
Market comparable pricing Comparability adjustment 0.6% – 1.7% (1.5%) Increase

Loans held for investment,
    at fair value
$ 5,157
Relative value
analysis Broker quotes

Credit risk factors 97.9% –  104.8%
(100.8%) of par
1.2% - 100.0% (4.6%) Increase

Decrease

Non-performing loans $ 61
Discounted cash flow Default rates 5.0% Decrease
Non-performing loans $ 886
Relative value analysis Loss severity 20.0% - 30.0% (21.4%) Decrease

MSA $ 450
Discounted cash flow
Prepayment speed (CPR)
Discount rate
10.2% - 60.0% (21.3%)
9.0% - 10.5% (9.2%) Decrease
Decrease

Interest-only strips $ 26
Discounted cash flow
Prepayment speed (CPR)
Discount rate
15.6% - 29.7% (27.4%)
9.0% Decrease
Decrease

Commitments to extend credit on loans to be held for sale $ 737
Relative value analysis
TBA-MBS broker quotes

Fall-out ratio ⁽³⁾
99.3% –  105.1%
(102.0%) of par
12.9% - 32.0% (30.6%) Increase

Decrease

Liabilities:

Commitments to extend credit on loans to be held for sale $ 21
Relative value analysis
TBA-MBS broker quotes

Fall-out ratio ⁽³⁾
98.5% –  101.5%
(100.8%) of par
12.9% - 32.0% (30.6%) Increase

Decrease

Mandatory loan sale commitments $ 24
Relative value analysis
TBA MBS broker quotes

Roll-forward costs ⁽⁴⁾
100.9% - 103.4%
(103.4%) of par
0.012% Decrease

Decrease


⁽¹⁾	The range is based on the estimated fair values and management estimates.


⁽²⁾	Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.


⁽³⁾	The percentage of commitments to extend credit on loans to be held for sale which management has estimated may not fund.


⁽⁴⁾	An estimated cost to roll forward the mandatory loan sale commitments which management has estimated may not be delivered to the corresponding investors in a timely manner.

The significant unobservable inputs used in the fair value measurement of the ~~Corporation’s~~Corporation's assets and liabilities include the following: prepayment speeds, discount rates, MBS – TBA quotes, estimated fallout ratios, broker quotes and roll-forward costs, among ~~other inputs.~~others. Significant increases or decreases in any of these inputs in isolation could result in significantly lower or higher fair value measurement. The various unobservable inputs used to determine valuations may have similar or diverging impacts on valuation.

The carrying amount and fair value of the ~~Corporation’s~~Corporation's other financial instruments as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017~~2018 was as follows:


	December 31, 2017									March 31, 2019
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Investment securities - held to maturity	$	87,626	$	87,336	—	$	87,336	$	—	$	102,510	$	103,056		—	$	103,056	$	—
Loans held for investment, not recorded at fair value	$	880,819	$	864,096	—	—		$	864,096	$	878,315	$	857,399		—		—	$	857,399
FHLB – San Francisco stock	$	8,108	$	8,108	—	$	8,108	—		$	8,199	$	8,199		—	$	8,199		—

Financial liabilities:
Deposits	$	907,788	$	874,441	—	—		$	874,441	$	876,884	$	847,875		—		—	$	847,875
Borrowings	$	111,189	$	111,141	—	—		$	111,141	$	101,121	$	101,274		—		—	$	101,274

	June 30, 2018
(In Thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Investment securities - held to maturity	$	87,813	$	87,239		—	$	87,239		—
Loans held for investment, not recorded at fair value	$	897,451	$	873,112		—		—	$	873,112
FHLB – San Francisco stock	$	8,199	$	8,199		—	$	8,199		—

Financial liabilities:
Deposits	$	907,598	$	877,641		—		—	$	877,641
Borrowings	$	126,163	$	123,778		—		—	$	123,778

June 30, 2017
(In Thousands) Carrying
Amount Fair
Value
Level 1
Level 2
Level 3
Financial assets:
Investment securities - held to maturity $ 60,441
$ 60,629
—
$ 60,629
—
Loans held for investment, not recorded at fair value $ 898,474
$ 885,650
—
—
$ 885,650
FHLB – San Francisco stock $ 8,108
$ 8,108
—
$ 8,108
—

Financial liabilities:
Deposits $ 926,521
$ 896,140
—
—
$ 896,140
Borrowings $ 126,226
$ 126,083
—
—
$ 126,083

Investment securities - held to maturity: The investment securities - held to maturity consist of time deposits at CRA qualified minority financial institutions, U.S. SBA securities and U.S. government sponsored enterprise MBS. Due to the short-term nature of the time deposits, the principal ~~balances~~balance approximated fair value (Level 2). For the MBS and the U.S. SBA securities, the Corporation utilizes quoted prices in ~~active and less than~~ active markets for similar securities for its fair value measurement ~~of MBS and debt securities~~ (Level 2).

Loans held for investment, not recorded at fair value: For loans that reprice frequently at market rates, the carrying amount approximates the fair value. For fixed-rate loans, the fair value is determined by either (i) discounting the estimated future cash flows of such loans over their estimated remaining contractual maturities using a current interest rate at which such loans would be made to borrowers, or (ii) quoted market prices. ~~The allowance for loan losses is subtracted as an estimate of the underlying credit risk.~~

FHLB – San Francisco stock: The carrying amount reported for FHLB – San Francisco stock approximates fair value. When redeemed, the Corporation will receive an amount equal to the par value of the stock.

Deposits: The fair value of time deposits is estimated using a discounted cash flow calculation. The discount rate is based upon rates currently offered for deposits of similar remaining maturities. The fair value of transaction accounts (checking, money market and savings accounts) is estimated using a discounted cash flow calculation and management estimates of current market conditions.

Borrowings: The fair value of borrowings has been estimated using a discounted cash flow calculation. The discount rate on such borrowings is based upon rates currently offered for borrowings of similar remaining maturities.

The Corporation has various processes and controls in place to ensure that fair value is reasonably estimated. The Corporation generally determines fair value of their Level 3 assets and liabilities by using internally developed models which primarily utilize discounted cash flow techniques and prices obtained from independent management services or brokers. The Corporation performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process. The fair values of investment securities, commitments to extend credit on loans held for sale, mandatory commitments and option contracts are determined from the independent management services or brokers; while the fair value of MSA and interest-only strips are determined using the internally developed models which are based on discounted cash flow analysis. The fair value of non-performing loans is determined by calculating discounted cash flows, relative value analysis or collateral value, less selling costs.

While the Corporation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. During the quarter ended ~~December~~March 31, ~~2017,~~2019, there were no significant changes to the ~~Corporation’s~~Corporation's valuation techniques that had, or are expected to have, a material impact on its consolidated financial position or results of operations.

Note 9: Incentive Plans

As of ~~December~~March 31, ~~2017,~~2019, the Corporation had two active share-based compensation plans, which are described below. These plans are the 2013 Equity Incentive Plan (“("2013 ~~Plan”~~Plan") and the 2010 Equity Incentive Plan (“("2010 ~~Plan”~~Plan"). Additionally, the Corporation had one inactive share-based compensation plan - the 2006 Equity Incentive Plan (“("2006 ~~Plan”~~Plan") where no new awards can be granted but outstanding grants remain eligible for exercise.

For the quarters ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, the compensation cost for these plans was ~~$258,000~~$37,000 and ~~$275,000,~~$292,000, respectively. The income tax ~~expense~~benefit (deficiencies) recognized in the Condensed Consolidated Statements of Operations per adoption of ASU 2016-09 for share-based compensation plans for the ~~quarter~~quarters ended ~~December~~March 31, ~~2017~~2019 and 2018 was ~~$7,000; while the income tax expense recognized in the Condensed Consolidated Statements of Stockholders' Equity for share-based compensation plans for the quarter ended December 31, 2016 was $8,000.~~$(10,000) and $186,000, respectively.

For the first ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, the compensation cost for these plans was ~~$524,000~~$767,000 and ~~$977,000,~~$816,000, respectively. The income tax benefit recognized in the Condensed Consolidated Statements of Operations per adoption of ASU 2016-09 for share-based compensation plans for the ~~first six~~nine months ended ~~December~~March 31, ~~2017~~2019 and 2018 was $20,000; while the income tax benefit recognized in the Condensed Consolidated Statements of Stockholders' Equity for share-based compensation plans for the first six months ended December 31, 2016 was $179,000.$114,000 and $206,000, respectively.

Equity Incentive Plans. The Corporation established and the shareholders approved the 2013 Plan, the 2010 Plan and the 2006 Plan (collectively, "the Plans") for directors, advisory directors, directors emeriti, officers and employees of the Corporation and its subsidiary. The 2013 Plan authorizes 300,000 stock options and 300,000 shares of restricted stock. The 2013 Plan also provides that no person may be granted more than 60,000 stock options or 45,000 shares of restricted stock in any one year. The 2010 Plan authorizes 586,250 stock options and 288,750 shares of restricted stock. The 2010 Plan also provides that no person may be granted more than 117,250 stock options or 43,312 shares of restricted stock in any one year. The 2006 Plan authorized 365,000 stock options and 185,000 shares of restricted stock. The 2006 Plan also provided that no person ~~may be~~was granted more than 73,000 stock options or 27,750 shares of restricted stock in any one year.

Equity Incentive Plans - Stock Options. Under the Plans, options may not be granted at a price less than the fair market value at the date of the grant. Options typically vest over a five-year or shorter period as long as the director, advisory director, director emeritus, officer or employee remains in service to the Corporation. The options are exercisable after vesting for up to the remaining term of the original grant. The maximum term of the options granted is 10 years.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option valuation model with the following assumptions. The expected volatility is based on implied volatility from historical common stock closing prices for the prior 84 months. The expected dividend yield is based on the most recent quarterly dividend on an annualized basis. The expected term is based on the historical experience of all fully vested stock option grants and is reviewed

annually. The risk-free interest rate is based on the U.S. Treasury note rate with a term similar to the underlying stock option on the particular grant date.

During the ~~second~~third quarter of fiscal 2019, no options were granted or forfeited, and 11,250 options were exercised. This compares to the third quarter of fiscal 2018 when no options were granted ~~while 5,750~~or forfeited, and 56,500 options were ~~exercised and~~exercised. During the first nine months of fiscal 2019, no options were ~~forfeited.~~granted or forfeited, and 31,250 options were exercised. This compares to the ~~second quarter of fiscal 2017 when 6,000 options were granted, 22,750 options were exercised~~

~~and 11,250 options were forfeited. During the~~ first ~~six~~nine months of fiscal 2018 when no options were granted, ~~27,250~~and 83,750 options were exercised and 2,500 options were forfeited. ~~This compares to the first six months of fiscal 2017 when 26,000 options were granted, while 23,750 options were exercised and 27,250 options were forfeited.~~ As of ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, there were 147,500 ~~and 138,000~~ stock options available for future grants under the Plans ~~respectively.~~at both dates.

The following tables summarize the stock option activity in the Plans for the quarter and ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2019.


	For the Quarter Ended December 31, 2017					For the Quarter Ended March 31, 2019
Options	Shares		Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Outstanding at September 30, 2017	591,250		$12.27
Outstanding at December 31, 2018							509,000		$	12.83
Granted	—		$—				—		$	—
Exercised	(5,750	)	$14.59				(11,250	)	$	14.59
Forfeited	—		$—				—		$	—
Outstanding at December 31, 2017	585,500		$12.25	5.29	$3,633
Vested and expected to vest at December 31, 2017	545,350		$12.03	5.17	$3,501
Exercisable at December 31, 2017	384,750		$10.67	4.41	$2,973
Outstanding at March 31, 2019							497,750		$	12.79		4.53		$	3,551
Vested and expected to vest at March 31, 2019							495,150		$	12.75		4.52		$	3,550
Exercisable at March 31, 2019							484,750		$	12.60		4.45		$	3,546


	For the Six Months Ended December 31, 2017					For the Nine Months Ended March 31, 2019
Options	Shares		Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Outstanding at June 30, 2017	615,250		$12.14
Outstanding at June 30, 2018							529,000		$	12.77
Granted	—		$—				—		$	—
Exercised	(27,250	)	$9.57				(31,250	)	$	12.49
Forfeited	(2,500	)	$14.59				—		$	—
Outstanding at December 31, 2017	585,500		$12.25	5.29	$3,633
Vested and expected to vest at December 31, 2017	545,350		$12.03	5.17	$3,501
Exercisable at December 31, 2017	384,750		$10.67	4.41	$2,973
Outstanding at March 31, 2019							497,750		$	12.79		4.53		$	3,551
Vested and expected to vest at March 31, 2019							495,150		$	12.75		4.52		$	3,550
Exercisable at March 31, 2019							484,750		$	12.60		4.45		$	3,546

As of ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, there was ~~$652,000~~$68,000 and ~~$1.1 million~~$503,000 of unrecognized compensation expense, respectively, related to unvested share-based compensation arrangements under the Plans. The expense is expected to be recognized over a weighted-average period of ~~1.1~~1.5 years and ~~2.0~~1.0 years, respectively. The forfeiture rate during the first ~~six~~nine months of fiscal ~~2018~~2019 and ~~2017~~2018 was 20 percent for both periods, and was calculated by using the historical forfeiture experience of stock option grants and is reviewed annually.

Equity Incentive Plans – Restricted Stock. The Corporation used 300,000 shares, 288,750 shares and 185,000 shares of its treasury stock to fund the 2013 Plan, the 2010 Plan and the 2006 Plan, respectively. Awarded shares typically vest over a five-year or shorter period as long as the director, advisory director, director emeriti, officer or employee remains in service to the Corporation. Once vested, a recipient of restricted stock will have all rights of a shareholder, including the power to vote and the right to receive dividends. The Corporation recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the award date.

There ~~was~~were no restricted stock awards and no forfeitures, while there were 3,000 shares of restricted stock vested in the third quarter of fiscal 2019. This compares to no restricted stock activity in the ~~second~~third quarter of fiscal ~~2018. This compares to~~2018, other than the ~~award of 3,000 shares, the forfeiture of 8,250 shares and no~~ vesting of ~~restricted stock in the second quarter of fiscal 2017.~~10,500 shares. For the first ~~six~~nine months of fiscal ~~2018,~~2019, there was no restricted stock activity, other than the ~~forfeiture~~vesting of ~~2,000~~89,500 shares. This compares to no restricted stock activity, other than the ~~award~~vesting of ~~18,000~~10,500 shares and the forfeiture of ~~15,250~~2,000 shares ~~and the vesting of 87,750 shares of restricted stock in~~for the first ~~six~~nine months of fiscal ~~2017.~~2018. As of ~~December~~March 31,

~~2017~~ 2019 and ~~2016,~~2018, there were 267,750 shares ~~and 271,750 shares~~ of restricted stock ~~respectively~~ available for future awards under the ~~Plans.~~Plans at both dates.

The following ~~table summarizes~~tables summarize the unvested restricted stock activity infor the quarter and ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2019.


	For the Quarter Ended December 31, 2017		For the Quarter Ended March 31, 2019
Unvested Shares	Shares	Weighted-Average Award Date Fair Value	Shares			Weighted- Average Award Date Fair Value
Unvested at September 30, 2017	109,000	$14.45
Unvested at December 31, 2018				12,000		$	18.31
Granted	—	$—		—		$	—
Vested	—	$—		(3,000	)	$	18.90
Forfeited	—	$—		—		$	—
Unvested at December 31, 2017	109,000	$14.45
Expected to vest at December 31, 2017	87,200	$14.45
Unvested at March 31, 2019				9,000		$	18.11
Expected to vest at March 31, 2019				7,200		$	18.11


	For the Six Months Ended December 31, 2017			For the Nine Months Ended March 31, 2019
Unvested Shares	Shares		Weighted-Average Award Date Fair Value	Shares			Weighted- Average Award Date Fair Value
Unvested at June 30, 2017	111,000		$14.16
Unvested at June 30, 2018					98,500		$	14.35
Granted	—		$—		—		$	—
Vested	—		$—		(89,500	)	$	13.97
Forfeited	(2,000	)	$13.30		—		$	—
Unvested at December 31, 2017	109,000		$14.45
Expected to vest at December 31, 2017	87,200		$14.45
Unvested at March 31, 2019					9,000		$	18.11
Expected to vest at March 31, 2019					7,200		$	18.11

As of ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, the unrecognized compensation expense was ~~$867,000~~$131,000 and ~~$1.3 million,~~$687,000, respectively, related to unvested share-based compensation arrangements under the Plans, and reported as a reduction to ~~stockholders’~~stockholders' equity. This expense is expected to be recognized over a weighted-average period of ~~1.3~~1.5 years and ~~2.2~~1.2 years, respectively. Similar to stock options, a forfeiture rate of 20 percent has been applied for the restricted stock compensation expense calculations in the first ~~six~~nine months of fiscal ~~2018~~2019 and ~~2017.~~

~~Stock Option Plan.~~ The Corporation established the Stock Option Plan for key employees and eligible directors under which options to acquire up to 352,500 shares of common stock may be granted. Under the Stock Option Plan, stock options may not be granted at a price less than the fair market value at the date of the grant. Stock options typically vest over a five-year period on a pro-rata basis as long as the employee or director remains in service to the Corporation. The stock options are exercisable after vesting for up to the remaining term of the original grant. The maximum term of the stock options granted is 10 years. As of December 31, 2017, no stock options remain available for future grants under the Stock Option Plan, which expired in November 2013.

The fair value of each stock option grant was estimated on the date of the grant using the Black-Scholes option valuation model with the following assumptions. The expected volatility was based on implied volatility from historical common stock closing prices for the prior 84 months. The expected dividend yield was based on the most recent quarterly dividend on an annualized basis. The expected term was based on the historical experience of stock option grants and is reviewed annually. The risk-free interest rate was based on the U.S. Treasury note rate with a term similar to the underlying stock option on the particular grant date.

2018.

For the second quarter of fiscal 2018 and 2017, there was no activity in the Stock Option Plan. For the first six months of fiscal 2018 and 2017, there was no activity in the Stock Option Plan, except forfeitures of 50,000 shares and 12,500 shares, respectively. As of December 31, 2017 and 2016, there were no stock options available for future grants under the Stock Option Plan.

~~The following table summarizes the activity in the Stock Option Plan for the six months ended December 31, 2017.~~

For the Six Months Ended December 31, 2017

Options

Shares

Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value
($000)
Outstanding at June 30, 2017 50,000
$19.92
Granted —
$—
Exercised —
$—
Forfeited (50,000 ) $19.92
Outstanding at December 31, 2017 —
$— — $—
Vested and expected to vest at December 31, 2017 —
$— — $—
Exercisable at December 31, 2017 —
$— — $—

~~As of December 31, 2017 and 2016, there was no unrecognized compensation expense at either date, related to unvested share-based compensation arrangements under the Stock Option Plan.~~

Note 10: Reclassification ~~adjustment~~Adjustment of Accumulated Other Comprehensive Income ("AOCI")

The following tables provide the changes in AOCI by component for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018.


	For the Quarter Ended December 31, 2017										For the Quarter Ended March 31, 2019
	Unrealized gains and losses on										Unrealized gains and losses on
(In Thousands)	Investment securities available for sale			Interest-only strips			Total			Investment securities available for sale				Interest- only strips			Total

Beginning balance at September 30, 2017	$	214		$	16		$	230
Beginning balance at December 31, 2018											$	154		$	15		$	169

Other comprehensive loss before reclassifications	(61		)	(4		)	(65		)			(4	)		(2	)		(6	)
Amount reclassified from accumulated other comprehensive income	42			3			45					—			—			—
Net other comprehensive loss	(19		)	(1		)	(20		)			(4	)		(2	)		(6	)

Ending balance at December 31, 2017	$	195		$	15		$	210
Ending balance at March 31, 2019											$	150		$	13		$	163

		For the Quarter Ended March 31, 2018
		Unrealized gains and losses on
(In Thousands)	Investment securities available for sale				Interest- only strips			Total

Beginning balance at December 31, 2017		$	195		$	15		$	210

Other comprehensive loss before reclassifications			(20	)		(2	)		(22	)
Amount reclassified from accumulated other comprehensive income			(2	)		—			(2	)
Net other comprehensive loss			(22	)		(2	)		(24	)

Ending balance at March 31, 2018		$	173		$	13		$	186


		For the Nine Months Ended March 31, 2019
		Unrealized gains and losses on
(In Thousands)	Investment securities available for sale				Interest- only strips			Total

Beginning balance at June 30, 2018		$	194		$	16		$	210

Other comprehensive loss before reclassifications			(44	)		(3	)		(47	)
Amount reclassified from accumulated other comprehensive income			—			—			—
Net other comprehensive loss			(44	)		(3	)		(47	)

Ending balance at March 31, 2019		$	150		$	13		$	163

		For the Nine Months Ended March 31, 2018
		Unrealized gains and losses on
(In Thousands)	Investment securities available for sale				Interest- only strips			Total

Beginning balance at June 30, 2017		$	211		$	18		$	229

Other comprehensive loss before reclassifications			(78	)		(8	)		(86	)
Amount reclassified from accumulated other comprehensive income			40			3			43
Net other comprehensive loss			(38	)		(5	)		(43	)

Ending balance at March 31, 2018		$	173		$	13		$	186

For the Quarter Ended December 31, 2016
Unrealized gains and losses on
(In Thousands) Investment securities available for sale Interest-only strips Total

Beginning balance at September 30, 2016 $ 256
$ 24
$ 280

Other comprehensive loss before reclassifications (14 ) (2 ) (16 )
Amount reclassified from accumulated other comprehensive income —
—
—
Net other comprehensive loss (14 ) (2 ) (16 )

Ending balance at December 31, 2016 $ 242
$ 22
$ 264

For the Six Months Ended December 31, 2017
Unrealized gains and losses on
(In Thousands) Investment securities available for sale Interest-only strips Total

Beginning balance at June 30, 2017 $ 211
$ 18
$ 229

Other comprehensive loss before reclassifications (58 ) (6 ) (64 )
Amount reclassified from accumulated other comprehensive income 42
3
45
Net other comprehensive loss (16 ) (3 ) (19 )

Ending balance at December 31, 2017 $ 195
$ 15
$ 210

For the Six Months Ended December 31, 2016
Unrealized gains and losses on
(In Thousands) Investment securities available for sale Interest-only strips Total

Beginning balance at June 30, 2016 $ 286
$ 27
$ 313

Other comprehensive loss before reclassifications (44 ) (5 ) (49 )
Amount reclassified from accumulated other comprehensive income —
—
—
Net other comprehensive loss (44 ) (5 ) (49 )

Ending balance at December 31, 2016 $ 242
$ 22
$ 264

Note 11: Offsetting Derivative and Other Financial Instruments

The ~~Corporation’s~~Corporation's derivative transactions are generally governed by International Swaps and Derivatives Association Master Agreements and similar arrangements, which include provisions governing the setoff of assets and liabilities between the parties. When the Corporation has more than one outstanding derivative transaction with a single counterparty, the setoff provisions contained within these agreements generally allow the non-defaulting party the right to reduce its liability to the defaulting party by amounts eligible for setoff, including the collateral received as well as eligible offsetting transactions with that counterparty,

irrespective of the currency, place of payment, or booking office. The ~~Corporation’s~~Corporation's policy is to present its derivative assets and derivative liabilities on the Condensed Consolidated Statements of Financial Condition on a net basis. The derivative assets and liabilities are comprised of mandatory loan sale commitments, TBA MBS trades and option contracts.

The following tables present the gross and net amounts of derivative assets and liabilities and other financial instruments as reported in the ~~Corporation’s~~Corporation's Condensed Consolidated Statement of Financial Condition, and the gross amount not offset in the ~~Corporation’s~~Corporation's Condensed Consolidated Statement of Financial Condition as of the dates indicated.

As of ~~December~~March 31, ~~2017:~~

Gross Net
Amount Amount
Offset in the of Assets in Gross Amount Not Offset in
Condensed the Condensed the Condensed Consolidated
Gross Consolidated Consolidated Statements of Financial Condition
Amount of Statements Statements Cash
Recognized of Financial of Financial Financial Collateral Net
(In Thousands) Assets Condition Condition Instruments Received Amount
Assets
Derivatives $ 2
$ —
$ 2
$ —
$ —
$ 2
Total $ 2
$ —
$ 2
$ —
$ —
$ 2

Gross Net
Amount Amount
Offset in the of Liabilities in Gross Amount Not Offset in
Condensed the Condensed the Condensed Consolidated
Gross Consolidated Consolidated Statements of Financial Condition
Amount of Statements Statements Cash
Recognized of Financial of Financial Financial Collateral Net
(In Thousands) Liabilities Condition Condition Instruments Received Amount
Liabilities
Derivatives $ 207
$ —
$ 207
$ —
$ —
$ 207
Total $ 207
$ —
$ 207
$ —
$ —
$ 207

~~As of June 30, 2017:~~

Gross Net
Amount Amount
Offset in the of Assets in Gross Amount Not Offset in
Condensed the Condensed the Condensed Consolidated
Gross Consolidated Consolidated Statements of Financial Condition
Amount of Statements Statements Cash
Recognized of Financial of Financial Financial Collateral Net
(In Thousands) Assets Condition Condition Instruments Received Amount
Assets
Derivatives $ 623
$ —
$ 623
$ —
$ —
$ 623
Total $ 623
$ —
$ 623
$ —
$ —
$ 623

2019:

Gross

Net

Amount

Offset in the

of ~~Liabilities~~Assets in

Gross Amount Not Offset in

Condensed

the Condensed

the Condensed Consolidated

Gross

Consolidated

Statements of Financial Condition

Amount of

Statements

Cash

Recognized

of Financial

Financial

Collateral

Net

(In Thousands)

~~Liabilities~~Assets

Condition

Instruments

Received

Amount

~~Liabilities~~Assets

Derivatives

$—

—

Total

$—

—

$—

Gross

Net

Amount

Offset in the

of Liabilities in

Gross Amount Not Offset in

Condensed

the Condensed

the Condensed Consolidated

Gross

Consolidated

Statements of Financial Condition

Amount of

Statements

Cash

Recognized

of Financial

Financial

Collateral

Net

(In Thousands)

Liabilities

Condition

Instruments

Received

Amount

Liabilities

Derivatives

$224

$—

$224

$—

$224

Total

$224

$—

$224

$—

$224

As of June 30, 2018:

Gross

Net

Amount

Offset in the

of Assets in

Gross Amount Not Offset in

Condensed

the Condensed

the Condensed Consolidated

Gross

Consolidated

Statements of Financial Condition

Amount of

Statements

Cash

Recognized

of Financial

Financial

Collateral

Net

(In Thousands)

Assets

Condition

Instruments

Received

Amount

Assets

Derivatives

$—

Total

$—

Gross

Net

Amount

Offset in the

of Liabilities in

Gross Amount Not Offset in

Condensed

the Condensed

the Condensed Consolidated

Gross

Consolidated

Statements of Financial Condition

Amount of

Statements

Cash

Recognized

of Financial

Financial

Collateral

Net

(In Thousands)

Liabilities

Condition

Instruments

Received

Amount

Liabilities

Derivatives

$440

$—

$440

$—

$440

Total

$440

$—

$440

$—

$440

Note 12: Revenue From Contracts With Customers

In accordance with ASC 606, revenues are recognized when goods or services are transferred to the customer in exchange for the consideration the Company expects to be entitled to receive. The largest portion of the Company's revenue is from interest income, which is not in the scope of ASC 606. All of the Company's revenue from contracts with customers in the scope of ASC 606 is recognized in non-interest income.

If a contract is determined to be within the scope of ASC 606, the Company recognizes revenue as it satisfies a performance obligation. Payments from customers are generally collected at the time services are rendered, monthly, or quarterly. For contracts with customers within the scope of ASC 606, revenue is either earned at a point in time or revenue is earned over time. Examples of revenue earned at a point in time are automated teller machine ("ATM") transaction fees, wire transfer fees, overdraft fees and interchange fees. Revenue is primarily based on the number and type of transactions that are generally derived from transactional information accumulated by our systems and is recognized immediately as the transactions occur or upon providing the service to complete the customer's transaction. The Company is generally the principal in these contracts, with the exception of interchanges fees, in which case the Company is acting as the agent and records revenue net of expenses paid to the principal. Examples of revenue earned over time, which generally occur on a monthly basis, are deposit account maintenance fees, investment advisory fees, merchant revenue, trust and investment management fees and safe deposit box fees. Revenue is generally derived from transactional information accumulated by our systems or those of third-parties and is recognized as the related transactions occur or services are rendered to the customer.

Disaggregation of Revenue:

The following table includes the Company's non-interest income disaggregated by type of services for the quarters and nine months ended March 31, 2019 and 2018:

	For the Quarters Ended March 31,					For the Nine Months Ended March 31,
Type of Services	2019		2018			2019		2018
(In Thousands)
Asset management fees	$	77	$	87		$	215	$	294
Debit card and ATM fees		395		394			1,227		1,190
Deposit related fees		484		549			1,522		1,659
Loan related fees		12		(6	)		25		(42	)
BOLI ⁽¹⁾		47		65			140		199
Loan servicing fees ⁽¹⁾		262		493			863		1,173
Net gain on sale of loans ⁽¹⁾		1,719		3,597			7,114		12,761
Other		56		31			90		69
Total non-interest income	$	3,052	$	5,210		$	11,196	$	17,303

⁽¹⁾	Not in scope of ASC 606.

For the quarters and nine months ended March 31, 2019 and 2018, substantially all of the Company's revenues within the scope of ASC 606 are for performance obligations satisfied at a specified date.

Revenues recognized in scope of ASC 606:

Asset management fees: Asset management fees are variable, since they are based on the underlying portfolio value, which is subject to market conditions and amounts invested by clients through a third-party provider. Asset management fees are recognized over the period that services are provided, and when the portfolio values are known or can be estimated at the end of each month.

Debit card and ATM fees: Debit and ATM interchange income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange fees from debit cardholder transactions through a third party payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders' debit card. Certain expenses directly associated with the debit cards are recorded on a net basis with the interchange income.

Deposit related fees: Fees are earned on the Bank's deposit accounts for various products offered to or services performed for the Bank's customers. Fees include business account fees, non-sufficient fund fees, stop payment fees, wire services, safe deposit box and others. These fees are recognized on a daily, monthly or quarterly basis, depending on the type of service.

Loan related fees: Non-interest loan fee income is earned on loans that the Bank services, excluding loan servicing fees which are not within the scope of ASC 606. Loan related fees include prepayment fees, late charges, brokered loan fees, maintenance fees and others. These fees are recognized on a daily, monthly, quarterly or annual basis, depending on the type of service.

Other: Fees earned on other services, such as merchant services or occasional non-recurring type services, are recognized at the time of the event or the applicable billing cycle.

Note 13: Income Taxes

On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the ~~“Tax Act”~~"Tax Act"). The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Tax Act reduces the corporate federal tax income rate from a maximum of 35 percent to a flat 21 percent. The federal corporate tax rate reduction was effective January 1, 2018. Since the Corporation has a fiscal year end of June 30^th, the reduced federal corporate income tax rate for its fiscal year 2018 ~~will result~~resulted in the application of a blended federal statutory income tax rate of 28.06 percent, which is based on the applicable tax rates before and after the Tax Act and corresponding number of days in the fiscal year before and after enactment, and then a flat 21 percent tax rate thereafter.

Under generally accepted accounting principles, the Corporation uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. At June 30, 2017, the ~~Corporation’s~~Corporation's deferred tax assets and liabilities were determined based on the then-current enacted federal tax rate of 35 percent. As a result of the reduction in the federal corporate income tax rate under the Tax Act, the Corporation revalued its deferred tax assets and liabilities at December 31, 2017. Deferred tax assets and liabilities ~~expected to be~~ realized in fiscal year 2018 were re-measured using the aforementioned blended rate. All remaining deferred tax assets and liabilities were re-measured using the new statutory federal rate of 21 percent. These re-measurements collectively resulted in a discrete tax expense of ~~$1.8~~$1.9 million that was recognized ~~during~~in the ~~quarter ended December 31, 2017. The Corporation’s revaluation~~first nine months of its deferred tax assets and liabilities is subject to further clarification of the Tax Act and refinements of its estimates. As a result, the actual impact on the deferred tax assets and liabilities and income tax expense due to the Tax Act may vary from the amounts estimated.

fiscal 2018.

The estimated combined federal and state statutory tax rates, before discrete items, for ~~the remainder of~~ fiscal ~~2018~~years 2019 and ~~for fiscal 2019~~2018 are as follows:


Statutory Tax Rates	Q3FY2018	Q4FY2018	FY2019	FY2019	FY2018
Federal Tax Rate	28.06%		21.00%	21.00%	28.06%
State Tax Rate	10.84%			10.84%
Combined Statutory Tax Rate⁽¹⁾	35.86%		29.56%	29.56%	35.86%

⁽¹⁾ The combined statutory tax rate is net of the federal tax benefit for the state tax deduction.

The ~~Corporation’s~~Corporation's effective tax rate may differ from the estimated statutory tax rates described above due to discrete items such as further adjustments to net deferred tax assets, excess tax benefits derived from stock option exercises and non-taxable earnings from bank owned life insurance, among other items.

Note ~~13:~~14: Subsequent Event

On ~~January~~April 30, ~~2018,~~2019, the Corporation announced that the ~~Corporation’s~~Corporation's Board of Directors declared a quarterly cash dividend of ~~$0.14~~$0.14 per share. Shareholders of the ~~Corporation’s~~Corporation's common stock at the close of business on ~~February 20, 2018~~May 21, 2019 will be entitled to receive the cash dividend. The cash dividend will be payable on ~~March 13, 2018.~~June 11, 2019.

On April 30, 2019, the Corporation announced that the Corporation's Board of Directors authorized a one-year extension of the April 2018 stock repurchase plan. To date, a total of 23,748 shares of the Corporation's common stock have been purchased under the plan, leaving 349,252 shares of the Corporation's common stock authorized for purchase from time to time in the open market or in privately negotiated transactions prior to the expiration of the extension on April 26, 2020.

ITEM 2 – ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Provident Financial Holdings, Inc., a Delaware corporation, was organized in January 1996 for the purpose of becoming the holding company of Provident Savings Bank, F.S.B. ("the Bank") upon the ~~Bank’s~~Bank's conversion from a federal mutual to a federal stock savings bank ~~(“Conversion”~~("Conversion"). The Conversion was completed on June 27, 1996. The Corporation is regulated by the Federal Reserve Board ~~(“FRB”~~("FRB"). At ~~December~~March 31, ~~2017,~~2019, the Corporation had total assets of ~~$1.16~~$1.12 billion, total deposits of ~~$907.8~~$876.9 million and total ~~stockholders’~~stockholders' equity of ~~$120.7~~$121.2 million. The Corporation has not engaged in any significant activity other than holding the stock of the Bank. Accordingly, the information set forth in this report, including financial statements and related data, relates primarily to the Bank and its subsidiaries. As used in this report, the terms ~~“we,” “our,” “us,”~~"we," "our," "us," and ~~“Corporation”~~"Corporation" refer to Provident Financial Holdings, Inc. and its consolidated subsidiaries, unless the context indicates otherwise.

The Bank, founded in 1956, is a federally chartered stock savings bank headquartered in Riverside, California. The Bank is regulated by the Office of the Comptroller of the Currency ~~(“OCC”~~("OCC"), its primary federal regulator, and the Federal Deposit Insurance Corporation ~~(“FDIC”~~("FDIC"), the insurer of its deposits. The ~~Bank’s~~Bank's deposits are federally insured up to applicable limits by the FDIC. The Bank has been a member of the Federal Home Loan Bank System since 1956.

The ~~Corporation’s~~Corporation's business consists of community banking activities and mortgage banking activities, conducted by Provident Bank and Provident Bank Mortgage ("PBM"), a division of the Bank. Community banking activities primarily consist of accepting deposits from customers within the communities surrounding the ~~Bank’s~~Bank's full service offices and investing those funds in single-family loans, multi-family loans, commercial real estate loans, construction loans, commercial business loans, consumer loans and other real estate loans. The Bank also offers business checking accounts, other business banking services, and services loans for others. Mortgage banking activities consist of the origination ~~purchase~~ and sale of mortgage loans secured primarily by single-family residences. The Bank currently operates 14 retail/business banking offices in Riverside County and San Bernardino County (commonly known as the Inland Empire). Provident Bank Mortgage operates two wholesale loan production offices: one in Pleasanton and one in Rancho Cucamonga, California; and nine retail loan production offices located throughout California. The ~~Corporation’s~~Corporation's revenues are derived principally from interest on its loans and investment securities and fees generated through its community banking and mortgage banking activities. There are various risks inherent in the ~~Corporation’s~~Corporation's business including, among others, the general business environment, interest rates, the California real estate market, the demand for loans, the prepayment of loans, the repurchase of loans previously sold to investors, the secondary market conditions to sell loans, competitive conditions, legislative and regulatory changes, fraud and other risks.

The Corporation began to distribute quarterly cash dividends in the quarter ended ~~December~~March 31, 2002. On ~~October 24, 2017,~~January 29, 2019, the Corporation declared a quarterly cash dividend of $0.14 per share for the ~~Corporation’s~~Corporation's shareholders of record at the close of business on ~~November 14, 2017,~~February 19, 2019, which was paid on ~~December 5, 2017.~~March 12, 2019. Future declarations or payments of dividends will be

subject to the consideration of the ~~Corporation’s~~Corporation's Board of Directors, which will take into account the ~~Corporation’s~~Corporation's financial condition, results of operations, tax considerations, capital requirements, industry standards, legal restrictions, economic conditions and other factors, including the regulatory restrictions which affect the payment of dividends by the Bank to the Corporation. Under Delaware law, dividends may be paid either out of surplus or, if there is no surplus, out of net profits for the current fiscal year and/or the preceding fiscal year in which the dividend is declared. ~~For further discussion, see Note 13~~

On April 30, 2019, the Corporation announced that the Corporation's Board of Directors declared a quarterly cash dividend of $0.14 per share. Shareholders of the ~~Notes~~Corporation's common stock at the close of business on May 21, 2019 will be entitled to ~~Unaudited Interim Condensed Consolidated Financial Statements.~~receive the cash dividend. The cash dividend will be payable on June 11, 2019.

~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding the financial condition and results of operations of the Corporation. The information contained in this section should be read in conjunction with the Unaudited Interim Condensed Consolidated Financial Statements and accompanying selected Notes to Unaudited Interim Condensed Consolidated Financial Statements.

Safe-Harbor Statement

Certain matters in this Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This Form 10-Q contains statements that the Corporation believes are ~~“forward-looking~~"forward-looking statements.”" These statements relate to the ~~Corporation’s~~Corporation's financial condition, liquidity, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Corporation may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Corporation. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to the following: the possibility that the actual costs incurred from our exiting the mortgage banking business and the possibility that the actual changes in pre-tax losses from the mortgage banking segment and our pre-tax income will be materially different from the estimated changes provided in this report; the possibility that our mortgage banking business may experience increased volatility in its revenues and earnings before the discontinuation of the mortgage banking business, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the residential and commercial real estate markets and may lead to increased losses and non-performing assets and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our reserve; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of the Corporation by the FRB or of the Bank by the OCC or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to enter into a formal enforcement action or to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements and restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, including the interpretation of regulatory capital or other rules, including as a result of Basel III; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act ~~(the "Dodd Frank Act")~~ and the implementing regulations; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; our ability to attract and retain deposits; increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; our ability to implement our branch expansion strategy; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations

or to respond to regulatory actions; our ability to pay dividends on our common stock; adverse changes in the securities markets; the inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; war or terrorist activities; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks detailed in this report and in the ~~Corporation’s~~Corporation's other reports filed with or furnished to the ~~SEC, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2017.~~SEC. These developments

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

Critical Accounting Policies

The discussion and analysis of the ~~Corporation’s~~Corporation's financial condition and results of operations is based upon the ~~Corporation’s~~Corporation's condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

The Corporation's critical accounting policies are described in the Corporation's ~~2017~~2018 Annual Report on Form 10-K for the year ended June 30, ~~2017~~2018 in the Critical Accounting Policies section of Management's Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 - Organization and Significant Accounting Policies. There have been no significant changes during the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 to the critical accounting policies as described in the Corporation's ~~2017~~2018 Annual Report on Form 10-K for the period ended June 30, ~~2017.~~2018.

Executive Summary and Operating Strategy

Provident Savings Bank, F.S.B., established in 1956, is a financial services company committed to serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank conducts its business operations as Provident Bank, Provident Bank Mortgage, a division of the Bank, and through its subsidiary, Provident Financial Corp. The business activities of the Corporation, primarily through the Bank and its subsidiary, consist of community banking, mortgage banking and, to a lesser degree, investment services for customers and trustee services on behalf of the Bank.

Community banking operations primarily consist of accepting deposits from customers within the communities surrounding the ~~Corporation’s~~Corporation's full service offices and investing those funds in single-family, multi-family and commercial real estate loans. Also, to a lesser extent, the Corporation makes construction, commercial business, consumer and other mortgage loans. The primary source of income in community banking is net interest income, which is the difference between the interest income earned on loans and investment securities, and the interest expense paid on interest-bearing deposits and borrowed funds. Additionally, certain fees are collected from depositors, such as returned check fees, deposit account service charges, ATM fees, IRA/KEOGH fees, safe deposit box fees, wire transfer fees and overdraft protection fees, among other fees. Community banking operations also include providing investment services which primarily consist of selling alternative investment products such as annuities and mutual funds to the Bank’s depositors.others.

During the next three years, subject to market conditions, the Corporation intends to improve its community banking business by moderately increasing total assets; by increasing single-family mortgage loans and higher yielding ~~preferred~~ loans (i.e., multi-family, commercial real estate, construction and commercial business loans). In addition, the Corporation intends to decrease the percentage of time deposits in its deposit base and to increase the percentage of lower cost checking and savings accounts. This strategy is intended to improve core revenue through a higher net interest margin and ultimately, coupled with the growth of the Corporation, an increase in net interest income. While the ~~Corporation’s~~Corporation's long-term strategy is for moderate growth, management recognizes that growth may not occur as a result of weaknesses in general economic conditions.

Mortgage banking operations primarily consist of the origination ~~purchase~~ and sale of mortgage loans secured by single-family residences. The primary sources of income in mortgage banking are gain on sale of loans and certain fees collected from borrowers in connection with the loan origination process. On February 4, 2019, the Corporation announced that it was in the long-term best interests of the Corporation to discontinue the operations of the Corporation's mortgage banking segment conducted through PBM.

This decision was reached after an analysis of current economic conditions and the current operating environment for the highly competitive mortgage banking business, including the significant decline in loan origination volume. The Corporation ~~will~~had been pursuing a strategy of improving the profitability of its mortgage banking business by significantly reducing operating expenses commensurate with the significant decline in loan origination volume while maintaining loan sale margins and prudent underwriting standards. However, based on the operating environment and market conditions for the foreseeable future, the Corporation determined that it would be unable to successfully execute that strategy within a reasonable period of time.

The Corporation plans to continue to ~~modify~~originate single-family mortgage loans for retention on its balance sheet, primarily within its market area, the Inland Empire region of Southern California and purchase these loans consistent with its historical activity in this regard. Upon termination of PBM's mortgage banking operations, ~~including~~PBM will no longer be reported as a segment of the ~~number~~Corporation. The Corporation currently estimates that PBM's mortgage banking operations will end on or before June 30, 2019 and expects that the headcount in the Corporation will decrease by approximately 122 full time equivalent employees by that date.

As a result of exiting the mortgage banking business, the Corporation estimates:

quarterly net interest income from the mortgage banking segment to decline approximately $306,000 (net of funding costs) by the first quarter of fiscal 2020 from $306,000 in the second quarter of fiscal 2019 due to the decrease in loans held for sale,

quarterly non-interest income from the mortgage banking segment to decline approximately $2.7 million by the first quarter of fiscal 2020 from $2.7 million in the second quarter of fiscal 2019,

quarterly non-interest expense from the mortgage banking segment to decrease approximately $4.6 million by the first quarter of fiscal 2020 from $4.6 million in the second quarter of fiscal 2019,

quarterly non-interest income from the community banking segment to increase approximately $272,000 to $1.2 million by the end of the first quarter of fiscal 2020 from $906,000 in the second quarter of fiscal 2019 as a result of the discontinuation of inter-company charges to compensate PBM for originating loans held for investment and for servicing fees on loans sold on a servicing retained basis,

quarterly non-interest expense from the community banking segment to increase approximately $649,000 to $6.9 million by the end of the first quarter of fiscal 2020 from $6.3 million in the second quarter of fiscal 2019 as a result of retaining certain mortgage banking personnel ~~in response~~to continue to originate and purchase single-family mortgage loans for retention on the Bank's balance sheet and discontinuation of the management fee allocation from the Bank to the ~~rapidly changing~~ mortgage banking ~~environment. Changes may include a different product mix, changes to underwriting standards, variations~~segment,

the estimated fully phased in ~~its operating expenses or a combination~~quarterly impact of these changes in fiscal 2020 will be to increase the pre-tax income by approximately $1.2 million per quarter in comparison to the second quarter of fiscal 2019,

the Corporation will stop accepting loan applications and ~~other changes.~~loan locks from the mortgage banking segment early in the fourth quarter of fiscal 2019, as a result, revenues will decrease more quickly than expenses but the declines in each cannot be accurately forecast for the time period the Corporation is effecting the exit from the mortgage banking business, and

to stop operating its mortgage banking business as a defined segment with separate mortgage banking segment reporting prior to the first quarter of fiscal 2020.

The Corporation also estimates that it will:

incur total one-time costs of approximately $3.6 million to $4.0 million, which amounts include costs for severance, retention, personnel, premises, occupancy, depreciation, and costs related to termination of data processing and other contractual arrangements, and

have estimated cash outlays of approximately $3.5 million to $3.9 million of its total estimated one-time costs (consistent with the amounts above less depreciation).

48Once the mortgage banking exit has been completed, the future operations of the Corporation will be much more consistent with the traditional community banking activities as described earlier.

Investment services operations primarily consist of selling alternative investment products such as annuities and mutual funds to the Bank's depositors. Investment services and trustee services contribute a very small percentage of gross revenue.

Provident Financial Corp performs trustee services for the ~~Bank’s~~Bank's real estate secured loan transactions and has in the past held, and may in the future hold, real estate for investment. ~~Trustee services contribute a very small percentage of gross revenue.~~

There are a number of risks associated with the business activities of the Corporation, many of which are beyond the ~~Corporation’s~~Corporation's control, including: changes in accounting principles, laws, regulation, interest rates and the economy, among others. The Corporation attempts to mitigate many of these risks through prudent banking practices, such as interest rate risk management, credit risk management, operational risk management, and liquidity risk management. The California economic environment presents heightened risk for the Corporation primarily with respect to real estate values and loan delinquencies. Since the majority of the ~~Corporation’s~~Corporation's loans are secured by real estate located within California, significant declines in the value of California real estate may also inhibit the ~~Corporation’s~~Corporation's ability to recover on defaulted loans by selling the underlying real estate. In addition, the Corporation’s operating costs may increase significantly as a result of the Dodd-Frank Act. Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over several years, making it difficult to anticipate the overall financial impact on the Corporation.

Off-Balance Sheet Financing Arrangements and Contractual Obligations

Commitments and Derivative Financial Instruments. The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, in the form of originating loans or providing funds under existing lines of credit, loan sale agreements to third parties and option contracts. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying Condensed Consolidated Statements of Financial Condition. The ~~Corporation’s~~Corporation's exposure to credit loss, in the event of non-performance by the counterparty to these financial instruments, is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in entering into financial instruments with off-balance sheet risk as it does for on-balance sheet instruments. For a discussion on commitments and derivative financial instruments, see Note 7 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

Contractual Obligations. The following table summarizes the ~~Corporation’s~~Corporation's contractual obligations at ~~December~~March 31, ~~2017~~2019 and the effect these obligations are expected to have on the ~~Corporation’s~~Corporation's liquidity and cash flows in future periods:


	Payments Due by Period										Payments Due by Period
(In Thousands)	Less than 1 year		1 to less than 3 years		3 to 5 years		Over 5 years		Total		Less than 1 year		1 to less than 3 years		3 to 5 years		Over 5 years		Total
Operating obligations	$	2,545	$	3,053	$	1,365	$	905	$	7,868	$	2,683	$	3,744	$	1,118	$	570	$	8,115
Pension benefits	248		496		496		6,611		7,851			253		505		505		6,282		7,545
Time deposits	103,338		114,408		29,823		4,685		252,254			117,104		72,065		23,725		719		213,613
FHLB – San Francisco advances	12,560		24,842		33,965		51,711		123,078			2,646		45,313		42,494		20,565		111,018
FHLB – San Francisco letter of credit	7,000		—		—		—		7,000			10,000		—		—		—		10,000
FHLB – San Francisco MPF credit enhancement ⁽¹⁾	—		—		—		2,458		2,458			—		—		—		2,458		2,458
Total	$	125,691	$	142,799	$	65,649	$	66,370	$	400,509	$	132,686	$	121,627	$	67,842	$	30,594	$	352,749


⁽¹⁾	Represents the potential future obligation for loans previously sold by the Bank to the FHLB – San Francisco under its Mortgage Partnership Finance ~~(“MPF”~~("MPF") program. As of ~~December~~March 31, ~~2017,~~2019, the Bank serviced ~~$13.3~~$10.4 million of loans under this program. The estimated amounts by period are based on historical loss experience.

The expected obligation for time deposits and FHLB – San Francisco advances include anticipated interest accruals based on the respective contractual terms.

In addition to the off-balance sheet financing arrangements and contractual obligations mentioned above, the Corporation has derivatives and other financial instruments with off-balance sheet risks as described in Note 7 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

Comparison of Financial Condition at ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017~~2018

Total assets decreased ~~$38.5~~$56.2 million, or ~~three~~five percent, to ~~$1.16~~$1.12 billion at ~~December~~March 31, ~~2017~~2019 from ~~$1.20~~$1.18 billion at June 30, ~~2017.~~2018. The decrease was primarily attributable to decreases in ~~cash and cash equivalents,~~ loans held for investment and loans held for sale, partly offset by ~~an increase~~increases in cash and cash equivalents and investment ~~securities held to maturity.~~securities.

Total cash and cash equivalents, primarily excess cash deposited with the Federal Reserve Bank of San Francisco, ~~decreased $25.6~~increased $18.2 million, or 3542 percent, to ~~$47.2~~$61.5 million at ~~December~~March 31, ~~2017~~2019 from ~~$72.8~~$43.3 million at June 30, ~~2017.~~2018. The ~~decrease~~increase in the total cash and cash equivalents was primarily attributable to the ~~utilization of cash to fund~~decreases in loans held for sale and loans held for investment, partly offset by the increase in investment securities ~~held to maturity.~~and the payoff of borrowings and time deposits that matured during the first nine months of fiscal 2019.

Investment securities (held to maturity and available for sale) increased ~~$26.2~~$13.5 million, or 3814 percent, to ~~$96.0~~$108.8 million at ~~December~~March 31, ~~2017~~2019 from ~~$69.8~~$95.3 million at June 30, ~~2017.~~2018. The increase was primarily the result of investment security purchases, ~~of mortgage-backed securities held to maturity,~~ partly offset by scheduled and accelerated principal payments on mortgage-backed securities during the first ~~six~~nine months of fiscal ~~2018.~~2019. For further analysis on investment securities, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.

Loans held for investment decreased ~~$18.9~~$19.1 million, or two percent, to ~~$886.0~~$883.6 million at ~~December~~March 31, ~~2017~~2019 from ~~$904.9~~$902.7 million at June 30, ~~2017.~~2018, primarily due to a $26.2 million decline in multi-family loans, partly offset by a $5.6 million increase in commercial real estate loans. During the first ~~six~~nine months of fiscal ~~2018,~~2019, the Corporation originated ~~$76.7~~$93.8 million of loans held for investment, consisting primarily of single-family, multi-family and commercial real estate loans and also purchased $26.2 million in single-family, multi-family ~~loans. During the first six months of fiscal 2018, the Corporation purchased $3.1 million of~~and commercial real estate loans held for investment. Total loan principal payments during the first ~~six~~nine months of fiscal ~~2018~~2019 were ~~$100.8~~$140.5 million, down ~~four~~two percent from ~~$105.3~~$143.9 million during the comparable period in fiscal ~~2017, due primarily to lower loan refinance activity.~~2018. The single-family loans held for investment balance ~~of preferred loans decreased $10.4 million, or two percent, to $574.7~~was essentially unchanged at $314.8 million at ~~December~~both March 31, ~~2017, compared to $585.1 million at~~2019 and June 30, ~~2017, net of undisbursed loan funds of $7.4 million and $9.0 million, respectively,~~2018, and represented 65approximately 36 percent and 6435 percent of loans held for investment, respectively. The balance of single-family loans held for investment decreased $8.4 million, or three percent, to $313.8 million at December 31, 2017, compared to $322.2 million at June 30, 2017, and represented 35 percent and 36 percent of loans held for investment, respectively.

The tables below describe the geographic dispersion of gross real estate secured loans held for investment at ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, as a percentage of the total dollar amount outstanding:

As of ~~December~~March 31, ~~2017~~2019


(Dollars In Thousands)	Inland Empire				Southern California ⁽¹⁾				Other California				Other States				Total				Inland Empire					Southern California ⁽¹⁾					Other California					Other States					Total
Loan Category	Balance		%		Balance		%		Balance		%		Balance		%		Balance		%		Balance		%			Balance		%			Balance		%			Balance		%			Balance		%
Single-family	$	103,704	33	%	$	148,932	48	%	$	60,097	19	%	$	1,104	—	%	$	313,837	100	%	$	107,164		34	%	$	144,261		46	%	$	62,360		20	%	$	1,039		—	%	$	314,824		100	%
Multi-family	79,149		17	%	275,716		59	%	106,204		23	%	2,717		1	%	463,786		100	%		71,357		16	%		275,087		61	%		103,039		23	%		329		—	%		449,812		100	%
Commercial real estate	32,604		31	%	46,126		45	%	24,636		24	%	—		—	%	103,366		100	%		31,972		28	%		55,435		48	%		27,948		24	%		—		—	%		115,355		100	%
Construction	3,224		22	%	9,808		68	%	1,398		10	%	—		—	%	14,430		100	%		295		7	%		3,397		82	%		447		11	%		—		—	%		4,139		100	%
Other																						—		—	%		—		—	%		167		100	%		—		—	%		167		100	%
Total	$	218,681	24	%	$	480,582	54	%	$	192,335	21	%	$	3,821	1	%	$	895,419	100	%	$	210,788		24	%	$	478,1801		54	%	$	193,961		22	%	$	1,368		—	%	$	884,297		100	%


⁽¹⁾	Other than the Inland Empire.

As of June 30, ~~2017~~2018


(Dollars In Thousands)	Inland Empire				Southern California ⁽¹⁾				Other California				Other States				Total				Inland Empire					Southern California ⁽¹⁾					Other California						Other States					Total
Loan Category	Balance		%		Balance		%		Balance		%		Balance		%		Balance		%		Balance		%			Balance		%			Balance			%			Balance		%			Balance		%
Single-family	$	102,686	32	%	$	156,045	49	%	$	62,249	19	%	$	1,217	—	%	$	322,197	100	%	$	110,510		35	%	$	149,261		48	%	$	53,960			17	%	$	1,077		—	%	$	314,808		100	%
Multi-family	80,861		17	%	282,871		59	%	113,459		24	%	2,768		—	%	479,959		100	%		76,473		16	%		287,174		60	%		109,684			23	%		2,677		1	%		476,008		100	%
Commercial real estate	31,497		32	%	42,192		43	%	23,873		25	%	—		—	%	97,562		100	%		32,224		29	%		47,903		44	%		29,599	��		27	%		—		—	%		109,726		100	%
Construction	3,760		24	%	10,614		66	%	1,635		10	%	—		—	%	16,009		100	%		49		1	%		2,685		85	%		440			14	%		—		—	%		3,174		100	%
Other																						—		—	%		—		—	%		167			100	%		—		—	%		167		100	%
Total	$	218,804	24	%	$	491,722	54	%	$	201,216	22	%	$	3,985	—	%	$	915,727	100	%	$	219,256		24	%	$	487,0231		54	%	$	193,850			21	%	$	3,754		1	%	$	903,883		100	%


⁽¹⁾	Other than the Inland Empire.

Loans held for sale decreased ~~$19.9~~$65.8 million, or 1768 percent, to ~~$96.6~~$30.5 million at ~~December~~March 31, ~~2017~~2019 from ~~$116.5~~$96.3 million at June 30, ~~2017.~~2018. The decrease was primarily due to ~~lower~~a decrease in the loans originated ~~and purchased~~ for sale attributable to the winding down of the mortgage banking operations and the timing difference between loan fundings and loan sale settlements. Total loans originated ~~and purchased~~

for sale during the quarter ended ~~December~~March 31, ~~2017~~2019 was ~~$331.9~~$110.7 million ~~down $74.0 million or 18 percent from $405.9~~as compared to $241.6 million during the quarter ended June 30, ~~2017.~~2018.

Total deposits decreased ~~$18.7~~$30.7 million, or ~~two~~three percent, to ~~$907.8~~$876.9 million at ~~December~~March 31, ~~2017~~2019 from ~~$926.5~~$907.6 million at June 30, ~~2017.~~2018. Transaction accounts ~~increased $2.1~~decreased $3.3 million to ~~$660.7~~$666.7 million at ~~December~~March 31, ~~2017~~2019 from ~~$658.6~~$670.0 million at June 30, ~~2017,~~2018, while time deposits decreased ~~$20.8~~$27.4 million, or ~~eight~~12 percent, to ~~$247.1~~$210.2 million at ~~December~~March 31, ~~2017~~2019 from ~~$267.9~~$237.6 million at June 30, ~~2017. The change in deposit mix was~~2018 consistent with the ~~Corporation’s marketing~~Bank's strategy to ~~promote transaction accounts and the strategic decision to increase the percentage of lower cost checking and savings accounts in its deposit base and~~ decrease the percentage of time deposits ~~by competing less aggressively for time deposits.~~in its deposit base.

Total borrowings decreased ~~$15.0~~$25.1 million, or 1220 percent, to ~~$111.2~~$101.1 million at ~~December~~March 31, ~~2017~~2019 as compared to $126.2 million at June 30, ~~2017,~~2018, due to the maturity of short-term ~~borrowings. Total~~ borrowings ~~are~~and an early payoff of a long-term borrowing. The borrowings were primarily comprised of long-term FHLB - San Francisco advances used for interest rate risk management purposes.

Total ~~stockholders’~~stockholders' equity ~~decreased $7.5 million,~~increased $752,000, or ~~six~~one percent, to ~~$120.7~~$121.2 million at ~~December~~March 31, ~~2017~~2019 from ~~$128.2~~$120.5 million at June 30, ~~2017,~~2018, primarily as a result of ~~stock repurchases totaling $5.2~~net income of $3.6 million ~~(see Part II, Item 2, “Unregistered Sales~~and the amortization of ~~Equity Securities and Use~~stock-based compensation benefits during the first nine months of ~~Proceeds”), $2.1~~fiscal 2019, partly offset by $3.1 million of quarterly cash dividends paid to shareholders and ~~a net loss of $1.0 million, partly offset by the amortization of stock-based compensation benefits during the first six months of fiscal 2018.~~stock repurchases from restricted stock recipients to fund their withholding tax obligations.

Comparison of Operating Results for the Quarters and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018

The ~~Corporation’s~~Corporation's net loss for the ~~second~~third quarter of fiscal ~~2018~~2019 was ~~$777,000, a decrease of $2.3 million, or 152 percent, as compared~~$151,000, in contrast to the net income of ~~$1.5~~$1.7 million in the same period of fiscal 2017. The second quarter of fiscal 2018 results were impacted by a net tax charge of $1.8 million, or $(0.24) per diluted share, from the net deferred tax assets revaluation required by the tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act”) enacted on December 22, 2017; and a $650,000 litigation expense accrual which, net of tax benefit, reduced net results by approximately $(0.06) per diluted share.2018. Compared to the same quarter last year, the ~~decrease~~decline was primarily attributable to ~~decreases~~a $1.88 million decrease in the gain on sale of loans and a ~~decline in the recovery from the allowance for loan losses, lower net interest income and an~~$484,000 increase ~~in the provision for income taxes, partly offset by a decrease~~ in salaries and employee benefits ~~expense.~~ expense, partly offset by the $189,000 benefit from income taxes resulting from the loss before taxes this quarter in contrast to the $667,000 provision for income taxes in the same quarter last year (an $856,000 difference).

For the first ~~six~~nine months of fiscal ~~2018,~~2019, the ~~Corporation’s~~Corporation's net ~~loss~~income was ~~$1.0~~$3.6 million, ~~a decrease~~an increase of ~~$4.1~~$2.9 million, or ~~132~~397 percent, from the net income of ~~$3.1 million~~$731,000 in the same period of fiscal ~~2017. The first six months of fiscal 2018 results were impacted by~~2018. Compared to the same period last year, the increase was primarily attributable to (a) the one-time, non-cash, net tax charge of ~~$1.8~~$1.9 million ~~or $(0.24) per diluted share,~~ from the net deferred tax assets revaluation required by the Tax ~~Act; and a~~Act consistent with the lower corporate federal income tax rate applied in the second quarter of fiscal 2018 (not replicated this fiscal year), (b) the $3.4 million litigation reserve in the first nine months of ~~litigation~~fiscal 2018 (not replicated this fiscal year), (c) a $1.8 million increase in net interest income and (d) a $1.9 million decrease in salaries and employee benefits expense ~~accruals which, net~~and (e) the application of the statutory federal and state income tax ~~benefit, reduced net results by approximately $(0.45) per diluted share. Compared~~rate of 29.56% this current period as compared to the blended tax rate of 35.86% in the same period last ~~year, the~~year; partly offset by a $5.7 million decrease ~~was primarily attributable to decreases~~ in the gain on sale of loans, an increase in the litigation expense accruals, a decline in the recovery from the allowance for loan losses, lower net interest income and an increase in the provision for income taxes, partly offset by a decrease in salaries and employee benefits expense.loans.

The ~~Corporation’s~~Corporation's efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, increased to 91103 percent for the ~~second~~third quarter of fiscal ~~2018~~2019 from 87 percent in the same period of fiscal ~~2017. For~~2018. However, for the first ~~six~~nine months of fiscal ~~2018,~~2019, the ~~Corporation’s~~Corporation's efficiency ratio ~~also increased~~improved to 9789 percent from 8693 percent for the same period of fiscal ~~2017.~~2018.

Return (loss) on average assets decreased 7764 basis points to ~~(0.27)~~(0.05) percent in the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~0.50~~0.59 percent in the same period last year. ~~For~~However for the first ~~six~~nine months of fiscal ~~2018,~~2019, return on average assets was ~~(0.17)~~0.42 percent, ~~down 68~~up 34 basis points from ~~0.51~~0.08 percent in the same period last year.

Return (loss) on average equity ~~decreased to (2.50)~~was (0.49) percent in the ~~second~~third quarter of fiscal ~~2018 from 4.53~~2019 as compared to 5.76 percent in the same period last year. ~~For~~However for the first ~~six~~nine months of fiscal ~~2018,~~2019, return on average equity was ~~(1.59)~~3.97 percent compared to ~~4.66~~0.78 percent for the same period last year.

Diluted earnings (loss) ~~earnings~~ per share for the ~~second~~third quarter of fiscal ~~2018~~2019 were ~~$(0.10)~~$(0.02), ~~a 156~~down 109 percent ~~decrease~~ from ~~$0.18~~$0.23 in the same period last year. ~~For~~However for the first ~~six~~nine months of fiscal ~~2018,~~2019, diluted ~~(loss)~~ earnings per share were ~~$(0.13), a 134~~$0.48, up 433 percent ~~decrease~~ from ~~$0.38~~$0.09 in the same period last year. The higher percentage decrease in the diluted earnings per share in comparison to the percentage decrease in the net income between each period was primarily attributable to stock repurchases during the prior 12 months.

Net Interest Income:

For the Quarters Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. Net interest income ~~decreased~~increased by ~~$334,000~~$488,000, or five percent, to ~~$8.8~~$9.6 million for the ~~second~~third quarter of fiscal ~~2018~~2019 as compared to the ~~comparable~~same period in fiscal ~~2017,~~2018, as a result of a ~~lower average earning asset balance, and a slightly lower~~higher net interest margin. The average balance of interest-earning assets decreased $36.7 million, or three percent, to $1.14 billion in the second quarter of fiscal 2018 from $1.18 billion in the comparable period of fiscal 2017, primarily reflecting decreases in average loans receivable and interest earning deposits,margin, partly offset by ~~an increase in the~~a lower average ~~balance of investment securities.~~interest-earning asset balance. The net interest margin ~~decreased one~~increased 30 basis ~~point~~points to ~~3.08~~3.53 percent in the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~3.09~~3.23 percent in the same period of fiscal ~~2017,~~2018, primarily due to ~~a decrease~~an increase in the average yield on interest-earning assets, partly offset by a decrease in the average cost of interest-bearing liabilities. The weighted-average yield on interest-earning assets decreased by four basis points to 3.64 percent from 3.68 percent in the same quarter last year, while the weighted-average cost of interest-bearing liabilities decreased by two basis points to 0.62 percent for the second quarter of fiscal 2018 as compared to 0.64 percent in the same quarter last year. The decrease in the average yield of interest-earning assets was primarily due to a decrease in the average yield of FHLB - San Francisco stock, partly offset by increases in the average yield of loans receivable, investment securities and interest-earning deposits.

~~For the Six Months Ended December 31, 2017 and 2016.~~ Net interest income decreased $304,000, or two percent, to $17.9 million for the first six months of fiscal 2018 from $18.2 million for the comparable period in fiscal 2017, due to a lower average earning assets balance, partly offset by a higher net interest margin. The average balance of interest-earning assets decreased $32.6 million, or three percent, to $1.14 billion in the first six months of fiscal 2018 from $1.18 billion in the comparable period of fiscal 2017, primarily reflecting decreases in average loans receivable and interest earning deposits, partly offset by anslight increase ~~in the~~

average balance of investment securities. The net interest margin was 3.12 percent in the first six months of fiscal 2018, up three basis points from 3.09 percent in the same period of fiscal 2017 due to an increase in the average yield on interest-earning assets and a decrease in the average cost of interest-bearing liabilities. The weighted-average yield on interest-earning assets increased by ~~two~~31 basis points to ~~3.69~~4.09 percent in the third quarter of fiscal 2019 from 3.78 percent in the same quarter last year, while the weighted-average cost of interest-bearing liabilities increased by one basis point to 0.63 percent for the third quarter of fiscal 2019 as compared to 0.62 percent in the same quarter last year. The increase in the average yield of interest-earning assets was primarily due to an increase in the average yield of all interest-earning assets resulting primarily from higher market interest rates, except FHLB – San Francisco stock. The average balance of interest-earning assets decreased $41.4 million, or four percent, to $1.09 billion in the third quarter of fiscal 2019 from $1.13 billion in the comparable period of fiscal 2018, primarily reflecting a decrease in the average balance of loans receivable, partly offset by increases in the average balance of investment securities and interest-earning deposits. The average balance of interest-bearing liabilities decreased by $45.6 million, or four percent, to $979.0 million in the third quarter of fiscal 2019 from $1.02 billion in the same quarter last year.

For the Nine Months Ended March 31, 2019 and 2018. Net interest income increased $1.8 million, or seven percent, to $28.8 million for the first nine months of fiscal 2019 from $27.0 million for the comparable period in fiscal 2018, due to a higher net interest margin, partly offset by a lower average interest-earning assets balance. The net interest margin was 3.45 percent in the first nine months of fiscal 2019, up 29 basis points from 3.16 percent in the same period of fiscal 2018, primarily due to an increase in the average yield on interest-earning assets, partly offset by a slight increase in the average cost of interest-bearing liabilities. The net interest margin in the nine months of fiscal 2019 was augmented by $176,000 of previously unrecognized loan interest income resulting from the payoff of three non-performing loans and the $133,000 special cash dividend received on FHLB-San Francisco stock, which increased the net interest margin by approximately three basis points for the period. The weighted-average yield on interest-earning assets increased by 31 basis points to 4.03 percent, while the weighted-average cost of interest-bearing liabilities ~~decreased~~increased by two basis points to ~~0.62~~0.64 percent for the first ~~six~~nine months of fiscal ~~2018~~2019 as compared to the same period last year. The average balance of interest-earning assets decreased $28.5 million, or two percent, to $1.11 billion in the first nine months of fiscal 2019 from $1.14 billion in the comparable period of fiscal 2018, primarily reflecting a decrease in the average balance of loans receivable, partly offset by increases in the average balance of investment securities and interest earning deposits. The average balance of interest-bearing liabilities decreased by $28.9 million, or three percent, to $1.00 billion in the first nine months of fiscal 2019 from $1.03 billion in the same period last year.

Interest Income:

For the Quarters Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. Total interest income ~~decreased~~increased by ~~$438,000,~~$441,000, or four percent, to ~~$10.4~~$11.1 million for the ~~second~~third quarter of fiscal ~~2018~~2019 as compared to the same quarter of fiscal 2018. The increase was primarily due to an increase in interest income from ~~$10.8~~investment securities and interest-earning deposits.

Interest income on loans receivable increased $78,000, or one percent, to $10.0 million in the third quarter of fiscal 2019 as compared to the same quarter of fiscal 2018. This increase was attributable to a higher average loan yield reflecting the rise in interest rates over the last year, partly offset by a lower average loan balance. The average loans receivable yield during the third quarter of fiscal 2019 increased 25 basis points to 4.38 percent from 4.13 percent during the same quarter last year, primarily due to increases in the average yield of both loans held for investment and loans held for sale combined with a lower

percentage of loans held for sale to total loans receivable. The average balance of loans receivable decreased by $46.8 million, or five percent, to $915.0 million for the third quarter of fiscal 2019 from $961.8 million in the same quarter of fiscal 2017. The decrease was primarily due to lower interest income on loans receivable and FHLB - San Francisco stock, partly offset by higher interest income on investment securities and interest-earning deposits.

~~Interest income on loans receivable decreased $381,000, or four percent, to $9.7 million in the second quarter of fiscal~~ 2018, from $10.1 million for the same quarter of fiscal 2017. This decrease was attributable to a lower average loan balance, partly offset by a higher average loan yield. The average balance of loans receivable, including loans held for sale, decreased by $59.5 million, or six percent, to $990.9 million for the second quarter of fiscal 2018 from $1.05 billion in the same quarter of fiscal 2017, primarily due to a decrease in average loans held for sale attributable to ~~a decrease in~~the winding down of the mortgage banking ~~activity which was partly offset by an increase~~operations and, to a lesser extent, a decrease in average loans held for investment. The average loan yield, including loans held for sale, during the second quarter of fiscal 2018 increased eight basis points to 3.93 percent from 3.85 percent during the same quarter last year, primarily due to an increase in the average yield of loans held for investment and an increase in the average yield of loans held for sale with a lower percentage of loans held for sale to total loans receivable.

Loans receivable is comprised of loans held for investment and loans held for sale. The average balance of loans held for investment ~~increased $36.9~~decreased $13.1 million, or ~~four~~one percent, to ~~$890.2~~$875.5 million during the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~$853.3~~$888.6 million in the same quarter of fiscal ~~2017.~~2018. The average yield on the loans held for investment increased by ~~two~~23 basis points to ~~3.93~~4.36 percent in the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~3.91~~4.13 percent in the same quarter of fiscal ~~2017.~~2018. The average balance of loans held for sale ~~however,~~also decreased ~~$96.4~~$33.8 million, or 4946 percent, to ~~$100.7~~$39.5 million during the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~$197.1~~$73.3 million in the same quarter of fiscal ~~2017.~~2018. The average yield on the loans held for sale increased by 3261 basis points to ~~3.91~~4.74 percent in the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~3.59~~4.13 percent in the same quarter of fiscal ~~2017.~~2018.

Interest income from investment securities increased ~~$191,000,~~$210,000, or ~~149~~55 percent, to ~~$319,000~~$592,000 in the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~$128,000~~$382,000 for the same quarter of fiscal ~~2017.~~2018. This increase was primarily attributable to ~~a higher average balance and, to a lesser extent,~~ a higher average yield. The average balance of investment securities increased $43.0 million, or 94 percent, to $88.6 million in the second quarter of fiscal 2018 from $45.6 million in the same quarter of fiscal 2017. The increase in the average balance of investment securities was primarily the result of purchases of mortgage-backed securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities. The average investment securities yield increased 3278 basis points to ~~1.44~~2.32 percent in the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~1.12~~1.54 percent in the same quarter of fiscal ~~2017.~~2018. The increase in the average investment securities yield was primarily attributable to the purchases of investment securities which had higher average yields than the existing portfolio and the repricing of adjustable mortgage-backed securities to higher interest rates, partly offset by accelerated amortization of purchase premiums resulting from accelerated principal payments. The average balance of investment securities increased $2.5 million, or three percent, to $101.9 million in the third quarter of fiscal 2019 from $99.4 million in the same quarter of fiscal 2018. The increase in the average balance of investment securities was primarily the result of purchases of mortgage-backed securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities.

The FHLB – San Francisco cash dividend received in the ~~second~~third quarter of fiscal ~~2018~~2019 was ~~$143,000, down 69~~$144,000, unchanged from the same quarter of fiscal 2018. The average balance in the third quarter of fiscal 2019 increased $91,000, or one percent, to $8.2 million from ~~$458,000~~$8.1 million in the same quarter of fiscal ~~2017. The cash dividends received~~2018, attributable to a required stock purchase due to reduced borrowings of $91,000 in ~~the second quarter of last year included~~April 2018. As a ~~special cash dividend, not replicated in~~result, the ~~second quarter of fiscal 2018. The~~ average yield decreased to ~~7.05~~7.03 percent in the ~~second~~third quarter of fiscal ~~2018~~2019 as compared to ~~22.63~~7.10 percent in the comparable quarter last year.

Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, was ~~$168,000~~$386,000 in the ~~second~~third quarter of fiscal ~~2018,~~2019, up 66 percent from ~~$101,000~~$233,000 in the same quarter of fiscal ~~2017.~~2018. The increase was primarily due to a higher average ~~yield, partly offset by a lower average balance in the second quarter of fiscal 2018 as compared to the same quarter last year.~~yield. The average yield earned on interest-earning deposits increased 7489 basis points to ~~1.30~~2.40 percent in the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~0.56~~1.51 percent in the comparable quarter last year, due primarily to the increases in the targeted federal funds rate over the last year. The average balance of the interest-earning deposits in the ~~second~~third quarter of fiscal ~~2018~~2019 was ~~$50.7~~$64.4 million, ~~a decrease~~an increase of ~~$20.3~~$2.8 million or 29five percent, from ~~$71.0~~$61.6 million in the same quarter of fiscal ~~2017.~~2018. The ~~decrease~~increase in the average balance of interest-earning deposits was primarily due to the ~~utilization of funds for the increases~~decreases in loans held for investment and loans held for sale, partly offset by an increase in investment securities and ~~the~~ decreases in deposits and ~~borrowings, partly offset by the decline in the average balance of loans held for sale.~~

borrowings.

For the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. Total interest income ~~decreased~~increased by ~~$497,000,~~$1.8 million, or ~~two~~six percent, to ~~$21.1~~$33.6 million for the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~$21.6~~$31.8 million in the same period of fiscal ~~2017.~~2018. The ~~decrease~~increase was primarily due to ~~lower~~an increase in interest income ~~on loans receivable and FHLB - San Francisco stock, partly offset by higher interest income on investment securities and~~from all interest-earning ~~deposits.~~assets.

Loans receivable interest income ~~decreased $704,000,~~increased $691,000, or ~~three~~two percent, to ~~$19.9~~$30.5 million in the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~$20.6~~$29.8 million for the same period of fiscal ~~2017.~~2018. The ~~decrease~~increase was attributable to a higher average loan yield reflecting the rise in interest rates over the last year, partly offset by a lower average loan balance ~~partly offset by a higher average loan yield~~ in the first ~~six~~nine months of fiscal ~~2018~~2019 in comparison to the same period last year. The average balance of loans receivable, including loans held for sale, decreased $65.0 million to $999.2 million for the first six months of fiscal 2018 from $1.06 billion in the same period of fiscal 2017. The average loan yield, including loans held for sale, during the first ~~six~~nine months of fiscal ~~2018~~2019 increased 1129 basis points to ~~3.98~~4.32 percent from ~~3.87~~4.03 percent in the same period last year. The average balance of

loans receivable, including loans held for sale, decreased $45.7 million, or five percent, to $941.3 million for the first nine months of fiscal 2019 from $987.0 million in the same period of fiscal 2018.

Loans receivable is comprised of loans held for investment and loans held for sale. The average balance of loans held for investment ~~increased $48.8~~decreased $13.3 million, or ~~six~~one percent, to ~~$899.0~~$882.3 million during the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~$850.2~~$895.6 million in the same period of fiscal ~~2017.~~2018. The average yield on the loans held for investment increased by ~~five~~26 basis points to ~~3.99~~4.30 percent in the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~3.94~~4.04 percent in the same period of fiscal ~~2017.~~2018. The average balance of loans held for sale decreased by ~~$113.9~~$32.4 million, or 5335 percent, to ~~$100.2~~$59.0 million during the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~$214.1~~$91.4 million in the same period of fiscal ~~2017.~~2018. The average yield on the loans held for sale increased by 3374 basis points to ~~3.92~~4.71 percent in the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~3.59~~3.97 percent in the same period of fiscal ~~2017.~~2018.

Interest income from investment securities increased ~~$364,000,~~$423,000, or ~~172~~44 percent, to ~~$576,000~~$1.4 million in the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~$212,000~~$958,000 for the same period of fiscal ~~2017.~~2018. This increase was attributable to a higher average ~~balance~~yield and, to a lesser extent, a higher average yield. The average balance of investment securities increased $34.4 million, or 72 percent, to $82.0 million in the first six months of fiscal 2018 from $47.6 million in the same period of fiscal 2017. The increase in average balance of investment securities was primarily the result of purchases of mortgage-backed securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities.balance. The average investment securities yield increased 5147 basis points to ~~1.40~~1.93 percent in the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~0.89~~1.46 percent in the same period of fiscal ~~2017.~~2018. The increase in the average investment securities yield was primarily attributable to the purchases of investment securities which had higher average yields than the existing portfolio and the repricing of adjustable rate mortgage-backed securities to higher interest rates, partly offset by accelerated amortization of purchase premiums resulting from accelerated principal payments. The average balance of investment securities increased $7.8 million, or nine percent, to $95.5 million in the first nine months of fiscal 2019 from $87.7 million in the same period of fiscal 2018. The increase in the average balance of investment securities was primarily the result of purchases of mortgage-backed securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities.

The FHLB – San Francisco cash dividend received in the first ~~six~~nine months of fiscal ~~2018~~2019 was ~~$284,000, down 56~~$565,000, up 32 percent from ~~$643,000~~$428,000 in the same period of fiscal ~~2017. The cash dividend received in the first six months of fiscal 2017 includes~~2018, primarily attributable to a special cash dividend of $133,000 received in ~~the second quarter of fiscal 2017, not replicated in the same period of fiscal~~December 2018. ~~The~~As a result, the average yield ~~decreased~~increased to ~~7.01~~9.19 percent in the first ~~six~~nine months of fiscal ~~2018~~2019 as compared to ~~15.88~~7.04 percent in the comparable period last year.

Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, was ~~$358,000~~$1.1 million in the first ~~six~~nine months of fiscal ~~2018,~~2019, up ~~129~~88 percent from ~~$156,000~~$591,000 in the same period of fiscal ~~2017.~~2018. The increase was due to a higher average yield ~~partly offset by~~and, to a ~~lower~~lesser extent, a higher average balance in the first ~~six~~nine months of fiscal ~~2018~~2019 as compared to the same period last year. The average yield increased 7484 basis points to ~~1.27~~2.20 percent in the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~0.53~~1.36 percent in the comparable period last year, due primarily to the ~~recent~~ increases in the targeted federal funds ~~rate.~~rate over the last year. The average balance of the interest-earning deposits in the first ~~six~~nine months of fiscal ~~2018~~2019 was ~~$55.1~~$66.5 million, ~~a decrease~~an increase of ~~$2.0~~$9.2 million or ~~four~~16 percent, from ~~$57.1~~$57.3 million in the same period of fiscal ~~2017.~~2018. The ~~decrease~~increase in average balance of interest-earning deposits was primarily due to the ~~utilization of funds for the increases~~decreases in loans held for investment and loans held for sale, partly offset by an increase in investment securities and ~~the decreases~~a decrease in ~~deposits and borrowings, partly offset by the decline in the average balance of loans held for sale.~~deposits.

Interest Expense:

For the Quarters Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. Total interest expense ~~for~~decreased $47,000, or three percent to $1.5 million in the ~~second~~third quarter of fiscal ~~2018~~2019 from $1.6 million in the comparable quarter of fiscal 2018. This decrease was ~~$1.6 million~~attributable to lower interest expenses on both deposits and borrowings.

Interest expense on deposits for the third quarter of fiscal 2019 was $841,000 as compared to ~~$1.7 million~~$856,000 for the same period last year, a decrease of ~~$104,000,~~$15,000, or ~~six percent. This decrease was attributable to a lower interest expense on deposits, primarily in time deposits.~~

~~Interest expense on deposits for the second quarter of fiscal 2018 was $886,000 as compared to $982,000 for the same period last year, a decrease of $96,000, or 10~~two percent. The decrease in interest expense on deposits was primarily attributable to a lower average balance, ~~and to~~partly offset by a ~~lesser extent, a lower~~slightly higher average cost of deposits. The average balance of deposits decreased ~~$23.1~~$38.7 million, or ~~two~~four percent, to ~~$916.2~~$873.3 million during the quarter ended ~~December~~March 31, ~~2017~~2019 from ~~$939.3~~$912.0 million during the same period last year. The decrease in the average balance was primarily attributable to ~~a decrease~~decreases in time deposits and, to a lesser extent,

savings deposits, partly offset by an increase in

~~transaction accounts.~~ checking and money market deposits. The average cost of deposits ~~decreased three~~remained relatively stable, increasing only one basis ~~points~~point to ~~0.38~~0.39 percent during the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~0.41~~0.38 percent during the same quarter last year. The ~~decrease~~increase in the average cost of deposits was attributable primarily to a ~~lower~~higher average cost of time deposits, ~~and~~partly offset by a lower percentage of time deposits to the total deposit balance. Strategically, the Corporation has been promoting transaction accounts and competing less aggressively for time deposits. The Corporation believes the increase in transaction accounts was also attributable to the impact of depositors seeking an alternative to lower yielding time deposits in anticipation of higher interest rates. The average balance of transaction accounts to total deposits in the ~~second~~third quarter of fiscal ~~2018~~2019 was 7275 percent, compared to 6973 percent in the same period of fiscal ~~2017.~~2018.

Interest expense on borrowings, consisting of FHLB – San Francisco advances, for the ~~second~~third quarter of fiscal ~~2018~~2019 decreased ~~$8,000,~~$32,000, or ~~one~~four percent, to ~~$728,000~~$680,000 from ~~$736,000~~$712,000 for the same period last year. The decrease in interest expense on borrowings was the result of a lower average balance, partly offset by a higher average cost. The average balance of borrowings decreased ~~$8.0~~$6.8 million, or ~~seven~~six percent, to ~~$111.5~~$105.8 million during the quarter ended ~~December~~March 31, ~~2017~~2019 from ~~$119.5~~$112.6 million during the same period last year, primarily due ~~primarily~~ to the ~~maturity~~$10.0 million prepayment of ~~short-term borrowings.~~long-term borrowings in February 2019. The average cost of borrowings increased 15five basis points to ~~2.59~~2.61 percent for the quarter ended ~~December~~March 31, ~~2017~~2019 from ~~2.44~~2.56 percent in the same quarter last year. The increase in the average cost of ~~advances~~borrowings was primarily due to the ~~maturities~~prepayment of ~~the short-term~~long-term borrowings with ana lower interest rate in than the weighted average ~~cost below the existing borrowings in the second quarter~~interest rate of ~~fiscal 2017.~~all borrowings.

For the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. Total interest expense for the first ~~six~~nine months of fiscal ~~2018 was $3.2~~2019 decreased $36,000, or one percent, to $4.8 million as compared to ~~$3.4 million for~~ the same period last ~~year, a decrease of $193,000, or six percent.~~year. This decrease was attributable to a lower interest ~~expense~~expenses on both, deposits ~~primarily in time deposits, partly offset by a higher interest expense on~~and borrowings.

Interest expense on deposits for the first ~~six~~nine months of fiscal ~~2018 was $1.8~~2019 decreased $18,000, or one percent, to $2.6 million as compared to ~~$2.0 million for~~ the same period last ~~year, a decrease of $219,000, or 11 percent.~~year. The slight decrease in interest expense on deposits was primarily attributable to a lower average balance, ~~and, to~~partly offset by a ~~lesser extent, a lower~~higher average cost of deposits. The average balance of deposits decreased ~~$16.5~~$28.4 million, or ~~two~~three percent, to ~~$919.6~~$888.7 million during the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 from ~~$936.1~~$917.1 million during the same period last year. The decrease in the average balance was primarily attributable to decreases in time deposits and, to a lesser extent, savings deposits, partly offset by an increase in checking and money market deposits. The average cost of deposits increased one basis point to 0.39 percent during the first nine months of fiscal 2019 from 0.38 percent during the same period last year. The increase in the average balance was primarily attributable to a decrease in time deposits, partly offset by an increase in transaction accounts. The average cost of deposits decreased four basis points to 0.38 percent during the first six months of fiscal 2018 from 0.42 percent during the same period last year. The decrease in the average cost of deposits was attributable primarily to a ~~lower~~higher average cost of time deposits, ~~and~~partly offset by a lower percentage of time deposits to the total deposit balance. The average balance of transaction accounts to total deposits in the first ~~six~~nine months of fiscal ~~2018~~2019 was 7274 percent, compared to 6872 percent in the same period of fiscal ~~2017.~~2018.

Interest expense on borrowings, consisting of FHLB – San Francisco advances, for the first ~~six~~nine months of fiscal ~~2018 increased $26,000,~~2019 decreased $18,000, or ~~two~~one percent, to ~~$1.5~~$2.2 million ~~from $1.4 million for~~as compared to the same period last year. The ~~increase~~decrease in interest expense on borrowings was the result of a ~~higher~~lower average cost ~~partly offset by~~and to a lesser extent, a lower average balance. The average cost of borrowings ~~increased 26~~decreased one basis ~~points~~point to ~~2.57~~2.56 percent for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 from ~~2.31~~2.57 percent in the same period last year. The ~~increase in average cost of advances was primarily due to the maturity of short-term borrowings with a much lower average cost than long-term FHLB borrowings. The~~ average balance of borrowings decreased by ~~$10.4 million, or eight percent,~~$403,000 to ~~$112.8~~$112.4 million during the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 from ~~$123.2~~$112.8 million during the same period last ~~year, primarily due to the maturity of the short-term borrowings.~~

year.

The following tables present the average balance sheets for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively:

Average Balance Sheets


	Quarter Ended December 31, 2017						Quarter Ended December 31, 2016						Quarter Ended March 31, 2019							Quarter Ended March 31, 2018
(Dollars In Thousands)	Average Balance		Interest		Yield/ Cost		Average Balance		Interest		Yield/ Cost		Average Balance		Interest		Yield/ Cost			Average Balance		Interest		Yield/ Cost
Interest-earning assets:
Loans receivable, net ⁽¹⁾	$	990,906	$	9,735	3.93	%	$	1,050,410	$	10,116	3.85	%	$	915,049	$	10,011		4.38	%	$	961,826	$	9,933		4.13	%
Investment securities	88,588		319		1.44	%	45,599		128		1.12	%		101,851		592		2.32	%		99,390		382		1.54	%
FHLB – San Francisco stock	8,108		143		7.05	%	8,094		458		22.63	%		8,199		144		7.03	%		8,108		144		7.10	%
Interest-earning deposits	50,725		168		1.30	%	70,972		101		0.56	%		64,390		386		2.40	%		61,591		233		1.51	%

Total interest-earning assets	1,138,327		10,365		3.64	%	1,175,075		10,803		3.68	%		1,089,489		11,133		4.09	%		1,130,915		10,692		3.78	%

Non interest-earning assets	33,498						33,638							30,228							34,820

Total assets	$	1,171,825					$	1,208,713					$	1,119,717						$	1,165,735

Interest-bearing liabilities:
Checking and money market accounts ⁽²⁾	$	373,632	112		0.12	%	$	360,678	105		0.12	%	$	382,294	$	102		0.11	%	$	370,346	$	96		0.11	%
Savings accounts	289,990		149		0.20	%	283,120		146		0.20	%		274,400		139		0.21	%		293,579		147		0.20	%
Time deposits	252,588		625		0.98	%	295,477		731		0.98	%		216,558		600		1.12	%		248,104		613		1.00	%

Total deposits	916,210		886		0.38	%	939,275		982		0.41	%		873,252		841		0.39	%		912,029		856		0.38	%

Borrowings	111,521		728		2.59	%	119,530		736		2.44	%		105,793		680		2.61	%		112,625		712		2.56	%

Total interest-bearing liabilities	1,027,731		1,614		0.62	%	1,058,805		1,718		0.64	%		979,045		1,521		0.63	%		1,024,654		1,568		0.62	%

Non interest-bearing liabilities	19,932						17,007							17,991							20,804

Total liabilities	1,047,663						1,075,812							997,036							1,045,458

Stockholders’ equity	124,162						132,901
Total liabilities and stockholders’ equity	$	1,171,825					$	1,208,713
Stockholders' equity														122,681							120,277
Total liabilities and stockholders' equity													$	1,119,717						$	1,165,735

Net interest income			$	8,751					$	9,085					$	9,612						$	9,124

Interest rate spread ⁽³⁾					3.02	%					3.04	%						3.46	%						3.16	%
Net interest margin ⁽⁴⁾					3.08	%					3.09	%						3.53	%						3.23	%
Ratio of average interest-earning assets to average interest-bearing liabilities					110.76	%					110.98	%						111.28	%						110.37	%
Return on average assets					(0.27	)%					0.50	%
Return on average equity					(2.50	)%					4.53	%
Return (loss) on average assets																		(0.05	)%						0.59	%
Return (loss) on average equity																		(0.49	)%						5.76	%


⁽¹⁾	Includes loans held for sale and non-performing loans, as well as net deferred loan cost amortization of ~~$409~~$179 and ~~$238~~$120 for the quarters ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.


⁽²⁾	Includes the average balance of non interest-bearing checking accounts of ~~$78.6~~$83.1 million and ~~$74.0~~$78.9 million during the quarters ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.


⁽³⁾	Represents the difference between the weighted-average yield on all interest-earning assets and the weighted-average rate on all interest-bearing liabilities.


⁽⁴⁾	Represents net interest income before provision for loan losses as a percentage of average interest-earning assets.

	Nine Months Ended March 31, 2019							Nine Months Ended March 31, 2018
(Dollars In Thousands)	Average Balance		Interest		Yield/ Cost			Average Balance		Interest		Yield/ Cost
Interest-earning assets:
Loans receivable, net ⁽¹⁾	$	941,336	$	30,516		4.32	%	$	986,952	$	29,825		4.03	%
Investment securities		95,494		1,381		1.93	%		87,710		958		1.46	%
FHLB – San Francisco stock		8,199		565		9.19	%		8,108		428		7.04	%
Interest-earning deposits		66,498		1,111		2.20	%		57,254		591		1.36	%

Total interest-earning assets		1,111,527		33,573		4.03	%		1,140,024		31,802		3.72	%

Non interest-earning assets		30,711							33,240

Total assets	$	1,142,238						$	1,173,264

Interest-bearing liabilities:
Checking and money market accounts ⁽²⁾	$	379,882	$	327		0.11	%	$	372,413	$	311		0.11	%
Savings accounts		281,814		437		0.21	%		290,065		445		0.20	%
Time deposits		226,978		1,851		1.09	%		254,653		1,877		0.98	%

Total deposits		888,674		2,615		0.39	%		917,131		2,633		0.38	%

Borrowings		112,363		2,158		2.56	%		112,766		2,176		2.57	%

Total interest-bearing liabilities		1,001,037		4,773		0.64	%		1,029,897		4,809		0.62	%

Non interest-bearing liabilities		19,306							19,174

Total liabilities		1,020,343							1,049,071

Stockholders' equity		121,895							124,193
Total liabilities and stockholders' equity	$	1,142,238						$	1,173,264

Net interest income			$	28,800						$	26,993

Interest rate spread ⁽³⁾						3.39	%						3.10	%
Net interest margin ⁽⁴⁾						3.45	%						3.16	%
Ratio of average interest-earning assets to average interest-bearing liabilities						111.04	%						110.69	%
Return on average assets						0.42	%						0.08	%
Return on average equity						3.97	%						0.78	%

Six Months Ended
December 31, 2017 Six Months Ended
December 31, 2016
Average
Balance Interest Yield/
Cost Average
Balance Interest Yield/
Cost
Interest-earning assets:
Loans receivable, net ⁽¹⁾
$ 999,242
$ 19,892
3.98 % $ 1,064,246
$ 20,596
3.87 %
Investment securities 82,029
576
1.40 % 47,598
212
0.89 %
FHLB – San Francisco stock 8,108
284
7.01 % 8,094
643
15.88 %
Interest-earning deposits 55,085
358
1.27 % 57,140
156
0.53 %

Total interest-earning assets 1,144,464
21,110
3.69 % 1,177,078
21,607
3.67 %

Non interest-earning assets 32,514
32,603

Total assets $ 1,176,978
$ 1,209,681

Interest-bearing liabilities:
Checking and money market accounts ⁽²⁾
$ 373,425
215
0.11 % $ 355,685
203
0.11 %
Savings accounts 288,347
298
0.21 % 279,953
290
0.21 %
Time deposits 257,856
1,264
0.97 % 300,416
1,503
0.99 %

Total deposits 919,628
1,777
0.38 % 936,054
1,996
0.42 %

Borrowings 112,834
1,464
2.57 % 123,235
1,438
2.31 %

Total interest-bearing liabilities 1,032,462
3,241
0.62 % 1,059,289
3,434
0.64 %

Non interest-bearing liabilities 18,408
17,354

Total liabilities 1,050,870
1,076,643

Stockholders’ equity 126,108
133,038

Total liabilities and stockholders’ equity $ 1,176,978
$ 1,209,681

Net interest income $ 17,869
$ 18,173

Interest rate spread ⁽³⁾
3.07 % 3.03 %
Net interest margin ⁽⁴⁾
3.12 % 3.09 %
Ratio of average interest-earning assets to
average interest-bearing liabilities
110.85 % 111.12 %
Return on average assets (0.17 )% 0.51 %
Return on average equity (1.59 )% 4.66 %


⁽¹⁾	Includes loans held for sale and non-performing loans, as well as net deferred loan cost amortization of ~~$616~~$823 and ~~$402~~$736 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.


⁽²⁾	Includes the average balance of non interest-bearing checking accounts of ~~$79.1~~$82.7 million and ~~$72.3~~$79.1 million during the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.


⁽³⁾	Represents the difference between the weighted-average yield on all interest-earning assets and the weighted-average rate on all interest-bearing liabilities.


⁽⁴⁾	Represents net interest income before provision for loan losses as a percentage of average interest-earning assets.

The following tables set forth the effects of changing rates and volumes on interest income and expense for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively. Information is provided with respect to the effects attributable to changes in volume (changes in volume multiplied by prior rate), the effects attributable to changes in rate (changes in rate multiplied by prior volume) and the effects attributable to changes that cannot be allocated between rate and volume.

Rate/Volume Variance


	Quarter Ended December 31, 2017 Compared To Quarter Ended December 31, 2016 Increase (Decrease) Due to												Quarter Ended March 31, 2019 Compared To Quarter Ended March 31, 2018 Increase (Decrease) Due to
(In Thousands)	Rate			Volume			Rate/ Volume			Net			Rate			Volume			Rate/ Volume			Net
Interest-earning assets:
Loans receivable ⁽¹⁾	$	204		$	(573	)	$	(12	)	$	(381	)	$	590		$	(483	)	$	(29	)	$	78
Investment securities	37			120			34			191				196			9			5			210
FHLB – San Francisco stock	(315		)	1			(1		)	(315		)		(2	)		2			—			—
Interest-bearing deposits	132			(28		)	(37		)	67
Interest-earning deposits														136			11			6			153
Total net change in income on interest-earning assets	58			(480		)	(16		)	(438		)		920			(461	)		(18	)		441

Interest-bearing liabilities:
Checking and money market accounts	—			7			—			7				—			6			—			6
Savings accounts	—			3			—			3				1			(9	)		—			(8	)
Time deposits	—			(106		)	—			(106		)		74			(78	)		(9	)		(13	)
Borrowings	44			(49		)	(3		)	(8		)		12			(43	)		(1	)		(32	)
Total net change in expense on interest-bearing liabilities	44			(145		)	(3		)	(104		)		87			(124	)		(10	)		(47	)
Net increase (decrease) in net interest income	$	14		$	(335	)	$	(13	)	$	(334	)	$	833		$	(337	)	$	(8	)	$	488


⁽¹⁾	Includes loans held for sale and non-performing loans. For purposes of calculating volume, rate and rate/volume variances, non-performing loans were included in the weighted-average balance outstanding.

	Nine Months Ended March 31, 2019 Compared To Nine Months Ended March 31, 2018 Increase (Decrease) Due to
(In Thousands)	Rate			Volume			Rate/ Volume			Net
Interest-earning assets:
Loans receivable ⁽¹⁾	$	2,169		$	(1,379	)	$	(99	)	$	691
Investment securities		311			85			27			423
FHLB – San Francisco stock		131			5			1			137
Interest-bearing deposits		368			94			58			520
Total net change in income on interest-earning assets		2,979			(1,195	)		(13	)		1,771

Interest-bearing liabilities:
Checking and money market accounts		—			16			—			16
Savings accounts		5			(12	)		(1	)		(8	)
Time deposits		201			(204	)		(23	)		(26	)
Borrowings		(10	)		(8	)		—			(18	)
Total net change in expense on interest-bearing liabilities		196			(208	)		(24	)		(36	)
Net increase (decrease) in net interest income	$	2,783		$	(987	)	$	11		$	1,807

Six Months Ended December 31, 2017 Compared
To Six Months Ended December 31, 2016
Increase (Decrease) Due to
(In Thousands) Rate Volume Rate/
Volume Net
Interest-earning assets:
Loans receivable ⁽¹⁾
$ 590
$ (1,258 ) $ (36 ) $ (704 )
Investment securities 123
153
88
364
FHLB – San Francisco stock (359 ) 1
(1 ) (359 )
Interest-bearing deposits 215
(5 ) (8 ) 202
Total net change in income on interest-earning assets 569
(1,109 ) 43
(497 )

Interest-bearing liabilities:
Checking and money market accounts —
12
—
12
Savings accounts —
8
—
8
Time deposits (30 ) (213 ) 4
(239 )
Borrowings 161
(121 ) (14 ) 26
Total net change in expense on interest-bearing liabilities 131
(314 ) (10 ) (193 )
Net increase (decrease) in net interest income $ 438
$ (795 ) $ 53
$ (304 )


⁽¹⁾	Includes loans held for sale and non-performing loans. For purposes of calculating volume, rate and rate/volume variances, non-performing loans were included in the weighted-average balance outstanding.

Provision (Recovery) for Loan Losses:

For the Quarters Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. During the ~~second~~third quarter of fiscal ~~2018,~~2019, the Corporation recorded a provision for loan losses of $4,000, in contrast to a recovery from the allowance for loan losses of ~~$11,000, down 97 percent from a $350,000~~$505,000 in the same period of fiscal 2018. The recovery from the allowance for loan losses induring the same ~~period of fiscal 2017. The recovery recorded in the second~~ quarter ~~of fiscal 2018~~last year was primarily attributable to the ~~decrease~~improving risk profile of the loan portfolio as reflected in ~~loans held for investment~~the asset quality ratios and ~~net~~ loan ~~recoveries during the second quarter of fiscal 2018, partly offset by an increase in classified assets. Total non-performing~~balances shifting to lower risk categories from higher risk categories. Non-performing loans, net of the allowance for loan losses and fair value adjustments ~~was virtually~~remained relatively unchanged at ~~$8.0~~$6.1 million at both ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017 and was~~2018 but lower than the ~~$10.1~~$6.8 million at ~~December~~March 31, ~~2016.~~2018. Net loan recoveries in the ~~second~~third quarter of fiscal ~~2018~~2019 were ~~$23,000~~$15,000 or ~~(0.01)~~0.01 percent (annualized) of average loans receivable, compared to net loan ~~recoveries~~charge offs of ~~$16,000~~$39,000 or ~~(0.01)~~0.02 percent (annualized) of average loans receivable in the same quarter of fiscal ~~2017.~~2018. Total classified loans, net of the allowance for loan losses and fair value adjustments, ~~consisting of special mention and substandard loans,~~ were ~~$13.2~~$14.8 million at ~~December~~March 31, ~~2017~~2019 as compared to ~~$11.7~~$14.9 million at June 30, ~~2017~~2018 and ~~$18.3~~$11.1 million at ~~December~~March 31, ~~2016.~~2018. Classified loans net of the allowance for loan losses and fair value adjustments were comprised of $7.3 million and $7.5 million of loans in the special mention category and $7.5 million and $7.4 million of loans in the substandard category at March 31, 2019 and June 30, 2018, respectively.

For the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. During the first ~~six~~nine months of fiscal ~~2018,~~2019, the Corporation recorded ~~a provision for loan losses of $158,000, compared to~~ a recovery from the allowance for loan losses of ~~$500,000~~$450,000, as compared to a $347,000 recovery from the allowance for loan losses in the same period of fiscal ~~2017.~~2018. The ~~provision~~recovery from the allowance for loan losses in the first ~~six~~nine months of fiscal ~~2018~~2019 was primarily attributable to ~~net loan charge-offs and the increase in classified assets, partly offset by~~ the decrease in loans held for investment and the recoveries related to the payoff of the two non-performing loans during the first ~~six~~nine months of fiscal ~~2018.~~2019. Net loan ~~charge-offs~~recoveries in the first ~~six~~nine months of fiscal ~~2018~~2019 were ~~$122,000~~$145,000 or ~~0.02~~(0.02) percent (annualized) of average loans receivable, ~~compared~~in contrast to net loan ~~recoveries~~charge offs of ~~$221,000~~$161,000 or ~~(0.04)~~0.02 percent (annualized) of average loans receivable in the same period of fiscal ~~2017.~~2018.

The allowance for loan losses was determined through quantitative and qualitative adjustments including the Bank's charge-off experience and reflects the impact on loans held for investment from the current general economic conditions of the U.S. and California economies such as the improving unemployment rate and higher home prices in California. See related discussion of ~~“Asset Quality”~~"Asset Quality" below.

At ~~December~~March 31, ~~2017,~~2019, the allowance for loan losses was ~~$8.1~~$7.1 million, comprised of collectively evaluated allowances of ~~$8.1~~$6.9 million and individually evaluated allowances of ~~$15,000;~~$132,000; in comparison to the allowance for loan losses of ~~$8.0~~$7.4 million at June 30, ~~2017,~~2018, comprised of collectively evaluated allowances of ~~$7.9~~$7.2 million and individually evaluated allowances of ~~$101,000.~~$157,000. The allowance for loan losses as a percentage of gross loans held for investment was ~~0.90~~0.79 percent at ~~December~~March 31, ~~2017, up from 0.88~~2019 as compared to 0.81 percent at June 30, ~~2017.~~2018. Management considers, based on currently available information, the allowance for loan losses sufficient to absorb potential losses inherent in loans held for investment. For further analysis on the allowance for loan losses, see Note 6 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

Non-Interest Income:

For the Quarters Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. Total non-interest income decreased $2.1 million, or 2740 percent, to ~~$5.7~~$3.1 million for the quarter ended ~~December~~March 31, ~~2017~~2019 from ~~$7.8~~$5.2 million for the same period last year. The decrease was primarily attributable to a decrease in the net gain on sale of loans during the current quarter as compared to the comparable period last year.

The net gain on sale of loans decreased ~~$2.2~~$1.9 million, or 3453 percent, to ~~$4.3~~$1.7 million for the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~$6.5~~$3.6 million in the same quarter of fiscal ~~2017~~2018 reflecting the impact of a lower loan sale volume, partly offset by a higher average loan sale margin. Total loan sale volume, which includes the net change in commitments to extend credit on loans to be held for sale, decreased ~~$175.4~~$139.7 million or 3859 percent to ~~$287.8~~$95.8 million in the quarter ended ~~December~~March 31, ~~2017~~2019 from ~~$463.2~~$235.5 million in the comparable quarter last year. The decrease in loan sale volume was attributable ~~primarily~~ to the ~~decrease in refinance activity and, to a lesser extent, purchase activity as compared to~~winding down of the ~~same period last year.~~mortgage banking operations. Refinance loans as a percentage of total loans originated by PBM during the ~~second~~third quarter of fiscal ~~2018 were 42~~2019 was 30 percent, down from 5537 percent in the same quarter of fiscal ~~2017.~~2018. Retail loans as a percentage of total loans originated for sale by PBM during the ~~first six months~~third quarter of fiscal ~~2018~~2019 were 5565 percent, up from 5059 percent in the same ~~period~~quarter of fiscal ~~2017.~~2018. The average loan sale margin for PBM increased 1026 basis ~~point~~points to ~~1.49~~1.79 percent in the ~~second~~third quarter of fiscal ~~2018~~2019 from ~~1.39~~1.53 percent in the same period of fiscal ~~2017.~~2018. The increase in the average loan sale margin ~~for~~was the ~~six months ended December 31, 2017 was primarily attributable to more favorable loan sale market conditions,~~result of a ~~lower percentage of refinance originations and~~ higher percentage of retail ~~originations.~~loan production (which generally has higher loan sale margins) versus wholesale loan production and maintaining pricing discipline throughout the quarter. The gain on sale of loans includes an unfavorable fair-value adjustment on loans held for sale and derivative financial instruments (commitments to extend credit, commitments to sell loans, commitments to sell mortgage-backed securities, and option contracts) pursuant to ASC 815 and ASC 825 that amounted to a net loss of ~~$1.3 million~~$778,000 in the ~~second~~third quarter of fiscal ~~2018~~2019 as compared to ~~an unfavorable fair-value adjustment~~a net loss of ~~$6.4 million~~$844,000 in the same period last year. The fair-value adjustment on loans held for sale and derivative

financial instruments is consistent with the Bank's mortgage banking activity and the volatility of mortgage interest rates. As of ~~December~~March 31, ~~2017,~~2019, the fair value of derivative financial instruments pursuant to ASC 815 and ASC 825 was ~~$3.7 million,~~$951,000, compared to ~~$5.0~~$2.9 million at June 30, ~~2017~~2018 and ~~$4.0~~$2.8 million at ~~December~~March 31, ~~2016.~~ 2018.

For the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. Total non-interest income decreased ~~$5.0~~$6.1 million, or 2935 percent, to ~~$12.1~~$11.2 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 from ~~$17.1~~$17.3 million for the same period last year. The decrease was primarily attributable to a decrease in the gain on sale of loans.

The net gain on sale of loans decreased ~~$5.3~~$5.7 million, or 3744 percent, to ~~$9.2~~$7.1 million for the first ~~six~~nine months of fiscal ~~2018~~2019 from ~~$14.5~~$12.8 million in the same period of fiscal ~~2017~~2018 reflecting the impact of a lower loan sale volume, partly offset by a ~~slightly~~ higher average loan sale margin. Total loan sale volume was ~~$680.0~~$408.9 million in the first ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, down ~~$423.4~~$506.5 million, or 3855 percent, from ~~$1.10 billion~~$915.4 million in the comparable period last year. The decrease in loan sale volume was attributable primarily to ~~a decrease in~~ the ~~refinance market and, to a lesser extent,~~winding down of the ~~purchase market as compared to the same period last year.~~mortgage banking operations. Refinance loans as a percentage of total loans originated by PBM during the first ~~six~~nine months of fiscal ~~2018~~2019 were 4229 percent, down from 5641 percent in the same period of

fiscal ~~2017.~~2018. Retail loans as a percentage of total loans originated for sale by PBM during the first ~~six~~nine months of fiscal ~~2018~~2019 were 5564 percent, up from 5056 percent in the same period of fiscal ~~2017.~~2018. The average loan sale margin for PBM during the first ~~six~~nine months of fiscal ~~2018~~2019 was ~~1.34~~1.73 percent, up ~~three~~34 basis points from ~~1.31~~1.39 percent for the same period of fiscal ~~2017.~~2018. The increase in the average loan sale margin ~~for~~was the ~~six months ended December 31, 2017 was primarily attributable to more favorable loan sale market conditions,~~result of a ~~lower percentage of refinance originations and~~ higher percentage of retail ~~originations.~~loan production (which generally has higher loan sale margins) versus wholesale loan production and maintaining pricing discipline throughout the period. The gain on sale of loans includes an unfavorable fair-value adjustment on derivative financial instruments pursuant to ASC 815 and ASC 825, a net loss of ~~$1.4~~$1.9 million in the first ~~six~~nine months of fiscal ~~2018~~2019 as compared to ~~an unfavorable fair-value adjustment,~~ a net loss of ~~$4.3~~$2.2 million in the same period last year.

Non-Interest Expense:

For the Quarters Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. Total non-interest expense in the quarter ended ~~December~~March 31, ~~2017~~2019 was ~~$13.2~~$13.0 million, ~~a decrease~~an increase of ~~$1.5 million,~~$561,000, or 10five percent, as compared to ~~$14.7~~$12.4 million in the quarter ended ~~December~~March 31, ~~2016.~~2018. The ~~decrease~~increase was primarily a result of ~~a decrease~~an increase in salaries and employee benefits expense.

Total salaries and employee benefits expense increased $484,000, or five percent, to $9.3 million in the third quarter of fiscal 2019 from $8.8 million in the same period of fiscal 2018. The increase in salaries and employee benefits expense was primarily attributable to $1.5 million of one-time costs associated with staff reductions in mortgage banking operations and $674,000 in current costs associated with incentive compensation accruals, partly offset by lower variable compensation resulting from lower mortgage banking loan originations. Total loan originations and purchases (including loans originated and purchased for investment and loans originated for sale) decreased $114.8 million, or 43 percent, to $154.7 million in the third quarter of fiscal 2019 from $269.5 million in the comparable quarter of fiscal 2018. Total full-time equivalent employees in the mortgage banking division were 107 at March 31, 2019, down 47 percent from 200 at March 31, 2018.

On January 30, 2019, the Corporation announced that Bank will close its La Quinta Branch effective at the close of business on May 10, 2019. The Bank anticipates an ~~increase~~annual operational cost savings of approximately $473,000, primarily in salaries and employee benefits expenses and premises and occupancy expenses subsequent to the branch closure. Total one-time charges for the branch closure will be approximately $18,000.

On February 4, 2019, the Corporation announced that the Corporation's Board of Directors determined that it was in the long-term best interests of the Corporation to exit the operations of the Corporation's mortgage banking segment conducted through PBM. The Corporation estimates that it will incur one-time costs of approximately $3.6 million to $4.0 million to complete the exit during the remainder of fiscal 2019, which amounts include costs for severance, retention, personnel, premises, occupancy, depreciation, and costs related to termination of data processing and other contractual arrangements. As of March 31, 2019, the total one-time costs incurred were $1.6 million, comprised of $1.5 million in salaries and employee benefits expenses, $81,000 in premises and occupancy expenses, and $13,000 in equipment expenses.

For the Nine Months Ended March 31, 2019 and 2018. Total non-interest expense in the nine months ended March 31, 2019 was $35.6 million, a decrease of $5.8 million or 14 percent, as compared to $41.4 million in the same period ended March 31, 2018. The decrease was primarily due to decreases in salaries and employee benefits expense and in other non-interest expense.

Total salaries and employee benefits expense decreased ~~$1.7~~$1.9 million, or 17seven percent, to ~~$8.6~~$24.8 million in the ~~second quarter~~first nine months of fiscal ~~2018~~2019 from ~~$10.3~~$26.7 million in the same period of fiscal ~~2017.~~2018. The decrease was primarily attributable to lower incentive compensation costs and PBM staff reductions related to lower mortgage banking loan ~~originations.~~originations attributable to the winding down of the mortgage banking operations, partly offset by one-time costs associated with staff reductions in mortgage banking operations and incentive compensation accruals. Total loan originations and purchases (including loans originated and purchased for investment and loans originated ~~and purchased~~ for sale) decreased ~~$238.5~~$500.0 million, or 3947 percent, to ~~$366.8~~$573.4 million in the ~~second quarter~~first nine months of fiscal ~~2018~~2019 from ~~$605.3 million~~$1.07 billion in the comparable ~~quarter~~period of fiscal ~~2017.~~2018.

Total other non-interest expenses ~~increased $221,000,~~decreased $3.8 million, or 1355 percent, to ~~$1.9~~$3.1 million in the ~~second quarter~~first nine months of fiscal ~~2018~~2019 from ~~$1.7~~$6.9 million in the same period of fiscal ~~2017.~~2018. The ~~increase~~decrease in other non-interest expenses was primarily attributable to litigation settlement expense ~~accrual~~ of ~~$650,000~~$3.4 million in the ~~second quarter~~first nine months of fiscal 2018, up from a litigation expense accrual of $235,000 in the same quarter last year, partly offset by lower other loan origination costs. The litigation expense accrual in the second quarter of fiscal 2018 was related to two lawsuits which were settled on December 18, 2017.not replicated this current period. No additional contingencies exist regarding these ~~matters although the settlement agreement remains subject to court approval and other customary conditions. For additional information see Part II, Item 1, “Legal Proceedings.”~~

~~For the Six Months Ended December 31, 2017 and 2016.~~ Total non-interest expense in the six months ended December 31, 2017 was $28.9 million, a decrease of $1.4 million as compared to $30.3 million in the same period ended December 31, 2016. The decrease was primarily due to a decrease in salaries and employee benefits expense, partly offset by an increase in other non-interest expense.

Total salaries and employee benefits expense decreased $3.8 million, or 18 percent, to $17.9 million in the first six months of fiscal 2018 from $21.7 million in the same period of fiscal 2017. The decrease was primarily attributable to lower incentive compensation costs and PBM staff reductions related to lower mortgage banking loan originations. Total loan originations and purchases (including loans originated and purchased for investment and loans originated and purchased for sale) decreased $506.9 million, or 39 percent, to $804.0 million in the first six months of fiscal 2018 from $1.31 billion in the comparable period of fiscal 2017.

Total other non-interest expenses increased $2.5 million, or 76 percent, to $5.8 million in the first six months of fiscal 2018 from $3.3 million in the same period of fiscal 2017. The increase in other non-interest expenses was primarily attributable to litigation

expense accruals of $3.4 million in the first six months of fiscal 2018, up from the litigation expense accrual of $235,000 in the same period last year, partly offset by lower other loan origination costs. The litigation expense accruals in the first six months of fiscal 2018 was related to a lawsuit which was settled on September 12, 2017 and two lawsuits which were settled on December 18, 2017. No additional contingencies exist regarding theselegal matters although the settlement agreements remain subject to court approval and other customary conditions. For additional information see Part II, Item 1, ~~“Legal~~"Legal Proceedings.”"

Provision (Benefit) for Income Taxes:

The income tax provision reflects accruals for taxes at the applicable rates for federal income tax and California franchise tax based upon reported pre-tax income, adjusted for the effect of all permanent differences between income for tax and financial reporting purposes, such as non-deductible stock-based compensation, ~~non-taxable~~ earnings from bank-owned life insurance policies and certain California tax-exempt loans, among ~~other adjustments.~~others. Therefore, there are fluctuations in the effective income tax rate from period to period based on the relationship of net permanent differences to income before tax.

For the Quarters Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. The ~~Corporation’s provision for~~Corporation's income ~~taxes~~tax benefit was ~~$2.1 million~~$189,000 for the ~~second~~third quarter of fiscal ~~2018, up 91 percent from~~2019, in contrast to a $667,000 tax provision in the ~~$1.1 million provision for~~same quarter last year (an $856,000 difference). The decrease was attributable to loss before taxes and a lower federal income tax rate in the third quarter of fiscal 2019 in comparison to income before taxes in the same quarter last year. ~~The increase was primarily attributable to~~Since the ~~net deferred~~Corporation has a fiscal year end of June 30th, the reduced federal corporate income tax ~~asset revaluation required by~~rate from the Tax Act ~~partly offset by lower net income before taxes and~~for fiscal 2018 was the ~~reduction~~result of the application of a blended federal statutory tax ~~rate.~~rate of 28.06%, and is a flat 21% federal corporate income tax rate for fiscal 2019 and thereafter. The effective income tax rate for the quarter ended ~~December~~March 31, ~~2017~~2019 and 2018 was ~~160.2 percent, up from 42.1 percent~~55.59% and 27.79%, respectively. The higher effective tax rate in the ~~same~~third quarter ~~last year.~~of fiscal 2019 was due primarily to tax benefits resulting from stock-based compensation activities. The Corporation believes that the effective income tax rate applied in the ~~second~~third quarter of fiscal ~~2018~~2019 reflects its current income tax obligations.

~~The Tax Act provides a reduced federal tax rate for the Corporation, from a maximum 35 percent to a flat 21 percent as of January 1, 2018. However, the Corporation’s fiscal year runs through June 30~~^th of each year. As a result, the Corporation will be required to use a blended statutory tax rate for the fiscal year ending on June 30, 2018 and will not realize the full impact of the reduced federal tax rate until fiscal 2019 which begins on July 1, 2018. The estimated combined federal and state statutory tax rates, before discrete items, for the remainder of fiscal 2018 and for fiscal 2019 are as follows:

Statutory Tax Rates Q3FY2018 Q4FY2018 FY2019
Federal Tax Rate 28.06% 28.06% 21.00%
State Tax Rate 10.84% 10.84% 10.84%
Combined Statutory Tax Rate⁽¹⁾
35.86% 35.86% 29.56%

⁽¹⁾~~The combined statutory tax rate is net of the federal tax benefit for the state tax deduction.~~

The Corporation’s effective tax rate may differ from the estimated statutory tax rates described above due to discrete items such as further adjustments to net deferred tax assets, excess tax benefits derived from stock option exercises and non-taxable earnings from bank owned life insurance, among other items.

For the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018. The ~~Corporation’s~~Corporation's provision for income taxes was ~~$1.9~~$1.2 million for the first ~~six~~nine months of fiscal ~~2018,~~2019, down 2152 percent from the ~~$2.4~~$2.5 million provision for income taxes in the same period last year. The decrease in the provision for income taxes was primarily attributable to ~~a lower~~the one-time, non-cash, net ~~income before taxes~~tax charge of $1.9 million from the net deferred tax assets revaluation and the reduction ofin the federal corporate income tax rate resulting from the Tax Act, partly offset by the ~~net deferred tax asset revaluation.~~higher income before taxes recorded in the second quarter of fiscal 2018. The effective income tax rate for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and 2018 was ~~216.9 percent as compared to 43.2 percent in the same period last year.~~25.42% and 77.56%, respectively. The Corporation believes that the effective income tax rate applied in the first ~~six~~nine months of fiscal ~~2018~~2019 reflects its current income tax obligations.

Asset Quality

Non-performing loans, net of the allowance for loan losses and fair value adjustments, consisting of loans with collateral located in California, ~~was virtually~~remained unchanged at ~~$8.0~~$6.1 million at both ~~December~~March 31, ~~2017 and~~2019 June 30, ~~2017.~~2018. Non-performing loans as a percentage of loans held for investment at ~~December~~March 31, ~~2017~~2019 was ~~0.90 percent,~~0.69%, up from ~~0.88 percent~~0.67% at June 30, ~~2017.~~2018. The non-performing loans at ~~December~~March 31, ~~2017 were primarily~~2019 are comprised of 2920 single-family loans ($~~7.9~~5.3 million), one construction loan ($745,000) and one commercial business loan ($61,000). This compares to the $8.0 million of non-performing loans at June 30, 2017 which were primarily comprised of 27 single-family loans ($7.7 million); one commercial real estate loan ($201,000) and one commercial business loan ($65,000)44,000). No interest accruals were made for loans that were past due 90 days or more or if the loans were deemed non-performing.

As of ~~December~~March 31, ~~2017,~~2019, total restructured loans ~~increased $807,000,~~decreased $601,000, or 2212 percent, to ~~$4.4~~$4.6 million from ~~$3.6~~$5.2 million at June 30, ~~2017.~~2018. At ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017, $3.5~~2018, $2.7 million and ~~$3.1~~$3.4 million ~~respectively,~~ of these restructured loans were classified as ~~non-performing.~~non-performing, respectively. As of ~~December~~March 31, ~~2017, $2.8~~2019, $2.9 million, or 6463 percent, of the restructured loans have a current payment status, consistent with their modified payment terms; this compares to ~~$1.7~~$2.9 million, or 4656 percent, of restructured loans that had a current payment status, consistent with their modified payment terms as of June 30, ~~2017.~~2018.

~~Real estate owned~~

There was ~~$621,000 at December 31, 2017, down $994,000 or 62 percent from $1.6 million at June 30, 2017. The~~no real estate owned at ~~December~~March 31, ~~2017 was comprised of one~~2019 as compared to $906,000 at June 30, 2018 (two single-family ~~property~~properties located in ~~California.~~California).

Non-performing assets, which includes non-performing loans and real estate owned, decreased ~~$1.0~~$848,000 or 12 percent to $6.1 million or ~~10 percent to $8.6 million or 0.74~~0.55 percent of total assets at ~~December~~March 31, ~~2017~~2019 from ~~$9.6~~$7.0 million or ~~0.80~~0.59 percent of total assets at June 30, ~~2017.~~2018. Restructured loans which are performing in accordance with their modified terms and are not otherwise classified non-accrual are not included in non-performing assets. For further analysis on non-performing loans and restructured loans, see Note 6 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

Occasionally, the Corporation is required to repurchase loans sold to Freddie Mac, Fannie Mae or other institutional investors if it is determined that such loans do not meet the credit requirements of the investor, or if one of the parties involved in the loan misrepresented pertinent facts, committed fraud, or if such loans were 90-days past due within 120 days of the loan funding date. During the first ~~six~~nine months of fiscal ~~2018,~~2019, the Corporation ~~did not repurchase any~~repurchased five loans totaling $699,000, including two loans that were fully charged off ($25,000). In comparison, the Corporation repurchased two loans totaling $602,000 from ~~an investor pursuant to the recourse/repurchase covenants contained in the loan sale agreement. This compares to~~investors during the first ~~six~~nine months of fiscal ~~2017 when the Corporation repurchased one loan, totaling $389,000, from investors pursuant to the recourse/repurchase covenants contained in the loan sale agreements, which was subsequently paid off.~~2018. Additional repurchase requests may have been settled that did not result in the repurchase of the loan itself. The primary reasons for honoring the repurchase requests are borrower fraud, undisclosed liabilities on borrower applications, and documentation, verification and appraisal disputes. For the first ~~six~~nine months of fiscal ~~2018~~2019 and ~~2017,~~2018, the Corporation recorded a $33,000 recovery and a $22,000 recovery from the recourse ~~recoveries of $22,000~~liability, respectively, and ~~settled $11,000 in claims in lieu of loan repurchases in fiscal 2017.~~did not settle any claims. As of ~~December~~March 31, ~~2017,~~2019, the total recourse reserve for loans sold that are subject to repurchase ~~was~~decreased to $250,000, as compared to $283,000 ~~down from $305,000~~ at both June 30, ~~2017~~2018 and ~~from $412,000 at December~~March 31, ~~2016.~~2018.

Beginning in 2008, in connection with the downturn in the real estate market, the Corporation implemented tighter underwriting standards to reduce potential loan repurchase requests, including requiring higher credit scores, generally lower debt-to-income ratios, and verification of income and assets, among other criteria. Despite ~~management’s~~management's diligent estimate of the recourse reserve, the Corporation is still subject to risks and uncertainties associated with potentially higher loan repurchase claims from investors, and there are no assurances that the current recourse reserve will be sufficient to cover all future recourse claims.

The following table shows the summary of the recourse liability for the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016:~~2018:


	For the Quarters Ended December 31,						For the Six Months Ended December 31,						For the Quarters Ended March 31,				For the Nine Months Ended March 31,
Recourse Liability	2017			2016			2017			2016			2019		2018		2019			2018
(In Thousands)

Balance, beginning of the period	$	305		$	453		$	305		$	453		$	250	$	283	$	283		$	305
Recovery from recourse liability	(22		)	(30		)	(22		)	(30		)		—		—		(33	)		(22	)
Net settlements in lieu of loan repurchases	—			(11		)	—			(11		)		—		—		—			—
Balance, end of the period	$	283		$	412		$	283		$	412		$	250	$	283	$	250		$	283

A decline in real estate values subsequent to the time of origination of the ~~Corporation’s~~Corporation's real estate secured loans could result in higher loan delinquency levels, foreclosures, provisions for loan losses and net charge-offs. Real estate values and real estate markets are beyond the ~~Corporation’s~~Corporation's control and are generally affected by changes in national, regional or local economic conditions and other factors. These factors include fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes, fires and national disasters particular to California where substantially all of the ~~Corporation’s~~Corporation's real estate collateral is located. If real estate values decline from the levels described in the following tables (which were derived at the time of loan origination), the value of the real estate collateral securing the ~~Corporation’s~~Corporation's loans as set forth in the table could be significantly overstated. The ~~Corporation’s~~Corporation's ability to

recover on defaulted loans by foreclosing and selling the real estate collateral would

then be diminished and it would be more likely to suffer losses on defaulted loans. The Corporation generally does not update the loan-to-value ratio ~~(“LTV”~~("LTV") on its loans held for investment by obtaining new appraisals or broker price opinions (nor does the Corporation intend to do so in the future as a result of the costs and inefficiencies associated with completing the task) unless a specific loan has demonstrated deterioration or the Corporation receives a loan modification request from a borrower (in which case individually evaluated allowances are established, if required). Therefore, it is reasonable to assume that the LTV ratios disclosed in the following tables may be understated or overstated in comparison to their current LTV ratios as a result of their year of origination, the subsequent general decline or improvement in real estate values that has occurred and the specific location and condition of the individual properties. The Corporation has not quantified the current LTVs of its loans held for investment nor the impact the decline or improvement in real estate values has had on the original LTVs of its loans held for investment.

The following table describes certain credit risk characteristics of the ~~Corporation’s~~Corporation's single-family, first trust deed, mortgage loans held for investment as of ~~December~~March 31, ~~2017:~~2019:


(Dollars In Thousands)	Outstanding Balance ⁽¹⁾		Weighted- Average FICO ⁽²⁾	Weighted- Average LTV ⁽³⁾	Weighted- Average Seasoning ⁽⁴⁾	Outstanding Balance ⁽¹⁾		Weighted- Average FICO ⁽²⁾		Weighted- Average LTV ⁽³⁾		Weighted- Average Seasoning ⁽⁴⁾
Interest only	$	6,056	741	77%	9.73 years	$	1,500		619		75%	1.21 years
Stated income ⁽⁵⁾	$	87,194	731	61%	12.01 years	$	56,323		733		58%	13.33 years
FICO less than or equal to 660	$	7,243	643	61%	9.53 years	$	7,656		638		65%	8.22 years
Over 30-year amortization	$	9,724	729	63%	12.29 years	$	7,528		726		63%	13.63 years


⁽¹⁾	The outstanding balance presented on this table may overlap more than one category. Of the outstanding balance, ~~$4.8~~$2.9 million of ~~“stated~~"stated income,~~” $333,000~~" $300 of ~~“FICO~~"FICO less than or equal to 660,”" and ~~$218,000~~$214 of ~~“over~~"over 30-year ~~amortization”~~amortization" balances were non-performing.

⁽²⁾

Based on borrower's FICO scores at the time of loan origination. The FICO score represents the creditworthiness of a borrower based on the ~~borrower’s~~borrower's credit history, as reported by an independent third party. A higher FICO score indicates a greater degree of creditworthiness. Bank regulators have issued guidance stating that a FICO score of 660 and below is indicative of a ~~“subprime”~~"subprime" borrower.


⁽³⁾	LTV is the ratio derived by dividing the current loan balance by the lower of the original appraised value or purchase price of the real estate collateral.


⁽⁴⁾	Seasoning describes the number of years since the funding date of the loan.


⁽⁵⁾	Stated income is defined as borrower stated income on his/her loan application which was not subject to verification during the loan origination process.

The following table summarizes the amortization schedule of the ~~Corporation’s~~Corporation's interest only single-family, first trust deed, mortgage loans held for investment, including the percentage of those which are identified as non-performing or 30 – 89 days delinquent as of ~~December~~March 31, ~~2017:~~2019:


(Dollars In Thousands)	Balance		Non-Performing ⁽¹⁾	30 - 89 Days Delinquent ⁽¹⁾	Balance		Non-Performing ⁽¹⁾		30 - 89 Days Delinquent ⁽¹⁾
Fully amortize in the next 12 months	$	6,056	—%		$	1,500		—%		—%
Fully amortize between 1 year and 5 years	—		—%	—%		—		—%		—%
Fully amortize after 5 years	—		—%	—%		—		—%		—%
Total	$	6,056	—%	—%	$	1,500		—%		—%


⁽¹⁾	As a percentage of each category.

The following table summarizes the interest rate reset (repricing) schedule of the ~~Corporation’s~~Corporation's stated income single-family, first trust deed, mortgage loans held for investment, including the percentage of those which are identified as non-performing or 30 – 89 days delinquent as of ~~December~~March 31, ~~2017:~~2019:


(Dollars In Thousands)	Balance ⁽¹⁾		Non-Performing ⁽¹⁾	30 - 89 Days Delinquent ⁽¹⁾	Balance ⁽¹⁾		Non-Performing ⁽¹⁾		30 - 89 Days Delinquent ⁽¹⁾
Interest rate reset in the next 12 months	$	85,731	6%	1%	$	55,616		4%		1%
Interest rate reset between 1 year and 5 years	1,463		—%			—		—%		—%
Interest rate reset after 5 years	—		—%			707		100%		—%
Total	$	87,194	5%	1%	$	56,323		5%		1%


⁽¹⁾	As a percentage of each category. ~~Also, the loan balances and percentages on this table may overlap with the interest only single-family, first trust deed, mortgage loans held for investment table.~~

The reset of payment terms on adjustable rate mortgage loans (primarily interest only single-family loans) to a fully amortizing status from their interest-only period may create a payment shock for some of the Corporation’s borrowers as the loans adjust to a higher monthly payment consisting of both principal and interest, which may result in an increase in non-performing loans. To date, the Corporation has not experienced an elevated level of delinquencies or defaults related to payment shocks.

The following table describes certain credit risk characteristics, geographic locations and the calendar year of loan origination of the ~~Corporation’s~~Corporation's single-family, first trust deed, mortgage loans held for investment, at ~~December~~March 31, ~~2017:~~2019:

Calendar Year of Origination
(Dollars In Thousands) 2009 &
Prior

2010

2011

2012

2013

2014

2015

2016

2017
Total
Loan balance (in thousands) $150,053 $116 $949 $2,322 $2,565 $9,087 $13,363 $35,908 $84,521 $298,884
Weighted-average LTV ⁽¹⁾
62% 65% 60% 51% 44% 66% 69% 66% 74% 66%
Weighted-average age (in years) 12.10 7.13 6.43 5.33 4.50 3.35 2.58 1.44 0.69 6.76
Weighted-average FICO ⁽²⁾
730 700 711 758 754 753 738 743 737 735
Number of loans 512 1 4 13 22 23 20 66 126 787

Geographic breakdown (%)
Inland Empire 35% 100% 57% 14% 44% 45% 24% 28% 31% 33%
Southern California ⁽³⁾
52% —% 43% 50% 26% 30% 51% 38% 49% 48%
Other California ⁽⁴⁾
12% —% —% 36% 30% 25% 25% 34% 20% 18%
Other States 1% —% —% —% —% —% —% —% —% 1%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

	Calendar Year of Origination
(Dollars In Thousands)	2011 & Prior		2012		2013		2014		2015		2016		2017		2018		YTD 2019		Total
Loan balance (in thousands)	$	93,005	$	1,937	$	1,681	$	5,127	$	8,812	$	28,554	$	67,035	$	81,516	$	14,985	$	302,652
Weighted-average LTV ⁽¹⁾		58%		53%		40%		62%		68%		63%		72%		70%		68%		65%
Weighted-average age (in years)		13.42		6.58		5.85		4.68		3.82		2.72		1.86		0.74		0.92		5.30
Weighted-average FICO ⁽²⁾		730		757		758		754		746		752		739		743		769		741
Number of loans		347		10		18		16		13		56		104		140		26		730

Geographic breakdown (%)
Inland Empire		37%		17%		56%		33%		18%		26%		33%		42%		9%		34%
Southern California ⁽³⁾		51%		52%		25%		38%		57%		34%		45%		50%		29%		47%
Other California ⁽⁴⁾		11%		31%		19%		29%		25%		40%		22%		8%		62%		19%
Other States		1%		—%		—%		—%		—%		—%		—%		—%		—%		—%
Total		100%		100%		100%		100%		100%		100%		100%		100%		100%		100%


⁽¹⁾	LTV is the ratio derived by dividing the current loan balance by the lower of the original appraised value or purchase price of the real estate collateral.


⁽²⁾	At time of loan origination.


⁽³⁾	Other than the Inland Empire.


⁽⁴⁾	Other than the Inland Empire and Southern California.

The following table summarizes the interest rate reset (repricing) schedule of the Corporation's single-family, first trust deed, mortgage loans held for investment, including the percentage of those which are identified as non-performing or 30 – 89 days delinquent as of March 31, 2019:

(Dollars In Thousands)	Balance ⁽¹⁾		Non-Performing ⁽¹⁾		30 - 89 Days Delinquent ⁽¹⁾
Interest rate reset in the next 12 months	$	100,266		3%		1%
Interest rate reset between 1 year and 5 years		130,090		—%		—%
Interest rate reset after 5 years		72,296		3%		—%
Total	$	302,652		2%		—%

⁽¹⁾	As a percentage of each category.

The following table describes certain credit risk characteristics, geographic locations and the calendar year of loan origination of the ~~Corporation’s~~Corporation's multi-family loans held for investment, at ~~December~~March 31, ~~2017:~~2019:


	Calendar Year of Origination										Calendar Year of Origination
(Dollars In Thousands)	2009 & Prior	2010	2011	2012	2013	2014	2015	2016	2017	Total	2011 & Prior		2012		2013		2014		2015		2016		2017		2018		YTD 2019		Total
Loan balance (in thousands)	$21,081	$—	$6,735	$12,378	$59,669	$76,297	$82,196	$126,905	$78,525	$463,786	$	16,057	$	9,816	$	25,044	$	49,349	$	68,866	$	110,780	$	72,030	$	76,332	$	21,538	$	449,812
Weighted-average LTV ⁽¹⁾	41%	—%	52%	50%	54%	53%	54%	49%	50%	51%		37%		48%		48%		49%		51%		47%		49%		45%		59%		48%
Weighted-average DCR ⁽²⁾	1.62x	—	1.57x	1.82x	1.68x	1.66x	1.64x	1.66x				1.75x		1.90x		1.83x		1.70x		1.67x		1.67x		1.67x		1.57x		1.47x		1.66x
Weighted-average age (in years)	12.61	—	6.24	5.33	4.38	3.47	2.49	1.50	0.56	2.89		13.02		6.54		5.63		4.74		3.70		2.75		1.81		0.83		0.07		3.12
Weighted-average FICO ⁽³⁾	696	—	768	735	766	764	757	762	752	757		727		745		767		768		753		762		751		757		750		756
Number of loans	49	—	9	16	84	95	122	148	123	646		40		13		44		74		114		136		116		93		25		655

Geographic breakdown (%)
Inland Empire	36%	—%	7%	2%	35%	12%	17%	10%	18%	17%		34%		—%		41%		16%		18%		11%		17%		12%		10%		16%
Southern California ⁽⁴⁾	43%	—%	78%	64%	50%	54%	63%	64%		59%		56%		78%		46%		50%		60%		61%		64%		68%		68%		61%
Other California ⁽⁵⁾	8%	—%	15%	34%	15%	34%	20%	26%	18%	23%		8%		22%		13%		34%		22%		28%		19%		20%		22%		23%
Other States	13%	—%								1%		2%		—%		—%		—%		—%		—%		—%		—%		—%		—%
Total	100%	—%	100%									100%		100%		100%		100%		100%		100%		100%		100%		100%		100%


⁽¹⁾	LTV is the ratio derived by dividing the current loan balance by the lower of the original appraised value or purchase price of the real estate collateral.


⁽²⁾	Debt Coverage Ratio ~~(“DCR”~~("DCR") at time of origination.


⁽³⁾	At time of loan origination.


⁽⁴⁾	Other than the Inland Empire.


⁽⁵⁾	Other than the Inland Empire and Southern California.

The following table summarizes the interest rate reset or maturity schedule of the ~~Corporation’s~~Corporation's multi-family loans held for investment, including the percentage of those which are identified as non-performing, 30 – 89 days delinquent or not fully amortizing as of ~~December~~March 31, ~~2017:~~2019:


(Dollars In Thousands)	Balance		Non- Performing ⁽¹⁾	30 - 89 Days Delinquent	Percentage Not Fully Amortizing ⁽¹⁾	Balance		Non- Performing ⁽¹⁾		30 - 89 Days Delinquent		Percentage Not Fully Amortizing ⁽¹⁾
Interest rate reset or mature in the next 12 months	$	118,678	—%		3%	$	132,835		—%		—%		7%
Interest rate reset or mature between 1 year and 5 years	330,664		—%		4%		302,422		—%		—%		1%
Interest rate reset or mature after 5 years	14,444		—%		5%		14,555		—%		—%		—%
Total	$	463,786	—%		4%	$	449,812		—%		—%		3%


⁽¹⁾	As a percentage of each category.

The following table describes certain credit risk characteristics, geographic locations and the calendar year of loan origination of the ~~Corporation’s~~Corporation's commercial real estate loans held for investment, at ~~December~~March 31, ~~2017:~~2019:


	Calendar Year of Origination										Calendar Year of Origination
(Dollars In Thousands)	2009 & Prior	2010	2011	2012	2013	2014	2015	2016	2017	Total ⁽⁵⁾⁽⁶⁾	2011 & Prior		2012		2013		2014		2015		2016		2017		2018		YTD 2019		Total ⁽⁵⁾⁽⁶⁾
Loan balance (in thousands)	$1,198	$336	$—	$10,451	$12,887	$21,087	$20,033	$17,446	$19,928	$103,366	$	537	$	9,373	$	7,679	$	18,237	$	19,278	$	15,791	$	19,366	$	19,900	$	5,194		$	115,355
Weighted-average LTV ⁽¹⁾	25%	54%	—%	45%	46%	45%	41%	50%	44%	45%		36%		44%		48%		42%		39%		47%		42%		44%		42%			43%
Weighted-average DCR ⁽²⁾	1.47x	1.25x	—	1.94x	1.64x	1.93x	1.80x	1.58x	1.67x	1.75x		1.38x		1.98x		1.65x		1.96x		1.8x		1.57x		1.82x		1.61x		1.45x			1.75x
Weighted-average age (in years)	16.49	7.60	—	5.27	4.43	3.40	2.45	1.61	0.37	2.81		10.09		6.48		5.71		4.59		3.69		2.86		1.61		0.79		0.11			3.10
Weighted-average FICO ⁽²⁾	707	703	—	743	759	752	758	759	773	759		711		742		767		753		757		758		773		754		738			757
Number of loans	6	2	—	9	19	26	25	23		133		4		7		12		22		25		22		23		29		6			150

Geographic breakdown (%):
Inland Empire	73%	49%	—%	72%	22%	37%	31%	11%	26%	31%		69%		78%		27%		41%		31%		11%		26%		10%		—%			28%
Southern California ⁽³⁾	27%	51%	—%	28%	48%	43%	32%	62%	51%	45%		31%		22%		45%		44%		32%		65%		52%		55%		81%			48%
Other California ⁽⁴⁾	—%				30%	20%	37%	27%	23%	24%		—%		—%		28%		15%		37%		24%		22%		35%		19%			24%
Other States	—%											—%		—%		—%		—%		—%		—%		—%		—%		—%			—%
Total	100%		—%	100%								100%		100%		100%		100%		100%		100%		100%		100%		100%			100%


⁽¹⁾	LTV is the ratio derived by dividing the current loan balance by the lower of the original appraised value or purchase price of the real estate collateral.


⁽²⁾	At time of loan origination.


⁽³⁾	Other than the Inland Empire.


⁽⁴⁾	Other than the Inland Empire and Southern California.

⁽⁵⁾

Comprised of the following: ~~$34.2~~$47.2 million in Mixed Use; ~~$19.4~~$20.7 million in Office; $19.9 million in Retail; ~~$15.9 million in Office; $11.1~~$8.6 million in Mobile Home Parks; ~~$8.8~~$7.7 million in Warehouse; ~~$5.4~~$4.3 million in Medical/Dental Office; ~~$3.4~~$2.7 million in Mini-Storage; ~~$2.1~~$1.7 million in Restaurant/Fast Food; ~~$1.6~~$1.5 million in Light Industrial/Manufacturing and $1.1 million in Automotive – Non ~~Gasoline and $1.5 million in Light Industrial/Manufacturing.~~Gasoline.


⁽⁶⁾	Consisting of ~~$98.3~~$108.9 million or ~~95.1~~94.4 percent in investment properties and ~~$5.1~~$6.5 million or ~~4.9~~5.6 percent in owner occupied properties.

The following table summarizes the interest rate reset or maturity schedule of the ~~Corporation’s~~Corporation's commercial real estate loans held for investment, including the percentage of those which are identified as non-performing, 30 – 89 days delinquent or not fully amortizing as of ~~December~~March 31, ~~2017:~~2019:


(Dollars In Thousands)	Balance		Non- Performing ⁽¹⁾	30 - 89 Days Delinquent	Percentage Not Fully Amortizing ⁽¹⁾	Balance		Non- Performing ⁽¹⁾		30 - 89 Days Delinquent		Percentage Not Fully Amortizing ⁽¹⁾
Interest rate reset or mature in the next 12 months	$	28,529	—%		68%	$	45,699		—%		—%		83%
Interest rate reset or mature between 1 year and 5 years	69,617		—%		90%		69,656		—%		—%		90%
Interest rate reset or mature after 5 years	5,220		—%		83%		—		—%		—%		—%
Total	$	103,366	—%		84%	$	115,355		—%		—%		87%


⁽¹⁾	As a percentage of each category.

The following table sets forth information with respect to the ~~Corporation’s~~Corporation's non-performing assets, net of allowance for loan losses and fair value adjustments, at the dates indicated:


(In Thousands)	At December 31, 2017			At June 30, 2017			At March 31, 2019			At June 30, 2018
Loans on non-accrual status (excluding restructured loans):
Mortgage loans:
Single-family	$	4,508		$	4,668		$	2,657		$	2,665
Commercial real estate	—			201
Construction								745			—
Total	4,508			4,869				3,402			2,665

Accruing loans past due 90 days or more	—			—				—			—

Restructured loans on non-accrual status:
Mortgage loans:
Single-family	3,416			3,061				2,669			3,328
Commercial business loans	61			65				44			64
Total	3,477			3,126				2,713			3,392

Total non-performing loans	7,985			7,995				6,115			6,057

Real estate owned, net	621			1,615				—			906
Total non-performing assets	$	8,606		$	9,610		$	6,115		$	6,963

Non-performing loans as a percentage of loans held for investment, net of allowance for loan losses	0.90		%	0.88		%		0.69	%		0.67	%

Non-performing loans as a percentage of total assets	0.69		%	0.67		%		0.55	%		0.52	%

Non-performing assets as a percentage of total assets	0.74		%	0.80		%		0.55	%		0.59	%

The following table describes the non-performing loans, net of allowance for loan losses and fair value adjustments, by the calendar year of origination as of ~~December~~March 31, ~~2017:~~2019:

Calendar Year of Origination
(In Thousands) 2009 &
Prior
2010
2011
2012
2013
2014
2015
2016
2017
Total
Mortgage loans:
Single-family $ 7,837
$ —
$ —
$ 87
$ —
$ —
$ —
$ —
$ —
$ 7,924
Commercial business loans 61
—
—
—
—
—
—
—
—
61
Total $ 7,898
$ —
$ —
$ 87
$ —
$ —
$ —
$ —
$ —
$ 7,985

	Calendar Year of Origination
(In Thousands)	2011 & Prior		2012		2013		2014		2015		2016		2017		2018		YTD 2019		Total
Mortgage loans:
Single-family	$	3,775	$	84	$	—	$	—	$	—	$	—	$	1,467	$	—	$	—	$	5,326
Construction		—		—		—		—		—		—		—		745		—		745
Commercial business loans		44		—		—		—		—		—		—		—		—		44
Total	$	3,819	$	84	$	—	$	—	$	—	$	—	$	1,467	$	745	$	—	$	6,115

The following table describes the non-performing loans, net of allowance for loan losses and fair value adjustments, by the geographic location as of ~~December~~March 31, ~~2017:~~2019:


(In Thousands)	(In Thousands)	Inland Empire		Southern California ⁽¹⁾		Other California ⁽²⁾		Other States		Total		Inland Empire		Southern California ⁽¹⁾		Other California ⁽²⁾		Other States		Total
Mortgage loans:	Mortgage loans:
	Single-family	$	3,381	$	3,006	$	1,537	$	—	$	7,924
Single-family												$	1,892	$	2,110	$	1,324	$	—	$	5,326
Construction													—		745		—		—		745
Commercial business loans	Commercial business loans	61		—		—		—		61			44		—		—		—		44
Total	Total	$	3,442	$	3,006	$	1,537	$	—	$	7,985	$	1,936	$	2,855	$	1,324	$	—	$	6,115


⁽¹⁾	Other than the Inland Empire.


⁽²⁾	Other than the Inland Empire and Southern California.

The following table summarizes classified assets, which is comprised of classified loans, net of allowance for loan losses ~~net of undisbursed loan funds,~~and fair value adjustments, and real estate owned at the dates indicated:


	At December 31, 2017			At June 30, 2017			At March 31, 2019				At June 30, 2018
(Dollars In Thousands)	Balance		Count	Balance		Count	Balance		Count		Balance		Count
Special mention loans:
Mortgage loans:
Single-family	$	2,878	7	$	3,443	9	$	3,347		12	$	2,584		8
Multi-family	—		—	272		1		3,885		3		3,947		3
Construction	721		1	—		—
Commercial real estate								—		—		940		1
Total special mention loans	3,599		8	3,715		10		7,232		15		7,471		12

Substandard loans:
Mortgage loans:
Single-family	7,924		31	7,729		29		6,751		23		7,391		24
Commercial real estate	—		—	201		1
Construction	1,569		1	—		—		745		1		—		—
Commercial business loans	61		1	65		1		44		1		64		1
Total substandard loans	9,554		33	7,995		31		7,540		25		7,455		25

Total classified loans	13,153		41	11,710		41		14,772		40		14,926		37

Real estate owned:
Single-family	621		1	1,615		2		—		—		906		2
Total real estate owned	621		1	1,615		2		—		—		906		2

Total classified assets	$	13,774	42	$	13,325	43	$	14,772		40	$	15,832		39

Loan Volume Activities

The following table is provided to disclose details related to the volume of loans originated, purchased and sold for the quarters and ~~six~~nine months indicated:


	For the Quarters Ended December 31,						For the Six Months Ended December 31,						For the Quarters Ended March 31,						For the Nine Months Ended March 31,
(In Thousands)	2017			2016			2017			2016			2019			2018			2019			2018
Loans originated and purchased for sale:
Loans originated for sale:
Retail originations	$	183,787		$	264,857		$	397,088		$	583,827		$	72,353		$	129,816		$	287,399		$	526,904
Wholesale originations and purchases	148,077			277,054			327,068			605,426
Total loans originated and purchased for sale ⁽¹⁾	331,864			541,911			724,156			1,189,253
Wholesale originations														38,353			90,377			166,045			417,445
Total loans originated for sale ⁽¹⁾														110,706			220,193			453,444			944,349

Loans sold:
Servicing released	(351,720		)	(624,979		)	(725,183		)	(1,183,992		)		(134,264	)		(220,532	)		(510,798	)		(945,715	)
Servicing retained	(9,660		)	(13,520		)	(17,248		)	(22,821		)		(2,409	)		(5,326	)		(5,193	)		(22,574	)
Total loans sold ⁽²⁾	(361,380		)	(638,499		)	(742,431		)	(1,206,813		)		(136,673	)		(225,858	)		(515,991	)		(968,289	)

Loans originated for investment:
Mortgage loans:
Single-family	12,362			17,926			39,698			29,756				6,862			22,665			48,258			62,363
Multi-family	9,473			15,418			21,667			34,459				9,523			18,612			27,678			40,279
Commercial real estate	8,478			2,021			12,970			4,848				4,040			5,930			12,520			18,900
Construction	1,475			1,661			2,409			3,296				1,970			2,050			5,313			4,459
Consumer loans	2			1			3			1				—			—			—			3
Total loans originated for investment ⁽³⁾	31,790			37,027			76,747			72,360				22,395			49,257			93,769			126,004

Loans purchased for investment:
Mortgage loans:
Single-family	—			9,477			—			9,527				8,426			—			8,426			—
Multi-family	2,241			16,858			2,241			39,764				12,023			—			16,645			2,241
Commercial real estate	868			—			868			—				1,157			—			1,157			868
Total loans purchased for investment ⁽³⁾	3,109			26,335			3,109			49,291				21,606			—			26,228			3,109

Mortgage loan principal payments	(57,390		)	(54,722		)	(100,751		)	(105,264		)		(36,456	)		(43,163	)		(140,548	)		(143,914	)
Real estate acquired in settlement of loans	(700		)	—			(700		)	(1,298		)		—			(959	)		—			(1,659	)
(Decrease) increase in other items, net ⁽⁴⁾	(22		)	(5,577		)	968			(2,197		)		(499	)		1,955			(1,831	)		2,923

Net decrease in loans held for investment and loans held for sale at fair value	$	(52,729	)	$	(93,525	)	$	(38,902	)	$	(4,668	)
Net (decrease) increase in loans held for investment and loans held for sale at fair value													$	(18,921	)	$	1,425		$	(84,929	)	$	(37,477	)


⁽¹⁾	Includes PBM loans originated ~~and purchased~~ for sale during the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 totaling ~~$331.9~~$110.7 million, ~~$541.9~~$220.2 million, ~~$724.2~~$453.4 million and ~~$1.19 billion,~~$944.3 million, respectively.


⁽²⁾	Includes PBM loans sold during the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 totaling ~~$361.4~~$136.7 million, ~~$638.5~~$225.9 million, ~~$742.4~~$516.0 million and ~~$1.21 billion,~~$968.3 million, respectively.


⁽³⁾	Includes PBM loans originated and purchased for investment during the quarters and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 totaling ~~$12.4~~$4.0 million, ~~$15.6~~$20.6 million, ~~$37.8~~$44.0 million and ~~$26.8~~$58.4 million, respectively.


⁽⁴⁾	Includes net changes in undisbursed loan funds, deferred loan fees or costs, allowance for loan losses, fair ~~vale~~value of loans held for investment, fair value of loans held for sale, advance payments of escrows and repurchases.

Loans that the Corporation has originated for sale are primarily sold on a servicing released basis. Clear ownership is conveyed to the investor by endorsing the original note in favor of the investor; transferring the servicing to a new servicer consistent with investor instructions; communicating the servicing transfer to the borrower as required by law; and sending the loan file and collateral instruments electronically to the investor contemporaneous with receiving the cash proceeds from the sale of the loan. Additionally, the Corporation registers the change of ownership in the mortgage electronic registration system known as MERS as required by the contractual terms of the loan sale agreement. Also, the Corporation retains an imaged copy of the entire loan file and collateral instruments as an abundance of caution in the event questions arise that can only be answered by reviewing the loan file. Additionally, the Corporation does not originate or sponsor mortgage-backed securities.

Liquidity and Capital Resources

The ~~Corporation’s~~Corporation's primary sources of funds are deposits, proceeds from the sale of loans originated ~~and purchased~~ for sale, proceeds from principal and interest payments on loans, proceeds from the maturity and sale of investment securities, FHLB – San Francisco advances, access to the discount window facility at the Federal Reserve Bank of San Francisco and access to a federal funds facility with its correspondent bank. While maturities and scheduled amortization of loans and investment securities are a relatively predictable source of funds, deposit flows, mortgage prepayments and loan sales are greatly influenced by general interest rates, economic conditions and competition.

The primary investing activity of the Corporation is the origination and purchase of loans held for investment and loans held for sale. During the first ~~six~~nine months of fiscal ~~2018~~2019 and ~~2017,~~2018, the Corporation originated and purchased ~~$804.0~~$573.4 million and ~~$1.31~~$1.07 billion of loans, respectively. The total loans sold in the first ~~six~~nine months of fiscal 2019 and 2018 ~~and 2017~~ were ~~$742.4~~$516.0 million and ~~$1.21 billion,~~$968.3 million, respectively. At ~~December~~March 31, ~~2017,~~2019, the Corporation had loan origination commitments totaling ~~$57.7~~$16.6 million, undisbursed lines of credit totaling ~~$1.1~~$1.4 million and undisbursed construction loan funds totaling ~~$7.4~~$6.1 million. The Corporation anticipates that it will have sufficient funds available to meet its current loan commitments.

The ~~Corporation’s~~Corporation's primary financing activity is gathering deposits. During the first ~~six~~nine months of fiscal ~~2018,~~2019, the net decrease in deposits was ~~$18.7~~$30.7 million or three percent, primarily due to non-renewing scheduled maturities in time ~~deposits, partly offset by the increase in transaction accounts.~~deposits. The decrease in time deposits ~~and the increase in transaction accounts were~~was consistent with the Corporation's operating strategy. AsTime deposits decreased $27.4 million, or 12 percent, to $210.2 million at March 31, 2019 from $237.6 million at June 30, 2018. At March 31, 2019, time deposits with a principal amount of ~~December 31, 2017, total deposits were $907.8 million. At December 31, 2017, time deposits~~$250,000 or less and scheduled to mature in one year or less were ~~$101.6~~$93.5 million and total time deposits with a principal amount of ~~$100,000~~more than $250,000 and scheduled to mature in one year or ~~higher~~less were ~~$122.1~~$22.8 million. Historically, the Corporation has been able to retain a significant percentage of its time deposits as they mature.

The Corporation must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. The Corporation generally maintains sufficient cash and cash equivalents to meet short-term liquidity needs. At ~~December~~March 31, ~~2017,~~2019, total cash and cash equivalents were ~~$47.2~~$61.5 million, or ~~four~~five percent of total assets. Depending on market conditions and the pricing of deposit products and FHLB – San Francisco advances, the Bank may rely on FHLB – San Francisco advances for part of its liquidity needs. As of ~~December~~March 31, ~~2017,~~2019, total borrowings were ~~$111.2~~$101.1 million and the financing availability at FHLB – San Francisco was limited to 35 percent of total assets; the remaining borrowing facility was ~~$297.1~~$280.9 million and the remaining available collateral was ~~$535.6~~$485.7 million. In addition, the Bank has secured ~~a $75.8~~an $80.5 million discount window facility at the Federal Reserve Bank of San Francisco, collateralized by investment securities with a fair market value of ~~$80.7~~$85.6 million. As of ~~December~~March 31, ~~2017,~~2019, the Bank also has a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $17.0 million that matures on June 30, ~~2018~~2019 which the Bank intends to renew upon maturity. The Bank had no advances under its correspondent bank or discount window facility as of ~~December~~March 31, ~~2017.~~2019.

Regulations require thrifts to maintain adequate liquidity to assure safe and sound operations. The ~~Bank’s~~Bank's average liquidity ratio (defined as the ratio of average qualifying liquid assets to average deposits and borrowings) for the quarter ended ~~December~~March 31, ~~2017 decreased~~2019 increased to ~~17.9~~22.6 percent from ~~22.1~~14.9 percent for the quarter ended June 30, ~~2017.~~2018.

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

At ~~December~~March 31, ~~2017, Provident Financial Holdings, Inc. and~~2019, the Bank ~~each~~ exceeded all regulatory capital requirements. The Bank was categorized "well-capitalized" at ~~December~~March 31, ~~2017~~2019 under the regulations of the OCC.

As a bank holding company registered with the Federal Reserve, Provident Financial Holdings, Inc. is subject to the capital adequacy requirements of the Federal Reserve. For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis, and the Federal Reserve expects the holding company's subsidiary bank to be well capitalized under the prompt corrective action regulations. If Provident Financial Holdings, Inc. were subject to regulatory capital guidelines for bank holding companies with $3.0 billion or more in assets at March 31, 2019, Provident Financial Holdings, Inc. would have exceeded all regulatory capital requirements. The regulatory capital ratios calculated for Provident Financial Holdings, Inc. at March 31, 2019 were 10.81% for Tier 1 leverage-based capital, 18.32% for Tier 1 risk-based capital, 19.42% for total risk-based capital, and 18.32% for common equity Tier 1 ("CET1") capital ratio.

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

						Regulatory Requirements
	Actual					Minimum for Capital Adequacy Purposes⁽¹⁾					Minimum to Be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio

Provident Savings Bank, F.S.B.:

As of March 31, 2019
Tier 1 leverage capital (to adjusted average assets)	$	113,906		10.17	%	$	44,779		4.00	%	$	55,974		5.00	%
CET1 capital (to risk-weighted assets)	$	113,906		17.24	%	$	46,240		7.00	%	$	42,937		6.50	%
Tier 1 capital (to risk-weighted assets)	$	113,906		17.24	%	$	56,148		8.50	%	$	52,845		8.00	%
Total capital (to risk-weighted assets)	$	121,137		18.34	%	$	69,359		10.50	%	$	66,057		10.00	%

As of June 30, 2018
Tier 1 leverage capital (to adjusted average assets)	$	116,369		9.96	%	$	46,716		4.00	%	$	58,394		5.00	%
CET1 capital (to risk-weighted assets)	$	116,369		16.81	%	$	44,125		6.38	%	$	44,990		6.50	%
Tier 1 capital (to risk-weighted assets)	$	116,369		16.81	%	$	54,507		7.88	%	$	55,372		8.00	%
Total capital (to risk-weighted assets)	$	123,911		17.90	%	$	68,350		9.88	%	$	69,215		10.00	%

Regulatory Requirements
Actual
Minimum for Capital
Adequacy Purposes

Minimum to Be
Well Capitalized
Amount Ratio Amount Ratio Amount Ratio

Provident Financial Holdings, Inc.:

As of December 31, 2017
Tier 1 leverage capital (to adjusted average assets) $ 120,453 10.28 % $ 46,862 4.00 % $ 58,577 5.00 %
Common Equity Tier 1 ("CET1") capital (to risk-
weighted assets)
$ 120,453 17.62 % $ 39,313 5.75 % $ 44,441 6.50 %
Tier 1 capital (to risk-weighted assets) $ 120,453 17.62 % $ 49,568 7.25 % $ 54,696 8.00 %
Total capital (to risk-weighted assets) $ 128,716 18.83 % $ 63,242 9.25 % $ 68,370 10.00 %

As of June 30, 2017
Tier 1 leverage capital (to adjusted assets) $ 127,956 10.77 % $ 47,506 4.00 % $ 59,383 5.00 %
CET1 capital (to risk-weighted assets) $ 127,956 17.57 % $ 41,885 5.75 % $ 47,348 6.50 %
Tier 1 capital (to risk-weighted assets) $ 127,956 17.57 % $ 52,811 7.25 % $ 58,274 8.00 %
Total capital (to risk-weighted assets) $ 136,271 18.71 % $ 67,380 9.25 % $ 72,843 10.00 %

Provident Savings Bank, F.S.B.:

As of December 31, 2017
Tier 1 leverage capital (to adjusted average assets) $ 112,401 9.59 % $ 46,862 4.00 % $ 58,577 5.00 %
CET1 capital (to risk-weighted assets) $ 112,401 16.44 % $ 39,307 5.75 % $ 44,434 6.50 %
Tier 1 capital (to risk-weighted assets) $ 112,401 16.44 % $ 49,561 7.25 % $ 54,688 8.00 %
Total capital (to risk-weighted assets) $ 120,664 17.65 % �� $ 63,233 9.25 % $ 68,360 10.00 %

As of June 30, 2017
Tier 1 leverage capital (to adjusted assets) $ 117,530 9.90 %
$ 47,503 4.00 %
$ 59,379 5.00 %
CET1 capital (to risk-weighted assets) $ 117,530 16.14 %
$ 41,877 5.75 %
$ 47,339 6.50 %
Tier 1 capital (to risk-weighted assets) $ 117,530 16.14 %
$ 52,801 7.25 %
$ 58,263 8.00 %
Total capital (to risk-weighted assets) $ 125,845 17.28 %
$ 67,367 9.25 %
$ 72,829 10.00 %

⁽¹⁾	The dollar amounts and ratios include the capital conservation buffer of 2.50% and 1.875% of risk-weighted assets at March 31, 2019 and June 30, 2018, respectively, except the Tier 1 leverage capital dollar amounts and ratios.

In addition to the minimum CET1, Tier 1 and total capital ratios, ~~Provident Financial Holdings, Inc. and~~ the Bank ~~will have~~is required to maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This requirement began to be phased in on January 1, 2016 at 0.625 percent of risk-weighted assets and will increase each year to an amount equal to 2.5 percent of risk-weighted assets when fully implemented in January 2019. As of ~~December~~March 31, ~~2017,~~2019, the Bank's capital conservation buffer was ~~1.25 percent.~~10.34% as filed in the Call Report with the OCC.

The ability of the Corporation to pay dividends to stockholders depends primarily on the ability of the Bank to pay dividends to the Corporation. The Bank may not declare or pay a cash dividend if the effect thereof would cause its net worth to be reduced below the regulatory capital requirements imposed by federal regulation. In the first ~~six~~nine months of fiscal ~~2018,~~2019, the Bank paid a cash dividend of ~~$5.0~~$7.5 million to the Corporation; while the Corporation paid ~~$2.1~~$3.1 million of cash dividends to its shareholders.

Supplemental Information

	At March 31, 2019		At June 30, 2018		At March 31, 2018

Loans serviced for others (in thousands)	$	123,049	$	128,409	$	128,060

Book value per share	$	16.17	$	16.23	$	16.16

~~Supplemental Information~~

At
December 31,
2017 At
June 30,
2017 At
December 31,
2016

Loans serviced for others (in thousands) $127,088 $119,304 $113,615

Book value per share $16.15 $16.62 $16.75

ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk.

One of the ~~Corporation’s~~Corporation's principal financial objectives is to achieve long-term profitability while reducing its exposure to fluctuating interest rates. The Corporation has sought to reduce the exposure of its earnings to changes in interest rates by attempting to manage the repricing mismatch between interest-earning assets and interest-bearing liabilities. The principal element in achieving this objective is to increase the interest-rate sensitivity of the ~~Corporation’s~~Corporation's interest-earning assets by retaining for its portfolio new loan originations with interest rates subject to periodic adjustment to market conditions and by selling fixed-rate, single-family mortgage loans. In addition, the Corporation maintains an investment portfolio, which is largely in U.S. government agency MBS and U.S. government sponsored enterprise MBS with contractual maturities of up to 30 years that reprice ~~periodically~~frequently or have a relatively short-average life. The Corporation relies on retail deposits as its primary source of funds while utilizing FHLB – San Francisco advances as a secondary source of funding. Management believes retail deposits, unlike brokered deposits, reduces the effects of interest rate fluctuations because they generally represent a more stable source of funds. As part of its interest rate risk management strategy, the Corporation promotes transaction accounts and time deposits with terms up to seven years.

Through the use of an internal interest rate risk model, the Corporation is able to analyze its interest rate risk exposure by measuring the change in net portfolio value ~~(“NPV”~~("NPV") over a variety of interest rate scenarios. NPV is defined as the net present value of expected future cash flows from assets, liabilities and off-balance sheet contracts. The calculation is intended to illustrate the change in NPV that would occur in the event of an immediate change in interest rates of -200, -100, +100, +200 ~~+300~~ and ~~+400~~+300 basis points ~~(“bp”~~("bp") with no effect given to steps that management might take to counter the effect of the interest rate movement. The current federal funds rate is ~~1.50~~2.50 percent making an immediate change of ~~-200 and~~ -300 basis points improbable.

The following table is derived from the internal interest rate risk model and represents the NPV based on the indicated changes in interest rates as of ~~December~~March 31, ~~2017~~2019 (dollars in thousands).

Basis Points ("bp")
Change in Rates
Net
Portfolio
Value
NPV
Change⁽¹⁾
Portfolio
Value of
Assets
NPV as Percentage
of Portfolio Value
Assets⁽²⁾
Sensitivity
Measure⁽³⁾
+400 bp $ 262,577
$ 129,152
$ 1,282,301
20.48% +919 bp
+300 bp $ 236,832
$ 103,407
$ 1,263,229
18.75% +746 bp
+200 bp $ 206,859
$ 73,434
$ 1,240,231
16.68% +539 bp
+100 bp $ 172,084
$ 38,659
$ 1,212,942
14.19% +290 bp
0 bp $ 133,425
$ —
$ 1,181,462
11.29% 0 bp
-100 bp $ 120,515
$ (12,910 ) $ 1,173,826
10.27% -102 bp

Basis Points ("bp") Change in Rates		Net Portfolio Value		NPV Change ⁽¹⁾		Portfolio Value of Assets		NPV as Percentage of Portfolio Value Assets ⁽²⁾		Sensitivity Measure ⁽³⁾
	+300bp	$	221,787	$	98,304	$	1,210,431		18.32%		+740bp
	+200bp	$	192,959	$	69,476	$	1,187,516		16.25%		+533bp
	+100bp	$	159,617	$	36,134	$	1,160,287		13.76%		+284bp
	0bp	$	123,483	$	—	$	1,130,483		10.92%		0bp
	-100bp	$	113,761	$	(9,722	$	1,121,186		10.15%		-77bp
	-200bp	$	127,904	$	4,421	$	1,135,758		11.26%		+34bp


⁽¹⁾	Represents the increase (decrease) of the NPV at the indicated interest rate change in comparison to the NPV at ~~December~~March 31, ~~2017 (“~~2019 ("base ~~case”~~case").


⁽²⁾	Derived asfrom the NPV divided by the portfolio value of total assets.


⁽³⁾	Derived asfrom the change in the NPV ratio from the base case amount assuming the indicated change in interest rates (expressed in basis points).

The following table is derived from the internal interest rate risk model and represents the change in the NPV at a -100 basis point rate shock at ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017.~~2018.


	At December 31, 2017	At June 30, 2017	At March 31, 2019	At June 30, 2018
	(-100 bp rate shock)		(-100 bp rate shock)	(-100 bp rate shock)
Pre-Shock NPV Ratio: NPV as a % of PV Assets	11.29%	11.49%	10.92%	10.24%
Post-Shock NPV Ratio: NPV as a % of PV Assets	10.27%	10.16%	10.15%	9.62%
Sensitivity Measure: Change in NPV Ratio	-102 bp	-133 bp	-77 bp	-62 bp

The pre-shock NPV ratio ~~declined 20~~increased 68 basis points to ~~11.29~~10.92 percent at ~~December~~March 31, ~~2017~~2019 from ~~11.49~~10.24 percent at June 30, ~~2017 while~~2018 and the post-shock NPV ratio increased 1153 basis points to ~~10.27~~10.15 percent at ~~December~~March 31, ~~2017~~2019 from ~~10.16~~9.62 percent at June 30, ~~2017. As~~2018. The increase of the NPV ratios was primarily attributable to net income in the first nine months of fiscal 2019 and a ~~result,~~higher net valuation of total assets in comparison to total liabilities, partly offset by a $7.5 million cash dividend distribution from the ~~sensitivity ratio declined 31 basis points~~Bank to ~~102 basis points at December 31, 2017 from 133 basis points at June 30, 2017.~~Provident Financial Holdings, Inc. in September 2018.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. Additionally, certain assets, such as ARM loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from time deposits could likely deviate significantly from those assumed when calculating the results described in the tables above. It is also possible that, as a result of an interest rate increase, the higher mortgage payments required from ARM borrowers could result in an increase in delinquencies and defaults. Changes in market interest rates may also affect the volume and profitability of the ~~Corporation’s~~Corporation's mortgage banking operations. Accordingly, the data presented in the tables in this section should not be relied upon as indicative of actual results in the event of changes in interest rates. Furthermore, the NPV presented in the foregoing tables is not intended to present the fair market value of the Corporation, nor does it represent amounts that would be available for distribution to shareholders in the event of the liquidation of the Corporation.

The Corporation measures and evaluates the potential effects of interest rate movements through an interest rate sensitivity "gap" analysis. Interest rate sensitivity reflects the potential effect on net interest income when there is movement in interest rates. For loans, securities and liabilities with contractual maturities, the table presents ~~principal cash flows.~~contractual repricing or scheduled maturity. For transaction accounts (checking, money market and savings deposits) that have no contractual maturity, the table presents estimated principal cash flows and, as applicable, the Corporation's historical experience, management's judgment and statistical analysis ~~as applicable,~~ concerning their most likely withdrawal behaviors.

The following table represents the interest rate gap analysis of the Corporation's assets and liabilities as of ~~December~~March 31, ~~2017:~~2019:

																		Term to Contractual Repricing, Estimated Repricing, or Contractual Maturity ⁽¹⁾
																		As of March 31, 2019
			Term to Repricing or Maturity⁽¹⁾
			As of December 31, 2017
			12 months or less			Greater than 1 year to 3 years			Greater than 3 years to 5 years			Greater than 5 years or non sensitive			Total
(Dollars In Thousands)																		12 months or less			Greater than 1 year to 3 years			Greater than 3 years to 5 years			Greater than 5 years or non-sensitive			Total
			(Dollars In thousands)
Repricing Assets:	Repricing Assets:
	Cash and cash equivalents		$	44,345		$	—		$	—		$	2,828		$	47,173
	Investment securities		41,399			—			—			54,632			96,031
	Loans held for investment		303,164			231,237			265,483			86,092			885,976
	Loans held for sale		96,589			—			—			—			96,589
	FHLB - San Francisco stock		8,108			—			—			—			8,108
	Other assets		—			—			—			28,254			28,254
		Total assets	493,605			231,237			265,483			171,806			1,162,131
Cash and cash equivalents																		$	54,980		$	—		$	—		$	6,478		$	61,458
Investment securities																			34,768			200			—			73,836			108,804
Loans held for investment																			272,770			233,125			284,781			92,878			883,554
Loans held for sale																			30,500			—			—			—			30,500
FHLB - San Francisco stock																			8,199			—			—			—			8,199
Other assets																			3,387			—			—			23,493			26,880
Total assets																			404,604			233,325			284,781			196,685			1,119,395

Repricing Liabilities and Equity:	Repricing Liabilities and Equity:
	Checking deposits - non-interest bearing		—			—			—			77,144			77,144
	Checking deposits - interest bearing		38,454			76,909			76,909			64,091			256,363
	Savings deposits		58,484			116,968			116,968			—			292,420
	Money market deposits		17,362			17,362			—			—			34,724
	Time deposits		101,557			111,721			29,208			4,651			247,137
	FHLB - San Francisco borrowings		10,000			20,000			31,189			50,000			111,189
	Other liabilities		—			—			—			22,454			22,454
	Stockholders' equity		—			—			—			120,700			120,700
		Total liabilities and stockholders' equity	225,857			342,960			254,274			339,040			1,162,131
Checking deposits - non-interest bearing																			—			—			—			90,875			90,875
Checking deposits - interest bearing																			40,447			80,894			80,894			67,413			269,648
Savings deposits																			54,394			108,788			108,789			—			271,971
Money market deposits																			17,115			17,114			—			—			34,229
Time deposits																			116,331			69,668			23,446			716			210,161
Borrowings																			—			41,121			40,000			20,000			101,121
Other liabilities																			335			—			—			19,846			20,181
Stockholders' equity																			—			—			—			121,209			121,209
Total liabilities and stockholders' equity																			228,622			317,585			253,129			320,059			1,119,395

Repricing gap positive (negative)	Repricing gap positive (negative)		$	267,748		$	(111,723	)	$	11,209		$	(167,234	)	$	—		$	175,982		$	(84,260	)	$	31,652		$	(123,374	)	$	—
Cumulative repricing gap:	Cumulative repricing gap:
	Dollar amount		$	267,748		$	156,025		$	167,234		$	—		$	—
	Percent of total assets		23		%	13		%	14		%	—		%	—		%
Dollar amount																		$	175,982		$	91,722		$	123,374		$	—		$	—
Percent of total assets																			16	%		8	%		11	%		—	%		—	%

⁽¹⁾ Cash and cash equivalents are presented as ~~forecast~~estimated repricing; investment securities and loans held for investment are presented as contractual maturities or contractual repricing (without consideration for prepayments); loans held for sale and transaction accounts are presented as ~~forecast~~estimated repricing; FHLB - San Francisco stock is presented as ~~forecast~~contractual repricing; while time deposits (without consideration for early withdrawals) and ~~FHLB - San Francisco~~ borrowings are presented as contractual maturities.

The static gap analysis shows a positive position in the ~~"12 months or less" category and the "Greater than 3 years to 5 years"~~"Cumulative repricing gap - dollar amount" category, indicating more assets are sensitive to repricing than liabilities; while the gap analysis shows a negative position in the "Greater than 1 year to 3 years" category and the "Greater than 5 years or non sensitive" category, indicating more liabilities are sensitive to repricing than assets. However, the cumulative repricing gap is positive in each category. Non-maturity checking deposits are available for immediate withdrawal and are therefore assumed to be inherently sensitive to changes in interest rates.liabilities. Management views non-interest bearing deposits to be the least sensitive to

changes in market interest rates and these accounts are therefore characterized as long-term funding. Interest-bearing checking deposits are considered more sensitive, followed by increased sensitivity for savings and money market deposits. For the purpose of calculating gap, a portion of these interest-bearing deposit balances are assumed to be subject to estimated repricing as follows: interest-bearing checking deposits at ~~15 percent~~15% per year, savings deposits at ~~20 percent~~20% per year and money market deposits at ~~50 percent~~50% in the first and second years.

The gap results presented above could vary substantially if different assumptions are used or if actual experience differs from the assumptions used in the preparation of the gap analysis. Furthermore, the gap analysis provides a static view of interest rate risk

exposure at a specific point in time without taking into account redirection of cash flows activity and deposit ~~fluctuations, and repricing.~~fluctuations.

The extent to which the net interest margin will be impacted by changes in prevailing interest rates will depend on a number of factors, including how quickly interest-earning assets and interest-bearing liabilities react to interest rate changes. It is not uncommon for rates on certain assets or liabilities to lag behind changes in the market ~~interest rates.~~rates of interest. Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest sensitivities to vary. As a result, the relationship between interest-earning assets and interest-bearing liabilities, as shown in the previous table, is only a general indicator of interest rate sensitivity and the effect of changing ~~market~~rates of interest ~~rates~~ on net interest income is likely to be different from that predicted solely on the basis of the interest rate sensitivity analysis set forth in the previous table.

The Corporation also models the sensitivity of net interest income for the 12-month period subsequent to any given month-end assuming a dynamic balance sheet accounting for, among other items:

The ~~Corporation’s~~Corporation's current balance sheet and repricing characteristics;

Forecasted balance sheet growth consistent with the business plan;

Current interest rates and yield curves and management estimates of projected interest rates;

Embedded options, interest rate floors, periodic caps and lifetime caps;

Repricing characteristics for market rate sensitive instruments;

Loan, investment, deposit and borrowing cash flows;

Loan prepayment estimates for each type of loan; and

Immediate, permanent and parallel movements in interest rates of plus ~~400,~~ 300, 200 and 100 and minus 100 and 200 basis points.

The following table describes the results of the analysis at ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017.~~2018.


At December 31, 2017		At June 30, 2017
At March 31, 2019				At March 31, 2019	At June 30, 2018
Basis Point (bp) Change in Rates	Change in Net Interest Income	Basis Point (bp) Change in Rates	Change in Net Interest Income	Change in Net Interest Income	Basis Point (bp) Change in Rates	Change in Net Interest Income
+400 bp	11.76%	+400 bp	16.70%
+300 bp	10.03%	+300 bp	14.23%	6.50%	+300 bp	6.83%
+200 bp	8.22%	+200 bp	11.62%	6.04%	+200 bp	5.73%
+100 bp	6.12%	+100 bp	8.29%	5.00%	+100 bp	4.53%
-100 bp	(5.29)%	-100 bp	(3.68)%	(5.86)%	-100 bp	(3.98)%
-200 bp				(12.21)%	-200 bp	(10.61)%

At ~~both December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, the Corporation was asset sensitive as its interest-earning assets at those dates are expected to reprice more quickly than its interest-bearing liabilities during the subsequent 12-month period. Therefore, ~~at December 31, 2017 and June 30, 2017,~~ in a rising interest rate environment, the model ~~forecasts~~projects an increase in net interest income over the subsequent 12-month period. In a falling interest rate environment, the ~~model forecasts~~results project a decrease in net interest income over the subsequent 12-month period.

Management believes that the assumptions used to complete the analysis described in the table above are reasonable. However, past experience has shown that immediate, permanent and parallel movements in interest rates will not necessarily

occur. Additionally, while the analysis provides a tool to evaluate the projected net interest income to changes in interest rates, actual results may be substantially different if actual experience differs from the assumptions used to complete the analysis, particularly with respect to the 12-month business plan when asset growth is forecast. Therefore, the model results that the Corporation discloses should be thought of as a risk management tool to compare the trends of the ~~Corporation’s~~Corporation's current disclosure to previous disclosures, over time, within the context of the actual performance of the treasury yield curve.

ITEM 4 – Controls and Procedures.

a) An evaluation of the ~~Corporation’s~~Corporation's disclosure controls and procedures (as defined in Section 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934 (the ~~“Act”~~"Act")) was carried out under the supervision and with the participation of the ~~Corporation’s~~Corporation's Chief Executive Officer, Chief Financial Officer and the ~~Corporation’s~~Corporation's Disclosure Committee as of the end of the period covered by this quarterly report. In designing and evaluating the ~~Corporation’s~~Corporation's disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Also, because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,

within the Corporation have been detected. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation, the ~~Corporation’s~~Corporation's Chief Executive Officer and Chief Financial Officer concluded that the ~~Corporation’s~~Corporation's disclosure controls and procedures as of ~~December~~March 31, ~~2017~~2019 are effective, at the reasonable assurance level, in ensuring that the information required to be disclosed by the Corporation in the reports it files or submits under the Act is (i) accumulated and communicated to the ~~Corporation’s~~Corporation's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~SEC's rules and forms.

b) There have been no changes in the ~~Corporation’s~~Corporation's internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended ~~December~~March 31, ~~2017,~~2019, that has materially affected, or is reasonably likely to materially affect, the ~~Corporation’s~~Corporation's internal control over financial reporting. The Corporation does not expect that its internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

~~Periodically, there~~There have been various claims and lawsuits involving the Corporation, such as claims to enforce liens, condemnation proceedings on properties in which the Corporation holds security interests, claims involving the making and servicing of real property loans, employment matters and other issuesno material changes in the ~~ordinary course~~legal proceedings previously disclosed in Part I, Item 3 of ~~an incident~~the Corporation's Annual Report on Form 10-K for the year ended June 30, 2018, except as follows.

On November 13, 2018, the presiding Court approved the motion for final approval of the settlement agreement in the two class and collective action lawsuits filed by Gina McKeen-Chaplin and Neal, respectively, against the Bank. The settlement funds have been distributed to the ~~Corporation’s business. The Corporation is not a party to any pending legal proceedings that it believes would have a material adverse effect on~~plaintiffs and plaintiff's counsel consistent with the ~~financial condition, operations or cash flows of~~settlement agreements. On April 8, 2019, the ~~Corporation, except as set forth below. Additionally, in some actions, it is difficult to assess potential exposure because~~presiding Court signed an order closing and dismissing the ~~Corporation is still in the early stages of the litigation.~~cases.

On December ~~17, 2012, a class and collective action~~20, 2018, counsel in the lawsuit ~~Gina McKeen-Chaplin, individually and on behalf of others similarly situated~~known as Cannon vs. the Bank ~~was~~ filed ~~in the United States District Court~~a Motion for the Eastern District of California (the "Court") against the Bank claiming damages, restitution and injunctive relief for alleged misclassification of certain employees as exempt rather than non-exempt, resulting in a failure to pay appropriate overtime compensation, to provide meal and rest periods, to pay waiting time penalties and to provide accurate wage statements (the “McKeen-Chaplin lawsuit”).

On August 12, 2015, the Court issued an order denying the plaintiffs' motion for summary judgment and granting the Bank's motion for summary judgment affirming that the plaintiffs were properly classified as exempt employees and denying the federal claims. On August 18, 2015, the plaintiffs filed an appeal to the order. On July 5, 2017, the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) reversed the Court’s ruling granting the Bank's motion for summary judgment, instead ruling the plaintiffs were improperly classified as exempt employees and were entitled to overtime compensation. The Ninth Circuit remanded the case back to the Court with instructions to enter summary judgement in favorPreliminary Approval of the plaintiffs. As a result of the Ninth Circuit’s unfavorable ruling, the Bank filed on September 7, 2017, a petition for writ of certiorari to the United States Supreme Court, which was denied on November 27, 2017.

On May 22, 2013, counsel in the McKeen-Chaplin lawsuit filed another class action called Neal versus Provident Savings Bank, F.S.B. (the “Neal lawsuit”) in California Superior Court in Alameda County (the "State Court"). The Neal lawsuit is virtually identical to the McKeen-Chaplin lawsuit alleging that mortgage underwriters were misclassified as exempt employees and is in the early stages of litigation.

On December 18, 2017, the Bank entered into a Memorandum of Understanding with the plaintiffs' representatives to memorialize an agreement in principle to settle the pending McKeen-Chaplin and Neal Lawsuits. The Memorandum of Understanding assumes class certification for purposes of the settlement only and provides for an aggregate settlement payment by the Bank of $1.8 million, which includes all settlement funds, the named plaintiff service payments, and class counsel's attorneys' fees and costs. Any additional costs and expenses related to employer-side payroll taxes will be paid by the Bank.

The Bank's decision to settle these lawsuits was the result of the unfavorable ruling by the United States Supreme Court in the McKeen-Chaplin lawsuit and the significant legal costs, distraction from day-to-day operating activities and substantial resources that would be required to defend the Bank in protracted litigation if the Neal lawsuit would proceed. In addition, the Bank determined that the settlement would reduce the Bank's potential exposure to damages, penalties, fines and plaintiffs' legal fees in the event of an unfavorable outcome in the Neal lawsuit. The settlement will include the dismissal of all claims against the Bank and related parties in the McKeen-Chaplin and Neal Lawsuits without any admission of liability or wrongdoing attributed to the Bank. The settlement described in the Memorandum of Understanding remains subject to court approval and other customary conditions, including a limitation on the number of plaintiffs in each lawsuit that may opt out of the proposed settlement. If the opt out number for either lawsuit is exceeded, the Bank may at its sole and absolute discretion void the settlement within 30 days of receiving notice of the number of plaintiff’s electing to opt out of the settlement.

~~Based on the proposed settlement, the Corporation recorded litigation expense accrual of $650,000 in the second quarter of fiscal 2018 to fully reserve for the agreed upon settlement amount.~~

~~On August 6, 2015, a former employee, Christina Cannon, filed a lawsuit called Cannon versus the Bank~~Settlement in the California Superior Court for the County of San Bernardino. Cannon seeks to represent a class of all non-exempt employees in a class action lawsuit brought under California’s Unfair Competition Law, Business & Professions Code section 17200. The underlying claims include unpaid overtime (including off-the-clock work), meal and rest period violations, minimum wage violations, and failure to reimburse business expenses. On September 8, 2017, the attorneys for the plaintiffs in the Cannon Lawsuit sent notification to the Bank and to the California Labor & Workforce Development Agency informing them of their intent to bring a claim under the Private Attorneys’ General Act of 2004 (“PAGA”) on behalf of all non-exempt employees and covering a variety of alleged wage and hour violations. On SeptemberApril 12, 2017, the Bank entered into a Memorandum of Understanding with the plaintiffs’ representatives to memorialize an agreement in principle to settle the pending Cannon Lawsuit. The Memorandum of Understanding assumes class certification for purposes2019, this Court granted preliminary approval of the settlement ~~only~~ and ~~provides~~set a tentative date for ~~an aggregate settlement payment by~~a hearing on final approval for July 24, 2019, which presumes the Bank of $2.8 million, which includes all settlement funds, the class representative enhancement award, settlement administrator’s expenses, any employer-side payroll taxes, and class counsel’s attorneys’ fees and costs. The Bank’s decision to settle this matter was the result of the significant legal costs, distraction from day-to-day operating activities and substantial resources that would be required to defend the Bank in protracted litigation. In addition, the Bank determined that the settlement would reduce the Bank’s potential exposure to damages, penalties, fines and plaintiffs’ legal fees in the event of an unfavorable outcome in a court trial. The settlement includes the dismissal of all claims against the Bank and related parties in the Cannon Lawsuitnotice and claim under the PAGA, without any admission of liability or wrongdoing attributed to the Bank. The settlement described in the Memorandum of Understanding remains subject to court approval and other customary conditions. Because of the uncertainty surrounding this litigation, no litigation reserve had been previously establishedprocess will be completed by ~~the Bank resulting in the full $2.8 million settlement expense being recognized in the first quarter of fiscal 2018~~.

~~The Corporation is not a party to any other pending legal proceedings that it believes would have a material adverse effect on the financial condition, operations and cash flows of the Corporation.~~then.

Item 1A. Risk Factors.

~~There~~Except as set forth below, there have been no material changes in the risk factors previously disclosed in Part I, Item 1A of the Corporation's Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2018.

The discontinuation of our mortgage banking segment could adversely affect our results of operations.

On February 4, 2019, we announced the discontinuation of our mortgage banking segment conducted through Provident Bank Mortgage, a division of Provident Savings Bank, F.S.B. by June 30, 2019. As a result, we expect to incur one-time costs of approximately $3.6 million to $4.0 million during the remainder of fiscal 2019. It may take longer than we expect to complete the winding down of this business and we may incur costs that exceed our estimated costs. Although we anticipate the elimination of quarterly pre-tax losses from the mortgage banking segment and further anticipate increases in our pre-tax income of $1.2 million per quarter as a result of the discontinuation of the mortgage banking business, no assurance can be given as to when or whether we will realize these benefits.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The table below represents the ~~Corporation’s~~Corporation's purchases of its equity securities for the ~~second~~third quarter of fiscal ~~2018.~~2019.

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plan		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plan ⁽¹⁾
January 1 – 31, 2019		—	$	—		—		373,000
February 1 – 28, 2019		11,941	$	18.69		11,941		361,059
March 1 – 31, 2019		11,807	$	20.05		11,807		349,252
Total		23,748	$	19.36		23,748		349,252

Period

(a) Total
Number of
Shares Purchased

(b) Average
Price Paid
per Share

(c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plan
(d) Maximum
Number of Shares
that May Yet Be
Purchased Under the
Plan ⁽¹⁾
October 1 – 31, 2017 2,776
$19.42 2,776
256,424
November 1 – 30, 2017 47,671
$19.21 47,671
208,753
December 1 – 31, 2017 90,079
$19.23 90,079
118,674
Total 140,526
$19.23 140,526
118,674


⁽¹⁾	Represents the remaining shares available for future purchases under the ~~June 2017~~April 2018 stock repurchase plan.

During the quarter and nine months ended ~~December~~March 31, ~~2017,~~2019, the Corporation purchased ~~140,526~~23,748 shares of the ~~Corporation’s~~Corporation's common stock at an average cost of ~~$19.23~~$19.36 per share. As of ~~December~~March 31, ~~2017,~~2019, a total of ~~266,526~~23,748 shares or 69six percent of the shares authorized in the ~~June 2017~~April 2018 stock repurchase plan have been purchased at an average cost of ~~$19.33~~$19.36 per share, leaving ~~118,674~~349,252 shares available for future purchases. During the quarter ended ~~December~~March 31, ~~2017,~~2019, the Corporation issued 11,250 shares of common stock consistent the exercise of certain stock options and 3,000 shares of restricted common stock vested. The Company did not purchase any shares from recipients to fund their withholding tax obligations in the third quarter of fiscal 2019. For the nine months ended March 31, 2019, the Corporation issued 31,250 shares of common stock consistent with the exercise of certain stock options and 89,500 shares of restricted common stock vested. The Company purchased 21,071 shares at an average price of $18.28 per share from recipients to fund their withholding tax obligations in the first nine months of fiscal 2019. During the quarter and nine months ended March 31, 2019, the Corporation did not sell any securities that were not registered under the Securities Act of 1933.

The Corporation is subject to regulatory capital requirements adopted by the Federal Reserve Board, which generally are the same as the capital requirements for the Bank. These capital requirements include provisions that limit the ability of the Corporation to pay dividends to its stockholders or repurchase its shares.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

Exhibits:



3.1 (a)	~~Certificate of Incorporation of Provident Financial Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Corporation’s Registration Statement on Form S-1 (File No. 333-2230))~~

~~3.1 (b)~~	~~Certificate of Amendment to~~Amended and Restated Certificate of Incorporation of Provident Financial Holdings, Inc. as filed with the Delaware Secretary of State on November 24, 2009 (incorporated by reference to Exhibit 3.1 to the Corporation's Quarterly Report on Form 10-Q filed on November 9, 2010)

3.1 ~~(c)~~(b)	Amended and Restated Bylaws of Provident Financial Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the ~~Corporation’s~~Corporation's Current Report on Form 8-K filed on December 1, 2014)

10.1	Employment Agreement with Craig G. Blunden (incorporated by reference to Exhibit 10.1 to the ~~Corporation’s~~Corporation's Form 8-K dated December 19, 2005)



10.2	Post-Retirement Compensation Agreement with Craig G. Blunden (incorporated by reference to Exhibit 10.2 to the ~~Corporation’s~~Corporation's Form 8-K dated December 19, 2005)

10.3	Post-Retirement Compensation Agreement with Donavon P. Ternes (incorporated by reference to Exhibit 10.1 to the ~~Corporation’s~~Corporation's Form 8-K dated July 7, 2009)


10.4	Form of Severance Agreement with Deborah L. Hill, Robert "Scott" Ritter, Lilian Salter, Donavon P. Ternes, David S. Weiant and Gwendolyn L. Wertz (incorporated by reference to Exhibit 10.1 in the ~~Corporation’s~~Corporation's Form 8-K dated February 24, 2012)

10.5	2006 Equity Incentive Plan (incorporated by reference to Exhibit A to the ~~Corporation’s~~Corporation's proxy statement dated October 12, 2006)

10.6	Form of Incentive Stock Option Agreement for options granted under the 2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.10 in the ~~Corporation’s~~Corporation's Form 10-Q for the quarter ended December 31, 2006)

10.7	Form of Non-Qualified Stock Option Agreement for options granted under the 2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 in the ~~Corporation’s~~Corporation's Form 10-Q for the quarter ended December 31, 2006)

10.8	Form of Restricted Stock Agreement for restricted shares awarded under the 2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.12 in the ~~Corporation’s~~Corporation's Form 10-Q for the quarter ended December 31, 2006)

10.9	2010 Equity Incentive Plan (incorporated by reference to Exhibit A to the ~~Corporation’s~~Corporation's proxy statement dated October 28, 2010)

10.10	Form of Incentive Stock Option Agreement for options granted under the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 in the ~~Corporation’s~~Corporation's Form 8-K dated November 30, 2010)

10.11	Form of Non-Qualified Stock Option Agreement for options granted under the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 in the ~~Corporation’s~~Corporation's Form 8-K dated November 30, 2010)

10.12	Form of Restricted Stock Agreement for restricted shares awarded under the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 in the ~~Corporation’s~~Corporation's Form 8-K dated November 30, 2010)

10.13	2013 Equity Incentive Plan (incorporated by reference to Exhibit A to the ~~Corporation’s~~Corporation's proxy statement dated October 24, 2013)

10.14	Form of Incentive Stock Option Agreement for options granted under the 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 in the ~~Corporation’s~~Corporation's Registration Statement on Form S-8 (333-192727) dated December 9, 2013)

10.15	Form of Non-Qualified Stock Option Agreement for options granted under the 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 in the ~~Corporation’s~~Corporation's Registration Statement on Form S-8 (333-192727) dated December 9, 2013)

10.16	Form of Restricted Stock Agreement for restricted shares awarded under the 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 in the ~~Corporation’s~~Corporation's Registration Statement on Form S-8 (333-192727) dated December 9, 2013)

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101	The following materials from the ~~Corporation’s~~Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2017,~~2019, formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Statements of Financial Condition; (2) Condensed Consolidated Statements of Operations; (3) Condensed Consolidated Statements of Comprehensive Income; (4) Condensed Consolidated Statements of ~~Stockholders’~~Stockholders' Equity; (5) Condensed Consolidated Statements of Cash Flows; and (6) Selected Notes to Condensed Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	Provident Financial Holdings, Inc.



Date: ~~February 8, 2018~~May 9, 2019	/s/ Craig G. Blunden
	Craig G. Blunden
	Chairman and Chief Executive Officer (Principal Executive Officer)



Date: ~~February 8, 2018~~May 9, 2019	/s/ Donavon P. Ternes
	Donavon P. Ternes
	President, Chief Operating Officer and Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit Index



31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101	The following materials from the ~~Corporation’s~~Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2017,~~2019, formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Statements of Financial Condition; (2) Condensed Consolidated Statements of Operations; (3) Condensed Consolidated Statements of Comprehensive Income; (4) Condensed Consolidated Statements of ~~Stockholders’~~Stockholders' Equity; (5) Condensed Consolidated Statements of Cash Flows; and (6) Selected Notes to Condensed Consolidated Financial Statements.



	Adjustable Rate
(In Thousands)	Within One Year		After One Year Through 3 Years		After 3 Years Through 5 Years		After 5 Years Through 10 Years		Fixed Rate		Total
Mortgage loans:
Single-family	$	152,732	$	23,887	$	73,968	$	51,007	$	12,243	$	313,837
Multi-family	117,609		169,374		160,034		14,216		2,553		463,786
Commercial real estate	27,941		38,106		31,511		5,220		588		103,366
Construction	12,527		—		—		—		1,903		14,430
Commercial business loans	46		—		—		—		432		478
Consumer loans	144		—		—		—		—		144
Total loans held for investment, gross	$	310,999	$	231,367	$	265,513	$	70,443	$	17,719	$	896,041



		Quarter Ended December 31, 2016
(In Thousands)		Single-family			Multi-family			Commercial Real Estate			Construction			Other Mortgage			Commercial Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period		$	4,575		$	3,186		$	854		$	53		$	7		$	42		$	8		$	8,725
(Recovery) provision for loan losses		(304		)	(36		)	(18		)	12			(1		)	(5		)	2			(350		)
Recoveries		33			6			—			—			—			—			—			39
Charge-offs		(21		)	—			—			—			—			—			(2		)	(23		)
	Allowance for loan losses, end of period	$	4,283		$	3,156		$	836		$	65		$	6		$	37		$	8		$	8,391

Allowance for loan losses:
Individually evaluated for impairment		$	97		$	—		$	—		$	—		$	—		$	15		$	—		$	112
Collectively evaluated for impairment		4,186			3,156			836			65			6			22			8			8,279
	Allowance for loan losses, end of period	$	4,283		$	3,156		$	836		$	65		$	6		$	37		$	8		$	8,391

Loans held for investment:
Individually evaluated for impairment		$	7,844		$	374		$	—		$	—		$	—		$	85		$	—		$	8,303
Collectively evaluated for impairment		308,751			448,091			98,044			16,872			265			525			184			872,732
	Total loans held for investment, gross	$	316,595		$	448,465		$	98,044		$	16,872		$	265		$	610		$	184		$	881,035
Allowance for loan losses as a percentage of gross loans held for investment		1.35		%	0.70		%	0.85		%	0.39		%	2.26		%	6.07		%	4.35		%	0.96		%



		Six Months Ended December 31, 2016
(In Thousands)		Single-family			Multi-family			Commercial Real Estate			Construction			Other Mortgage			Commercial Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period		$	4,933		$	2,800		$	848		$	31		$	7		$	43		$	8		$	8,670
(Recovery) provision for loan losses		(859		)	343			(12		)	34			(1		)	(6		)	1			(500		)
Recoveries		296			13			—			—			—			—			1			310
Charge-offs		(87		)	—			—			—			—			—			(2		)	(89		)
	Allowance for loan losses, end of period	$	4,283		$	3,156		$	836		$	65		$	6		$	37		$	8		$	8,391

Allowance for loan losses:
Individually evaluated for impairment		$	97		$	—		$	—		$	—		$	—		$	15		$	—		$	112
Collectively evaluated for impairment		4,186			3,156			836			65			6			22			8			8,279
	Allowance for loan losses, end of period	$	4,283		$	3,156		$	836		$	65		$	6		$	37		$	8		$	8,391

Loans held for investment:
Individually evaluated for impairment		$	7,844		$	374		$	—		$	—		$	—		$	85		$	—		$	8,303
Collectively evaluated for impairment		308,751			448,091			98,044			16,872			265			525			184			872,732
	Total loans held for investment, gross	$	316,595		$	448,465		$	98,044		$	16,872		$	265		$	610		$	184		$	881,035
Allowance for loan losses as a percentage of gross loans held for investment		1.35		%	0.70		%	0.85		%	0.39		%	2.26		%	6.07		%	4.35		%	0.96		%



			Six Months Ended December 31,
			2017				2016
			Average		Interest		Average		Interest
			Recorded		Income		Recorded		Income
			Investment		Recognized		Investment		Recognized

Without related allowances:
	Mortgage loans:
		Single-family	$	7,659	$	135	$	7,771	$	37
		Multi-family	—		—		377		—
		Commercial real estate	34		13		—		—
			7,693		148		8,148		37

With related allowances:
	Mortgage loans:
		Single-family	608		19		2,517		46
		Multi-family	—		—		279		17
	Commercial business loans		77		3		91		3
			685		22		2,887		66

	Total		$	8,378	$	170	$	11,035	$	103



(Dollars In Thousands)	Fair Value As of December 31, 2017		Valuation Techniques	Unobservable Inputs	Range ⁽¹⁾ (Weighted Average)	Impact to Valuation from an Increase in Inputs ⁽²⁾

Assets:

Securities available - for sale: Private issue CMO	$	419	Market comparable pricing	Comparability adjustment	0.6% – 1.7% (1.5%)	Increase

Loans held for investment, at fair value	$	5,157	Relative value analysis	Broker quotes Credit risk factors	97.9% – 104.8% (100.8%) of par 1.2% - 100.0% (4.6%)	Increase Decrease

Non-performing loans	$	61	Discounted cash flow	Default rates	5.0%	Decrease
Non-performing loans	$	886	Relative value analysis	Loss severity	20.0% - 30.0% (21.4%)	Decrease

MSA	$	450	Discounted cash flow	Prepayment speed (CPR) Discount rate	10.2% - 60.0% (21.3%) 9.0% - 10.5% (9.2%)	Decrease Decrease

Interest-only strips	$	26	Discounted cash flow	Prepayment speed (CPR) Discount rate	15.6% - 29.7% (27.4%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	737	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	99.3% – 105.1% (102.0%) of par 12.9% - 32.0% (30.6%)	Increase Decrease

Liabilities:

Commitments to extend credit on loans to be held for sale	$	21	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	98.5% – 101.5% (100.8%) of par 12.9% - 32.0% (30.6%)	Increase Decrease

Mandatory loan sale commitments	$	24	Relative value analysis	TBA MBS broker quotes Roll-forward costs ⁽⁴⁾	100.9% - 103.4% (103.4%) of par 0.012%	Decrease Decrease



	Six Months Ended December 31, 2017						Six Months Ended December 31, 2016
	Average Balance		Interest		Yield/ Cost		Average Balance		Interest		Yield/ Cost
Interest-earning assets:
Loans receivable, net ⁽¹⁾	$	999,242	$	19,892	3.98	%	$	1,064,246	$	20,596	3.87	%
Investment securities	82,029		576		1.40	%	47,598		212		0.89	%
FHLB – San Francisco stock	8,108		284		7.01	%	8,094		643		15.88	%
Interest-earning deposits	55,085		358		1.27	%	57,140		156		0.53	%

Total interest-earning assets	1,144,464		21,110		3.69	%	1,177,078		21,607		3.67	%

Non interest-earning assets	32,514						32,603

Total assets	$	1,176,978					$	1,209,681

Interest-bearing liabilities:
Checking and money market accounts ⁽²⁾	$	373,425	215		0.11	%	$	355,685	203		0.11	%
Savings accounts	288,347		298		0.21	%	279,953		290		0.21	%
Time deposits	257,856		1,264		0.97	%	300,416		1,503		0.99	%

Total deposits	919,628		1,777		0.38	%	936,054		1,996		0.42	%

Borrowings	112,834		1,464		2.57	%	123,235		1,438		2.31	%

Total interest-bearing liabilities	1,032,462		3,241		0.62	%	1,059,289		3,434		0.64	%

Non interest-bearing liabilities	18,408						17,354

Total liabilities	1,050,870						1,076,643

Stockholders’ equity	126,108						133,038
Total liabilities and stockholders’ equity	$	1,176,978					$	1,209,681

Net interest income			$	17,869					$	18,173

Interest rate spread ⁽³⁾					3.07	%					3.03	%
Net interest margin ⁽⁴⁾					3.12	%					3.09	%
Ratio of average interest-earning assets to average interest-bearing liabilities					110.85	%					111.12	%
Return on average assets					(0.17	)%					0.51	%
Return on average equity					(1.59	)%					4.66	%



						Regulatory Requirements
	Actual					Minimum for Capital Adequacy Purposes				Minimum to Be Well Capitalized
	Amount		Ratio			Amount		Ratio		Amount		Ratio

Provident Financial Holdings, Inc.:

As of December 31, 2017
Tier 1 leverage capital (to adjusted average assets)	$	120,453	10.28	%		$	46,862	4.00	%	$	58,577	5.00	%
Common Equity Tier 1 ("CET1") capital (to risk- weighted assets)	$	120,453	17.62	%		$	39,313	5.75	%	$	44,441	6.50	%
Tier 1 capital (to risk-weighted assets)	$	120,453	17.62	%		$	49,568	7.25	%	$	54,696	8.00	%
Total capital (to risk-weighted assets)	$	128,716	18.83	%		$	63,242	9.25	%	$	68,370	10.00	%

As of June 30, 2017
Tier 1 leverage capital (to adjusted assets)	$	127,956	10.77	%		$	47,506	4.00	%	$	59,383	5.00	%
CET1 capital (to risk-weighted assets)	$	127,956	17.57	%		$	41,885	5.75	%	$	47,348	6.50	%
Tier 1 capital (to risk-weighted assets)	$	127,956	17.57	%		$	52,811	7.25	%	$	58,274	8.00	%
Total capital (to risk-weighted assets)	$	136,271	18.71	%		$	67,380	9.25	%	$	72,843	10.00	%

Provident Savings Bank, F.S.B.:

As of December 31, 2017
Tier 1 leverage capital (to adjusted average assets)	$	112,401	9.59	%		$	46,862	4.00	%	$	58,577	5.00	%
CET1 capital (to risk-weighted assets)	$	112,401	16.44	%		$	39,307	5.75	%	$	44,434	6.50	%
Tier 1 capital (to risk-weighted assets)	$	112,401	16.44	%		$	49,561	7.25	%	$	54,688	8.00	%
Total capital (to risk-weighted assets)	$	120,664	17.65	%	��	$	63,233	9.25	%	$	68,360	10.00	%

As of June 30, 2017
Tier 1 leverage capital (to adjusted assets)	$	117,530	9.90	%		$	47,503	4.00	%	$	59,379	5.00	%
CET1 capital (to risk-weighted assets)	$	117,530	16.14	%		$	41,877	5.75	%	$	47,339	6.50	%
Tier 1 capital (to risk-weighted assets)	$	117,530	16.14	%		$	52,801	7.25	%	$	58,263	8.00	%
Total capital (to risk-weighted assets)	$	125,845	17.28	%		$	67,367	9.25	%	$	72,829	10.00	%



	At December 31, 2017	At June 30, 2017	At December 31, 2016

Loans serviced for others (in thousands)	$127,088	$119,304	$113,615

Book value per share	$16.15	$16.62	$16.75



Basis Points ("bp") Change in Rates	Net Portfolio Value		NPV Change⁽¹⁾			Portfolio Value of Assets		NPV as Percentage of Portfolio Value Assets⁽²⁾	Sensitivity Measure⁽³⁾
+400 bp	$	262,577	$	129,152		$	1,282,301	20.48%	+919 bp
+300 bp	$	236,832	$	103,407		$	1,263,229	18.75%	+746 bp
+200 bp	$	206,859	$	73,434		$	1,240,231	16.68%	+539 bp
+100 bp	$	172,084	$	38,659		$	1,212,942	14.19%	+290 bp
0 bp	$	133,425	$	—		$	1,181,462	11.29%	0 bp
-100 bp	$	120,515	$	(12,910	)	$	1,173,826	10.27%	-102 bp