UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

	For the quarterly period ended	~~September 30,~~December 31, 2020

[ ]	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 telephone number, including area code)

_________________________________________________________

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [ ] No

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

	~~Large accelerated filer [ ]~~		~~Accelerated filer [ ]~~
	~~Non-accelerated filer [X]~~		~~Smaller reporting company [X]~~
			~~Emerging growth company [ ]~~

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [X] 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 [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of ~~October 30, 2020~~January 31, 2021 there were 7,442,254 shares of the registrant's common stock, $0.01 par value per share, outstanding.

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:

	Condensed Consolidated Statements of Financial Condition
		as of ~~September 30,~~December 31, 2020 and June 30, 2020	1
	Condensed Consolidated Statements of Operations
		for the Quarter ~~ended September 30,~~and Six Months Ended December 31, 2020 and 2019	2
	Condensed Consolidated Statements of Comprehensive Income
		for the Quarter ~~ended September 30,~~and Six Months Ended December 31, 2020 and 2019	3
	Condensed Consolidated Statements of Stockholders’ Equity
		for the Quarter ~~ended September 30,~~and Six Months Ended December 31, 2020 and 2019	4
	Condensed Consolidated Statements of Cash Flows
		for the ~~Three~~Six Months ~~ended September 30,~~Ended December 31, 2020 and 2019	56
	Notes to Unaudited Interim Condensed Consolidated Financial Statements		67

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

	General		3540
	Safe-Harbor Statement		3641
	Critical Accounting Policies		3742
	Executive Summary and Operating Strategy		3743
	Off-Balance Sheet Financing Arrangements		4046
	Comparison of Financial Condition at ~~September 30,~~December 31, 2020 and June 30, 2020		4046
	Comparison of Operating Results for the Quarter and Six Months ended ~~September 30,~~December 31, 2020 and 2019		4248
	Asset Quality		4858
	Loan Volume Activities		5162
	Liquidity and Capital Resources		5162
	Supplemental Information		5364

ITEM 3 -	Quantitative and Qualitative Disclosures about Market Risk		5465

ITEM 4 -	Controls and Procedures		5869

PART II -	OTHER INFORMATION

ITEM 1 -	Legal Proceedings		5869
ITEM 1A -	Risk Factors		5970
ITEM 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		5970
ITEM 3 -	Defaults Upon Senior Securities		5970
ITEM 4 -	Mine Safety Disclosures		5970
ITEM 5 -	Other Information		5971
ITEM 6 -	Exhibits		6071

SIGNATURES			6172

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Financial Condition

(Unaudited)

In Thousands, Except Share Information

	September 30, 2020			June 30, 2020			December 31, 2020			June 30, 2020
Assets
Cash and cash equivalents	$	66,467		$	116,034		$	74,001		$	116,034
Investment securities – held to maturity, at cost	193,868			118,627			203,098			118,627
Investment securities – available for sale, at fair value	4,416			4,717			4,158			4,717
Loans held for investment, net of allowance for loan losses of $8,490 and $8,265, respectively; includes $2,240 and $2,258 at fair value, respectively	884,953			902,796
Loans held for investment, net of allowance for loan losses of $8,538 and $8,265, respectively; includes $1,972 and $2,258 at fair value, respectively							855,086			902,796
Accrued interest receivable	3,373			3,271			3,126			3,271
Federal Home Loan Bank (“FHLB”) – San Francisco stock	7,970			7,970			7,970			7,970
Premises and equipment, net	10,099			10,254			9,980			10,254
Prepaid expenses and other assets	12,887			13,168			13,308			13,168

Total assets	$	1,184,033		$	1,176,837		$	1,170,727		$	1,176,837

Liabilities and Stockholders’ Equity

Liabilities:
Non interest-bearing deposits	$	114,537		$	118,771		$	109,609		$	118,771
Interest-bearing deposits	790,149			774,198			800,359			774,198
Total deposits	904,686			892,969			909,968			892,969

Borrowings	136,031			141,047			116,015			141,047
Accounts payable, accrued interest and other liabilities	18,657			18,845			19,760			18,845
Total liabilities	1,059,374			1,052,861			1,045,743			1,052,861

Commitments and Contingencies (Notes 6 and 10)

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; 18,097,615 and 18,097,615 shares issued; 7,441,259 and 7,436,315 shares outstanding, respectively)	181			181
Common stock, $.01 par value (40,000,000 shares authorized; 18,097,615 and 18,097,615 shares issued; 7,442,254 and 7,436,315 shares outstanding, respectively)							181			181
Additional paid-in capital	95,948			95,593			96,164			95,593
Retained earnings	194,789			194,345			194,923			194,345
Treasury stock at cost (10,656,356 and 10,661,300 shares, respectively)	(166,358		)	(166,247		)
Treasury stock at cost (10,655,361 and 10,661,300 shares, respectively)							(166,364		)	(166,247		)
Accumulated other comprehensive income, net of tax	99			104			80			104

Total stockholders’ equity	124,659			123,976			124,984			123,976

Total liabilities and stockholders’ equity	$	1,184,033		$	1,176,837		$	1,170,727		$	1,176,837

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
September 30,
2020 2019
Interest income:
    Loans receivable, net $ 8,917 $ 10,075
    Investment securities 478 614
    FHLB – San Francisco stock 100 143
    Interest-earning deposits 24 246
    Total interest income 9,519 11,078

Interest expense:
    Checking and money market deposits 91 110
    Savings deposits 78 134
    Time deposits 382 532
    Borrowings 802 720
    Total interest expense 1,353 1,496

Net interest income 8,166 9,582
Provision (recovery) for loan losses 220 (181 )
Net interest income, after provision (recovery) for loan losses 7,946 9,763

Non-interest income:
     Loan servicing and other fees 405 133
     Deposit account fees 310 447
     Card and processing fees 364 390
     Other 80 100
     Total non-interest income 1,159 1,070

Non-interest expense:
     Salaries and employee benefits 4,443 4,985
     Premises and occupancy 903 878
     Equipment 275 279
     Professional expenses 414 408
     Sales and marketing expenses 113 117
     Deposit insurance premiums and regulatory assessments 134 (16 )
     Other 703 587
     Total non-interest expense 6,985 7,238

Income before income taxes 2,120 3,595
Provision for income taxes 635 1,033
     Net income $ 1,485 $ 2,562

Basic earnings per share $ 0.20 $ 0.34
Diluted earnings per share $ 0.20 $ 0.33
Cash dividends per share $ 0.14 $ 0.14

	Quarter Ended December 31,					Six Months Ended December 31,
	2020		2019			2020		2019
Interest income:
Loans receivable, net	$	8,344	$	10,320		$	17,261	$	20,395
Investment securities	448		567			926		1,181
FHLB – San Francisco stock	100		145			200		288
Interest-earning deposits	17		189			41		435
Total interest income	8,909		11,221			18,428		22,299

Interest expense:
Checking and money market deposits	79		117			170		227
Savings deposits	54		131			132		265
Time deposits	335		530			717		1,062
Borrowings	803		804			1,605		1,524
Total interest expense	1,271		1,582			2,624		3,078

Net interest income	7,638		9,639			15,804		19,221
Provision (recovery) for loan losses	39		(22		)	259		(203		)
Net interest income, after provision (recovery) for loan losses	7,599		9,661			15,545		19,424

Non-interest income:
Loan servicing and other fees	120		367			525		500
Deposit account fees	329		451			639		898
Card and processing fees	368		371			732		761
Other	157		155			237		255
Total non-interest income	974		1,344			2,133		2,414

Non-interest expense:
Salaries and employee benefits	4,301		4,999			8,744		9,984
Premises and occupancy	865		880			1,768		1,758
Equipment	273		262			548		541
Professional expenses	402		331			816		739
Sales and marketing expenses	227		212			340		329
Deposit insurance premiums and regulatory assessments	141		59			275		43
Other	707		811			1,410		1,398
Total non-interest expense	6,916		7,554			13,901		14,792

Income before income taxes	1,657		3,451			3,777		7,046
Provision for income taxes	481		1,053			1,116		2,086
Net income	$	1,176	$	2,398		$	2,661	$	4,960

Basic earnings per share	$	0.16	$	0.32		$	0.36	$	0.66
Diluted earnings per share	$	0.16	$	0.31		$	0.36	$	0.65
Cash dividends per share	$	0.14	$	0.14		$	0.28	$	0.28

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 Quarter Ended September 30,						For the Quarter Ended December 31,						For the Six Months Ended December 31,
	2020			2019			2020			2019			2020			2019
Net income	$	1,485		$	2,562		$	1,176		$	2,398		$	2,661		$	4,960

Change in unrealized holding loss on securities available for sale	(7		)	(18		)	(27		)	(21		)	(34		)	(40		)
Reclassification adjustment for net loss on securities available for sale included in net loss	—			—			—			—			—			—
Other comprehensive loss, before income tax benefit	(7		)	(18		)
Other comprehensive loss, before income taxes							(27		)	(21		)	(34		)	(40		)

Income tax benefit	(2		)	(5		)	(8		)	(6		)	(10		)	(12		)
Other comprehensive loss	(5		)	(13		)	(19		)	(15		)	(24		)	(28		)

Total comprehensive income	$	1,480		$	2,549		$	1,157		$	2,383		$	2,637		$	4,932

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 Quarter Ended ~~September 30,~~December 31, 2020 and 2019:

	Common Stock				Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss), Net of Tax						Common Stock				Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss), Net of Tax
	Shares		Amount														Total			Shares		Amount														Total
Balance at June 30, 2020	7,436,315		$	181	$	95,593		$	194,345		$	(166,247	)	$	104		$	123,976
Balance at September 30, 2020																				7,441,259		$	181	$	95,948		$	194,789		$	(166,358	)	$	99		$	124,659

Net income							1,485										1,485									1,176										1,176
Other comprehensive loss														(5		)	(5		)														(19		)	(19		)
Purchase of treasury stock ⁽¹⁾	(2,556	)									(30		)				(30		)	(505	)									(6		)				(6		)
Distribution of restricted stock	7,500																			1,500
Forfeiture of restricted stock						81						(81	)					—
Amortization of restricted stock					241												241							200												200
Stock options expense					33												33							16												16
Cash dividends ⁽²⁾							(1,041			)							(1,041		)							(1,042			)							(1,042		)

Balance at September 30, 2020	7,441,259		$	181	$	95,948		$	194,789		$	(166,358	)	$	99		$	124,659
Balance at December 31, 2020																				7,442,254		$	181	$	96,164		$	194,923		$	(166,364	)	$	80		$	124,984

⁽¹⁾	Includes the purchase of ~~2,556~~505 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 ~~September 30,~~December 31, 2020.

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, 2019 7,486,106 $ 181 $ 94,351 $ 190,839 $ (164,891 ) $ 161 $ 120,641

Net income 2,562 2,562
Other comprehensive loss (13 ) (13 )
Purchase of treasury stock (16,924 ) (346 ) (346 )
Exercise of stock options 10,500 132 132
Forfeiture of restricted stock 72 (72 ) —
Amortization of restricted stock 220 220
Stock options expense 20 20
Cash dividends ⁽¹⁾
(1,047 ) (1,047 )

Balance at September 30, 2019 7,479,682 $ 181 $ 94,795 $ 192,354 $ (165,309 ) $ 148 $ 122,169

	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, 2019	7,479,682		$	181	$	94,795		$	192,354		$	(165,309	)	$	148		$	122,169

Net income							2,398										2,398
Other comprehensive loss														(15		)	(15		)
Purchase of treasury stock	(2,361	)									(51		)				(51		)
Exercise of stock options	5,750				83												83
Amortization of restricted stock					219												219
Stock options expense					21												21
Cash dividends ⁽¹⁾							(1,048			)							(1,048		)

Balance at December 31, 2019	7,483,071		$	181	$	95,118		$	193,704		$	(165,360	)	$	133		$	123,776

⁽¹⁾	Cash dividends of $0.14 per share were paid in the quarter ended ~~September 30,~~December 31, 2019.

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

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

	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, 2020	7,436,315		$	181	$	95,593		$	194,345		$	(166,247	)	$	104		$	123,976

Net income							2,661										2,661
Other comprehensive loss														(24		)	(24		)
Purchase of treasury stock ⁽¹⁾	(3,061	)									(36		)				(36		)
Distribution of restricted stock	9,000
Forfeiture of restricted stock						81						(81	)					—
Amortization of restricted stock					441												441
Stock options expense					49												49
Cash dividends ⁽²⁾							(2,083			)							(2,083		)

Balance at December 31, 2020	7,442,254		$	181	$	96,164		$	194,923		$	(166,364	)	$	80		$	124,984

⁽¹⁾	Includes the purchase of 3,061 shares of distributed restricted stock in settlement of employee withholding tax obligations.

⁽²⁾	Cash dividends of $0.28 per share were paid in the six months ended December 31, 2020.

	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, 2019	7,486,106		$	181	$	94,351	$	190,839		$		(164,891	)		$	161		$		120,641

Net income							4,960											4,960
Other comprehensive loss															(28		)	(28			)
Purchase of treasury stock	(19,285	)								(397			)					(397			)
Exercise of stock options	16,250				215													215
Forfeiture of restricted stock						72					(72			)					—
Amortization of restricted stock					439													439
Stock options expense					41													41
Cash dividends ⁽¹⁾							(2,095		)									(2,095			)

Balance at December 31, 2019	7,483,071		$	181	$	95,118	$	193,704		$		(165,360	)		$	133		$		123,776

⁽¹⁾Cash dividends of $0.28 per share were paid in the six months ended December 31, 2019.

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)

	Three Months Ended September 30,						Six Months Ended December 31,
	2020			2019			2020			2019
Cash flows from operating activities:
Net income	$	1,485		$	2,562		$	2,661		$	4,960
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,266			790			2,796			1,356
Provision (recovery) for loan losses	220			(181		)	259			(203		)
Stock-based compensation	274			240			490			480
Provision for deferred income taxes	27			1,173
Decrease in accounts payable, accrued interest and other liabilities	(158		)	(1,505		)
(Benefit) provision for deferred income taxes							(344		)	1,432
Increase (decrease) in accounts payable, accrued interest and other liabilities							952			(2,923		)
Increase in prepaid expenses and other assets	(66		)	(3,288		)	(81		)	(3,025		)
Net cash provided by (used for) operating activities	3,048			(209		)
Net cash provided by operating activities							6,733			2,077

Cash flows from investing activities:
Decrease (increase) in loans held for investment, net	17,157			(44,368		)	46,464			(61,773		)
Maturity of investment securities held to maturity	400			—			600			—
Principal payments from investment securities held to maturity	9,119			8,872			21,269			16,702
Principal payments from investment securities available for sale	295			436			527			695
Purchase of investment securities held to maturity	(85,117		)	—			(107,230		)	—
Purchase of premises and equipment	(69		)	(10		)	(207		)	(148		)
Net cash used for investing activities	(58,215		)	(35,070		)	(38,577		)	(44,524		)

Cash flows from financing activities:
Increase (decrease) in deposits, net	11,717			(9,535		)	16,999			(7,621		)
Repayments of short-term borrowings, net	(5,000		)	—			(5,000		)	—
Repayments of long-term borrowings	(16		)	(15		)	(20,032		)	(29		)
Proceeds from long-term borrowings	—			30,000			—			30,007
Exercise of stock options	—			132			—			215
Withholding taxes on stock based compensation	(30		)	(27		)	(37		)	(32		)
Cash dividends	(1,041		)	(1,047		)	(2,083		)	(2,095		)
Treasury stock purchases	(30		)	(346		)	(36		)	(397		)
Net cash provided by financing activities	5,600			19,162

Net cash (used for) provided by financing activities							(10,189		)	20,048
Net decrease in cash and cash equivalents	(49,567		)	(16,117		)	(42,033		)	(22,399		)
Cash and cash equivalents at beginning of period	116,034			70,632			116,034			70,632
Cash and cash equivalents at end of period	$	66,467		$	54,515		$	74,001		$	48,233
Supplemental information:
Cash paid for interest	$	1,343		$	1,475		$	2,742		$	3,091
Cash paid for income taxes	$	1,020		$	—		$	2,470		$	350
Transfer of loans held for sale to held for investment	$	—		$	566		$	—		$	1,085

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

5
6

The Corporation anticipates that the COVID-19 pandemic may continue to impact the business in future periods in one or more of the following ways, among others:

Higher provisions for certain commercial real estate loans may be incurred, especially to borrowers with tenants in industries, such as hospitality, travel, food service and restaurants and bars, and businesses providing physical services;

Significantly lower market interest rates which may have a negative impact on variable rate loans indexed to LIBOR, U.S. treasury and prime indices and on deposit pricing, as interest rate adjustments typically lag the effect on the yield earned on interest-earning assets because rates on many deposit accounts are decision-based, not tied to a specific market-based index, and are based on competition for deposits;

Certain additional fees for deposit and loan products may be waived or reduced;

Non-interest income may decline due to a decrease in fees earned as spending habits change by debit card customers complying with COVID-19 governmental safety requirements and who otherwise may be adversely affected by reductions in their personal income or job losses;

Non-interest expenses related to the effects of the COVID-19 pandemic may increase, including cleaning costs, supplies, equipment and other items; and

Additional loan forbearance or modifications may occur and borrowers may default on their loans, which may necessitate further increases to the allowance for loan losses.

While the full impact of COVID-19 on the Corporation's future financial results is uncertain and not currently estimable, the Corporation believes that the impact could be materially adverse to its financial condition and results of operations depending on the length and severity of the economic downturn brought on by the COVID-19 pandemic.

Off-Balance Sheet Financing Arrangements

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 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 ~~Notes~~Note 6 ~~and 10~~ of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

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

Total assets ~~increased $7.2~~decreased $6.1 million, or one percent, to ~~$1.18~~$1.17 billion at ~~September 30,~~December 31, 2020 from June 30, 2020. The ~~increase~~decrease was primarily attributable to ~~an increase in investment securities, partly offset by~~ decreases in cash and cash equivalents and loans held for ~~investment.~~investment, partly offset by an increase in investment securities.

Total cash and cash equivalents, primarily excess cash deposited with the Federal Reserve Bank of San Francisco, decreased ~~$49.5~~$42.0 million, or 4336 percent, to ~~$66.5~~$74.0 million at ~~September 30,~~December 31, 2020 from $116.0 million at June 30, 2020. The decrease in the total cash and cash equivalents was primarily attributable to the utilization of cash to fund purchases of investment ~~securities.~~securities and to payoff borrowings.

Investment securities (held to maturity and available for sale) increased ~~$75.0~~$84.0 million, or 6168 percent, to ~~$198.3~~$207.3 million at ~~September 30,~~December 31, 2020 from $123.3 million at June 30, 2020. The increase was primarily the result of purchases of investment ~~purchases~~securities totaling ~~$84.9~~$106.4 million, partly offset by scheduled and accelerated principal payments on mortgage-backed securities during the

first ~~three~~six months of fiscal 2021. For further analysis on investment securities, see Note 4 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements of this Form 10-Q.

Loans held for investment decreased ~~$17.8~~$47.7 million, or ~~two~~five percent, to ~~$885.0~~$855.1 million at ~~September 30,~~December 31, 2020 from $902.8 million at June 30, 2020, primarily due to ~~decreases~~a decrease in single-family ~~and multi-family~~ loans. During the first ~~three~~six months of fiscal 2021, the Corporation originated ~~$39.1~~$66.1 million of loans held for investment, consisting primarily of single-family and multi-family loans and also purchased ~~$8.9~~$11.5 million of multi-family loans held for investment that are located throughout California. Total loan principal payments during the first ~~three~~six months of fiscal 2021 were ~~$66.3~~$125.9 million, up 31nine percent from ~~$50.8~~$116.0 million during

the comparable period in fiscal 2020. The single-family loans held for investment balance at ~~September 30,~~December 31, 2020 and June 30, 2020 was ~~$288.8~~$257.9 million and $298.8 million, respectively, and represented approximately 30 percent and 33 percent of loans held for investment, ~~at both dates.~~respectively.

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

As of ~~September 30,~~December 31, 2020:

	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	$	77,026	27	%	$	131,639	46	%	$	79,598	27	%	$	527	—	%	$	288,790	100	%	$	71,881	28	%	$	115,141	45	%	$	70,546	27	%	$	296	—	%	$	257,864	100	%
Multi-family	69,349		14	%	313,460		65	%	99,785		21	%	306		—	%	482,900		100	%	69,025		14	%	314,635		65	%	104,453		21	%	299		—	%	488,412		100	%
Commercial real estate	23,745		23	%	47,467		45	%	33,995		32	%	—		—	%	105,207		100	%	23,462		23	%	45,342		44	%	33,747		33	%	—		—	%	102,551		100	%
Construction	1,082		12	%	6,430		73	%	1,275		15	%	—		—	%	8,787		100	%	861		12	%	6,274		88	%	—		—	%	—		—	%	7,135		100	%
Other	—		—	%	142		100	%	—		—	%	—		—	%	142		100	%	—		—	%	141		100	%	—		—	%	—		—	%	141		100	%
Total	$	171,202	19	%	$	499,138	57	%	$	214,653	24	%	$	833	—	%	$	885,826	100	%	$	165,229	19	%	$	481,533	56	%	$	208,746	25	%	$	595	—	%	$	856,103	100	%

⁽¹⁾	Other than the Inland Empire.

As of June 30, 2020:

	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	$	82,019	28	%	$	140,888	47	%	$	75,372	25	%	$	531	—	%	$	298,810	100	%	$	82,019	28	%	$	140,888	47	%	$	75,372	25	%	$	531	—	%	$	298,810	100	%
Multi-family	66,427		14	%	321,556		65	%	103,609		21	%	311		—	%	491,903		100	%	66,427		14	%	321,556		65	%	103,609		21	%	311		—	%	491,903		100	%
Commercial real estate	23,501		22	%	47,484		45	%	34,250		33	%	—		—	%	105,235		100	%	23,501		22	%	47,484		45	%	34,250		33	%	—		—	%	105,235		100	%
Construction	1,115		14	%	5,190		67	%	1,496		19	%	—		—	%	7,801		100	%	1,115		14	%	5,190		67	%	1,496		19	%	—		—	%	7,801		100	%
Other	—		—	%	143		100	%	—		—	%	—		—	%	143		100	%	—		—	%	143		100	%	—		—	%	—		—	%	143		100	%
Total	$	173,062	19	%	$	515,261	57	%	$	214,727	24	%	$	842	—	%	$	903,892	100	%	$	173,062	19	%	$	515,261	57	%	$	214,727	24	%	$	842	—	%	$	903,892	100	%

⁽¹⁾	Other than the Inland Empire.

Total deposits increased ~~$11.7~~$17.0 million, or ~~one~~two percent, to ~~$904.7~~$910.0 million at ~~September 30,~~December 31, 2020 from $893.0 million at June 30, 2020, primarily due to increases in transaction accounts resulting primarily from government assistance programs related to the COVID-19 pandemic, partly offset by a decrease in higher cost time deposits. Transaction accounts increased ~~$20.7~~$33.2 million, or ~~three~~five percent, to ~~$743.7~~$756.2 million at ~~September 30,~~December 31, 2020 from $723.0 million at June 30, 2020, while time deposits decreased ~~$9.0~~$16.2 million, or ~~five~~10 percent, to ~~$161.0~~$153.8 million at ~~September 30,~~December 31, 2020 from $170.0 million at June 30, 2020. The percentage of time deposits to total deposits decreased to 1817 percent at ~~September 30,~~December 31, 2020 from 19 percent at June 30, 2020, primarily due to

a managed run-off of higher cost time deposits consistent with the reduction in the Bank’s funding needs during the first ~~three~~six months of fiscal 2021.

Total borrowings decreased ~~$5.0~~$25.0 million, or ~~four~~18 percent, to ~~$136.0~~$116.0 million at ~~September 30,~~December 31, 2020 as compared to $141.0 million at June 30, 2020, due to ~~a repayment~~repayments totaling $25.0 million of ~~$5.0 million of~~long-term and short-term borrowings during the first ~~quarter~~six months of fiscal 2021. ~~The~~At December 31, 2020, borrowings are primarily comprised of long-term FHLB - San Francisco advances used for interest rate risk management purposes.

Total stockholders’ equity increased ~~$683,000,~~$1.0 million, or one percent, to ~~$124.7~~$125.0 million at ~~September 30,~~December 31, 2020 from $124.0 million at June 30, 2020, primarily as a result of year-to-date net income of ~~$1.5~~$2.7 million and stock-based compensation of ~~$274,000,~~$490,000, partly offset by ~~$1.0~~$2.1 million of quarterly cash dividends paid to shareholders during the first ~~three~~six months of fiscal 2021. The Corporation did not repurchase any shares of its common stock under its April 2020 plan during the ~~three~~six months ended ~~September 30,~~December 31, 2020, but purchased ~~2,556~~3,061 shares of distributed restricted stock in settlement of employee withholding tax obligations at an average cost of ~~$11.68~~$12.01 per share.

Comparison of Operating Results for the Quarter and Six Months ended ~~September 30,~~December 31, 2020 and 2019

The Corporation’s net income for the ~~first~~second quarter of fiscal 2021 was ~~$1.5~~$1.2 million, down ~~$1.1~~$1.2 million or 4251 percent from ~~$2.6~~$2.4 million in the same period of fiscal 2020. Compared to the same quarter last year, the decrease was primarily attributable to lower a decline of $2.0 million or 21 percent in net interest income and a ~~higher provision for loan losses,~~$370,000 or 27 percent decrease in non-interest income, partly offset by lower a $638,000 or eight percent decline in non-interest ~~expenses.~~ expense.

For the first six months of fiscal 2021, the Corporation’s net income was $2.7 million, a decrease of $2.3 million, or 46 percent, from $5.0 million in the same period of fiscal 2020. Compared to the same period last year, the decrease in earnings was primarily attributable to a $3.4 million decrease in net-interest income, partly offset by a $1.2 million decrease in salaries and employee benefits expense.

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

The Corporation’s efficiency ratio, defined as non-interest expense divided by the sum of net interest income and non-interest income, increased to 7580 percent for the ~~first~~second quarter of fiscal 2021 from 6869 percent in the same period of fiscal ~~2020, primarily due~~2020. For the first six months of fiscal 2021, the Corporation’s efficiency ratio also increased to 78 percent from 68 percent for the ~~decrease in net interest income.~~ same period of fiscal 2020.

Return on average assets was ~~0.50~~0.40 percent in the ~~first~~second quarter of fiscal 2021, down 47 basis points from ~~0.95~~0.87 percent in the same period last year. For the first six months of fiscal 2021, return on average assets was 0.45 percent, down 46 basis points from 0.91 percent in the same period last year.

Return on average equity was ~~4.78~~3.77 percent in the ~~first~~second quarter of fiscal 2021, down from ~~8.46~~7.81 percent in the same period last year. For the first six months of fiscal 2021, return on average equity was 4.27 percent, down from 8.13 percent for the same period last year.

Diluted earnings per share for the ~~first~~second quarter of fiscal 2021 were ~~$0.20,~~$0.16, down 48 percent from diluted earnings per share of ~~$0.33~~$0.31 in the same period last year. For the first six months of fiscal 2021, diluted earnings per share were $0.36, down 45 percent from $0.65 in the same period last year.

Net Interest Income:

For the Quarter Ended ~~September 30,~~December 31, 2020 and 2019. Net interest income decreased by ~~$1.4~~$2.0 million, or 1521 percent, to ~~$8.2~~$7.6 million for the ~~first~~second quarter of fiscal 2021 from $9.6 million in the same period in fiscal 2020, as a result of a lower net interest margin, partly offset by a higher average interest-earning asset balance. The net interest margin decreased 8093 basis points to ~~2.84~~2.66 percent in the ~~first~~second quarter of fiscal 2021 from ~~3.64~~3.59 percent in the same period of fiscal 2020, primarily due to a decrease in the average yield for all ~~categories~~asset categories. The decrease of ~~interest-earning assets attributable~~the average yield was due primarily to the declines in interest rates on adjustable rate instruments and interest-earning deposits following decreases to short-term rates over the last year, including the emergency 150 basis point reduction in the targeted Federal Funds Rate in March 2020 due to the COVID-19 pandemic. The weighted-average yield on interest-earning assets decreased by 90108 basis points to ~~3.31~~3.10 percent in the ~~first~~ second

quarter of fiscal 2021 from ~~4.21~~4.18 percent in the same quarter last year, and the weighted-average cost of interest-bearing liabilities decreased by 1116 basis points to ~~0.52~~0.49 percent for the ~~first~~second quarter of fiscal 2021 as compared to ~~0.63~~0.65 percent in the same quarter last year. The average balance of interest-earning assets increased ~~$98.5~~$75.0 million, or ~~nine~~seven percent, to $1.15 billion in the ~~first~~second quarter of fiscal 2021 from ~~$1.05~~$1.07 billion in the comparable period of fiscal 2020, reflecting increases in the average balance of investment securities and interest-earning deposits, partly offset by a decrease in the average balance of loans receivable. The average balance of interest-bearing liabilities increased by ~~$97.5~~$72.9 million, or 10eight percent, to $1.04 billion in the ~~first~~second quarter of fiscal 2021 from ~~$942.5~~$964.6 million in the same quarter last year primarily reflecting increases in the average balance of interest-bearing deposits and, to a ~~lower~~lesser extent, the average balance of borrowings.

For the Six Months Ended December 31, 2020 and 2019. Net interest income decreased by $3.4 million, or 18 percent, to $15.8 million for the first six months of fiscal 2021 from $19.2 million in the same period in fiscal 2020, as a result of a lower net interest margin, partly offset by a higher average interest-earning asset balance. The net interest margin was 2.75 percent in the first six months of fiscal 2021, a decrease of 87 basis points from 3.61 percent in the same period of fiscal 2020, primarily due to a decrease in the average yield on interest-earning assets, partly offset by a decrease in the average cost of interest-bearing liabilities. The weighted-average yield on interest-earning assets decreased by 99 basis points to 3.20 percent in the first six months of fiscal 2021 from 4.19 percent in the same quarter last year, and the weighted-average cost of interest-bearing liabilities decreased by 14 basis points to 0.50 percent for the first six months of fiscal 2021 as compared to 0.64 percent in the same period last year. The average balance of interest-earning assets increased $86.7 million, or eight percent, to $1.15 billion in the first six months of fiscal 2021 from $1.06 billion in the comparable period of fiscal 2020, primarily reflecting increases in the average balance of investment securities and interest earning deposits, partly offset by a decrease in the average balance of loans receivable. The average balance of interest-bearing liabilities increased by $85.2 million, or nine percent, to $1.04 billion in the first six months of fiscal 2021 from $953.6 million in the same period last year primarily reflecting an increase in the average balance of transaction accounts.

Beginning in August 2019, the Federal Reserve reduced the targeted Federal Funds Rate by 25 basis points three times in 2019 and ~~the~~by 150 basis points during the quarter ended March 2020 to a range of 0.00% to 0.25%. The 150 basis-point decrease in the targeted Federal Funds Rate in response to the COVID-19 pandemic did not occur until late in the quarter in March 2020, and the effect of the lower interest rate environment has continued to be realized during this quarter. Furthermore, the effect of the changes in the targeted Federal Funds Rate on the cost of liabilities typically lags the effect on the yield earned on interest-earning assets because rates on many deposit accounts are decision-based, not tied to a specific market-based index, and are based on competition for deposits while most interest-earning assets adjust earlier because they are tied to a specific market-based index. Because the length of the COVID-19 pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown until the pandemic subsides, the Corporation expects its net interest income and net interest margin will continue to be adversely affected in ~~the remainder of~~ calendar year ~~2020~~2021 and possibly longer.

Interest Income:

For the Quarter Ended ~~September 30,~~December 31, 2020 and 2019. Total interest income decreased by ~~$1.6~~$2.3 million, or 1421 percent, to ~~$9.5~~$8.9 million for the ~~first~~second quarter of fiscal 2021 as compared to ~~$11.1~~$11.2 million for the same quarter of fiscal 2020. The decrease was ~~primarily~~ due to decreases in interest income from all interest-earning ~~assets.~~assets, mainly loans receivable.

Interest income on loans receivable decreased by ~~$1.2~~$2.0 million, or 1219 percent, to ~~$8.9~~$8.3 million in the ~~first~~second quarter of fiscal 2021 from ~~$10.1~~$10.3 million in the same quarter of fiscal 2020. The decrease was due to a lower average yield and, to a ~~much lower~~lesser extent, a lower average balance. The average loans receivable yield during the ~~first~~second quarter of fiscal 2021 decreased 4758 basis points to ~~3.99~~3.84 percent from ~~4.46~~4.42 percent during the same quarter last year. The decrease in the average yield on loans receivable was primarily attributable to loans repricing downward reflecting declines in the targeted Federal Funds Rate and the increase of net deferred loan costs to ~~$466,000~~$521,000 in the ~~first~~second quarter of fiscal 2021 from ~~$160,000~~$12,000 in the same quarter of fiscal 2020. A deferred loan fee of $378,000 was recognized in interest income as a result of a loan payoff in the second quarter of fiscal 2020 from a previously classified non-performing loan that had been upgraded to pass and not replicated in the second quarter of fiscal

2021. The average balance of loans receivable decreased by ~~$10.3~~$65.6 million, or ~~one~~seven percent, to ~~$893.0~~$868.5 million for the ~~first~~second quarter of fiscal 2021 from ~~$903.3~~$934.1 million in the same quarter of fiscal 2020.

Interest income from investment securities decreased ~~$136,000,~~$119,000, or 2221 percent, to ~~$478,000~~$448,000 in the ~~first~~second quarter of fiscal 2021 from ~~$614,000~~$567,000 for the same quarter of fiscal 2020. This decrease was attributable to a lower average yield, partly offset by a higher average balance. The average investment securities yield decreased ~~134~~174 basis points to ~~1.22~~0.86 percent in the ~~first~~second quarter of fiscal 2021 from ~~2.56~~2.60 percent in the same quarter of fiscal 2020. The decrease in the average investment securities yield was primarily attributable to investment securities purchases at a lower average yield than the existing portfolio, a higher premium amortization between the quarters ($~~357,000~~531,000 vs. ~~$130,000)~~$97,000) and the downward repricing of adjustable rate mortgage-backed securities. The average balance of investment securities increased ~~$60.3~~$121.4 million, or 63139 percent, to ~~$156.2~~$208.5 million in the ~~first~~second quarter of fiscal 2021 from ~~$95.9~~$87.1 million in the same quarter of fiscal 2020. The increase in the average balance of investment securities was primarily attributable to ~~the~~purchases of investment ~~purchases,~~securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities.

The FHLB – San Francisco cash dividend received in the ~~first~~second quarter of fiscal 2021 was $100,000, down ~~$43,000~~$45,000 or 3031 percent from the same quarter of fiscal 2020. The average balance of FHLB – San Francisco stock in the ~~first~~second quarter of fiscal 2021 decreased slightly to $8.0 million from $8.2 million in the same quarter of fiscal 2020 and the average yield decreased to 5.02 percent in the ~~first~~second quarter of fiscal 2021 from ~~6.98~~7.07 percent in the same quarter last year.

Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, was ~~$24,000~~$17,000 in the ~~first~~second quarter of fiscal 2021, down 9091 percent from ~~$246,000~~$189,000 in the same quarter of fiscal 2020. The decrease was ~~primarily~~ due to a lower average yield, partly offset by a higher average balance. The average yield earned on interest-earning deposits decreased ~~206~~152 basis points to 0.10 percent in the second quarter of fiscal 2021 from 1.62 percent in the comparable quarter last year, due primarily to decreases in the targeted Federal Funds Rate over the last year. The average balance of the interest-earning deposits in the second quarter of fiscal 2021 was $64.9 million, an increase of $19.4 million or 43 percent, from $45.5 million in the same quarter of fiscal 2020.

For the Six Months Ended December 31, 2020 and 2019. Total interest income decreased by $3.9 million, or 17 percent, to $18.4 million for the first six months of fiscal 2021 from $22.3 million in the same period of fiscal 2020. The decrease was due to decreases in interest income from all interest-earning assets, mainly loans receivable.

Loans receivable interest income decreased $3.1 million, or 15 percent, to $17.3 million in the first six months of fiscal 2021 from $20.4 million for the same period of fiscal 2020. The decrease was due to a lower average yield and, to a lesser extent, a lower average balance. The average loan yield during the first six months of fiscal 2021 decreased 52 basis points to 3.92 percent from 4.44 percent in the same period last year. The decrease in the average yield on loans receivable was primarily attributable to loans repricing downward reflecting declines in the targeted Federal Funds Rate and the increase of net deferred loan costs to $987,000 in the first six months of fiscal 2021 from $172,000 in the same period of fiscal 2020. The higher net deferred loan costs was due primarily to higher loan prepayments during the periods and the prior period deferred loan fees of $520,000 which were recognized in interest income as a result of three loan payoffs in the first six months of fiscal 2020 from a previously classified non-performing loans that had been upgraded to pass and not replicated in the first six months of fiscal 2021. The average balance of loans receivable decreased $38.0 million, or four percent, to $880.7 million for the first six months of fiscal 2021 from $918.7 million in the same period of fiscal 2020.

Interest income from investment securities decreased $255,000, or 22 percent, to $926,000 in the first six months of fiscal 2021 from $1.2 million for the same period of fiscal 2020. This decrease was attributable to a lower average yield, partly offset by a higher average balance. The average investment securities yield decreased 156 basis points to 1.02 percent in the first six months of fiscal 2021 from 2.58 percent in the same period of fiscal 2020. The decrease in the average investment securities yield was primarily attributable to a higher premium amortization ($890,000 compared to $227,000) and the purchases of investment securities during the last 12 months which had lower average yields than the existing portfolio. The average balance

of investment securities increased $90.8 million, or 99 percent, to $182.3 million in the first six months of fiscal 2021 from $91.5 million in the same period of fiscal 2020. The increase in the average balance of investment securities was primarily the result of purchases of mortgage-backed securities, partly offset by scheduled and accelerated principal payments on mortgage-backed securities.

The FHLB – San Francisco cash dividend received in the first six months of fiscal 2021 was $200,000, down 31 percent from $288,000 in the same period of fiscal 2020. As a result, the average yield decreased to 5.02 percent in the first six months of fiscal 2021 as compared to 7.03 percent in the comparable period last year.

Interest income from interest-earning deposits, primarily cash deposited at the Federal Reserve Bank of San Francisco, was $41,000 in the first six months of fiscal 2021, down 91 percent from $435,000 in the same period of fiscal 2020. The decrease was due to a lower average yield, partly offset by a higher average balance. The average yield earned on interest-earning deposits decreased 179 basis points to 0.10 percent in the first ~~quarter~~six months of fiscal 2021 from ~~2.16~~1.89 percent in the comparable quarter last year, due primarily to decreases in the targeted Federal Funds Rate over the last year. The average balance of the interest-earning deposits in the first ~~quarter~~six months of fiscal 2021 was ~~$93.3~~$79.1 million, an increase of ~~$48.8~~$34.1 million or ~~110~~76 percent, from ~~$44.5~~$45.0 million in the same ~~quarter~~period of fiscal 2020.

Interest Expense:

For the Quarter Ended ~~September 30,~~December 31, 2020 and 2019. Total interest expense decreased by ~~$143,000~~$311,000 or 1020 percent to ~~$1.4~~$1.3 million in the ~~first~~second quarter of fiscal 2021 from ~~$1.5~~$1.6 million in the same quarter last year. This decrease was primarily attributable to lower deposit ~~expense, partly offset by higher borrowing~~ expense.

Interest expense on deposits for the ~~first~~second quarter of fiscal 2021 was ~~$551,000~~$468,000 as compared to ~~$776,000~~$778,000 for the same period last year, a decrease of ~~$225,000,~~$310,000, or 2940 percent. The decrease in interest expense on deposits was attributable to a lower average cost of deposits, partly offset by a higher average balance. The average cost of deposits improved, decreasing by 1316 basis points to ~~0.24~~0.21 percent during the ~~first~~second quarter of fiscal 2021 from 0.37 percent during the same quarter last year. The decrease in the average cost of deposits was attributable primarily to a lower percentage of time deposits to the total deposit balance and a 2028 basis-point decrease in the average cost of time deposits. The average cost of transaction accounts also decreased by eight basis points. The average balance of deposits increased ~~$68.5~~$69.1 million, or eight percent, to ~~$899.3~~$902.7 million during the quarter ended ~~September 30,~~December 31, 2020 from ~~$830.8~~$833.6 million during the same period last year. The increase in the average balance was primarily attributable to ~~an increase~~increases in ~~the~~ transaction accounts resulting primarily from government assistance programs related to the COVID-19 pandemic, partly offset by a decrease in higher cost time deposits. Strategically, the Corporation has been promoting transaction accounts and competing less aggressively for time deposits. The average balance of transaction accounts to total deposits in the ~~first~~second quarter of fiscal 2021 was 8183 percent, compared to 7778 percent in the same period of fiscal 2020.

Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the ~~first~~second quarter of fiscal 2021 ~~increased $82,000, or 11 percent,~~decreased slightly to ~~$802,000~~$803,000 from ~~$720,000~~$804,000 for the same period last year. The ~~increase~~decrease in interest expense on borrowings was the result of a ~~higher~~lower average ~~balance,~~cost, partly offset by a ~~lower~~higher average ~~cost. The average balance of borrowings increased $29.1 million, or 26 percent, to $140.7 million during the quarter ended September 30, 2020 from $111.6 million during the same period last year.~~balance. The average cost of borrowings decreased 30seven basis points to ~~2.26~~2.36 percent for the quarter ended ~~September 30,~~December 31, 2020 from ~~2.56~~2.43 percent in the same quarter last year. The decrease in the average cost of borrowings was primarily due to new long-term borrowings obtained at a lower interest rate than prior borrowings, reflecting the decline in market rates over the last year. The average balance of borrowings increased $3.7 million, or three percent, to $134.8 million during the quarter ended December 31, 2020 from $131.1 million during the same period last year.

For the Six Months Ended December 31, 2020 and 2019. Total interest expense decreased $454,000, or 15 percent to $2.6 million in the first six months of fiscal 2021 from $3.1 million in the same period last year. This decrease was attributable primarily to lower deposit expense, partly offset by higher borrowing expense.

Interest expense on deposits for the first six months of fiscal 2021 was $1.0 million as compared to $1.6 million in the same period last year, a decrease of $535,000 or 34 percent. The decrease in interest expense on deposits was primarily attributable to a lower average cost and, partly offset by a higher average balance of deposits. The decrease in the average cost of deposits was attributable primarily to a lower percentage of time deposits to the total deposit balance and a 25 basis-point decrease in the average cost of time deposits. The average cost of transaction accounts also decreased by seven basis points. The average cost of deposits decreased 15 basis points to 0.22 percent during the first six months of fiscal 2021 from 0.37 percent during the same period last year. The average balance of deposits increased $68.8 million, or eight percent, to $901.0 million during the six months ended December 31, 2020 from $832.2 million during the same period last year. The increase in the average balance was primarily attributable to increases in transaction accounts resulting primarily from government assistance programs related to the COVID-19 pandemic, partly offset by a decrease in higher cost time deposits. The average balance of transaction accounts to total deposits in the first six months of fiscal 2021 was 82 percent, compared to 77 percent in the same period of fiscal 2020.

Interest expense on borrowings, consisting primarily of FHLB – San Francisco advances, for the first six months of fiscal 2021 increased $81,000, or five percent, to $1.6 million from $1.5 million in the same period last year. The increase in interest expense on borrowings was the result of a higher average balance, partly offset by a lower average cost. The average balance of borrowings increased by $16.4 million, or 14 percent, to $137.8 million during the six months ended December 31, 2020 from $121.4 million during the same period last year, primarily due to new long-term borrowings at a lower average cost. The average cost of borrowings decreased 18 basis points to 2.31 percent for the six months ended December 31, 2020 from 2.49 percent in the same period last year.

The following tables present the average balance sheets for the quarter and six months ended ~~September 30,~~December 31, 2020 and 2019, respectively:

Average Balance Sheets

	Quarter Ended September 30, 2020						Quarter Ended September 30, 2019						Quarter Ended December 31, 2020						Quarter Ended December 31, 2019
(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⁾	$	892,971	$	8,917	3.99	%	$	903,272	$	10,075	4.46	%	$	868,494	$	8,344	3.84	%	$	934,060	$	10,320	4.42	%
Investment securities	156,235		478		1.22	%	95,945		614		2.56	%	208,453		448		0.86	%	87,108		567		2.60	%
FHLB – San Francisco stock	7,970		100		5.02	%	8,199		143		6.98	%	7,970		100		5.02	%	8,199		145		7.07	%
Interest-earning deposits	93,276		24		0.10	%	44,511		246		2.16	%	64,922		17		0.10	%	45,519		189		1.62	%

Total interest-earning assets	1,150,452		9,519		3.31	%	1,051,927		11,078		4.21	%	1,149,839		8,909		3.10	%	1,074,886		11,221		4.18	%

Non interest-earning assets	31,624						31,408						29,958						32,216

Total assets	$	1,182,076					$	1,083,335					$	1,179,797					$	1,107,102

Interest-bearing liabilities:
Checking and money market accounts ⁽²⁾	$	455,528	$	91	0.08	%	$	381,211	$	110	0.11	%	$	461,363	$	79	0.07	%	$	388,430	$	117	0.12	%
Savings accounts	276,413		78		0.11	%	259,651		134		0.20	%	283,432		54		0.08	%	257,666		131		0.20	%
Time deposits	167,345		382		0.91	%	189,958		532		1.11	%	157,906		335		0.84	%	187,458		530		1.12	%

Total deposits	899,286		551		0.24	%	830,820		776		0.37	%	902,701		468		0.21	%	833,554		778		0.37	%

Borrowings	140,711		802		2.26	%	111,641		720		2.56	%	134,826		803		2.36	%	131,084		804		2.43	%

Total interest-bearing liabilities	1,039,997		1,353		0.52	%	942,461		1,496		0.63	%	1,037,527		1,271		0.49	%	964,638		1,582		0.65	%

Non interest-bearing liabilities	17,735						19,692						17,415						19,644

Total liabilities	1,057,732						962,153						1,054,942						984,282

Stockholders’ equity	124,344						121,182						124,855						122,820
Total liabilities and stockholders’ equity	$	1,182,076					$	1,083,335					$	1,179,797					$	1,107,102

Net interest income			$	8,166					$	9,582					$	7,638					$	9,639

Interest rate spread ⁽³⁾					2.79	%					3.58	%					2.61	%					3.53	%
Net interest margin ⁽⁴⁾					2.84	%					3.64	%					2.66	%					3.59	%
Ratio of average interest-earning assets to average interest-bearing liabilities					110.62	%					111.61	%					110.82	%					111.43	%
Return on average assets					0.50	%					0.95	%					0.40	%					0.87	%
Return on average equity					4.78	%					8.46	%					3.77	%					7.81	%

⁽¹⁾	Includes non-performing loans ~~as well as~~and net deferred loan cost amortization of ~~$466~~$521 thousand and ~~$160~~$12 thousand for the quarter ended ~~September 30,~~December 31, 2020 and 2019, respectively.

⁽²⁾	Includes the average balance of non interest-bearing checking accounts of ~~$115.8~~$111.7 million and ~~$81.3~~$84.2 million during the quarter ended ~~September 30,~~December 31, 2020 and 2019, 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 (recovery) for loan losses as a percentage of average interest-earning assets.

	Six Months Ended December 31, 2020						Six Months Ended December 31, 2019
(Dollars In Thousands)	Average Balance		Interest		Yield/ Cost		Average Balance		Interest		Yield/ Cost
Interest-earning assets:
Loans receivable, net ⁽¹⁾	$	880,733	$	17,261	3.92	%	$	918,666	$	20,395	4.44	%
Investment securities	182,344		926		1.02	%	91,527		1,181		2.58	%
FHLB – San Francisco stock	7,970		200		5.02	%	8,199		288		7.03	%
Interest-earning deposits	79,099		41		0.10	%	45,015		435		1.89	%

Total interest-earning assets	1,150,146		18,428		3.20	%	1,063,407		22,299		4.19	%

Non interest-earning assets	30,790						31,812

Total assets	$	1,080,936					$	1,095,219

Interest-bearing liabilities:
Checking and money market accounts ⁽²⁾	$	458,445	$	170	0.07	%	$	384,820	$	227	0.12	%
Savings accounts	279,923		132		0.09	%	258,659		265		0.20	%
Time deposits	162,625		717		0.87	%	188,708		1,062		1.12	%

Total deposits	900,993		1,019		0.22	%	832,187		1,554		0.37	%

Borrowings	137,769		1,605		2.31	%	121,363		1,524		2.49	%

Total interest-bearing liabilities	1,038,762		2,624		0.50	%	953,550		3,078		0.64	%

Non interest-bearing liabilities	17,575						19,668

Total liabilities	1,056,337						973,218

Stockholders’ equity	124,599						122,001
Total liabilities and stockholders’ equity	$	1,080,936					$	1,095,219

Net interest income			$	15,804					$	19,221

Interest rate spread ⁽³⁾					2.70	%					3.55	%
Net interest margin ⁽⁴⁾					2.75	%					3.61	%
Ratio of average interest-earning assets to average interest-bearing liabilities					110.72	%					111.52	%
Return on average assets					0.45	%					0.91	%
Return on average equity					4.27	%					8.13	%

⁽¹⁾	Includes non-performing loans and net deferred loan cost amortization of $987 thousand and $172 thousand for the six months ended December 31, 2020 and 2019, respectively.

⁽²⁾	Includes the average balance of non interest-bearing checking accounts of $113.7 million and $82.7 million during the six months ended December 31, 2020 and 2019, respectively.

⁽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 (recovery) for loan losses as a percentage of average interest-earning assets.

The following tables set forth the effects of changing rates and volumes on interest income and expense for the quarter and six months ended ~~September 30,~~December 31, 2020 and 2019, 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 September 30, 2020 Compared To Quarter Ended September 30, 2019 Increase (Decrease) Due to												Quarter Ended December 31, 2020 Compared To Quarter Ended December 31, 2019 Increase (Decrease) Due to
(In Thousands)	Rate			Volume			Rate/ Volume			Net			Rate			Volume			Rate/ Volume			Net
Interest-earning assets:
Loans receivable(1)	$	(1,055	)	$	(115	)	$	12		$	(1,158	)	$	(1,346	)	$	(725	)	$	95		$	(1,976	)
Investment securities	(320		)	386			(202		)	(136		)	(380		)	789			(528		)	(119		)
FHLB – San Francisco stock	(40		)	(4		)	1			(43		)	(42		)	(4		)	1			(45		)
Interest-earning deposits	(234		)	263			(251		)	(222		)	(177		)	79			(74		)	(172		)
Total net change in income on interest-earning assets	(1,649		)	530			(440		)	(1,559		)	(1,945		)	139			(506		)	(2,312		)

Interest-bearing liabilities:
Checking and money market accounts	(34		)	21			(6		)	(19		)	(51		)	22			(9		)	(38		)
Savings accounts	(60		)	8			(4		)	(56		)	(82		)	13			(8		)	(77		)
Time deposits	(98		)	(63		)	11			(150		)	(133		)	(83		)	21			(195		)
Borrowings	(84		)	188			(22		)	82			(23		)	23			(1		)	(1		)
Total net change in expense on interest-bearing liabilities	(276		)	154			(21		)	(143		)	(289		)	(25		)	3			(311		)
Net (decrease) increase in net interest income	$	(1,373	)	$	376		$	(419	)	$	(1,416	)	$	(1,656	)	$	164		$	(509	)	$	(2,001	)

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

	Six Months Ended December 31, 2020 Compared To Six Months Ended December 31, 2019 Increase (Decrease) Due to
(In Thousands)	Rate			Volume			Rate/ Volume			Net
Interest-earning assets:
Loans receivable ⁽¹⁾	$	(2,391	)	$	(842	)	$	99		$	(3,134	)
Investment securities	(719		)	1,172			(708		)	(255		)
FHLB – San Francisco stock	(82		)	(8		)	2			(88		)
Interest-bearing deposits	(411		)	322			(305		)	(394		)
Total net change in income on interest-earning assets	(3,603		)	644			(912		)	(3,871		)

Interest-bearing liabilities:
Checking and money market accounts	(83		)	45			(19		)	(57		)
Savings accounts	(142		)	21			(12		)	(133		)
Time deposits	(231		)	(147		)	33			(345		)
Borrowings	(110		)	206			(15		)	81
Total net change in expense on interest-bearing liabilities	(566		)	125			(13		)	(454		)
Net (decrease) increase in net interest income	$	(3,037	)	$	519		$	(899	)	$	(3,417	)

⁽¹⁾	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 Quarter Ended ~~September 30,~~December 31, 2020 and 2019. During the ~~first~~second quarter of fiscal 2021, the Corporation recorded a provision for loan losses of ~~$220,000,~~$39,000, as compared to a recovery from the allowance for loan losses of ~~$181,000~~$22,000 in the same period of fiscal 2020. The increase in provision for loan losses during this quarter reflects an increase in non-performing loans partly offset by the decrease in loan balances.

For the Six Months Ended December 31, 2020 and 2019. During the first six months of fiscal 2021, the Corporation recorded a provision for loan losses of $259,000, as compared to a recovery from the allowance for loan losses of $203,000 in the same period of fiscal 2020. The increase in provision for loan losses during this six-month period was primarily attributable to an increase in the qualitative component established in our allowance for loan losses methodology in response to the deteriorating economic conditions and probable loan losses, including the potential effects from higher forecasted unemployment rates and lower gross domestic product, as well as the impact on other economic conditions on the U.S. and global economies from COVID-19.

Non-performing loans, net of the allowance for loan losses and fair value adjustments ~~decreased eight~~increased 109 percent to ~~$4.5~~$10.3 million at ~~September 30,~~December 31, 2020 from $4.9 million at June 30, 2020 and ~~$5.2~~$3.4 million at ~~September 30,~~December 31, 2019. Net loan recoveries in the ~~first~~second quarter of fiscal 2021 were ~~$5,000~~$9,000 or 0.00 percent (annualized) of average loans receivable, as compared to net loan recoveries of ~~$34,000~~$14,000 or ~~0.02~~0.01 percent (annualized) of average loans receivable in the same quarter of fiscal 2020. For the first six months of fiscal 2021, the net loan recoveries were $14,000 or 0.00 percent (annualized) of average loans receivable as compared to net loan recoveries of $48,000 or 0.01 percent (annualized) of average loans receivable in the same period of fiscal 2020. Total classified loans, net of the allowance for loan losses and fair value adjustments, were ~~$10.6~~$14.9 million at ~~September 30,~~December 31, 2020 as compared to $14.1 million at June 30, 2020 and ~~$13.0~~$13.7 million at ~~September 30,~~December 31, 2019. Classified loans net of the allowance for loan losses and fair value adjustments at ~~September 30,~~December 31, 2020 were comprised of ~~$6.0~~$4.6 million of loans in the special mention category and ~~$4.6~~$10.3 million of loans in the substandard category as compared to $8.6 million of loans in the special mention category and $5.5 million of loans in the substandard category at June 30, 2020.

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. See related discussion of “Asset Quality.”

At ~~September 30,~~December 31, 2020, the allowance for loan losses was $8.5 million, comprised of collectively evaluated allowances of ~~$8.4~~$7.9 million and individually evaluated allowances of ~~$84,000;~~$570,000; in comparison to the allowance for loan losses of $8.3 million at June 30, 2020, comprised of collectively evaluated allowances of $8.2 million and individually evaluated allowances of $100,000. The allowance for loan losses as a percentage of gross loans held for investment was ~~0.95~~0.99 percent at ~~September 30,~~December 31, 2020 as compared to 0.91 percent at June 30, 2020. Management considers, based on currently available information, the allowance for loan losses sufficient to absorb potential losses inherent in loans held for investment. For further analysis on the allowance for loan losses, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements. A further decline in national and local economic conditions, as a result of the COVID-19 pandemic or other factors, could result in a material increase in the allowance for loan losses and may adversely affect the Corporation’s financial condition and results of operations.

Non-Interest Income:

For the Quarter Ended ~~September 30,~~December 31, 2020 and 2019. Total non-interest income ~~increased $89,000,~~decreased $370,000, or ~~eight~~28 percent, to ~~$1.2 million~~$974,000 for the quarter ended ~~September 30,~~December 31, 2020 from ~~$1.1~~$1.3 million for the same period last year. The ~~increase~~decrease was primarily attributable to ~~an increase~~decreases in loan servicing and other fees ~~partly offset~~and deposit account fees.

Loan servicing and other fees decreased $247,000 or 67 percent to $120,000 in the second quarter of fiscal 2021 from $367,000 in the same quarter last year. The decrease was due primarily to a decrease in prepayment fees resulting from lower loan payoffs, particularly in multi-family loans.

Deposit account fees decreased $122,000 or 27 percent to $329,000 in the second quarter of fiscal 2021 from $451,000 in the same quarter last year. The decrease was due primarily to certain fees that were waived related to accounts impacted by the COVID-19 pandemic and reduced transactions reflecting changes in spending habits due to the COVID-19 pandemic.

For the Six Months Ended December 31, 2020 and 2019. Total non-interest income decreased $281,000, or 12 percent, to $2.1 million for the six months ended December 31, 2020 from $2.4 million for the same period last year. The decrease was primarily attributable to a decrease in deposit account fees.

Loan servicing and other fees increased ~~$272,000~~$25,000 or ~~205~~five percent to ~~$405,000~~$525,000 in the first ~~quarter~~six months of fiscal 2021 from ~~$133,000~~$500,000 in the same ~~quarter~~period last year. The increase was due primarily to an increase in prepayment fees resulting from higher loan payoffs, particularly in multi-family loans.

Deposit account fees decreased ~~$137,000~~$259,000 or 3129 percent to ~~$310,000~~$639,000 in the first ~~quarter~~six months of fiscal 2021 from ~~$447,000~~$898,000 in the same ~~quarter~~period last year. The decrease was due primarily to certain fees that were waived related to accounts impacted by the COVID-19 pandemic and reduced transactions reflecting changes in spending habits due to the COVID-19 pandemic.

Non-Interest Expense:

For the Quarter Ended ~~September 30,~~December 31, 2020 and 2019. Total non-interest expense in the quarter ended ~~September 30,~~December 31, 2020 was ~~$7.0~~$6.9 million, a decrease of ~~$253,000,~~$638,000, or ~~three~~eight percent, as compared to ~~$7.2~~$7.6 million in the quarter ended ~~September 30,~~December 31, 2019. The decrease was primarily attributable to a decrease in salaries and employee benefits expenses and other operating expenses, partly offset by higher deposit insurance premiums and regulatory assessment ~~expenses and other operating~~ expenses.

Salaries and employee benefits expense decreased ~~$542,000,~~$698,000, or 1114 percent, to ~~$4.4~~$4.3 million in the ~~first~~second quarter of fiscal 2021 from $5.0 million in the same period of fiscal 2020. The decrease was due primarily to fewer employees and lower employee bonus and other incentive payments. Total loan originations and purchases decreased ~~$45.4~~$52.0 million, or 4964 percent, to ~~$48.0~~$29.6 million in the ~~first~~second quarter of fiscal 2021 from ~~$93.4~~$81.6 million in the same quarter of fiscal 2020. Total full-time equivalent employees (“FTE”) were ~~163~~166 at ~~September 30,~~December 31, 2020, down 2518 FTE or 1310 percent from ~~188~~184 FTE at ~~September 30,~~December 31, 2019.

Deposit insurance premiums and regulatory assessment expenses were ~~$134,000~~$141,000 in the ~~first~~second quarter of fiscal 2021, ~~in contrast to a recovery/credit of $16,000~~up 139 percent from $59,000 in the same quarter of fiscal 2020. The increase was due primarily to FDIC insurance premium credits applied in the ~~first~~second quarter of fiscal 2020, which were not replicated in the ~~first~~second quarter of fiscal 2021.

Other non-interest expenses ~~increased $116,000,~~decreased $104,000, or 2013 percent, to ~~$703,000~~$707,000 in the ~~first~~second quarter of fiscal 2021 from ~~$587,000~~$811,000 in the same quarter of fiscal 2020. The ~~increase~~decrease in other non-interest expenses was primarily attributable to ~~the $296,000 reversion of litigation expenses in the first quarter of fiscal 2020, which was not replicated this quarter, partly offset by~~ reduced expenses reflecting lower loan originations and purchases.

For the Six Months Ended December 31, 2020 and 2019. Total non-interest expense in the six months ended December 31, 2020 was $13.9 million, a decrease of $891,000, or six percent, as compared to $14.8 million in the six months ended

4757

December 31, 2019. The decrease was primarily attributable to a decrease in salaries and employee benefits expenses, partly offset by higher deposit insurance premiums and regulatory assessment expenses.

Salaries and employee benefits expense decreased $1.3 million, or 13 percent, to $8.7 million in the first six months of fiscal 2021 from $10.0 million in the same period of fiscal 2020. The decrease was due primarily to fewer employees and lower employee bonus and other incentive payments. Total loan originations and purchases decreased $97.4 million, or 56 percent, to $77.6 million in the first six months of fiscal 2021 from $175.0 million in the same period of fiscal 2020.

Deposit insurance premiums and regulatory assessment expenses were $275,000 in the first six months of fiscal 2021, up 540 percent from $43,000 in the same period of fiscal 2020. The increase was due primarily to FDIC insurance premium credits applied in the first six months of fiscal 2020, which were not replicated in the same period of fiscal 2021.

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, earnings from bank-owned life insurance policies and certain California tax-exempt loans, among others. Therefore, there are fluctuations in the effective income tax rate from period to period based on the relationship of net permanent differences to income before tax.

For the Quarter Ended ~~September 30,~~December 31, 2020 and 2019. The Corporation’s income tax provision was ~~$635,000~~$481,000 for the ~~first~~second quarter of fiscal 2021, a 3954 percent decrease from ~~$1.0~~$1.1 million in the same quarter last year, primarily reflecting lower pre-tax income. The effective income tax rate for the quarter ended ~~September 30,~~December 31, 2020 was ~~29.95~~29.0 percent as compared to ~~28.73~~30.5 percent for the quarter ended ~~September 30,~~December 31, 2019. The Corporation believes that the effective income tax rate applied in the second quarter of fiscal 2021 reflects its current income tax obligations.

For the Six Months Ended December 31, 2020 and 2019. The Corporation’s income tax provision was $1.1 million for the first ~~quarter~~six months of fiscal 2021, a 47 percent decrease from $2.1 million in the same period last year, primarily reflecting lower pre-tax income. The effective income tax rate for the six months ended December 31, 2020 and 2019 was 29.6 percent at both periods. The Corporation believes that the effective income tax rate applied in the first six months of fiscal 2021 reflects its current income tax obligations.

Asset Quality

Non-performing assets were comprised solely of non-performing loans at both December 31, 2020 and June 30, 2020. Non-performing loans, net of the allowance for loan losses and fair value adjustments, consisting of loans with collateral located in California, was ~~$4.5~~$10.3 million at ~~September 30,~~December 31, 2020, ~~down $392,000 or eight~~up 109 percent from $4.9 million at June 30, 2020. Non-performing loans as a percentage of loans held for investment at ~~September 30,~~December 31, 2020 was ~~0.51%~~1.20%, ~~improving~~up from 0.55% at June 30, 2020. The non-performing loans at ~~September 30,~~December 31, 2020 are comprised of 1733 single-family ~~loans ($4.5 million) and one commercial business loan ($27,000).~~loans. No interest accruals were made for loans that were past due 90 days or more or if the loans were deemed non-performing.

As of ~~September 30,~~December 31, 2020, total restructured loans ~~decreased $194,000, or seven~~increased 215 percent, to ~~$2.4~~$8.2 million from $2.6 million at June 30, 2020. At both ~~September 30,~~December 31, 2020 and June 30, 2020, all of these restructured loans were classified as non-performing. As of ~~September 30,~~December 31, 2020, all of the restructured loans have a current payment status, consistent with their modified payment terms; this compares to $1.2 million, or 44 percent, of restructured loans that had a current payment status, consistent with their modified payment terms as of ~~June 30, 2020.~~

~~There was no real estate owned at both September 30, 2020 and June 30, 2020.~~

Non-performing assets, which includes non-performing loans and real estate owned, if any, decreased $392,000 or eight percent to $4.5 million or 0.38 percent of total assets at September 30, 2020 from $4.9 million or 0.42 percent of total assets at June 30, 2020. Restructured loans which are performing in accordance with their modified terms and are not otherwise classified non-accrual are not included in non-performing assets. For further analysis on non-performing loans and restructured loans, see Note 5 of the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

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

A decline in real estate values subsequent to the time of origination of the Corporation’s real estate secured loans could result in higher loan delinquency levels, foreclosures, provisions for loan losses and net charge-offs. Real estate values and real estate markets are beyond the Corporation’s control and are generally affected by changes in national, regional or local economic conditions and other factors. These factors include fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes, fires and national disasters particular to California where substantially all of the Corporation’s real estate collateral is located. If real estate values decline, the value of the real estate collateral securing the Corporation’s loans as set forth in the table could be significantly overstated. The Corporation’s ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and it would be more likely to suffer losses on defaulted loans. The Corporation generally does not update the loan-to-value ratio on its loans held for investment by obtaining new appraisals or broker price opinions (nor does the Corporation intend to do so in the future as a result of the costs and inefficiencies associated with

completing the task) unless a specific loan has demonstrated deterioration in which case individually evaluated allowances are established, if required.

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

(In Thousands)	At September 30, 2020			At June 30, 2020			At December 31, 2020			At June 30, 2020
Loans on non-accrual status (excluding restructured loans):
Mortgage loans:
Single-family	$	2,084		$	2,281		$	2,062		$	2,281
Total	2,084			2,281			2,062			2,281

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

Restructured loans on non-accrual status:
Mortgage loans:
Single-family	2,421			2,612			8,208			2,612
Commercial business loans	27			31			—			31
Total	2,448			2,643			8,208			2,643

Total non-performing loans	4,532			4,924			10,270			4,924

Real estate owned, net	—			—			—			—
Total non-performing assets	$	4,532		$	4,924		$	10,270		$	4,924

Non-performing loans as a percentage of loans held for investment, net of allowance for loan losses	0.51		%	0.55		%	1.20		%	0.55		%

Non-performing loans as a percentage of total assets	0.38		%	0.42		%	0.88		%	0.42		%

Non-performing assets as a percentage of total assets	0.38		%	0.42		%	0.88		%	0.42		%

4960

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

	At September 30, 2020				At June 30, 2020				At December 31, 2020				At June 30, 2020
(Dollars In Thousands)	Balance			Count	Balance			Count	Balance			Count	Balance			Count
Special mention loans:
Mortgage loans:
Single-family	$	2,175		4	$	3,120		7	$	935		2	$	3,120		7
Multi-family	3,755			3	3,777			3	3,732			3	3,777			3
Commercial real estate	—			—	1,703			1	—			—	1,703			1
Total special mention loans	5,930			7	8,600			11	4,667			5	8,600			11

Substandard loans:
Mortgage loans:
Single-family	4,598			20	5,438			22	10,270			35	5,438			22
Commercial business loans	27			1	31			1	—			—	31			1
Total substandard loans	4,625			21	5,469			23	10,270			35	5,469			23

Total classified loans	10,555			28	14,069			34	14,937			40	14,069			34

Real estate owned	—			—	—			—	—			—	—			—

Total classified assets	$	10,555		28	$	14,069		34	$	14,937		40	$	14,069		34

Total classified assets as a percentage of total assets		0.89	%			1.20	%			1.28	%			1.20	%

5061

Loan Volume Activities

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

	For the Quarter Ended September 30,						For the Quarter Ended December 31,							For the Six Months Ended December 31,
(In Thousands)	2020			2019			2020			2019				2020				2019
Loans originated for investment::
Loans originated for investment:
Mortgage loans:
Single-family	$	23,199		$	7,506		12,444			8,061			35,643				15,567
Multi-family	12,909			19,350			13,907			14,921			26,816				34,271
Commercial real estate	1,860			2,419			—			6,479			1,860				8,898
Construction	1,140			896			688			2,313			1,828				3,209
Consumer loans							—			1			—				1
Total loans originated for investment	39,108			30,171			27,039			31,775			66,147				61,946

Loans purchased for investment:
Mortgage loans:
Single-family	—			26,123			—			44,610			—				70,733
Multi-family	8,938			37,126			2,525			5,243			11,463				42,369
Total loans purchased for investment	8,938			63,249			2,525			49,853			11,463				113,102

Mortgage loan principal payments	(66,323		)	(50,829		)	(59,575		)	(65,205		)	(125,898			)	(116,034			)
Increase in other items, net ⁽¹⁾	434			1,798			144			992			578				2,790

Net (decrease) increase in loans held for investment	$	(17,843	)	$	44,389		$	(29,867	)	$	17,415		$		(47,710	)	$		61,804

⁽¹⁾	Includes net changes in undisbursed loan funds, deferred loan fees or costs, allowance for loan losses, fair value of loans held for investment, advance payments of escrows and repurchases.

Liquidity and Capital Resources

The Corporation’s primary sources of funds are deposits, 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. During the first ~~three~~six months of fiscal 2021 and 2020, the Corporation originated and purchased loans held for investment of ~~$48.0~~$77.6 million and ~~$93.4~~$175.0 million, respectively. At ~~September 30,~~December 31, 2020, the Corporation had loan origination commitments totaling ~~$7.7~~$12.3 million, undisbursed lines of credit totaling ~~$928,000~~$942,000 and undisbursed construction loan funds totaling ~~$3.4~~$2.7 million. The Corporation anticipates that it will have sufficient funds available to meet its current loan commitments. During the first six months of fiscal 2021 and 2020, total loan repayments were $125.9 million and $116.0 million, respectively.

The Corporation’s primary financing activity is gathering deposits. During the first ~~three~~six months of fiscal 2021, the net increase in deposits was ~~$11.7~~$17.0 million or ~~one~~two percent, ~~primarily~~ due to an increase in transaction accounts, partly offset by a decrease in time

deposits. Time deposits decreased ~~$9.0~~$16.2 million, or ~~five~~10 percent, to ~~$161.0~~$153.8 million at ~~September 30,~~December 31, 2020 from $170.0

million at June 30, 2020. At ~~September 30,~~December 31, 2020, time deposits with a principal amount of $250,000 or less and scheduled to mature in one year or less were ~~$71.4~~$68.6 million and total time deposits with a principal amount of more than $250,000 and scheduled to mature in one year or less were ~~$14.6~~$15.1 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 ~~September 30,~~December 31, 2020, total cash and cash equivalents were ~~$66.5~~$74.0 million, or six 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 ~~September 30,~~December 31, 2020, total borrowings were ~~$136.0~~$116.0 million and the financing availability at FHLB – San Francisco was limited to 35 percent of total assets; the remaining borrowing facility available was ~~$255.4~~$277.9 million and the remaining available collateral was ~~$360.7~~$332.8 million. In addition, the Bank has secured a ~~$165.7~~$176.2 million discount window facility at the Federal Reserve Bank of San Francisco, collateralized by investment securities with a fair market value of ~~$176.2~~$187.4 million. As of ~~September 30,~~December 31, 2020, the Bank also has a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $17.0 million that matures on June 30, 2021 which the Bank intends to renew upon maturity. The Bank had no advances under its correspondent bank or discount window facility as of ~~September 30,~~December 31, 2020.

Regulations require thrifts to maintain adequate liquidity to assure safe and sound operations. The Bank’s average liquidity ratio (defined as the ratio of average qualifying liquid assets to average deposits and borrowings) for the quarter ended ~~September 30,~~December 31, 2020 increased to ~~25.4~~27.7 percent from 23.1 percent for the quarter ended June 30, 2020.

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

At ~~September 30,~~December 31, 2020, the Bank exceeded all regulatory capital requirements. The Bank was categorized "well-capitalized" at ~~September 30,~~December 31, 2020 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.

5263

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

																	Regulatory Requirements
					Regulatory Requirements								Actual				Minimum for Capital Adequacy Purposes ⁽¹⁾				Minimum to Be Well Capitalized
	Actual				Minimum for Capital Adequacy Purposes ⁽¹⁾				Minimum to Be Well Capitalized				Amount		Ratio		Amount		Ratio		Amount			Ratio
		Amount	Ratio			Amount	Ratio			Amount	Ratio
Provident Savings Bank, F.S.B.:

As of September 30, 2020
As of December 31, 2020
Tier 1 leverage capital (to adjusted average assets)	$	113,942	9.64	%	$	47,277	4.00	%	$	59,096	5.00	%	$	115,562	9.78	%	$	47,249	4.00	%		$	59,061	5.00	%
CET1 capital (to risk-weighted assets)	$	113,942	16.94	%	$	47,082	7.00	%	$	43,719	6.50	%	$	115,562	18.30	%	$	44,193	7.00	%		$	41,037	6.50	%
Tier 1 capital (to risk-weighted assets)	$	113,942	16.94	%	$	57,170	8.50	%	$	53,807	8.00	%	$	115,562	18.30	%	$	53,663	8.50	%		$	50,507	8.00	%
Total capital (to risk-weighted assets)	$	122,351	18.19	%	$	70,622	10.50	%	$	67,259	10.00	%	$	123,463	19.56	%	$	66,290	10.50	%		$	63,133	10.00	%

As of June 30, 2020
Tier 1 leverage capital (to adjusted average assets)	$	116,967	10.13	%	$	46,188	4.00	%	$	57,735	5.00	%	$	116,967	10.13	%	$	46,188	4.00	%		$	57,735	5.00	%
CET1 capital (to risk-weighted assets)	$	116,967	17.51	%	$	46,747	7.00	%	$	43,408	6.50	%	$	116,967	17.51	%	$	46,747	7.00	%		$	43,408	6.50	%
Tier 1 capital (to risk-weighted assets)	$	116,967	17.51	%	$	56,765	8.50	%	$	53,426	8.00	%	$	116,967	17.51	%	$	56,765	8.50	%		$	53,426	8.00	%
Total capital (to risk-weighted assets)	$	125,316	18.76	%	$	70,121	10.50	%	$	66,782	10.00	%	$	125,316	18.76	%	$	70,121	10.50	%		$	66,782	10.00	%

⁽¹⁾	Inclusive of the conservation buffer of 2.50% for CET1 capital, Tier 1 capital and Total capital ratios.

In addition to the minimum CET1, Tier 1 and Total capital ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital 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. As of ~~September 30,~~December 31, 2020, the capital conservation buffer required a minimum of 2.50% of risk weighted assets.

The ability of the Corporation to pay dividends to stockholders depends primarily on the ability of the Bank to pay dividends to the Corporation. 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 ~~three~~six months of fiscal ~~2020,~~2021, the Bank paid a cash dividend of $5.0 million to the Corporation, while the Corporation paid ~~$1.0~~$2.1 million of cash dividends to its shareholders.

Supplemental Information

	At September 30, 2020	At June 30, 2020	At September 30, 2019	At December 31, 2020	At June 30, 2020	At December 31, 2019

Loans serviced for others (in thousands)	$77,562	$86,505	$110,494	$64,521	$86,505	$102,824

Book value per share	$16.75	$16.67	$16.33	$16.79	$16.67	$16.54

5364

ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk.

One of the Corporation’s principal financial objectives is to achieve long-term profitability while reducing its exposure to fluctuating interest rates. The Corporation has sought to reduce the exposure of its earnings to changes in interest rates by attempting to manage the repricing mismatch between interest-earning assets and interest-bearing liabilities. The principal element in achieving this objective is to increase the interest-rate sensitivity of the Corporation’s interest-earning assets by retaining for its portfolio new loan originations with interest rates subject to periodic adjustment to market conditions. In addition, the Corporation maintains an investment portfolio, which is largely in U.S. government agency MBS and U.S. government sponsored enterprise MBS with contractual maturities of up to 30 years that reprice 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”) 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 -100, +100, +200 and +300 basis points (“bp”) with no effect given to steps that management might take to counter the effect of the interest rate movement. As of ~~September 30,~~December 31, 2020, the targeted Federal Funds Rate range was 0.00% to 0.25%, making an immediate change of -200 basis points or more 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 ~~September 30,~~December 31, 2020 (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⁾	Net Portfolio Value		NPV Change ⁽¹⁾			Portfolio Value of Assets		NPV as Percentage of Portfolio Value Assets ⁽²⁾	Sensitivity Measure ⁽³⁾
+300 bp	$	250,940	$	109,241		$	1,313,467	19.11%	+749 bp	$	258,292	$	111,580		$	1,306,574	19.77%	+763 bp
+200 bp	$	222,185	$	80,486		$	1,289,534	17.23%	+561 bp	$	229,240	$	82,528		$	1,281,912	17.88%	+574 bp
+100 bp	$	188,884	$	47,185		$	1,261,195	14.98%	+336 bp	$	194,945	$	48,233		$	1,252,129	15.57%	+343 bp
0 bp	$	141,699	$	—		$	1,219,117	11.62%	0 bp	$	146,712	$	—		$	1,208,534	12.14%	0 bp
-100 bp	$	118,402	$	(23,297	)	$	1,193,665	9.92%	-170 bp	$	127,434	$	(19,278	)	$	1,187,318	10.73%	-141 bp

⁽¹⁾	Represents the increase (decrease) of the NPV at the indicated interest rate change in comparison to the NPV at ~~September 30,~~December 31, 2020 (“base case”).

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

⁽³⁾	Derived from 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 ~~September 30,~~December 31, 2020 and June 30, 2020.

	At September 30, 2020	At June 30, 2020	At December 31, 2020	At June 30, 2020
	(-100 bp rate shock)	(-100 bp rate shock)	(-100 bp rate shock)	(-100 bp rate shock)
Pre-Shock NPV Ratio: NPV as a % of PV Assets	11.62%	11.93%	12.14%	11.93%
Post-Shock NPV Ratio: NPV as a % of PV Assets	9.92%	10.57%	10.73%	10.57%
Sensitivity Measure: Change in NPV Ratio	-170 bp	-136 bp	-141 bp	-136 bp

5465

The pre-shock NPV ratio ~~decreased 31~~increased 21 basis points to ~~11.62~~12.14 percent at ~~September 30,~~December 31, 2020 from 11.93 percent at June 30, 2020 and the post-shock NPV ratio ~~decreased 65~~increased 16 basis points to ~~9.92~~10.73 percent at ~~September 30,~~December 31, 2020 from 10.57 percent at June 30, 2020. The ~~decrease~~increase of the NPV ratios was primarily attributable to net income in the first six months of fiscal 2021 and the changes in the composition of the balance sheet and interest rates, partly offset by a $5.0 million cash dividend distribution from the Bank to Provident Financial Holdings, Inc. in September ~~2020, partly offset by net income in the first three months of fiscal 2021 and the change in interest rates.~~2020.

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. 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 contractual repricing or scheduled maturity. For transaction accounts (checking, money market and savings deposits) that have no contractual maturity, the table presents estimated principal cash flows and, as applicable, the Corporation's historical experience, management's judgment and statistical analysis concerning their most likely withdrawal behaviors.

5566

The following table represents the interest rate gap analysis of the Corporation's assets and liabilities as of ~~September 30,~~December 31, 2020:

			Term to Contractual Repricing, Estimated Repricing, or Contractual Maturity ⁽¹⁾																	Term to Contractual Repricing, Estimated Repricing, or Contractual Maturity ⁽¹⁾
			As of September 30, 2020																	As of December 31, 2020
(Dollars In Thousands)	(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)		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

Repricing Assets:	Repricing Assets:																	Repricing Assets:
	Cash and cash equivalents		$	60,683		$	—		$	—		$	5,784		$	66,467		Cash and cash equivalents		$	68,874		$	—		$	—		$	5,127		$	74,001
	Investment securities		19,912			—			—			178,372			198,284			Investment securities		18,554			—			—			188,702			207,256
	Loans held for investment		288,409			239,783			256,184			100,577			884,953			Loans held for investment		286,634			235,210			239,130			94,112			855,086
	FHLB - San Francisco stock		7,970			—			—			—			7,970			FHLB - San Francisco stock		7,970			—			—			—			7,970
	Other assets		3,373			—			—			22,986			26,359			Other assets		3,126			—			—			23,288			26,414
		Total assets	380,347			239,783			256,184			307,719			1,184,033				Total assets	385,158			235,210			239,130			311,229			1,170,727

Repricing Liabilities and Equity:	Repricing Liabilities and Equity:																	Repricing Liabilities and Equity:
	Checking deposits - non-interest bearing		—			—			—			114,537			114,537			Checking deposits - non-interest bearing		—			—			—			109,609			109,609
	Checking deposits - interest bearing		45,311			90,622			90,622			75,517			302,072			Checking deposits - interest bearing		47,124			94,249			94,249			78,541			314,163
	Savings deposits		56,373			112,745			112,745			—			281,863			Savings deposits		57,827			115,653			115,653			—			289,133
	Money market deposits		22,631			22,631			—			—			45,262			Money market deposits		21,655			21,655			—			—			43,310
	Time deposits		86,004			56,663			17,465			820			160,952			Time deposits		83,718			52,516			16,913			606			153,753
	Borrowings		46,031			50,000			40,000			—			136,031			Borrowings		26,015			50,000			40,000			—			116,015
	Other liabilities		355			—			—			18,302			18,657			Other liabilities		227			—			—			19,533			19,760
	Stockholders' equity		—			—			—			124,659			124,659			Stockholders' equity		—			—			—			124,984			124,984
		Total liabilities and stockholders' equity	256,705			332,661			260,832			333,835			1,184,033				Total liabilities and stockholders' equity	236,566			334,073			266,815			333,273			1,170,727

Repricing gap positive (negative)	Repricing gap positive (negative)		$	123,642		$	(92,878	)	$	(4,648	)	$	(26,116	)	$	—		Repricing gap positive (negative)		$	148,592		$	(98,863	)	$	(27,685	)	$	(22,044	)	$	—
Cumulative repricing gap:	Cumulative repricing gap:																	Cumulative repricing gap:
	Dollar amount		$	123,642		$	30,764		$	26,116		$	—		$	—		Dollar amount		$	148,592		$	49,729		$	22,044		$	—		$	—
	Percent of total assets		10		%	3		%	2		%	—		%	—		%	Percent of total assets		13		%	4		%	2		%	—		%	—		%

⁽¹⁾ Cash and cash equivalents are presented as estimated repricing; investment securities and loans held for investment are presented as contractual maturities or contractual repricing (without consideration for prepayments); FHLB - San Francisco stock is presented as contractual repricing; transaction accounts (checking, savings and money market deposits) are presented as estimated repricing; while time deposits (without consideration for early withdrawals) and borrowings are presented as contractual maturities.

The static gap analysis shows a positive position in the "cumulative repricing gap - dollar amount" category, indicating more assets are sensitive to repricing than liabilities. Management views non-interest bearing checking 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% per year, savings deposits at 20% per year and money market deposits at 50% in the first and second years.

5667

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.

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 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 rates of interest 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 current balance sheet and repricing characteristics;

Forecast 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 300, 200 and 100 and minus 100 basis points.

The following table describes the results of the analysis at ~~September 30,~~December 31, 2020 and June 30, 2020.

At September 30, 2020		At June 30, 2020
At December 31, 2020				At December 31, 2020	At June 30, 2020
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
+300 bp	9.39%	+300 bp	15.11%	9.42%	+300 bp	15.11%
+200 bp	6.12%	+200 bp	9.95%	6.28%	+200 bp	9.95%
+100 bp	3.28%	+100 bp	5.25%	3.40%	+100 bp	5.25%
-100 bp	0.69%	-100 bp	(0.05)%	(0.10)%	-100 bp	(0.05)%

At ~~September 30,~~December 31, 2020 and June 30, 2020, 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, in a rising interest rate environment, the model projects an increase in net interest income over the subsequent 12-month period. In a falling interest rate environment, the results project a slight ~~increase~~decrease in net interest income over the subsequent 12-month period at ~~September 30,~~December 31, 2020 ~~as compared to a slight decrease in net interest income over the subsequent 12-month period at~~and June 30, 2020.

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 current disclosure to previous disclosures, over time, within the context of the actual performance of the treasury yield curve.

5768

ITEM 4 – Controls and Procedures.

a) An evaluation of the Corporation’s disclosure controls and procedures (as defined in Section 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934 (the “Act”)) was carried out under the supervision and with the participation of the Corporation’s Chief Executive Officer, Chief Financial Officer and the Corporation’s Disclosure Committee as of the end of the period covered by this quarterly report. In designing and evaluating the Corporation’s disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Also, because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been detected. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures as of ~~September 30,~~December 31, 2020 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 management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

b) There have been no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended ~~September 30,~~December 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting. The Corporation does not expect that its internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Periodically, there have been various claims and lawsuits involving the Corporation, such as claims to enforce liens, condemnation proceedings on properties in which the Corporation holds security interests, claims involving the making and servicing of real property loans, employment matters and other issues in the ordinary course of and incidental to the Corporation’s business. These proceedings and the associated legal claims are often contested and the outcome of individual matters is not always predictable. Additionally, in some actions, it is difficult to assess potential exposure because the Corporation is still in the early stages of the litigation. The Corporation is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, operations or cash flows.

5869

Item 1A. Risk Factors.

There have been no material changes in the risk factors previously disclosed in Part I, Item 1A of the Corporation's Annual Report on Form 10-K for the year ended June 30, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a)	Not applicable.

(b)	Not applicable.

(c)	The table below represents the Corporation’s purchases of its equity securities for the ~~first~~second quarter of fiscal 2021.

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⁾
July 1 – 31, 2020 — $ — — 371,815
August 1 – 31, 2020 — $ — — 371,815
September 1 – 30, 2020 2,556 $ 11.68 — 371,815
Total 2,556 $ 11.68 — 371,815

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, 2020	505	$	13.68	—	371,815
November 1 – 30, 2020	—	$	—	—	371,815
December 1 – 31, 2020	—	$	—	—	371,815
Total	505	$	13.68	—	371,815

⁽¹⁾	Represents the remaining shares available for future purchases under the April 2020 stock repurchase plan.

During the quarter and six months ended ~~September 30,~~December 31, 2020, the Corporation did not purchase any shares of the Corporation’s common stock under the April 2020 stock repurchase plan. As of ~~September 30,~~December 31, 2020, the Corporation has not purchased any shares authorized in the April 2020 stock repurchase plan, leaving all 371,815 shares available for purchase until the plan expires on April 30, 2021.

During the quarter ended ~~September 30,~~December 31, 2020, there was no stock option or restricted stock activity, ~~while~~other than 5,500 stock options that were forfeited and 1,500 shares of restricted stock that were vested. The Corporation purchased 505 shares from recipients to fund their withholding tax obligations in the second quarter fiscal 2021 with an average cost of $13.68 per share.

During the six months ended December 31, 2020, there were 5,500 stock option that were forfeited, a total of 9,000 shares of restricted stock were forfeited and ~~7,500~~9,000 shares of restricted stock were vested. The Corporation purchased ~~2,556~~3,061 shares from recipients to fund their withholding tax obligations in the first ~~quarter~~six months of fiscal 2021 with an average cost of ~~$11.68~~$12.01 per share.

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)	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 (b)	Amended and Restated Bylaws of Provident Financial Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed on December 1, 2014)

4.1	Form of Certificate of Provident's Common Stock (incorporated by reference to the Corporation’s Registration Statement on Form S-1 (333-2230) filed on March 11, 1996))

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101	The following materials from the Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30,~~December 31, 2020, 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 (Loss); (4) Condensed Consolidated Statements of Stockholders’ Equity; (5) Condensed Consolidated Statements of Cash Flows; and (6) Selected Notes to Condensed Consolidated Financial Statements.

6071

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: ~~November 6, 2020~~February 8, 2021	/s/ Craig G. Blunden
	Craig G. Blunden
	Chairman and Chief Executive Officer (Principal Executive Officer)



Date: ~~November 6, 2020~~February 8, 2021	/s/ Donavon P. Ternes
	Donavon P. Ternes
	President, Chief Operating Officer and Chief Financial Officer (Principal Financial and Accounting Officer)

6172

June 30, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value		Carrying Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value		Carrying Value
(In Thousands)
Held to maturity
Held to maturity:
U.S. government sponsored enterprise MBS	$	115,763	$	2,636	$	(45	)	$	118,354	$	115,763	$	115,763	$	2,636	$	(45	)	$	118,354	$	115,763
U.S. SBA securities	2,064		—		(17		)	2,047		2,064		2,064		—		(17		)	2,047		2,064
Certificate of deposits	800		—		—			800		800		800		—		—			800		800
Total investment securities - held to maturity	$	118,627	$	2,636	$	(62	)	$	121,201	$	118,627	$	118,627	$	2,636	$	(62	)	$	121,201	$	118,627

Available for sale
Available for sale:
U.S. government agency MBS	$	2,823	$	120	$	—		$	2,943	$	2,943	$	2,823	$	120	$	—		$	2,943	$	2,943
U.S. government sponsored enterprise MBS	1,556		21		—			1,577		1,577		1,556		21		—			1,577		1,577
Private issue CMO	204		—		(7		)	197		197		204		—		(7		)	197		197
Total investment securities - available for sale	$	4,583	$	141	$	(7	)	$	4,717	$	4,717	$	4,583	$	141	$	(7	)	$	4,717	$	4,717
Total investment securities	$	123,210	$	2,777	$	(69	)	$	125,918	$	123,344	$	123,210	$	2,777	$	(69	)	$	125,918	$	123,344

As of June 30, 2020	Unrealized Holding Losses				Unrealized Holding Losses				Unrealized Holding Losses				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
Held to maturity:
U.S. government sponsored enterprise MBS	$	12,731	$	45	$	—	$	—	$	12,731	$	45	$	12,731	$	45	$	—	$	—	$	12,731	$	45
U.S. SBA securities		—	$	—		2,040		17		2,040		17		—	$	—		2,040		17		2,040		17
Total investment securities – held to maturity	$	12,731	$	45	$	2,040	$	17	$	14,771	$	62	$	12,731	$	45	$	2,040	$	17	$	14,771	$	62

Available for sale
Available for sale:
Private issue CMO	$	197	$	7	$	—	$	—	$	197	$	7	$	197	$	7	$	—	$	—	$	197	$	7
Total investment securities – available for sale	$	197	$	7	$	—	$	—	$	197	$	7	$	197	$	7	$	—	$	—	$	197	$	7
Total investment securities	$	12,928	$	52	$	2,040	$	17	$	14,968	$	69	$	12,928	$	52	$	2,040	$	17	$	14,968	$	69

	September 30, 2020				June 30, 2020				December 31, 2020				June 30, 2020
(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	$	800	$	800	$	1,000	$	1,000	$	800	$	800
Due after one through five years	21,057		21,956		19,389		20,194		19,081		19,913		19,389		20,194
Due after five through ten years	69,215		70,425		50,895		52,315		76,934		78,367		50,895		52,315
Due after ten years	102,996		103,566		47,543		47,892		106,083		107,171		47,543		47,892
Total investment securities - held to maturity	$	193,868	$	196,547	$	118,627	$	121,201	$	203,098	$	206,451	$	118,627	$	121,201

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	4,289		4,416		4,583		4,717		4,057		4,158		4,583		4,717
Total investment securities - available for sale	$	4,289	$	4,416	$	4,583	$	4,717	$	4,057	$	4,158	$	4,583	$	4,717
Total investment securities	$	198,157	$	200,963	$	123,210	$	125,918	$	207,155	$	210,609	$	123,210	$	125,918

			At September 30, 2020														At December 31, 2020
			Unpaid										Net				Unpaid										Net
			Principal		Related			Recorded					Recorded				Principal		Related			Recorded					Recorded
(In Thousands)	(In Thousands)		Balance		Charge-offs			Investment		Allowance ⁽¹⁾			Investment		(In Thousands)		Balance		Charge-offs			Investment		Allowance ⁽¹⁾			Investment

Mortgage loans:	Mortgage loans:														Mortgage loans:
	Single-family:														Single-family:
		With a related allowance	$	3,352	$	—		$	3,352	$	(430	)	$	2,922		With a related allowance	$	9,636	$	—		$	9,636	$	(928	)	$	8,708
		Without a related allowance ⁽²⁾	2,045		(462		)	1,583		—			1,583			Without a related allowance ⁽²⁾	2,015		(453		)	1,562		—			1,562
	Total single-family		5,397		(462		)	4,935		(430		)	4,505		Total single-family		11,651		(453		)	11,198		(928		)	10,270

Commercial business loans:
	With a related allowance		31		—			31		(4		)	27
Total commercial business loans			31		—			31		(4		)	27

Total non-performing loans	Total non-performing loans		$	5,428	$	(462	)	$	4,966	$	(434	)	$	4,532	Total non-performing loans		$	11,651	$	(453	)	$	11,198	$	(928	)	$	10,270

			At June 30, 2020
			Unpaid										Net
			Principal		Related			Recorded					Recorded
(In Thousands)			Balance		Charge-offs			Investment		Allowance ⁽¹⁾			Investment

Mortgage loans:
	Single-family:
		With a related allowance	$	3,289	$	—		$	3,289	$	(438	)	$	2,851
		Without a related allowance ⁽²⁾	2,509		(467		)	2,042		—			2,042
	Total single-family		5,798		(467		)	5,331		(438		)	4,893

Commercial business loans:
	With a related allowance		35		—			35		(4		)	31
Total commercial business loans			35		—			35		(4		)	31

Total non-performing loans			$	5,833	$	(467	)	$	5,366	$	(442	)	$	4,924

	Quarter Ended September 30,
	2020		2019
Interest income:
Loans receivable, net	$	8,917	$	10,075
Investment securities	478		614
FHLB – San Francisco stock	100		143
Interest-earning deposits	24		246
Total interest income	9,519		11,078

Interest expense:
Checking and money market deposits	91		110
Savings deposits	78		134
Time deposits	382		532
Borrowings	802		720
Total interest expense	1,353		1,496

Net interest income	8,166		9,582
Provision (recovery) for loan losses	220		(181		)
Net interest income, after provision (recovery) for loan losses	7,946		9,763

Non-interest income:
Loan servicing and other fees	405		133
Deposit account fees	310		447
Card and processing fees	364		390
Other	80		100
Total non-interest income	1,159		1,070

Non-interest expense:
Salaries and employee benefits	4,443		4,985
Premises and occupancy	903		878
Equipment	275		279
Professional expenses	414		408
Sales and marketing expenses	113		117
Deposit insurance premiums and regulatory assessments	134		(16		)
Other	703		587
Total non-interest expense	6,985		7,238

Income before income taxes	2,120		3,595
Provision for income taxes	635		1,033
Net income	$	1,485	$	2,562

Basic earnings per share	$	0.20	$	0.34
Diluted earnings per share	$	0.20	$	0.33
Cash dividends per share	$	0.14	$	0.14

	Adjustable Rate												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		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	$	75,377	$	56,552	$	74,327	$	74,546	$	7,988	$	288,790	$	69,861	$	51,462	$	62,242	$	64,482	$	9,817	$	257,864
Multi-family	158,412		155,709		154,045		14,586		148		482,900		162,764		154,224		153,475		17,810		139		488,412
Commercial real estate	48,576		28,123		28,195		—		313		105,207		48,239		30,205		23,822		—		285		102,551
Construction	6,626		—		—		—		2,161		8,787		6,477		—		—		—		658		7,135
Other	—		—		—		—		142		142		—		—		—		—		141		141
Commercial business loans	535		—		—		—		388		923		500		—		—		—		382		882
Consumer loans	100		—		—		—		—		100		95		—		—		—		—		95
Total loans held for investment, gross	$	289,626	$	240,384	$	256,567	$	89,132	$	11,140	$	886,849	$	287,936	$	235,891	$	239,539	$	82,292	$	11,422	$	857,080

		June 30, 2020
(In Thousands)		Single- family		Multi- family		Commercial Real Estate		Construction		Other Mortgage		Commercial Business		Consumer		Total

Pass		$	289,942	$	488,126	$	105,235	$	6,098	$	143	$	445	$	94	$	890,083
Special Mention		3,120		3,777		—		1,703		—		—		—		8,600
Substandard		5,748		—		—		—		—		35		—		5,783
	Total loans held for investment, gross	$	298,810	$	491,903	$	105,235	$	7,801	$	143	$	480	$	94	$	904,466

		June 30, 2020
(In Thousands)		Current		30-89 Days Past Due		Non-Accrual⁽¹⁾		Total Loans Held for Investment, Gross

Mortgage loans:
	Single-family	$	293,326	$	219	$	5,265	$	298,810
	Multi-family	491,903		—		—		491,903
	Commercial real estate	105,235		—		—		105,235
	Construction	7,801		—		—		7,801
	Other	143		—		—		143
Commercial business loans		445		—		35		480
Consumer loans		94		—		—		94
	Total loans held for investment, gross	$	898,947	$	219	$	5,300	$	904,466

		Quarter Ended December 31, 2020
(In Thousands)		Single- family			Multi-family			Commercial Real Estate			Construction				Other		Commercial Business			Consumer				Total
Allowance for loan losses:
Allowance at beginning of period		$	2,671		$	4,490		$	1,162		$	116		$	3		$	42		$	6		$	8,490
Provision (recovery) for loan losses		26			50			(30		)	(6		)		—		(1		)	—			39
Recoveries		9			—			—			—				—		—			1			10
Charge-offs		—			—			—			—				—		—			(1		)	(1		)
	Allowance for loan losses, end of period	$	2,706		$	4,540		$	1,132		$	110		$	3		$	41		$	6		$	8,538

Allowance for loan losses:
Individually evaluated for impairment		$	570		$	—		$	—		$	—		$	—		$	—		$	—		$	570
Collectively evaluated for impairment		2,136			4,540			1,132			110				3		41			6			7,968
	Allowance for loan losses, end of period	$	2,706		$	4,540		$	1,132		$	110		$	3		$	41		$	6		$	8,538

Loans held for investment:
Individually evaluated for impairment		$	9,237		$	—		$	—		$	—		$	—		$	—		$	—		$	9,237
Collectively evaluated for impairment		248,627			488,412			102,551			7,135				141		882			95			847,843
	Total loans held for investment, gross	$	257,864		$	488,412		$	102,551		$	7,135		$	141		$	882		$	95		$	857,080
Allowance for loan losses as a percentage of gross loans held for investment			1.05	%		0.93	%		1.10	%		1.54	%		2.13	%		4.65	%		6.32	%		0.99	%

		Quarter Ended September 30, 2020
(In Thousands)		Single- family			Multi- family			Commercial Real Estate			Construction				Other		Commercial Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period		$	2,622		$	4,329		$	1,110		$	171		$	3		$	24		$	6		$	8,265
Provision (recovery) for loan losses		44			161			52			(55		)		—		18			—			220
Recoveries		5			—			—			—				—		—			—			5
Charge-offs		—			—			—			—				—		—			—			—
	Allowance for loan losses, end of period	$	2,671		$	4,490		$	1,162		$	116		$	3		$	42		$	6		$	8,490

Allowance for loan losses:
Individually evaluated for impairment		$	80		$	—		$	—		$	—		$	—		$	4		$	—		$	84
Collectively evaluated for impairment		2,591			4,490			1,162			116				3		38			6			8,406
	Allowance for loan losses, end of period	$	2,671		$	4,490		$	1,162		$	116		$	3		$	42		$	6		$	8,490

Loans held for investment:
Individually evaluated for impairment		$	2,957		$	—		$	—		$	—		$	—		$	31		$	—		$	2,988
Collectively evaluated for impairment		285,833			482,900			105,207			8,787				142		892			100			883,861
	Total loans held for investment, gross	$	288,790		$	482,900		$	105,207		$	8,787		$	142		$	923		$	100		$	886,849
Allowance for loan losses as a percentage of gross loans held for investment			0.92	%		0.93	%		1.10	%		1.32	%		2.11	%		4.55	%		6.00	%		0.95	%

		Quarter Ended December 31, 2019
(In Thousands)		Single- family			Multi-family			Commercial Real Estate			Construction				Commercial Business		Consumer			Total
Allowance for loan losses:
Allowance at beginning of period		$	2,234		$	3,507		$	1,085		$	74		$	20		$	9		$	6,929
Provision (recovery) for loan losses		(90		)	(5		)	(27		)	94				8		(2		)	(22		)
Recoveries		13			—			—			—				—		1			14
Charge-offs		—			—			—			—				—		—			—
	Allowance for loan losses, end of period	$	2,157		$	3,502		$	1,058		$	168		$	28		$	8		$	6,921

Allowance for loan losses:
Individually evaluated for impairment		$	46		$	—		$	—		$	—		$	6		$	—		$	52
Collectively evaluated for impairment		2,111			3,502			1,058			168				22		8			6,869
	Allowance for loan losses, end of period	$	2,157		$	3,502		$	1,058		$	168		$	28		$	8		$	6,921

Loans held for investment:
Individually evaluated for impairment		$	3,053		$	—		$	—		$	—		$	43		$	—		$	3,096
Collectively evaluated for impairment		344,291			479,151			107,613			6,914				535		140			938,644
	Total loans held for investment, gross	$	347,344		$	479,151		$	107,613		$	6,914		$	578		$	140		$	941,740
Allowance for loan losses as a percentage of gross loans held for investment			0.62	%		0.73	%		0.98	%		2.43	%		4.84	%		5.71	%		0.73	%

		Quarter Ended September 30, 2019																									Six Months Ended December 31, 2020
(In Thousands)	(In Thousands)	Single- family			Multi- family			Commercial Real Estate			Construction				Other		Commercial Business			Consumer			Total			(In Thousands)	Single- family			Multi-family			Commercial Real Estate			Construction				Other		Commercial Business			Consumer				Total
Allowance for loan losses:	Allowance for loan losses:																									Allowance for loan losses:
Allowance at beginning of period	Allowance at beginning of period	$	2,709		$	3,219		$	1,050		$	61		$	3		$	26		$	8		$	7,076		Allowance at beginning of period	$	2,622		$	4,329		$	1,110		$	171		$	3		$	24		$	6		$	8,265
Provision (recovery) for loan losses	Provision (recovery) for loan losses	(510		)	288			35			13				(3	)	(6		)	2			(181		)	Provision (recovery) for loan losses	70			211			22			(61		)		—		17			—			259
Recoveries	Recoveries	36			—			—			—				—		—			—			36			Recoveries	14			—			—			—				—		—			1			15
Charge-offs	Charge-offs	(1		)	—			—			—				—		—			(1		)	(2		)	Charge-offs	—			—			—			—				—		—			(1		)	(1		)
	Allowance for loan losses, end of period	$	2,234		$	3,507		$	1,085		$	74		$	—		$	20		$	9		$	6,929		Allowance for loan losses, end of period	$	2,706		$	4,540		$	1,132		$	110		$	3		$	41		$	6		$	8,538

Allowance for loan losses:	Allowance for loan losses:																									Allowance for loan losses:
Individually evaluated for impairment	Individually evaluated for impairment	$	47		$	—		$	—		$	—		$	—		$	7		$	—		$	54		Individually evaluated for impairment	$	570		$	—		$	—		$	—		$	—		$	—		$	—		$	570
Collectively evaluated for impairment	Collectively evaluated for impairment	2,187			3,507			1,085			74				—		13			9			6,875			Collectively evaluated for impairment	2,136			4,540			1,132			110				3		41			6			7,968
	Allowance for loan losses, end of period	$	2,234		$	3,507		$	1,085		$	74		$	—		$	20		$	9		$	6,929		Allowance for loan losses, end of period	$	2,706		$	4,540		$	1,132		$	110		$	3		$	41		$	6		$	8,538

Loans held for investment:	Loans held for investment:																									Loans held for investment:
Individually evaluated for impairment	Individually evaluated for impairment	$	3,766		$	—		$	—		$	1,139		$	—		$	45		$	—		$	4,950		Individually evaluated for impairment	$	9,237		$	—		$	—		$	—		$	—		$	—		$	—		$	9,237
Collectively evaluated for impairment	Collectively evaluated for impairment	324,566			479,597			110,652			4,773				—		323			144			920,055			Collectively evaluated for impairment	248,627			488,412			102,551			7,135				141		882			95			847,843
	Total loans held for investment, gross	$	328,332		$	479,597		$	110,652		$	5,912		$	—		$	368		$	144		$	925,005		Total loans held for investment, gross	$	257,864		$	488,412		$	102,551		$	7,135		$	141		$	882		$	95		$	857,080
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		0.68	%		0.73	%		0.98	%		1.25	%		—	%		5.43	%		6.25	%		0.74	%	Allowance for loan losses as a percentage of gross loans held for investment		1.05	%		0.93	%		1.10	%		1.54	%		2.13	%		4.65	%		6.32	%		0.99	%

		Six Months Ended December 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		$	2,709		$	3,219		$	1,050		$	61		$	3		$	26		$	8		$	7,076
Provision (recovery) for loan losses		(600		)	283			8			107				(3	)	2			—			(203		)
Recoveries		49			—			—			—				—		—			1			50
Charge-offs		(1		)	—			—			—				—		—			(1		)	(2		)
	Allowance for loan losses, end of period	$	2,157		$	3,502		$	1,058		$	168		$	—		$	28		$	8		$	6,921

Allowance for loan losses:
Individually evaluated for impairment		$	46		$	—		$	—		$	—		$	—		$	6		$	—		$	52
Collectively evaluated for impairment		2,111			3,502			1,058			168				—		22			8			6,869
	Allowance for loan losses, end of period	$	2,157		$	3,502		$	1,058		$	168		$	—		$	28		$	8		$	6,921

Loans held for investment:
Individually evaluated for impairment		$	3,053		$	—		$	—		$	—		$	—		$	43		$	—		$	3,096
Collectively evaluated for impairment		344,291			479,151			107,613			6,914				—		535			140			938,644
	Total loans held for investment, gross	$	347,344		$	479,151		$	107,613		$	6,914		$	—		$	578		$	140		$	941,740
Allowance for loan losses as a percentage of gross loans held for investment			0.62	%		0.73	%		0.98	%		2.43	%		—	%		4.84	%		5.71	%		0.73	%

			Quarter Ended September 30,										Quarter Ended December 31,
			2020				2019						2020				2019
			Average		Interest		Average		Interest				Average		Interest		Average		Interest
			Recorded		Income		Recorded		Income				Recorded		Income		Recorded		Income
(In Thousands)	(In Thousands)		Investment		Recognized		Investment		Recognized		(In Thousands)		Investment		Recognized		Investment		Recognized

Without related allowances:	Without related allowances:										Without related allowances:
	Mortgage loans:										Mortgage loans:
		Single-family	$	1,883	$	—	$	3,086	$	116		Single-family	$	1,570	$	—	$	2,874	$	21
		Construction	—		—		1,084		—				1,570		—		2,874		21
			1,883		—		4,170		116

With related allowances:	With related allowances:										With related allowances:
	Mortgage loans:										Mortgage loans:
		Single-family	3,510		40		1,198		12			Single-family	8,285		29		1,105		12
	Commercial business loans		32		1		46		1		Commercial business loans		19		—		44		1
			3,542		41		1,244		13				8,304		29		1,149		13

	Total		$	5,425	$	41	$	5,414	$	129	Total		$	9,874	$	29	$	4,023	$	34

			Six Months Ended December 31,
			2020				2019
			Average		Interest		Average		Interest
			Recorded		Income		Recorded		Income
(In Thousands)			Investment		Recognized		Investment		Recognized

Without related allowances:
	Mortgage loans:
		Single-family	$	1,726	$	—	$	2,980	$	111
		Construction	—		—		542		20
			1,726		—		3,522		131

With related allowances:
	Mortgage loans:
		Single-family	5,897		69		1,151		24
	Commercial business loans		26		1		45		2
			5,923		70		1,196		26

	Total		$	7,649	$	70	$	4,718	$	157

	Forbearance Granted				Forbearance Completed					Forbearance Remaining				Forbearance Granted				Forbearance Completed ⁽¹⁾					Forbearance Remaining
(Dollars In Thousands)	Number of Loans		Amount		Number of Loans		Amount			Number of Loans		Amount		Number of Loans		Amount		Number of Loans		Amount			Number of Loans		Amount
Single-family loans		57	$	23,036		13		$	5,872		44	$	17,164		58	$	23,239		52		$	21,404		6	$	1,835
Multi-family loans		4		2,043		3			1,588		1		455		5		2,346		3			1,583		2		763
Commercial real estate loans		2		1,069		2			1,069		—		—		2		1,066		2			1,066		—		—
Total loan forbearance		63	$	26,148		18		$	8,529		45	$	17,619		65	$	26,651		57		$	24,053		8	$	2,598

Commitments	September 30, 2020		June 30, 2020		December 31, 2020		June 30, 2020
(In Thousands)

Undisbursed loan funds – Construction loans	$	3,436	$	4,029	$	2,736	$	4,029
Undisbursed lines of credit – Commercial business loans	485		935		520		935
Undisbursed lines of credit – Consumer loans	443		448		422		448
Commitments to extend credit on loans to be held for investment	7,690		13,579		12,281		13,579
Total	$	12,054	$	18,991	$	15,959	$	18,991

(In Thousands)	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Net Unrealized Loss			Aggregate Fair Value		Aggregate Unpaid Principal Balance		Net Unrealized Loss
As of September 30, 2020:
As of December 31, 2020:
Loans held for investment, at fair value	$	2,240	$	2,354	$	(114	)	$	1,972	$	2,097	$	(125	)

As of June 30, 2020:
Loans held for investment, at fair value	$	2,258	$	2,369	$	(111	)	$	2,258	$	2,369	$	(111	)

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 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.

	Fair Value Measurement at September 30, 2020 Using:								Fair Value Measurement at December 31, 2020 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	$	—	$	2,726	$	—	$	2,726	$	—	$	2,551	$	—	$	2,551
U.S. government sponsored enterprise MBS	—		1,506		—		1,506		—		1,434		—		1,434
Private issue CMO	—		—		184		184		—		—		173		173
Investment securities - available for sale	—		4,232		184		4,416		—		3,985		173		4,158

Loans held for investment, at fair value	—		—		2,240		2,240		—		—		1,972		1,972
Interest-only strips	—		—		13		13		—		—		12		12
Total assets	$	—	$	4,232	$	2,437	$	6,669	$	—	$	3,985	$	2,157	$	6,142

Liabilities	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total liabilities	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

	Fair Value Measurement at June 30, 2020 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	2,943	$	—	$	2,943
U.S. government sponsored enterprise MBS	—		1,577		—		1,577
Private issue CMO	—		—		197		197
Investment securities - available for sale	—		4,520		197		4,717

Loans held for investment, at fair value	—		—		2,258		2,258
Interest-only strips	—		—		14		14
Total assets	$	—	$	4,520	$	2,469	$	6,989

Liabilities:	$	—	$	—	$	—	$	—
Total liabilities	$	—	$	—	$	—	$	—

	For the Quarter Ended September 30, 2020												For the Quarter Ended December 31, 2020
	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			Total			Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Total
Beginning balance at June 30, 2020	$	197		$	2,258		$	14		$	2,469
Beginning balance at September 30, 2020													$	184		$	2,240		$	13		$	2,437
Total gains or losses (realized/unrealized):
Included in earnings	—			(4		)	—			(4		)	—			(11		)	—			(11		)
Included in other comprehensive loss	4			—			(1		)	(3		)	2			—			(1		)	1
Purchases	—			—			—			—			—			—			—			—
Issuances	—			—			—			—			—			—			—			—
Settlements	(17		)	(14		)	—			(31		)	(13		)	(257		)	—			(270		)
Transfers in and/or out of Level 3	—			—			—			—			—			—			—			—
Ending balance at September 30, 2020	$	184		$	2,240		$	13		$	2,437
Ending balance at December 31, 2020													$	173		$	1,972		$	12		$	2,157

	For the Quarter Ended December 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			Total
Beginning balance at September 30, 2019	$	253		$	4,386		$	14		$	4,653
Total gains or losses (realized/unrealized):
Included in earnings	—			31			—			31
Included in other comprehensive loss	(3		)	—			(1		)	(4		)
Purchases	—			—			—			—
Issuances	—			—			—			—
Settlements	(19		)	(244		)	—			(263		)
Transfers in and/or out of Level 3	—			—			—			—
Ending balance at December 31, 2019	$	231		$	4,173		$	13		$	4,417

	For the Quarter Ended September 30, 2019												For the Six Months Ended December 31, 2020
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)												Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
	Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Total
Beginning balance at June 30, 2019	$	269		$	5,094		$	16		$	5,379
(In Thousands)													Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Total
Beginning balance at June 30, 2020													$	197		$	2,258		$	14		$	2,469
Total gains or losses (realized/unrealized):
Included in earnings	—			(18		)	—			(18		)	—			(15		)	—			(15		)
Included in other comprehensive loss	—			—			(2		)	(2		)	6			—			(2		)	4
Purchases	—			—			—			—			—			—			—			—
Issuances	—			—			—			—			—			—			—			—
Settlements	(16		)	(690		)	—			(706		)	(30		)	(271		)	—			(301		)
Transfers in and/or out of Level 3	—			—			—			—			—			—			—			—
Ending balance at September 30, 2019	$	253		$	4,386		$	14		$	4,653
Ending balance at December 31, 2020													$	173		$	1,972		$	12		$	2,157

	June 30, 2020
(In Thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Investment securities - held to maturity	$	118,627	$	121,201	$	—	$	121,201	$	—
Loans held for investment, not recorded at fair value	$	900,538	$	902,074	$	—	$	—	$	902,074
FHLB – San Francisco stock	$	7,970	$	7,970	$	—	$	7,970	$	—

Financial liabilities:
Deposits	$	892,969	$	864,239	$	—	$	—	$	864,239
Borrowings	$	141,047	$	149,976	$	—	$	—	$	149,976

	For the Quarter Ended September 30, 2020									For the Quarter Ended December 31, 2020
	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 June 30, 2020	$	94		$	10		$	104
Beginning balance at September 30, 2020										$	90		$	9	$	99

Other comprehensive loss before reclassifications	(4		)	(1		)	(5		)	(19		)	—		(19		)
Amount reclassified from accumulated other comprehensive income	—			—			—			—			—		—
Net other comprehensive loss	(4		)	(1		)	(5		)	(19		)	—		(19		)

Ending balance at September 30, 2020	$	90		$	9		$	99
Ending balance at December 31, 2020										$	71		$	9	$	80

(In Thousands)	At September 30, 2020		At June 30, 2020		At December 31, 2020		At June 30, 2020
Condensed Consolidated Statements of Condition:
Premises and equipment - Operating lease right of use assets	$	2,474	$	2,525	$	2,393	$	2,525
Accounts payable, accrued interest and other liabilities – Operating lease liabilities	$	2,573	$	2,640	$	2,478	$	2,640

(In Thousands)	Three Months Ended September 30, 2020		Three Months Ended September 30, 2019
Condensed Consolidated Statements of Cash Flows:
Operating cash flows from operating leases, net⁽¹⁾	$	226	$	284

		Amount⁽¹⁾				Amount⁽¹⁾
Year Ending June 30,	Year Ending June 30,	(In Thousands)				(In Thousands)
2021	2021	$	633			$	455
2022	2022	707				778
2023	2023	469				469
2024	2024	359				359
2025	2025	255				255
Thereafter	Thereafter	276				275
Total contract lease payments	Total contract lease payments	$	2,699			$	2,591

Total liability to make lease payments	Total liability to make lease payments	$	2,573			$	2,478
Difference in undiscounted and discounted future lease payments	Difference in undiscounted and discounted future lease payments	$	126			$	113
Weighted average discount rate	Weighted average discount rate			2.06	%	Weighted average discount rate		2.00	%
Weighted average remaining lease term (years)	Weighted average remaining lease term (years)			4.3		Weighted average remaining lease term (years)		4.1

⁽¹⁾ Contractual base rents do not include property taxes and other operating expenses due under respective lease agreements.	⁽¹⁾ Contractual base rents do not include property taxes and other operating expenses due under respective lease agreements.					⁽¹⁾ Contractual base rents do not include property taxes and other operating expenses due under respective lease agreements.

(Dollars In Thousands)	Number of Loans		Amount		% of Total Loans		Weighted Avg. LTV⁽¹⁾			Weighted Avg. FICO⁽²⁾		Weighted Avg. Debt Coverage Ratio⁽³⁾			Weighted Avg. Forbearance Period Granted⁽⁴⁾		Number of Loans		Amount		% of Total Loans		Weighted Avg. LTV ⁽¹⁾			Weighted Avg. FICO ⁽²⁾		Weighted Avg. Debt Coverage Ratio ⁽³⁾			Weighted Avg. Forbearance Period Granted ⁽⁴⁾
Single-family loans		44	$	17,164	1.94	%		62	%		737		N/A			6.0		6	$	1,835	0.21	%		75	%		725		N/A			6.0
Multi-family loans		1		455	0.05	%		60	%		687		1.32	x		3.0		2		763	0.09	%		56	%		711		1.26	x		5.0
Total loans in forbearance		45	$	17,619	1.99	%		62	%		733		1.32	x		5.9		8	$	2,598	0.30	%		69	%		721		1.26	x		5.7