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Income Taxes
 12 Months Ended
Jun. 30, 2025
Income Taxes  
Income Taxes

Note 8: Income Taxes

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ASC 740, “Income Taxes,” requires the affirmative evaluation that it is more likely than not, based on the technical merits of a tax position, that an enterprise is entitled to economic benefits resulting from positions taken in income tax returns. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements. Management has determined that there were no unrecognized tax benefits to be reported in the Corporation’s consolidated financial statements for the fiscal years ended June 30, 2025 and 2024.

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Under GAAP, the Corporation uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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

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Under the asset and liability method of accounting for income taxes, deferred tax assets are recognized for deductible temporary differences and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

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The provision for income taxes for the years indicated consisted of the following:

​

​

​

​

​

​

​

​

​

​

Year Ended June 30, 

(In Thousands)

    

2025

    

2024

​

​

​

​

​

​

​

Current:

 

​

  

 

​

  

Federal

​

$

709

​

$

2,161

State

​

 

479

​

 

1,278

​

​

 

1,188

​

 

3,439

Deferred:

​

 

  

​

 

  

Federal

​

 

948

​

 

(238)

State

​

 

482

​

 

(165)

​

​

 

1,430

​

 

(403)

Provision for income taxes

​

$

2,618

​

$

3,036

​

The Corporation’s tax expense from non-qualified stock-based compensation recognized in the Consolidated Statements of Operations in connection with the adoption of ASU 2016-09 for fiscal 2025 and 2024 was $2,000 and $0, respectively.

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The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to net income before income taxes as a result of the following differences for the years indicated:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Year Ended June 30, 

​

​

2025

​

2024

​

(In Thousands)

    

Amount

    

Tax Rate

    

Amount

    

Tax Rate

    

​

​

​

​

​

​

​

​

​

​

​

​

Federal income tax at statutory rate

​

$

1,863

 

21.00

%  

$

2,181

 

21.00

%  

State income tax, net of federal income tax benefit

​

 

759

 

8.55

%  

 

880

 

8.48

%  

Changes in taxes resulting from:

​

 

  

 

​

​

 

  

 

​

​

Bank-owned life insurance

​

 

(39)

 

(0.44)

%  

 

(39)

 

(0.38)

%  

Non-deductible expenses

​

 

28

 

0.31

%  

 

12

 

0.12

%  

Non-deductible stock-based compensation

​

 

2

 

0.02

%  

 

—

 

—

%  

Shortfall on stock-based compensation

​

 

1

 

0.02

%  

 

—

 

—

%  

Return to provision adjustment

​

​

2

​

0.03

%  

​

(1)

​

(0.01)

%  

Other

​

 

2

 

0.02

%  

 

3

 

0.02

%  

Effective income tax

​

$

2,618

 

29.51

%  

$

3,036

 

29.23

%  

​

Deferred tax (liabilities) assets at June 30, 2025 and 2024 by jurisdiction were as follows:

​

​

​

​

​

​

​

​

​

​

June 30, 

(In Thousands)

    

2025

    

2024

​

​

​

​

​

​

​

Deferred taxes - federal

​

$

(551)

​

$

404

Deferred taxes - state

​

 

(281)

​

 

202

Total deferred tax (liabilities) assets

​

$

(832)

​

$

606

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Net deferred tax (liabilities) assets at June 30, 2025 and 2024 were comprised of the following:

​

​

​

​

​

​

​

​

​

​

June 30, 

(In Thousands)

    

2025

    

2024

​

​

​

​

​

​

​

Loss reserves

​

$

2,163

​

$

2,387

Non-accrued interest

​

 

146

​

 

175

Deferred compensation

​

 

1,520

​

 

2,388

Accrued vacation

​

 

197

​

 

187

Depreciation

​

 

239

​

 

174

State tax

​

 

179

​

 

203

Unrealized loss on investment securities

​

 

—

​

 

4

Lease liability

​

​

536

​

​

448

Other

​

 

258

​

 

208

Total deferred tax assets

​

 

5,238

​

 

6,174

​

​

​

​

​

​

​

FHLB - San Francisco stock dividends

​

 

(645)

​

 

(645)

Prepaid expenses

​

 

(66)

​

 

(39)

Unrealized gain on investment securities

​

 

(6)

​

 

—

Unrealized gain on interest-only strips

​

 

(2)

​

 

(3)

Unrealized gain on other equity investments

​

​

(232)

​

​

—

Right-of-use asset

​

​

(526)

​

​

(432)

Deferred loan costs, net

​

 

(4,593)

​

 

(4,449)

Total deferred tax liabilities

​

 

(6,070)

​

 

(5,568)

Net deferred tax (liabilities) assets

​

$

(832)

​

$

606

​

The net deferred tax assets were included in prepaid expenses and other assets, while the net deferred tax liabilities were included in accounts payable, accrued interest and other liabilities in the Consolidated Statements of Financial Condition. The Corporation analyzes the deferred tax assets to determine whether a valuation allowance is required based on the more-likely-than-not criteria that such assets will be realized principally through future taxable income or expense. This criteria takes into account the actual earnings and the estimates of future profitability. The Corporation may carryback net federal tax losses to the preceding five taxable years and forward to the succeeding 20 taxable years. At June 30, 2025 and 2024, the Corporation had no federal and state net tax loss carryforwards. Based on management’s consideration of historical and anticipated future income before income taxes, as well as the reversal period for the items giving rise to the deferred tax assets and liabilities, a valuation allowance was not considered necessary at June 30, 2025 and 2024 and management believes it is more likely than not the Corporation will realize its deferred tax assets (liabilities).

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Retained earnings at June 30, 2025 and 2024 include approximately $9.0 million (pre-1988 bad debt reserve for tax purposes) for which federal income tax of $3.1 million has not been provided. If the amounts that qualify as deductions for federal income tax purposes are later used for purposes other than for bad debt losses, including distribution in liquidation, they will be subject to federal income tax at the then-current corporate tax rate. If those amounts are not so used, they will not be subject to tax even in the event the Bank were to convert its charter from a thrift to a bank.

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The Corporation files income tax returns for the United States and California jurisdictions. The Internal Revenue Service has audited the Bank’s income tax returns through 1996 and the California Franchise Tax Board (“CFTB”) has audited the

Bank through 1990. Also, the Internal Revenue Service completed a review of the Corporation’s income tax returns for fiscal 2006 and 2007; and the CFTB completed a review of the Corporation’s income tax returns for fiscal 2009 and 2010. Fiscal years 2023 and thereafter remain subject to federal examination, while the California state tax returns for fiscal years 2022 and thereafter are subject to examination by state taxing authorities. In April 2025, the CFTB initiated a tax examination of the Corporation’s returns for fiscal years 2021 and 2022. As of June 30, 2025, all requested documents have been provided to the CFTB, and the Corporation is currently in discussions regarding the potential outcome of this examination. While the Corporation believes that its tax positions are fully supported, any adjustment resulting from ongoing audits or reviews could have a material impact on its financial position, results of operations, or cash flows. The Corporation continues to evaluate the potential outcomes of the audits and related exposure to uncertain tax positions.

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It is the Corporation’s policy to record any penalties or interest charges arising from federal or state taxes as a component of income tax expense. For the fiscal years ended June 30, 2025 and 2024, there were no tax penalties and no interest charges arising from federal or state taxes.