Note 8: Income Taxes

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ASC 740, “Income Taxes,” requires that an enterprise recognize the benefit of a tax position taken or expected to be taken in a tax return only when it is more likely than not, based on the technical merits of the position, that the position will be sustained upon examination. 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 required to be recognized or disclosed in the Corporation’s consolidated financial statements for the fiscal years ended June 30, 2026 and 2025.

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In the fiscal year ended June 30, 2026, the Corporation adopted ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires PBEs to annually (a) disclose specific categories in the rate

reconciliation and (b) provide additional information for reconciling items that meet a quantitative threshold of equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate.

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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 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:

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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:

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Cash paid for income taxes for the fiscal years ended June 30, 2026 and 2025 were as follows:

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Net deferred tax liabilities at June 30, 2026 and 2025 by jurisdiction were as follows:

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Net deferred tax liabilities at June 30, 2026 and 2025 were comprised of the following:

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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 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 through future taxable income. This analysis considers historical earnings and estimates of future profitability. The Corporation may carry back net federal tax losses to the preceding five taxable years and carry forward such losses to the succeeding 20 taxable years. At June 30, 2026 and 2025, 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, 2026 and 2025.

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Retained earnings at June 30, 2026 and 2025 include approximately $9.0 million related to pre 1988 bad debt reserve for tax purposes for which federal income tax of $1.9 million has not been provided. These amounts will only become subject to federal income tax at the then-current corporate tax rate if they are used for purposes other than for bad debt losses, including distribution in liquidation of the Bank. If those amounts are not so used, they will not be subject to tax even though the Bank has converted its charter from a thrift to a bank.

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The Corporation files income tax returns in the United States and California jurisdictions. 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 California Franchise Tax Board (“CFTB”) initiated a tax examination of the Corporation’s returns for fiscal years 2021 and 2022. As of June 30, 2026, all requested documents have been provided to the CFTB. On August 19, 2026, we received a notice from the CFTB that the audits of the June 30, 2022 and June 30, 2021 California tax returns have been completed resulting in no change to our tax liability. The CFTB audits have been closed.

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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, 2026 and 2025, there were no tax penalties and no interest charges arising from federal or state taxes.