What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-09 · 155 added, 143 removed, 974 unchanged (23% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2022 and September 30, 2021

June 30, 2022 and September 30, 2021

(Dollars in thousands, except per share amounts)

39 unchanged sentences

CONSOLIDATED BALANCE SHEETS (continued)

March 31, 2022 and September 30, 2021

June 30, 2022 and September 30, 2021

(Dollars in thousands, except per share amounts)

6 unchanged sentences

50,000,000 shares authorized;

8,305,826 shares issued and outstanding - March 31, 2022 8,355,469 shares issued and outstanding - September 30, 2021

8,249,448 shares issued and outstanding - June 30, 2022 8,355,469 shares issued and outstanding - September 30, 2021

39,585 42,673

8 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

For the three and six months ended March 31, 2022 and 2021

For the three and nine months ended June 30, 2022 and 2021

(Dollars in thousands, except per share amounts)

Three Months Ended March 31, Six Months Ended

Three Months Ended June 30, Nine Months Ended

2022 2021 2022 2021

19 unchanged sentences

Escrow fees 41 64 164 243

Valuation recovery on loan servicing rights, net — 438 119 202

Valuation recovery (allowance) on loan servicing rights, net — ( 179 ) 119 23

Other, net 250 307 687 921

Total non-interest income 3,083 4,886 6,525 9,445

Total non-interest income, net 3,102 4,266 9,627 13,711

See notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (continued)

For the three and six months ended March 31, 2022 and 2021

For the three and nine months ended June 30, 2022 and 2021

(Dollars in thousands, except per share amounts)

Three Months Ended March 31, Six Months Ended

Three Months Ended June 30, Nine Months Ended

2022 2021 2022 2021

29 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three and six months ended March 31, 2022 and 2021

For the three and nine months ended June 30, 2022 and 2021

(Dollars in thousands)

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

12 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the three and six months ended March 31, 2022 and 2021

For the three and nine months ended June 30, 2022 and 2021

(Dollars in thousands, except per share amounts)

4 unchanged sentences

Earnings Total

Balance, December 31, 2020 8,317,793 $ 42,480 $ 150,801 $ 44 $ 193,325

Balance, March 31, 2021 8,361,457 $ 42,949 $ 155,473 $ 121 $ 198,543

Net income — — 7,024 — 7,024

Other comprehensive income — — — 8 8

Repurchase of common stock ( 16,688 ) ( 469 ) — — ( 469 )

Exercise of stock options 9,200 97 — — 97

Common stock dividends ($ 0.21 per common share)

— — ( 1,758 ) — ( 1,758 )

Stock option compensation expense — 47 — — 47

Balance, June 30, 2021 8,353,969 $ 42,624 $ 160,739 $ 129 $ 203,492

Balance, March 31, 2022 8,305,826 $ 40,988 $ 171,388 $ ( 107 ) $ 212,269

Balance, December 31, 2021 8,348,821 $ 42,436 $ 167,897 $ 42 $ 210,375

Net income — — 5,738 — 5,738

3 unchanged sentences

Common stock dividends ($ 0.22 per common share)

— — ( 1,827 ) — ( 1,827 )

Stock option compensation expense — 72 — — 72

Balance, March 31, 2022 8,305,826 $ 40,988 $ 171,388 $ ( 107 ) $ 212,269

Balance, June 30, 2022 8,249,448 $ 39,585 $ 175,299 $ ( 565 ) $ 214,319

Common Stock Accumulated

9 unchanged sentences

Common stock dividends ($ 0.72 per common share)

— — ( 5,999 ) — ( 5,999 )

Stock option compensation expense — 139 — — 139

Balance, March 31, 2021 8,361,457 $ 42,949 $ 155,473 $ 121 $ 198,543

Balance, June 30, 2021 8,353,969 $ 42,624 $ 160,739 $ 129 $ 203,492

Balance, September 30, 2021 8,355,469 $ 42,673 $ 164,167 $ 59 $ 206,899

4 unchanged sentences

Common stock dividends ($ 0.65 per common share)

— — ( 5,418 ) — ( 5,418 )

Stock option compensation expense — 204 — — 204

Balance, March 31, 2022 8,305,826 $ 40,988 $ 171,388 $ ( 107 ) $ 212,269

Balance, June 30, 2022 8,249,448 $ 39,585 $ 175,299 $ ( 565 ) $ 214,319

See notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended March 31, 2022 and 2021

For the nine months ended June 30, 2022 and 2021

(Dollars in thousands)

Six Months Ended March 31,

Nine Months Ended June 30,

Cash flows from operating activities

8 unchanged sentences

Change in fair value of investments in equity securities 83 17

Amortization (accretion) of discounts and premiums on securities 176 ( 16 )

Amortization of discounts and premiums on securities 123 49

Gain on sales of OREO and other repossessed assets, net ( 1 ) ( 92 )

5 unchanged sentences

BOLI net earnings ( 457 ) ( 445 )

Increase (decrease) in deferred loan origination fees ( 1,342 ) 563

Decrease in deferred loan origination fees ( 1,192 ) ( 97 )

Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses ( 1,521 ) ( 1,552 )

1 unchanged sentence

Cash flows from investing activities

Net (increase) decrease in CDs held for investment ( 137 ) 25,871

Net decrease in CDs held for investment 4,594 34,327

Purchase of investment securities held to maturity ( 167,671 ) ( 33,797 )

3 unchanged sentences

Purchase of FHLB stock ( 91 ) ( 181 )

Increase in loans receivable, net ( 64,193 ) ( 17,164 )

Decrease (increase) in loans receivable, net ( 118,167 ) 12,698

Purchases of premises and equipment ( 822 ) ( 658 )

Proceeds from sales of OREO and other repossessed assets 158 985

Net cash used in investing activities ( 172,768 ) ( 10,949 )

Net cash provided by (used in) investing activities ( 256,285 ) 13,213

S ee notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the six months ended March 31, 2022 and 2021

For the nine months ended June 30, 2022 and 2021

(Dollars in thousands)

Six Months Ended March 31,

Nine Months Ended June 30,

Cash flows from financing activities

25 unchanged sentences

The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021 (“2021 Form 10-K”).

The unaudited consolidated results of operations for the six months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2022.

The unaudited consolidated results of operations for the nine months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2022.

(b) Principles of Consolidation:

3 unchanged sentences

The Company has one reportable operating segment which is defined as community banking in western Washington under the operating name, "Timberland Bank."

(d) The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, as of the date of the consolidated balance sheets, and the reported amounts of income and expenses during the reporting period.

(d) The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, as of the date of the consolidated balance sheets, and the reported amounts of income and expenses during the reporting period.

Actual results could differ from those estimates.

(e) Certain prior period amounts have been reclassified to conform to the March 31, 2022 presentation with no change to previously reported net income or total shareholders’ equity.

(e) Certain prior period amounts have been reclassified to conform to the June 30, 2022 presentation with no change to previously reported net income or total shareholders’ equity.

(2) INVESTMENT SECURITIES

Held to maturity and available for sale investment securities have been classified according to management’s intent and were as follows as of March 31, 2022 and September 30, 2021 (dollars in thousands):

Held to maturity and available for sale investment securities have been classified according to management’s intent and were as follows as of June 30, 2022 and September 30, 2021 (dollars in thousands):

Losses Estimated

March 31, 2022

June 30, 2022

Held to maturity

20 unchanged sentences

Total $ 63,080 $ 210 $ ( 114 ) $ 63,176

Held to maturity and available for sale investment securities with unrealized losses were as follows as of March 31, 2022 (dollars in thousands):

Held to maturity and available for sale investment securities with unrealized losses were as follows as of June 30, 2022 (dollars in thousands):

Less Than 12 Months 12 Months or Longer Total

8 unchanged sentences

475 ( 25 ) 1 — — — 475 ( 25 )

$ 193,021 $ ( 11,921 ) 59 $ 9,923 $ ( 245 ) 7 $ 202,944 $ ( 12,166 )

Available for sale

20 unchanged sentences

The Company has the ability and the intent to hold the investments until the fair value recovers.

Further, as of March 31, 2022, management does not have the intent to sell any of the securities classified as available for sale for which the estimated fair value is below the recorded value and believes that it is more likely than not that the Company will not have to sell such securities before a recovery of cost (or recorded value if previously written down).

Further, as of June 30, 2022, management does not have the intent to sell any of the securities classified as available for sale for which the estimated fair value is below the recorded value and believes that it is more likely than not that the Company will not have to sell such securities before a recovery of cost (or recorded value if previously written down).

The Company bifurcates OTTI into (1) amounts related to credit losses which are recognized through earnings and (2) amounts related to all other factors which are recognized as a component of other comprehensive income (loss).

2 unchanged sentences

Significant judgment by management is required in this analysis that includes, but is not limited to, assumptions regarding the collectability of principal and interest, net of related expenses, on the underlying loans.

The following table presents a summary of the significant inputs utilized to measure management’s estimates of the credit loss component on OTTI securities as of March 31, 2022 and 2021:

The following table presents a summary of the significant inputs utilized to measure management’s estimates of the credit loss component on OTTI securities as of June 30, 2022 and 2021:

Range Weighted

Minimum Maximum Average

March 31, 2022

June 30, 2022

Constant prepayment rate 6.00 % 15.00 % 10.15 %

1 unchanged sentence

Loss severity rate — % 7.85 % 3.39 %

March 31, 2021

June 30, 2021

Constant prepayment rate 6.00 % 15.00 % 12.84 %

1 unchanged sentence

Loss severity rate — % 14.53 % 4.82 %

The following table presents the OTTI recoveries for the three and six months ended March 31, 2022 and 2021 (dollars in thousands):

The following table presents the OTTI recoveries for the three and nine months ended June 30, 2022 and 2021 (dollars in thousands):

Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021

June 30, 2022 Three Months Ended

June 30, 2021

Maturity Held To

1 unchanged sentence

Net recoveries recognized in earnings (1) $ 5 $ 6

Six Months Ended

March 31, 2022 Six Months Ended

March 31, 2021

Nine Months Ended

June 30, 2022 Nine Months Ended

June 30, 2021

Maturity Held To

3 unchanged sentences

(1) Represents OTTI related to credit losses.

The following table presents a roll forward of the credit loss component of held to maturity and available for sale debt securities that have been written down for OTTI with the credit loss component recognized in earnings for the six months ended March 31, 2022 and 2021 (dollars in thousands):

Six Months Ended

The following table presents a roll forward of the credit loss component of held to maturity and available for sale debt securities that have been written down for OTTI with the credit loss component recognized in earnings for the nine months ended June 30, 2022 and 2021 (dollars in thousands):

Nine Months Ended

Beginning balance of credit loss $ 853 $ 885

4 unchanged sentences

Ending balance of credit loss $ 842 $ 866

During the six months ended March 31, 2022, the Company recorded a $ 1,000 net realized gain on 14 held to maturity investment securities.

During the six months ended March 31, 2021, the Company recorded a $ 5,000 net realized loss (as a result of investment securities being deemed worthless) on 13 held to maturity investment securities, all of which had been recognized previously as a credit loss.

The recorded amount of investment securities pledged as collateral for public fund deposits, federal treasury tax and loan deposits, FHLB collateral and other non-profit organization deposits totaled $ 82.57 million and $ 97.60 million at March 31, 2022 and September 30, 2021, respectively.

The contractual maturities of debt securities at March 31, 2022 were as follows (dollars in thousands).

During the nine months ended June 30, 2022, the Company recorded a $ 2,000 net realized gain on 16 held to maturity investment securities.

During the nine months ended June 30, 2021, the Company recorded a $ 5,000 net realized loss (as a result of investment securities being deemed worthless) on 12 held to maturity investment securities, all of which had been recognized previously as a credit loss.

The recorded amount of investment securities pledged as collateral for public fund deposits, federal treasury tax and loan deposits, FHLB collateral and other non-profit organization deposits totaled $ 114.81 million and $ 97.60 million at June 30, 2022 and September 30, 2021, respectively.

The contractual maturities of debt securities at June 30, 2022 were as follows (dollars in thousands).

Expected maturities may differ from scheduled maturities due to the prepayment of principal or call provisions.

3 unchanged sentences

Cost Estimated

Due within one year $ 2,008 $ 1,970 $ — $ —

Due after one year to five years 135,710 130,419 3,524 3,512

27 unchanged sentences

Any change in these indicators could have a significant negative impact on the Company's financial condition, impact the goodwill impairment analysis or cause the Company to perform a goodwill impairment analysis more frequently than once per year.

As of March 31, 2022, management believes that there have been no events or changes in the circumstances since May 31, 2021 that would indicate a potential impairment of goodwill.

As of June 30, 2022, management believes that there have been no events or changes in the circumstances since May 31, 2022 that would indicate a potential impairment of goodwill.

No assurances can be given, however, that the Company will not record an impairment loss on goodwill in the future.

If adverse economic conditions or decreases in the Company's stock price and market capitalization as a result of the novel coronavirus of 2019 ("COVID-19") pandemic were to be deemed to be other than temporary, it may significantly affect the fair value of the Company's goodwill and may trigger impairment charges.

If adverse economic conditions or any decreases in the Company's stock price and market capitalization as a result of the novel coronavirus of 2019 ("COVID-19") pandemic were sustained in the future other than temporary, it may significantly affect the fair value of the Company's goodwill and may trigger impairment charges.

Any impairment charge could have a material adverse effect on the Company's results of operations and financial condition.

The recorded amount of goodwill at March 31, 2022 and September 30, 2021 remained unchanged at $ 15.13 million.

The recorded amount of goodwill at June 30, 2022 and September 30, 2021 remained unchanged at $ 15.13 million.

CDI represents the future economic benefit of the potential cost savings from acquiring core deposits as part of a business combination compared to the cost of alternative funding sources.

1 unchanged sentence

CDI is evaluated for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable, with any changes in estimated useful life accounted for prospectively over the revised remaining life.

As of March 31, 2022, management believes that there have been no events or changes in the circumstances that would indicate a potential impairment of CDI.

As of June 30, 2022, management believes that there have been no events or changes in the circumstances that would indicate a potential impairment of CDI.

(4) LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Loans receivable by portfolio segment consisted of the following at March 31, 2022 and September 30, 2021 (dollars in thousands):

Loans receivable by portfolio segment consisted of the following at June 30, 2022 and September 30, 2021 (dollars in thousands):

2022 September 30,

26 unchanged sentences

_____________________________

(1) Does not include one- to four-family loans held for sale totaling $ 2,772 and $ 3,217 at March 31, 2022 and September 30, 2021, respectively.

Loans receivable at March 31, 2022 and September 30, 2021 are reported net of unamortized discounts totaling $ 358,000 and $ 449,000 , respectively.

(1) Does not include one- to four-family loans held for sale totaling $ 700 and $ 3,217 at June 30, 2022 and September 30, 2021, respectively.

Loans receivable at June 30, 2022 and September 30, 2021 are reported net of unamortized discounts totaling $ 295,000 and $ 449,000 , respectively.

Allowance for Loan Losses

The following tables set forth information for the three and six months ended March 31, 2022 and 2021 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):

Three Months Ended March 31, 2022

The following tables set forth information for the three and nine months ended June 30, 2022 and 2021 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):

Three Months Ended June 30, 2022

Allowance Provision for

16 unchanged sentences

Total $ 13,433 $ — $ ( 8 ) $ 8 $ 13,433

Six Months Ended March 31, 2022

Nine Months Ended June 30, 2022

Allowance Provision for

16 unchanged sentences

Total $ 13,469 $ — $ ( 59 ) $ 23 $ 13,433

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Allowance Provision for

16 unchanged sentences

Total $ 13,434 $ — $ — $ 35 $ 13,469

Six Months Ended March 31, 2021

Nine Months Ended June 30, 2021

Allowance Provision for

16 unchanged sentences

Total $ 13,414 $ — $ ( 3 ) $ 58 $ 13,469

The following tables present information on the loans evaluated individually and collectively for impairment in the allowance for loan losses by portfolio segment at March 31, 2022 and September 30, 2021 (dollars in thousands):

The following tables present information on the loans evaluated individually and collectively for impairment in the allowance for loan losses by portfolio segment at June 30, 2022 and September 30, 2021 (dollars in thousands):

Allowance for Loan Losses Recorded Investment in Loans

7 unchanged sentences

Impairment Total

March 31, 2022

June 30, 2022

Mortgage loans:

10 unchanged sentences

Home equity and second mortgage

— 434 434 402 32,419 32,821

Other — 51 51 4 2,541 2,545

22 unchanged sentences

Total $ 247 $ 13,222 $ 13,469 $ 5,224 $ 981,842 $ 987,066

The following tables present an analysis of loans by aging category and portfolio segment at March 31, 2022 and September 30, 2021 (dollars in thousands):

The following tables present an analysis of loans by aging category and portfolio segment at June 30, 2022 and September 30, 2021 (dollars in thousands):

Past Due 60-89

3 unchanged sentences

Past Due Current Total

March 31, 2022

June 30, 2022

Mortgage loans:

51 unchanged sentences

Loans in this classification have the weaknesses of substandard loans with the additional characteristic that the weaknesses make the collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss.

At March 31, 2022 and September 30, 2021, there were no loans classified as doubtful.

At June 30, 2022 and September 30, 2021, there were no loans classified as doubtful.

Loans in this classification are considered uncollectible and of such little value that continuance as bankable assets is not warranted.

This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this loan even though partial recovery may be realized in the future.

At March 31, 2022 and September 30, 2021, there were no loans classified as loss.

The following tables present an analysis of loans by credit quality indicator and portfolio segment at March 31, 2022 and September 30, 2021 (dollars in thousands):

March 31, 2022 Pass Watch Special

At June 30, 2022 and September 30, 2021, there were no loans classified as loss.

The following tables present an analysis of loans by credit quality indicator and portfolio segment at June 30, 2022 and September 30, 2021 (dollars in thousands):

June 30, 2022 Pass Watch Special

Mention Substandard Total

30 unchanged sentences

Commercial business loans 73,992 49 37 501 74,579

73,992 49 37 501 74,579

SBA PPP loans 40,922 — — — 40,922

11 unchanged sentences

The categories of non-accrual loans and impaired loans overlap, although they are not identical.

The following table is a summary of information related to impaired loans by portfolio segment as of March 31, 2022 and for the three and six months then ended (dollars in thousands):

The following table is a summary of information related to impaired loans by portfolio segment as of June 30, 2022 and for the three and nine months then ended (dollars in thousands):

Investment Unpaid Principal Balance (Loan Balance Plus Charge Off) Related

25 unchanged sentences

______________________________________________

(1) For the three months ended March 31, 2022 .

(2) For the six months ended March 31, 2022.

(1) For the three months ended June 30, 2022 .

(2) For the nine months ended June 30, 2022.

The following table is a summary of information related to impaired loans by portfolio segment as of and for the year ended September 30, 2021 (dollars in thousands):

39 unchanged sentences

TDRs are classified as non-accrual (and considered to be non-performing) unless they have been performing in accordance with modified terms for a period of at least six months.

The Company had $ 2.67 million and $ 2.55 million in TDRs included in impaired loans at March 31, 2022 and September 30, 2021, respectively, and had no commitments at these dates to lend additional funds on these loans.

There was no allowance for loan losses allocated to TDRs at March 31, 2022 and September 30, 2021.

There were no TDRs for which there was a payment default within the first 12 months of the modification during the six months ended March 31, 2022.

The Company had $ 2.64 million and $ 2.55 million in TDRs included in impaired loans at June 30, 2022 and September 30, 2021, respectively, and had no commitments at these dates to lend additional funds on these loans.

There was no allowance for loan losses allocated to TDRs at June 30, 2022 and September 30, 2021.

There were no TDRs for which there was a payment default within the first 12 months of the modification during the nine months ended June 30, 2022.

The Coronavirus Aid, Relief, and Economic Security Act of 2020, signed into law on March 27, 2020 ("CARES Act"), provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs.

This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers,

This included short-term (e.g., six months) modifications such as payment deferrals, fee waivers,

extensions of repayment terms, or other delays in payment that are insignificant.

Borrowers are considered current under the CARES Act and related regulatory guidance if they are less than 30 days past due on their contractual payments at the time a modification program is implemented.

Borrowers were considered current under the CARES Act and related regulatory guidance if they were less than 30 days past due on their contractual payments at the time a modification program is implemented.

On December 27, 2020, the Consolidated Appropriations Act, 2021 ("CAA 2021") was signed into law.

2 unchanged sentences

In response to requests from borrowers and in accordance with the CARES Act and related regulatory guidance, the Company made payment deferral COVID-19 related modifications (typically 90-day payment deferrals with interest continuing to accrue or scheduled to be paid monthly) on a number of loans.

All of these borrowers had resumed making payments as of March 31, 2022.

Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

There were no loans with COVID-19 loan modifications on deferral status outstanding at March 31, 2022.

All of these borrowers had resumed making payments as of June 30, 2022.

Loan modifications in accordance with the CARES Act and related regulatory guidance were still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

There were no loans with COVID-19 loan modifications on deferral status outstanding at June 30, 2022.

The following table sets forth information with respect to COVID-19 loan modifications on deferral status at September 30, 2021 (dollars in thousands):

3 unchanged sentences

Total COVID-19 Modifications 1 $ 323 100.0 %

The following tables set forth information with respect to the Company’s TDRs by interest accrual status as of March 31, 2022 and September 30, 2021 (dollars in thousands):

March 31, 2022

The following tables set forth information with respect to the Company’s TDRs by interest accrual status as of June 30, 2022 and September 30, 2021 (dollars in thousands):

June 30, 2022

Accruing Non-

15 unchanged sentences

Total $ 2,371 $ 182 $ 2,553

There was one new TDR recognized during the six months ended March 31, 2022.

There was one new TDR recognized during the nine months ended June 30, 2022.

There were no new TDRs recognized during the year ended September 30, 2021.

The following table sets forth information with respect to the Company's TDRs, by portfolio segment, during the six months ended March 31, 2022:

March 31, 2022 Number of

The following table sets forth information with respect to the Company's TDRs, by portfolio segment, during the nine months ended June 30, 2022:

June 30, 2022 Number of

Contracts Pre-Modification

7 unchanged sentences

The ROU assets totaled $ 2.89 million at October 1, 2019.

The Company's leases have remaining lease terms of sixteen months to eleven years, some of which include options to extend the leases for up to five years.

The components of lease cost (included in the premises and equipment expense category in the consolidated statements of income) are as follows for the three and six months ended March 31, 2022 and 2021 (dollars in thousands):

Three Months Ended March 31, Six Months Ended March 31,

The Company's leases have remaining lease terms of thirteen months to eleven years, some of which include options to extend the leases for up to five years.

The components of lease cost (included in the premises and equipment expense category in the consolidated statements of income) are as follows for the three and nine months ended June 30, 2022 and 2021 (dollars in thousands):

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

2 unchanged sentences

Total lease cost $ 95 $ 92 $ 283 $ 277

The following tables provide supplemental information related to operating leases at or for the three and six months ended March 31, 2022 and 2021 (dollars in thousands):

At or For the Three Months Ended March 31, 2022 At or For the

Six Months Ended

March 31, 2022

The following tables provide supplemental information related to operating leases at or for the three and nine months ended June 30, 2022 and 2021 (dollars in thousands):

At or For the Three Months Ended June 30 , 2022 At or For the

Nine Months Ended

June 30, 2022

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Weighted average discount rate-operating leases 2.25 % 2.25 %

At or For the Three Months Ended March 31, 2021 At or For Six Months Ended March 31, 2021

At or For the Three Months Ended June 30, 2021 At or For Nine Months Ended June 30, 2021

Cash paid for amounts included in the measurement of lease liabilities:

5 unchanged sentences

liability was determined by utilizing the September 30, 2019 fixed-rate advances issued by the FHLB, for all leases entered into prior to the October 1, 2019 adoption date.

Maturities of operating lease liabilities at March 31, 2022 for future fiscal years are as follows (dollars in thousands):

Maturities of operating lease liabilities at June 30, 2022 for future fiscal years are as follows (dollars in thousands):

Remainder of 2022 $ 80

7 unchanged sentences

Common stock equivalents arise from the assumed conversion of outstanding stock options to purchase common stock.

Information regarding the calculation of basic and diluted net income per common share for the three and six months ended March 31, 2022 and 2021 is as follows (dollars in thousands, except per share amounts):

Three Months Ended March 31, Six Months Ended March 31,

Information regarding the calculation of basic and diluted net income per common share for the three and nine months ended June 30, 2022 and 2021 is as follows (dollars in thousands, except per share amounts):

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

10 unchanged sentences

____________________________________________

(1) For the three and six months ended March 31, 2022, average options to purchase 204,398 and 207,256 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share, because their effect would have been anti-dilutive.

For the three and six months ended March 31, 2021, average options to purchase 135,590 and 136,631 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share, because their effect would have been anti-dilutive.

(1) For the three and nine months ended June 30, 2022, average options to purchase 201,150 and 205,221 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share, because their effect would have been anti-dilutive.

For the three and nine months ended June 30, 2021, average options to purchase 134,365 and 135,876 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share, because their effect would have been anti-dilutive.

(7) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the three and six months ended March 31, 2022 and 2021 are as follows (dollars in thousands):

Three Months Ended March 31, 2022

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the three and nine months ended June 30, 2022 and 2021 are as follows (dollars in thousands):

Three Months Ended June 30, 2022

Changes in fair value of available for sale securities (1) Changes in OTTI on held to maturity securities (1) Total (1)

2 unchanged sentences

Balance of AOCI at the end of period $ ( 554 ) $ ( 11 ) $ ( 565 )

Six Months Ended March 31, 2022

Nine Months Ended June 30, 2022

Changes in fair value of available for sale securities (1) Changes in OTTI on held to maturity securities (1) Total (1)

2 unchanged sentences

Balance of AOCI at the end of period $ ( 554 ) $ ( 11 ) $ ( 565 )

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Changes in fair value of available for sale securities (1) Changes in OTTI on held to maturity securities (1) Total (1)

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Balance of AOCI at the end of period $ 145 $ ( 16 ) $ 129

Six Months Ended March 31, 2021

Nine Months Ended June 30, 2021

Changes in fair value of available for sale securities (1) Changes in OTTI on held to maturity securities (1) Total (1)

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Under the Company’s 2003 Stock Option Plan, the Company was able to grant options for up to 300,000 shares of common stock to employees, officers, directors and directors emeriti.

Under the Company's 2014 Equity Incentive Plan, the Company is able to grant options and awards of restricted stock (with or without performance measures) for up to 352,366 shares of common stock to employees, officers, directors and directors emeriti.

Under the Company's 2019 Equity Incentive Plan, the Company is able to grant options and awards or restricted stock (with or without performance measures) for up to 350,000

shares of common stock, of which 300,000 shares are reserved to be awarded to employees, including officers, and 50,000 shares are reserved to be awarded to directors and directors emeriti.

Under the Company's 2014 Equity Incentive Plan, the Company is able to grant options and awards of restricted stock (with or without performance measures) for up to 352,366 shares of

common stock to employees, officers, directors and directors emeriti.

Under the Company's 2019 Equity Incentive Plan, the Company is able to grant options and awards or restricted stock (with or without performance measures) for up to 350,000 shares of common stock, of which 300,000 shares are reserved to be awarded to employees, including officers, and 50,000 shares are reserved to be awarded to directors and directors emeriti.

Shares issued may be purchased in the open market or may be issued from authorized and unissued shares.

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Generally, options and restricted stock vest in 20 % annual installments on each of the five anniversaries from the date of the grant, and options generally have a maximum contractual term of ten years from the date of grant.

At March 31, 2022, there were 26,696 shares of common stock available which may be awarded as options or restricted stock pursuant to future grant under the 2014 Equity Incentive Plan.

At March 31, 2022, there were 238,400 shares of common stock available which may be awarded as options or restricted stock pursuant to future grant under the 2019 Equity Incentive Plan.

At both March 31, 2022 and 2021, there were no unvested restricted stock awards.

There were no restricted stock grants awarded during the six months ended March 31, 2022 and 2021.

Stock option activity for the six months ended March 31, 2022 and 2021 is summarized as follows:

Six Months Ended March 31, 2022 Six Months Ended March 31, 2021

At June 30, 2022, there were 26,696 shares of common stock available which may be awarded as options or restricted stock pursuant to future grant under the 2014 Equity Incentive Plan.

At June 30, 2022, there were 239,400 shares of common stock available which may be awarded as options or restricted stock pursuant to future grant under the 2019 Equity Incentive Plan.

At both June 30, 2022 and 2021, there were no unvested restricted stock awards.

There were no restricted stock grants awarded during the nine months ended June 30, 2022 and 2021.

Stock option activity for the nine months ended June 30, 2022 and 2021 is summarized as follows:

Nine Months Ended June 30, 2022 Nine Months Ended June 30, 2021

Number of Shares Weighted

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The fair value of stock options is determined using the Black-Scholes valuation model.

The weighted average assumptions for options granted during the six months ended March 31, 2022 were as follows:

The weighted average assumptions for options granted during the nine months ended June 30, 2022 were as follows:

Expected volatility 34 %

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Grant date fair value per share $ 5.88

The aggregate intrinsic value of options exercised during the six months ended March 31, 2022 and 2021 was $ 443,000 and $ 947,000 , respectively.

At March 31, 2022, there were 178,670 unvested options with an aggregate grant date fair value of $ 847,000 , all of which the Company assumes will vest.

The aggregate intrinsic value of unvested options at March 31, 2022 was $ 538,000 .

There were 400 options vested during the six months ended March 31, 2022 with a total fair value of $ 2,000 .

At March 31, 2021, there were 158,392 unvested options with an aggregate grant date fair value of $ 565,000 .

There were 200 options that vested during the six months ended March 31, 2021 with a total fair value of $ 1,000 .

Additional information regarding options outstanding at March 31, 2022 is as follows:

The aggregate intrinsic value of options exercised during the nine months ended June 30, 2022 and 2021 was $ 475,000 and $ 1.12 million, respectively.

At June 30, 2022, there were 173,670 unvested options with an aggregate grant date fair value of $ 830,000 , all of which the Company assumes will vest.

The aggregate intrinsic value of unvested options at June 30, 2022 was $ 409,000 .

There were 2,400 options vested during the nine months ended June 30, 2022 with a total fair value of $ 9,400 .

At June 30, 2021, there were 157,892 unvested options with an aggregate grant date fair value of $ 564,000 .

There were 200 options that vested during the nine months ended June 30, 2021 with a total fair value of $ 1,000 .

Additional information regarding options outstanding at June 30, 2022 is as follows:

Options Outstanding Options Exercisable

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359,875 $ 22.20 6.3 186,205 $ 19.44 4.5

The aggregate intrinsic value of options outstanding at March 31, 2022 and 2021 was $ 2.17 million and $ 2.99 million , respectively.

As of March 31, 2022, unrecognized compensation cost related to unvested stock options was $ 777,000 , which is expected to be recognized over a weighted average life of 2.31 years.

The aggregate intrinsic value of options outstanding at June 30, 2022 and 2021 was $ 1.81 million and $ 2.91 million , respectively.

As of June 30, 2022, unrecognized compensation cost related to unvested stock options was $ 706,000 , which is expected to be recognized over a weighted average life of 2.23 years.

(9) FAIR VALUE MEASUREMENTS

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The estimated fair values of mutual funds are based upon quoted market prices (Level 1).

The Company had no liabilities measured at fair value on a recurring basis at March 31, 2022 and September 30, 2021.

The Company's assets measured at estimated fair value on a recurring basis at March 31, 2022 and September 30, 2021 were as follows (dollars in thousands):

March 31, 2022 Estimated Fair Value

The Company had no liabilities measured at fair value on a recurring basis at June 30, 2022 and September 30, 2021.

The Company's assets measured at estimated fair value on a recurring basis at June 30, 2022 and September 30, 2021 were as follows (dollars in thousands):

June 30, 2022 Estimated Fair Value

Level 1 Level 2 Level 3 Total

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Total $ 955 $ 63,176 $ — $ 64,131

There were no transfers among Level 1, Level 2 and Level 3 during the six months ended March 31, 2022 and the year ended September 30, 2021.

There were no transfers among Level 1, Level 2 and Level 3 during the nine months ended June 30, 2022 and the year ended September 30, 2021.

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP.

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The valuation of OREO and other repossessed assets is subject to significant external and internal judgment (Level 3).

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at March 31, 2022 (dollars in thousands):

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at June 30, 2022 (dollars in thousands):

Estimated Fair Value

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MBS - private label residential — 7 —

OREO and other repossessed assets — — 157

Total $ — $ 7 $ 122

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis as of March 31, 2022 (dollars in thousands):

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis as of June 30, 2022 (dollars in thousands):

Fair Value Valuation

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Impaired loans $ 122 Market approach Appraised value less estimated selling costs NA

OREO and other repossessed assets $ 157 Market approach Lower of appraised value or listing price less estimated selling costs NA

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at September 30, 2021 (dollars in thousands):

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The disclosures also do not include estimated fair value amounts for certain items which are not defined as financial instruments but for which may have significant value.

The Company does not believe that it would be practicable to estimate a representative fair value for these types of items as of March 31, 2022 and September 30, 2021.

The Company does not believe that it would be practicable to estimate a representative fair value for these types of items as of June 30, 2022 and September 30, 2021.

Because GAAP excludes certain items from fair value disclosure requirements, any aggregation of the fair value amounts presented would not represent the underlying value of the Company.

Additionally, in accordance with GAAP, the Company uses the exit price notion in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

The recorded amounts and estimated fair values of financial instruments were as follows as of March 31, 2022 and September 30, 2021 (dollars in thousands):

March 31, 2022

The recorded amounts and estimated fair values of financial instruments were as follows as of June 30, 2022 and September 30, 2021 (dollars in thousands):

June 30, 2022

Fair Value Measurements Using:

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ASU 2016-13 replaces the existing incurred losses methodology with a current expected losses methodology with respect to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held to maturity investment securities and off-balance sheet commitments.

In addition, ASU 2016-13 requires credit losses relating to available for sale debt securities to be recorded through an allowance for credit losses rather than as a reduction of the carrying amount.

ASU 2016-13 also changes the accounting for purchased credit-impaired securities

In addition, ASU 2016-13 requires credit losses relating to available for sale debt securities to be recorded through an allowance for credit losses rather

than as a reduction of the carrying amount.

ASU 2016-13 also changes the accounting for purchased credit-impaired securities and loans.

ASU 2016-13 retains many of the current disclosure requirements in GAAP and expands certain disclosure requirements.

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This ASU is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company has not adopted ASU 2020-04 as of December 31, 2021.

The Company has not adopted ASU 2020-04 as of June 30, 2022.

The adoption of ASU 2020-04 is not expected to have a material impact on the Company's future consolidated financial statements.

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

The amendments eliminate the accounting guidance for troubled debt restructurings (“TDRs”) for creditors, require new disclosures for creditors for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty, and require public business entities to include current-period gross write-offs in the vintage disclosure tables.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The adoption of ASU 2022-02 is not expected to have a material impact on the Company's future consolidated financial statements.

(11) REVENUE FROM CONTRACTS WITH CUSTOMERS

ASC 606 applies to all contracts with customers to provide goods or services in the ordinary course of business, except for contracts that are specifically excluded from its scope.

ASU 2014-09 Revenue from Contracts with Customers (" ASC 606') which applies to all contracts with customers to provide goods or services in the ordinary course of business, except for contracts that are specifically excluded from its scope.

The majority of the Company's revenues are composed of interest income, deferred loan fee accretion, premium/discount accretion, gains on sales of loans and investments, BOLI net earnings, servicing income on loans sold and other loan fee income, which are not within the scope of ASC 606.

Revenue reported as service charges on deposits, ATM and debit card interchange transaction fees, merchant services fees, non-deposit investment fees and escrow fees are within the scope of ASC 606.

Revenue reported as service charges on deposits, ATM and debit card interchange

transaction fees, merchant services fees, non-deposit investment fees and escrow fees are within the scope of ASC 606.

All of the Company's revenue from contracts with customers within the scope of ASC 60 6 is recognized in non-interest income with the exception of gains on sales of OREO and gains on sales/disposition of premises and equipment, which are included in non-interest expense.

For the three months ended March 31, 2022, the Company recognized $ 1.01 million in service charges on deposits, $ 1.25 million in ATM and debit card interchange transaction fees, $ 44,000 in escrow fees, and $ 8,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the six months ended March 31, 2022, the Company recognized $ 1.93 million in service charges on deposits, $ 2.52 million in ATM and debit card interchange transaction fees, $ 123,000 in escrow fees, and $ 10,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the three months ended March 31,

2021, the Company recognized $ 941,000 in service charges on deposits, $ 1.24 million in ATM and debit card interchange transaction fees, $ 74,000 in escrow fees, and $ 3,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the six months ended March 31, 2021, the Company recognized $ 2.00 million in service charges on deposits, $ 2.39 million in ATM and debit card interchange transaction fees, $ 179,000 in escrow fees, and $ 7,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the three months ended June 30, 2022, the Company recognized $ 1.05 million in service charges on deposits, $ 1.35 million in ATM and debit card interchange transaction fees, $ 41,000 in escrow fees, and $ 4,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the nine months ended June 30, 2022, the Company recognized $ 2.98 million in service charges on deposits, $ 3.87 million in ATM and debit card interchange transaction fees, $ 164,000 in escrow fees, and $ 14,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the three months ended June 30, 2021, the Company recognized $ 948,000 in service charges on deposits, $ 1.36 million in ATM and debit card interchange transaction fees, $ 64,000 in escrow fees, and $ 8,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the nine months ended nine months ended June 30, 2021, the Company recognized $ 2.94 million in service charges on deposits, $ 3.76 million in ATM and debit card interchange transaction fees, $ 243,000 in escrow fees, and $ 14,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

If a contract is determined to be within the scope of ASC 606, the Company recognizes revenue when it satisfies its performance obligation.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements