What changed in this filing

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Item 1. Financial Statements

2023-02-08 compared with 2022-08-05 · 178 added, 307 removed, 822 unchanged (37% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2022 and September 30, 2021

December 31, 2022 and September 30, 2022

(Dollars in thousands, except per share amounts)

17 unchanged sentences

Premises and equipment, net 21,703 21,898

Other real estate owned (“OREO”) and other repossessed assets, net — 157

Accrued interest receivable 5,508 4,483

10 unchanged sentences

Total deposits 1,601,090 1,632,176

FHLB borrowings — 5,000

Operating lease liabilities 2,001 2,066

6 unchanged sentences

CONSOLIDATED BALANCE SHEETS (continued)

June 30, 2022 and September 30, 2021

December 31, 2022 and September 30, 2022

(Dollars in thousands, except per share amounts)

1 unchanged sentence

(Unaudited) *

Commitments and contingent liabilities (see Note 12)

Shareholders’ equity

3 unchanged sentences

50,000,000 shares authorized;

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

8,231,197 shares issued and outstanding - December 31, 2022 8,221,952 shares issued and outstanding - September 30, 2022

38,878 38,751

8 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

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

For the three months ended December 31, 2022 and 2021

(Dollars in thousands, except per share amounts)

Three Months Ended June 30, Nine Months Ended

2022 2021 2022 2021

Three Months Ended December 31,

Interest and dividend income

18 unchanged sentences

Escrow fees 30 78

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

Valuation recovery on loan servicing rights, net — 119

Other, net 297 230

4 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (continued)

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

For the three months ended December 31, 2022 and 2021

(Dollars in thousands, except per share amounts)

Three Months Ended June 30, Nine Months Ended

2022 2021 2022 2021

Three Months Ended December 31,

Non-interest expense

28 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

For the three months ended December 31, 2022 and 2021

(Dollars in thousands)

Three Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

Comprehensive income

Net income $ 7,507 $ 5,485

Other comprehensive income (loss)

Unrealized holding gain (loss) on investment securities available for sale, net of income taxes of $( 122 ), $ 0 , $( 167 ), and $ 16 , respectively

Other comprehensive loss

Unrealized holding loss on investment securities available for sale, net of income tax benefits of $( 5 ) and $( 5 ), respectively

( 19 ) ( 18 )

1 unchanged sentence

Accretion of OTTI on investment securities held to maturity, net of income taxes of $ 0 and $ 0 , respectively

Total other comprehensive income (loss), net of income taxes ( 458 ) 8 ( 624 ) 68

Total other comprehensive loss, net of income taxes ( 18 ) ( 17 )

Total comprehensive income $ 7,489 $ 5,468

3 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

For the three months ended December 31, 2022 and 2021

(Dollars in thousands, except per share amounts)

Number of Shares Amount Accumulated

Compre-hensive

Income (Loss)

Stock Retained

Earnings Total

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

Net income — — 5,738 — 5,738

Other comprehensive loss — — — ( 458 ) ( 458 )

Repurchase of common stock ( 58,678 ) ( 1,502 ) — — ( 1,502 )

Exercise of stock options 2,300 27 — — 27

Common stock dividends ($ 0.22 per common share)

— — ( 1,827 ) — ( 1,827 )

Stock option compensation expense — 72 — — 72

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

Common Stock Accumulated

5 unchanged sentences

Net income — — 5,485 — 5,485

Other comprehensive income — — — 68 68

Other comprehensive loss — — — ( 17 ) ( 17 )

Repurchase of common stock ( 15,548 ) ( 433 ) — — ( 433 )

3 unchanged sentences

Stock option compensation expense — 66 — — 66

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

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

Balance, September 30, 2022 8,221,952 $ 38,751 $ 180,535 $ ( 717 ) $ 218,569

6 unchanged sentences

Stock option compensation expense — 78 — — 78

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

Balance, December 31, 2022 8,231,197 $ 38,878 $ 185,406 $ ( 735 ) $ 223,549

See notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended June 30, 2022 and 2021

For the three months ended December 31, 2022 and 2021

(Dollars in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

Cash flows from operating activities

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses 525 —

Depreciation 338 358

5 unchanged sentences

Change in fair value of investments in equity securities ( 2 ) 9

Amortization of discounts and premiums on securities 123 49

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

Amortization (accretion) of discounts and premiums on securities ( 298 ) 101

Gain on sales of loans, net ( 21 ) ( 663 )

4 unchanged sentences

BOLI net earnings ( 156 ) ( 154 )

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

Increase (decrease) in deferred loan origination fees 211 ( 604 )

Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses 170 ( 978 )

1 unchanged sentence

Cash flows from investing activities

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

Net (increase) decrease in CDs held for investment ( 498 ) 3,834

Purchase of investment securities held to maturity ( 14,317 ) ( 48,486 )

2 unchanged sentences

Proceeds from maturities and prepayments of investment securities available for sale 2,559 6,502

Purchase of FHLB stock ( 91 ) ( 181 )

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

Increase in loans receivable, net ( 40,841 ) ( 24,892 )

Purchases of premises and equipment ( 143 ) ( 99 )

Proceeds from sales of OREO and other repossessed assets 158 985

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

Net cash used in investing activities ( 67,607 ) ( 60,146 )

S ee notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the nine months ended June 30, 2022 and 2021

For the three months ended December 31, 2022 and 2021

(Dollars in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

Cash flows from financing activities

Net increase in deposits $ 93,559 $ 164,246

Repayments of FHLB borrowings ( 5,000 ) ( 5,000 )

Net increase (decrease) in deposits $ ( 31,086 ) $ 36,076

Proceeds from exercise of stock options 397 130

1 unchanged sentence

Payment of dividends ( 2,636 ) ( 1,755 )

Net cash provided by financing activities 79,849 153,336

Net increase (decrease) in cash and cash equivalents ( 158,045 ) 189,274

Net cash provided by (used in) financing activities ( 33,673 ) 34,018

Net decrease in cash and cash equivalents ( 91,859 ) ( 21,868 )

Cash and cash equivalents

2 unchanged sentences

Supplemental disclosure of cash flow information

Income taxes paid $ 3,642 $ 4,642

Interest paid $ 1,180 $ 656

Supplemental disclosure of non-cash investing activities

Other comprehensive income (loss) related to investment securities $ ( 624 ) $ 68

Other comprehensive loss related to investment securities $ ( 18 ) $ ( 17 )

See notes to unaudited consolidated financial statements

9 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, 2022 (“2022 Form 10-K”).

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.

The unaudited consolidated results of operations for the three months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2023.

(b) Principles of Consolidation:

5 unchanged sentences

Actual results could differ from those estimates.

(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.

(e) Certain prior period amounts have been reclassified to conform to the December 31, 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 June 30, 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 December 31, 2022 and September 30, 2022 (dollars in thousands):

Losses Estimated

June 30, 2022

December 31, 2022

Held to maturity

4 unchanged sentences

Private label residential 49,563 272 ( 2,258 ) 47,577

Taxable municipal securities 2,092 — ( 58 ) 2,034

Bank issued trust preferred securities 500 — ( 30 ) 470

9 unchanged sentences

Private label residential 49,335 245 ( 2,392 ) 47,188

Taxable municipal securities 2,102 — ( 67 ) 2,035

Bank issued trust preferred securities 500 — ( 31 ) 469

3 unchanged sentences

Total $ 42,309 $ — $ ( 894 ) $ 41,415

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

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

Less Than 12 Months 12 Months or Longer Total

6 unchanged sentences

Private label residential 28,489 ( 1,043 ) 24 16,897 ( 1,215 ) 11 45,386 ( 2,258 )

Taxable municipal securities 2,034 ( 58 ) 1 — — — 2,034 ( 58 )

Bank issued trust preferred securities

15 unchanged sentences

35,447 ( 2,166 ) 27 8,708 ( 226 ) 6 44,155 ( 2,392 )

Taxable municipal securities 2,035 ( 67 ) 1 — — — 2,035 ( 67 )

Bank issued trust preferred securities 469 ( 31 ) 1 — — — 469 ( 31 )

$ 189,351 $ ( 10,937 ) 100 $ 47,652 $ ( 6,148 ) 20 $ 237,003 $ ( 17,085 )

6 unchanged sentences

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

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).

Further, as of December 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).

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 June 30, 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 December 31, 2022 and 2021:

Range Weighted

Minimum Maximum Average

June 30, 2022

December 31, 2022

Constant prepayment rate 6.00 % 15.00 % 8.87 %

1 unchanged sentence

Loss severity rate — % 7.76 % 2.94 %

June 30, 2021

December 31, 2021

Constant prepayment rate 6.00 % 15.00 % 12.50 %

1 unchanged sentence

Loss severity rate — % 13.95 % 3.30 %

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

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 three months ended December 31, 2022 and 2021 (dollars in thousands):

Three Months Ended

June 30, 2022 Three Months Ended

June 30, 2021

Maturity Held To

Total recoveries $ 5 $ 6

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

Nine Months Ended

June 30, 2022 Nine Months Ended

June 30, 2021

Maturity Held To

Total recoveries $ 16 $ 14

Net recoveries recognized in earnings (1) $ 16 $ 14

_________________

(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 nine months ended June 30, 2022 and 2021 (dollars in thousands):

Nine Months Ended

Beginning balance of credit loss $ 836 $ 853

4 unchanged sentences

Ending balance of credit loss $ 826 $ 850

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).

During the three months ended December 31, 2022, the Company recorded a $ 7,000 net realized loss on 14 held to maturity investment securities.

During the three months ended December 31, 2021, the Company recorded a $ 3,000 net realized loss (as a result of investment securities being deemed worthless) on 15 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 $ 160.19 million and $ 133.82 million at December 31, 2022 and September 30, 2022, respectively.

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

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

28 unchanged sentences

a significant decline in expected future cash flows;

a sustained, significant decline in the Company's stock price and market capitalization;

a sustained, significant decline in the

Company's stock price and market capitalization;

a significant adverse change in legal factors or in the business climate;

2 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 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.

As of December 31, 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 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.

If adverse economic conditions or any decreases in the Company's stock price and market capitalization were deemed 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 June 30, 2022 and September 30, 2021 remained unchanged at $ 15.13 million.

The recorded amount of goodwill at December 31, 2022 and September 30, 2022 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 June 30, 2022, management believes that there have been no events or changes in the circumstances that would indicate a potential impairment of CDI.

As of December 31, 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 June 30, 2022 and September 30, 2021 (dollars in thousands):

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

2022 September 30,

26 unchanged sentences

_____________________________

(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.

(1) Does not include one- to four-family loans held for sale totaling $ 0 and $ 748 at December 31, 2022 and September 30, 2022, respectively.

Loans receivable at December 31, 2022 and September 30, 2022 are reported net of unamortized discounts totaling $ 239,000 and $ 267,000 , respectively.

Allowance for Loan Losses

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

(Recapture of) Loan Losses Charge-

offs Recoveries Ending

Mortgage loans:

One- to four-family $ 1,247 $ 109 $ — $ — $ 1,356

Multi-family 735 153 — — 888

Commercial 6,931 ( 168 ) — — 6,763

Construction – custom and owner/builder 686 47 — — 733

Construction – speculative one- to four-family 126 ( 33 ) — — 93

Construction – commercial 463 ( 109 ) — — 354

Construction – multi-family 436 ( 108 ) — — 328

Construction – land development 126 113 — — 239

Land 377 ( 17 ) — — 360

Consumer loans:

Home equity and second mortgage 469 ( 35 ) — — 434

Other 44 15 ( 8 ) — 51

Commercial business loans 1,793 33 — 8 1,834

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

Nine Months Ended June 30, 2022

Allowance Provision for

(Recapture of) Loan Losses Charge-

offs Recoveries Ending

Mortgage loans:

One-to four-family $ 1,154 $ 202 $ — $ — $ 1,356

Multi-family 765 123 — — 888

Commercial 6,813 ( 50 ) — — 6,763

Construction – custom and owner/builder 644 89 — — 733

Construction – speculative one- to four-family 188 ( 95 ) — — 93

Construction – commercial 784 ( 430 ) — — 354

Construction – multi-family 436 ( 108 ) — — 328

Construction – land development 124 115 — — 239

Land 470 ( 110 ) — — 360

Consumer loans:

Home equity and second mortgage 528 ( 94 ) — — 434

Other 50 10 ( 10 ) 1 51

Commercial business loans 1,513 348 ( 49 ) 22 1,834

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

Three Months Ended June 30, 2021

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

Three Months Ended December 31, 2022

Allowance Provision for

16 unchanged sentences

Total $ 13,703 $ 525 $ — $ 1 $ 14,229

Nine Months Ended June 30, 2021

Three Months Ended December 31, 2021

Allowance Provision for

16 unchanged sentences

Total $ 13,469 $ — $ ( 1 ) $ — $ 13,468

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):

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

Allowance for Loan Losses Recorded Investment in Loans

7 unchanged sentences

Impairment Total

June 30, 2022

December 31, 2022

Mortgage loans:

35 unchanged sentences

Total $ 127 $ 13,576 $ 13,703 $ 4,532 $ 1,145,918 $ 1,150,450

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):

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

Past Due 60-89

3 unchanged sentences

Past Due Current Total

June 30, 2022

December 31, 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 June 30, 2022 and September 30, 2021, there were no loans classified as doubtful.

At December 31, 2022 and September 30, 2022, 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 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

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

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

December 31, 2022 Pass Watch Special

Mention Substandard Total

43 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 June 30, 2022 and for the three and nine months then ended (dollars in thousands):

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

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

Allowance Quarter to Date ("QTD") Average Recorded Investment (1) Year to Date ("YTD") Average Recorded Investment (2) QTD Interest Income Recognized (1) YTD Interest Income Recognized (2) QTD Cash Basis Interest Income Recognized (1) YTD Cash Basis Interest Income Recognized (2)

Allowance Year to Date ("YTD") Average Recorded Investment (1) YTD Interest Income Recognized (1) YTD Cash Basis Interest Income Recognized (1)

With no related allowance recorded:

9 unchanged sentences

With an allowance recorded:

Mortgage loans:

Land — — — — 181 — — — —

Commercial business loans 249 249 127 249 — —

10 unchanged sentences

______________________________________________

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

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

(1) For the three months ended December 31, 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, 2022 (dollars in thousands):

14 unchanged sentences

With an allowance recorded:

Mortgage loans:

One- to four-family — — — 97 — —

Land 362 362 76 72 — —

Consumer loans:

Home equity and second mortgage — — — 145 — —

Commercial business loans 250 250 127 268 — —

20 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 $ 2.64 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 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 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.

Among other purposes, the CAA 2021, provided coronavirus emergency response and relief, including extending relief offered under the CARES Act related to restructured loans as a result of COVID-19.

The provisions ended on January 1, 2022.

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 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):

COVID-19 Loan Modifications September 30, 2021

Mortgage loans Number Balance Percent

One- to four-family 1 $ 323 100.0 %

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 June 30, 2022 and September 30, 2021 (dollars in thousands):

June 30, 2022

The Company had $ 2.58 million and $ 2.62 million in TDRs included in impaired loans at December 31, 2022 and September 30, 2022, 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 December 31, 2022 and September 30, 2022.

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

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

December 31, 2022

Accruing Non-

2 unchanged sentences

Commercial $ 2,322 $ — $ 2,322

Land — 101 101

Consumer loans:

6 unchanged sentences

Commercial $ 2,330 $ — $ 2,330

Land — 119 119

Consumer loans:

1 unchanged sentence

Total $ 2,472 $ 143 $ 2,615

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 nine months ended June 30, 2022:

June 30, 2022 Number of

There were no new TDRs recognized during the three months ended December 31, 2022.

There was one new TDR recognized during the year ended September 30, 2022.

The following table sets forth information with respect to the Company's TDR, by portfolio segment, during the year ended September 30, 2022:

September 30, 2022 Number of

Contracts Pre-Modification

4 unchanged sentences

(1) Modification was a result of an increase in principal balance and a reduction in interest rate and monthly payment.

The Company adopted the Financial Accounting Standard Board's ("FASB's") Accounting Standards Codification ("ASC") 842, Leases ("ASC 842") on October 1, 2019 and began recording operating lease liabilities and operating lease ROU assets in the consolidated balance sheets.

The Company has operating leases for three retail bank branch offices.

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

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

At December 31, 2022, the Company has operating leases for two retail bank branch offices.

The Company's leases have remaining lease terms of four to nine years , both of which include options to extend the leases for up to five years .

Lease extensions are not certain, and the Company evaluates each lease based on the specific circumstances for the location to determine the probability of exercising the extensions in the calculation of ROU assets and liabilities.

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 months ended December 31, 2022 and 2021 (dollars in thousands):

Three Months Ended December 31,

Operating lease cost $ 88 $ 94

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Total lease cost $ 88 $ 94

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:

Operating cash flows from operating leases $ 87 $ 261

Weighted average remaining lease term-operating leases 7.9 years 7.9 years

Weighted average discount rate-operating leases 2.25 % 2.25 %

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

The following tables provide supplemental information related to operating leases at or for the three months ended December 31, 2022 and year ended September 30, 2022 (dollars in thousands):

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

September 30, 2022

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

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The Company's leases typically do not contain a discount rate implicit in the lease contracts.

As an alternative, the weighted average discount rate used to estimate the present value of future lease payments in calculating the value of the ROU asset and

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 June 30, 2022 for future fiscal years are as follows (dollars in thousands):

As an alternative, the weighted average discount rate used to estimate the present value of future lease payments in calculating the value of the ROU asset and liability was determined by utilizing the FHLB fixed-rate credit advance borrowing rate for the term correlating to the remaining term of each lease.

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

Remainder of 2023 $ 233

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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 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

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

Three Months Ended December 31,

Basic net income per common share computation

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____________________________________________

(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.

(1) For the three months ended December 31, 2022 and 2021, average options to purchase 182,000 and 210,052 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 nine months ended June 30, 2022 and 2021 are as follows (dollars in thousands):

Three Months Ended June 30, 2022

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

Three Months Ended December 31, 2022

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 $ ( 725 ) $ ( 10 ) $ ( 735 )

Nine Months Ended June 30, 2022

Three Months Ended December 31, 2021

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 $ 57 $ ( 15 ) $ 42

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)

Balance of AOCI at the beginning of period $ 144 $ ( 23 ) $ 121

Other comprehensive income 1 7 8

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

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)

Balance of AOCI at the beginning of period $ 87 $ ( 26 ) $ 61

Other comprehensive income 58 10 68

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

__________________________

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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 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.

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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 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

At December 31, 2022, there were 2,196 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 December 31 2022, there were 196,700 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 December 31, 2022 and 2021, there were no unvested restricted stock awards.

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

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

Three Months Ended December 31, 2022 Three Months Ended December 31, 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 nine months ended June 30, 2022 were as follows:

Expected volatility 34 %

Expected life (in years) 5

Expected dividend yield 3.49 %

Risk free interest rate 1.22 %

Grant date fair value per share $ 5.88

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:

There were no options granted during the three months ended December 31, 2022.

The aggregate intrinsic value of options exercised during the three months ended December 31, 2022 and 2021 was $ 244,000 and $ 123,000 , respectively.

At December 31, 2022, there were 191,710 unvested options with an aggregate grant date fair value of $ 1.08 million, all of which the Company assumes will vest.

The aggregate intrinsic value of unvested options at December 31, 2022 was $ 1.61 million.

There were 200 options vested during the three months ended December 31, 2022 with a total fair value of $ 652 .

At December 31, 2021, there were 176,670 unvested options with an aggregate grant date fair value of $ 844,000 .

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

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

Options Outstanding Options Exercisable

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400,310 $ 23.43 6.6 208,600 $ 21.29 4.6

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

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.

The aggregate intrinsic value of options outstanding at December 31, 2022 and 2021 was $ 4.28 million and $ 2.62 million , respectively.

As of December 31, 2022, unrecognized compensation cost related to unvested stock options was $ 1.04 million, which is expected to be recognized over a weighted average life of 2.42 years.

(9) FAIR VALUE MEASUREMENTS

10 unchanged sentences

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 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

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

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

December 31, 2022 Estimated Fair Value

Level 1 Level 2 Level 3 Total

11 unchanged sentences

Total $ 835 $ 41,415 $ — $ 42,250

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.

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

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.

7 unchanged sentences

Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Investment Securities Held to Maturity:

The estimated fair value of investment securities held to maturity is based upon the assumptions market participants would use in pricing the investment security.

Such assumptions include quoted market prices (Level 1), market prices of similar securities or observable inputs (Level 2) and unobservable inputs such as dealer quotes, discounted cash flows or similar techniques (Level 3).

OREO and Other Repossessed Assets, net:

OREO and other repossessed assets are recorded at estimated fair value less estimated costs to sell.

Estimated fair value is generally determined by management based on a number of factors, including third-party appraisals of estimated fair value in an orderly sale.

Estimated costs to sell are based on standard market factors.

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 June 30, 2022 (dollars in thousands):

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

Estimated Fair Value

2 unchanged sentences

Commercial business loans $ — $ — $ 122

Total impaired loans — — 122

Investment securities – held to maturity:

MBS - private label residential — 7 —

Total $ — $ — $ 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 June 30, 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 December 31, 2022 (dollars in thousands):

Fair Value Valuation

Technique(s) Unobservable Input(s) Range

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

Technique(s) Unobservable Input(s)

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

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

2 unchanged sentences

Impaired loans:

Mortgage loans:

Land $ — $ — $ 286

Commercial business loans $ — $ — $ 123

Total impaired loans — — 409

Investment securities – held to maturity:

MBS - private label residential — 10 —

OREO and other repossessed assets — — 157

Total $ — $ — $ 123

1 unchanged sentence

Fair Value Valuation

Technique(s) Unobservable Input(s) Range

Impaired loans $ 409 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

Technique(s) Unobservable Input(s)

Impaired loans $ 123 Market approach Appraised value less estimated selling costs

GAAP requires disclosure of estimated fair values for certain financial instruments.

3 unchanged sentences

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 June 30, 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 December 31, 2022 and September 30, 2022.

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 June 30, 2022 and September 30, 2021 (dollars in thousands):

June 30, 2022

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

December 31, 2022

Fair Value Measurements Using:

7 unchanged sentences

Other investments 3,000 3,000 3,000 — —

Loans held for sale 700 717 717 — —

Loans receivable, net 1,172,559 1,134,291 — — 1,134,291

23 unchanged sentences

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 and loans.

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 PCI debt securities and loans.

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

ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

"smaller reporting company" filer with the U.S.

Securities and Exchange Commission, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Upon adoption, the Company expects a change in the processes and procedures to calculate the allowance for loan losses, including changes in the assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model.

In addition, the current policy for OTTI on investment securities available for sale will be replaced with an allowance approach.

The Company is reviewing the requirements of ASU 2016-13 and has begun developing and implementing processes and procedures to help ensure that it is fully compliant with the amendments at the adoption date.

At this time, the Company anticipates that the allowance for loan losses will increase as a result of the implementation of this ASU;

however, until its evaluation is complete, the magnitude of the increase will be unknown.

The Company is reviewing the requirements of ASU 2016-13 and has begun developing and implementing processes and procedures to help ensure that it is fully compliant with ASU 2016-13 at the adoption date.

At this time, the Company anticipates that the allowance for loan losses will increase as a result of the implementation of ASU 2016-13;

however, until its evaluation is complete, the magnitude of this increase will be unknown.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other:

1 unchanged sentence

This ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test.

In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value of its assets and liabilities (including unrecognized assets and liabilities) at the impairment testing date following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

In computing the implied fair value of goodwill under Step 2, an entity has to perform procedures to determine the fair value of its assets and liabilities (including unrecognized assets and liabilities) at the impairment testing date following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An entity should recognize an impairment charge for the amount by

An entity would then recognize an impairment charge for the amount by

which the carrying amount exceeds the reporting unit's fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, an entity should consider income tax effects from any tax

deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, an entity would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2022.

The adoption ASU 2017-04 is not expected to a have a material impact on the Company's future consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the accounting for Income Taxes.

The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidelines.

ASU 2019-12 was effective for fiscal years beginning after December 15, 2020,

including interim periods within those fiscal years.

The Company adopted ASU 2019-12 effective October 1, 2021, and it did not have a material impact on the Company's consolidated financial statements.

The adoption ASU 2017-04 is not expected to have a material impact on the Company's future consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

3 unchanged sentences

This ASU is effective for all entities as of March 12, 2020 through December 31, 2024.

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

The Company has not adopted ASU 2020-04 as of December 31, 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):

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

3 unchanged sentences

(11) REVENUE FROM CONTRACTS WITH CUSTOMERS

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.

ASU 2014-09 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.

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 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.

For the three months ended December 31, 2022, the Company recognized $ 947,000 in service charges on deposits, $ 1.25 million in ATM and debit card interchange transaction fees, $ 30,000 in escrow fees, and $ 30,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the three months ended December 31, 2021, the Company recognized $ 913,000 in service charges on deposits, $ 1.28 million in ATM and debit card interchange transaction fees, $ 78,000 in escrow fees, and $ 2,000 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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Revenues are generally recognized on a monthly basis and are generally based on a percentage of the customer's assets under management or based on investment solutions that are implemented for the customer.

(12) COMMITMENTS AND CONTINGENT LIABILITIES

In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers.

These financial instruments include commitments to extend credit.

These instruments involve, to varying degrees, elements of credit risk not recognized in the consolidated balance sheets.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments.

The Bank uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Since commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Company evaluates each customer’s credit - worthiness on a case-by-case basis.

The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party.

However, such loan to value ratios will subsequently change, based on increases and decreases in the supporting collateral values.

Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, land and income-producing commercial properties.

A summary of the Company's commitments at December 31, 2022 and 2021 are listed below (in thousands):

December 31, 2022 December 31, 2021

Undisbursed portion of construction loans in process (see Note 4) $ 112,096 $ 106,009

Undisbursed lines of credit 133,932 129,456

Commitments to extend credit 14,126 14,205

$ 260,154 $ 249,670

The Company maintains a separate reserve for losses related to unfunded loan commitments.

Management estimates the amount of probable losses related to unfunded loan commitments by applying the loss factors used in the allowance for loan loss methodology to an estimate of the expected amount of funding and applies this adjusted factor to the unused portion of unfunded loan commitments.

The reserve for unfunded loan commitments totaled $ 320,000 and $ 362,000 at December 31, 2022 and 2021, respectively.

These amounts are included in other liabilities and accrued expenses in the accompanying consolidated balance sheets.

Increases (decreases) in the reserve for unfunded loan commitments are recorded in non-interest expense in the accompanying consolidated statements of income.

The Bank has an employee severance compensation plan which expires in 2027 and which provides severance pay benefits to eligible employees in the event of a change in control of Timberland Bancorp or the Bank (as defined in the plan).

In general, all employees with two or more years of service will be eligible to participate in the plan.

Under the plan, in the event of a change in control of Timberland Bancorp or the Bank, eligible employees who are terminated or who terminate employment (but only upon the occurrence of events specified in the plan) within 12 months of the effective date of a change in control would be entitled to a payment based on years of service or officer rank with the Bank.

The maximum payment for any eligible employee would be equal to 18 months of the employee’s current compensation.

Timberland Bancorp has entered into employment contracts with certain key employees, which provide for contingent payment subject to future events.

Because of the nature of its activities, the Company is subject to various pending and threatened legal actions which arise in the ordinary course of business.

In the opinion of management, liabilities arising from these claims, if any, will not have a material effect on the future consolidated financial position of the Company.

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