What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-09 · 144 added, 137 removed, 964 unchanged (23% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2023 and September 30, 2022

June 30, 2023 and September 30, 2022

(Dollars in thousands, except per share amounts)

29 unchanged sentences

Total deposits 1,552,730 1,632,176

FHLB borrowings 15,000 —

Operating lease liabilities 1,939 2,066

6 unchanged sentences

CONSOLIDATED BALANCE SHEETS (continued)

March 31, 2023 and September 30, 2022

June 30, 2023 and September 30, 2022

(Dollars in thousands, except per share amounts)

7 unchanged sentences

50,000,000 shares authorized;

8,203,174 shares issued and outstanding - March 31, 2023 8,221,952 shares issued and outstanding - September 30, 2022

8,094,174 shares issued and outstanding - June 30, 2023 8,221,952 shares issued and outstanding - September 30, 2022

35,401 38,751

8 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

For the three and six months ended March 31, 2023 and 2022

For the three and nine months ended June 30, 2023 and 2022

(Dollars in thousands, except per share amounts)

Three Months Ended March 31, Six Months Ended

Three Months Ended June 30, Nine Months Ended

2023 2022 2023 2022

14 unchanged sentences

Net recoveries on investment securities 2 5 7 16

Gain on sale of investment securities available for sale, net 95 — 95 —

Service charges on deposits 970 1,052 2,810 2,979

3 unchanged sentences

Escrow fees 27 41 85 164

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

Valuation recovery on MSRs — — — 119

Other, net 209 250 741 687

4 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (continued)

For the three and six months ended March 31, 2023 and 2022

For the three and nine months ended June 30, 2023 and 2022

(Dollars in thousands, except per share amounts)

Three Months Ended March 31, Six Months Ended

Three Months Ended June 30, Nine Months Ended

2023 2022 2023 2022

2 unchanged sentences

Premises and equipment 1,010 904 2,935 2,814

Gain on sales/dispositions of premises and equipment, net ( 32 ) ( 6 ) ( 32 ) —

Advertising 179 187 551 513

25 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three and six months ended March 31, 2023 and 2022

For the three and nine months ended June 30, 2023 and 2022

(Dollars in thousands)

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

1 unchanged sentence

Net income $ 6,306 $ 5,738 $ 20,476 $ 16,550

Other comprehensive income (loss)

Unrealized holding gain (loss) on investment securities available for sale, net of income taxes of $ 64 , $( 40 ), $ 58 and $( 45 ), respectively

Other comprehensive loss

Unrealized holding loss on investment securities available for sale, net of income taxes of $( 66 ) , $( 122 ), $( 8 ) and $( 167 ), respectively

( 249 ) ( 459 ) ( 29 ) ( 629 )

1 unchanged sentence

Accretion of OTTI on investment securities held to maturity, net of income taxes of $ 0 , $ 0 , $ 1 and $ 1 , respectively

Total other comprehensive income (loss), net of income taxes 240 ( 149 ) 222 ( 166 )

Total other comprehensive loss, net of income taxes ( 249 ) ( 458 ) ( 27 ) ( 624 )

Total comprehensive income $ 6,057 $ 5,280 $ 20,449 $ 15,926

3 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the three and six months ended March 31, 2023 and 2022

For the three and nine months ended June 30, 2023 and 2022

(Dollars in thousands, except per share amounts)

4 unchanged sentences

Earnings Total

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

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

Net income — — 5,738 — 5,738

5 unchanged sentences

Stock option compensation expense — 72 — — 72

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

Balance, March 31, 2023 8,203,174 $ 37,979 $ 190,177 $ ( 495 ) $ 227,661

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

Net income — — 6,306 — 6,306

Other comprehensive income — — — 240 240

Other comprehensive loss — — — ( 249 ) ( 249 )

Repurchase of common stock ( 110,000 ) ( 2,674 ) — — ( 2,674 )

3 unchanged sentences

Stock option compensation expense — 79 — — 79

Balance, March 31, 2023 8,203,174 $ 37,979 $ 190,177 $ ( 495 ) $ 227,661

Balance, June 30, 2023 8,094,174 $ 35,401 $ 194,606 $ ( 744 ) $ 229,263

Common Stock Accumulated

11 unchanged sentences

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

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

Net income — — 20,476 — 20,476

Other comprehensive income — — — 222 222

Other comprehensive loss — — — ( 27 ) ( 27 )

Repurchase of common stock ( 154,833 ) ( 4,119 ) — — ( 4,119 )

3 unchanged sentences

Stock option compensation expense — 235 — — 235

Balance, March 31, 2023 8,203,174 $ 37,979 $ 190,177 $ ( 495 ) $ 227,661

Balance, June 30, 2023 8,094,174 $ 35,401 $ 194,606 $ ( 744 ) $ 229,263

See notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended March 31, 2023 and 2022

For the nine months ended June 30, 2023 and 2022

(Dollars in thousands)

Six Months Ended March 31,

Nine Months Ended June 30,

Cash flows from operating activities

3 unchanged sentences

Depreciation 1,022 1,035

Deferred income taxes — 266

Deferred income taxes/(benefits) ( 77 ) 223

Accretion of discount on purchased loans ( 64 ) ( 154 )

1 unchanged sentence

Stock option compensation expense 235 204

Gain on sale of investment securities available for sale, net ( 95 ) —

Net recoveries on investment securities ( 7 ) ( 16 )

1 unchanged sentence

Amortization (accretion) of discounts and premiums on securities ( 922 ) 123

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

Gain on sales of loans, net ( 147 ) ( 1,337 )

Gain on sales/disposition of premises and equipment, net ( 32 ) —

Loans originated for sale ( 6,062 ) ( 47,199 )

7 unchanged sentences

Cash flows from investing activities

Net (increase) decrease in CDs held for investment 2,726 ( 137 )

Net decrease in CDs held for investment 5,963 4,594

Proceeds from sale of investment securities available for sale 8,929 —

Purchase of investment securities held to maturity ( 15,601 ) ( 167,671 )

5 unchanged sentences

Purchases of premises and equipment ( 711 ) ( 822 )

Proceeds from sales of premises and equipment 45 —

Proceeds from sales of OREO and other repossessed assets — 158

Net cash used in investing activities ( 135,596 ) ( 256,285 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the six months ended March 31, 2023 and 2022

For the nine months ended June 30, 2023 and 2022

(Dollars in thousands)

Six Months Ended March 31,

Nine Months Ended June 30,

Cash flows from financing activities

Net increase (decrease) in deposits $ ( 79,446 ) $ 93,559

Repayments of FHLB borrowings — ( 5,000 )

Proceeds from (repayments of) FHLB borrowings 15,000 ( 5,000 )

Proceeds from exercise of stock options 534 359

10 unchanged sentences

Supplemental disclosure of non-cash investing activities

Other comprehensive income (loss) related to investment securities $ 222 $ ( 166 )

Other comprehensive loss related to investment securities $ ( 27 ) $ ( 624 )

Operating lease liabilities arising from recording of ROU assets $ 71 $ —

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 six months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2023.

The unaudited consolidated results of operations for the nine months ended June 30, 2023 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 March 31, 2023 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, 2023 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, 2023 and September 30, 2022 (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, 2023 and September 30, 2022 (dollars in thousands):

Losses Estimated

March 31, 2023

June 30, 2023

Held to maturity

22 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 March 31, 2023 (dollars in thousands):

Held to maturity and available for sale investment securities with unrealized losses were as follows as of June 30, 2023 (dollars in thousands):

Less Than 12 Months 12 Months or Longer Total

34 unchanged sentences

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

Further, as of March 31, 2023, 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, 2023, 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, 2023 and 2022:

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, 2023 and 2022:

Range Weighted

Minimum Maximum Average

March 31, 2023

June 30, 2023

Constant prepayment rate 6.00 % 15.00 % 9.84 %

1 unchanged sentence

Loss severity rate — % 3.70 % 1.34 %

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 %

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, 2023 and 2022 (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, 2023 and 2022 (dollars in thousands):

Nine Months Ended

Beginning balance of credit loss $ 836 $ 853

4 unchanged sentences

Ending balance of credit loss $ 819 $ 842

During the six months ended March 31, 2023, the Company recorded a $ 9,000 net realized loss on 14 held to maturity investment securities all of which had been recognized previously as credit loss.

During the six months ended March 31, 2022, the Company recorded a $ 1,000 net realized gain on 14 held to maturity investment securities all of which had been recognized previously as 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 $ 215.33 million and $ 133.82 million at March 31, 2023 and September 30, 2022, respectively.

The contractual maturities of debt securities at March 31, 2023 were as follows (dollars in thousands).

During the nine months ended June 30, 2023, the Company recorded a $ 10,000 net realized loss on 14 held to maturity investment securities all of which had been recognized previously as credit loss.

During the nine months ended June 30, 2022, the Company recorded a $ 2,000 net realized gain on 16 held to maturity investment securities all of which had been recognized previously as 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 $ 204.13 million and $ 133.82 million at June 30, 2023 and September 30, 2022, respectively.

The contractual maturities of debt securities at June 30, 2023 were as follows (dollars in thousands).

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

23 unchanged sentences

Management's qualitative assessment takes into consideration macroeconomic conditions, industry and market considerations, cost or margin factors, financial performance and share price of the Company's common stock.

The Company performed its fiscal year 2022 goodwill impairment test during the quarter ended June 30, 2022.

The Company performed its fiscal year 2023 goodwill impairment test during the quarter ended June 30, 2023 with the assistance of an independent third-party firm specializing in goodwill impairment valuations for financial institutions.

Based on this assessment, the Company determined that it is not "more likely than not" that the Company's fair value is less than its carrying amount, and, therefore, goodwill was determined not to be impaired at May 31, 2023.

2 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 March 31, 2023, 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 June 30, 2023, management believes that there have been no events or changes in the circumstances since May 31, 2023 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.

1 unchanged sentence

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, 2023 and September 30, 2022 remained unchanged at $ 15.13 million.

The recorded amount of goodwill at June 30, 2023 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 March 31, 2023, 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, 2023, 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, 2023 and September 30, 2022 (dollars in thousands):

Loans receivable by portfolio segment consisted of the following at June 30, 2023 and September 30, 2022 (dollars in thousands):

2023 September 30,

26 unchanged sentences

_____________________________

(1) Does not include one- to four-family loans held for sale totaling $ 200 and $ 748 at March 31, 2023 and September 30, 2022, respectively.

Loans receivable at March 31, 2023 and September 30, 2022 are reported net of unamortized discounts totaling $ 225,000 and $ 267,000 , respectively.

(1) Does not include one- to four-family loans held for sale totaling $ 0 and $ 748 at June 30, 2023 and September 30, 2022, respectively.

Loans receivable at June 30, 2023 and September 30, 2022 are reported net of unamortized discounts totaling $ 203,000 and $ 267,000 , respectively.

Allowance for Loan Losses

The following tables set forth information for the three and six months ended March 31, 2023 and 2022 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):

Three Months Ended March 31, 2023

The following tables set forth information for the three and nine months ended June 30, 2023 and 2022 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):

Three Months Ended June 30, 2023

Allowance Provision for

16 unchanged sentences

Total $ 14,698 $ 610 $ ( 1 ) $ — $ 15,307

Six Months Ended March 31, 2023

Nine Months Ended June 30, 2023

Allowance Provision for

16 unchanged sentences

Total $ 13,703 $ 1,610 $ ( 7 ) $ 1 $ 15,307

Three Months Ended March 31, 2022

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

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, 2023 and September 30, 2022 (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, 2023 and September 30, 2022 (dollars in thousands):

Allowance for Loan Losses Recorded Investment in Loans

7 unchanged sentences

Impairment Total

March 31, 2023

June 30, 2023

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 March 31, 2023 and September 30, 2022 (dollars in thousands):

The following tables present an analysis of loans by aging category and portfolio segment at June 30, 2023 and September 30, 2022 (dollars in thousands):

Past Due 60-89

3 unchanged sentences

Past Due Current Total

March 31, 2023

June 30, 2023

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, 2023 and September 30, 2022, there were no loans classified as doubtful.

At June 30, 2023 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 March 31, 2023 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 March 31, 2023 and September 30, 2022 (dollars in thousands):

March 31, 2023 Pass Watch Special

At June 30, 2023 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 June 30, 2023 and September 30, 2022 (dollars in thousands):

June 30, 2023 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 March 31, 2023 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, 2023 and for the three and nine months then ended (dollars in thousands):

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

23 unchanged sentences

______________________________________________

(1) For the three months ended March 31, 2023 .

(2) For the six months ended March 31, 2023.

(1) For the three months ended June 30, 2023 .

(2) For the nine months ended June 30, 2023.

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):

38 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 $ 2.60 million and $ 2.62 million in TDRs included in impaired loans at March 31, 2023 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 March 31, 2023 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 six months ended March 31, 2023.

The following tables set forth information with respect to the Company’s TDRs by interest accrual status as of March 31, 2023 and September 30, 2022 (dollars in thousands):

March 31, 2023

The Company had $ 2.60 million and $ 2.62 million in TDRs included in impaired loans at June 30, 2023 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 June 30, 2023 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 nine months ended June 30, 2023.

The following tables set forth information with respect to the Company’s TDRs by interest accrual status as of June 30, 2023 and September 30, 2022 (dollars in thousands):

June 30, 2023

Accruing Non-

13 unchanged sentences

Total $ 2,472 $ 143 $ 2,615

There were no new TDRs recognized during the six months ended March 31, 2023.

There were no new TDRs recognized during the nine months ended June 30, 2023.

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:

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

September 30, 2022 Number of

5 unchanged sentences

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

At March 31, 2023, 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 .

At June 30, 2023, the Company has operating leases for three retail bank branch offices.

The Company's leases have remaining lease terms of two to eight years , and include options to extend the leases from two 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 and six months ended March 31, 2023 and 2022 (dollars in thousands):

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

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, 2023 and 2022 (dollars in thousands):

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

2023 2022 2023 2022

2 unchanged sentences

Total lease cost $ 87 $ 95 $ 261 $ 283

The following tables provide supplemental information related to operating leases at or for the three and six months ended March 31, 2023 and 2022 (dollars in thousands):

At or For the Three Months Ended March 31, 2023 At or For the

Six Months Ended

March 31, 2023

The following tables provide supplemental information related to operating leases at or for the three and nine months ended June 30, 2023 and 2022 (dollars in thousands):

At or For the Three Months Ended June 30, 2023 At or For the

Nine Months Ended

June 30, 2023

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

2 unchanged sentences

Weighted average discount rate-operating leases 2.34 % 2.34 %

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

Six Months Ended

March 31, 2022

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:

4 unchanged sentences

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 lease 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 March 31, 2023 for future fiscal years are as follows (dollars in thousands):

Maturities of operating lease liabilities at June 30, 2023 for future fiscal years are as follows (dollars in thousands):

Remainder of 2023 $ 82

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, 2023 and 2022 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, 2023 and 2022 is as follows (dollars in thousands, except per share amounts):

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

2023 2022 2023 2022

10 unchanged sentences

____________________________________________

(1) For the three and six months ended March 31, 2023, average options to purchase 176,867 and 177,484 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, 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.

(1) For the three and nine months ended June 30, 2023, average options to purchase 256,503 and 203,823 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, 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.

(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, 2023 and 2022 are as follows (dollars in thousands):

Three Months Ended March 31, 2023

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the three and nine months ended June 30, 2023 and 2022 are as follows (dollars in thousands):

Three Months Ended June 30, 2023

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 $ ( 486 ) $ ( 9 ) $ ( 495 )

Other comprehensive income 239 1 240

Other comprehensive loss ( 249 ) — ( 249 )

Balance of AOCI at the end of period $ ( 735 ) $ ( 9 ) $ ( 744 )

Six Months Ended March 31, 2023

Nine Months Ended June 30, 2023

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 $ ( 706 ) $ ( 11 ) $ ( 717 )

Other comprehensive income 220 2 222

Other comprehensive income (loss) ( 29 ) 2 ( 27 )

Balance of AOCI at the end of period $ ( 735 ) $ ( 9 ) $ ( 744 )

Three Months Ended March 31, 2022

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)

12 unchanged sentences

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, 2023, there were 1,796 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, 2023, there were 198,900 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, 2023 and 2022, there were no unvested restricted stock awards.

There were no restricted stock grants awarded during the six months ended March 31, 2023 and 2022.

Stock option activity for the six months ended March 31, 2023 and 2022 is summarized as follows:

Six Months Ended March 31, 2023 Six Months Ended March 31, 2022

At June 30, 2023, there were 4,796 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, 2023, there were 199,100 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, 2023 and 2022, there were no unvested restricted stock awards.

There were no restricted stock grants awarded during the nine months ended June 30, 2023 and 2022.

Stock option activity for the nine months ended June 30, 2023 and 2022 is summarized as follows:

Nine Months Ended June 30, 2023 Nine Months Ended June 30, 2022

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, 2023 were as follows:

The weighted average assumptions for options granted during the nine months ended June 30, 2023 were as follows:

Expected volatility 33 %

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Grant date fair value per share $ 8.65

The aggregate intrinsic value of options exercised during the six months ended March 31, 2023 and 2022 was $ 337,000 and $ 443,000 , respectively.

At March 31, 2023, there were 189,910 unvested options with an aggregate grant date fair value of $ 1.07 million, all of which the Company assumes will vest.

The aggregate intrinsic value of unvested options at March 31, 2023 was $ 371,000 .

There were 200 options vested during the six months ended March 31, 2023 with a total fair value of $ 1,000 .

At March 31, 2022, there were 178,670 unvested options with an aggregate grant date fair value of $ 847,000 .

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

Additional information regarding options outstanding at March 31, 2023 is as follows:

The aggregate intrinsic value of options exercised during the nine months ended June 30, 2023 and 2022 was $ 345,000 and $ 475,000 , respectively.

At June 30, 2023, there were 186,910 unvested options with an aggregate grant date fair value of $ 1.05 million, all of which the Company assumes will vest.

The aggregate intrinsic value of unvested options at June 30, 2023 was $ 313,000 .

There were 3,200 options vested during the nine months ended June 30, 2023 with a total fair value of $ 17,000 .

At June 30, 2022, there were 173,670 unvested options with an aggregate grant date fair value of $ 830,000 .

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

Additional information regarding options outstanding at June 30, 2023 is as follows:

Options Outstanding Options Exercisable

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388,070 $ 23.47 6.1 201,160 $ 21.31 4.2

The aggregate intrinsic value of options outstanding at March 31, 2023 and 2022 was $ 1.78 million and $ 2.17 million , respectively.

As of March 31, 2023, unrecognized compensation cost related to unvested stock options was $ 972,000 , which is expected to be recognized over a weighted average life of 5.00 years.

The aggregate intrinsic value of options outstanding at June 30, 2023 and 2022 was $ 1.58 million and $ 1.81 million , respectively.

As of June 30, 2023, unrecognized compensation cost related to unvested stock options was $ 893,000 , which is expected to be recognized over a weighted average life of 2.22 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, 2023 and September 30, 2022.

The Company's assets measured at estimated fair value on a recurring basis at March 31, 2023 and September 30, 2022 were as follows (dollars in thousands):

March 31, 2023 Estimated Fair Value

The Company had no liabilities measured at fair value on a recurring basis at June 30, 2023 and September 30, 2022.

The Company's assets measured at estimated fair value on a recurring basis at June 30, 2023 and September 30, 2022 were as follows (dollars in thousands):

June 30, 2023 Estimated Fair Value

Level 1 Level 2 Level 3 Total

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Total $ 835 $ 41,415 $ — $ 42,250

There were no transfers among Level 1, Level 2 and Level 3 during the six months ended March 31, 2023 and the year ended September 30, 2022.

There were no transfers among Level 1, Level 2 and Level 3 during the nine months ended June 30, 2023 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.

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

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at March 31, 2023 (dollars in thousands):

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at June 30, 2023 (dollars in thousands):

Estimated Fair Value

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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 March 31, 2023 (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, 2023 (dollars in thousands):

Fair Value Valuation

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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, 2023 and September 30, 2022.

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, 2023 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 March 31, 2023 and September 30, 2022 (dollars in thousands):

March 31, 2023

The recorded amounts and estimated fair values of financial instruments were as follows as of June 30, 2023 and September 30, 2022 (dollars in thousands):

June 30, 2023

Fair Value Measurements Using:

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

Loans held for sale 200 204 204 — —

Loans receivable, net 1,260,647 1,219,328 — — 1,219,328

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Certificates of deposit 251,313 248,541 — — 248,541

FHLB borrowings 15,000 14,665 — — 14,665

Accrued interest payable 881 881 881 — —

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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.

At this time, the Company does not expect the allowance for loan losses to materially change as a result of the implementation of ASU 2016-13 and expects to finalize the calculation in the first quarter of the fiscal year ending September 30, 2024.

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

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All of the Company's revenue from contracts with customers withi n the scope of ASC 606 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, 2023, the Company recognized $ 893,000 in service charges on deposits, $ 1.28 million in ATM and debit card interchange transaction fees, $ 29,000 in escrow fees, and $ 4,000 in fee income from non-deposit investment sales.

For the six months ended March 31, 2023, the Company recognized $ 1.84 million in service charges on deposits, $ 2.53 million in ATM and debit card interchange transaction fees, $ 59,000 in escrow fees and $ 34,000 in fee income from non-deposit investment sales.

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.

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 interchanges transaction fees, $ 123,000 in escrow fees, and $ 10,000 in fee income from non-deposit investment sales.

For the three months ended June 30, 2023, the Company recognized $ 970,000 in service charges on deposits, $ 1.34 million in ATM and debit card interchange transaction fees, $ 27,000 in escrow fees, and $ 1,000 in fee income from non-deposit investment sales.

For the nine months ended June 30, 2023, the Company recognized $ 2.81 million in service charges on deposits, $ 3.86 million in ATM and debit card interchange transaction fees, $ 85,000 in escrow fees and $ 35,000 in fee income from non-deposit investment sales.

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.

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 interchanges transaction fees, $ 164,000 in escrow fees, and $ 14,000 in fee income from non-deposit investment sales.

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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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 March 31, 2023 and 2022 are listed below (in thousands):

March 31, 2023 March 31, 2022

A summary of the Company's commitments at June 30, 2023 are listed below (in thousands):

June 30, 2023

Undisbursed portion of construction loans in process (see Note 4) $ 104,774

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Commitments to extend credit 29,881

$ 279,182 $ 256,599

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

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unfunded loan commitments.

The reserve for unfunded loan commitments totaled $ 320,000 and $ 345,000 at March 31, 2023 and 2022, respectively.

The reserve for unfunded loan commitments totaled $ 327,000 at June 30, 2023.

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 provides for 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).

The Bank has an employee severance compensation plan which expires in 2027 that provides for 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.

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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