What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2024-02-12 · 274 added, 164 removed, 935 unchanged (32% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

December 31, 2023 and September 30, 2023

March 31, 2024 and September 30, 2023

(Dollars in thousands, except per share amounts)

7 unchanged sentences

approximates fair value) 11,204 15,188

Investment securities held to maturity, at amortized cost (net of allowance for credit losses of $ 82 at December 31, 2023), (estimated fair value of $ 254,361 and $ 253,766 )

Investment securities held to maturity, at amortized cost (net of allowance for credit losses of $ 85 at March 31, 2024), (estimated fair value of $ 200,807 and $ 253,766 )

211,818 270,218

28 unchanged sentences

CONSOLIDATED BALANCE SHEETS (continued)

December 31, 2023 and September 30, 2023

March 31, 2024 and September 30, 2023

(Dollars in thousands, except per share amounts)

7 unchanged sentences

50,000,000 shares authorized;

8,120,708 shares issued and outstanding - December 31, 2023 8,105,338 shares issued and outstanding - September 30, 2023

8,023,121 shares issued and outstanding - March 31, 2024 8,105,338 shares issued and outstanding - September 30, 2023

32,338 34,771

8 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

For the three months ended December 31, 2023 and 2022

For the three and six months ended March 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended

2024 2023 2024 2023

Interest and dividend income

11 unchanged sentences

Provision for credit losses - loans 166 475 545 1,000

Recapture of credit losses - investment securities ( 10 ) —

Provision for (recapture of) credit losses - investment securities 3 — ( 7 ) —

Recapture of credit losses - unfunded commitments ( 88 ) — ( 121 ) —

14 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (continued)

For the three months ended December 31, 2023 and 2022

For the three and six months ended March 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended

2024 2023 2024 2023

Non-interest expense

8 unchanged sentences

Loan administration and foreclosure 134 138 239 259

Technology and telecommunication expenses 974 789

Technology and communications 1,040 880 2,014 1,668

Deposit operations 324 246 644 592

16 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three months ended December 31, 2023 and 2022

For the three and six months ended March 31, 2024 and 2023

(Dollars in thousands)

Three Months Ended

Three Months Ended March 31, Six Months Ended

2024 2023 2024 2023

Comprehensive income

Net income $ 5,708 $ 6,663 $ 12,004 $ 14,169

Other comprehensive income (loss)

Unrealized holding gain (loss) on investment securities available for sale, net of income taxes of $ 66 and $( 5 ), respectively

Other comprehensive income

Unrealized holding gain on investment securities available for sale, net of income taxes of $ 22 , $ 64 , $ 88 and $ 58 , respectively

82 239 330 220

Change in other than temporary impairment ("OTTI") on investment securities held to maturity, net of income taxes:

Accretion of OTTI on investment securities held to maturity, net of income taxes of $ 0 ,$ 0 , $ 2 , and $ 1 , respectively

Total other comprehensive income (loss), net of income taxes 257 ( 18 )

Total other comprehensive income, net of income taxes 82 240 339 222

Total comprehensive income $ 5,790 $ 6,903 $ 12,343 $ 14,391

3 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the three months ended December 31, 2023 and 2022

For the three and six months ended March 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

Number of Shares Amount Accumulated

Compre-hensive

Income (Loss)

Stock Retained

Earnings Total

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

Net income — — 6,663 — 6,663

Other comprehensive income — — — 240 240

Repurchase of common stock ( 34,263 ) ( 1,098 ) — — ( 1,098 )

Exercise of stock options 6,240 121 — — 121

Common stock dividends ($ 0.23 per common share)

— — ( 1,892 ) — ( 1,892 )

Stock -based compensation expense — 78 — — 78

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

Balance, December 31, 2023 8,120,708 $ 34,869 $ 203,327 $ ( 827 ) $ 237,369

Net income — — 5,708 — 5,708

Other comprehensive income — — — 82 82

Repurchase of common stock ( 99,787 ) ( 2,672 ) — — ( 2,672 )

Exercise of stock options 2,200 35 — — 35

Common stock dividends ($ 0.24 per common share)

— — ( 1,949 ) — ( 1,949 )

Stock-based compensation expense — 106 — — 106

Balance, March 31, 2024 8,023,121 $ 32,338 $ 207,086 $ ( 745 ) $ 238,679

Common Stock Accumulated

5 unchanged sentences

Net income — — 14,169 — 14,169

Other comprehensive loss — — — ( 18 ) ( 18 )

Other comprehensive income — — — 222 222

Repurchase of common stock ( 44,833 ) ( 1,445 ) — — ( 1,445 )

3 unchanged sentences

Stock-based compensation expense — 156 — — 156

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

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

Balance, September 30, 2023 8,105,338 $ 34,771 $ 199,386 $ ( 1,084 ) $ 233,073

8 unchanged sentences

— — ( 488 ) — ( 488 )

Balance, December 31, 2023 8,120,708 $ 34,869 $ 203,327 $ ( 827 ) $ 237,369

Balance, March 31, 2024 8,023,121 $ 32,338 $ 207,086 $ ( 745 ) $ 238,679

See notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended December 31, 2023 and 2022

For the six months ended March 31, 2024 and 2023

(Dollars in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

Cash flows from operating activities

14 unchanged sentences

BOLI net earnings ( 312 ) ( 313 )

Increase in deferred loan origination fees 95 211

Increase (decrease) in deferred loan origination fees ( 63 ) 438

Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses ( 3,042 ) ( 1,269 )

1 unchanged sentence

Cash flows from investing activities

Net decrease (increase) in CDs held for investment 2,739 ( 498 )

Net decrease in CDs held for investment 3,984 2,726

Purchase of investment securities held to maturity ( 1,919 ) ( 15,602 )

2 unchanged sentences

Proceeds from maturities and prepayments of investment securities available for sale 2,667 3,921

Purchase of FHLB stock — ( 8 )

Redemption of FHLB stock 1,565 —

6 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the three months ended December 31, 2023 and 2022

For the six months ended March 31, 2024 and 2023

(Dollars in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

Cash flows from financing activities

10 unchanged sentences

Supplemental disclosure of cash flow information

Income taxes paid $ 3,388 $ 4,634

Interest paid $ 13,473 $ 3,214

Supplemental disclosure of non-cash investing activities

Other comprehensive income (loss) related to investment securities $ 257 $ ( 18 )

Other comprehensive income related to investment securities $ 339 $ 222

Adjustment to retained earnings, net of deferred tax;

11 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, 2023 (“2023 Form 10-K”).

The unaudited consolidated results of operations for the three months ended December 31, 2023 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2024.

The unaudited consolidated results of operations for the six months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2024.

(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 December 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 March 31, 2024 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 December 31, 2023 and September 30, 2023 (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 March 31, 2024 and September 30, 2023 (dollars in thousands):

Losses Estimated

Fair Value Allowance for Credit Losses ("ACL")

December 31, 2023

March 31, 2024

Held to Maturity

7 unchanged sentences

Total held to maturity $ 211,818 $ 331 $ ( 11,342 ) $ 200,807 $ 85

December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

March 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Available for Sale

8 unchanged sentences

Municipal securities 1,787 — ( 47 ) 1,740

Bank issues trust preferred securities 500 — ( 51 ) 449

Bank issued trust preferred securities 500 — ( 51 ) 449

Total $ 270,218 $ 295 $ ( 16,747 ) $ 253,766

2 unchanged sentences

$ 43,132 $ — $ ( 1,361 ) $ 41,771

Held to maturity and available for sale investment securities with unrealized losses were as follows as of December 31, 2023 (dollars in thousands):

Held to maturity and available for sale investment securities with unrealized losses were as follows as of March 31, 2024 (dollars in thousands):

Less Than 12 Months 12 Months or Longer Total

30 unchanged sentences

$ 10,635 $ ( 308 ) 3 $ 30,809 $ ( 1,053 ) 27 $ 41,444 $ ( 1,361 )

During the three months ended December 31, 2023, the Company recorded a $ 1,000 net realized loss on 13 held to maturity investment securities all of which had been recognized previously as credit loss.

During the three months ended December 31, 2022, the Company recorded a $ 7,000 net realized loss 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 $ 204.13 million and $ 201.82 million at December 31, 2023 and September 30, 2023, respectively.

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

During the six months ended March 31, 2024, the Company had no net realized losses on held to maturity investment securities.

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.

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 $ 230.46 million and $ 201.82 million at March 31, 2024 and September 30, 2023, respectively.

The contractual maturities of debt securities at March 31, 2024 were as follows (dollars in thousands).

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

11 unchanged sentences

The Company assesses each available for sale investment security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis results from a credit loss or other factors.

The Company did not record an ACL on any available for sale debt securities at December 31, 2023 or upon adoption of ASU 2016-13 on October 1, 2023.

The Company did not record an

ACL on any available for sale debt securities at March 31, 2024 or upon adoption of ASU 2016-13 on October 1, 2023.

As of both dates, the Company considered the unrealized losses across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value.

The Company expects the fair value of these securities to recover as the securities approach their maturity dates or sooner if market yields for such securities decline.

The Company does not believe that these securities are other than temporarily impaired because of their credit quality or related to any issuer or industry specific event.

The Company does not believe that these securities are impaired because of their credit quality or related to any issuer or industry specific event.

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

9 unchanged sentences

The calculation is completed on a quarterly basis using the default studies provided by an industry leading source.

At December 31, 2023, the allowance for credit losses on the held to maturity securities portfolio totaled $ 82,000 .

The following table sets forth information for the three months ended December 31, 2023 regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended December 31, 2023

At March 31, 2024, the ACL on the held to maturity securities portfolio totaled $ 85,000 .

The following tables set forth information for the three and six months ended March 31, 2024 regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended March 31, 2024

Held to Maturity Beginning Allowance Impact of Adopting CECL (ASU 2016-13) Provision for (Recapture of) Credit Losses Ending Allowance

2 unchanged sentences

Total $ 82 $ — $ 3 $ 85

Six Months Ended March 31, 2024

Beginning Allowance Impact of Adopting CECL (ASU 2016-13) Provision for (Recapture of) Credit Losses Ending Allowance

Held to Maturity

Private label residential — 82 ( 5 ) 77

Bank issued trust preferred securities — 10 ( 2 ) 8

Total $ — $ 92 $ ( 7 ) $ 85

The ACL on held to maturity investment securities is included within investment securities held to maturity on the consolidated balance sheets.

Changes in the ACL are recorded within provision for (recapture of) credit losses on the consolidated income statement.

Accrued interest receivable on held to maturity investment securities totaled $ 908,000 at December 31, 2023 and is included

within accrued interest income receivable on the consolidated balance sheet.

Changes in the ACL are recorded through the provision for (recapture of) credit losses on the consolidated income statement.

Accrued interest receivable on held to maturity investment securities totaled $ 665,000 at March 31, 2024 and is included

in accrued interest income receivable on the consolidated balance sheet.

This amount is excluded from the estimate

5 unchanged sentences

credited to income is reversed.

The Company had $ 85,000 of private label mortgage-backed held to maturity investment securities in non-accrual status at December 31, 2023.

The Company had $ 79,000 of private label mortgage-backed held to maturity investment securities in non-accrual status at March 31, 2024.

The Company monitors the credit quality of debt securities held to maturity through the use of credit ratings from Moody's, S&P and Fitch.

The Company monitors the credit ratings on a quarterly basis.

The following table sets forth the Company's held to maturity investment securities at December 31, 2023 by credit quality indicator:

The following table sets forth the Company's held to maturity investment securities at March 31, 2024 by credit quality indicator:

Credit Ratings

As of December 31, 2023 AAA/AA/A BBB/BB/B Unrated Total

As of March 31, 2024 AAA/AA/A BBB/BB/B Unrated Total

Held to Maturity

1 unchanged sentence

government agency securities $ 122,087 $ — $ — $ 122,087

Mortgage-backed securities ("MBS"):

government agencies 52,218 — — 52,218

8 unchanged sentences

The amounts written off due to credit loss remain and continue to be recovered on a cash basis.

The following table presents a roll forward of the credit loss component of held to maturity debt securities that have been written down for OTTI with the credit loss component recognized in earnings for the three months ended December 31, 2023 and 2022 (dollars in thousands):

Three Months Ended

The following table presents a roll forward of the credit loss component of held to maturity debt securities that have been written down for OTTI with the credit loss component recognized in earnings for the six months ended March 31, 2024 and 2023 (dollars in thousands):

Six Months Ended

Beginning balance of credit loss $ 816 $ 836

11 unchanged sentences

If the Company's qualitative assessment concluded that it is "more likely than not" that the fair value of its reporting unit is less than its carrying amount, it must perform the two-step impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized, if any.

The first step of the goodwill impairment test compares the estimated fair

value of the reporting unit with its carrying amount, or the book value, including goodwill.

If the estimated fair value of the reporting unit equals or exceeds its book value, goodwill is considered not impaired, and the second step of the impairment test is unnecessary.

The first step of the goodwill impairment test compares the estimated fair value of the reporting unit with its carrying amount, or the book value, including goodwill.

If the estimated fair value of the

reporting unit equals or exceeds its book value, goodwill is considered not impaired, and the second step of the impairment test is unnecessary.

The second step, if necessary, measures the amount of goodwill impairment loss to be recognized.

13 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 December 31, 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.

As of March 31, 2024, 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 December 31, 2023 and September 30, 2023 remained unchanged at $ 15.13 million.

The recorded amount of goodwill at March 31, 2024 and September 30, 2023 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 December 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 March 31, 2024, 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 CREDIT LOSSES

Loans receivable by portfolio segment consisted of the following at December 31, 2023 and September 30, 2023 (dollars in thousands):

Loans receivable by portfolio segment consisted of the following at March 31, 2024 and September 30, 2023 (dollars in thousands):

2024 September 30,

26 unchanged sentences

_____________________________

(1) Does not include one- to four-family loans held for sale totaling $ 1,425 and $ 400 at December 31, 2023 and September 30, 2023, respectively.

Loans receivable at December 31, 2023 and September 30, 2023 are reported net of unamortized discounts totaling $ 182,000 and $ 192,000 , respectively.

(1) Does not include one- to four-family loans held for sale totaling $ 1.31 million and $ 400,000 at March 31, 2024 and September 30, 2023, respectively.

Loans receivable at March 31, 2024 and September 30, 2023 are reported net of unamortized discounts totaling $ 172,000 and $ 192,000 , respectively.

Credit Quality Indicators

1 unchanged sentence

The Company categorizes loans into risk grade categories based on relevant information about the ability of borrowers to service their debt such as:

current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors such as the estimated fair value of the collateral.

current financial information, historical payment experience, credit documentation, public information and current economic

trends, among other factors such as the estimated fair value of the collateral.

The Company uses the following definitions for credit risk ratings as part of the on-going monitoring of the credit quality of its loan portfolio:

10 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 December 31, 2023 and September 30, 2023, there were no loans classified as doubtful.

At March 31, 2024 and September 30, 2023, 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 December 31, 2023 and September 30, 2023, there were no loans classified as loss.

The following table sets forth the Company's loan portfolio at December 31, 2023 by risk attribute and year of origination as well as current period gross charge-offs (dollars in thousands):

At March 31, 2024 and September 30, 2023, there were no loans classified as loss.

The following table sets forth the Company's loan portfolio at March 31, 2024 by risk attribute and year of origination as well as current period gross charge-offs (dollars in thousands):

Term Loans Amortized Cost Basis by Origination Fiscal Year

2 unchanged sentences

Pass $ 4,294 $ 41,193 $ 116,309 $ 50,922 $ 19,551 $ 41,984 $ — $ 274,253

Watch — 1,800 — — — — — 1,800

Substandard — — — — — 380 — 380

5 unchanged sentences

Watch — — — — 3,094 10,648 — 13,742

Special Mention — — — — — 4,401 — 4,401

Substandard — — — — — 5,864 — 5,864

27 unchanged sentences

Total home equity $ 2,676 $ 5,190 $ 2,053 $ 319 $ 717 $ 2,697 $ 28,705 $ 42,357

Term Loans Amortized Cost Basis by Origination Fiscal Year

Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable

Other consumer

3 unchanged sentences

Current period gross write-offs $ 3 $ 1 $ — $ — $ — $ — $ 2 $ 6

Term Loans Amortized Cost Basis by Origination Fiscal Year

Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable

Commercial business

8 unchanged sentences

Watch — 2,768 1,262 2,671 3,589 11,633 256 22,179

Special Mention — — — — — 4,401 — 4,401

Substandard — 1,475 — 152 — 6,791 — 8,418

3 unchanged sentences

The Company adopted the new accounting standard for the ACL, commonly referred to as the current expected credit losses ("CECL") methodology, as of October 1, 2023.

All disclosures as of and for the three months ended December 31, 2023 are presented in accordance with the new accounting standard.

All disclosures as of and for the three and six months ended March 31, 2024 are presented in accordance with the new accounting standard.

The comparative financial periods prior to the adoption of this new accounting standard are presented and disclosed under previously applicable GAAP's incurred loss methodology, which is not directly comparable to the new, CECL methodology.

See also Note 10, Recent Accounting Pronouncements.

As a result of implementing this new accounting standard, there was a one-time adjustment to the fiscal year 2024 opening allowance balance of $ 461,000 related to loans held for for investment.

As a result of implementing this new accounting standard, there was a one-time adjustment to the fiscal year 2024 opening allowance balance of $ 461,000 related to loans held for investment.

The Company elected not to measure an ACL for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful.

4 unchanged sentences

The Company estimates the expected credit losses over the loans' contractual terms, adjusted for expected prepayments.

The ACL calculation is

calculated for loan segments utilizing loan level information and relevant information from internal and external sources related to past events and current conditions.

The ACL is calculated for loan segments utilizing loan level information and relevant information from internal and external sources related to past events and current conditions.

Management has adopted the discounted cash flow ("DCF") methodology for all segments.

2 unchanged sentences

Prepayments are established for each segment based on historical averages for the segments, which management believes is an accurate presentation of future prepayment activity.

Loans that do not share common risk characteristics with other loans are evaluated individually and are not included in the collective analysis.

Loans that are evaluated individually are not included in the collective analysis.

The ACL on loans that are individually evaluated may be estimated based on their expected cash flows, or in the case of loans for which repayment is expected substantially through the operation or sale of collateral when the borrower is experiencing financial difficulty, may be measured based on the fair value of the collateral less estimated selling costs.

9 unchanged sentences

Loss rates used by the Company are affected as changes in these factors increase or decrease from quarter to quarter.

In addition, regulatory agencies, as integral part of their examination process, periodically review the Company's allowance for credit losses and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

The following tables set forth information for the three months ended December 31, 2023 and 2022 regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended December 31, 2023

Allowance Impact of Adopting CECL (ASU 2016-13) Provision for

In addition, regulatory agencies, as integral part of their examination process, periodically review the Company's ACL and may require the Company to make additions to the ACL based on their judgment about information available to them at the time of their examinations.

The following tables set forth information for the three and six months ended March 31, 2024 and 2023 regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended March 31, 2024

Allowance Provision for

(Recapture of) Credit Losses Charge-

15 unchanged sentences

Total $ 16,655 $ 166 $ ( 4 ) $ 1 $ 16,818

Three Months Ended December 31, 2022

Six Months Ended March 31, 2024

Allowance Impact of Adopting CECL (ASU 2016-13) Provision for

(Recapture of) Loan Losses Charge-

offs Recoveries Ending

Mortgage loans:

One-to four-family $ 2,417 $ ( 408 ) $ 176 $ — $ — $ 2,185

Multi-family 1,156 ( 120 ) 322 — — 1,358

Commercial 7,209 ( 494 ) 239 — — 6,954

Construction – custom and owner/builder 750 542 ( 77 ) — — 1,215

Construction – speculative one- to four-family 148 ( 16 ) 10 — — 142

Construction – commercial 316 176 ( 41 ) — — 451

Construction – multi-family 602 204 ( 328 ) — — 478

Construction – land development 274 25 ( 44 ) — — 255

Land 406 318 116 — — 840

Consumer loans:

Home equity and second mortgage 519 ( 243 ) 29 — — 305

Other 53 ( 7 ) 5 ( 6 ) — 45

Commercial business loans 1,967 484 138 — 1 2,590

Total $ 15,817 $ 461 $ 545 $ ( 6 ) $ 1 $ 16,818

Three Months Ended March 31, 2023

Allowance Provision for

16 unchanged sentences

Total $ 14,229 $ 475 $ ( 6 ) $ — $ 14,698

Six Months Ended March 31, 2023

Allowance Provision for

(Recapture of) Loan Losses Charge-

offs Recoveries Ending

Mortgage loans:

One-to four-family $ 1,658 $ 394 $ — $ — $ 2,052

Multi-family 855 83 — — 938

Commercial 6,682 222 — — 6,904

Construction – custom and owner/builder 675 51 — — 726

Construction – speculative one- to four-family 130 ( 9 ) — — 121

Construction – commercial 343 ( 76 ) — — 267

Construction – multi-family 447 215 — — 662

Construction – land development 233 12 — — 245

Land 397 ( 34 ) — — 363

Consumer loans:

Home equity and second mortgage 440 67 — — 507

Other 42 6 ( 1 ) — 47

Commercial business loans 1,801 69 ( 5 ) 1 1,866

Total $ 13,703 $ 1,000 $ ( 6 ) $ 1 $ 14,698

The following tables present information on the allowance for loan losses by portfolio segment at September 30, 2023 prior to the adoption of ASU 2016-13 (dollars in thousands):

Allowance for Credit Losses Recorded Investment in Loans

Allowance for Loan Losses Recorded Investment in Loans

Evaluated for

30 unchanged sentences

Generally, payments received on non-accrual loans are applied to reduce the outstanding principal balance of the loan.

At times interest may be accounted for on a cash basis, depending on the collateral value and the borrowers payment history.

A loan is generally not removed from non-accrual until all delinquent principal, interest and late fees have been brought current and the borrower demonstrates repayment ability over a a period of not less than six months and all taxes are current.

The following tables present an analysis of loans by aging category and portfolio segment at December 31, 2023 and September 30, 2023 (dollars in thousands):

At times interest may be accounted for on a cash basis, depending on the collateral value and the borrower's payment history.

A loan is generally not removed from non-accrual until all delinquent principal, interest and late fees have been brought current and the borrower demonstrates repayment ability over a period of not less than six months and all taxes are current.

The following tables present an analysis of loans by aging category and portfolio segment at March 31, 2024 and September 30, 2023 (dollars in thousands):

Past Due 60-89

3 unchanged sentences

Past Due Current Total

December 31, 2023

March 31, 2024

Mortgage loans:

58 unchanged sentences

Total $ 1,299,220 $ 17,758 $ — $ 6,386 $ 1,323,364

At December 31, 2023, the Company had $ 1.72 million of non-accrual loans with an ACL of $ 319,000 and $ 1.65 million of non-accrual loans with no ACL.

The following table is a summary of the amortized cost of collateral dependent non-accrual loans as of December 31, 2023 (in thousands):

At March 31, 2024, the Company had $ 2.21 million of non-accrual loans with an ACL of $ 361,000 and $ 1.40 million of non-accrual loans with no ACL.

The following table is a summary of the amortized cost of collateral dependent non-accrual loans as of March 31, 2024 (in thousands):

Recorded Investment Related ACL

2 unchanged sentences

Commercial 1,149 28

Construction - custom & owner/builder 150 —

Construction - custom and owner/builder 152 —

Consumer loans:

Home equity & second mortgage 171 —

Home equity and second mortgage 165 —

Commercial business loans 1,759 333

25 unchanged sentences

With an allowance recorded:

Mortgage loans:

Commercial business loans 245 245 123 247 — —

11 unchanged sentences

(1) For the year ended September 30, 2023 .

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

The following table is a summary of information related to impaired loans by portfolio segment prior to the adoption of CECL as of March 31, 2023 and for three and six months then ended (dollars in thousands):

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

Allowance YTD

Investment (1) YTD Interest

(1) YTD Cash Basis Interest Income Recognized (1)

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)

With no related allowance recorded:

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_____________________________________________

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

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

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

Troubled debt restructurings ("TDRs")

2 unchanged sentences

This ASU eliminated the accounting guidance for TDR loans for creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty.

No loans to borrowers experiencing financial difficulty were modified in the three months ended December 31, 2023.

At December 31, 2022, the Company had $ 2.58 million of TDRs, all of which were paying as agreed.

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

No loans to borrowers experiencing financial difficulty were modified in the three and six months ended March 31, 2024 and 2023.

At March 31, 2023, the Company had $ 2.60 million of TDRs, all of which were paying as agreed.

There were no defaults in these loans during the six months ended March 31, 2024 and 2023.

In accordance with the Company's policy guidelines, unsecured loans are generally charged-off when no payments have been received for three consecutive months unless an alternative action plan is in effect.

3 unchanged sentences

Regardless of whether a loan is unsecured or collateralized, once an amount is determined to be a confirmed loan loss it is promptly charged off.

At December 31, 2023, the Company has operating leases for two retail bank branch offices and an administrative office.

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 .

At March 31, 2024, the Company has operating leases for two retail bank branch offices and an administrative office.

The Company's leases have remaining lease terms of two to seven 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 operating lease ROU assets and lease 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, 2023 and 2022 (dollars in thousands):

Three Months Ended December 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 six months ended March 31, 2024 and 2023 (dollars in thousands):

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

2024 2023 2024 2023

Operating lease cost $ 92 $ 85 $ 185 $ 174

1 unchanged sentence

Total lease cost $ 92 $ 85 $ 185 $ 174

The following tables provide supplemental information related to operating leases at or for the three months ended December 31, 2023 and year ended September 30, 2023 (dollars in thousands):

At or For the Three Months Ended December 31, 2023 At or For the Year Ended September 30, 2023

The following tables provide supplemental information related to operating leases at or for the three and six months ended March 31, 2024 and 2023 (dollars in thousands):

At or For the Three Months Ended March 31, 2024 At or For the Six Months Ended March 31, 2024

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

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

Operating cash flows from operating leases $ 78 $ 155

Weighted average remaining lease term-operating leases 7.2 years 7.2 years

Weighted average discount rate-operating leases 2.25 % 2.25 %

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

Maturities of operating lease liabilities at March 31, 2024 for future fiscal years are as follows (dollars in thousands):

Remainder of 2024 $ 167

8 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 months ended December 31, 2023 and 2022 is as follows (dollars in thousands, except per share amounts):

Three Months Ended December 31,

Information regarding the calculation of basic and diluted net income per common share for the three and six months ended March 31, 2024 and 2023 is as follows (dollars in thousands, except per share amounts):

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

2024 2023 2023 2023

Basic net income per common share computation

9 unchanged sentences

____________________________________________

(1) For the three months ended December 31, 2023 and 2022, average options to purchase 214,595 and 182,000 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 six months ended March 31, 2024, average options to purchase 244,030 and 229,232 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, 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 be anti-dilutive.

(7) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the three months ended December 31, 2023 and 2022 are as follows (dollars in thousands):

Three Months Ended December 31, 2023

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the three and six months ended March 31, 2024 and 2023 are as follows (dollars in thousands):

Three Months Ended March 31, 2024

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 $ ( 745 ) $ — $ ( 745 )

Three Months Ended December 31, 2022

Six Months Ended March 31, 2024

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 $ ( 1,075 ) $ ( 9 ) $ ( 1,084 )

Other comprehensive income (loss) ( 19 ) 1 ( 18 )

Other comprehensive income 330 9 339

Balance of AOCI at the end of period $ ( 745 ) $ — $ ( 745 )

Three Months Ended March 31, 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 $ ( 725 ) $ ( 10 ) $ ( 735 )

Other comprehensive income 239 1 240

Balance of AOCI at the end of period $ ( 486 ) $ ( 9 ) $ ( 495 )

Six Months Ended March 31, 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

Balance of AOCI at the end of period $ ( 486 ) $ ( 9 ) $ ( 495 )

__________________________

1 unchanged sentence

(8) STOCK COMPENSATION PLANS

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.

3 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 December 31, 2023, there were 7,816 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, 2023, there were 178,650 shares of common stock available which may be awarded as options or restricted stock pursuant to future grant under the 2019 Equity Incentive Plan.

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

Three Months Ended December 31, 2023 Three Months Ended December 31, 2022

At March 31, 2024, there were 9,356 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, 2024, there were 181,870 shares of common stock available which may be awarded as options or restricted stock pursuant to future grant under the 2019 Equity Incentive Plan.

Stock option activity for the six months ended March 31, 2024 and 2023 is summarized as follows:

Six Months Ended March 31, 2024 Six Months Ended March 31, 2023

Number of Shares Weighted

2 unchanged sentences

Exercised ( 29,900 ) 13.03 ( 26,055 ) 19.88

Granted — — 1,000 33.40

Forfeited ( 10,140 ) 25.71 ( 4,600 ) 27.38

1 unchanged sentence

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

There were no stock options granted during the three months ended December 31, 2023 and 2022.

The aggregate intrinsic value of options exercised during the three months ended December 31, 2023 and 2022 was $ 469,000 and $ 244,000 , respectively.

At December 31, 2023, there were 124,640 unvested options with an aggregate grant date fair value of $ 725,000 , all of which the Company assumes will vest.

The aggregate intrinsic value of unvested options at December 31, 2023 was $ 704,000 .

There were 100 options that vested during the three months ended December 31, 2023 with a total fair value of $ 326 .

At December 31, 2022, there were 191,710 unvested options with an aggregate grant date fair value of $ 1.08 million.

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

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

There were no stock options granted during the six months ended March 31, 2024.

The weighted average assumptions for options granted during the six months ended March 31, 2023 were as follows:

Expected volatility 33 %

Expected life (in years) 5

Expected dividend yield 2.99 %

Risk free interest rate 3.58 %

Grant date fair value per share $ 8.65

The aggregate intrinsic value of options exercised during the six months ended March 31, 2024 and 2023 was $ 499,000 and $ 337,000 , respectively.

At March 31, 2024, there were 121,820 unvested options with an aggregate grant date fair value of $ 709,000 , all of which the Company assumes will vest.

The aggregate intrinsic value of unvested options at March 31, 2024 was $ 217,000 .

There were 300 options that vested during the six months ended March 31, 2024 with a total fair value of $ 2,000 .

At March 31, 2023, there were 189,910 unvested options with an aggregate grant date fair value of $ 1.07 million.

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

Additional information regarding options outstanding at March 31, 2024 is as follows:

Options Outstanding Options Exercisable

9 unchanged sentences

329,110 $ 24.95 5.8 207,290 $ 24.43 4.7

The aggregate intrinsic value of options outstanding at December 31, 2023 and 2022 was $ 2.22 million and $ 4.28 million , respectively.

As of December 31, 2023, unrecognized compensation cost related to unvested stock options was $ 711,000 , which is expected to be recognized over a weighted average life of 2.02 years.

At December 31, 2023, there were 26,150 unvested restricted stock awards.

At December 31, 2022, there were no unvested restricted stock awards.

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

The aggregate intrinsic value of options outstanding at March 31, 2024 and 2023 was $ 1.06 million and $ 1.78 million , respectively.

As of March 31, 2024, unrecognized compensation cost related to unvested stock options was $ 645,000 , which is expected to be recognized over a weighted average life of 1.90 years.

At March 31, 2024, there were 26,150 unvested restricted stock awards.

At March 31, 2023, there were no unvested restricted stock awards.

There were no restricted stock grants awarded during the six months ended March 31, 2024 and 2023.

Number of Unvested Shares Weighted Average Grant Date Fair Value

1 unchanged sentence

Forfeited — —

Outstanding, December 31, 2023 26,150 $ 27.37

Outstanding, March 31, 2024 26,150 $ 27.37

The fair value of restricted stock awards is equal to the fair value of the Company's stock on the date of the grant.

The related stock-based compensation expense is recorded over the requisite service period.

At December 31, 2023, unrecognized compensation cost related to unvested restricted stock awards was $ 676,000 , which is expected to be recognized over a weighted average period of 2.78 years.

At March 31, 2024, unrecognized compensation cost related to unvested restricted stock awards was $ 636,000 , which is expected to be recognized over a weighted average period of 2.23 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 December 31, 2023 and September 30, 2023.

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

December 31, 2023 Estimated Fair Value

The Company had no liabilities measured at fair value on a recurring basis at March 31, 2024 and September 30, 2023.

The Company's assets measured at estimated fair value on a recurring basis at March 31, 2024 and September 30, 2023 were as follows (dollars in thousands):

March 31, 2024 Estimated Fair Value

Level 1 Level 2 Level 3 Total

11 unchanged sentences

Total $ 811 $ 41,771 $ — $ 42,582

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

There were no transfers among Level 1, Level 2 and Level 3 during the six months ended March 31, 2024 and the year ended September 30, 2023.

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.

10 unchanged sentences

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

Estimated Fair Value

December 31, 2023 Level 1 Level 2 Level 3

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at March 31, 2024 and September 30, 2023 (dollars in thousands):

Estimated Fair Value Total Estimated

March 31, 2024 Level 1 Level 2 Level 3 Fair Value

Individually evaluated loans:

Mortgage loans:

Commercial $ — $ — $ 460 $ 460

Commercial business loans — — 1,387 1,387

Total $ — $ — $ 1,847 $ 1,847

Estimated Fair Value

September 30, 2023 Level 1 Level 2 Level 3

Estimated Fair Value Total Estimated

September 30, 2023 Level 1 Level 2 Level 3 Fair Value

Impaired loans:

1 unchanged sentence

Total $ — $ — $ 122 $ 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 December 31, 2023 and September 30, 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 March 31, 2024 and September 30, 2023 (dollars in thousands):

Technique(s) Unobservable Input(s) Range

5 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 December 31, 2023 and September 30, 2023.

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, 2024 and September 30, 2023.

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

December 31, 2023

The recorded amounts and estimated fair values of financial instruments were as follows as of March 31, 2024 and September 30, 2023 (dollars in thousands):

March 31, 2024

Fair Value Measurements Using:

35 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 required 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.

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

ASU 2016-13 also changed the accounting for PCI debt securities and loans.

2 unchanged sentences

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

Upon adoption, the Company experienced changes in the processes and procedures to calculate the allowance for credit losses, including changes in the assumptions and estimates to consider expected credit losses over the life of the loan versus the accounting practices that were utilized with the incurred loss model.

Upon adoption, the Company experienced changes in the processes and procedures to calculate the ACL, including changes in the assumptions and estimates to consider expected credit losses over the life of the loan versus the accounting practices that were utilized with the incurred loss model.

In addition, the prior policy for OTTI on investment securities available for sale was replaced with an allowance approach.

On October 1, 2023, the Company adopted this ASU, which resulted in a net of tax charge of $ 488,000 to retained earnings, a $ 461,000 increase to the allowance for credit losses on loans, a $ 92,000 increase to credit losses on investment securities, and a $ 65,000 increase to credit losses on unfunded commitments for the cumulative effect of adopting this guidance.

For more information related to the implementation, see Note 4 Loans Receivable and Allowance for Credit Losses, Note 2 Investment Securities and Note 12 Commitment and Contingent Liabilities.

On October 1, 2023, the Company adopted this ASU, which resulted in a net of tax charge of $ 488,000 to retained earnings, a $ 461,000 increase to the ACL on loans, a $ 92,000 increase to ACL on investment securities, and a $ 65,000 increase to ACL on unfunded commitments for the cumulative effect of adopting this guidance.

For more information related to the implementation, see Note 4 Loans Receivable and Allowance for Credit Losses, Note 2 Investment Securities and Note 12 Commitments and Contingent Liabilities.

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

9 unchanged sentences

The adoption of ASU 2017-04 did not have a material impact on the Company's consolidated financial statements.

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

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASU 2016-13):

Troubled Debt Restructurings and Vintage Disclosures.

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

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

This ASU is effective upon adoption of ASU 2016-13.

On October 1, 2023, the Company adopted this ASU at the same time ASU 2016-13 was adopted.

The Company had no recoveries and write offs of $ 2,000 for the three months ended December 31, 2023.

The Company had $ 1,000 in recoveries and $ 6,000 of write offs for the six months ended March 31, 2024.

(11) REVENUE FROM CONTRACTS WITH CUSTOMERS

2 unchanged sentences

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 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 December 31, 2023, the Company recognized $ 1.02 million in service charges on deposits, $ 1.26 million in ATM and debit card interchange transaction fees, $ 19,000 in escrow fees, and $ 2,000 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 of the Company's revenue from contracts with customers within 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, 2024, the Company recognized $ 988,000 in service charges on deposits, $ 1.21 million in ATM and debit card interchange transaction fees, $ 15,000 in escrow fees, and $ 2,000 in fee income from non-deposit investment sales, all considered within the scope of ASC 606.

For the six months ended March 31, 2024, the Company recognized $ 2.01 million in service changes on deposits, $ 2.48 million in ATM and debit card interchange transaction fees, $ 33,000 in escrow fees, and $ 3,000 in fee income from non-deposit investment sales.

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 changes 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.

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

27 unchanged sentences

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

December 31, 2023 December 31, 2022

A summary of the Company's commitments at March 31, 2024 and 2023 are listed below (in thousands):

March 31, 2024 March 31, 2023

Undisbursed portion of construction loans in process (see Note 4) $ 77,502 99,253

2 unchanged sentences

$ 232,491 $ 279,182

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

The Company estimates expected losses on unfunded, off-balance sheet commitments over the contractual period in which the exposure to credit risk from a contractual obligation to extend credit, unless the Company has determined that obligation is unconditionally cancellable.

The allowance methodology for calculating the ACL on unfunded loan commitments is similar to the methodology for calculating the ACL on loans but also includes an estimate of the future utilization of the commitment as determined by

historical commitment utilization.

Credit risk associated with the unfunded commitments are consistent with the loss ratio for each loan segment within the allowance for credit losses for loans.

The ACL for unfunded commitments is recognized in other liabilities and accrued expenses in the consolidated balance sheets and is adjusted as a provision (recapture of provision) for credit losses on the consolidated income statements.

The ACL for unfunded loan commitments totaled $ 364,000 at December 31, 2023.

The following table sets forth information for the three months ended December 31, 2023 and 2022 regarding activity in the allowance for credit losses for unfunded loan commitments (dollars in thousands):

Allowance for Credit Losses December 31, 2023 December 31, 2022

Beginning balance $ 332 $ 305

The Company maintains a separate ACL related to unfunded loan commitments.

The Company estimates expected losses on unfunded, off-balance sheet commitments over the contractual period in which the exposure to credit risk from a contractual

obligation to extend credit, unless the Company has determined that obligation is unconditionally cancellable.

The methodology for calculating the ACL on unfunded loan commitments is similar to the methodology for calculating the ACL on loans but also includes an estimate of the future utilization of the commitment as determined by historical commitment utilization.

Credit risk associated with the unfunded commitments are consistent with the loss ratio for each loan segment within the ACL for loans.

The ACL on unfunded commitments is recognized in other liabilities and accrued expenses in the consolidated balance sheets and is adjusted as a provision (recapture of provision) for credit losses on the consolidated income statements.

The ACL on unfunded loan commitments totaled $ 276,000 at March 31, 2024.

The following table sets forth information for the three and six months ended March 31, 2024 and 2023 regarding activity in the a ACL on unfunded loan commitments (dollars in thousands):

ACL Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

Beginning ACL $ 364 $ 320

(Recapture of) provision for credit losses ( 88 ) —

Ending ACL $ 276 $ 320

ACL Six Months Ended March 31, 2024 Six Months Ended March 31, 2023

Beginning ACL $ 332 $ 305

Impact of adopting CECL (ASU 2016-13) 65 —

(Recapture of) provision for credit losses ( 121 ) 15

Ending allowance $ 364 $ 320

Ending ACL $ 276 $ 320

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).

6 unchanged sentences

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