What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-02-10 compared with 2024-08-07 · 322 added, 501 removed, 731 unchanged (53% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2024 and September 30, 2023

December 31, 2024 and September 30, 2024

(Dollars in thousands, except per share amounts)

5 unchanged sentences

Total cash and cash equivalents 164,071 164,728

Certificates of deposit (“CDs”) held for investment (at cost, which

approximates fair value) 10,458 15,188

Investment securities held to maturity, at amortized cost (net of allowance for credit losses of $ 72 at June 30, 2024 and $ 0 at September 30, 2023), (estimated fair value of $ 166,761 and $ 253,766 )

Certificates of deposit (“CDs”) held for investment, at cost 7,470 10,209

Investment securities held to maturity, at amortized cost (net of allowance for credit losses ("ACL") of $ 55 and $ 60 ), (estimated fair value of $ 147,709 and $ 166,007 )

156,105 172,097

4 unchanged sentences

Loans held for sale 411 —

Loans receivable, net of allowance for credit losses of $ 17,046 and $ 15,817

Loans receivable, net of ACL of $ 17,288 and $ 17,478

1,411,819 1,421,523

Premises and equipment, net 21,617 21,486

Other real estate owned (“OREO”) and other repossessed assets, net 221 —

Accrued interest receivable 7,095 6,990

19 unchanged sentences

CONSOLIDATED BALANCE SHEETS (continued)

June 30, 2024 and September 30, 2023

December 31, 2024 and September 30, 2024

(Dollars in thousands, except per share amounts)

1 unchanged sentence

(Unaudited) *

Commitments and contingent liabilities (see Note 12)

Commitments and contingencies (see Note 12)

Shareholders’ equity

3 unchanged sentences

50,000,000 shares authorized;

7,953,421 shares issued and outstanding - June 30, 2024 8,105,338 shares issued and outstanding - September 30, 2023

7,954,673 shares issued and outstanding - December 31, 2024 7,960,127 shares issued and outstanding - September 30, 2024

29,593 29,862

Retained earnings 220,398 215,531

Accumulated other comprehensive loss ( 545 ) ( 1,084 )

Accumulated other comprehensive (loss) income ( 792 ) 20

Total shareholders’ equity 249,199 245,413

5 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

For the three and nine months ended June 30, 2024 and 2023

For the three months ended December 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

Three Months Ended June 30, Nine Months Ended

2024 2023 2024 2023

Three Months Ended December 31,

Interest and dividend income

13 unchanged sentences

Recapture of credit losses - unfunded commitments ( 20 ) ( 33 )

Total provision for credit loss - net 244 610 660 1,610

Total provision for credit losses - net 27 336

Net interest income after provision for (recapture of) credit losses 16,943 15,668

1 unchanged sentence

Net recoveries on investment securities 3 5

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

Service charges on deposits 999 1,023

9 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (continued)

For the three and nine months ended June 30, 2024 and 2023

For the three months ended December 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

Three Months Ended June 30, Nine Months Ended

2024 2023 2024 2023

Three Months Ended December 31,

Non-interest expense

1 unchanged sentence

Premises and equipment 950 973

Gain on sales/dispositions of premises and equipment, net ( 3 ) ( 32 ) ( 3 ) ( 32 )

Advertising 181 186

OREO and other repossessed assets, net — — 1 1

ATM and debit card interchange transaction fees 521 615

23 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three and nine months ended June 30, 2024 and 2023

For the three months ended December 31, 2024 and 2023

(Dollars in thousands)

Three Months Ended June 30, Nine Months Ended

2024 2023 2024 2023

Three Months Ended December 31,

Comprehensive income

1 unchanged sentence

Other comprehensive income (loss)

Unrealized holding gain (loss) on investment securities available for sale, net of income taxes of $ 53 , $( 66 ), $ 142 and $( 8 ), respectively

200 ( 249 ) 530 ( 29 )

Unrealized holding (loss) gain on investment securities available for sale, net of income taxes of $( 216 ) and $ 66 , respectively

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 and $ 1 , respectively

Total other comprehensive income (loss), net of income taxes 200 ( 249 ) 539 ( 27 )

Total other comprehensive (loss) income, net of income taxes ( 812 ) 257

Total comprehensive income $ 6,048 $ 6,553

3 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the three and nine months ended June 30, 2024 and 2023

For the three months ended December 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, March 31, 2023 8,203,174 $ 37,979 $ 190,177 $ ( 495 ) $ 227,661

Net income — — 6,306 — 6,306

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

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

Exercise of stock options 1,000 17 — — 17

Common stock dividends ($ 0.23 per common share)

— — ( 1,877 ) — ( 1,877 )

Stock-based compensation expense — 79 — — 79

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

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

Net income — — 5,924 — 5,924

Other comprehensive income — — — 200 200

Repurchase of common stock ( 70,000 ) ( 1,767 ) — — ( 1,767 )

Exercise of stock options 300 5 — — 5

Common stock dividends ($ 0.24 per common share)

— — ( 1,923 ) — ( 1,923 )

Stock-based compensation expense — 105 — — 105

Balance, June 30, 2024 7,953,421 $ 30,681 $ 211,087 $ ( 545 ) $ 241,223

Common Stock Accumulated

5 unchanged sentences

Net income — — 6,296 — 6,296

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

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

Other comprehensive income — — — 257 257

Repurchase of common stock, net of tax ( 12,330 ) ( 362 ) — — ( 362 )

Exercise of stock options 27,700 355 — — 355

2 unchanged sentences

Stock-based compensation expense — 105 — — 105

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

Adoption of Accounting Standards Update ("ASU") 2016-13 — — ( 488 ) — ( 488 )

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

Balance, September 30, 2024 7,960,127 $ 29,862 $ 215,531 $ 20 $ 245,413

Net income — — 6,860 — 6,860

Other comprehensive income — — — 539 539

Repurchase of common stock ( 182,117 ) ( 4,801 ) — — ( 4,801 )

Other comprehensive loss — — — ( 812 ) ( 812 )

Repurchase of common stock, net of tax ( 27,404 ) ( 884 ) — — ( 884 )

Restricted stock grant forfeitures ( 450 ) — — — —

Exercise of stock options 22,400 474 — — 474

2 unchanged sentences

Stock-based compensation expense — 141 — — 141

Adoption of ASU 2016-13 , net of tax

— — ( 488 ) — ( 488 )

Balance, June 30, 2024 7,953,421 $ 30,681 $ 211,087 $ ( 545 ) $ 241,223

Balance, December 31, 2024 7,954,673 $ 29,593 $ 220,398 $ ( 792 ) $ 249,199

See notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended June 30, 2024 and 2023

For the three months ended December 31, 2024 and 2023

(Dollars in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

Cash flows from operating activities

Net income $ 6,860 $ 6,296

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

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Provision for credit losses 27 336

Depreciation 375 356

Deferred income taxes/(benefits) — ( 77 )

Accretion of discount on purchased loans ( 8 ) ( 10 )

1 unchanged sentence

Stock-based compensation expense 141 105

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

Net recoveries on investment securities ( 3 ) ( 5 )

2 unchanged sentences

Gain on sales of loans, net ( 43 ) ( 78 )

Gain on sales/disposition of premises and equipment, net ( 3 ) ( 32 )

Loans originated for sale ( 2,680 ) ( 4,742 )

4 unchanged sentences

Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses ( 9,910 ) ( 1,087 )

Net cash provided by operating activities 16,404 23,230

Net cash (used in) provided by operating activities ( 3,056 ) 4,867

Cash flows from investing activities

Net decrease in CDs held for investment 2,739 2,739

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

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

2 unchanged sentences

Proceeds from maturities and prepayments of investment securities available for sale 2,860 1,644

Purchase of FHLB stock — ( 608 )

Redemption of FHLB stock — 1,601

Increase in loans receivable, net ( 96,118 ) ( 130,403 )

Decrease (increase) in loans receivable, net 9,419 ( 34,869 )

Purchases of premises and equipment ( 506 ) ( 298 )

Proceeds from sales of premises and equipment 8 45

Net cash used in investing activities ( 28,676 ) ( 135,596 )

Net cash provided by (used in) investing activities 22,054 ( 24,827 )

S ee notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the nine months ended June 30, 2024 and 2023

For the three months ended December 31, 2024 and 2023

(Dollars in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

Cash flows from financing activities

Net increase (decrease) in deposits $ 67,609 $ ( 79,446 )

Proceeds from (repayment of) FHLB borrowings ( 15,000 ) 15,000

Net (decrease) increase in deposits $ ( 17,252 ) $ 66,134

Repayment of FHLB borrowings — ( 15,000 )

Proceeds from exercise of stock options 474 355

1 unchanged sentence

Payment of dividends ( 1,993 ) ( 1,867 )

Net cash provided by (used in) financing activities 42,464 ( 74,436 )

Net increase (decrease) in cash and cash equivalents 30,192 ( 186,802 )

Net cash (used in) provided by financing activities ( 19,655 ) 49,260

Net (decrease) increase in cash and cash equivalents ( 657 ) 29,300

Cash and cash equivalents

2 unchanged sentences

Supplemental disclosure of cash flow information

Income taxes paid $ 4,884 $ 6,268

Interest paid $ 8,543 $ 6,206

Supplemental disclosure of non-cash investing activities

Other comprehensive income (loss) related to investment securities $ 539 $ ( 27 )

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

Adjustment to retained earnings, net of deferred tax;

- adoption of ASU 2016-13 $ ( 488 ) $ —

Other comprehensive (loss) income related to investment securities $ ( 812 ) $ 257

Loans transferred to OREO $ 221 $ —

Adjustment to retained earnings, net of deferred tax - adoption of ASU 2016-13 $ — $ ( 488 )

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, 2024 (“2024 Form 10-K”).

The unaudited consolidated results of operations for the nine months ended June 30, 2024 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 three months ended December 31, 2024 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2025.

(b) Principles of Consolidation:

The unaudited consolidated financial statements include the accounts of the Company and the Bank’s wholly-owned subsidiary, Timberland Service Corporation.

The unaudited consolidated financial statements include the accounts of the Company and the Bank’s wholly-owned subsidiary, Timberland Service Corp.

All significant inter-company transactions and balances have been eliminated in consolidation.

3 unchanged sentences

Actual results could differ from those estimates.

(e) Certain prior period amounts have been reclassified to conform to the June 30, 2024 presentation with no change to previously reported net income or total shareholders’ equity.

(e) Certain prior period amounts have been reclassified to conform to the December 31, 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 June 30, 2024 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 December 31, 2024 and September 30, 2024 (dollars in thousands):

Losses Estimated

Fair Value Allowance for Credit Losses ("ACL")

June 30, 2024

Fair Value Allowance for Credit Losses

December 31, 2024

Held to Maturity

6 unchanged sentences

Bank issued trust preferred securities 497 — ( 7 ) 490 3

Total held to maturity $ 176,787 $ 240 $ ( 10,266 ) $ 166,761 $ 72

June 30, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Total $ 156,105 $ 273 $ ( 8,669 ) $ 147,709 $ 55

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

Available for Sale

3 unchanged sentences

Total $ 78,082 $ 55 $ ( 1,057 ) $ 77,080

September 30, 2023

September 30, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses

Held to Maturity

6 unchanged sentences

Total $ 172,097 $ 483 $ ( 6,573 ) $ 166,007 $ 60

September 30, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Available for Sale

Treasury and U.S.

government agency securities $ 3,934 $ 6 $ ( 1 ) $ 3,939

government agencies 68,297 545 ( 524 ) 68,318

$ 43,132 $ — $ ( 1,361 ) $ 41,771

Held to maturity and available for sale investment securities with unrealized losses were as follows as of June 30, 2024 (dollars in thousands):

Total $ 72,231 $ 551 $ ( 525 ) $ 72,257

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

Less Than 12 Months 12 Months or Longer Total

6 unchanged sentences

Private label residential 2,731 ( 12 ) 4 19,187 ( 1,410 ) 19 21,918 ( 1,422 )

Municipal securities — — — 1,226 ( 10 ) 1 1,226 ( 10 )

Bank issued trust preferred securities

17 unchanged sentences

804 ( 6 ) 1 20,447 ( 974 ) 19 21,251 ( 980 )

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

Bank issued trust preferred securities — — — 477 ( 18 ) 1 477 ( 18 )

1 unchanged sentence

Available for sale

Treasury and U.S.

government agency securities $ 1,962 $ ( 1 ) 1 $ — $ — — $ 1,962 $ ( 1 )

government agencies 11,368 ( 117 ) 4 25,751 ( 407 ) 23 37,119 ( 524 )

$ 13,330 $ ( 118 ) 5 $ 25,751 $ ( 407 ) 23 $ 39,081 $ ( 525 )

During the nine months ended June 30, 2024, the Company recorded a $ 1,000 net realized losses on 14 held to maturity investment securities.

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.

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 $ 212.16 million and $ 201.82 million at June 30, 2024 and September 30, 2023, respectively.

The contractual maturities of debt securities at June 30, 2024 were as follows (dollars in thousands).

During the three months ended December 31, 2024, the Company recorded a $ 2,000 net realized loss on 13 held to maturity investment securities, all of which had been recognized previously as a credit loss.

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.

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 $ 193.62 million and $ 208.81 million at December 31, 2024 and September 30, 2024, respectively.

The contractual maturities of investment securities at December 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 June 30, 2024 or upon adoption of ASU 2016-13 on October 1, 2023.

The Company did not record an ACL on any available for sale investment securities at December 31, 2024 or September 30, 2024.

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.

12 unchanged sentences

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

At June 30, 2024, the ACL on the held to maturity securities portfolio totaled $ 72,000 .

The following tables set forth information for the three and nine months ended June 30, 2024 regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended June 30, 2024

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

At December 31, 2024 and September 30, 2024, the ACL on the held to maturity securities portfolio totaled $ 55,000 and $ 60,000 , respectively.

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

Three Months Ended December 31, 2024

Held to Maturity Beginning Allowance Provision for (Recapture of) Credit Losses Ending Allowance

Private label residential $ 55 $ ( 3 ) $ 52

1 unchanged sentence

Total $ 60 $ ( 5 ) $ 55

(1) The total provision for (recapture of) credit losses does not match the three months ended income statement due to rounding.

Nine Months Ended June 30, 2024

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

Held to Maturity

Three Months Ended December 31, 2023

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

Private label residential $ — $ 82 $ ( 9 ) $ 73

1 unchanged sentence

Total $ — $ 92 $ ( 10 ) $ 82

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

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

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 $ 663,000 at June 30, 2024 and is included

in accrued interest income receivable on the consolidated balance sheet.

This amount is excluded from the estimate

of expected credit losses.

Held to maturity debt securities are typically classified as non-accrual when the contractual

payment of principal or interest has become 90 days past due or management has serious doubts about the further

collectability of principal or interest.

When held to maturity debt securities are placed on non-accrual status, unpaid interest

credited to income is reversed.

The Company had $ 72,000 of private label mortgage-backed held to maturity investment securities in non-accrual status at June 30, 2024.

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

Accrued interest receivable on held to maturity investment securities totaled $ 810,000 at December 31, 2024 and is included in accrued interest receivable on the consolidated balance sheet.

This amount is excluded from the estimate of expected credit losses.

Held to maturity investment securities are typically classified as non-accrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest.

When held to maturity investment securities are placed on non-accrual status, unpaid interest credited to income is reversed.

The Company had $ 45,000 of private label mortgage-backed held to maturity investment securities in non-accrual status at December 31, 2024.

The Company monitors the credit quality of investment securities held to maturity using 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 June 30, 2024 by credit quality indicator:

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

Credit Ratings

As of June 30, 2024 AAA/AA/A BBB/BB/B Unrated Total

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

Held to Maturity

6 unchanged sentences

Total held to maturity $ 144,101 $ — $ 12,004 $ 156,105

Credit Ratings

As of September 30, 2024 AAA/AA/A BBB/BB/B Unrated Total

Held to Maturity

Treasury and U.S.

government agency securities $ 92,312 $ — $ — $ 92,312

government agencies 49,481 — — 49,481

Private label residential 16,277 — 12,202 28,479

Municipal securities 1,230 — 100 1,330

Bank issued trust preferred securities — — 495 495

Total held to maturity $ 159,300 $ — $ 12,797 $ 172,097

Prior to adopting ASU 2016-13, the Company bifurcated 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).

3 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 nine months ended June 30, 2024 and 2023 (dollars in thousands):

Nine Months Ended

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

Three Months Ended

Beginning balance of credit loss $ 803 $ 816

8 unchanged sentences

For purposes of goodwill impairment testing, the services offered through the Bank and its subsidiary are managed as one strategic unit and represent the Company's only reporting unit.

The annual goodwill impairment test begins with a qualitative assessment of whether it is "more likely than not" that the reporting unit's fair value is less than its carrying amount.

If an entity concludes that it is not "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it need not perform a two-step impairment test.

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

The reporting unit must determine fair value for all assets and liabilities, excluding goodwill.

The net of the assigned fair value of assets and liabilities is then compared to the book value of the reporting unit, and any excess book value becomes the implied fair value of goodwill.

If the carrying amount of the goodwill exceeds the newly calculated implied fair value of goodwill, an impairment loss is recognized in the amount required to write-down the goodwill to the implied fair value.

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.

An assessment of qualitative factors is completed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed.

The quantitative goodwill impairment test is used to identify the existence of impairment and the amount of impairment loss and compares the reporting unit’s estimated fair value, including goodwill, to its carrying amount.

If the fair value exceeds the carrying amount, then goodwill is not considered impaired.

If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill allocated to that reporting unit.

The Company performed its fiscal year 2024 goodwill impairment test during the quarter ended June 30, 2024.

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, 2024.

A significant amount of judgment is involved in determining if an indicator of goodwill impairment has occurred.

Such indicators may include, among others:

a significant decline in expected future cash flows;

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;

adverse assessment or action by a regulator;

and unanticipated competition.

Any change in these indicators could have a

significant negative impact on the Company's financial condition, impact the goodwill impairment analysis or cause the Company to perform a goodwill impairment analysis more frequently than once per year.

As of June 30, 2024, management believes that there have been no events or changes in the circumstances since May 31, 2024 that would indicate a potential impairment of goodwill.

As of December 31, 2024, management believes that there have been no events or changes in the circumstances since May 31, 2024 that would indicate a potential impairment of goodwill.

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

If adverse economic conditions or any decreases in the Company's stock price and market capitalization were deemed other than temporary, it may significantly affect the fair value of the Company's goodwill and may trigger impairment charges.

If adverse economic conditions or any decreases in the Company's stock price and market capitalization were deemed to be other than temporary, it may significantly affect the fair value of the Company's goodwill and may trigger impairment charges.

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

The recorded amount of goodwill at June 30, 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 June 30, 2024, management believes that there have been no events or changes in the circumstances that would indicate a potential impairment of CDI.

As of December 31, 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 June 30, 2024 and September 30, 2023 (dollars in thousands):

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

2024 September 30,

3 unchanged sentences

Multi-family 177,861 11.7 177,350 11.7

Commercial 597,865 39.7 568,265 39.8

Commercial real estate 597,054 39.3 599,219 39.6

Construction - custom and owner/builder 124,104 8.2 132,101 8.7

19 unchanged sentences

Loans receivable, net $ 1,411,819 $ 1,421,523

_____________________________

(1) Does not include one- to four-family loans held for sale totaling $ 1.80 million and $ 400,000 at June 30, 2024 and September 30, 2023, respectively.

Loans receivable at June 30, 2024 and September 30, 2023 are reported net of unamortized discounts totaling $ 163,000 and $ 192,000 , respectively.

Loans receivable at December 31, 2024 and September 30, 2024 are reported net of unamortized discounts totaling $ 147,000 and $ 155,000 , respectively.

Credit Quality Indicators

14 unchanged sentences

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

At June 30, 2024 there was one loan classified as doubtful which is supported by an SBA guarantee of the remaining balance.

At 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.

At December 31, 2024 and September 30, 2024, there was one loan classified as doubtful which is supported by an SBA guarantee of the remaining balance.

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

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

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

The following table sets forth the Company's loan portfolio at June 30, 2024 by risk attribute and year of origination as well as current period gross charge-offs (dollars in thousands):

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

The following table sets forth the Company's loan portfolio at December 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

18 unchanged sentences

Watch — 248 9,595 5,306 2,726 746 — 18,621

Substandard — — — 152 — — — 152

Total construction $ 21,701 $ 42,271 $ 6,807 $ 2,878 $ 432 $ 436 $ — $ 74,525

Total construction-custom & owner/builder $ 2,276 $ 47,654 $ 18,762 $ 5,306 $ 2,935 $ 746 $ — $ 77,679

Construction-speculative one-to four-family (1)

Pass $ 982 $ 2,921 $ 866 $ — $ — $ — $ — $ 4,769

Total construction $ 3,468 $ 2,747 $ — $ 518 $ — $ — $ — $ 6,733

Total construction-speculative one-to four-family $ 982 $ 2,921 $ 866 $ — $ — $ — $ — $ 4,769

Construction-commercial (1)

Pass $ 1,401 $ 2,060 $ 8,966 $ 2,072 $ — $ — $ — $ 14,499

Watch — 968 — — — — — 968

Total construction $ 991 $ 17,882 $ 1,045 $ 1,293 $ — $ — $ — $ 21,211

Total construction-commercial $ 1,401 $ 2,060 $ 8,966 $ 2,072 $ — $ — $ — $ 14,499

Construction-multi-family (1)

Pass $ 838 $ 2,572 $ 20,603 $ — $ — $ — $ — $ 24,013

Total construction $ 2,033 $ 18,249 $ — $ — $ — $ — $ — $ 20,282

Total construction-multi-family $ 838 $ 2,572 $ 20,603 $ — $ — $ — $ — $ 24,013

Construction-land development (1)

Pass $ — $ 1,444 $ 1,446 $ — $ — $ — $ — $ 2,890

Total construction $ 1,903 $ 2,760 $ 11,918 $ — $ — $ — $ — $ 16,581

Watch — — — 11,549 — — — 11,549

Total construction-land development $ — $ 1,444 $ 1,446 $ 11,549 $ — $ — $ — $ 14,439

Pass $ 2,417 $ 9,785 $ 4,430 $ 6,449 $ 3,793 $ 2,656 $ 232 $ 29,762

1 unchanged sentence

Total land $ 2,417 $ 9,785 $ 4,430 $ 6,750 $ 3,793 $ 3,131 $ 232 $ 30,538

Home equity and second mortgage

Pass $ 885 $ 5,728 $ 4,435 $ 1,783 $ 249 $ 2,584 $ 31,271 $ 46,935

1 unchanged sentence

Substandard — — — — — 79 587 666

Total home equity $ 3,434 $ 4,873 $ 2,017 $ 315 $ 707 $ 2,380 $ 29,953 $ 43,679

Total home equity and second mortgage $ 885 $ 5,728 $ 4,435 $ 1,783 $ 1,499 $ 2,663 $ 31,858 $ 48,851

Term Loans Amortized Cost Basis by Origination Fiscal Year

Type 2025 2024 2023 2022 2021 Prior Revolving Loans Total Loans Receivable

Other consumer

3 unchanged sentences

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

Commercial business

Pass $ 2,475 $ 15,538 $ 18,992 $ 33,119 $ 7,192 $ 11,129 $ 44,607 $ 133,052

Watch — — — 197 380 625 180 1,382

Substandard — 166 — — — 254 256 676

Doubtful — 202 — — — — — 202

Total commercial business $ 2,475 $ 15,906 $ 18,992 $ 33,316 $ 7,572 $ 12,008 $ 45,043 $ 135,312

Current period gross write-offs $ — $ — $ — $ 241 $ — $ — $ — $ 241

Pass $ — $ — $ — $ — $ 182 $ 22 $ — $ 204

Total SBA PPP $ — $ — $ — $ — $ 182 $ 22 $ — $ 204

Total loans receivable, gross (1)

Pass $ 23,379 $ 141,007 $ 243,193 $ 321,131 $ 180,609 $ 386,043 $ 85,229 $ 1,380,591

Watch — 248 12,296 17,353 4,356 12,802 180 47,235

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

Substandard — 166 — — — 1,113 843 2,122

Doubtful — 202 — — — — — 202

Total loans receivable $ 23,379 $ 141,623 $ 255,489 $ 338,484 $ 184,965 $ 404,359 $ 86,252 $ 1,434,551

Current period gross charge-off $ — $ 2 $ — $ 241 $ — $ — $ 1 $ 244

_____________________

(1) Net of construction LIP

The following table sets forth the Company's loan portfolio at September 30, 2024 by risk attribute and year of origination as well

as gross charges offs in the year ending September 30, 2024:

Term Loans Amortized Cost Basis by Origination Fiscal Year

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

One-to four-family

Pass $ 12,941 $ 66,671 $ 113,834 $ 48,120 $ 19,053 $ 36,659 $ — $ 297,278

Watch — 1,796 — — — — — 1,796

Substandard — — — — — 49 — 49

Total one- to four-family $ 12,941 $ 68,467 $ 113,834 $ 48,120 $ 19,053 $ 36,708 $ — $ 299,123

Pass $ 13,136 $ 19,440 $ 39,673 $ 33,144 $ 27,029 $ 43,759 $ 1,169 $ 177,350

Total multi-family $ 13,136 $ 19,440 $ 39,673 $ 33,144 $ 27,029 $ 43,759 $ 1,169 $ 177,350

Commercial real estate

Pass $ 23,758 $ 73,005 $ 126,939 $ 91,035 $ 55,498 $ 194,273 $ 8,799 $ 573,307

Watch — 944 — — 4,201 10,548 — 15,693

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

Substandard — — — — — 5,818 — 5,818

Total commercial real estate $ 23,758 $ 73,949 $ 126,939 $ 91,035 $ 59,699 $ 215,040 $ 8,799 $ 599,219

Construction-custom & owner/builder (1)

Pass $ 38,303 $ 29,159 $ 778 $ — $ — $ — $ — $ 68,240

Watch 221 3,239 5,848 2,861 429 436 — 13,034

Total construction-custom & owner/builder $ 38,524 $ 32,398 $ 6,626 $ 2,861 $ 429 $ 436 $ — $ 81,274

Construction-speculative one-to four-family (1)

Pass $ 5,039 $ 2,412 $ — $ — $ — $ — $ — $ 7,451

Total construction-speculative one-to four-family $ 5,039 $ 2,412 $ — $ — $ — $ — $ — $ 7,451

Construction-commercial (1)

Pass $ 6,006 $ 16,349 $ 1,457 $ — $ — $ — $ — $ 23,812

Total construction-commercial $ 6,006 $ 16,349 $ 1,457 $ — $ — $ — $ — $ 23,812

Term Loans Amortized Cost Basis by Origination Fiscal Year

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

Construction-multi-family (1)

Pass $ 588 $ 20,169 $ — $ — $ — $ — $ — $ 20,757

Total construction-multi-family $ 588 $ 20,169 $ — $ — $ — $ — $ — $ 20,757

Construction-land development (1)

Pass $ 1,673 $ 2,807 $ — $ — $ — $ — $ — $ 4,480

Watch — — 11,549 — — — — 11,549

Total construction-land development $ 1,673 $ 2,807 $ 11,549 $ — $ — $ — $ — $ 16,029

Pass $ 10,287 $ 4,828 $ 6,588 $ 4,004 $ 766 $ 1,954 $ 458 $ 28,885

Watch — — — — — 481 — 481

Total land $ 10,287 $ 4,828 $ 6,588 $ 4,004 $ 766 $ 2,435 $ 458 $ 29,366

Home equity and second mortgage

Pass $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,097 $ 31,766 $ 47,214

Substandard — — — — — 81 618 699

Total home equity and second mortgage $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,178 $ 32,384 $ 47,913

Other consumer

Pass $ 1,744 $ 441 $ 241 $ 57 $ 8 $ 501 $ 71 $ 3,063

Watch — — — — — 65 1 66

Total other consumer $ 1,744 $ 441 $ 241 $ 57 $ 8 $ 566 $ 72 $ 3,129

Current period gross write-offs $ 6 $ 1 $ — $ — $ — $ — $ 2 $ 9

Commercial business

7 unchanged sentences

Total SBA PPP $ — $ — $ — $ 224 $ 36 $ — $ — $ 260

Total loans receivable, gross (net of construction LIP)

Term Loans Amortized Cost Basis by Origination Fiscal Year

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

Total loans receivable, gross (1)

Pass $ 135,424 $ 259,907 $ 326,617 $ 185,424 $ 110,552 $ 284,018 $ 85,707 $ 1,387,649

5 unchanged sentences

Current period gross charge-off $ 6 $ 80 $ — $ — $ — $ 13 $ 2 $ 101

_____________________

( 1) Net of construction LIP

Allowance for Credit Losses

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 and nine months ended June 30, 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 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.

The Company has concluded that this policy results in the timely reversal of uncollectible interest.

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost.

3 unchanged sentences

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.

The calculation utilizes the discounted cash flow ("DCF") methodology for all segments.

The Company incorporates a reasonable and supportable forecast that utilizes current period national gross domestic product ("GDP") and national unemployment figures.

Each of the loan segments are impacted by these factors.

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

Each of the loan segments are impacted by those factors.

Prepayment rates 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 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.

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.

When available information confirms that specific loans or portions thereof are uncollectible, identified amounts are charged against the ACL.

8 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 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 nine months ended June 30, 2024 and 2023 regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended June 30, 2024

In addition, regulatory agencies, as integral part of their examination process, periodically review the Company's ACL and may require the Company to make adjustments 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 months ended December 31, 2024 and 2023 regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended December 31, 2024

Allowance Provision for

4 unchanged sentences

Multi-family 1,308 3 — — 1,311

Commercial 6,954 241 — — 7,195

Commercial real estate 6,934 ( 42 ) — — 6,892

Construction – custom and owner/builder 1,328 ( 67 ) — — 1,261

9 unchanged sentences

Total $ 17,478 $ 52 $ ( 244 ) $ 2 $ 17,288

Nine Months Ended June 30, 2024

Three Months Ended December 31, 2023

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

(Recapture of) Credit Losses Charge-

offs Recoveries Ending

Mortgage loans:

One-to four-family $ 2,417 $ ( 408 ) $ 225 $ — $ 43 $ 2,277

Multi-family 1,156 ( 120 ) 406 — — 1,442

Commercial 7,209 ( 494 ) 480 — — 7,195

Construction – custom and owner/builder 750 542 ( 1 ) — — 1,291

Construction – speculative one- to four-family 148 ( 16 ) ( 37 ) — — 95

Construction – commercial 316 176 ( 99 ) — — 393

Construction – multi-family 602 204 ( 449 ) — — 357

Construction – land development 274 25 ( 9 ) — — 290

Land 406 318 104 — — 828

Consumer loans:

Home equity and second mortgage 519 ( 243 ) 38 — — 314

Other 53 ( 7 ) 7 ( 8 ) — 45

Commercial business loans 1,967 484 145 ( 79 ) 2 2,519

Total $ 15,817 $ 461 $ 810 $ ( 87 ) $ 45 $ 17,046

Three Months Ended June 30, 2023

Allowance Provision for

(Recapture of) Loan Losses Charge-

3 unchanged sentences

Multi-family 1,156 ( 120 ) 164 — — 1,200

Commercial 6,904 125 — — 7,029

Construction – custom and owner/builder 726 73 — — 799

Construction – speculative one- to four-family 121 ( 11 ) — — 110

Construction – commercial 267 24 — — 291

Construction – multi-family 662 30 — — 692

Construction – land development 245 ( 12 ) — — 233

Land 363 26 — — 389

Consumer loans:

Home equity and second mortgage 507 35 — — 542

Other 47 5 ( 1 ) — 51

Commercial business loans 1,866 115 — — 1,981

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

Nine Months Ended June 30, 2023

Allowance Provision for

(Recapture of) Loan Losses Charge-

offs Recoveries Ending

Mortgage loans:

One-to four-family $ 1,658 $ 520 $ — $ — $ 2,178

Multi-family 855 157 — — 1,012

Commercial 6,682 347 — — 7,029

Construction – custom and owner/builder 675 124 — — 799

Construction – speculative one- to four-family 130 ( 20 ) — — 110

Construction – commercial 343 ( 52 ) — — 291

Construction – multi-family 447 245 — — 692

Construction – land development 233 — — — 233

Land 397 ( 8 ) — — 389

Consumer loans:

Home equity and second mortgage 440 102 — — 542

Other 42 11 ( 2 ) — 51

Commercial business loans 1,801 184 ( 5 ) 1 1,981

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

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 Loan Losses Recorded Investment in Loans

Evaluated for

Impairment Collectively

Evaluated for

Impairment Total Individually

Evaluated for

Impairment Collectively

Evaluated for

Impairment Total

September 30, 2023

Mortgage loans:

One- to four-family $ — $ 2,417 $ 2,417 $ 368 $ 252,859 $ 253,227

Multi-family — 1,156 1,156 — 127,176 127,176

Commercial — 7,209 7,209 2,973 565,292 568,265

Commercial real estate 7,209 ( 494 ) 107 — — 6,822

Construction – custom and owner/builder 750 542 ( 58 ) — — 1,234

— 750 750 — 73,239 73,239

Construction – speculative one- to four-family 148 ( 16 ) — — — 132

— 148 148 — 9,361 9,361

Construction – commercial 316 176 ( 62 ) — — 430

4 unchanged sentences

Home equity and second mortgage 519 ( 243 ) 10 — — 286

— 519 519 382 37,899 38,281

Other 53 ( 7 ) 2 ( 2 ) — 46

Commercial business loans 1,967 484 168 — — 2,619

SBA PPP loans — — — — 466 466

Total $ 15,817 $ 461 $ 379 $ ( 2 ) $ — $ 16,655

5 unchanged sentences

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 June 30, 2024 and September 30, 2023 (dollars in thousands):

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

Past Due 60-89

3 unchanged sentences

Past Due Current Total

June 30, 2024

December 31, 2024

Mortgage loans:

1 unchanged sentence

Multi-family — — — — — 177,861 177,861

Commercial — — 1,310 — 1,310 596,555 597,865

Commercial real estate — 436 698 — 1,134 595,920 597,054

Construction – custom and owner/builder — — — — — 77,679 77,679

20 unchanged sentences

Multi-family — — — — — 177,350 177,350

Commercial — — 683 — 683 567,582 568,265

Commercial real estate — — 1,158 — 1,158 598,061 599,219

Construction – custom and owner/builder — — — — — 81,274 81,274

11 unchanged sentences

(1) Includes non-accrual loans past due 90 days or more and other loans classified as non-accrual.

The following tables present an analysis of loans by credit quality indicator and portfolio segment at September 30, 2023 (dollars in thousands):

September 30, 2023 Pass Watch Special

Mention Substandard Total

Mortgage loans:

One- to four-family $ 252,859 $ — $ — $ 368 $ 253,227

Multi-family 127,176 — — — 127,176

Commercial 551,669 11,143 — 5,453 568,265

Construction – custom and owner/builder 68,181 5,058 — — 73,239

Construction – speculative one- to four-family 9,361 — — — 9,361

Construction – commercial 25,063 967 — — 26,030

Construction – multi-family 45,890 — — — 45,890

Construction – land development 16,129 — — — 16,129

Land 26,226 500 — — 26,726

Consumer loans:

Home equity and second mortgage 37,982 34 — 265 38,281

Other 2,716 56 — — 2,772

Commercial business loans

135,502 — — 300 135,802

SBA PPP loans 466 — — — 466

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

At June 30, 2024, the Company had $ 1.91 million of non-accrual loans with an ACL of $ 243,000 and $ 2.21 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 June 30, 2024 (in thousands):

At December 31, 2024, the Company had $ 1.40 million of non-accrual loans with an ACL of $ 431,000 and $ 1.33 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, 2024 (in thousands):

Recorded Investment Related ACL

1 unchanged sentence

One- to four-family $ 47 $ —

Commercial 1,310 —

Construction - custom and owner/builder 152 —

Consumer loans:

Home equity and second mortgage 615 —

Commercial business loans 1,908 243

Total $ 4,120 $ 243

Impaired Loans

Prior to the adoption of CECL, a loan was considered impaired when it was probable that the Company would be unable to collect all amounts (principal and interest) when due according to the original contractual terms of the loan agreement.

Smaller balance homogeneous loans, such as residential mortgage loans and consumer loans, may be collectively evaluated for impairment.

When a loan was identified as being impaired, the amount of the impairment was measured by using discounted cash flows, except when, as an alternative, the current estimated fair value of the collateral (reduced by estimated costs to sell, if applicable) or observable market price was used.

The valuation of real estate collateral is subjective in nature and may be adjusted in future periods because of changes in economic conditions.

Management considers third-party appraisals, as well as independent fair market value assessments from realtors or persons involved in selling real estate, in determining the estimated fair value of particular properties.

In addition, as certain of these third-party appraisals and independent fair market value assessments are only updated periodically, changes in the values of specific properties may have occurred subsequent to the most recent appraisals.

Accordingly, the amounts of any such potential changes and any related adjustments are generally recorded at the time that such information is received.

When the estimated net realizable value of the impaired loan is less than the recorded investment in the loan (including accrued interest and net deferred loan origination fees or costs), impairment is recognized by creating or adjusting an allocation of the allowance for credit losses, and uncollected accrued interest is reversed against interest income.

If ultimate collection of principal is in doubt, all cash receipts on impaired loans are applied to reduce the principal balance.

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 prior to the adoption of CECL as of September 30, 2023 and for the year then ended (dollars in thousands):

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

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

With no related allowance recorded:

Mortgage loans:

One- to four-family $ 368 $ 412 $ — $ 378 $ 29 $ 29

Commercial 2,973 2,973 — 2,987 167 129

Land — — — 297 5 4

Consumer loans:

Home equity and second mortgage 382 382 — 390 12 10

Other — — — 1 — —

Commercial business loans 41 90 — 49 — —

Subtotal 3,764 3,857 — 4,102 213 172

With an allowance recorded:

Mortgage loans:

Commercial business loans 245 245 123 247 — —

Subtotal 245 245 123 247 — —

Mortgage loans:

One- to four-family 368 412 — 378 29 29

Commercial 2,973 2,973 — 2,987 167 129

Land — — — 297 5 4

Commercial real estate 698 —

Consumer loans:

Home equity and second mortgage 587 —

Other — — — 1 — —

Commercial business loans 1,401 431

Total $ 2,733 $ 431

______________________________________________

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

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

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

With no related allowance recorded:

Mortgage loans:

One- to four-family $ 373 $ 417 $ — $ 376 $ 381 $ 7 $ 21 $ 7 $ 21

Commercial 2,988 2,988 — 2,894 2,939 40 121 31 94

Land 150 150 — 305 371 2 4 1 3

Consumer loans:

Home equity and second mortgage 390 390 — 488 444 3 9 2 7

Other — 48 — 1 2 — — — —

Commercial business loans 44 44 — 46 51 — — — —

Subtotal 3,945 4,037 — 4,110 4,188 52 155 41 125

With an allowance recorded:

Commercial business loans 245 245 123 247 247 — — — —

Subtotal 245 245 123 247 247 — — — —

At September 30, 2024, the Company had $ 1.83 million of non-accrua1 loans with an ACL of $ 506,000 and $ 2.06 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 September 30, 2024 (in thousands):

Recorded Investment Related ACL

Mortgage loans:

One- to four-family $ 49 $ —

Commercial 2,988 2,988 — 2,894 2,939 40 121 31 94

Land 150 150 — 305 371 2 4 1 3

Commercial real estate 1,158 —

Consumer loans:

Home equity and second mortgage 618 —

Other — 48 — 1 2 — — — —

Commercial business loans 2,060 506

Total $ 3,885 $ 506

_____________________________________________

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

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

Troubled debt restructurings ("TDRs")

On October 1, 2023, the Company adopted ASU No.

2022-02, Financial Instruments - Credit Losses (ASU 2016-13).

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 and nine months ended June 30, 2024 and 2023.

At June 30, 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 nine months ended June 30, 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.

The outstanding balance of a secured loan that is in excess of the net realizable value is generally charged-off if no payments are received for four or five consecutive months.

However, charge-off's are postponed if alternative proposals to restructure, obtain additional guarantors, obtain additional assets as collateral or a potential sale of the underlying collateral would result in full repayment of the outstanding loan balance.

Once other potential sources of repayment are exhausted, the impaired portion of the loan is charged-off.

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 June 30, 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 and nine months ended June 30, 2024 and 2023 (dollars in thousands):

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

2024 2023 2024 2023

Troubled Loan Modifications

Occasionally, the Company offers modifications of loans to borrowers experiencing financial difficulty by providing principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions or any combination of these.

When principal forgiveness is provided, the amount of the forgiveness is charged-off against the ACL for loans.

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged-off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL for loans is adjusted by the same amount.

The ACL on modified loans is measured using the same credit loss estimation methods used to determine the ACL of all other loans held for investment.

These methods incorporate the post-modification of loan terms, as well as defaults and charge-offs associated with historical modified loans.

There were no loans modified related to borrowers experiencing financial difficulty during the three months ended December 31, 2024.

There were no loans past due at December 31, 2024 that had been modified in the previous 12 months.

At December 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 for up to five years .

The components of lease cost (included in the premises and equipment expense category in the consolidated statements of income) are as follows for the three months ended December 31, 2024 and 2023 (dollars in thousands):

Three Months Ended December 31,

Operating lease cost $ 96 $ 93

1 unchanged sentence

Total lease cost $ 96 $ 93

The following tables provide supplemental information related to operating leases at or for the three and nine months ended June 30, 2024 and 2023 (dollars in thousands):

At or For the Three Months Ended June 30, 2024 At or For the Nine Months Ended June 30, 2024

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

Operating cash flows from operating leases $ 83 $ 249

Weighted average remaining lease term-operating leases 6.1 years 6.1 years

Weighted average discount rate-operating leases 2.34 % 2.34 %

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

The following table provides supplemental information related to operating leases at or for the three months ended December 31, 2024 and 2023 (dollars in thousands):

At or For the Three Months Ended December 31, 2024 At or For the Three Months Ended December 31, 2023

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 June 30, 2024 for future fiscal years are as follows (dollars in thousands):

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

Remainder of 2025 $ 253

7 unchanged sentences

Diluted net income per common share is computed by dividing net income to common shareholders by the weighted average number of common shares and common stock equivalents for items that are dilutive, net of shares assumed to be repurchased using the treasury stock method at the average share price for the Company’s common stock during the period.

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

Information regarding the calculation of basic and diluted net income per common share for the three and nine months ended June 30, 2024 and 2023 is as follows (dollars in thousands, except per share amounts):

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

2024 2023 2024 2023

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

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

Three Months Ended December 31,

Basic net income per common share computation

9 unchanged sentences

____________________________________________

(1) For the three and nine months ended June 30, 2024, average options to purchase 240,820 and 233,081 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, 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 be anti-dilutive.

(1) For the three months ended December 31, 2024 and 2023, average options to purchase 96,220 and 214,595 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share because their effect would have been anti-dilutive.

(7) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the three and nine months ended June 30, 2024 and 2023 are as follows (dollars in thousands):

Three Months Ended June 30, 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 $ ( 745 ) $ — $ ( 745 )

Other comprehensive income 200 — 200

Balance of AOCI at the end of period $ ( 545 ) $ — $ ( 545 )

Nine Months Ended June 30, 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 530 9 539

Balance of AOCI at the end of period $ ( 545 ) $ — $ ( 545 )

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)

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

Three Months Ended December 31, 2024

Changes in fair value of available for sale securities (1) Total (1)

Balance of AOCI at the beginning of period $ 20 $ 20

1 unchanged sentence

Balance of AOCI at the end of period $ ( 792 ) $ ( 792 )

Nine Months Ended June 30, 2023

__________________________

(1) All amounts are net of income taxes.

Three Months Ended December 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 $ ( 1,075 ) $ ( 9 ) $ ( 1,084 )

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

Other comprehensive income 248 9 257

Balance of AOCI at the end of period $ ( 827 ) $ — $ ( 827 )

2 unchanged sentences

(8) STOCK COMPENSATION PLANS

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

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

The Company has two active stock compensation plans:

the 2014 Equity Incentive Plan and the 2019 Equity Incentive Plan.

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

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

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

The exercise price of each option equals the fair market value of the Company’s common stock on the date of grant.

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

contractual term of ten years from the date of grant.

At June 30, 2024, there were 15,576 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, 2024, there were 182,070 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 nine months ended June 30, 2024 and 2023 is summarized as follows:

Nine Months Ended June 30, 2024 Nine Months Ended June 30, 2023

Generally, options and restricted stock vest in equal annual installments commencing on the first anniversary of the grant date.

Stock options generally vest over a five year period from the date of the grant with a maximum contractual term of ten years from the date of grant.

Restricted stock grants generally vest over a three or five year term from the grant date.

At December 31, 2024, there were 15,576 and 155,705 shares of common stock available which may be awarded as options or restricted stock pursuant to future grants under the 2014 and 2019 Equity Incentive Plans, respectively.

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

Three Months Ended December 31, 2024 Three Months Ended December 31, 2023

Number of Shares Weighted

2 unchanged sentences

Exercised ( 22,400 ) 21.17 ( 27,700 ) 12.81

Granted — — 1,000 33.40

Forfeited ( 600 ) 27.40 ( 5,380 ) 25.10

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 nine months ended June 30, 2024.

The weighted average assumptions for options granted during the nine months ended June 30, 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 nine months ended June 30, 2024 and 2023 was $ 501,000 and $ 345,000 , respectively.

At June 30, 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 June 30, 2024 was $ 221,000 .

There were 300 options that vested during the nine months ended June 30, 2024 with a total fair value of $ 2,000 .

At June 30, 2023, there were 186,910 unvested options with an aggregate grant date fair value of $ 1.05 million.

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

Additional information regarding options outstanding at June 30, 2024 is as follows:

There were no stock options granted during the three months ended December 31, 2024 and 2023.

The aggregate intrinsic value of options exercised during the three months ended December 31, 2024 and 2023 was $ 239,000 and $ 469,000 , respectively.

At December 31, 2024, there were 76,530 unvested options with an aggregate grant date fair value of $ 464,000 , all of which the Company assumes will vest.

The aggregate intrinsic value of unvested options at December 31, 2024 was $ 328,000 .

There were 100 options that vested during the three months ended December 31, 2024 with a total fair value of $ 326 .

At December 31, 2023, there were 124,640 unvested options with an aggregate grant date fair value of $ 725,000 .

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

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

Options Outstanding Options Exercisable

9 unchanged sentences

283,240 $ 25.52 5.3 206,710 $ 25.25 4.5

The aggregate intrinsic value of options outstanding at June 30, 2024 and 2023 was $ 1.07 million and $ 1.58 million , respectively.

As of June 30, 2024, unrecognized compensation cost related to unvested stock options was $ 579,000 , which is expected to be recognized over a weighted average life of 1.81 years.

At June 30, 2024, there were 26,150 unvested restricted stock awards.

At June 30, 2023, there were no unvested restricted stock awards.

There were no restricted stock awards granted during the nine months ended June 30, 2024 and 2023.

Number of Unvested Shares Weighted Average Grant Date Fair Value

Outstanding, September 30, 2023 26,150 $ 27.37

The aggregate intrinsic value of options outstanding at December 31, 2024 and 2023 was $ 1.45 million and $ 2.22 million , respectively.

As of December 31, 2024, unrecognized compensation cost related to unvested stock options was $ 437,000 , which is expected to be recognized over a weighted average period of 1.60 years.

There were no restricted stock awards granted during the three months ended December 31, 2024 and 2023.

Three Months Ended December 31, 2024 Three Months Ended December 31, 2023

Number of Unvested Shares Weighted Average Grant Date Fair Value Number of Unvested Shares Weighted Average Grant Date Fair Value

Restricted stock outstanding beginning of period 49,015 $ 29.28 26,150 $ 27.37

Forfeited ( 450 ) 29.28 — —

Outstanding, June 30, 2024 26,150 $ 27.37

Restricted stock outstanding end of period 48,565 $ 29.28 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 June 30, 2024, unrecognized compensation cost related to unvested restricted stock awards was $ 597,000 , which is expected to be recognized over a weighted average period of 1.98 years.

At December 31, 2024, unrecognized compensation cost related to unvested restricted stock awards was $ 1.34 million, which is expected to be recognized over a weighted average period of 2.45 years.

(9) FAIR VALUE MEASUREMENTS

1 unchanged sentence

GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.

GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels.

GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three levels.

Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels.

4 unchanged sentences

The Company's assets measured at fair value on a recurring basis consist of investment securities available for sale and investments in equity securities.

The estimated fair values of MBS are based upon market prices of similar securities or observable inputs (Level 2).

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

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

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

June 30, 2024 Estimated Fair Value

The estimated fair values of MBS are based upon quoted market prices (Level 1) and market prices of similar securities or observable inputs (Level 2).

The estimated fair values of mutual funds and U.S.

Treasury and U.S.

government agency securities are based upon quoted market prices (Level 1).

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

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

December 31, 2024 Estimated Fair Value

Level 1 Level 2 Level 3 Total

Available for sale investment securities

Treasury and U.S.

government agency securities $ 9,544 $ — $ — $ 9,544

government agencies — 67,536 — 67,536

5 unchanged sentences

Available for sale investment securities

Treasury and U.S.

government agency securities $ 3,939 $ — $ — $ 3,939

government agencies — 68,318 — 68,318

2 unchanged sentences

Total $ 4,805 $ 68,318 $ — $ 73,123

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

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

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.

2 unchanged sentences

Individually Evaluated Collateral-Dependent Loans:

Loans for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, where applicable.

Accordingly, collateral dependent loans are classified within level 3 of the fair value hierarchy.

Impaired Loans :

Prior to the adoption of CECL, the estimated fair value of impaired loans is calculated using the collateral value method or on a discounted cash flow basis.

The specific reserve for collateral dependent impaired loans is based on the estimated fair value of the collateral less estimated costs to sell, if applicable.

In some cases, adjustments are made to the appraised values due to various factors including age of the appraisal, age of the comparable collateral included in the appraisal and known changes in the market and in the underlying collateral.

Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.

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 June 30, 2024 and September 30, 2023 (dollars in thousands):

OREO and Other Repossessed Assets, net:

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

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

Estimated costs to sell are based on standard market factors.

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

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

Estimated Fair Value Total Estimated

June 30, 2024 Level 1 Level 2 Level 3 Fair Value

Individually evaluated loans:

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

Individually evaluated collateral-dependent loans:

Commercial business loans $ — $ — $ 970 $ 970

Total loans — — 970 970

OREO and other repossessed assets — — 221 221

Total $ — $ — $ 1,191 $ 1,191

1 unchanged sentence

September 30, 2024 Level 1 Level 2 Level 3 Fair Value

Impaired loans:

Individually evaluated collateral-dependent loans:

Commercial business loans $ — $ — $ 1,315 $ 1,315

Total $ — $ — $ 1,315 $ 1,315

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

The following table presents quantitative information about Level 3 inputs for financial instruments measured at fair value on a non-recurring basis as of December 31, 2024 and September 30, 2024 (dollars in thousands):

Technique(s) Unobservable Input(s) Range

Individually evaluated and impaired loans Market approach Appraised value less estimated selling costs N/A

Individually evaluated collateral-dependent loans Market approach Appraised value less estimated selling costs N/A

OREO and other repossessed assets Market approach Lower of appraised value or listing price less estimated selling costs N/A

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

2 unchanged sentences

In addition, as the Company normally intends to hold the majority of its financial instruments until maturity, it does not expect to realize many of the estimated amounts disclosed.

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

The Company does not believe that it would be practicable to estimate a representative fair value for these types of items as of June 30, 2024 and September 30, 2023.

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

The Company does not believe that it would be practicable to estimate a fair value for these types of items as of December 31, 2024 and September 30, 2024.

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

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

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

June 30, 2024

Additionally, 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, 2024 and September 30, 2024 (dollars in thousands):

December 31, 2024

Fair Value Measurements Using:

24 unchanged sentences

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

Loans held for sale 400 407 407 — —

Loans receivable, net 1,421,523 1,387,642 — — 1,387,642

5 unchanged sentences

(10) RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments , as amended by ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11.

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 ACL rather than as a reduction of the carrying amount.

ASU 2016-13 also changed the accounting for Purchase Credit Impaired ("PCI") debt securities and loans.

ASU 2016-13 retained many of the current disclosure requirements in GAAP and expanded certain disclosure requirements.

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

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 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 held to maturity 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 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 2 Investment Securities, Note 4 Loans Receivable and Allowance for Credit Losses and Note 12 Commitments and Contingent Liabilities.

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

Simplifying the Test for Goodwill Impairment.

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

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

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

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

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

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

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

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

The adoption 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 (ASU 2016-13):

Troubled Debt Restructurings and Vintage Disclosures.

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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

5 unchanged sentences

An entity should apply the amendments in this ASU on a prospective basis.

The Company expects this ASU to only impact its disclosure requirement and does not expect the adoption of this ASU to have a material impact on its business operations or the Company's consolidated financial statements.

The Company expects this ASU to only impact its disclosure requirements and does not expect the adoption of this ASU to have a material impact on its business operations or the Company's consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220):

Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures .

The amendments in this ASU require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses.

In conjunction with recent standards that enhanced the disaggregation of revenue and income tax information, the disaggregated expense information will enable investors to better understand the major components of an entity's income statement.

The new standard is effective for annual periods beginning after December 15, 2026, with early adoption permitted.

The Company expects this ASU to only impact its disclosure requirements and does not expect the adoption of the ASU to have a material impact on its business operations or the Company's consolidated financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Company's financial position, results of operations or cash flows.

(11) REVENUE FROM CONTRACTS WITH CUSTOMERS

3 unchanged sentences

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 June 30, 2024, the Company recognized $ 1.01 million in service charges on deposits, $ 1.30 million in ATM and debit card interchange transaction fees, $ 18,000 in escrow fees, and $ 3,000 in fee income from non-deposit investment sales included in "Other" on the Consolidated Statement of Income, all considered within the scope of ASC 606.

For the nine months ended June 30, 2024, the Company recognized $ 3.02 million in service charges on deposits, $ 3.77 million in ATM and debit card interchange transaction fees, $ 51,000 in escrow fees, and $ 6,000 in fee in come 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 December 31, 2024, the Company recognized $ 999,000 in service charges on deposits, $ 1.27 million in ATM and debit card interchange transaction fees, $ 18,000 in escrow fees, and $ 1,000 in fee income from non-deposit investment sales included in "Other" on the consolidated statement of income, all considered within the scope of ASC 606.

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.

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

6 unchanged sentences

• ATM and Debit Card Interchange Transaction Fees:

The Company earns fees from cardholder transactions conducted through third-party payment network providers which consist of interchange fees earned from the payment networks as a debit card issuer.

The Company earns fees from cardholder transactions conducted through third-party payment network providers which consist of interchange fees earned from the payment networks

as a debit card issuer.

These fees are recognized when the transaction occurs, but may settle on a daily or monthly basis.

5 unchanged sentences

The Company earns fees from contracts with customers for investment activities.

Revenues are generally recognized on a monthly basis and are generally based on a percentage of the customer's assets under management or based on investment solutions that are implemented for the customer.

(12) COMMITMENTS AND CONTINGENT LIABILITIES

Revenues are generally recognized monthly and are generally based on a percentage of the customer's assets under management or based on investment solutions that are implemented for the customer.

(12) COMMITMENTS AND CONTINGENCIES

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

7 unchanged sentences

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

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

supporting collateral values.

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

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

A summary of the Company's commitments at June 30, 2024 and 2023 are listed below (in thousands):

June 30, 2024 June 30, 2023

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

December 31, 2024 December 31, 2023

Undisbursed portion of construction loans in process (see Note 4) $ 85,350 $ 104,683

3 unchanged sentences

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 $ 267,000 at June 30, 2024.

The following table sets forth information for the three and nine months ended June 30, 2024 and 2023 regarding activity in the a ACL on unfunded loan commitments (dollars in thousands):

ACL Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

Beginning ACL $ 276 $ 320

Provision for (recapture of) credit losses ( 9 ) (1) 7

Ending ACL $ 267 $ 327

(1) The provision for (recapture of) credit losses does not match the three months ended income statement due to rounding.

ACL Nine Months Ended June 30, 2024 Nine Months Ended June 30, 2023

Management estimates the amount of expected losses related to unfunded, off-balance sheet commitments over the contractual period during which it is exposed to credit risk from its obligation to extend credit, unless the Company has determined that obligation is unconditionally cancellable.

Credit risk associated with the unfunded commitments is 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 for (recapture of) credit losses on the consolidated income statements.

The ACL on unfunded loan commitments totaled $ 307,000 at December 31, 2024.

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

Three Months Ended December 31, 2024 Three Months Ended December 31, 2023

Beginning ACL $ 327 $ 332

2 unchanged sentences

Ending ACL $ 307 $ 364

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.

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

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

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

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

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

Timberland Bancorp has employment agreements with the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Lending Officer, Chief Credit Officer and Chief Technology Officer which provide for a severance payment and other benefits if the officers are involuntarily terminated following a change in control of Timberland Bancorp or the Bank.

The maximum value of the severance benefits under the employment agreements is 2.99 times the officer's average annual compensation during the five-year period prior to the effective date of the change in control.

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

1 unchanged sentence

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