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Timberland Bancorp
TSBK
#7910
Rank
$0.31 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$40.35
Share price
0.22%
Change (1 day)
41.48%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Timberland Bancorp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2025 Q1

Timberland Bancorp - 10-Q quarterly report FY2025 Q1


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2024

OR

 ☐           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____.

Commission file number 000-23333

TIMBERLAND BANCORP, INC.
(Exact name of registrant as specified in its charter) 
Washington 91-1863696 
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 
 
624 Simpson Avenue, Hoquiam, Washington 
98550
(Address of principal executive offices) (Zip Code)
(360) 533-4747
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $.01 par valueTSBKThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒     No ___

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes _☒_   No __
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐    Non-accelerated filer ☒ Smaller reporting company ☒   Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ___    No   _☒_

As of February 3, 2025, there were 7,955,453 shares of the registrant's common stock, $.01 par value per share outstanding.


INDEX

 
Page
   
  Item 1.    
 
   
 
   
 
   
 
   
 
   
 
   
 
   
  Item 2.     
   
  Item 3.    
   
  Item 4.     
   
 
   
  Item 1.     
    
  Item 1A.     
   
  Item 2.     
   
  Item 3.     
   
  Item 4.
   
  Item 5.     
52 
   
  Item 6.     
   
 
Certifications  
 Exhibit 31.1 
 Exhibit 31.2 
 Exhibit 32 
Exhibit 101
Exhibit 104

2

PART I.    FINANCIAL INFORMATION
Item 1.    Financial Statements (unaudited)
TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 2024 and September 30, 2024
(Dollars in thousands, except per share amounts)
December 31,
2024		September 30,
2024
(Unaudited)*
Assets  
Cash and cash equivalents:  
Cash and due from financial institutions$24,538 $29,071 
Interest-bearing deposits in banks139,533 135,657 
Total cash and cash equivalents164,071 164,728 
Certificates of deposit (“CDs”) held for investment, at cost7,470 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 
Investment securities available for sale, at fair value77,080 72,257 
Investments in equity securities, at fair value840 866 
Federal Home Loan Bank of Des Moines (“FHLB”) stock, at cost2,037 2,037 
Other investments, at cost3,000 3,000 
Loans held for sale411 — 
Loans receivable, net of ACL of $17,288 and $17,478
1,411,819 1,421,523 
Premises and equipment, net21,617 21,486 
Other real estate owned (“OREO”) and other repossessed assets, net221 — 
Accrued interest receivable7,095 6,990 
Bank owned life insurance (“BOLI”)23,777 23,611 
Goodwill15,131 15,131 
Core deposit intangible (“CDI”), net406 451 
Loan servicing rights, net1,195 1,372 
Operating lease right-of-use ("ROU") assets1,400 1,475 
Other assets15,805 6,242 
Total assets$1,909,480 $1,923,475 
Liabilities and shareholders’ equity  
Liabilities  
Deposits:
     Non-interest-bearing demand$402,911 $413,116 
     Interest-bearing1,227,505 1,234,552 
Total deposits1,630,416 1,647,668 
FHLB borrowings20,000 20,000 
Operating lease liabilities1,501 1,575 
Other liabilities and accrued expenses8,364 8,819 
Total liabilities$1,660,281 $1,678,062 
* Derived from audited consolidated financial statements.


See notes to unaudited consolidated financial statements
3

TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (continued)
December 31, 2024 and September 30, 2024
(Dollars in thousands, except per share amounts)
 
December 31,
2024		September 30,
2024
(Unaudited)*
Commitments and contingencies (see Note 12)
Shareholders’ equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued
$— $— 
Common stock, $0.01 par value; 50,000,000 shares authorized;
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 earnings220,398 215,531 
Accumulated other comprehensive (loss) income(792)20 
Total shareholders’ equity249,199 245,413 
Total liabilities and shareholders’ equity$1,909,480 $1,923,475 
* Derived from audited consolidated financial statements.


See notes to unaudited consolidated financial statements

4

TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended December 31, 2024 and 2023
(Dollars in thousands, except per share amounts)
(Unaudited)

 Three Months Ended December 31,
 20242023
Interest and dividend income  
Loans receivable and loans held for sale$21,032 $18,395 
Investment securities2,138 2,311 
Dividends from mutual funds, FHLB stock and other investments86 91 
Interest-bearing deposits in banks and CDs2,001 1,699 
Total interest and dividend income25,257 22,496 
Interest expense  
Deposits8,084 6,143 
FHLB borrowings203 349 
Total interest expense8,287 6,492 
Net interest income16,970 16,004 
Provision for (recapture of) credit losses
Provision for credit losses - loans52 379 
Recapture of credit losses - investment securities(5)(10)
Recapture of credit losses - unfunded commitments(20)(33)
Total provision for credit losses - net27336
Net interest income after provision for (recapture of) credit losses16,943 15,668 
Non-interest income  
Net recoveries on investment securities3 5 
Service charges on deposits999 1,023 
ATM and debit card interchange transaction fees1,267 1,264 
BOLI net earnings166 156 
Gain on sales of loans, net43 78 
Escrow fees18 19 
Other, net201 253 
Total non-interest income, net2,697 2,798 





 See notes to unaudited consolidated financial statements
5

TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (continued)
For the three months ended December 31, 2024 and 2023
(Dollars in thousands, except per share amounts)
(Unaudited)
 Three Months Ended December 31,
 20242023
Non-interest expense  
Salaries and employee benefits$6,092 $5,911 
Premises and equipment950 973 
Advertising181 186 
ATM and debit card interchange transaction fees521 615 
Postage and courier121 126 
State and local taxes346 319 
Professional fees346 253 
Federal Deposit Insurance Corporation ("FDIC") insurance210 210 
Loan administration and foreclosure128 105 
Technology and communications1,140 974 
Deposit operations332 320 
Amortization of CDI45 56 
Other655 576 
Total non-interest expense, net11,067 10,624 
Income before income taxes8,573 7,842 
Provision for income taxes1,713 1,546 
     Net income
$6,860 $6,296 
Net income per common share  
Basic$0.86 $0.78 
Diluted$0.86 $0.77 
Weighted average common shares outstanding  
Basic7,958,275 8,114,209 
Diluted7,999,504 8,166,048 
Dividends paid per common share$0.25 $0.23 





See notes to unaudited consolidated financial statements
6

TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended December 31, 2024 and 2023
(Dollars in thousands)
(Unaudited) 
 Three Months Ended  December 31,
 20242023
Comprehensive income
Net income$6,860 $6,296 
Other comprehensive income (loss)
Unrealized holding (loss) gain on investment securities available for sale, net of income taxes of $(216) and $66, respectively
(812)248 
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
— 9 
Total other comprehensive (loss) income, net of income taxes(812)257 
Total comprehensive income$6,048 $6,553 



See notes to unaudited consolidated financial statements
7

TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the three months ended December 31, 2024 and 2023
(Dollars in thousands, except per share amounts)
(Unaudited)
 Common Stock Accumulated
Other
Compre-hensive
Income (Loss)		 
 Number of SharesAmountRetained
Earnings		Total
Balance, September 30, 20238,105,338 $34,771 $199,386 $(1,084)$233,073 
Net income— — 6,296 — 6,296 
Other comprehensive income— — — 257 257 
Repurchase of common stock, net of tax(12,330)(362)— — (362)
Exercise of stock options27,700 355 — — 355 
Common stock dividends ($0.23 per common share)
— — (1,867)— (1,867)
Stock-based compensation expense— 105 — — 105 
Adoption of Accounting Standards Update ("ASU") 2016-13— — (488)— (488)
Balance, December 31, 20238,120,708 $34,869 $203,327 $(827)$237,369 
Balance, September 30, 20247,960,127 $29,862 $215,531 $20 $245,413 
Net income— — 6,860 — 6,860 
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 
Common stock dividends ($0.25 per common share)
— — (1,993)— (1,993)
Stock-based compensation expense— 141 — — 141 
Balance, December 31, 20247,954,673 $29,593 $220,398 $(792)$249,199 




See notes to unaudited consolidated financial statements
8

TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 2024 and 2023
(Dollars in thousands)
(Unaudited)
 Three Months Ended December 31,
 20242023
Cash flows from operating activities  
Net income$6,860 $6,296 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:  
Provision for credit losses27 336 
Depreciation375 356 
Accretion of discount on purchased loans(8)(10)
Amortization of CDI45 56 
Stock-based compensation expense141 105 
Net recoveries on investment securities(3)(5)
Change in fair value of investments in equity securities26 (37)
Accretion of discounts and premiums on securities(252)(293)
Gain on sales of loans, net(43)(78)
Loans originated for sale(2,680)(4,742)
Proceeds from sales of loans2,312 3,795 
Amortization of loan servicing rights200 236 
BOLI net earnings(166)(156)
Increase in deferred loan origination fees20 95 
Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses(9,910)(1,087)
Net cash (used in) provided by operating activities(3,056)4,867 
Cash flows from investing activities  
Net decrease in CDs held for investment2,739 2,739 
Purchase of investment securities held to maturity— (1,919)
Purchase of investment securities available for sale(8,577)— 
Proceeds from maturities and prepayments of investment securities held to maturity16,119 6,275 
Proceeds from maturities and prepayments of investment securities available for sale2,860 1,644 
Redemption of FHLB stock— 1,601 
Decrease (increase) in loans receivable, net9,419 (34,869)
Purchases of premises and equipment(506)(298)
Net cash provided by (used in) investing activities22,054 (24,827)

See notes to unaudited consolidated financial statements
9

TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the three months ended December 31, 2024 and 2023
(Dollars in thousands)
(Unaudited)
 Three Months Ended December 31,
 20242023
Cash flows from financing activities  
Net (decrease) increase in deposits$(17,252)$66,134 
Repayment of FHLB borrowings— (15,000)
Proceeds from exercise of stock options474 355 
Repurchase of common stock(884)(362)
Payment of dividends(1,993)(1,867)
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  
Beginning of period164,728 128,721 
End of period$164,071 $158,021 
Supplemental disclosure of cash flow information  
Interest paid$8,543 $6,206 
Supplemental disclosure of non-cash investing activities  
Other comprehensive (loss) income related to investment securities$(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
10

Timberland Bancorp, Inc. and Subsidiary
Notes to Unaudited Consolidated Financial Statements

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  Basis of Presentation:  The accompanying unaudited consolidated financial statements of Timberland Bancorp, Inc. and its wholly-owned subsidiary, Timberland Bank (the "Bank") (collectively, "the Company") were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with GAAP. However, all adjustments which are, in the opinion of management, necessary for a fair presentation of the interim consolidated financial statements have been included.  All such adjustments are of a normal recurring nature. 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 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 Corp.   All significant inter-company transactions and balances have been eliminated in consolidation.

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

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

(e)  Certain prior period amounts have been reclassified to conform to the 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 December 31, 2024 and September 30, 2024 (dollars in thousands):
 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value		Allowance for Credit Losses
December 31, 2024    
Held to Maturity    
U.S. Treasury and U.S. government agency securities$79,391 $— $(4,916)$74,475 $— 
Mortgage-backed securities ("MBS"):
U.S. government agencies48,161 — (2,324)45,837 — 
Private label residential26,833 264 (1,422)25,675 52 
Municipal securities1,223 9 — 1,232 — 
Bank issued trust preferred securities497 — (7)490 3 
Total$156,105 $273 $(8,669)$147,709 $55 





11





December 31, 2024Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available for Sale
U.S. Treasury and U.S. government agency securities$9,569 $— $(25)$9,544 
MBS: U.S. government agencies68,513 55 (1,032)67,536 
Total$78,082 $55 $(1,057)$77,080 



September 30, 2024Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAllowance for Credit Losses
Held to Maturity
U.S. Treasury and U.S. government agency securities$92,312 $70 $(4,197)$88,185 $— 
MBS:
U.S. government agencies49,481 174 (1,378)48,277 — 
 Private label residential 28,479 231 (980)27,730 55 
Municipal securities1,330 8 — 1,338 $— 
Bank issued trust preferred securities495 — (18)477 5
Total$172,097 $483 $(6,573)$166,007 $60 



September 30, 2024Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available for Sale
U.S. Treasury and U.S. government agency securities$3,934 $6 $(1)$3,939 
MBS: U.S. government agencies68,297 545 (524)68,318 
Total$72,231 $551 $(525)$72,257 


12




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 Months12 Months or LongerTotal
 Estimated
 Fair
 Value		Gross
Unrealized
Losses		QuantityEstimated
 Fair
 Value		Gross
Unrealized
Losses		QuantityEstimated
 Fair
 Value		Gross
Unrealized
Losses
Held to maturity
U.S. Treasury and U.S. government agency securities$9,786 $(9)1 $64,689 $(4,907)15 $74,475 $(4,916)
MBS:
U.S. government agencies18,746 (237)15 26,938 (2,087)43 45,684 (2,324)
Private label residential2,731 (12)4 19,187 (1,410)19 21,918 (1,422)
Bank issued trust
  preferred securities
— — — 490 (7)1 490 (7)
     Total
$31,263 $(258)20 $111,304 $(8,411)78 $142,567 $(8,669)
Available for sale
U.S. Treasury and U.S. government agency securities$7,557 $(25)5 $— $— — $7,557 $(25)
MBS:
U.S. government agencies22,027 (522)7 24,959 (510)22 46,986 (1,032)
     Total
$29,584 $(547)12 $24,959 $(510)22 $54,543 $(1,057)

Held to maturity and available for sale investment securities with unrealized losses were as follows as of September 30, 2024 (dollars in thousands):
 Less Than 12 Months12 Months or LongerTotal
 Estimated
 Fair
 Value		Gross
Unrealized Losses		QuantityEstimated
 Fair
 Value		Gross
Unrealized Losses		QuantityEstimated
 Fair
 Value		Gross
Unrealized Losses
Held to maturity        
U.S. Treasury and U.S. government agency securities$— $— — $78,363 $(4,197)17 $78,363 $(4,197)
MBS:
U.S. government agencies1 — 1 28,618 (1,378)44 28,619 (1,378)
 Private label
    residential
804 (6)1 20,447 (974)19 21,251 (980)
Bank issued trust preferred securities— — — 477 (18)1 477 (18)
     Total
$805 $(6)2 $127,905 $(6,567)81 $128,710 $(6,573)
Available for sale
U.S. Treasury and U.S. government agency securities$1,962 $(1)1 $— $— — $1,962 $(1)
MBS:
U.S. government agencies11,368 (117)4 25,751 (407)23 37,119 (524)
     Total
$13,330 $(118)5 $25,751 $(407)23 $39,081 $(525)


13




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.

 Held to MaturityAvailable for Sale
 Amortized
Cost		Estimated
Fair
Value		Amortized
Cost		Estimated
Fair
Value
Due within one year$15,209 $15,152 $4,932 $4,927 
Due after one year to five years80,597 75,568 9,553 9,537 
Due after five years to ten years1,210 1,252 1,915 1,906 
Due after ten years59,089 55,737 61,682 60,710 
Total$156,105 $147,709 $78,082 $77,080 

Credit Quality Indicators and Allowance for Credit Losses

Available for Sale Investment Securities

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 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. The Company expects the fair value of these securities to recover as the securities approach their maturity dates or sooner if market yields for such securities decline. The Company does not believe that these securities are impaired because of their credit quality or related to any issuer or industry specific event. The Company has the ability and intent to hold the investments until the fair value recovers.

Held to Maturity Investment Securities

The Company measures expected credit losses on held to maturity investment securities, which are comprised of U.S. government agency and U.S. government mortgage-backed securities, private label mortgage-backed securities, municipal, and other bonds. The Company’s agency and mortgage-backed securities that are issued by U.S. government entities and agencies are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. As such, no ACL has been established for these securities. The ACL on the private label mortgage-backed securities, municipal, and other bonds within the held to maturity securities portfolio is calculated using the probability of default/loss given default ("PD/LGD") method. The calculation is completed on a quarterly basis using the default studies provided by an industry leading source. At December 31, 2024 and September 30, 2024, the ACL on the held to maturity securities portfolio totaled $55,000 and $60,000, respectively.










14




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 MaturityBeginning AllowanceProvision for (Recapture of) Credit LossesEnding Allowance
MBS:
Private label residential$55 $(3)$52 
Bank issued trust preferred securities5 (2)3 
Total $60 $(5)$55 


Three Months Ended December 31, 2023
Held to MaturityBeginning AllowanceImpact of Adopting CECL (ASU 2016-13)Provision for (Recapture of) Credit LossesEnding Allowance
MBS:
Private label residential$— $82 $(9)$73 
Bank issued trust preferred securities— 10 (1)9 
Total $— $92 $(10)$82 

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 $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 December 31, 2024 by credit quality indicator:
Credit Ratings
As of December 31, 2024AAA/AA/ABBB/BB/BUnratedTotal
Held to Maturity
U.S. Treasury and U.S. government agency securities$79,391 $— $— $79,391 
MBS:
U.S. government agencies48,161 — — 48,161 
Private label residential15,326 — 11,507 26,833 
Municipal securities1,223 — — 1,223 
Bank issued trust preferred securities— — 497 497 
Total held to maturity$144,101 $— $12,004 $156,105 

15




Credit Ratings
As of September 30, 2024AAA/AA/ABBB/BB/BUnratedTotal
Held to Maturity
U.S. Treasury and U.S. government agency securities$92,312 $— $— $92,312 
MBS:— 
U.S. government agencies49,481 — — 49,481 
Private label residential16,277 — 12,202 28,479 
Municipal securities1,230 — 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). To determine the component of the gross OTTI related to credit losses, the Company compared the amortized cost basis of the OTTI security to the present value of its revised expected cash flows, discounted using its pre-impairment yield.  The revised expected cash flow estimates for individual securities are based primarily on an analysis of default rates, prepayment speeds and third-party analytic reports.  Significant judgment by management was required in this analysis that included, but not limited to, assumptions regarding the collectability of principal and interest, net of related expenses, on the underlying loans.  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 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
December 31,
 20242023
Beginning balance of credit loss$803 $816 
Subtractions: 
Net realized loss previously recorded as credit losses— (1)
Recapture of prior credit loss(2)(4)
Ending balance of credit loss$801 $811 















16





(3) GOODWILL AND CDI

Goodwill is initially recorded when the purchase price paid in a business combination exceeds the estimated fair value of the net identified tangible and intangible assets acquired and liabilities assumed.  Goodwill is presumed to have an indefinite useful life and is analyzed annually for impairment.  The Company performs an annual review during the third quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine if the recorded goodwill is impaired. 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.

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.

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 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.

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. CDI is amortized to non-interest expense using an accelerated method based on an estimated runoff of related deposits over a period of ten years. CDI is evaluated for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable, with any changes in estimated useful life accounted for prospectively over the revised remaining life. As of December 31, 2024, management believes that there have been no events or changes in the circumstances that would indicate a potential impairment of CDI.

17




(4) LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Loans receivable by portfolio segment consisted of the following at December 31, 2024 and September 30, 2024 (dollars in thousands):
 December 31,
2024		September 30,
2024
 AmountPercentAmountPercent
Mortgage loans:    
One- to four-family (1)$306,443 20.2 %$299,123 19.7 %
Multi-family177,861 11.7 177,350 11.7 
Commercial real estate597,054 39.3 599,219 39.6 
Construction - custom and owner/builder124,104 8.2 132,101 8.7 
Construction - speculative one- to four-family8,887 0.6 11,495 0.8 
Construction - commercial22,841 1.5 29,463 1.9 
Construction - multi-family48,940 3.2 28,401 1.9 
Construction - land development15,977 1.0 17,741 1.2 
Land30,538 2.0 29,366 1.9 
Total mortgage loans1,332,645 87.7 1,324,259 87.4 
Consumer loans:    
Home equity and second mortgage48,851 3.2 47,913 3.2 
Other2,889 0.2 3,129 0.2 
Total consumer loans51,740 3.4 51,042 3.4 
Commercial loans:
Commercial business135,312 8.9 138,743 9.2 
U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans204 — 260 — 
    Total commercial loans135,516 8.9 139,003 9.2 
Total loans receivable1,519,901 100.0 %1,514,304 100.0 %
Less:    
Undisbursed portion of construction loans in process ("LIP")85,350  69,878  
Deferred loan origination fees, net5,444  5,425  
ACL17,288  17,478  
Subtotal108,082 92,781 
Loans receivable, net$1,411,819  $1,421,523  

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

The Company uses credit risk grades which reflect the Company’s assessment of a loan’s risk or loss potential.  The Company categorizes loans into risk grade categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors such as the estimated fair value of the collateral.  The Company uses the following definitions for credit risk ratings as part of the on-going monitoring of the credit quality of its loan portfolio:

Pass:  Pass loans are defined as those loans that meet acceptable quality underwriting standards.

Watch:  Watch loans are defined as those loans that still exhibit acceptable quality, but have some concerns that justify greater attention.  If these concerns are not corrected, a potential for further adverse categorization exists.  These concerns could relate to a specific condition peculiar to the borrower, its industry segment or the general economic environment.

Special Mention: Special mention loans are defined as those loans deemed by management to have some potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in the deterioration of the payment prospects of the loan. 

Substandard:  Substandard loans are defined as those loans that are inadequately protected by the current net worth and paying capacity of the obligor, or of the collateral pledged.  Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt.  If the weakness or weaknesses are not corrected, there is the distinct possibility that some loss will be sustained.

Doubtful: Loans in this classification have the weaknesses of substandard loans with the additional characteristic that the weaknesses make the collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. At December 31, 2024 and September 30, 2024, there was one loan classified as doubtful which is supported by an SBA guarantee of the remaining balance.

Loss:  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 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
Type20252024202320222021PriorRevolving LoansTotal Loans Receivable
One-to four-family
Risk Rating
Pass$1,883 $14,158 $76,808 $112,988 $46,422 $52,343 $— $304,602 
Watch— — 1,794 — — — — 1,794 
Substandard— — — — — 47 — 47 
Total one- to four-family$1,883 $14,158 $78,602 $112,988 $46,422 $52,390 $— $306,443 
Multi-family
Risk Rating
Pass$2,908 $13,134 $19,416 $39,515 $32,976 $68,743 $1,169 $177,861 
Total multi-family$2,908 $13,134 $19,416 $39,515 $32,976 $68,743 $1,169 $177,861 
Commercial real estate
Risk Rating
Pass$5,995 $25,866 $77,637 $125,111 $89,546 $248,060 $7,877 $580,092 
Watch— — 907 — — 10,921 — 11,828 
Special Mention— — — — — 4,401 — 4,401 
Substandard— — — — — 733 — 733 
Total commercial real estate$5,995 $25,866 $78,544 $125,111 $89,546 $264,115 $7,877 $597,054 
18




Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20252024202320222021PriorRevolving LoansTotal Loans Receivable
Construction-custom & owner/builder (1)
Risk Rating
Pass$2,276 $47,406 $9,167 $— $209 $— $— $59,058 
Watch— 248 9,595 5,306 2,726 746 — 18,621 
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)
Risk Rating
Pass$982 $2,921 $866 $— $— $— $— $4,769 
Total construction-speculative one-to four-family$982 $2,921 $866 $— $— $— $— $4,769 
Construction-commercial (1)
Risk Rating
Pass$1,401 $2,060 $8,966 $2,072 $— $— $— $14,499 
Total construction-commercial $1,401 $2,060 $8,966 $2,072 $— $— $— $14,499 
Construction-multi-family (1)
Risk Rating
Pass$838 $2,572 $20,603 $— $— $— $— $24,013 
Total construction-multi-family$838 $2,572 $20,603 $— $— $— $— $24,013 
Construction-land development (1)
Risk Rating
Pass$— $1,444 $1,446 $— $— $— $— $2,890 
Watch— — — 11,549 — — — 11,549 
Total construction-land development$— $1,444 $1,446 $11,549 $— $— $— $14,439 
Land
Risk Rating
Pass$2,417 $9,785 $4,430 $6,449 $3,793 $2,656 $232 $29,762 
Watch— — — 301 — 475 — 776 
Total land$2,417 $9,785 $4,430 $6,750 $3,793 $3,131 $232 $30,538 
Home equity and second mortgage
Risk Rating
Pass$885 $5,728 $4,435 $1,783 $249 $2,584 $31,271 $46,935 
Watch— — — — 1,250 — — 1,250 
Substandard— — — — — 79 587 666 
Total home equity and second mortgage$885 $5,728 $4,435 $1,783 $1,499 $2,663 $31,858 $48,851 
19




Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20252024202320222021PriorRevolving LoansTotal Loans Receivable
Other consumer
Risk Rating
Pass$1,319 $395 $427 $94 $40 $506 $73 $2,854 
Watch— — — — — 35 — 35 
Total other consumer$1,319 $395 $427 $94 $40 $541 $73 $2,889 
Current period gross write-offs$— $2 $— $— $— $— $1 $3 
Commercial business
Risk Rating
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 $— $— $— $241 
SBA PPP
Risk Rating
Pass$— $— $— $— $182 $22 $— $204 
Total SBA PPP$— $— $— $— $182 $22 $— $204 
Total loans receivable, gross (1)
Risk Rating
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
20





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
Type20242023202220212020PriorRevolving LoansTotal Loans Receivable
One-to four-family
Risk Rating
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 
Multi-family
Risk Rating
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
Risk Rating
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)
Risk Rating
Pass$38,303 $29,159 $778 $— $— $— $— $68,240 
Watch221 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)
Risk Rating
Pass$5,039 $2,412 $— $— $— $— $— $7,451 
Total construction-speculative one-to four-family$5,039 $2,412 $— $— $— $— $— $7,451 
Construction-commercial (1)
Risk Rating
Pass$6,006 $16,349 $1,457 $— $— $— $— $23,812 
Total construction-commercial$6,006 $16,349 $1,457 $— $— $— $— $23,812 
21




Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20242023202220212020PriorRevolving LoansTotal Loans Receivable
Construction-multi-family (1)
Risk Rating
Pass$588 $20,169 $— $— $— $— $— $20,757 
Total construction-multi-family$588 $20,169 $— $— $— $— $— $20,757 
Construction-land development (1)
Risk Rating
Pass$1,673 $2,807 $— $— $— $— $— $4,480 
Watch— — 11,549 — — — — 11,549 
Total construction-land development$1,673 $2,807 $11,549 $— $— $— $— $16,029 
Land
Risk Rating
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
Risk Rating
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
Risk Rating
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
Risk Rating
Pass$16,129 $19,910 $35,117 $8,588 $7,589 $4,775 $43,444 $135,552 
Watch— — 202 36 696 6 180 1,120 
Substandard— 1,352 — — — 517 — 1,869 
Doubtful— 202 — — — — — 202 
Total commercial business$16,129 $21,464 $35,319 $8,624 $8,285 $5,298 $43,624 $138,743 
Current period gross write-offs$— $79 $— $— $— $13 $— $92 
SBA PPP
Risk Rating
Pass$— $— $— $224 $36 $— $— $260 
Total SBA PPP$— $— $— $224 $36 $— $— $260 
22




Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20242023202220212020PriorRevolving LoansTotal Loans Receivable
Total loans receivable, gross (1)
Risk Rating
Pass$135,424 $259,907 $326,617 $185,424 $110,552 $284,018 $85,707 $1,387,649 
Watch221 5,979 17,599 2,897 5,326 11,536 181 43,739 
Special Mention— — — — — 4,401 — 4,401 
Substandard— 1,352 — — — 6,465 618 8,435 
Doubtful— 202 — — — — — 202 
Total loans receivable$135,645 $267,440 $344,216 $188,321 $115,878 $306,420 $86,506 $1,444,426 
Current period gross charge-off$6 $80 $— $— $— $13 $2 $101 
_____________________
(1) Net of construction LIP

Allowance for Credit Losses

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. For loans that do not share similar risk characteristics and cannot be evaluated on a collective basis, the Company will evaluate the loan individually. The Company estimates the expected credit losses over the loans' contractual terms, adjusted for expected prepayments. 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. 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 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.

When available information confirms that specific loans or portions thereof are uncollectible, identified amounts are charged against the ACL. The existence of some or all of the following criteria will generally confirm that a loss has been incurred: the loan is significantly delinquent and the borrower has not demonstrated the ability or intent to bring the loan current; the Company has no recourse to the borrower, or if it does, the borrower has insufficient assets to pay the debt; and/or the estimated fair value of the loan collateral is significantly below the current loan balance, and there is little or no near-term prospect for improvement.

Management's evaluation of the ACL is based on ongoing, quarterly assessments of the known and inherent risks in the loan portfolio. Loss factors are based on the Company's historical loss experience with additional consideration and adjustments made for changes in economic conditions, changes in the amount and composition of the loan portfolio, delinquency rates, changes in collateral values, seasoning of the loan portfolio, duration of the current business cycle, a detailed analysis of individually evaluated loans and other factors as deemed appropriate. Management also assesses the risk related to reasonable and supportable forecasts that are used. These factors are evaluated on a quarterly basis. 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 adjustments to the ACL based on their judgment about information available to them at the time of their examinations.

23




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
 Beginning
Allowance		Provision for
(Recapture of) Credit Losses		Charge-
offs		RecoveriesEnding
Allowance
Mortgage loans:     
One- to four-family$2,632 $67 $— $— $2,699 
Multi-family1,308 3 — — 1,311 
Commercial real estate6,934 (42)— — 6,892 
Construction – custom and owner/builder1,328 (67)— — 1,261 
Construction – speculative one- to four-family128 (46)— — 82 
Construction – commercial537 (208)— — 329 
Construction – multi-family456 71 — — 527 
Construction – land development335 (43)— — 292 
Land793 9 — — 802 
Consumer loans:    
Home equity and second mortgage348 5 — — 353 
Other39 (3)(3)— 33 
Commercial business loans2,640 306 (241)2 2,707 
Total$17,478 $52 $(244)$2 $17,288 

 Three Months Ended December 31, 2023
 Beginning
Allowance		Impact of Adopting CECL (ASU 2016-13)Provision for
(Recapture of) Loan Losses		Charge-
offs		RecoveriesEnding
Allowance
Mortgage loans:     
  One- to four-family$2,417 $(408)$87 $— $— $2,096 
  Multi-family1,156 (120)164 — — 1,200
  Commercial real estate7,209 (494)107 — — 6,822
  Construction – custom and owner/builder750 542 (58)— — 1,234
  Construction – speculative one- to four-family148 (16)— — — 132
  Construction – commercial316 176 (62)— — 430
Construction – multi-family602 204 (71)— — 735 
  Construction – land development274 25 (1)— — 298 
  Land406 318 33 — — 757
Consumer loans:     
  Home equity and second mortgage519 (243)10 — — 286
  Other53 (7)2 (2)— 46
Commercial business loans1,967 484 168 — — 2,619
Total$15,817 $461 $379 $(2)$— $16,655 





24




Non-Accrual Loans

When a loan is 90 days delinquent the accrual of interest is generally discontinued and the loan is placed on non-accrual. All interest accrued but not collected for loans placed on non-accrual is reversed out of interest income. Generally, payments received on non-accrual loans are applied to reduce the outstanding principal balance of the loan. At times interest may be accounted for on a cash basis, depending on the collateral value and the borrower's payment history. A loan is generally not removed from non-accrual until all delinquent principal, interest and late fees have been brought current and the borrower demonstrates repayment ability over a period of not less than six months and all taxes are current.

The following tables present an analysis of loans by aging category and portfolio segment at December 31, 2024 and September 30, 2024 (dollars in thousands):
 30–59
Days
Past Due		60-89
Days
Past Due		Non-
Accrual (1)		Past Due
90 Days
or More
and Still
Accruing		Total
Past Due		CurrentTotal
Loans
December 31, 2024       
Mortgage loans:       
One- to four-family$— $62 $47 $— $109 $306,334 $306,443 
Multi-family— — — — — 177,861 177,861 
Commercial real estate— 436 698 — 1,134 595,920 597,054 
Construction – custom and owner/builder— — — — — 77,679 77,679 
Construction – speculative one- to four-family— — — — — 4,769 4,769 
Construction – commercial— — — — — 14,499 14,499 
Construction – multi-family— — — — — 24,013 24,013 
Construction – land development— — — — — 14,439 14,439 
Land— — — — — 30,538 30,538 
Consumer loans:    
Home equity and second mortgage— — 587 — 587 48,264 48,851 
Other— — — — — 2,889 2,889 
Commercial business loans541 248 1,401 — 2,190 133,122 135,312 
SBA PPP loans— — — — — 204 204 
Total$541 $746 $2,733 $— $4,020 $1,430,531 $1,434,551 
(1) Includes non-accrual loans past due 90 days or more and other loans classified as non-accrual.
25




30–59
Days
Past Due		60-89
Days
Past Due		Non-
Accrual (1)		Past Due
90 Days
or More
and Still
Accruing		Total
Past Due		CurrentTotal
Loans
September 30, 2024       
Mortgage loans:       
One- to four-family$— $— $49 $— $49 $299,074 $299,123 
Multi-family— — — — — 177,350 177,350 
Commercial real estate— — 1,158 — 1,158 598,061 599,219 
Construction – custom and owner/builder— — — — — 81,274 81,274 
Construction – speculative one- to four-family— — — — — 7,451 7,451 
Construction – commercial— — — — — 23,812 23,812 
Construction – multi-family— — — — — 20,757 20,757 
Construction – land development— — — — — 16,029 16,029 
Land— — — — — 29,366 29,366 
Consumer loans:
Home equity and second mortgage— — 618 — 618 47,295 47,913 
Other— 1 — — 1 3,128 3,129 
Commercial business loans424 169 2,060 — 2,653 136,090 138,743 
SBA PPP loans— — — — — 260 260 
Total$424 $170 $3,885 $— $4,479 $1,439,947 $1,444,426 
(1) Includes non-accrual loans past due 90 days or more and other loans classified as non-accrual.


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 InvestmentRelated ACL
Mortgage loans:
One- to four-family$47 $— 
Commercial real estate698 — 
Consumer loans:
Home equity and second mortgage587 — 
Commercial business loans1,401 431 
Total$2,733 $431 













26




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 InvestmentRelated ACL
Mortgage loans:
One- to four-family$49 $— 
Commercial real estate1,158 — 
Consumer loans:
Home equity and second mortgage618 — 
Commercial business loans2,060 506 
Total$3,885 $506 

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.































27




(5) LEASES

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

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

Three Months Ended December 31,
Lease cost:20242023
Operating lease cost$96$93
Short-term lease cost——
Total lease cost$96 $93 

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, 2024At or For the Three Months Ended December 31, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$83 $82 
Weighted average remaining lease term-operating leases5.8 years6.5 years
Weighted average discount rate-operating leases2.34 %2.34 %

The Company's leases typically do not contain a discount rate implicit in the lease contracts. As an alternative, the weighted average discount rate used to estimate the present value of future lease payments in calculating the value of the ROU asset and lease liability was determined by utilizing the FHLB fixed-rate credit advance borrowing rate for the term correlating to the remaining term of each lease.

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

Remainder of 2025$253 
2026304 
2027232 
2028219 
2029218 
Thereafter383 
Total lease payments1,609 
Less imputed interest108 
Total$1,501 



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(6) NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income to common shareholders by the weighted average number of common shares outstanding during the period, without considering any dilutive items.  Nonvested shares of restricted stock are included in the computation of basic earnings per share because the holder has voting rights and shares in non-forfeitable dividends during the vesting period. 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.  

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,
20242023
Basic net income per common share computation
Numerator – net income $6,860 $6,296 
Denominator – weighted average common shares outstanding7,958,275 8,114,209 
Basic net income per common share$0.86 $0.78 
Diluted net income per common share computation
Numerator – net income$6,860 $6,296 
Denominator – weighted average common shares outstanding7,958,275 8,114,209 
Effect of dilutive stock options (1)41,229 51,839 
Weighted average common shares outstanding - assuming dilution7,999,504 8,166,048 
Diluted net income per common share$0.86 $0.77 
____________________________________________
(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 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 $20 
Other comprehensive loss(812)(812)
Balance of AOCI at the end of period$(792)$(792)
__________________________
(1) All amounts are net of income taxes.
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Three Months Ended December 31, 2023
Changes in fair value of available for sale securities (1)Changes in OTTI on held to maturity securities (1)Total (1)
Balance of AOCI at the beginning of period$(1,075)$(9)$(1,084)
Other comprehensive income 248 9 257 
Balance of AOCI at the end of period$(827)$— $(827)
__________________________
(1) All amounts are net of income taxes.



(8) STOCK COMPENSATION PLANS

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 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, 2024Three Months Ended December 31, 2023
  Number of SharesWeighted
Average
Exercise
Price		 Number of SharesWeighted
Average
Exercise
Price
Options outstanding, beginning of period306,240 $25.21 369,150 $24.00 
Exercised(22,400)21.17 (27,700)12.81 
Forfeited(600)27.40 (5,380)25.10 
Options outstanding, end of period283,240 $25.52 336,070 $24.91 

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

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

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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 OutstandingOptions Exercisable
Range of
Exercise
Prices ($)		NumberWeighted
Average
Exercise
Price 		Weighted
Average
Remaining
Contractual
Life (Years)		NumberWeighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Life (Years)
10.26-10.7114,750 $10.62 0.514,750 $10.62 0.5
15.67-19.1350,750 16.57 4.739,920 16.48 4.5
26.50-27.4091,020 27.32 6.951,720 27.25 6.1
28.23-29.6995,400 28.80 5.269,800 29.01 4.6
31.80-33.4031,320 31.85 3.930,520 31.59 3.8
 283,240 $25.52 5.3206,710 $25.25 4.5

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, 2024Three Months Ended December 31, 2023
Number of Unvested SharesWeighted Average Grant Date Fair ValueNumber of Unvested SharesWeighted Average Grant Date Fair Value
Restricted stock outstanding beginning of period49,015 $29.28 26,150 $27.37 
     Forfeited(450)29.28 — — 
Restricted stock outstanding end of period48,565 $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 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

Fair value is defined under GAAP as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. 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 levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels. These levels are:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

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Level 2: Significant observable inputs other than quoted prices included within Level 1, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability based on the best information available in the circumstances.

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 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, 2024Estimated Fair Value 
 Level 1Level 2Level 3Total
Available for sale investment securities    
U.S. Treasury and U.S. government agency securities$9,544 $— $— $9,544 
  MBS: U.S. government agencies— 67,536 — 67,536 
Investments in equity securities
   Mutual funds840 — — 840 
Total$10,384 $67,536 $— $77,920 
September 30, 2024Estimated Fair Value 
 Level 1Level 2Level 3Total
Available for sale investment securities    
U.S. Treasury and U.S. government agency securities$3,939 $— $— $3,939 
  MBS: U.S. government agencies— 68,318 — 68,318 
Investments in equity securities
   Mutual funds866 — — 866 
Total$4,805 $68,318 $— $73,123 

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.  These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period.

The Company uses the following methods and significant assumptions to estimate fair value on a non-recurring basis:

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

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).

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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 ValueTotal Estimated
December 31, 2024Level 1Level 2Level 3Fair 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 

 Estimated Fair ValueTotal Estimated
September 30, 2024Level 1Level 2Level 3Fair Value
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 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):

  Valuation
Technique(s)		 Unobservable Input(s)Range
Individually evaluated collateral-dependent loansMarket approachAppraised value less estimated selling costsN/A
OREO and other repossessed assetsMarket approachLower of appraised value or listing price less estimated selling costsN/A

GAAP requires disclosure of estimated fair values for certain financial instruments. Such estimates are subjective in nature, and significant judgment is required regarding the risk characteristics of various financial instruments at a discrete point in time. Therefore, such estimates could vary significantly if assumptions regarding uncertain factors were to change. 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 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, the Company uses the exit price notion in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

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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:
 Recorded
Amount		 Estimated Fair Value 
Level 1		 
Level 2		 
Level 3
Financial assets     
Cash and cash equivalents$164,071 $164,071 $164,071 $— $— 
CDs held for investment7,470 7,470 7,470 — — 
Investment securities233,185 224,790 84,019 140,771 — 
Investments in equity securities840 840 840 — — 
FHLB stock2,037 2,037 2,037 — — 
Other investments3,000 3,000 3,000 — — 
Loans held for sale411 424 424 — — 
Loans receivable, net1,411,819 1,372,737 — — 1,372,737 
     Accrued interest receivable7,095 7,095 7,095 — — 
Financial liabilities     
Certificates of deposit385,835 385,987 — — 385,987 
FHLB borrowings20,000 19,896 — — 19,896 
Accrued interest payable1,876 1,876 1,876 — — 



 September 30, 2024
  Fair Value Measurements Using:
 Recorded
Amount		 Estimated Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets     
Cash and cash equivalents$164,728 $164,728 $164,728 $— $— 
CDs held for investment10,209 10,209 10,209 — — 
Investment securities244,354 238,264 146,141 92,123 — 
Investments in equity securities866 866 866 — — 
FHLB stock2,037 2,037 2,037 — — 
Other investments3,000 3,000 3,000 — — 
Loans receivable, net1,421,523 1,387,642 — — 1,387,642 
     Accrued interest receivable6,990 6,990 6,990 — — 
Financial liabilities     
Certificates of deposit368,308 368,312 — — 368,312 
FHLB borrowings20,000 20,035 — — 20,035 
Accrued interest payable2,132 2,132 2,132 — — 


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(10) RECENT ACCOUNTING PRONOUNCEMENTS

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. The amendments in this ASU are intended to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income tax paid information. The ASU requires disclosure in the rate reconciliation of specific categories as well as additional information for reconciling items that meet a quantitative threshold. The amendment requires on an annual basis a reconciliation broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity should apply the amendments in this ASU on a prospective basis. 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

ASU 2014-09 Revenue from Contracts with Customers ("ASC 606") applies to all contracts with customers to provide goods or services in the ordinary course of business, except for contracts that are specifically excluded from its scope. The majority of the Company's revenues are composed of interest income, deferred loan fee accretion, premium/discount accretion, gains on sales of loans and investments, BOLI net earnings, servicing income on loans sold and other loan fee income, which are not within the scope of ASC 606. Revenue reported as service charges on deposits, ATM and debit card interchange transaction fees, merchant services fees, non-deposit investment fees and escrow fees are within the scope of ASC 606. 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 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. Descriptions of the Company's revenue-generating activities that are within the scope of ASC 606 are as follows:

•Service Charges on Deposits: The Company earns fees from its deposit customers from a variety of deposit products and services. Non-transaction based fees such as account maintenance fees and monthly statement fees are considered to be provided to the customer under a day-to-day contract with ongoing renewals. Revenue for these non-transaction fees are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Transaction-based fees such as non-sufficient fund charges, stop payment charges and wire fees are recognized at the time the transaction is executed, as the contract duration does not extend beyond the service performed.
•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
35

as a debit card issuer. These fees are recognized when the transaction occurs, but may settle on a daily or monthly basis.
•Escrow Fees: The Company earns fees from real estate escrow contracts with customers. The Company receives and disburses money and/or property according to the customer's contract. Fees are recognized when the escrow contract closes.
•Fee Income from Non-deposit Investment Sales: The Company earns fees from contracts with customers for investment activities. 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. These financial instruments include commitments to extend credit.  These instruments involve, to varying degrees, elements of credit risk not recognized in the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Since commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party.  However, such loan to value ratios will subsequently change, based on increases and decreases in the supporting collateral values. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, land and income-producing commercial properties.

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

December 31, 2024December 31, 2023
Undisbursed portion of construction loans in process (see Note 4)$85,350 $104,683 
Undisbursed lines of credit115,279 135,250 
Commitments to extend credit16,265 11,810 
$216,894 $251,743 

The Company maintains a separate ACL related to unfunded loan commitments. 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. 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 utilization. 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, 2024Three Months Ended December 31, 2023
Beginning ACL$327 $332 
Impact of adopting CECL (ASU 2016-13)— 65 
Provision for (recapture of) credit losses(20)(33)
Ending ACL$307 $364 
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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 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.  In the opinion of management, liabilities arising from these claims, if any, will not have a material effect on the future consolidated financial position of the Company.



Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this Form 10-Q, the terms “we,” “us,” “our” and the “Company” refer to Timberland Bancorp, Inc. and its consolidated subsidiaries, unless the context indicates otherwise.  References to the “Bank” in this Form 10-Q, refer to Timberland Bank, a wholly-owned subsidiary of Timberland Bancorp, Inc., and the Bank’s wholly-owned subsidiary, Timberland Service Corporation.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the consolidated financial statements and accompanying notes to the consolidated financial statements contained in Item 1 of this Form 10-Q. The following analysis discusses the material changes in the consolidated financial condition and results of operations of the Company at and for the three months ended December 31, 2024.  


Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future economic performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to:

•adverse impacts to economic conditions in our local markets or other markets where we have lending relationships
•effects of employment levels, labor shortages inflation, a recession or slowed economic growth;
•changes in the interest rate environment, including the past increases in the Board of Governors of the Federal Reserve System (“Federal Reserve”) benchmark rate and duration of such increased levels, which could adversely affect our revenues and expenses, the values of our assets and obligations, and the availability and cost of capital and liquidity;
•the impact of inflation and the Federal Reserve monetary policy;
•the effects of any Federal government shutdown;
•credit risks of lending activities, including loan delinquencies, write-offs, changes in our ACL, and provision for credit losses;
•fluctuations in the demand for loans, the number of unsold homes, land and other properties, and real estate values in our market areas;
•secondary market conditions for loans and our ability to sell loans in the secondary market;
37

•results of examinations of us by regulatory authorities, which may the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or our bank subsidiary which could require us to increase our ACL, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings;
•the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment;
•legislative or regulatory changes, including changes in banking, securities and tax law, in regulatory policies and principles, or the interpretation of regulatory capital or other rules;
•our ability to attract and retain deposits;
•our ability to control operating costs and expenses;
•use of estimates in determining the fair value of assets, which may prove incorrect;
•disruptions or security breaches or other adverse events, failures or interruptions in or attacks on our information technology systems or on the third-party vendors;
•our ability to retain key members of our senior management team;
•costs and effects of litigation, including settlements and judgments;
•our ability to implement our business strategies, including expectations regarding key growth initiatives and strategic priorities;
•increased competitive pressures among financial services companies, including repricing and competitors' pricing initiatives, and their impact on our market position, loan and deposit products;
•changes in consumer spending, borrowing and savings habits;
•the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions;
•our ability to pay dividends on our common stock;
•quality and composition of our securities portfolio and the impact of adverse changes in the securities markets;
•inability of key third-party providers to perform their obligations;
•changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board (“FASB”);
•The potential imposition of new tariffs or changes to existing trade policies that could affect economic activity or specific industry sectors;
•environmental, social and governance goals and targets;
•effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest, and other external events;
•other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and
•other risks described elsewhere in this Form 10-Q and our other reports filed with or furnished to the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the "2024 Form 10-K”).

Any of the forward-looking statements that we make in this Form 10-Q and in the other public statements we make are based upon management's beliefs and assumptions at the time they are made. We do not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements included in this quarterly report to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur and we caution readers not to place undue reliance on any forward-looking statements. These risks could cause our actual results for fiscal 2025 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect the Company's consolidated financial condition and results of operations as well as its stock price performance.


Overview

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 offices (including its main office in Hoquiam). At December 31, 2024, the Company had total assets of $1.91 billion, net loans receivable of $1.41 billion, total deposits of $1.63 billion and total shareholders’ equity of $249.20 million.  The Company's business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including the unaudited consolidated financial statements and related data, relates primarily to the Bank's operations.

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The Bank is a community-oriented bank which has traditionally offered a variety of savings products to its retail and business customers while concentrating its lending activities on real estate secured loans. Lending activities have been focused primarily on the origination of loans secured by real estate, including residential construction loans, one- to four-family residential loans, multi-family loans and commercial real estate loans. The Bank also originates commercial business loans and other consumer loans.

The profitability of the Company’s operations depends primarily on its net interest income after provision for (recapture of) credit losses.  Net interest income is the difference between interest income, which is the income that the Company earns on interest-earning assets, which are primarily loans and investments, and interest expense, the amount that the Company pays on its interest-bearing liabilities, which are primarily deposits and borrowings (as needed).  Net interest income is affected by changes in the volume and mix of interest-earning assets, the interest earned on those assets, the volume and mix of interest-bearing liabilities and the interest paid on those interest-bearing liabilities.

Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and types of interest earning assets, interest bearing and non-interest bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period. Since March 2022, through July 2023, in response to inflation, the Federal Open Market Committee ("FOMC") of the Federal Reserve had increased the target range for the federal funds rate by 525 basis points, to a range of 5.25% to 5.50%. Inflation has decreased over the last year and as a result, the Federal Reserve has decreased the target range by 100 basis points in the last four months, to a range of 4.25% to 4.50% at December 31, 2024.

The provision for (recapture of) credit losses is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio as well as prevailing economic and market conditions.  The ACL on loans reflects the amount that management has determined is adequate to cover probable expected credit losses in the loan portfolio. As the loan portfolio increases, or due to an increase in probable expected losses inherent in the loan portfolio, the ACL may increase, resulting in a decrease to net interest income after the provision. Improvement in loan risk ratings, increase in property values, or receipts of recoveries of amounts previously charged off may partially or fully offset any required increases to the ACL on loans due to loan growth or an increase in the probable expected credit losses. The Company recorded a provision for credit losses on loans of $52,000 and $379,000 for the three months ended December 31, 2024 and 2023, respectively, primarily due to loan portfolio growth.

Net income is also affected by non-interest income and non-interest expense.  For the three months ended December 31, 2024, non-interest income consisted primarily of service charges on deposit accounts, gain on sales of loans, ATM and debit card interchange transaction fees, BOLI net earnings, servicing income on loans sold, escrow fees and other operating income.  Non-interest income is also increased by net recoveries on investment securities and recoveries of prior OTTI losses on investment securities, if any.  Non-interest income is also decreased by valuation allowances on loan servicing rights and increased by recoveries of valuation allowances on loan servicing rights, if any.  Non-interest expense consisted primarily of salaries and employee benefits, premises and equipment, advertising, ATM and debit card interchange transaction fees, postage and courier expenses, state and local taxes, professional fees, FDIC insurance premiums, loan administration and foreclosure expenses, technology and communications expenses, deposit operation expenses, amortization of CDI, and other non-interest expenses. In certain periods, non-interest expense may be reduced by gains on the sale of premises and equipment and OREO. Both non-interest income and non-interest expense are affected by the growth of the Company's operations and growth in the number of loan and deposit accounts.

Results of operations may also be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.


Critical Accounting Estimates

Management's discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

39

The Company's critical accounting estimates are described in the Company’s 2024 Form 10-K under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Estimates.” That discussion highlights estimates that the Company makes that involve uncertainty or potential for substantial change. There have been no material changes in the Company’s critical accounting policies and estimates as previously disclosed in the Company’s 2024 Form 10-K.

Comparison of Financial Condition at December 31, 2024 and September 30, 2024

General: Total assets decreased by $14.00 million, or 0.7%, to $1.91 billion at December 31, 2024 from $1.92 billion at September 30, 2024.  The decrease in total assets was primarily due to decreases in loans receivable and investment securities, which were partially offset by increases in several other asset categories.

Net loans receivable decreased by $9.70 million, or 0.7%, to $1.41 billion at December 31, 2024 from $1.42 billion at September 30, 2024, primarily due to decreases in commercial business and commercial real estate loans, as well as construction loans due to an increase in the undisbursed portion of construction loans. Smaller declines in several other loan categories also contributed to the overall decrease. These decreases were partially offset by an increase in one- to four-family loans and in several other loan categories.

Total deposits decreased by $17.25 million, or 1.0%, to $1.63 billion at December 31, 2024 from $1.65 billion at September 30, 2024, primarily due to decreases in money market, non-interest bearing and NOW checking account balances. These decreases were partially offset by increases in certificate of deposit ("CDs") and savings account balances.
 
Shareholders’ equity increased by $3.79 million, or 1.5%, to $249.20 million at December 31, 2024 from $245.41 million at September 30, 2024.  The increase was primarily due to net income and proceeds from stock option exercises during the current period. These increases were partially offset by the payment of dividends to common shareholders, repurchases of common stock and an other comprehensive loss during the three months ended December 31, 2024.

A more detailed explanation of the changes in significant balance sheet categories follows:

Cash and Cash Equivalents and CDs Held for Investment: Cash and cash equivalents and CDs held for investment decreased by $3.40 million, or 1.9%, to $171.54 million at December 31, 2024 from $174.94 million at September 30, 2024. The decrease was due to a $2.74 million decrease in CDs held for investments and a $657,000 decrease in cash and cash equivalents, which was used to fund deposit withdrawals.

Investment Securities:  Investment securities (including investments in equity securities) decreased by $11.19 million, or 4.6%, to $234.03 million at December 31, 2024 from $245.22 million at September 30, 2024. This decrease was primarily due to maturities, prepayments and scheduled amortizations. Partially offsetting these decreases was the purchase of additional U.S. government agency mortgage-backed investment securities and U.S. Treasury investment securities, all of which were classified as available for sale. For additional information on investment securities, see Note 2 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

FHLB Stock: FHLB stock remained constant at $2.04 million at December 31, 2024 and September 30, 2024.

Other Investments: Other investments, consisting solely of the Company's investment in the Solomon Hess SBA Loan Fund LLC, was unchanged at $3.00 million at both December 31, 2024 and September 30, 2024. This investment is utilized to help satisfy compliance with the Bank's Community Reinvestment Act investment test requirements.

Loans: Net loans receivable decreased by $9.70 million, or 0.7%, to $1.41 billion at December 31, 2024 from $1.42 billion at September 30, 2024.  The decrease was primarily due to a $3.43 million decrease in commercial business loans, a $2.17 million decrease in commercial real estate loans and a $13.92 million decrease in construction loans due to a $15.47 million increase in the undisbursed portion of construction loans. These decreases were partially offset by a $7.32 million increase in one- to four-family loans, and smaller increases in other loan categories.

Loan originations decreased by $16.86 million, or 19.1%, to $72.07 million for the three months ended December 31, 2024 from $88.93 million for the three months ended December 31, 2023.  The decrease in loan originations was primarily due to a decrease in multi-family, commercial business, one- to four-family and consumer loans originated. The decrease was partially offset by an increase in construction loan originations. The Company generally sells longer-term fixed-rate one- to four-family mortgage loans for asset liability management purposes and to generate non-interest income. Sales of fixed-rate one- to four-
40

family loans decreased by $1.48 million, or 39.08%, to $2.31 million for the three months ended December 31, 2024 from $9.60 million for the three months ended December 31, 2023, primarily due to a decrease in one- to four-family construction loans refinancing to permanent loans and being sold into the secondary market.

For additional information on loans, see Note 4 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Premises and Equipment:  Premises and equipment increased by $131,000, or 0.6%, to $21.62 million at December 31, 2024 from $21.49 million at September 30, 2024.  This increase was primarily due to additions from remodeling projects, partially offset by scheduled depreciation.

OREO (Other Real Estate Owned):  At December 31, 2024, total OREO and other repossessed assets consisted of one commercial real estate property with a value of $221,000 and one land parcel with no recorded value. At September 30, 2024 total OREO and other repossessed assets consisted of one land parcel with no recorded value.

BOLI (Bank Owned Life Insurance): BOLI increased by $166,000, or 0.7%, to $23.78 million at December 31, 2024 from $23.61 million at September 30, 2024. The increase was due to net BOLI earnings, representing the increase in the cash surrender value of the BOLI policies.

Goodwill and CDI:  The recorded amount of goodwill remained unchanged at $15.13 million at both December 31, 2024 and September 30, 2023. CDI decreased by $45,000, or 10.0%, to $406,000 at December 31, 2024 from $451,000 at September 30, 2024 due to scheduled amortization. For additional information on goodwill and CDI, see Note 3 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Loan Servicing Rights, Net: Loan servicing rights, net decreased by $177,000, or 12.90%, to $1.20 million at December 31, 2024 from $1.37 million at September 30, 2024 primarily due to the amortization of servicing rights. The principal amount of loans serviced for Freddie Mac and SBA decreased by $7.46 million to $363.10 million at December 31, 2024 from $370.56 million at September 30, 2024.

Deposits: Deposits decreased by $17.25 million, or 1.0%, to $1.63 billion at December 31, 2024 from $1.65 billion at September 30, 2024. The decrease was primarily due to a $15.51 million decrease in money market account balances, a $10.21 million decrease in non-interest bearing demand account balances and a $9.91 million decrease in NOW checking accounts balances in part due to some larger customers ending the calendar year with lower balances. These decreases were partially offset by a $17.53 million increase in certificates of deposit account balances and a $852,000 increase in savings account balances.

Deposits consisted of the following at December 31, 2024 and September 30, 2024 (dollars in thousands):
 December 31, 2024September 30, 2024
AmountPercentAmountPercent
Non-interest-bearing demand$402,911 24.7 %$413,116 25.1 %
NOW checking323,412 19.8 333,329 20.2 
Savings206,845 12.7 205,993 12.5 
Money market311,413 19.1 326,922 19.8 
Certificates of deposit under $250212,764 13.1 205,970 12.4 
Certificates of deposit $250 and over122,997 7.5 113,579 6.9 
Certificates of deposit - brokered50,074 3.1 48,759 3.1 
Total$1,630,416 100.0 %$1,647,668 100.0 %

FHLB Borrowings: The Company has short- and long-term borrowing lines with the FHLB with total credit available on the lines equal to 45% of the Bank's total assets, limited by available collateral. FHLB borrowings remained constant at $20.00 million at both December 31, 2024 and September 30, 2024. The borrowings consist of three long-term borrowings: two totaling $15.00 million with scheduled maturities in May 2026, both bearing interest at 3.95%, and one $5.00 million borrowing maturing in August 2026 with an interest rate of 4.03%.

41

Shareholders’ Equity:  Total shareholders’ equity increased by $3.79 million, or 1.5%, to $249.20 million at December 31, 2024 from $245.41 million at September 30, 2024.  The increase was primarily due to net income of $6.86 million and proceeds of $474,000 from the exercise of stock options. This increase was partially offset by dividend payments to common shareholders of $1.99 million, the repurchase of 27,404 shares of the Company's common stock for $884,000 and an $812,000 other comprehensive loss for fair value adjustment on available for sale investment securities.

Asset Quality and Commercial Real Estate Portfolio Breakdown:

Non-performing assets to total assets was 0.16% at December 31, 2024 and 0.20% at September 30, 2024. Non-performing assets decreased by $937,000, or 23.8%, to $3.00 million at December 31, 2024 from $3.94 million at September 30, 2023. The decrease was primarily due to a $1.15 million decrease in non-accrual loans, with the largest decreases occurring in the commercial business and commercial real estate portfolios. These decreases were partially offset by a $221,000 increase in OREO.

The following table sets forth information with respect to the Company’s non-performing assets at December 31, 2024 and September 30, 2024 (dollars in thousands):
December 31,
2024		September 30,
2024
Loans accounted for on a non-accrual basis:  
Mortgage loans: 
    One- to four-family (1)$47 $49 
    Commercial698 1,158 
Consumer loans:  
    Home equity and second mortgage587 618 
Commercial business loans 1,401 2,060 
       Total loans accounted for on a non-accrual basis2,733 3,885 
Accruing loans which are contractually past due 90 days or more— — 
Total of non-accrual and 90 days or more past due loans 2,733 3,885 
Non-accrual investment securities45 51 
OREO and other repossessed assets, net221 — 
       Total non-performing assets$2,999 $3,936 
Non-accrual and 90 days or more past due loans as a percentage of loans receivable0.19 %0.27 %
Non-accrual and 90 days or more past due loans as a percentage of total assets0.14 %0.20 %
Non-performing assets as a percentage of total assets0.16 %0.20 %
Loans receivable (2)$1,429,107 $1,439,001 
Total assets$1,909,480 $1,923,475 
___________________________________
(1) At December 31, 2024 and September 30, 2024, there were no one-to four-family properties in the process of foreclosure.
(2)  Does not include loans held for sale. Loan balances are before any reduction of the ACL.







42





The following tables provide a breakdown of commercial real estate ("CRE") loans by collateral types as of December 31, 2024 and September 30, 2024:

CRE Loan Portfolio Breakdown by Collateral at December 31, 2024
($ in thousands)
Collateral TypeBalancePercent of CRE PortfolioPercent of Total Loan PortfolioAverage Balance per LoanNon-Accrual
Industrial warehouse$126,435 21 %8 %$1,228 $195 
Medical/dental offices84,786 14 6 1,265 — 
Office buildings67,600 11 4 768 — 
Other retail buildings52,313 9 3 545 — 
Mini-storage33,773 6 2 1,351 — 
Hotel/motel32,367 5 2 2,697 — 
Restaurants27,977 5 2 560 273 
Gas stations/convenience stores24,881 4 2 1,037 — 
Churches15,874 3 1 934 — 
Nursing homes13,745 2 1 1,964 — 
Mobile home parks10,694 2 1 465 — 
Shopping centers10,648 2 1 1,774 — 
Other95,961 16 6 706 230 
Total CRE$597,054 100 %39 %$913 $698 

CRE Loan Portfolio Breakdown by Collateral at September 30, 2024
($ in thousands)
Collateral TypeBalancePercent of CRE PortfolioPercent of Total Loan PortfolioAverage Balance per LoanNon-Accrual
Industrial warehouse$125,852 21 %8 %$1,246 $195 
Medical/dental offices83,276 14 5 1,262 — 
Office buildings68,526 11 5 779 — 
Other retail buildings50,067 8 3 533 — 
Mini-storage38,600 6 3 1,430 — 
Hotel/motel31,182 5 2 2,835 — 
Restaurants27,269 5 2 557 273 
Gas stations/convenience stores25,145 4 2 1,048 — 
Nursing homes18,434 3 1 2,304 — 
Churches16,235 3 1 854 — 
Mobile home parks10,798 2 1 491 — 
Shopping centers10,718 2 1 1,786 — 
Other93,117 16 6 705 690 
Total CRE$599,219 100 %40 %$926 $1,158 
43

Comparison of Operating Results for the Three Months Ended December 31, 2024 and 2023

Net income increased by $564,000, or 9.0%, to $6.86 million for the quarter ended December 31, 2024 from $6.30 million for the quarter ended December 31, 2023. Net income per diluted common share increased by $0.09, or 11.7%, to $0.86 for the quarter ended December 31, 2024 from $0.77 for the quarter ended December 31, 2023. The increases in net income and net income per diluted common share for the three months ended December 31, 2024, were primarily due to a $966,000 increase in net interest income and a $309,000 decrease in the provision for credit losses. These increases were partially offset by a $443,000 increase in non-interest expense, a $167,000 increase in the provision for income taxes and $101,000 decrease in non-interest income.

Net Interest Income: Net interest income increased by $966,000, or 6.0%, to $16.97 million for the quarter ended December 31, 2024 from $16.00 million for the quarter ended December 31, 2023. This increase was due to a 35 basis point increase in the weighted average yield of interest-earning assets to 5.42% at December 31, 2024 from 5.07% at December 31, 2023 and to a $75.76 million increase in average total interest-earning assets. Partially offsetting the increase in the yield on interest-earning assets, was a a 40 basis point increase in the average cost of interest-bearing liabilities to 2.62% for the current quarter from 2.22% for the quarter ended December 31, 2023 and a $94.91 million increase in average total interest-bearing liabilities.

Total interest and dividend income increased by $2.76 million, or 12.3%, to $25.26 million for the quarter ended December 31, 2024 from $22.50 million for the quarter ended December 31, 2023, primarily due to increases in the average yield earned on and average balance of loans receivable, as well as an increase in the average balance of interest-bearing deposits in banks and CDs and a higher average yield on investment securities. These increases were partially offset by a decrease in the average balance of investment securities and, to a lesser extent, a decrease in the average rate paid on interest-bearing deposits in banks and CDs.

The average balance of total interest-earning assets increased by $75.76 million, or 4.3%, to $1.85 billion for the quarter ended December 31, 2024 from $1.78 billion for the quarter ended December 31, 2023. The average balance of loans receivable increased by $105.17 million, or 7.9%, and the average balance of interest-bearing deposits in banks and CDs increased by $40.51 million or 32.1%. These increases were partially offset by a decrease in the average balance of investment securities of $68.84 million or 22.2% between the periods. During the quarter ended December 31, 2024, there was a total of $123,000 of pre-payment penalties, non-accrual interest and late fees collected compared to $142,000 collected for the quarter ended December 31, 2023. The average yield on interest-earning assets increased by 35 basis points to 5.42% for the quarter ended December 31, 2024 from 5.07% for the quarter ended December 31, 2023. The average yield on investment securities increased 55 basis points to 3.51% for the quarter ended December 31, 2024 compared to the quarter ended December 31, 2023, while the average yield on loans receivable increased 28 basis points to 5.8% during the same period.

Total interest expense increased by $1.80 million, or 27.6%, to $8.29 million for the quarter ended December 31, 2024 from $6.49 million for the quarter ended December 31, 2023. This increase was due to an increase in the average balance and, to a lesser extent, an increase in the average cost of interest-bearing liabilities, primarily deposits. The average balance of interest-bearing liabilities increased by $94.91 million, or 8.2%, to $1.26 billion for the quarter ended December 31, 2024 from $1.16 billion for the quarter ended December 31, 2023, primarily due to increases in the average balances of money market and certificate of deposit accounts, partially offset by decreases in the average balance of NOW checking accounts. The average cost of interest-bearing liabilities increased to 2.62% for the quarter ended December 31, 2024 from 2.22% for the quarter ended December 31, 2023.

As a result of changes above, the net interest margin ("NIM") increased to 3.64% for the quarter ended December 31, 2024 from 3.60% for the quarter ended December 31, 2023.


44

Average Balances, Interest and Average Yields/Cost

The following tables set forth, for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities and average yields and costs. Such yields and costs for the periods indicated are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the periods presented (dollars in thousands).
 Three Months Ended December 31,
 20242023
Average
Balance		Interest and
Dividends		Yield/
Cost		Average
Balance		Interest and
Dividends		Yield/
Cost
Interest-earning assets:
Loans receivable (1)(2)$1,438,144 $21,032 5.80 %$1,332,971 $18,395 5.52 %
Investment securities (2)241,345 2,138 3.51 310,183 2,311 2.96 
 Dividends from mutual funds, FHLB stock and other investments 5,891 86 6.41 6,981 91 5.19 
 Interest-bearing deposits in banks and CDs166,764 2,001 4.76 126,253 1,699 5.35 
Total interest-earning assets1,852,144 25,257 5.42 1,776,388 22,496 5.07 
Non-interest-earning assets75,534   81,612   
     Total assets$1,927,678   $1,858,000   
Interest-bearing liabilities:      
Savings $205,650 144 0.28 $220,042 121 0.22 
Money market324,424 2,797 3.42 224,939 1,329 2.34 
NOW checking 328,455 1,142 1.38 376,682 1,435 1.51 
Certificates of deposit331,785 3,418 4.10 268,628 2,681 3.97 
Brokered CDs46,414 583 4.98 42,725 578 5.38 
Short-term borrowings— — — 13,804 195 5.62 
Long-term borrowings20,000 203 4.03 15,000 153 4.06 
Total interest-bearing liabilities1,256,728 8,287 2.62 1,161,820 6,492 2.22 
Non-interest-bearing deposits414,149 450,027 
Other liabilities10,146   11,878   
Total liabilities1,681,023   1,623,725   
Shareholders' equity246,655   234,275   
Total liabilities and    
shareholders' equity$1,927,678 $1,858,000   
Net interest income$16,970  $16,004  
Interest rate spread2.81 %  2.85 %
Net interest margin (3)3.64 %  3.60 %
Ratio of average interest-earning  assets to average interest- bearing liabilities147.38 %  152.90 %
_______________
(1)Does not include interest on loans on non-accrual status. Includes loans held for sale. Amortized net deferred loan fees, late fees, extension fees, prepayment penalties, and the accretion of the fair value discount on loans are included with interest and dividends.
(2)Average balances include loans and investment securities on non-accrual status.
(3)Net interest income divided by total average interest-earning assets, annualized.

45

Rate Volume Analysis

The following table sets forth the effects of changing rates and volumes on the net interest income of the Company.   Information is provided with respect to the (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate), (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the net change (sum of the prior columns).  Changes in rate/volume have been allocated to rate and volume variances based on the absolute values of each (dollars in thousands).
 Three months ended
December 31, 2024
compared to three months
ended December 31, 2023
increase (decrease) due to
 RateVolumeNet
Change
Interest-earning assets:   
Loans receivable and loans held for sale$1,136 $1,501 $2,637 
Investment securities392 (565)(173)
 Dividends from mutual funds, FHLB stock and other investments 10 (15)(5)
  Interest-bearing deposits in banks and CDs(199)501 302 
Total net increase in income on interest-earning assets1,339 1,422 2,761 
Interest-bearing liabilities:   
Savings 31 (8)23 
Money market 747 720 1,467 
NOW checking (118)(174)(292)
Certificates of deposit 37 706 743 
Short-term FHLB borrowings(98)(98)(196)
   Long-term borrowings(1)51 50 
Total net increase in expense on interest-bearing liabilities598 1,197 1,795 
Net increase in net interest income$741 $225 $966 

Provision for Credit Losses: A $27,000 provision for credit losses was recorded for the quarter ended December 31, 2024, consisting of a $52,000 provision for credit losses on loans which was primarily due to an increase in loans receivable, a $5,000 recapture of credit losses on investment securities, and a $20,000 recapture of credit losses on unfunded commitments which was primarily due to a decrease in the balance of unfunded loan commitments. A $336,000 provision for credit losses was recorded for the quarter ended December 31, 2023, consisting of a $379,000 provision for credit losses on loans, a $10,000 recapture of credit losses on investment securities and a $33,000 recapture of credit losses on unfunded commitments.

For the quarter ended December 31, 2024, net charge-offs were $242,000 compared to $2,000 for the quarter ended December 31, 2023. Non-accrual loans decreased by $1.15 million, or 29.7%, to $2.73 million at December 31, 2024 from $3.89 million at September 30, 2024, and decreased by $633,000, or 18.8%,from $3.36 million at December 31, 2023. Total delinquent loans (past due 30 days or more) and non-accrual loans decreased by $459,000, or 10.2%, to $4.02 million at December 31, 2024, from $4.48 million at September 30, 2024 and increased by $417,000, or 11.6%, from $3.60 million one year ago. 

While management believes the estimates and assumptions used in its determination of the adequacy of the ACL are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions will not have a material adverse impact on our financial condition and results of operations. A further decline in national and local economic conditions, as a result of the effects of inflation, a potential recession or slowed economic growth, among other factors, could
46

result in a material increase in the ACL and have a material adverse impact on the financial condition and results of operations. In addition, the determination of the amount of the ACL is subject to review by bank regulators as part of the routine examination process, which may result in the adjustment of reserves based upon their judgment of information available to them at the time of their examination and have a material adverse impact on the financial condition and results of operations.

In accordance with GAAP, acquired loans are recorded at their estimated fair value, resulting in a net discount to the loans' contractual amounts, with a portion of this discount reflecting possible credit losses. Credit discounts are included in the determination of fair value. With the adoption of CECL, purchased loans are evaluated for impairment in the same manner as the rest of the loan portfolio. The remaining fair value discount associated with acquired loans was $147,000 at December 31, 2024. This discount will continue to accrete into income as these loans continue to pay down.

For additional information, see Note 4 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Non-interest Income: Total non-interest income decreased by $101,000, or 3.6%, to $2.70 million for the quarter ended December 31, 2024 from $2.80 million for the quarter ended December 31, 2023. This decrease was primarily due to a $52,000 decrease in other, net non-interest income, largely due to a $63,000 decrease in the fair value of investments in equity securities, $35,000 decrease in gain on sales loans and a $24,000 decrease in service charges on deposits. These decreases were partially offset by a $10,000 increase in BOLI net earnings.

Non-interest Expense:  Total non-interest expense increased by $443,000, or 4.2%, to $11.07 million for the quarter ended December 31, 2024 from $10.62 million for the quarter ended December 31, 2023. This increase was primarily due to increased expenses of $181,000 in salary and employee benefits, due to annual salary increases, $166,000 in technology and communications due to increased usage charges, $93,000 in professional fees mainly due to additional costs related to CECL, and $79,000 in other non-interest expenses. These increases were partially offset by a $94,000 decrease in ATM and debit card interchange transaction fees as a result of a decrease in fraud charges. The efficiency ratio for the current quarter was 56.27% compared to 56.50% for the comparable quarter one year ago. The slight improvement in the efficiency ratio was due to higher overall revenue, which was partially offset by higher non-interest expense.

Provision for Income Taxes: The provision for income taxes increased by $167,000, or 10.8%, to $1.71 million for the quarter ended December 31, 2024 from $1.55 million for the quarter ended December 31, 2023. The increase in the provision for income taxes was primarily due to higher pre-tax income. The Company's effective income tax rate was 20.0% for the quarter ended December 31, 2024 and 19.6% for the quarter ended December 31, 2023.


Liquidity

The Company's primary sources of funds are customer deposits, proceeds from principal and interest payments on loans, the sale of loans, maturing investment securities, maturing CDs held for investment and borrowings, if needed, from the FHLB and FRB.  While the maturities and the scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions, and competition.

The Bank must maintain an adequate level of liquidity to help ensure the availability of sufficient funds to fund its operations. The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs.  At December 31, 2024, the Bank's regulatory liquidity ratio (net cash, and short-term and marketable assets, as a percentage of net deposits and short-term liabilities) was 12.92%. The Bank maintains a credit facility with the FHLB that provides for immediately available borrowings up to an aggregate amount equal to 45% of total assets, limited by available collateral. At December 31, 2024, the Bank had a total of $599.34 million available for borrowings with the FHLB of which $20.00 million was outstanding. The Bank maintains a short-term borrowing line with the FRB with total credit based on eligible collateral: Borrower-in-Custody ("BIC").  At December 31, 2024, the Bank had no outstanding balance on the BIC line, under which $77.14 million was available for future borrowings. The Bank also maintains a $50.00 million overnight borrowing line with Pacific Coast Bankers' Bank ("PCBB"). At December 31, 2024, the Bank did not have an outstanding balance on this borrowing line. Subject to market conditions, the Bank expects to utilize these borrowing facilities from time to time in the future to fund loan originations and deposits withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible.

Liquidity management is both a short and long-term responsibility of the Bank's management.  The Bank adjusts its investments in liquid assets based upon management's assessment of (i) expected loan demand, (ii) projected loan sales, (iii) expected
47

deposit flows, and (iv) yields available on interest-bearing deposits.  Excess liquidity is invested generally in interest-bearing overnight deposits, CDs held for investment and short-term government and agency obligations.  If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB, the FRB and PCBB.

The Bank's primary investing activity is the origination of loans and, to a lesser extent, the purchase of investment securities. During the three months ended December 31, 2024 and 2023, the Bank originated $72.07 million and $88.93 million of loans, respectively. At December 31, 2024, the Bank had undisbursed lines of credit and commitments to extend credit totaling $131.54 million and undisbursed construction loans in process totaling $85.35 million.  Investment securities purchased during the three months ended December 31, 2024 and 2023 totaled $8.58 million and $1.92 million, respectively.

The Bank’s liquidity is also affected by the volume of loans sold and loan principal payments.  During the three months ended December 31, 2024 and 2023, the Bank sold $2.31 million and $9.60 million, respectively, in loans and loan participation interests.  During the three months ended December 31, 2024 and 2023, the Bank received $65.16 million and $44.35 million in principal repayments, respectively.

The Bank's liquid assets in the form of cash and cash equivalents, CDs held for investment, and investment securities available for sale (including equity securities) increased to $249.46 million at December 31, 2024 from $248.06 million at September 30, 2024. CDs that are scheduled to mature in less than one year from December 31, 2024 totaled $327.38 million. Historically, the Bank has been able to retain a significant amount of its deposits as they mature.

Capital expenditures are incurred on an ongoing basis to expand and improve the Bank's product offerings, enhance and modernize technology infrastructure, and to introduce new technology-based products to compete effectively in the various markets. Capital expenditure projects are evaluated based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and the expected return on investment. The amount of capital investment is influenced by, among other things, current and projected demand for services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations.

Based on current objectives, there are no capital expenditures projected for the remaining nine months of the fiscal year ending September 30, 2025 that would materially impact liquidity. For the remainder of the 2025 fiscal year, the Bank projects that fixed commitments will include $253,000 of operating lease payments. No FHLB borrowings are scheduled to mature during fiscal year 2025. In addition, at December 31, 2024, there were other future obligations and accrued expenses of $8.36 million.

The Bank's management believes that the liquid assets combined with the available lines of credit provide adequate liquidity to meet current financial obligations for at least the next 12 months.

Timberland Bancorp is a separate legal entity from the Bank and must provide for its own liquidity and pay its own operating expenses. In addition to is operating expenses, Timberland Bancorp is responsible for paying any dividends declared, if any, to its shareholders and funds paid for Company stock repurchases. Sources of capital and liquidity for Timberland Bancorp include distributions from the Bank and the issuance of debt or equity securities, although there are regulatory restrictions on the ability of the Bank to pay dividends. At December 31, 2024, Timberland Bancorp (on an unconsolidated basis) had liquid assets of $1.73 million.

The Company currently expects to continue the current practice of paying quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. The current quarterly common stock dividend rate is $0.25 per share, as approved by the Board of Directors, which is a dividend rate per share that enables the Company to balance multiple objectives of managing and investing in the Bank and returning a substantial portion of cash to shareholders. Assuming continued payment during fiscal year 2025 at the rate of $0.25 per share, the average total dividend paid each quarter would be approximately $1.99 million based on the number of current outstanding shares at December 31, 2024 (which assumes no change in the number of shares).

In addition, from time to time, our Board of Directors has authorized stock repurchase plans. In general, stock repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. Shares purchased under such plans may also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. On July 25, 2023, the Company announced the adoption of a new stock repurchase program pursuant to which the Company may repurchase up to 404,708 shares of Company common stock, of which 127,762 shares remained available for future purchases as of December 31, 2024. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities,
48

liquidity, and other factors deemed appropriate. The repurchase program does not obligate the Company to purchase any particular number of shares.


Capital Resources

The Bank, as a state-chartered, federally insured savings bank, is subject to the capital requirements established by the FDIC. Under the FDIC's capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

Consistent with the Bank's goals to operate a sound and profitable organization, it is the Bank's policy to maintain a "well-capitalized" status under the regulatory capital categories of the FDIC. Based on capital levels at December 31, 2024, the Bank was considered to be "well-capitalized" under applicable regulatory requirements. Management monitors the capital levels to provide for current and future business opportunities and to maintain the Bank's "well-capitalized" status.

The following table compares the Bank’s actual capital amounts at December 31, 2024, to its minimum regulatory capital requirements at that date (dollars in thousands):
 ActualRegulatory
Minimum To
Be “Adequately
Capitalized”		To Be “Well Capitalized”
Under Prompt
Corrective Action
Provisions
 AmountRatioAmountRatioAmountRatio
Leverage Capital Ratio:      
Tier 1 capital$233,573 12.23 %$76,404 4.00 %$95,505 5.00 %
Risk-based Capital Ratios:
Common equity Tier 1 capital233,573 18.00 56,722 4.50 81,932 6.50 
Tier 1 capital233,573 18.00 75,630 6.00 100,840 8.00 
Total capital249,353 19.25 100,840 8.00 126,050 10.00 

In addition to the minimum common equity Tier 1 ("CET1"), Tier 1 and total capital ratios, the Bank is required to maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of retained income that could be utilized for such actions. At December 31, 2024, the Bank's CET1 capital exceeded the required capital conservation buffer.

Timberland Bancorp, Inc. is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. For a bank holding company with less than $3.0 billion in assets (as of June 30th of the preceding year), the capital guidelines apply on a bank only basis, and the Federal Reserve expects the holding company's subsidiary bank to be well capitalized under the prompt corrective action regulations. If Timberland Bancorp, Inc. were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at December 31, 2024, Timberland Bancorp, Inc. would have exceeded all regulatory requirements. The following table presents for informational purposes the regulatory capital ratios for Timberland Bancorp, Inc. as of December 31, 2024 (dollars in thousands):
Actual
 AmountRatio
Leverage Capital Ratio:  
Tier 1 capital$235,783 12.32 %
Risk-based Capital Ratios:
Common equity Tier 1 capital235,783 18.69 
Tier 1 capital235,783 18.69 
Total capital251,572 19.55 

49


Key Financial Ratios and Data
 Three Months Ended December 31,
20242023
PERFORMANCE RATIOS:
 
Return on average assets1.41 %1.36 %
Return on average equity11.03 %10.75 %
Net interest margin3.64 %3.60 %
Efficiency ratio56.27 %56.50 %


Item 3.  Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in information concerning market risk from the information provided in the Company’s 2024 Form 10-K.
Item 4.  Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures:  An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of the Company’s Chief Executive Officer (principal executive officer), Chief Financial Officer (principal financial officer) and several other members of the Company’s senior management as of the end of the period covered by this report.  The Company’s Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2024, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
 
(b)Changes in Internal Controls:  There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company does not expect that its disclosure controls and procedures and internal control over financial     reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; as over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II.   OTHER INFORMATION

Item 1.       Legal Proceedings
Neither the Company nor the Bank is a party to any material legal proceedings at this time.  From time to time, the Bank is involved in various claims and legal actions arising in the ordinary course of business.

Item 1A.    Risk Factors
There have been no material changes in the Risk Factors previously disclosed in Item 1A of the Company's 2024 Form 10-K, except as follows:


50

Current and future uses of Artificial Intelligence ("AI") and other emerging technologies may create additional risks.

The increasing adoption of AI in financial services presents significant opportunities but also introduces a range of risks that could impact our operations, regulatory compliance, and customer trust. AI introduces model risk, where flawed algorithms or biased data could result in inaccurate credit decisions, compliance violations, or discriminatory outcomes in lending or customer service. Cybersecurity threats, such as data breaches, adversarial attacks, and data poisoning, pose significant challenges, particularly as these systems handle large volumes of sensitive customer information. Additionally, the opaque nature of some AI models, often referred to as "black-box" systems, raises regulatory compliance concerns, as regulators increasingly require transparency and explainability in AI-driven decision-making.

Operational risks also arise from potential system failures, over-reliance on AI, and integration challenges with existing infrastructure. Disruptions in AI systems could impact critical functions such as fraud detection, transaction monitoring, and customer support. Ethical and reputational risks, including unintended consequences or perceived unfairness in AI-driven decisions, may erode customer trust and expose us to regulatory scrutiny.

To mitigate these risks requires a robust governance framework, regularly testing and auditing of AI models, and strong human oversight. Investments in cybersecurity, data privacy protections, and employee training are critical to managing these risks.


Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

(a)    Not applicable

(b)    Not applicable

(c)    Stock Repurchases



The following table sets forth the shares repurchased by the Company during the quarter ended December 31, 2024:

PeriodTotal No. of Shares RepurchasedAverage Price Paid Per ShareTotal No. of Shares Purchased as Part of Publicly Announced PlanMaximum No. of Shares that May Yet Be Purchased Under the Plan (1)
10/01/2024 - 10/31/2024144 $30.09 144 155,022 
11/01/2024 - 11/3020249,529 32.20 9,529 145,493 
12/01/2024 - 12/31/202417,731 32.47 17,731 127,762 
Total27,404 $32.37 27,404 127,762 

(1) On July 25, 2023, the Company announced a stock repurchase program to purchase up to 404,708 shares of the Company's common stock. This marked the Company's 19th stock repurchase plan. The existing repurchase program does not have a set expiration date and will expire upon repurchase of the full amount of authorized shares. Shares may be repurchased from time to time in the open market or in privately negotiated transactions based upon market conditions and available liquidity. Cumulatively, since January 1998, the Company has repurchased 8,613,367 shares of its common stock at an average price of $10.45 per share.

The Company is subject to certain restrictions on its ability to repurchase its common stock. The Company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of its consolidated net worth. The Federal Reserve may disapprove a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would
51

violate any law, regulation, Federal Reserve order, or any condition imposed by, or written agreement with, the Federal Reserve.

Item 3.      Defaults Upon Senior Securities
Not applicable.

Item 4.     Mine Safety Disclosures
Not applicable.

Item 5.     Other Information
a.None to be reported.
b.None to be reported.
c.During the quarter ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6.         Exhibits

(a)   Exhibits
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
21Subsidiaries of the Registrant*
31.1
31.2
32
101
The following materials from Timberland Bancorp Inc's Quarterly Report 10-Q for the quarter ended December 31, 2024 formatted on Extensible Business Reporting Language (XBRL) (a) Consolidated Balance Sheets; (b) Consolidated Statements of Income; (c) Consolidated Statements of Comprehensive Income; (d) Consolidated Statements of Shareholders' Equity; (e) Consolidated Statements of Cash Flows; and (f) Notes to Unaudited Consolidated Financial Statements
104Cover Page Interactive Data File, formatted in Inline XBRL and included in Exhibit 101
_________________
* Copies of these exhibits are available upon written request to Jonathan A. Fischer, Secretary, Timberland
Bancorp, Inc., 624 Simpson Avenue, Hoquiam, WA 98550
(1)Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (333-35817).
(2)Incorporated by reference to the Registrant's Current Report on Form 8-K filed on August 23, 2023.
(3)Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 16, 2007.
52

(4)Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997.
(5)Incorporated by reference to the Exhibits included in the Registrant's Registration Statement on Form S-8 (333-240040).
(6)Incorporated by reference to Registrant's Current Report on Form 8-K filed on December 22, 2023.
(7)Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended September 30, 2023 and incorporated herein by reference.
(8)Attached as Appendix A to the Registrant's Annual Meeting Proxy Statement filed on December 19, 2014.
(9)Attached as Appendix A to the Registrant's Annual Meeting Proxy Statement filed on December 18, 2019.
(10)Filed as exhibits to the Registrant's Registration Statement on Form S-8 (333-240040) and incorporated herein by reference.
53

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

 
 Timberland Bancorp, Inc. 
  
  
Date: February 10, 2025
By:  /s/ Dean J. Brydon                              
 Dean J. Brydon
 Chief Executive Officer 
 (Principal Executive Officer) 
  
 
 
Date: February 10, 2025
By:  /s/Marci A. Basich                                
 Marci A. Basich
 Chief Financial Officer
(Principal Financial Officer)
54

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