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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 FY2026 Q1

Timberland Bancorp - 10-Q quarterly report FY2026 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, 2025

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 2, 2026, there were 7,884,326 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, 2025 and September 30, 2025
(Dollars in thousands, except per share amounts)
December 31,
2025		September 30,
2025
(Unaudited)*
Assets  
Cash and cash equivalents:  
Cash and due from financial institutions$23,176 $23,649 
Interest-bearing deposits in banks223,688 219,779 
Total cash and cash equivalents246,864 243,428 
Certificates of deposit (“CDs”) held for investment, at cost6,470 7,217 
Investment securities held to maturity, at amortized cost (net of allowance for credit losses ("ACL") of $34 and $36), (estimated fair value of $129,395 and $132,334)
133,259 136,861 
Investment securities available for sale, at fair value75,243 78,240 
Investments in equity securities, at fair value867 864 
Federal Home Loan Bank of Des Moines (“FHLB”) stock, at cost2,045 2,045 
Other investments, at cost3,000 3,000 
Loans held for sale3,736 1,127 
Loans receivable, net of ACL of $18,125 and $18,091
1,458,832 1,463,590 
Premises and equipment, net21,826 21,684 
Other real estate owned (“OREO”) and other repossessed assets, net221 221 
Accrued interest receivable7,435 7,393 
Bank owned life insurance (“BOLI”)21,988 21,830 
Goodwill15,131 15,131 
Core deposit intangible (“CDI”), net237 271 
Loan servicing rights, net678 815 
Operating lease right-of-use ("ROU") assets2,856 2,949 
Other assets5,439 6,113 
Total assets$2,006,127 $2,012,779 
Liabilities and shareholders’ equity  
Liabilities  
Deposits:
     Non-interest-bearing demand$404,300 $430,685 
     Interest-bearing1,300,182 1,285,950 
Total deposits1,704,482 1,716,635 
Operating lease liabilities3,015 3,077 
FHLB borrowings20,000 20,000 
Other liabilities and accrued expenses10,221 10,453 
Total liabilities$1,737,718 $1,750,165 
* 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, 2025 and September 30, 2025
(Dollars in thousands, except per share amounts)
 
December 31,
2025		September 30,
2025
(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;
7,879,828 shares issued and outstanding - December 31, 2025 7,889,571 shares issued and outstanding - September 30, 2025
26,025 26,305 
Retained earnings242,617 236,607 
Accumulated other comprehensive loss(233)(298)
Total shareholders’ equity268,409 262,614 
Total liabilities and shareholders’ equity$2,006,127 $2,012,779 
* 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, 2025 and 2024
(Dollars in thousands, except per share amounts)
(Unaudited)

 Three Months Ended December 31,
 20252024
Interest and dividend income  
Loans receivable and loans held for sale$22,673 $21,032 
Investment securities1,862 2,138 
Dividends from mutual funds, FHLB stock and other investments82 86 
Interest-bearing deposits in banks and CDs2,578 2,001 
Total interest and dividend income27,195 25,257 
Interest expense  
Deposits8,043 8,084 
FHLB borrowings203 203 
Total interest expense8,246 8,287 
Net interest income18,949 16,970 
Provision for (recapture of) credit losses
Provision for credit losses - loans16 52 
Recapture of credit losses - investment securities(2)(5)
Recapture of credit losses - unfunded commitments(49)(20)
Total provision for (recapture of) credit losses - net(35)27
Net interest income after provision for (recapture of) credit losses18,984 16,943 
Non-interest income  
Net recoveries on investment securities5 3 
Service charges on deposits989 999 
ATM and debit card interchange transaction fees1,194 1,267 
BOLI net earnings158 166 
Gain on sales of loans, net78 43 
Escrow fees24 18 
Servicing income on loans sold53 27 
Other, net263 174 
Total non-interest income, net2,764 2,697 





 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, 2025 and 2024
(Dollars in thousands, except per share amounts)
(Unaudited)
 Three Months Ended December 31,
 20252024
Non-interest expense  
Salaries and employee benefits$6,453 $6,092 
Premises and equipment1,074 950 
Advertising192 181 
OREO and other repossessed assets, net5 — 
ATM and debit card interchange transaction fees582 521 
Postage and courier143 121 
State and local taxes457 346 
Professional fees316 346 
Federal Deposit Insurance Corporation ("FDIC") insurance221 210 
Loan administration and foreclosure80 128 
Technology and communications1,055 1,140 
Deposit operations347 332 
Amortization of CDI34 45 
Other472 655 
Total non-interest expense, net11,431 11,067 
Income before income taxes10,317 8,573 
Provision for income taxes2,101 1,713 
     Net income
$8,216 $6,860 
Net income per common share  
Basic$1.04 $0.86 
Diluted$1.04 $0.86 
Weighted average common shares outstanding  
Basic7,885,656 7,958,275 
Diluted7,923,037 7,999,504 
Dividends paid per common share$0.28 $0.25 





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, 2025 and 2024
(Dollars in thousands)
(Unaudited) 
 Three Months Ended December 31
 20252024
Comprehensive income
Net income$8,216 $6,860 
Other comprehensive income (loss)
Unrealized holding gain (loss) on investment securities available for sale, net of income taxes of $17, and $(216), respectively
65 (812)
Total other comprehensive income (loss), net of income taxes65 (812)
Total comprehensive income$8,281 $6,048 



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, 2025 and 2024
(Dollars in thousands, except per share amounts)
(Unaudited)
 Common Stock Accumulated
Other
Compre-hensive
Income (Loss)		 
 Number of SharesAmountRetained
Earnings		Total
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 options22,400 474 — — 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 
Balance, September 30, 20257,889,571 $26,305 $236,607 $(298)$262,614 
Net income— — 8,216 — 8,216 
Other comprehensive income— — — 65 65 
Repurchase of common stock, net of tax(29,303)(1,000)— — (1,000)
Restricted stock grant forfeitures(2,080)— — — — 
Exercise of stock options 21,640 562 — — 562 
Common stock dividends ($0.28 per common share)
— — (2,206)— (2,206)
Stock-based compensation expense— 158 — — 158 
Balance, December 31, 20257,879,828 $26,025 $242,617 $(233)$268,409 


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, 2025 and 2024
(Dollars in thousands)
(Unaudited)
 Three Months Ended December 31,
 20252024
Cash flows from operating activities  
Net income$8,216 $6,860 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
(Recapture of) provision for credit losses(35)27 
Depreciation363 375 
Accretion of discount on purchased loans(9)(8)
Amortization of CDI34 45 
Stock-based compensation expense158 141 
Net recoveries on investment securities(5)(3)
Change in fair value of investments in equity securities(3)26 
Accretion of discounts and premiums on securities(277)(252)
Gain on sales of loans, net(78)(43)
Loans originated for sale(6,196)(2,680)
Proceeds from sales of loans3,665 2,312 
Amortization of loan servicing rights173 200 
BOLI net earnings(158)(166)
Change in deferred loan origination fees(190)20 
Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses426 (9,910)
Net cash provided by (used in) operating activities6,084 (3,056)
Cash flows from investing activities  
Net decrease in CDs held for investment747 2,739 
Purchase of investment securities available for sale(3,958)(8,577)
Proceeds from maturities and prepayments of investment securities held to maturity3,766 16,119 
Proceeds from maturities and prepayments of investment securities available for sale7,158 2,860 
Decrease in loans receivable, net4,941 9,419 
Purchase of premises and equipment(505)(506)
Net cash provided by investing activities12,149 22,054 

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, 2025 and 2024
(Dollars in thousands)
(Unaudited)
 Three Months Ended December 31,
 20252024
Cash flows from financing activities  
Net decrease in deposits$(12,153)$(17,252)
Proceeds from exercise of stock options562 474 
Repurchase of common stock, net of tax(1,000)(884)
Payment of dividends(2,206)(1,993)
Net cash used in financing activities(14,797)(19,655)
  
Net increase (decrease) in cash and cash equivalents3,436 (657)
Cash and cash equivalents  
Beginning of period243,428 164,728 
End of period$246,864 $164,071 
Supplemental disclosure of cash flow information  
Income taxes paid$— $— 
Interest paid$8,284 $8,543 
Supplemental disclosure of non-cash investing activities  
Other comprehensive income (loss) related to investment securities$65 $(812)
Loans transferred to OREO and other repossessed assets$— $221 

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, 2025 (“2025 Form 10-K”).  The unaudited consolidated results of operations for the three months ended December 31, 2025 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2026.

(b)  Principles of Consolidation:  The unaudited consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, the Bank, 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's revenue is primarily derived from the business of banking. Management has assigned certain responsibilities by business-line and evaluates financial performance on a Company-wide basis. The Company's financial performance is monitored on a consolidated basis by the Company's Chief Executive Officer, President and Chief Financial Officer, which are considered the Company's chief operating decision makers ("CODMs") for financial oversight. The primary measure of performance is consolidated net income. Financial performance is reviewed monthly by the CODMs. The presentation of financial performance is consistent with amounts and financial statement line items shown in the Company's consolidated balance sheets and consolidated statements of income. All of the Company's operations are considered by management to be aggregated in one reportable operating segment.

(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, 2025 presentation with no change to previously reported net income or total shareholders’ equity.





















11
Timberland Bancorp, Inc. and Subsidiary
Notes to Unaudited Consolidated Financial Statements

(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, 2025 and September 30, 2025 (dollars in thousands):
 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value		Allowance for Credit Losses
December 31, 2025    
Held to Maturity    
U.S. Treasury and U.S. government agency securities$69,733 $5 $(2,340)$67,398 $— 
Mortgage-backed securities ("MBS"):
U.S. government agencies46,175 195 (1,199)45,171 — 
Private label residential16,247 222 (747)15,722 33 
Municipal securities605 4 — 609 — 
Bank issued trust preferred securities499 — (4)495 1 
Total$133,259 $426 $(4,290)$129,395 $34 


December 31, 2025Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available for Sale
MBS: U.S. government agencies$75,538 $449 $(744)$75,243 
Total$75,538 $449 $(744)$75,243 


September 30, 2025Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAllowance for Credit Losses
Held to Maturity
U.S. Treasury and U.S. government agency securities$69,646 $15 $(2,760)$66,901 $— 
MBS:
U.S. government agencies48,735 199 (1,357)47,577 — 
 Private label residential 17,376 196 (822)16,750 35 
Municipal securities605 6 — 611 — 
Bank issued trust preferred securities499 — (4)495 1
Total$136,861 $416 $(4,943)$132,334 $36 


September 30, 2025Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available for Sale
U.S. government securities$4,968 $— $— $4,968 
MBS: U.S. government agencies73,649 382 (759)73,272 
Total$78,617 $382 $(759)$78,240 
12




Held to maturity and available for sale investment securities with unrealized losses were as follows as of December 31, 2025 (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$— $— — $57,422 $(2,340)14 $57,422 $(2,340)
MBS:
U.S. government agencies235 (1)3 25,805 (1,198)38 26,040 (1,199)
Private label residential14 — 1 13,090 (747)15 13,104 (747)
Bank issued trust
  preferred securities
495 (4)1 — — — 495 (4)
     Total
$744 $(5)5 $96,317 $(4,285)67 $97,061 $(4,290)
Available for sale
MBS:
U.S. government agencies$10,020 $(52)3 $28,258 $(692)24 $38,278 $(744)
     Total
$10,020 $(52)3 $28,258 $(692)24 $38,278 $(744)

Held to maturity and available for sale investment securities with unrealized losses were as follows as of September 30, 2025 (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$— $— — $56,960 $(2,760)14 $56,960 $(2,760)
MBS:
U.S. government agencies7 — 1 27,776 (1,357)42 27,783 (1,357)
 Private label
    residential
341 (2)3 14,646 (820)14 14,987 (822)
Bank issued trust preferred securities495 (4)1 — — — 495 (4)
     Total
$843 $(6)5 $99,382 $(4,937)70 $100,225 $(4,943)
Available for sale
U.S. government securities$3,977 $— 1 $— $— — $3,977 $— 
MBS:
U.S. government agencies11,922 (67)3 28,947 (692)24 40,869 (759)
     Total
$15,899 $(67)4 $28,947 $(692)24 $44,846 $(759)


During the three months ended December 31, 2025, the Company recorded a $3,000 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
13




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 credit losses.

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 $194.02 million and $195.93 million at December 31, 2025 and September 30, 2025, respectively.

The contractual maturities of investment securities at December 31, 2025 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$34,886 $34,614 $2,122 $2,125 
Due after one year to five years45,217 43,120 3,752 3,747 
Due after five years to ten years34 141 188 187 
Due after ten years53,122 51,520 69,476 69,184 
Total$133,259 $129,395 $75,538 $75,243 


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, 2025 or September 30, 2025. 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, 2025 and September 30, 2025, the ACL on the held to maturity securities portfolio totaled $34,000 and $36,000, respectively.










14




The following tables set forth information for the three months ended December 31, 2025 and 2024 regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended December 31, 2025Three Months Ended December 31, 2024
Beginning AllowanceProvision for (Recapture of) Credit LossesEnding AllowanceBeginning AllowanceProvision for (Recapture of) Credit LossesEnding Allowance
Held to Maturity
MBS:
Private label residential$35 $(2)$33 $55 $(3)$52 
Bank issued trust preferred securities1 — 1 5 (2)3 
Total$36 $(2)$34 $60 $(5)$55 


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 $418,000 at December 31, 2025 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 $32,000 of private label mortgage-backed held to maturity investment securities in non-accrual status at December 31, 2025.

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 tables set forth the Company's held to maturity investment securities at December 31, 2025 and September 30, 2025, by credit quality indicator (dollars in thousands):
Credit Ratings
As of December 31, 2025AAA/AA/ABBB/BB/BUnratedTotal
Held to Maturity
U.S. Treasury and U.S. government agency securities$69,733 $— $— $69,733 
MBS:
U.S. government agencies46,175 — — 46,175 
Private label residential11,734 — 4,513 16,247 
Municipal securities605 — — 605 
Bank issued trust preferred securities— — 499 499 
Total held to maturity$128,247 $— $5,012 $133,259 

15




Credit Ratings
As of September 30, 2025AAA/AA/ABBB/BB/BUnratedTotal
Held to Maturity
U.S. Treasury and U.S. government agency securities$69,646 $— $— $69,646 
MBS:
U.S. government agencies48,735 — — 48,735 
Private label residential12,455 — 4,921 17,376 
Municipal securities605 — — 605 
Bank issued trust preferred securities— — 499 499 
Total held to maturity$131,441 $— $5,420 $136,861 

Prior to adopting ASU 2016-13 during the year ended September 30, 2024, 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, 2025 and 2024 (dollars in thousands):
 Three Months Ended
December 31,
 20252024
Beginning balance of credit loss$788 $803 
Subtractions: 
Net realized loss previously recorded as credit losses(3)— 
Recovery of prior credit loss(5)(2)
Ending balance of credit loss$780 $801 















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 2025 goodwill impairment test during the quarter ended June 30, 2025. 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, 2025.

As of December 31, 2025, management believes that there have been no events or changes in the circumstances since May 31, 2025 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, 2025, 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, 2025 and September 30, 2025 (dollars in thousands):
 December 31,
2025		September 30,
2025
 AmountPercentAmountPercent
Mortgage loans:    
One- to four-family (1)$325,724 20.7 %$317,691 20.1 %
Multi-family212,331 13.5 207,767 13.2 
Commercial real estate611,989 38.9 610,692 38.7 
Construction - custom and owner/builder102,177 6.5 130,341 8.3 
Construction - speculative one- to four-family15,110 1.0 10,745 0.7 
Construction - commercial20,199 1.3 21,818 1.4 
Construction - multi-family65,856 4.2 45,660 2.9 
Construction - land development2,387 0.2 15,324 1.0 
Land33,521 2.1 35,952 2.3 
Total mortgage loans1,389,294 88.4 1,395,990 88.6 
Consumer loans:    
Home equity and second mortgage52,569 3.3 50,479 3.2 
Other1,898 0.1 2,034 0.1 
Total consumer loans54,467 3.4 52,513 3.3 
Commercial loans:
Commercial business128,397 8.2 126,937 8.1 
U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans20 — 58 — 
    Total commercial loans128,417 8.2 126,995 8.1 
Total loans receivable1,572,178 100.0 %1,575,498 100.0 %
Less:    
Undisbursed portion of construction loans in process ("LIP")89,883  88,289  
Deferred loan origination fees, net5,338  5,528  
ACL18,125  18,091  
Subtotal113,346 111,908 
Loans receivable, net$1,458,832  $1,463,590  
__________________
(1) Does not include one- to four-family loans held for sale totaling $3.74 million and $1.13 million at December 31, 2025 and September 30, 2025, respectively.

Loans receivable at December 31, 2025 and September 30, 2025, are reported net of unamortized discounts totaling $43,000 and $51,000, 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, 2025, no loans were classified as doubtful. At September 30, 2025, 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, 2025 and September 30, 2025, there were no loans classified as loss.

The following table sets forth the Company's loan portfolio at December 31, 2025 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
Type20262025202420232022PriorRevolving LoansTotal Loans Receivable
One-to four-family
Risk Rating
Pass$136 $12,291 $40,200 $74,354 $101,198 $89,908 $— $318,087 
Watch— — — 550 — 270 — 820 
Special Mention— — — — 4,829 — — 4,829 
Substandard— — — 1,781 207 — — 1,988 
Total one- to four-family$136 $12,291 $40,200 $76,685 $106,234 $90,178 $— $325,724 
Multi-family
Risk Rating
Pass$5,505 $16,257 $13,128 $39,852 $38,905 $85,983 $1,594 $201,224 
Watch— — — — — 11,107 — 11,107 
Total multi-family$5,505 $16,257 $13,128 $39,852 $38,905 $97,090 $1,594 $212,331 
Commercial real estate
Risk Rating
Pass$4,464 $47,877 $25,255 $79,316 $122,444 $303,629 $12,017 $595,002 
Watch— — — — 237 12,087 — 12,324 
Special Mention— — — — — 31 — 31 
Substandard— — — — 304 4,328 — 4,632 
Total commercial real estate$4,464 $47,877 $25,255 $79,316 $122,985 $320,075 $12,017 $611,989 
18




Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20262025202420232022PriorRevolving LoansTotal Loans Receivable
Construction-custom & owner/builder (1)
Risk Rating
Pass$2,341 $39,185 $5,423 $1,500 $1,098 $— $— $49,547 
Watch— 767 5,810 3,735 306 1,312 — 11,930 
Substandard— — — — 553 — — 553 
Total construction-custom & owner/builder$2,341 $39,952 $11,233 $5,235 $1,957 $1,312 $— $62,030 
Construction-speculative one-to four-family (1)
Risk Rating
Pass$1,789 $5,847 $235 $322 $— $— $— $8,193 
Total construction-speculative one-to four-family$1,789 $5,847 $235 $322 $— $— $— $8,193 
Construction-commercial (1)
Risk Rating
Pass$32 $9,272 $3,100 $2,855 $— $— $— $15,259 
Total construction-commercial $32 $9,272 $3,100 $2,855 $— $— $— $15,259 
Construction-multi-family (1)
Risk Rating
Pass$2,146 $18,351 $7,800 $— $— $— $— $28,297 
Total construction-multi-family$2,146 $18,351 $7,800 $— $— $— $— $28,297 
Construction-land development (1)
Risk Rating
Pass$— $— $— $2,067 $— $— $— $2,067 
Total construction-land development$— $— $— $2,067 $— $— $— $2,067 
Land
Risk Rating
Pass$2,192 $8,272 $8,652 $3,645 $5,521 $4,133 $362 $32,777 
Watch— — — — 296 448 — 744 
Total land$2,192 $8,272 $8,652 $3,645 $5,817 $4,581 $362 $33,521 
Home equity and second mortgage
Risk Rating
Pass$1,029 $2,358 $4,843 $3,260 $1,438 $2,293 $36,982 $52,203 
Watch— — — — — 10 — 10 
Substandard— — — — — 57 299 356 
Total home equity and second mortgage$1,029 $2,358 $4,843 $3,260 $1,438 $2,360 $37,281 $52,569 
19




Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20262025202420232022PriorRevolving LoansTotal Loans Receivable
Other consumer
Risk Rating
Pass$439 $105 $450 $381 $68 $389 $40 $1,872 
Watch— — — — — 6 — 6 
Substandard— — — — — — 20 20 
Total other consumer$439 $105 $450 $381 $68 $395 $60 $1,898 
Commercial business
Risk Rating
Pass$1,488 $10,706 $12,455 $17,033 $25,676 $12,959 $45,710 $126,027 
Special Mention— — — — 174 483 650 1,307 
Substandard— — — 159 140 510 254 1,063 
Total commercial business$1,488 $10,706 $12,455 $17,192 $25,990 $13,952 $46,614 $128,397 
SBA PPP
Risk Rating
Pass$— $— $— $— $— $20 $— $20 
Total SBA PPP$— $— $— $— $— $20 $— $20 
Total loans receivable, gross (1)
Risk Rating
Pass$21,561 $170,521 $121,541 $224,585 $296,348 $499,314 $96,705 $1,430,575 
Watch— 767 5,810 4,285 839 25,240 — 36,941 
Special Mention— — — — 5,003 514 650 6,167 
Substandard— — — 1,940 1,204 4,895 573 8,612 
Total loans receivable$21,561 $171,288 $127,351 $230,810 $303,394 $529,963 $97,928 $1,482,295 
Current period gross charge-off$— $— $— $— $— $— $— $— 
_____________________
(1) Net of construction LIP
20





The following table sets forth the Company's loan portfolio at September 30, 2025, by risk attribute and year of origination as well as gross charges offs in the year ending September 30, 2025:

Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20252024202320222021PriorRevolving LoansTotal Loans Receivable
One-to four-family
Risk Rating
Pass$10,885 $25,692 $79,193 $102,942 $45,274 $47,078 $— $311,064 
Special Mention— — — 4,846 — — — 4,846 
Substandard— — 1,781 — — — — 1,781 
Total one- to four-family$10,885 $25,692 $80,974 $107,788 $45,274 $47,078 $— $317,691 
Multi-family
Risk Rating
Pass$16,305 $13,129 $40,004 $39,064 $22,489 $62,516 $1,334 $194,841 
Watch— — — — — 3,264 — 3,264 
Substandard— — — — 9,662 — — 9,662 
Total multi-family$16,305 $13,129 $40,004 $39,064 $32,151 $65,780 $1,334 $207,767 
Commercial real estate
Risk Rating
Pass$47,145 $25,419 $79,692 $123,631 $82,507 $225,019 $10,212 $593,625 
Watch— — — 238 — 9,307 — 9,545 
Special Mention— — — — — 32 — 32 
Substandard— — — — — 7,490 — 7,490 
Total commercial real estate$47,145 $25,419 $79,692 $123,869 $82,507 $241,848 $10,212 $610,692 
Construction-custom & owner/builder (1)
Risk Rating
Pass$32,733 $33,785 $560 $— $758 $— $— $67,836 
Watch— 3,875 5,367 1,855 1,232 — — 12,329 
Substandard— — — 553 — — — 553 
Total construction-custom & owner/builder$32,733 $37,660 $5,927 $2,408 $1,990 $— $— $80,718 
Construction-speculative one-to four-family (1)
Risk Rating
Pass$6,375 $16 $44 $— $— $— $— $6,435 
Watch— — 488 — — — — 488 
Total construction-speculative one-to four-family$6,375 $16 $532 $— $— $— $— $6,923 
Construction-commercial (1)
Risk Rating
Pass$10,284 $2,725 $2,725 $— $— $— $— $15,734 
Total construction-commercial$10,284 $2,725 $2,725 $— $— $— $— $15,734 
21




Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20252024202320222021PriorRevolving LoansTotal Loans Receivable
Construction-multi-family (1)
Risk Rating
Pass$11,084 $7,604 $— $— $— $— $— $18,688 
Total construction-multi-family$11,084 $7,604 $— $— $— $— $— $18,688 
Construction-land development (1)
Risk Rating
Pass$— $358 $1,629 $— $— $— $— $1,987 
Substandard— — — 11,549 — — — 11,549 
Total construction-land development$— $358 $1,629 $11,549 $— $— $— $13,536 
Land
Risk Rating
Pass$11,667 $9,393 $3,741 $5,805 $1,951 $2,339 $303 $35,199 
Watch— — — 298 — 455 — 753 
Total land$11,667 $9,393 $3,741 $6,103 $1,951 $2,794 $303 $35,952 
Home equity and second mortgage
Risk Rating
Pass$2,528 $5,154 $3,574 $1,556 $237 $2,112 $34,649 $49,810 
Watch— — — — — 10 — 10 
Substandard— — — — — 57 602 659 
Total home equity and second mortgage$2,528 $5,154 $3,574 $1,556 $237 $2,179 $35,251 $50,479 
Other consumer
Risk Rating
Pass$565 $459 $390 $82 $48 $423 $38 $2,005 
Watch— — — — — 7 — 7 
Substandard— — — — — — 22 22 
Total other consumer$565 $459 $390 $82 $48 $430 $60 $2,034 
Current period gross write-offs$4 $1 $— $— $— $— $1 $6 
Commercial business
Risk Rating
Pass$10,686 $12,875 $17,674 $27,359 $5,793 $9,870 $40,048 $124,305 
Watch— — — — 649 — — 649 
Special Mention— — — 187 304 201 — 692 
Substandard— — 159 140 — 790 — 1,089 
Doubtful— — 202 — — — — 202 
Total commercial business$10,686 $12,875 $18,035 $27,686 $6,746 $10,861 $40,048 $126,937 
Current period gross write-offs$— $— $— $241 $— $— $— $241 
22




Term Loans Amortized Cost Basis by Origination Fiscal Year
Type20252024202320222021PriorRevolving LoansTotal Loans Receivable
SBA PPP
Risk Rating
Pass$— $— $— $— $58 $— $— $58 
Total SBA PPP$— $— $— $— $58 $— $— $58 
Total loans receivable, gross (1)
Risk Rating
Pass$160,257 $136,609 $229,226 $300,439 $159,115 $349,357 $86,584 $1,421,587 
Watch— 3,875 5,855 2,391 1,881 13,043 — 27,045 
Special Mention— — — 5,033 304 233 — 5,570 
Substandard— — 1,940 12,242 9,662 8,337 624 32,805 
Doubtful— — 202 — — — — 202 
Total loans receivable$160,257 $140,484 $237,223 $320,105 $170,962 $370,970 $87,208 $1,487,209 
Current period gross charge-off$4 $1 $— $241 $— $— $1 $247 
_____________________
(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. Management has adopted 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 evaluated individually 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, 2025 and 2024 regarding activity in the ACL by portfolio segment (dollars in thousands):
 Three Months Ended December 31, 2025
 Beginning
Allowance		Provision for
(Recapture of) Credit Losses		Charge-
Offs		RecoveriesEnding
Allowance
Mortgage loans:     
One- to four-family$2,892 $62 $— $— $2,954 
Multi-family1,625 11 — — 1,636 
Commercial real estate7,147 (68)— — 7,079 
Construction – custom and owner/builder1,268 (108)— — 1,160 
Construction – speculative one- to four-family112 49 — — 161 
Construction – commercial348 32 — — 380 
Construction – multi-family400 293 — — 693 
Construction – land development412 (348)— — 64 
Land797 (70)— — 727 
Consumer loans:    
Home equity and second mortgage435 13 — — 448 
Other58 (4)— — 54 
Commercial business loans2,597 154 — 18 2,769 
Total$18,091 $16 $— $18 $18,125 

 Three Months Ended December 31, 2024
 Beginning
Allowance		Provision for
(Recapture of) Loan Losses		Charge-
Offs		RecoveriesEnding
Allowance
Mortgage loans:     
  One- to four-family$2,632 $67 $— $— $2,699 
  Multi-family1,3083— — 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 
  Land7939 — — 802 
Consumer loans:
  Home equity and second mortgage3485— — 353 
  Other39(3)(3)— 33 
Commercial business loans2,640306(241)2 2,707 
Total$17,478 $52 $(244)$2 $17,288 





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, 2025 and September 30, 2025 (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, 2025       
Mortgage loans:       
One- to four-family$— $535 $1,988 $— $2,523 $323,201 $325,724 
Multi-family— — — — — 212,331 212,331 
Commercial real estate— — 304 — 304 611,685 611,989 
Construction – custom and owner/builder (2)
— — 553 — 553 61,477 62,030 
Construction – speculative one- to four-family (2)
— — — — — 8,193 8,193 
Construction – commercial (2)
— — — — — 15,259 15,259 
Construction – multi-family (2)
— — — — — 28,297 28,297 
Construction – land development (2)
— — — — — 2,067 2,067 
Land— 450 — — 450 33,071 33,521 
Consumer loans:    
Home equity and second mortgage— 135 356 — 491 52,078 52,569 
Other— — 20 — 20 1,878 1,898 
Commercial business loans— 650 1,063 — 1,713 126,684 128,397 
SBA PPP loans— — — — — 20 20 
Total$— $1,770 $4,284 $— $6,054 $1,476,241 $1,482,295 
(1) Includes non-accrual loans past due 90 days or more and other loans classified as non-accrual.
(2) Net of construction LIP.
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, 2025       
Mortgage loans:       
One- to four-family$— $210 $1,781 $— $1,991 $315,700 $317,691 
Multi-family— — — — — 207,767 207,767 
Commercial real estate— 255 159 — 414 610,278 610,692 
Construction – custom and owner/builder (2)
— — 553 — 553 80,165 80,718 
Construction – speculative one- to four-family (2)
— — — — — 6,923 6,923 
Construction – commercial (2)
— — — — — 15,734 15,734 
Construction – multi-family (2)
— — — — — 18,688 18,688 
Construction – land development (2)
— — — — — 13,536 13,536 
Land— — — — — 35,952 35,952 
Consumer loans:
Home equity and second mortgage— 411 602 — 1,013 49,466 50,479 
Other— — 22 — 22 2,012 2,034 
Commercial business loans374 — 1,290 — 1,664 125,273 126,937 
SBA PPP loans— — — — — 58 58 
Total$374 $876 $4,407 $— $5,657 $1,481,552 $1,487,209 
(1) Includes non-accrual loans past due 90 days or more and other loans classified as non-accrual.
(2) Net of construction LIP.



At December 31, 2025, the Company had $534,000 of non-accrual loans with an ACL of $362,000 and $3.75 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, 2025 (in thousands):
Recorded InvestmentRelated ACL
Mortgage loans:
One- to four-family$1,988 $— 
Commercial real estate304 — 
Construction - custom and owner/builder553 — 
Consumer loans:
Home equity and second mortgage356 — 
   Other20 20 
Commercial business loans1,063 342 
Total$4,284 $362 










26




At September 30, 2025, the Company had $1.31 million of non-accrual loans with an ACL of $360,000 and $3.10 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, 2025 (in thousands):
Recorded InvestmentRelated ACL
Mortgage loans:
One- to four-family$1,781 $— 
Commercial real estate159 — 
Construction - custom and owner/builder553 — 
Consumer loans:
Home equity and second mortgage602 — 
   Other22 22 
Commercial business loans1,290 338 
Total$4,407 $360 

Loan Modifications to Borrowers Experiencing Financial Difficulty

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 loan modifications to borrowers experiencing financial difficulty during the three months ended December 31, 2025 and 2024. All loans modified during the past twelve months are performing according to modified terms.



























27




(5) LEASES

At December 31, 2025, the Company has operating leases for three retail bank branch offices and an administrative office. The Company's leases have remaining lease terms of one to twenty-four years, and include options to extend the leases for up to fifteen 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, 2025 and 2024 (dollars in thousands):

Three Months Ended December 31,
Lease cost:20252024
Operating lease cost$126$96
Short-term lease cost——
Total lease cost$126 $96 

The following table provides supplemental information related to operating leases at or for the three months ended December 31, 2025 and 2024 (dollars in thousands):

At or For the Three Months Ended December 31 2025At or For the Three Months Ended December 31, 2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$88 $83 
Weighted average remaining lease term-operating leases16.6 years5.8 years
Weighted average discount rate-operating leases4.13 %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, 2025 for future fiscal years are as follows (dollars in thousands):

Remainder of Fiscal 2026$285 
Fiscal 2027340 
Fiscal 2028344 
Fiscal 2029340 
Fiscal 2030327 
Thereafter3,126 
Total lease payments4,762 
Less imputed interest1,747 
Total$3,015 
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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, 2025 and 2024, is as follows (dollars in thousands, except per share amounts):
 Three Months Ended December 31,
20252024
Basic net income per common share computation
Numerator – net income $8,216 $6,860 
Denominator – weighted average common shares outstanding7,885,656 7,958,275 
Basic net income per common share$1.04 $0.86 
Diluted net income per common share computation
Numerator – net income$8,216 $6,860 
Denominator – weighted average common shares outstanding7,885,656 7,958,275 
Effect of dilutive stock options (1)37,381 41,229 
Weighted average common shares outstanding - assuming dilution7,923,037 7,999,504 
Diluted net income per common share$1.04 $0.86 
____________________________________________
(1) For the three months ended December 31, 2025 and 2024, average options to purchase 1,000 and 96,220 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.

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(7) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the three months ended December 31, 2025 and 2024, are as follows (dollars in thousands):

Three Months EndedThree Months Ended
December 31, 2025December 31, 2024
Changes in fair value of available for sale securitiesTotalChanges in fair value of available for sale securitiesTotal
Balance of AOCI at the beginning of period$(298)$(298)$20 $20 
Other comprehensive income (loss)65 65 (812)(812)
Balance of AOCI at the end of period $(233)$(233)$(792)$(792)
__________________________
(1) All amounts are net of income taxes.



(8) STOCK COMPENSATION PLANS

The Company maintains one active stock compensation plan, the 2019 Equity Incentive Plan (the "2019 Plan"). Under the 2019 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 for issuance to employees and officers, and 50,000 shares are reserved for issuance to directors and directors emeriti. Shares issued under the 2019 Plan may be purchased in the open market or issued from the Company's authorized and unissued shares.  The exercise price of each stock option equals the fair market value of the Company’s common stock on the date of grant. Stock options generally vest in equal annual installments over five years beginning on the first anniversary of the grant date and have a maximum contractual term of ten years. Restricted stock awards typically vest in equal annual installments over a three- or five-year period beginning on the first anniversary of the grant date. At December 31, 2025, 132,935 shares of common stock remained available for further issuance under the 2019 Plan, either as stock options or restricted stock.

The Company's 2014 Equity Incentive Plan (the "2014 Plan") expired on January 27, 2025; therefore, no further awards may be granted under the plan. As of December 31, 2025, there were 109,890 shares outstanding that had been previously granted in the 2014 Plan, of which 98,090 were vested and 11,800 were unvested.

Stock option activity for the three months ended December 31, 2025 and 2024, is summarized as follows:
 Three Months Ended December 31, 2025Three Months Ended December 31, 2024
  Number of SharesWeighted
Average
Exercise
Price		 Number of SharesWeighted
Average
Exercise
Price
Options outstanding, beginning of period215,530 $26.22 306,240 $25.21 
Exercised(21,640)25.98 (22,400)21.17 
Forfeited(1,800)27.68 (600)27.40 
Options outstanding, end of period192,090 $26.23 283,240 $25.52 

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, 2025 and 2024.
The aggregate intrinsic value of options exercised during the three months ended December 31, 2025 and 2024 was $201,000 and $239,000, respectively.

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At December 31, 2025, there were 33,400 unvested options with an aggregate grant date fair value of $223,000, all of which the Company assumes will vest. The aggregate intrinsic value of unvested options at December 31, 2025 was $268,000.  There were 100 options that vested during the three months ended December 31, 2025 with a total fair value of $326.

At December 31, 2024, there were 76,530 unvested options with an aggregate grant date fair value of $464,000. There were 100 options that vested during the three months ended December 31, 2024 with a total fair value of $326.
Additional information regarding options outstanding at December 31, 2025, 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)
15.67-19.1337,155 $16.56 3.737,155 $16.56 3.7
26.50-27.4065,360 27.34 6.043,160 27.30 5.6
28.23-29.6969,600 28.73 4.459,000 28.82 4.1
31.80-33.4019,975 31.88 3.019,375 31.14 2.8
 192,090 $26.23 4.7158,690 $25.91 4.3

The aggregate intrinsic value of options outstanding at December 31, 2025 and 2024, was $1.84 million and $1.45 million, respectively.

As of December 31, 2025, unrecognized compensation cost related to unvested stock options was $210,000, which is expected to be recognized over a weighted average period of 1.16 years.

There were no restricted stock awards granted during the three months ended December 31, 2025 and 2024.

The following table presents the activity related to restricted stock for the three months ended December 31, 2025 and 2024:

Three Months Ended December 31, 2025 Three Months Ended December 31, 2024
Number of Unvested SharesWeighted Average Grant Date Fair ValueNumber of Unvested SharesWeighted Average Grant Date Fair Value
Restricted stock outstanding beginning of period70,450 $31.94 49,015 $29.28 
     Forfeited(2,080)29.50 (450)29.28 
Restricted stock outstanding end of period68,370 $32.01 48,565 $29.28 

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, 2025, unrecognized compensation cost related to unvested restricted stock awards was $2.06 million, which is expected to be recognized over a weighted average period of 2.42 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:

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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.

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 available for sale investment securities 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 are based upon quoted market prices (Level 1).

The Company had no liabilities measured at fair value on a recurring basis at December 31, 2025 and September 30, 2025. The Company's assets measured at estimated fair value on a recurring basis at December 31, 2025 and September 30, 2025, were as follows (dollars in thousands):
December 31, 2025Estimated Fair Value 
 Level 1Level 2Level 3Total
Available for sale investment securities    
  MBS: U.S. government agencies$— $75,243 $— $75,243 
Investments in equity securities
   Mutual funds867 — — 867 
Total$867 $75,243 $— $76,110 
September 30, 2025Estimated Fair Value 
 Level 1Level 2Level 3Total
Available for sale investment securities    
U.S. government securities$4,968 $— $— $4,968 
  MBS: U.S. government agencies— 73,272 — 73,272 
Investments in equity securities
   Mutual funds864 — — 864 
Total$5,832 $73,272 $— $79,104 

There were no transfers among Level 1, Level 2 and Level 3 during the three months ended December 31, 2025 and the year ended September 30, 2025.

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, 2025 and September 30, 2025 (dollars in thousands):
 Estimated Fair ValueTotal Estimated
December 31, 2025Level 1Level 2Level 3Fair Value
Individually evaluated collateral-dependent loans:    
  Commercial business loans$— $— $173 $173 
Total loans— — 173 173 
OREO and other repossessed assets— — 221 221 
Total$— $— $394 $394 

 Estimated Fair ValueTotal Estimated
September 30, 2025Level 1Level 2Level 3Fair Value
Individually evaluated collateral-dependent loans:    
  Commercial business loans$— $— $177 $177 
Total loans— — 177 177 
OREO and other repossessed assets— — 221 221 
Total$— $— $398 $398 


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, 2025 and September 30, 2025:

  Valuation
Technique(s)		 Significant Unobservable Input(s)Range
Individually evaluated collateral-dependent loansMarket approachAppraised value less estimated selling costs8%
OREO and other repossessed assetsMarket approachLower of appraised value or listing price less estimated selling costs8%

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, 2025 and September 30, 2025. 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, 2025 and September 30, 2025 (dollars in thousands):
 December 31, 2025
  Fair Value Measurements Using:
 Recorded
Amount		 Estimated Fair Value 
Level 1		 
Level 2		 
Level 3
Financial assets     
Cash and cash equivalents$246,864 $246,864 $246,864 $— $— 
CDs held for investment6,470 6,470 6,470 — — 
Investment securities208,502 204,639 67,398 137,241 — 
Investments in equity securities867 867 867 — — 
FHLB stock2,045 2,045 2,045 — — 
Other investments3,000 3,000 3,000 — — 
Loans held for sale3,736 3,787 3,787 — — 
Loans receivable, net1,458,832 1,443,563 — — 1,443,563 
     Accrued interest receivable7,435 7,435 7,435 — — 
Financial liabilities     
Certificates of deposit431,098 430,840 — — 430,840 
FHLB borrowings20,000 20,026 — — 20,026 
Accrued interest payable1,925 1,925 1,925 — — 

 September 30, 2025
  Fair Value Measurements Using:
 Recorded
Amount		 Estimated Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets     
Cash and cash equivalents$243,428 $243,428 $243,428 $— $— 
CDs held for investment7,217 7,217 7,217 — — 
Investment securities215,101 210,574 71,870 138,704 — 
Investments in equity securities864 864 864 — — 
FHLB stock2,045 2,045 2,045 — — 
Other investments3,000 3,000 3,000 — — 
Loans held for sale1,127 1,159 1,159 — — 
Loans receivable, net1,463,590 1,441,850 — — 1,441,850 
     Accrued interest receivable7,393 7,393 7,393 — — 
Financial liabilities     
Certificates of deposit442,521 442,024 — — 442,024 
FHLB borrowings20,000 20,009 — — 20,009 
Accrued interest payable1,963 1,963 1,963 — — 


(10) RECENT ACCOUNTING PRONOUNCEMENTS

In December 2023, the FASB issued 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
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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 annual 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.

In January 2025, the FASB issued ASU 2025-01, Income Statement (Subtopic 220-40): Income Statement-Reporting Comprehensive Income-Expense Disaggregations Disclosures: Clarifying the effective Date. The amendments in this ASU amend the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2025-01 is permitted.

In November 2025, The FASB issued ASU 2025-08, Financial Instruments - Credit Losses (Topic 326) Purchased loans. The ASU expands the use of the gross-up method for accounting for certain acquired loans, specifically purchased seasoned loans ("PSLs"). This methods allows entities to recognize an allowance for credit losses at the acquisition date, which is added to the asset's amortized cost basis. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company does not expect this ASU to impact the Company's consolidated financial statements since there are no PSLs in the loan portfolio.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) Narrow-Scope Improvements. The ASU adds additional interim disclosures from various Codification Topics to ASC 270. It requires entities to disclose events that occurred since the end of the last annual reporting period that materially affect the entity. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is 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, 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, 2025, the Company recognized $989,000 in service charges on deposits, $1.19 million in ATM and debit card interchange transaction fees, $24,000 in escrow fees, and $23,000 in fee income from non-deposit investment sales included in "Other, net" in non-interest income on the consolidated statement of income, all considered within the scope of ASC 606. For the three months ended December 31, 2024, the Company recognized $999,000 in service charges on deposits,
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$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.

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 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, 2025 and 2024, are listed below (in thousands):

December 31, 2025December 31, 2024
Undisbursed portion of construction loans in process (see Note 4)$89,883 $85,350 
Undisbursed lines of credit122,109 115,279 
Commitments to extend credit32,200 16,265 
$244,192 $216,894 

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 in which there is exposure to credit risk from a contractual obligation to extend credit, unless the Company has determined that obligation is unconditionally cancellable. The methodology for calculating the ACL on unfunded loan commitments is similar to the methodology for calculating the ACL on loans but also includes an estimate of the future utilization of the commitment as determined by
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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 $383,000 and $307,000 at December 31, 2025 and 2024, respectively

The following table sets forth information for the three months ended December 31, 2025 and 2024, regarding activity in the ACL on unfunded loan commitments (dollars in thousands):

Three Months Ended December 31, 2025Three Months Ended December 31, 2024
Beginning ACL$432 $327 
Provision for (recapture of) credit losses(49)(20)
Ending ACL$383 $307 
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 its Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Lending Officer and Chief Technology Officer which provide for severance payments 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 these agreements is equal to 2.99 times the officer's average annual compensation during the five-year period preceding 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, 2025.  


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-
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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 express 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;
•changes in employment levels, labor shortages inflation, a recession or slowed economic growth;
•changes in interest rate levels and the duration volatility, and the timing and pace of such changes, including actions by the Board of Governors of the Federal Reserve System (“Federal Reserve”), which could materially affect our net interest margin, funding costs, asset values, access to capital and liquidity;
•the impact of inflation, including and related monetary and fiscal policy responses thereto, and the impact their effect on consumer and business behavior;
•Geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, could disrupt financial markets, global supply chains, energy commodity prices, or economic activity in specific industry sectors;
•the effects of a Federal government shutdown, a debt ceiling standoff, or other fiscal policy uncertainty;
•credit risks of associated with lending activities, including loan delinquencies, write-offs, changes in our allowance for credit losses ("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;
•results of examinations of us by regulatory authorities, including the possibility that any such regulatory authorities 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 publicity 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;
•the ability to adapt to rapid technological changes, including advancements related to artificial intelligence, digital banking platforms, and cybersecurity;
•the use of estimates in determining the fair value of assets, which may prove inaccurate;
•staffing fluctuations in response to changes in product demand or corporate implementation strategies;
•vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks;
•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;
•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”);
•environmental, social and governance goals and targets matters;
•effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil domestic political 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, 2025 (the "2025 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
38

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, except as may be required by law. 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 2026 and beyond to differ materially from those expressed or implied 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, 2025, the Company had total assets of $2.01 billion, net loans receivable of $1.46 billion, total deposits of $1.70 billion and total shareholders’ equity of $268.41 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.

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.

Our net interest income, net interest margin, and net interest spread are primarily influenced by changes in market interest rates, the shape of the yield curve, and the interest rates we earn on interest-earning assets or pay on interest-bearing liabilities. These components of net interest income are also affected by the volume and composition of our interest-earning assets, interest-bearing and non-interest-bearing liabilities, and shareholders’ equity. During the first fiscal quarter of 2026 (fiscal quarter ended December 31, 2025), interest rate trends were influenced by monetary policy actions taken by the Federal Open Market Committee (“FOMC”) of the Federal Reserve. In the second half of the calendar year 2025, the FOMC reduced the target range for the federal funds rate three times, most recently to a range of 3.50% to 3.75% at December 31, 2025. Despite the decline in market rates, asset yields increased due to the origination of new loans at higher rates and upward repricing of adjustable-rate loans. At the same time, funding costs declined at a slower pace, which moderated the overall benefit to our net interest margin.

The provision for (recapture of) credit losses on loans 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 $16,000 for the three months ended December 31, 2025 compared to a provision for credit losses on loans of $52,000 for the three months ended December 31, 2024.

Net income is also impacted by levels of non-interest income and non-interest expense. For the three months ended December 31, 2025, 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 may also be affected by net recoveries on investment securities and the reversal of previously recognized OTTI losses, if applicable. Additionally, it is reduced by valuation allowances on loan servicing rights and increased by recoveries of such allowances, when recognized. Non-interest expense for the same periods primarily included salaries and
39

employee benefits, premises and equipment costs, 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-related expenses, technology and communications expenses, deposit operation expenses, amortization of CDI, and other general operating expenses. In certain periods, non-interest expense may be offset by gains on the sale of premises and equipment or OREO. Both non-interest income and non-interest expense are influenced by the Company’s overall growth and the expansion of its loan and deposit account base.

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.

The Company's critical accounting estimates are described in the Company’s 2025 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 2025 Form 10-K.

Comparison of Financial Condition at December 31, 2025 and September 30, 2025

General: Total assets decreased by $6.65 million, or 0.3%, to $2.006 billion at December 31, 2025 from $2.013 billion at September 30, 2025.  The decrease was primarily due to decreases in investment securities and decreases in net loans receivable. These decreases were partially offset by increases in cash and cash equivalents.

Net loans receivable decreased by $4.76 million, or 0.3%, to $1.459 billion at December 31, 2025 from $1.464 billion at September 30, 2025, primarily due to decreases in construction and land loans categories. These decreases were partially offset by increases in one- to four- family, multi-family, home equity and second mortgage loan categories.

Total deposits decreased by $12.15 million, or 0.7%, to $1.704 billion at December 31, 2025 from $1.717 billion at September 30, 2025, primarily due to decreases in non-interest deposit account balances, certificates of deposit "CDs" account balances, and savings account balances. These decreases were partially offset by increases in NOW checking and money market account balances.
 
Shareholders’ equity increased by $5.80 million, or 2.2%, to $268.41 million at December 31, 2025 from $262.61 million at September 30, 2025.  The increase was primarily due to net income earned during the current period, partially offset by the payment of dividends to common shareholders, and repurchases of common stock during the three months ended December 31, 2025.

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 increased by $2.69 million, or 1.1%, to $253.33 million at December 31, 2025 from $250.65 million at September 30, 2025. The increase was due to a $3.44 million increase in cash and cash equivalents, resulting primarily from maturities, prepayments and scheduled amortizations of investment securities and loan payoffs. The overall increase was partially offset by a $747,000 decrease in CDs held for investment.

Investment Securities:  Investment securities (including investments in equity securities) decreased by $6.60 million, or 3.1%, to $209.37 million at December 31, 2025 from $215.97 million at September 30, 2025. This decrease was primarily due to maturities, prepayments and scheduled amortizations. For additional information on investment securities, see Note 2 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

40

FHLB Stock: FHLB stock remained constant at $2.05 million at December 31, 2025 and September 30, 2025.

Other Investments: Other investments, consisting solely of the Company's investment in the Solomon Hess SBA Loan Fund LLC, remained unchanged at $3.00 million at both December 31, 2025 and September 30, 2025. This investment is utilized to help satisfy compliance with the Bank's Community Reinvestment Act investment test requirements.

Loans: Net loans receivable decreased by $4.76 million, or 0.3%, to $1.459 billion at December 31, 2025 from $1.464 billion at September 30, 2025.  The decrease was primarily due to an $18.16 million decrease in construction loans and a $2.43 million decrease in land loans. These decreases were partially offset by an $8.03 million increase in one- to four-family loans, a $4.56 million increase in multi-family loans, a $2.09 million increase in the home equity and second mortgage loans and smaller increases in other loan categories.

Loan originations increased by $992,000, or 1.4%, to $73.06 million for the three months ended December 31, 2025 from $72.07 million for the three months ended December 31, 2024.  The increase was primarily due to increases in originations of commercial business, multi-family and one- to four-family loans. These increases were partially offset by decreases in construction and commercial real estate 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-family loans increased by $1.36 million, or 58.7%, to $3.66 million for the three months ended December 31, 2025 from $2.31 million for the three months ended December 31, 2024, primarily due to an increase 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 $142,000, or 0.7%, to $21.83 million at December 31, 2025 from $21.68 million at September 30, 2025.  The modest increase reflects capitalized additions related to facility improvements and equipment purchases during the period, which were largely offset by scheduled depreciation expense.

OREO (Other Real Estate Owned):  At December 31, 2025 and September 30, 2025, 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.

BOLI (Bank Owned Life Insurance): BOLI increased by $158,000, or 0.7%, to $21.99 million at December 31, 2025 from $21.83 million at September 30, 2025. 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, 2025 and September 30, 2025. CDI decreased by $34,000, or 12.5%, to $237,000 at December 31, 2025 from $271,000 at September 30, 2025 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 $137,000, or 16.8%, to $678,000 at December 31, 2025 from $815,000 at September 30, 2025 primarily due to the amortization of servicing rights. The principal amount of loans serviced for Freddie Mac and the U.S. Small Business Administration decreased by $4.99 million to $352.02 million at December 31, 2025 from $357.01 million at September 30, 2025.

Other Assets: Other assets decreased $674,000, or 11.0% to $5.44 million at December 31 2025 from $6.11 million at September 30, 2025. This was mainly due to a $781,000 decrease in the debit card processing prefund amount.

Deposits: Deposits decreased by $12.15 million, or 0.7%, to $1.70 billion at December 31, 2025 from $1.72 billion at September 30, 2025. The decrease was primarily due to a $26.39 million decrease in non-interest bearing demand deposits, an $11.42 million decrease in CDs and a $4.19 million decrease in savings account balances. These decreases were partially offset by a $21.68 million increase in NOW checking and an $8.16 million increase in money market account balances. The change in deposit balances and mix reflects continued competitive pricing pressures in the current interest rate environment. While some funds migrated from non-interest-bearing and lower-yielding accounts into higher-yielding transaction products, CDs declined as some customers opted to maintain greater access to funds.

41

At December 31, 2025, the loan-to-deposit ratio was approximately 85.59%, compared to 85.26% September 30, 2025, reflecting continued disciplined loan growth largely funded by core deposit activity. Management continues to monitor deposit pricing and mix in the context of liquidity management and efforts to support net interest income and profitability.

Deposits consisted of the following at December 31, 2025 and September 30, 2025 (dollars in thousands):
 December 31, 2025September 30, 2025
AmountPercentAmountPercent
Non-interest-bearing demand$404,300 23.7 %$430,685 25.1 %
NOW checking367,278 21.5 345,599 20.1 
Savings197,490 11.6 201,678 11.7 
Money market304,316 17.9 296,152 17.3 
Certificates of deposit under $250256,809 15.1 256,597 14.9 
Certificates of deposit $250 and over136,764 8.0 142,813 8.3 
Certificates of deposit - brokered37,525 2.2 43,111 2.6 
Total$1,704,482 100.0 %$1,716,635 100.0 %

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 unchanged at $20.00 million at both December 31, 2025 and September 30, 2025. The borrowings consist of three 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%.

Shareholders’ Equity:  Total shareholders’ equity increased by $5.80 million, or 2.2%, to $268.41 million at December 31, 2025 from $262.61 million at September 30, 2025.  The increase was primarily due to net income of $8.22 million. This increase was partially offset by dividend payments to common shareholders of $2.21 million and the repurchase of 29,303 shares of the Company's common stock for $1.00 million, net of tax.






























42

Asset Quality and Commercial Real Estate Portfolio Breakdown:

Non-performing assets to total assets was 0.23% at both December 31, 2025 and September 30, 2025. Non-performing assets decreased by $126,000, or 2.7%, to $4.54 million at December 31, 2025 from $4.66 million at September 30, 2025. The decrease was primarily due to a $123,000 decrease in non-accrual loans. The decrease in non-accrual loans was driven by the reductions in the home equity and second mortgage and commercial business portfolios and partially offset by increases in the commercial real estate and one- to four- family portfolios. Decreases in the home equity and second mortgage and commercial business categories were primarily attributable to loan payoffs.

Substandard loans decreased $24.19 million to $8.61 million at December 31, 2025 from $32.81 million at September 30, 2025. As of December 31, 2025, substandard loans are 0.55% of total loans receivable. The decrease is primarily a result of the largest substandard loan that was secured by a land development project paying off during the quarter and the second largest substandard loan that was secured by an apartment property being upgraded.

The following table sets forth information with respect to the Company’s non-performing assets at December 31, 2025 and September 30, 2025 (dollars in thousands):
December 31,
2025		September 30,
2025
Loans accounted for on a non-accrual basis:  
Mortgage loans: 
    One- to four-family (1)$1,988 $1,781 
    Commercial real estate304 159 
    Construction – custom and owner/builder553 553 
Consumer loans:  
    Home equity and second mortgage356 602 
Other20 22 
Commercial business loans 1,063 1,290 
       Total loans accounted for on a non-accrual basis4,284 4,407 
Accruing loans which are contractually past due 90 days or more— — 
Total of non-accrual and 90 days or more past due loans 4,284 4,407 
Non-accrual investment securities32 35 
OREO and other repossessed assets, net221 221 
       Total non-performing assets$4,537 $4,663 
Non-accrual and 90 days or more past due loans as a percentage of loans receivable0.29 %0.30 %
Non-accrual and 90 days or more past due loans as a percentage of total assets0.21 %0.22 %
Non-performing assets as a percentage of total assets0.23 %0.23 %
Loans receivable (2)$1,476,957 $1,481,681 
Total assets$2,006,127 $2,012,779 
___________________________________
(1) At both December 31, 2025 and September 30, 2025 there was one one- to four-family property in the process of foreclosure.
(2)  Does not include loans held for sale. Loan balances are before any reduction of the ACL.


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The following tables provide a breakdown of commercial real estate ("CRE") loans by collateral types as of December 31, 2025 and September 30, 2025:

CRE Loan Portfolio Breakdown by Collateral at December 31, 2025
($ in thousands)
Collateral TypeBalancePercent of CRE PortfolioPercent of Total Loan PortfolioAverage Balance per LoanNon-Accrual
Industrial warehouse$129,108 21.1 %8.2 %$1,317 $— 
Medical/dental offices84,338 13.8 5.4 1,240 — 
Office buildings68,132 11.1 4.3 811 304 
Other retail buildings53,059 8.7 3.4 596 — 
Mini-storage38,098 6.2 2.4 1,524 — 
Hotel/motel31,031 5.1 2.0 2,585 — 
Restaurants28,365 4.6 1.8 579 — 
Gas stations/convenience stores26,468 4.3 1.7 1,018 — 
Churches14,018 2.3 0.9 876 — 
Nursing homes13,379 2.2 0.9 2,230 — 
Shopping centers10,363 1.7 0.7 1,727 — 
Mobile home parks9,160 1.5 0.6 413 — 
Other106,470 17.4 6.8 783 — 
Total CRE$611,989 100.0 %39.1 %$961 $304 

CRE Loan Portfolio Breakdown by Collateral at September 30, 2025
($ in thousands)
Collateral TypeBalancePercent of CRE PortfolioPercent of Total Loan PortfolioAverage Balance per LoanNon-Accrual
Industrial warehouse$129,815 21.3 %8.2 %$1,311 $159 
Medical/dental offices81,831 13.4 5.2 1,240 — 
Office buildings67,840 11.1 4.3 817 — 
Other retail buildings54,497 8.9 3.5 599 — 
Mini-storage38,291 6.3 2.4 1,532 — 
Hotel/motel31,345 5.1 2.0 2,612 — 
Restaurants28,703 4.7 1.8 586 — 
Gas stations/convenience stores25,597 4.2 1.6 1,024 — 
Churches14,410 2.4 0.9 901 — 
Nursing homes13,456 2.2 0.9 2,243 — 
Shopping centers10,436 1.7 0.7 1,739 — 
Mobile home parks9,174 1.5 0.6 417 — 
Other105,297 17.2 6.7 774 — 
Total CRE$610,692 100.0 %38.8 %$960 $159 
44

Comparison of Operating Results for the Three Months Ended December 31, 2025 and 2024

Net income increased by $1.36 million, or 19.8%, to $8.22 million for the quarter ended December 31, 2025 from $6.86 million for the quarter ended December 31, 2024. Net income per diluted common share increased by $0.18, or 20.9%, to $1.04 for the quarter ended December 31, 2025 from $0.86 for the quarter ended December 31, 2024. The increases in net income and diluted earnings per share for the three months ended December 31, 2025, were primarily due to a $1.98 million increase in net interest income and a $67,000 increase in non-interest income. These increases were partially offset by a $388,000 increase in the provision for income taxes and a $364,000 increase in non-interest expense.

Net Interest Income: Net interest income increased by $1.98 million, or 11.7%, to $18.95 million for the quarter ended December 31, 2025 from $16.97 million for the quarter ended December 31, 2024. This increase was due to a 10 basis point increase in the weighted average yield of interest-earning assets to 5.52% for the quarter ended December 31, 2025 from 5.42% for the quarter ended December 31, 2024, a 16 basis point decrease in the average cost of interest bearing liabilities and a $101.38 million increase in average total interest-earning assets. The improvement reflects both favorable asset repricing, particularly within the loan portfolio, and a reduction in funding costs driven by repricing and a shift in funding mix. These benefits were partially offset by a $75.50 million increase in average interest-bearing liabilities.

Total interest and dividend income increased by $1.94 million, or 7.7%, to $27.20 million for the quarter ended December 31, 2025 from $25.26 million for the quarter ended December 31, 2024. The increase was primarily due to higher yields earned on loans receivable, and growth in the average balance of interest-bearing deposits in banks and CDs. The average yield on loans increased 28 basis points, reflecting continued asset repricing, while the average balance of loans increased $40.42 million. The average balance of interest-bearing deposits in banks and CDs increased $89.62 million, although the yield on those balances declined 77 basis points due to changes in short-term interest rates, partially offsetting the benefit of higher balances. These increases were partially offset by a $28.67 million decrease in the average balance of investment securities.

The average balance of total interest-earning assets increased by $101.38 million, or 5.5%, to $1.95 billion for the quarter ended December 31, 2025 from $1.85 billion for the quarter ended December 31, 2024. Prepayment penalties, non-accrual interest and late fees totaled $282,000 for the quarter ended December 31, 2025 compared to $123,000 in the prior year quarter and contributed to a 6 basis point increase in the loan portfolio yield. The overall yield on interest-earning assets increased by 10 basis points to 5.52% for the quarter ended December 31, 2025 from 5.42% for the quarter ended December 31, 2024.

Total interest expense decreased by $41,000, or 0.5%, to $8.25 million for the quarter ended December 31, 2025 from $8.29 million for the quarter ended December 31, 2024. The decrease occurred despite a $75.50 million increase in the average balance of interest-bearing liabilities, as the average cost of those liabilities declined 16 basis points to 2.46% for the quarter ended December 31, 2025 from 2.62% for the quarter ended December 31, 2024. The lower funding costs reflects both repricing of deposit products and a shift in funding mix, including growth in lower-costing accounts and a reductions in higher -cost money market and CD accounts. Average balances of CDs and NOW checking accounts increased, partially offset by decreases in money market and savings account balances.

As a result of changes above, the net interest margin ("NIM") increased to 3.85% for the quarter ended December 31, 2025 from 3.64% for the quarter ended December 31, 2024.

















45

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,
 20252024
Average
Balance		Interest and
Dividends		Yield/
Cost		Average
Balance		Interest and
Dividends		Yield/
Cost
Interest-earning assets:
Loans receivable (1)(2)$1,478,563 $22,673 6.08 %$1,438,144 $21,032 5.80 %
Investment securities (2)212,672 1,862 3.47 241,345 2,138 3.51 
 Dividends from mutual funds, FHLB stock and other investments 5,912 82 5.50 5,891 86 6.41 
 Interest-bearing deposits in banks and CDs256,379 2,578 3.99 166,764 2,001 4.76 
Total interest-earning assets1,953,526 27,195 5.52 1,852,144 25,257 5.42 
Non-interest-earning assets79,280   75,534   
     Total assets$2,032,806   $1,927,678   
Interest-bearing liabilities:      
NOW checking$368,557 1,495 1.61 $328,455 1,142 1.38 
Money market304,183 2,195 2.86 324,424 2,797 3.42 
Savings198,384 150 0.30 205,650 144 0.28 
Certificates of deposit401,821 3,776 3.73 331,785 3,418 4.10 
Brokered CDs39,282 427 4.31 46,414 583 4.98 
Short-term borrowings20,000 203 4.03 — — — 
Long-term borrowings— — — 20,000 203 4.03 
Total interest-bearing liabilities1,332,227 8,246 2.46 1,256,728 8,287 2.62 
Non-interest-bearing deposits420,521 414,149 
Other liabilities15,640   10,146   
Total liabilities1,768,388   1,681,023   
Shareholders' equity264,418   246,655   
Total liabilities and    
shareholders' equity$2,032,806 $1,927,678   
Net interest income$18,949  $16,970  
Interest rate spread3.06 %  2.81 %
Net interest margin (3)3.85 %  3.64 %
Ratio of average interest-earning  assets to average interest- bearing liabilities146.64 %  147.38 %
_______________
(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.
46

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, 2025
compared to three months
ended December 31, 2024
increase (decrease) due to
 RateVolumeNet
Change
Interest-earning assets:   
Loans receivable and loans held for sale$1,039 $602 $1,641 
Investment securities(25)(251)(276)
 Dividends from mutual funds, FHLB stock and other investments (4)— (4)
  Interest-bearing deposits in banks and CDs(364)941 577 
Total net increase in income on interest-earning assets646 1,292 1,938 
Interest-bearing liabilities:   
NOW checking204 149 353 
Money market (435)(167)(602)
Savings11 (5)6 
Certificates of deposit (418)620 202 
Short-term FHLB borrowings— 203 203 
   Long-term borrowings— (203)(203)
Total net increase (decrease) in expense on interest-bearing liabilities(638)597 (41)
Net increase in net interest income$1,284 $695 $1,979 

Provision for Credit Losses: A $35,000 recapture of credit losses was recorded for the quarter ended December 31, 2025, consisting of a $16,000 provision for credit losses on loans, a $2,000 recapture of credit losses on investment securities, and a $49,000 recapture of credit losses on unfunded commitments which was due to construction loans converting to permanent financing. 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, a $5,000 recapture of credit losses on investment securities and an $20,000 recapture of credit losses on unfunded commitments.

For the quarter ended December 31, 2025, net recoveries totaled $18,000 compared to net-charge offs of $242,000 for the quarter ended December 31, 2024. Non-accrual loans decreased by $123,000, or 2.8%, to $4.28 million at December 31, 2025 from $4.41 million at September 30, 2024, and increased by $1.55 million, or 56.8%, from $2.73 million at December 31, 2024. Total delinquent loans (past due 30 days or more) and non-accrual loans increased by $397,000, or 7.0%, to $6.05 million at December 31, 2025, from $5.66 million at September 30, 2025 and increased by $2.03 million, or 50.5%, from $4.02 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 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
47

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.

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 increased by $67,000, or 2.5%, to $2.76 million for the quarter ended December 31, 2025 from $2.70 million for the quarter ended December 31, 2024. This increase was primarily due to a $35,000 increase in gain on sale of loans, reflecting a higher volume of fixed-rate one- to four-family mortgages into the secondary market, a $26,000 increase in servicing income on loans sold and smaller increases in several other categories. These increases were partially offset by a $73,000 decrease in ATM and debit card interchange fees, primarily due to lower transaction volume and a $10,000 decrease in service charges on deposits, reflecting lower overdraft-related fee activity.

Non-interest Expense:  Total non-interest expense increased by $364,000, or 3.3%, to $11.43 million for the quarter ended December 31, 2025 from $11.07 million for the quarter ended December 31, 2024. This increase was mainly due to a $361,000 increase in salary and employee benefits due to annual compensation increases, a $124,000 increase in premises and equipment expense due to expenses related to the addition of the University Place branch, a $111,000 increase in state and local taxes expense and a $61,000 increase in ATM and debit card interchange transaction expense. These increases were partially offset by an $85,000 decrease in technology and communications expenses due to contract negotiations with our core processor in the second quarter of 2025, a $30,000 decrease in professional fees expense and several expense recoveries on items in the other, net category.

The efficiency ratio for the current quarter improved to 52.65% compared to 56.27% for the comparable quarter one year ago. The 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 $388,000, or 22.7%, to $2.10 million for the quarter ended December 31, 2025 from $1.71 million for the quarter ended December 31, 2024. The increase in the provision for income taxes was primarily due to higher pre-tax income. The Company's effective income tax rate was 20.4% for the quarter ended December 31, 2025 and 20.0% for the quarter ended December 31, 2024.


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 influenced by general interest rates, economic conditions, and competitive factors.

The Bank maintains an adequate level of liquidity to ensure that sufficient funds are available to fund its operations. It generally holds sufficient cash and short-term investments to meet short-term liquidity needs. At December 31, 2025, 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 16.90%. The Bank maintains a credit facility with the FHLB providing immediately available borrowings of up to 45% of total assets, limited by available collateral. At December 31, 2025, the Bank had a total of $708.68 million available for borrowings with the FHLB of which $20.00 million was outstanding. Additionally, the Bank maintains a short-term borrowing line with the FRB, with total credit based on eligible collateral, under the Borrower-in-Custody program with $71.87 million available and no outstanding balance at December 31, 2025. The Bank also maintains a $50.00 million overnight borrowing line with Pacific Coast Bankers' Bank ("PCBB") with no outstanding balance at December 31, 2025. Subject to market conditions, the Bank may utilize these borrowing facilities to fund loan originations and deposits withdrawals, satisfy other financial commitments, repay maturing debt and to pursue investment opportunities as appropriate..

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 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.

48

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, 2025 and 2024, the Bank originated $73.06 million and $72.07 million of loans, respectively. At December 31, 2025, the Bank had undisbursed lines of credit and commitments to extend credit totaling $154.31 million and undisbursed construction loans in process totaling $89.88 million.  Investment securities purchased during the three months ended December 31, 2025 and 2024 totaled $3.96 million and $8.58 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, 2025 and 2024, the Bank sold $3.66 million and $2.31 million, respectively, in loans and loan participation interests.  During the three months ended December 31, 2025 and 2024, the Bank received $66.94 million and $65.16 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) decreased to $329.44 million at December 31, 2025 from $329.75 million at September 30, 2025. CDs that are scheduled to mature in less than one year from December 31, 2025 totaled $405.34 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.

For the remainder of the 2026 fiscal year, the Bank projects that fixed commitments will include approximately $285,000 of operating lease payments. All FHLB borrowings are scheduled to mature during fiscal year 2026. In addition, at December 31, 2025, the Bank had other future obligations and accrued expenses totaling $10.22 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. However, the Bank’s ability to pay dividends is subject to regulatory limitations, including capital adequacy requirements and supervisory approval under certain circumstances. The Bank maintains strong capital levels and earnings capacity, which support its ability to upstream dividends to Timberland Bancorp, subject to applicable regulatory constraints. At December 31, 2025, Timberland Bancorp (on an unconsolidated basis) had liquid assets of $1.41 million.

The Company currently expects to continue its practice of paying quarterly cash dividends on its common stock, subject to the discretion of the Board of Directors, which may modify or discontinue this practice at any time and for any reason without prior notice. The cash dividend rate that was announced on January 26, 2026 and will be paid on February 27, 2026 is $0.29 per share, a level the Company believes appropriately balances the objectives of investing in the Bank and returning capital to shareholders. Based on the number of shares outstanding as of December 31, 2025, continued payment at this rate would result in an average total quarterly dividend of approximately $2.29 million.

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 22, 2025, the Company announced the adoption of a new stock repurchase program pursuant to which the Company may repurchase up to 5% of the outstanding shares, or 393,842 shares. 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, liquidity, and other factors deemed appropriate. The repurchase program does not obligate the Company to purchase any particular number of shares.




49

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, 2025, 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, 2025, 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$252,586 12.67 %$79,735 4.00 %$99,669 5.00 %
Risk-based Capital Ratios:
Common equity Tier 1 capital252,586 19.86 57,220 4.50 82,651 6.50 
Tier 1 capital252,586 19.86 76,293 6.00 101,724 8.00 
Total capital268,513 21.12 101,724 8.00 127,155 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 capital levels. Failure to maintain the required buffer could result in limitations on the Bank’s ability to pay dividends, repurchase shares, and pay discretionary bonuses, based on specified percentages of eligible retained income. At December 31, 2025, the Bank’s capital exceeded the conservation buffer.

Timberland Bancorp, Inc. is a bank holding company registered with the Federal Reserve and is subject to capital adequacy requirements under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. For bank holding companies with less than $3.0 billion in consolidated assets (as of June 30th of the preceding year), the Federal Reserve capital guidelines are generally applied on a bank only basis. In such cases, the Federal Reserve expects the 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, 2025, 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, 2025 (dollars in thousands):
Actual
 AmountRatio
Leverage Capital Ratio:  
Tier 1 capital$254,518 12.61 %
Risk-based Capital Ratios:
Common equity Tier 1 capital254,518 20.01 
Tier 1 capital254,518 20.01 
Total capital270,451 21.26 


50

Key Financial Ratios and Data
 Three Months Ended December 31,
20252024
PERFORMANCE RATIOS:
 
Return on average assets1.60 %1.41 %
Return on average equity12.33 %11.03 %
Net interest margin3.85 %3.64 %
Efficiency ratio52.65 %56.27 %


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 2025 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, 2025, 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, 2025 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.




51

Item 1A.    Risk Factors

There have been no material changes in the Risk Factors previously disclosed in Item 1A of the Company's 2025 Form 10-K.



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, 2025:

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)
10/01/2025 - 10/31/2025— $— — 337,280 
11/01/2025 - 11/30/202516,443 33.63 16,443 320,837 
12/01/2025 - 12/31/202512,860 35.49 12,860 307,977 
Total29,303 $34.44 29,303 307,977 

(1)     On July 22, 2025, the Company announced a stock repurchase program to purchase up to 393,842 shares of the Company's common stock, which replaced the Company's then existing repurchase plan which had 31,762 shares available to be repurchased prior to termination. The July 2025 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.


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, 2025, 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.

52

Item 6.         Exhibits

(a)   Exhibits
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
31.1
31.2
32
101
The following materials from Timberland Bancorp Inc's Quarterly Report 10-Q for the quarter ended December 31, 2025 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
_________________
(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.
(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 6, 2026
By:  /s/ Dean J. Brydon                              
 Dean J. Brydon
 Chief Executive Officer 
 (Duly Authorized Officer) 
  
 
 
Date: February 6, 2026
By:  /s/Marci A. Basich                                
 Marci A. Basich
 Chief Financial Officer
(Principal Financial Officer)
54

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