Equibles

10-Q

TIMBERLAND BANCORP INC (TSBK)

10-Q 2025-08-08 For: 2025-06-30
View Original
Added on April 07, 2026

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 June 30, 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 class Trading Symbol(s) Name of each exchange on which registered
Common stock, $.01 par value TSBK The 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 August 5, 2025, there were 7,897,239 shares of the registrant's common stock, $.01 par value per share outstanding.

INDEX

PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Income 5
Consolidated Statements of Comprehensive Income 7
Consolidated Statements of Shareholders’ Equity 8
Consolidated Statements of Cash Flows 9
Notes to Unaudited Consolidated Financial Statements 11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39
Item 3. Quantitative and Qualitative Disclosures About Market Risk 55
Item 4. Controls and Procedures 55
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 56
Item 1A. Risk Factors 56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 57
Item 3. Defaults Upon Senior Securities 57
Item 4. Mine Safety Disclosures 57
Item 5. Other Information 57
Item 6. Exhibits 58
SIGNATURES
Certifications
Exhibit 31.1
Exhibit 31.2
Exhibit 32
Exhibit 101
Exhibit 104

Item 1.    Financial Statements (unaudited)

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

June 30, 2025 and September 30, 2024

(Dollars in thousands, except per share amounts)

June 30,<br>2025 September 30,<br>2024
(Unaudited) *
Assets
Cash and cash equivalents:
Cash and due from financial institutions $ 32,532 $ 29,071
Interest-bearing deposits in banks 161,095 135,657
Total cash and cash equivalents 193,627 164,728
Certificates of deposit (“CDs”) held for investment, at cost 8,462 10,209
Investment securities held to maturity, at amortized cost (net of allowance for credit losses ("ACL") of $46 and $60), (estimated fair value of $135,622 and $166,007) 141,570 172,097
Investment securities available for sale, at fair value 86,475 72,257
Investments in equity securities, at fair value 855 866
Federal Home Loan Bank of Des Moines (“FHLB”) stock, at cost 2,045 2,037
Other investments, at cost 3,000 3,000
Loans held for sale 1,763 —
Loans receivable, net of ACL of $17,878 and $17,478 1,441,496 1,421,523
Premises and equipment, net 21,490 21,486
Other real estate owned (“OREO”) and other repossessed assets, net 221 —
Accrued interest receivable 7,174 6,990
Bank owned life insurance (“BOLI”) 24,113 23,611
Goodwill 15,131 15,131
Core deposit intangible (“CDI”), net 316 451
Loan servicing rights, net 911 1,372
Operating lease right-of-use ("ROU") assets 1,248 1,475
Other assets 7,295 6,242
Total assets $ 1,957,192 $ 1,923,475
Liabilities and shareholders’ equity
Liabilities
Deposits:
Non-interest-bearing demand $ 406,222 $ 413,116
Interest-bearing 1,263,255 1,234,552
Total deposits 1,669,477 1,647,668
FHLB borrowings 20,000 20,000
Operating lease liabilities 1,350 1,575
Other liabilities and accrued expenses 9,701 8,819
Total liabilities $ 1,700,528 $ 1,678,062

* Derived from audited consolidated financial statements.

See notes to unaudited consolidated financial statements

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (continued)

June 30, 2025 and September 30, 2024

(Dollars in thousands, except per share amounts)

June 30,<br>2025 September 30,<br>2024
(Unaudited) *
Commitments and contingencies (see Note 12)
Shareholders’ equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued $ — $ —
Common stock, $0.01 par value; 50,000,000 shares authorized;<br><br>7,876,853 shares issued and outstanding - June 30, 2025 7,960,127 shares issued and outstanding - September 30, 2024 27,226 29,862
Retained earnings 230,213 215,531
Accumulated other comprehensive (loss) income (775) 20
Total shareholders’ equity 256,664 245,413
Total liabilities and shareholders’ equity $ 1,957,192 $ 1,923,475

* Derived from audited consolidated financial statements.

See notes to unaudited consolidated financial statements

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

For the three and nine months ended June 30, 2025 and 2024

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended June 30, Nine Months Ended<br>June 30,
2025 2024 2025 2024
Interest and dividend income
Loans receivable and loans held for sale $ 21,411 $ 19,537 $ 63,339 $ 56,841
Investment securities 2,064 2,335 6,205 6,892
Dividends from mutual funds, FHLB stock and other investments 83 94 252 266
Interest-bearing deposits in banks and CDs 1,986 2,173 5,870 5,791
Total interest and dividend income 25,544 24,139 75,666 69,790
Interest expense
Deposits 7,721 7,938 23,259 21,383
FHLB borrowings 201 220 602 787
Total interest expense 7,922 8,158 23,861 22,170
Net interest income 17,622 15,981 51,805 47,620
Provision for (recapture of) credit losses
Provision for credit losses - loans 351 264 640 810
Recapture of credit losses - investment securities (4) (12) (14) (20)
Provision for (recapture of) credit losses - unfunded commitments 93 (8) 87 (130)
Total provision for (recapture of) credit losses - net 440 244 713 660
Net interest income after provision for (recapture of) credit losses 17,182 15,737 51,092 46,960
Non-interest income
Net recoveries on investment securities 2 2 9 9
Gain on sale of investment securities available for sale, net 24 — 24 —
Service charges on deposits 966 1,014 2,924 3,024
ATM and debit card interchange transaction fees 1,262 1,297 3,706 3,773
BOLI net earnings 171 158 502 470
Gain on sales of loans, net 138 68 303 188
Escrow fees 32 18 66 51
Servicing income on loans sold 39 19 101 37
Other, net 241 215 624 652
Total non-interest income, net 2,875 2,791 8,259 8,204

See notes to unaudited consolidated financial statements

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (continued)

For the three and nine months ended June 30, 2025 and 2024

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended June 30, Nine Months Ended<br>June 30,
2025 2024 2025 2024
Non-interest expense
Salaries and employee benefits $ 5,825 $ 5,928 $ 17,893 $ 17,863
Premises and equipment 973 1,011 2,998 3,065
Gain on sales/dispositions of premises and equipment, net — (3) — (3)
Advertising 182 211 552 556
OREO and other repossessed assets, net 8 — 17 1
ATM and debit card interchange transaction fees 658 580 1,700 1,796
Postage and courier 137 130 401 401
State and local taxes 570 335 1,251 979
Professional fees 341 335 1,118 908
Federal Deposit Insurance Corporation ("FDIC") insurance 211 208 640 624
Loan administration and foreclosure 99 156 383 395
Technology and communications 993 1,086 3,253 3,101
Deposit operations 345 450 997 1,094
Amortization of CDI 45 56 135 169
Other 780 586 2,090 1,735
Total non-interest expense, net 11,167 11,069 33,428 32,684
Income before income taxes 8,890 7,459 25,923 22,480
Provision for income taxes 1,790 1,535 5,208 4,552
Net income $ 7,100 $ 5,924 $ 20,715 $ 17,928
Net income per common share
Basic $ 0.90 $ 0.74 $ 2.61 $ 2.22
Diluted $ 0.90 $ 0.74 $ 2.60 $ 2.21
Weighted average common shares outstanding
Basic 7,893,308 8,004,552 7,929,626 8,067,068
Diluted 7,921,762 8,039,345 7,963,412 8,109,043
Dividends paid per common share $ 0.26 $ 0.24 $ 0.76 $ 0.71

See notes to unaudited consolidated financial statements

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three and nine months ended June 30, 2025 and 2024

(Dollars in thousands)

(Unaudited)

Three Months Ended June 30 Nine Months Ended <br>June 30
2025 2024 2025 2024
Comprehensive income
Net income $ 7,100 $ 5,924 $ 20,715 $ 17,928
Other comprehensive income (loss)
Unrealized holding gain (loss) on investment securities available for sale, net of income taxes of $(28), $53, $(212) and $142, respectively (105) 200 (795) 530
Change in other than temporary impairment ("OTTI") on investment securities held to maturity, net of income taxes:
Accretion of OTTI on investment securities held to maturity, net of income taxes of $0, $0, $0 and $2, respectively — — — 9
Total other comprehensive income (loss), net of income taxes (105) 200 (795) 539
Total comprehensive income $ 6,995 $ 6,124 $ 19,920 $ 18,467

See notes to unaudited consolidated financial statements

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the three and nine months ended June 30, 2025 and 2024

(Dollars in thousands, except per share amounts)

(Unaudited)

Common Stock Accumulated<br>Other<br>Compre-hensive<br>Income (Loss)
Number of Shares Amount Retained<br>Earnings Total
Balance, March 31, 2024 8,023,121 $ 32,338 $ 207,086 $ (745) $ 238,679
Net income — — 5,924 — 5,924
Other comprehensive income — — — 200 200
Repurchase of common stock, net of tax (70,000) (1,767) — — (1,767)
Exercise of stock options 300 5 — — 5
Common stock dividends ($0.24 per common share) — — (1,923) — (1,923)
Stock-based compensation expense — 105 — — 105
Balance, June 30, 2024 7,953,421 $ 30,681 $ 211,087 $ (545) $ 241,223
Balance, March 31, 2025 7,903,489 $ 28,028 $ 225,166 $ (670) $ 252,524
Net income — — 7,100 — 7,100
Other comprehensive loss — — — (105) (105)
Repurchase of common stock, net of tax (34,236) (1,053) — — (1,053)
Exercise of stock options 7,600 130 — — 130
Common stock dividends ($0.26 per common share) — — (2,053) — (2,053)
Stock-based compensation expense — 121 — — 121
Balance, June 30, 2025 7,876,853 $ 27,226 $ 230,213 $ (775) $ 256,664 Common Stock Accumulated<br>Other<br>Compre-hensive<br>Income (Loss)
--- --- --- --- --- --- --- --- ---
Number of Shares Amount Retained<br>Earnings Total
Balance, September 30, 2023 8,105,338 $ 34,771 $ 199,386 $ (1,084) $ 233,073
Net income — — 17,928 — 17,928
Other comprehensive income — — — 539 539
Repurchase of common stock, net of tax (182,117) (4,801) — — (4,801)
Exercise of stock options 30,200 395 — — 395
Common stock dividends ($0.71 per common share) — — (5,739) — (5,739)
Stock-based compensation expense — 316 — — 316
Adoption of Accounting Standards Update ("ASU") 2016-13, net of tax — — (488) — (488)
Balance, June 30, 2024 7,953,421 $ 30,681 $ 211,087 $ (545) $ 241,223
Balance, September 30, 2024 7,960,127 $ 29,862 $ 215,531 $ 20 $ 245,413
Net income — — 20,715 — 20,715
Other comprehensive loss — — — (795) (795)
Repurchase of common stock, net of tax (123,404) (3,846) — — (3,846)
Restricted stock grant forfeitures (1,830) (11) — — (11)
Exercise of stock options 41,960 817 — — 817
Common stock dividends ($0.76 per common share) — — (6,033) — (6,033)
Stock-based compensation expense — 404 — — 404
Balance, June 30, 2025 7,876,853 $ 27,226 $ 230,213 $ (775) $ 256,664

See notes to unaudited consolidated financial statements

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended June 30, 2025 and 2024

(Dollars in thousands)

(Unaudited)

Nine Months Ended June 30,
2025 2024
Cash flows from operating activities
Net income $ 20,715 $ 17,928
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 713 660
Depreciation 1,131 1,088
Deferred income taxes (73) —
Accretion of discount on purchased loans (92) (29)
Amortization of CDI 135 169
Stock-based compensation expense 393 316
Gain on sale of investment securities available for sale, net (24) —
Net recoveries on investment securities (9) (9)
Change in fair value of investments in equity securities 11 (25)
Accretion of discounts and premiums on securities (866) (842)
Gain on sales of loans, net (303) (188)
Gain on sales/dispositions of premises and equipment, net — (3)
Loans originated for sale (14,059) (10,330)
Proceeds from sales of loans 12,599 9,123
Amortization of loan servicing rights 582 684
BOLI net earnings (502) (470)
Increase in deferred loan origination fees 2 162
Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses (277) (1,830)
Net cash provided by operating activities 20,076 16,404
Cash flows from investing activities
Net decrease in CDs held for investment 1,747 4,730
Proceeds from sale of investment securities available for sale 13,494 —
Purchase of investment securities held to maturity (5,413) (1,919)
Purchase of investment securities available for sale (40,576) (36,089)
Proceeds from maturities and prepayments of investment securities held to maturity 36,324 96,052
Proceeds from maturities and prepayments of investment securities available for sale 12,387 4,105
Purchase of FHLB stock (8) —
Redemption of FHLB stock — 1,565
Increase in loans receivable, net (20,744) (96,118)
Purchases of premises and equipment (1,135) (1,010)
Proceeds from sales of premises and equipment — 8
Net cash used in investing activities (3,924) (28,676)

See notes to unaudited consolidated financial statements

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the nine months ended June 30, 2025 and 2024

(Dollars in thousands)

(Unaudited)

Nine Months Ended June 30,
2025 2024
Cash flows from financing activities
Net increase in deposits $ 21,809 $ 67,609
Repayment of FHLB borrowings — (15,000)
Proceeds from exercise of stock options 817 395
Repurchase of common stock (3,846) (4,801)
Payment of dividends (6,033) (5,739)
Net cash provided by financing activities 12,747 42,464
Net increase in cash and cash equivalents 28,899 30,192
Cash and cash equivalents
Beginning of period 164,728 128,721
End of period $ 193,627 $ 158,913
Supplemental disclosure of cash flow information
Income taxes paid $ 5,650 $ 4,884
Interest paid $ 24,253 $ 21,854
Supplemental disclosure of non-cash investing activities
Other comprehensive (loss) income related to investment securities $ (795) $ 539
Loans transferred to OREO $ 221 $ —
Adjustment to retained earnings, net of deferred tax - adoption of ASU 2016-13 $ — $ (488)

See notes to unaudited consolidated financial statements

Timberland Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  Basis of Presentation:  The accompanying unaudited consolidated financial statements of Timberland Bancorp, Inc. and its wholly-owned subsidiary, Timberland Bank (the "Bank") (collectively, "the Company") were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with GAAP. However, all adjustments which are, in the opinion of management, necessary for a fair presentation of the interim consolidated financial statements have been included.  All such adjustments are of a normal recurring nature. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2024 (“2024 Form 10-K”).  The unaudited consolidated results of operations for the nine months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2025.

(b)  Principles of Consolidation:  The unaudited consolidated financial statements include the accounts of the Company, 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 has one reportable operating segment which is defined as community banking in western Washington under the operating name, "Timberland Bank."

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

(e)  Certain prior period amounts have been reclassified to conform to the June 30, 2025 presentation with no change to previously reported net income or total shareholders’ equity.

(2) INVESTMENT SECURITIES

Held to maturity and available for sale investment securities have been classified according to management’s intent and were as follows as of June 30, 2025 and September 30, 2024 (dollars in thousands):

Amortized<br>Cost Gross<br>Unrealized<br>Gains Gross<br>Unrealized<br>Losses Estimated<br>Fair Value Allowance for Credit Losses
June 30, 2025
Held to Maturity
U.S. Treasury and U.S. government agency securities $ 69,559 $ — $ (3,478) $ 66,081 $ —
Mortgage-backed securities ("MBS"):
U.S. government agencies 50,685 10 (1,682) 49,013 —
Private label residential 20,222 205 (1,009) 19,418 45
Municipal securities 605 6 — 611 —
Bank issued trust preferred securities 499 — — 499 1
Total $ 141,570 $ 221 $ (6,169) $ 135,622 $ 46
June 30, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
--- --- --- --- --- --- --- --- ---
Available for Sale
U.S. Treasury and U.S. government agency securities $ 14,888 $ — $ (22) $ 14,866
MBS: U.S. government agencies 72,568 205 (1,164) 71,609
Total $ 87,456 $ 205 $ (1,186) $ 86,475
September 30, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses
--- --- --- --- --- --- --- --- --- --- ---
Held to Maturity
U.S. Treasury and U.S. government agency securities $ 92,312 $ 70 $ (4,197) $ 88,185 $ —
MBS:
U.S. government agencies 49,481 174 (1,378) 48,277 —
Private label residential 28,479 231 (980) 27,730 55
Municipal securities 1,330 8 — 1,338 —
Bank issued trust preferred securities 495 — (18) 477 5
Total $ 172,097 $ 483 $ (6,573) $ 166,007 $ 60
September 30, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
--- --- --- --- --- --- --- --- ---
Available for Sale
U.S. Treasury and U.S. government agency securities $ 3,934 $ 6 $ (1) $ 3,939
MBS: U.S. government agencies 68,297 545 (524) 68,318
Total $ 72,231 $ 551 $ (525) $ 72,257

Held to maturity and available for sale investment securities with unrealized losses were as follows as of June 30, 2025 (dollars in thousands):

Less Than 12 Months 12 Months or Longer Total
Estimated<br> Fair<br> Value Gross<br>Unrealized<br>Losses Quantity Estimated<br> Fair<br> Value Gross<br>Unrealized<br>Losses Quantity Estimated<br> Fair<br> Value Gross<br>Unrealized<br>Losses
Held to maturity
U.S. Treasury and U.S. government agency securities $ — $ — — $ 56,200 $ (3,478) 14 $ 56,200 $ (3,478)
MBS:
U.S. government agencies 14,460 (72) 11 25,307 (1,610) 40 39,767 (1,682)
Private label residential 1,303 (5) 3 15,011 (1,004) 14 16,314 (1,009)
Total $ 15,763 $ (77) 14 $ 96,518 $ (6,092) 68 $ 112,281 $ (6,169)
Available for sale
U.S. Treasury and U.S. government agency securities $ 14,866 $ (22) 3 $ — $ — — $ 14,866 $ (22)
MBS:
U.S. government agencies 22,988 (484) 6 24,861 (680) 23 47,849 (1,164)
Total $ 37,854 $ (506) 9 $ 24,861 $ (680) 23 $ 62,715 $ (1,186)

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

Less Than 12 Months 12 Months or Longer Total
Estimated<br> Fair<br> Value Gross<br>Unrealized Losses Quantity Estimated<br> Fair<br> Value Gross<br>Unrealized Losses Quantity Estimated<br> Fair<br> Value Gross<br>Unrealized Losses
Held to maturity
U.S. Treasury and U.S. government agency securities $ — $ — — $ 78,363 $ (4,197) 17 $ 78,363 $ (4,197)
MBS:
U.S. government agencies 1 — 1 28,618 (1,378) 44 28,619 (1,378)
Private label <br>residential 804 (6) 1 20,447 (974) 19 21,251 (980)
Bank issued trust preferred securities — — — 477 (18) 1 477 (18)
Total $ 805 $ (6) 2 $ 127,905 $ (6,567) 81 $ 128,710 $ (6,573)
Available for sale
U.S. Treasury and U.S. government agency securities $ 1,962 $ (1) 1 $ — $ — — $ 1,962 $ (1)
MBS:
U.S. government agencies 11,368 (117) 4 25,751 (407) 23 37,119 (524)
Total $ 13,330 $ (118) 5 $ 25,751 $ (407) 23 $ 39,081 $ (525)

During the nine months ended June 30, 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 nine months ended June 30,

2024, the Company recorded a $1,000 net realized loss on 14 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 $207.83 million and $208.81 million at June 30, 2025 and September 30, 2024, respectively.

The contractual maturities of investment securities at June 30, 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 Maturity Available for Sale
Amortized<br>Cost Estimated<br>Fair<br>Value Amortized<br>Cost Estimated<br>Fair<br>Value
Due within one year $ 14,366 $ 14,293 $ 14,888 $ 14,866
Due after one year to five years 66,659 63,156 6,074 6,070
Due after five years to ten years 663 758 202 202
Due after ten years 59,882 57,415 66,292 65,337
Total $ 141,570 $ 135,622 $ 87,456 $ 86,475

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 June 30, 2025 or September 30, 2024. As of both dates, the Company considered the unrealized losses across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value. The Company expects the fair value of these securities to recover as the securities approach their maturity dates or sooner if market yields for such securities decline. The Company does not believe that these securities are impaired because of their credit quality or related to any issuer or industry specific event. The Company has the ability and intent to hold the investments until the fair value recovers.

Held to Maturity Investment Securities

The Company measures expected credit losses on held to maturity investment securities, which are comprised of U.S. government agency and U.S. government mortgage-backed securities, private label mortgage-backed securities, municipal, and other bonds. The Company’s agency and mortgage-backed securities that are issued by U.S. government entities and agencies are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. As such, no ACL has been established for these securities. The ACL on the private label mortgage-backed securities, municipal, and other bonds within the held to maturity securities portfolio is calculated using the probability of default/loss given default ("PD/LGD") method. The calculation is completed on a quarterly basis using the default studies provided by an industry leading source. At June 30, 2025 and September 30, 2024, the ACL on the held to maturity securities portfolio totaled $46,000 and $60,000, respectively.

The following tables set forth information for the three and nine months ended June 30, 2025 and 2024, respectively, regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024
Beginning Allowance Provision for (Recapture of) Credit Losses Ending Allowance Beginning Allowance Provision for (Recapture of) Credit Losses Ending Allowance
Held to Maturity
MBS:
Private label residential $ 48 $ (3) $ 45 $ 77 $ (11) $ 66
Bank issued trust<br>preferred securities 2 (1) 1 8 (2) 6
Total $ 50 $ (4) $ 46 $ 85 $ (13) * $ 72

*Amount differs from Income Statement due to rounding.

Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024
Beginning Allowance Provision for (Recapture of) Credit Losses Ending Allowance Beginning Allowance Impact of Adopting CECL (ASU 2016-13) Provision for (Recapture of) Credit Losses Ending Allowance
Held to Maturity
MBS:
Private label residential $ 55 $ (10) $ 45 $ — $ 82 $ (16) $ 66
Bank issued trust<br>preferred securities 5 (4) 1 — 10 (4) 6
Total $ 60 $ (14) $ 46 $ — $ 92 $ (20) $ 72

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 $698,000 at June 30, 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 $38,000 of private label mortgage-backed held to maturity investment securities in non-accrual status at June 30, 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 June 30, 2025 and September 30, 2024, by credit quality indicator:

Credit Ratings
As of June 30, 2025 AAA/AA/A BBB/BB/B Unrated Total
Held to Maturity
U.S. Treasury and U.S. government agency securities $ 69,559 $ — $ — $ 69,559
MBS:
U.S. government agencies 50,685 — — 50,685
Private label residential 13,805 — 6,417 20,222
Municipal securities 605 — — 605
Bank issued trust preferred securities — — 499 499
Total held to maturity $ 134,654 $ — $ 6,916 $ 141,570
Credit Ratings
--- --- --- --- --- --- --- --- ---
As of September 30, 2024 AAA/AA/A BBB/BB/B Unrated Total
Held to Maturity
U.S. Treasury and U.S. government agency securities $ 92,312 $ — $ — $ 92,312
MBS:
U.S. government agencies 49,481 — — 49,481
Private label residential 16,277 — 12,202 28,479
Municipal securities 1,230 — 100 1,330
Bank issued trust preferred securities — — 495 495
Total held to maturity $ 159,300 $ — $ 12,797 $ 172,097

Prior to adopting ASU 2016-13, the Company bifurcated OTTI into (1) amounts related to credit losses which are recognized through earnings and (2) amounts related to all other factors which are recognized as a component of other comprehensive income (loss). 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 nine months ended June 30, 2025 and 2024 (dollars in thousands):

Nine Months Ended <br>June 30,
2025 2024
Beginning balance of credit loss $ 803 $ 816
Subtractions:
Net realized loss previously recorded as credit losses (3) (1)
Recapture of prior credit loss (6) (9)
Ending balance of credit loss $ 794 $ 806

(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 June 30, 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 June 30, 2025, management believes that there have been no events or changes in the circumstances that would indicate a potential impairment of CDI.

(4) LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Loans receivable by portfolio segment consisted of the following at June 30, 2025 and September 30, 2024 (dollars in thousands):

June 30,<br>2025 September 30,<br>2024
Amount Percent Amount Percent
Mortgage loans:
One- to four-family (1) $ 317,574 20.6 % $ 299,123 19.7 %
Multi-family 200,418 13.0 177,350 11.7
Commercial real estate 607,924 39.5 599,219 39.6
Construction - custom and owner/builder 128,900 8.4 132,101 8.7
Construction - speculative one- to four-family 9,595 0.6 11,495 0.8
Construction - commercial 15,992 1.0 29,463 1.9
Construction - multi-family 32,731 2.1 28,401 1.9
Construction - land development 15,461 1.0 17,741 1.2
Land 36,193 2.4 29,366 1.9
Total mortgage loans 1,364,788 88.6 1,324,259 87.4
Consumer loans:
Home equity and second mortgage 47,511 3.1 47,913 3.2
Other 2,176 0.1 3,129 0.2
Total consumer loans 49,687 3.2 51,042 3.4
Commercial loans:
Commercial business 126,497 8.2 138,743 9.2
U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans 101 — 260 —
Total commercial loans 126,598 8.2 139,003 9.2
Total loans receivable 1,541,073 100.0 % 1,514,304 100.0 %
Less:
Undisbursed portion of construction loans in process ("LIP") 76,272 69,878
Deferred loan origination fees, net 5,427 5,425
ACL 17,878 17,478
Subtotal 99,577 92,781
Loans receivable, net $ 1,441,496 $ 1,421,523

__________________

(1) Does not include one- to four-family loans held for sale totaling $1.76 million and $0 at June 30, 2025 and September 30, 2024, respectively.

Loans receivable at June 30, 2025 and September 30, 2024, are reported net of unamortized discounts totaling $63,000 and $155,000, respectively.

Credit Quality Indicators

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

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

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

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

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

Doubtful: Loans in this classification have the weaknesses of substandard loans with the additional characteristic that the weaknesses make the collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. At June 30, 2025 and September 30, 2024, there was one loan classified as doubtful which is supported by an SBA guarantee of the remaining balance.

Loss:  Loans in this classification are considered uncollectible and of such little value that continuance as an asset is not warranted.  This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this loan even though partial recovery may be realized in the future. At June 30, 2025 and September 30, 2024, there were no loans classified as loss.

The following table sets forth the Company's loan portfolio at June 30, 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
Type 2025 2024 2023 2022 2021 Prior Revolving Loans Total Loans Receivable
One-to four-family
Risk Rating
Pass $ 6,854 $ 23,038 $ 79,736 $ 105,353 $ 45,490 $ 50,458 $ — $ 310,929
Special Mention — — — 4,864 — — — 4,864
Substandard — — 1,781 — — — — 1,781
Total one- to four-family $ 6,854 $ 23,038 $ 81,517 $ 110,217 $ 45,490 $ 50,458 $ — $ 317,574
Multi-family
Risk Rating
Pass $ 12,807 $ 13,131 $ 35,324 $ 39,219 $ 22,970 $ 64,281 $ 1,196 $ 188,928
Watch — — — — — 1,786 — 1,786
Substandard — — — — 9,704 — — 9,704
Total multi-family $ 12,807 $ 13,131 $ 35,324 $ 39,219 $ 32,674 $ 66,067 $ 1,196 $ 200,418
Commercial real estate
Risk Rating
Pass $ 34,874 $ 25,570 $ 80,034 $ 124,457 $ 84,177 $ 232,142 $ 8,459 $ 589,713
Watch — — — 239 — 9,289 — 9,528
Special Mention — — — — — 1,153 — 1,153
Substandard — — — — — 7,530 — 7,530
Total commercial real estate $ 34,874 $ 25,570 $ 80,034 $ 124,696 $ 84,177 $ 250,114 $ 8,459 $ 607,924
Term Loans Amortized Cost Basis by Origination Fiscal Year
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Type 2025 2024 2023 2022 2021 Prior Revolving Loans Total Loans Receivable
Construction-custom & owner/builder (1)
Risk Rating
Pass $ 18,895 $ 44,346 $ 1,320 $ — $ — $ — $ — $ 64,561
Watch — 1,469 6,562 2,408 2,446 — — 12,885
Total construction-custom & owner/builder $ 18,895 $ 45,815 $ 7,882 $ 2,408 $ 2,446 $ — $ — $ 77,446
Construction-speculative one-to four-family (1)
Risk Rating
Pass $ 5,137 $ 325 $ 34 $ — $ — $ — $ — $ 5,496
Watch — — 477 — — — — 477
Total construction-speculative one-to four-family $ 5,137 $ 325 $ 511 $ — $ — $ — $ — $ 5,973
Construction-commercial (1)
Risk Rating
Pass $ 5,637 $ 2,708 $ 3,492 $ — $ — $ — $ — $ 11,837
Total construction-commercial $ 5,637 $ 2,708 $ 3,492 $ — $ — $ — $ — $ 11,837
Construction-multi-family (1)
Risk Rating
Pass $ 6,042 $ 6,811 $ 4,760 $ — $ — $ — $ — $ 17,613
Total construction-multi-family $ 6,042 $ 6,811 $ 4,760 $ — $ — $ — $ — $ 17,613
Construction-land development (1)
Risk Rating
Pass $ — $ 484 $ 1,505 $ — $ — $ — $ — $ 1,989
Substandard — — — 11,549 — — — 11,549
Total construction-land development $ — $ 484 $ 1,505 $ 11,549 $ — $ — $ — $ 13,538
Land
Risk Rating
Pass $ 10,433 $ 9,568 $ 3,851 $ 5,851 $ 2,998 $ 2,458 $ 273 $ 35,432
Watch — — — 299 — 462 — 761
Total land $ 10,433 $ 9,568 $ 3,851 $ 6,150 $ 2,998 $ 2,920 $ 273 $ 36,193
Home equity and second mortgage
Risk Rating
Pass $ 1,334 $ 5,314 $ 3,956 $ 1,579 $ 241 $ 2,230 $ 32,184 $ 46,838
Watch — — — — — 10 30 40
Substandard — — — — — 58 575 633
Total home equity and second mortgage $ 1,334 $ 5,314 $ 3,956 $ 1,579 $ 241 $ 2,298 $ 32,789 $ 47,511
Term Loans Amortized Cost Basis by Origination Fiscal Year
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Type 2025 2024 2023 2022 2021 Prior Revolving Loans Total Loans Receivable
Other consumer
Risk Rating
Pass $ 668 $ 467 $ 404 $ 85 $ 48 $ 426 $ 47 $ 2,145
Watch — — — — — 8 — 8
Substandard — — — — — — 23 $ 23
Total other consumer $ 668 $ 467 $ 404 $ 85 $ 48 $ 434 $ 70 $ 2,176
Current period gross write-offs $ 2 $ 1 $ — $ — $ — $ — $ 1 $ 4
Commercial business
Risk Rating
Pass $ 6,859 $ 13,771 $ 17,969 $ 28,520 $ 6,257 $ 9,835 $ 41,208 $ 124,419
Special Mention — — — 199 315 211 — 725
Substandard — — 160 148 14 575 254 1,151
Doubtful — 202 — — — — — 202
Total commercial business $ 6,859 $ 13,973 $ 18,129 $ 28,867 $ 6,586 $ 10,621 $ 41,462 $ 126,497
Current period gross write-offs $ — $ — $ — $ 241 $ — $ — $ — $ 241
SBA PPP
Risk Rating
Pass $ — $ — $ — $ — $ 101 $ — $ — $ 101
Total SBA PPP $ — $ — $ — $ — $ 101 $ — $ — $ 101
Total loans receivable, gross (1)
Risk Rating
Pass $ 109,540 $ 145,533 $ 232,385 $ 305,064 $ 162,282 $ 361,830 $ 83,367 $ 1,400,001
Watch — 1,469 7,039 2,946 2,446 11,555 30 25,485
Special Mention — — — 5,063 315 1,364 — 6,742
Substandard — — 1,941 11,697 9,718 8,163 852 32,371
Doubtful — 202 — — — — — 202
Total loans receivable $ 109,540 $ 147,204 $ 241,365 $ 324,770 $ 174,761 $ 382,912 $ 84,249 $ 1,464,801
Current period gross charge-off $ 2 $ 1 $ — $ 241 $ — $ — $ 1 $ 245

_____________________

(1) Net of construction LIP

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

Term Loans Amortized Cost Basis by Origination Fiscal Year
Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable
One-to four-family
Risk Rating
Pass $ 12,941 $ 66,671 $ 113,834 $ 48,120 $ 19,053 $ 36,659 $ — $ 297,278
Watch — 1,796 — — — — — 1,796
Substandard — — — — — 49 — 49
Total one- to four-family $ 12,941 $ 68,467 $ 113,834 $ 48,120 $ 19,053 $ 36,708 $ — $ 299,123
Multi-family
Risk Rating
Pass $ 13,136 $ 19,440 $ 39,673 $ 33,144 $ 27,029 $ 43,759 $ 1,169 $ 177,350
Total multi-family $ 13,136 $ 19,440 $ 39,673 $ 33,144 $ 27,029 $ 43,759 $ 1,169 $ 177,350
Commercial real estate
Risk Rating
Pass $ 23,758 $ 73,005 $ 126,939 $ 91,035 $ 55,498 $ 194,273 $ 8,799 $ 573,307
Watch — 944 — — 4,201 10,548 — 15,693
Special Mention — — — — — 4,401 — 4,401
Substandard — — — — — 5,818 — 5,818
Total commercial real estate $ 23,758 $ 73,949 $ 126,939 $ 91,035 $ 59,699 $ 215,040 $ 8,799 $ 599,219
Construction-custom & owner/builder (1)
Risk Rating
Pass $ 38,303 $ 29,159 $ 778 $ — $ — $ — $ — $ 68,240
Watch 221 3,239 5,848 2,861 429 436 — 13,034
Total construction-custom & owner/builder $ 38,524 $ 32,398 $ 6,626 $ 2,861 $ 429 $ 436 $ — $ 81,274
Construction-speculative one-to four-family (1)
Risk Rating
Pass $ 5,039 $ 2,412 $ — $ — $ — $ — $ — $ 7,451
Total construction-speculative one-to four-family $ 5,039 $ 2,412 $ — $ — $ — $ — $ — $ 7,451
Construction-commercial (1)
Risk Rating
Pass $ 6,006 $ 16,349 $ 1,457 $ — $ — $ — $ — $ 23,812
Total construction-commercial $ 6,006 $ 16,349 $ 1,457 $ — $ — $ — $ — $ 23,812
Term Loans Amortized Cost Basis by Origination Fiscal Year
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable
Construction-multi-family (1)
Risk Rating
Pass $ 588 $ 20,169 $ — $ — $ — $ — $ — $ 20,757
Total construction-multi-family $ 588 $ 20,169 $ — $ — $ — $ — $ — $ 20,757
Construction-land development (1)
Risk Rating
Pass $ 1,673 $ 2,807 $ — $ — $ — $ — $ — $ 4,480
Watch — — 11,549 — — — — 11,549
Total construction-land development $ 1,673 $ 2,807 $ 11,549 $ — $ — $ — $ — $ 16,029
Land
Risk Rating
Pass $ 10,287 $ 4,828 $ 6,588 $ 4,004 $ 766 $ 1,954 $ 458 $ 28,885
Watch — — — — — 481 — 481
Total land $ 10,287 $ 4,828 $ 6,588 $ 4,004 $ 766 $ 2,435 $ 458 $ 29,366
Home equity and second mortgage
Risk Rating
Pass $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,097 $ 31,766 $ 47,214
Substandard — — — — — 81 618 699
Total home equity and second mortgage $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,178 $ 32,384 $ 47,913
Other consumer
Risk Rating
Pass $ 1,744 $ 441 $ 241 $ 57 $ 8 $ 501 $ 71 $ 3,063
Watch — — — — — 65 1 66
Total other consumer $ 1,744 $ 441 $ 241 $ 57 $ 8 $ 566 $ 72 $ 3,129
Current period gross write-offs $ 6 $ 1 $ — $ — $ — $ — $ 2 $ 9
Commercial business
Risk Rating
Pass $ 16,129 $ 19,910 $ 35,117 $ 8,588 $ 7,589 $ 4,775 $ 43,444 $ 135,552
Watch — — 202 36 696 6 180 1,120
Substandard — 1,352 — — — 517 — 1,869
Doubtful — 202 — — — — — 202
Total commercial business $ 16,129 $ 21,464 $ 35,319 $ 8,624 $ 8,285 $ 5,298 $ 43,624 $ 138,743
Current period gross write-offs $ — $ 79 $ — $ — $ — $ 13 $ — $ 92
SBA PPP
Risk Rating
Pass $ — $ — $ — $ 224 $ 36 $ — $ — $ 260
Total SBA PPP $ — $ — $ — $ 224 $ 36 $ — $ — $ 260
Term Loans Amortized Cost Basis by Origination Fiscal Year
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable
Total loans receivable, gross (1)
Risk Rating
Pass $ 135,424 $ 259,907 $ 326,617 $ 185,424 $ 110,552 $ 284,018 $ 85,707 $ 1,387,649
Watch 221 5,979 17,599 2,897 5,326 11,536 181 43,739
Special Mention — — — — — 4,401 — 4,401
Substandard — 1,352 — — — 6,465 618 8,435
Doubtful — 202 — — — — — 202
Total loans receivable $ 135,645 $ 267,440 $ 344,216 $ 188,321 $ 115,878 $ 306,420 $ 86,506 $ 1,444,426
Current period gross charge-off $ 6 $ 80 $ — $ — $ — $ 13 $ 2 $ 101

_____________________

(1) Net of construction LIP

Allowance for Credit Losses

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. For loans that do not share similar risk characteristics and cannot be evaluated on a collective basis, the Company will evaluate the loan individually. The Company estimates the expected credit losses over the loans' contractual terms, adjusted for expected prepayments. The ACL is calculated for loan segments utilizing loan level information and relevant information from internal and external sources related to past events and current conditions. The calculation utilizes the discounted cash flow ("DCF") methodology for all segments. The Company incorporates a reasonable and supportable forecast that utilizes current period national gross domestic product ("GDP") and national unemployment figures. Each of the loan segments are impacted by those factors. Prepayment rates are established for each segment based on historical averages for the segments, which management believes is an accurate presentation of future prepayment activity. Loans that are evaluated individually are not included in the collective analysis. The ACL on loans that are individually evaluated may be estimated based on their expected cash flows, or in the case of loans for which repayment is expected substantially through the operation or sale of collateral when the borrower is experiencing financial difficulty, may be measured based on the fair value of the collateral less estimated selling costs.

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

Management's evaluation of the ACL is based on ongoing, quarterly assessments of the known and inherent risks in the loan portfolio. Loss factors are based on the Company's historical loss experience with additional consideration and adjustments made for changes in economic conditions, changes in the amount and composition of the loan portfolio, delinquency rates, changes in collateral values, seasoning of the loan portfolio, duration of the current business cycle, a detailed analysis of individually evaluated loans and other factors as deemed appropriate. Management also assesses the risk related to reasonable and supportable forecasts that are used. These factors are evaluated on a quarterly basis. Loss rates used by the Company are affected as changes in these factors increase or decrease from quarter to quarter. In addition, regulatory agencies, as integral part of their examination process, periodically review the Company's ACL and may require the Company to make adjustments to the ACL based on their judgment about information available to them at the time of their examinations.

The following tables set forth information for the three months ended June 30, 2025 and 2024, regarding activity in the ACL by portfolio segment (dollars in thousands):

Three Months Ended June 30, 2025
Beginning<br>Allowance Provision for<br>(Recapture of) Credit Losses Charge-<br>Offs Recoveries Ending<br>Allowance
Mortgage loans:
One- to four-family $ 2,800 $ 93 $ — $ — $ 2,893
Multi-family 1,315 265 — — 1,580
Commercial real estate 6,983 180 — — 7,163
Construction – custom and owner/builder 1,217 25 — — 1,242
Construction – speculative one- to four-family 89 8 — — 97
Construction – commercial 358 (101) — — 257
Construction – multi-family 543 (165) — — 378
Construction – land development 375 38 — — 413
Land 852 (39) — — 813
Consumer loans:
Home equity and second mortgage 345 66 — — 411
Other 33 4 — 1 38
Commercial business loans 2,615 (23) — 1 2,593
Total $ 17,525 $ 351 $ — $ 2 $ 17,878
Three Months Ended June 30, 2024
--- --- --- --- --- --- --- --- ---
Beginning<br>Allowance Provision for<br>(Recapture of) Loan Losses Charge-<br>Offs Recoveries Ending<br>Allowance
Mortgage loans:
One- to four-family $ 2,185 $ 49 $ — $ 43 $ 2,277
Multi-family 1,358 84 — — 1,442
Commercial real estate 6,954 241 — — 7,195
Construction – custom and owner/builder 1,215 76 — — 1,291
Construction – speculative one- to four-family 142 (47) — — 95
Construction – commercial 451 (58) — — 393
Construction – multi-family 478 (121) — — 357
Construction – land development 255 35 — — 290
Land 840 (12) — — 828
Consumer loans:
Home equity and second mortgage 305 9 — — 314
Other 45 2 (2) — 45
Commercial business loans 2,590 6 (79) 2 2,519
Total $ 16,818 $ 264 $ (81) $ 45 $ 17,046

The following tables set forth information for the nine months ended June 30, 2025 and 2024, regarding activity in the ACL by portfolio segment (dollars in thousands):

Nine Months Ended June 30, 2025
Beginning<br>Allowance Provision for<br>(Recapture of) Credit Losses Charge-<br>Offs Recoveries Ending<br>Allowance
Mortgage loans:
One-to four-family $ 2,632 $ 261 $ — $ — $ 2,893
Multi-family 1,308 272 — — 1,580
Commercial real estate 6,934 229 — — 7,163
Construction – custom and owner/builder 1,328 (86) — — 1,242
Construction – speculative one- to four-family 128 (31) — — 97
Construction – commercial 537 (280) — — 257
Construction – multi-family 456 (78) — — 378
Construction – land development 335 78 — — 413
Land 793 20 — — 813
Consumer loans:
Home equity and second mortgage 348 63 — — 411
Other 39 2 (4) 1 38
Commercial business loans 2,640 190 (241) 4 2,593
Total $ 17,478 $ 640 $ (245) $ 5 $ 17,878
Nine Months Ended June 30, 2024
--- --- --- --- --- --- --- --- --- --- --- --- ---
Beginning<br>Allowance Impact of Adopting CECL (ASU 2016-13) Provision for<br>(Recapture of) Loan Losses Charge-<br>Offs Recoveries Ending<br>Allowance
Mortgage loans:
One-to four-family $ 2,417 $ (408) $ 225 $ — $ 43 $ 2,277
Multi-family 1,156 (120) 406 — — 1,442
Commercial real estate 7,209 (494) 480 — — 7,195
Construction – custom and owner/builder 750 542 (1) — — 1,291
Construction – speculative one-to four-family 148 (16) (37) — — 95
Construction – commercial 316 176 (99) — — 393
Construction – multi-family 602 204 (449) — — 357
Construction – land development 274 25 (9) — — 290
Land 406 318 104 — — 828
Consumer loans:
Home equity and second mortgage 519 (243) 38 — — 314
Other 53 (7) 7 (8) — 45
Commercial business loans 1,967 484 145 (79) 2 2,519
Total $ 15,817 $ 461 $ 810 $ (87) $ 45 $ 17,046

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 June 30, 2025 and September 30, 2024 (dollars in thousands):

30–59<br>Days<br>Past Due 60-89<br>Days<br>Past Due Non-<br>Accrual (1) Past Due<br>90 Days<br>or More<br>and Still<br>Accruing Total<br>Past Due Current Total<br>Loans
June 30, 2025
Mortgage loans:
One- to four-family $ — $ — $ 1,781 $ — $ 1,781 $ 315,793 $ 317,574
Multi-family — — — — — 200,418 200,418
Commercial real estate — 277 161 — 438 607,486 607,924
Construction – custom and owner/builder (2) — 521 — — 521 76,925 77,446
Construction – speculative one- to four-family (2) — — — — — 5,973 5,973
Construction – commercial (2) — — — — — 11,837 11,837
Construction – multi-family (2) — — — — — 17,613 17,613
Construction – land development (2) — — — — — 13,538 13,538
Land — 450 — — 450 35,743 36,193
Consumer loans:
Home equity and second mortgage 58 — 575 — 633 46,878 47,511
Other — 23 — — 23 2,153 2,176
Commercial business loans 650 350 1,326 — 2,326 124,171 126,497
SBA PPP loans — — — — — 101 101
Total $ 708 $ 1,621 $ 3,843 $ — $ 6,172 $ 1,458,629 $ 1,464,801

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

(2) Net of construction LIP.

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

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

(2) Net of construction LIP.

At June 30, 2025, the Company had $523,000 of non-accrual loans with an ACL of $308,000 and $3.32 million of non-accrual loans with no ACL. The following table is a summary of the amortized cost of collateral dependent non-accrual loans as of June 30, 2025 (in thousands):

Recorded Investment Related ACL
Mortgage loans:
One- to four-family $ 1,781 $ —
Commercial real estate 161 —
Consumer loans:
Home equity and second mortgage 575 —
Commercial business loans 1,326 308
Total $ 3,843 $ 308

At September 30, 2024, the Company had $1.83 million of non-accrual loans with an ACL of $506,000 and $2.06 million of non-accrual loans with no ACL. The following table is a summary of the amortized cost of collateral dependent non-accrual loans as of September 30, 2024 (in thousands):

Recorded Investment Related ACL
Mortgage loans:
One- to four-family $ 49 $ —
Commercial real estate 1,158 —
Consumer loans:
Home equity and second mortgage 618 —
Commercial business loans 2,060 506
Total $ 3,885 $ 506

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.

The following tables present the amortized cost basis of loans at June 30, 2025 that were both experiencing financial difficulty and modified during the nine months ended June 30, 2025, by loan class and modification type (dollars in thousands):

Combination - Term Extension and Collateral Addition
June 30, 2025 Amortized Cost Basis % of Total Loan Type Financial Effect
Commercial Business Loan $ 256 0.20 % Loan extended three months and secured a deed of trust on a land parcel Combination - Term Extension and Payment Modification
--- --- --- --- --- ---
June 30, 2025 Amortized Cost Basis % of Total Loan Type Financial Effect
Commercial Business Loan $ 2 — % Loan extended seven months, monthly payment reduced with principal payments due at time of change in terms and 1.5 months after signing

The loans above are performing according to modified terms. There were no modified loans to borrowers experiencing financial difficulty at June 30, 2024.

(5) LEASES

At June 30, 2025, the Company has operating leases for two retail bank branch offices and an administrative office. The Company's leases have remaining lease terms of two to seven years, and include options to extend the leases for up to five years. Lease extensions are not certain, and the Company evaluates each lease based on the specific circumstances for the location to determine the probability of exercising the extensions in the calculation of ROU assets and lease liabilities.

The components of lease cost (included in the premises and equipment expense category in the consolidated statements of income) are as follows for the three and nine months ended June 30, 2025 and 2024 (dollars in thousands):

Three Months Ended June 30, Nine Months Ended June 30,
Lease cost: 2025 2024 2025 2024
Operating lease cost $ 87 $ 98 $ 284 $ 283
Short-term lease cost — — — —
Total lease cost $ 87 $ 98 $ 284 $ 283

The following tables provide supplemental information related to operating leases at or for the three and nine months ended June 30, 2025 and 2024 (dollars in thousands):

At or For the Three Months Ended June 30, 2025 At or For the Nine Months Ended June 30, 2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 84 $ 252
Weighted average remaining lease term-operating leases 5.5 years 5.5 years
Weighted average discount rate-operating leases 2.35 % 2.35 %
At or For the Three Months Ended June 30, 2024 At or For the Nine Months Ended June 30, 2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 83 $ 249
Weighted average remaining lease term-operating leases 6.1 years 6.1 years
Weighted average discount rate-operating leases 2.34 % 2.34 %

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 June 30, 2025 for future fiscal years are as follows (dollars in thousands):

Remainder of Fiscal 2025 $ 85
Fiscal 2026 304
Fiscal 2027 232
Fiscal 2028 219
Fiscal 2029 218
Thereafter 383
Total lease payments 1,441
Less imputed interest 91
Total $ 1,350

(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 and nine months ended June 30, 2025 and 2024 is as follows (dollars in thousands, except per share amounts):

Three Months Ended June 30, Nine Months Ended June 30,
2025 2024 2025 2024
Basic net income per common share computation
Numerator – net income $ 7,100 $ 5,924 $ 20,715 $ 17,928
Denominator – weighted average common shares outstanding 7,893,308 8,004,552 7,929,626 8,067,068
Basic net income per common share $ 0.90 $ 0.74 $ 2.61 $ 2.22
Diluted net income per common share computation
Numerator – net income $ 7,100 $ 5,924 $ 20,715 $ 17,928
Denominator – weighted average common shares outstanding 7,893,308 8,004,552 7,929,626 8,067,068
Effect of dilutive stock options (1) 28,454 34,793 33,786 41,975
Weighted average common shares outstanding - assuming dilution 7,921,762 8,039,345 7,963,412 8,109,043
Diluted net income per common share $ 0.90 $ 0.74 $ 2.60 $ 2.21

____________________________________________

(1) For the three and nine months ended June 30, 2025, average options to purchase 137,720 and 120,049 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share because their effect would have been anti-dilutive. For the three and nine months ended June 30, 2024, average options to purchase 240,820 and 233,081 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share because their effect would have been anti-dilutive.

(7) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the three and nine months ended June 30, 2025 and 2024, are as follows (dollars in thousands):

Three Months Ended June 30, 2025 Nine Months Ended June 30, 2025
Changes in fair value of available for sale securities (1) Total Changes in fair value of available for sale securities (1) Total
Balance of AOCI at the beginning of period $ (670) $ (670) $ 20 $ 20
Other comprehensive loss (105) (105) (795) (795)
Balance of AOCI at the end of period $ (775) $ (775) $ (775) $ (775)

__________________________

(1) All amounts are net of income taxes.

Three Months Ended June 30, 2024 Nine Months Ended June 30, 2024
Changes in fair value of available for sale securities (1) Total Changes in fair value of available for sale securities (1) Accretion of other-than-temporary impairment on held to maturity securities (1) Total
Balance of AOCI at the beginning of period $ (745) $ (745) $ (1,075) $ (9) $ (1,084)
Other comprehensive income 200 200 530 9 539
Balance of AOCI at the end of period $ (545) $ (545) $ (545) $ — $ (545)
__________________________
(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 on 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 June 30, 2025, 162,185 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 June 30, 2025, there were 150,780 shares outstanding that had been previously granted in the 2014 Plan, of which 128,350 were vested and 22,430 were unvested.

Stock option activity for the nine months ended June 30, 2025 and 2024, is summarized as follows:

Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024
Number of Shares Weighted<br>Average<br>Exercise<br>Price Number of Shares Weighted<br>Average<br>Exercise<br>Price
Options outstanding, beginning of period 306,240 $ 25.21 369,150 $ 24.00
Exercised (41,960) 19.47 (30,200) 13.07
Forfeited (11,300) 28.41 (16,560) 26.98
Options outstanding, end of period 252,980 $ 26.02 322,390 $ 24.87

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

There were no stock options granted during the nine months ended June 30, 2025 and 2024.

The aggregate intrinsic value of options exercised during the nine months ended June 30, 2025 and 2024 was $487,000 and $501,000, respectively.

At June 30, 2025, there were 69,430 unvested options with an aggregate grant date fair value of $421,000, all of which the Company assumes will vest. The aggregate intrinsic value of unvested options at June 30, 2025 was $346,000.  There were 2,500 options that vested during the nine months ended June 30, 2025 with a total fair value of $16,000.

At June 30, 2024, there were 121,820 unvested options with an aggregate grant date fair value of $709,000. There were 300 options that vested during the nine months ended June 30, 2024 with a total fair value of $2,000.

Additional information regarding options outstanding at June 30, 2025, is as follows:

Options Outstanding Options Exercisable
Range ofExercisePrices () Number Weighted<br>Average<br>Exercise<br>Price Weighted<br>Average<br>Remaining<br>Contractual<br>Life (Years) Number Weighted<br>Average<br>Exercise<br>Price Weighted<br>Average<br>Remaining<br>Contractual<br>Life (Years)
10.26 10.71 4,750 $ 10.71 0.3 4,750 $ 10.71 0.3
15.67 19.13 47,550 16.55 4.2 37,720 16.46 3.9
26.50 27.40 82,960 27.32 6.3 46,960 27.26 5.6
28.23 29.69 89,000 28.80 4.7 66,000 28.99 4.2
31.80 33.40 28,720 31.86 3.4 28,120 31.35 3.3
252,980 $ 26.02 4.9 183,550 $ 25.93 4.2

All values are in US Dollars.

The aggregate intrinsic value of options outstanding at June 30, 2025 and 2024, was $1.33 million and $1.07 million, respectively.

As of June 30, 2025, unrecognized compensation cost related to unvested stock options was $309,000, which is expected to be recognized over a weighted average period of 1.37 years.

There were no restricted stock awards granted during the nine months ended June 30, 2025 and 2024.

Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024
Number of Unvested Shares Weighted Average Grant Date Fair Value Number of Unvested Shares Weighted Average Grant Date Fair Value
Restricted stock outstanding beginning of period 49,015 $ 29.28 26,150 $ 27.37
Forfeited (1,830) 28.70 — —
Vested (200) 27.37 — —
Restricted stock outstanding end of period 46,985 $ 29.31 26,150 $ 27.37

The fair value of restricted stock awards is equal to the fair value of the Company's stock on the date of the grant. The related stock-based compensation expense is recorded over the requisite service period. At June 30, 2025, unrecognized compensation cost related to unvested restricted stock awards was $1.12 million, which is expected to be recognized over a weighted average period of 2.28 years.

(9) FAIR VALUE MEASUREMENTS

Fair value is defined under GAAP as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels. These levels are:

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

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

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

The Company's assets measured at fair value on a recurring basis consist of investment securities available for sale and investments in equity securities. The estimated fair values of MBS are based upon quoted market prices (Level 1) and market prices of similar securities or observable inputs (Level 2). The estimated fair values of mutual funds and U.S. Treasury and U.S. government agency securities are based upon quoted market prices (Level 1).

The Company had no liabilities measured at fair value on a recurring basis at June 30, 2025 and September 30, 2024. The Company's assets measured at estimated fair value on a recurring basis at June 30, 2025 and September 30, 2024, were as follows (dollars in thousands):

June 30, 2025 Estimated Fair Value
Level 1 Level 2 Level 3 Total
Available for sale investment securities
U.S. Treasury and U.S. government agency securities $ 14,866 $ — $ — $ 14,866
MBS: U.S. government agencies — 71,609 — 71,609
Investments in equity securities
Mutual funds 855 — — 855
Total $ 15,721 $ 71,609 $ — $ 87,330
September 30, 2024 Estimated Fair Value
--- --- --- --- --- --- --- --- ---
Level 1 Level 2 Level 3 Total
Available for sale investment securities
U.S. Treasury and U.S. government agency securities $ 3,939 $ — $ — $ 3,939
MBS: U.S. government agencies — 68,318 — 68,318
Investments in equity securities
Mutual funds 866 — — 866
Total $ 4,805 $ 68,318 $ — $ 73,123

There were no transfers among Level 1, Level 2 and Level 3 during the nine months ended June 30, 2025 and the year ended September 30, 2024.

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP.  These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period.

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

Individually Evaluated Collateral-Dependent Loans: Loans for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell, where applicable. Accordingly, collateral dependent loans are classified within level 3 of the fair value hierarchy.

OREO and Other Repossessed Assets, net:  OREO and other repossessed assets are recorded at estimated fair value less estimated costs to sell.  Estimated fair value is generally determined by management based on a number of factors, including third-party appraisals of estimated fair value in an orderly sale.  Estimated costs to sell are based on standard market factors.  The valuation of OREO and other repossessed assets is subject to significant external and internal judgment (Level 3).

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at June 30, 2025 and September 30, 2024 (dollars in thousands):

Estimated Fair Value Total Estimated
June 30, 2025 Level 1 Level 2 Level 3 Fair Value
Individually evaluated collateral-dependent loans:
Commercial business loans $ — $ — $ 523 $ 523
Total loans — — 523 523
OREO and other repossessed assets — — 221 221
Total $ — $ — $ 744 $ 744
Estimated Fair Value Total Estimated
--- --- --- --- --- --- --- --- ---
September 30, 2024 Level 1 Level 2 Level 3 Fair Value
Individually evaluated collateral-dependent loans:
Commercial business loans $ — $ — $ 1,315 $ 1,315
Total $ — $ — $ 1,315 $ 1,315

The following table presents quantitative information about Level 3 inputs for financial instruments measured at fair value on a non-recurring basis as of June 30, 2025 and September 30, 2024:

Valuation<br>Technique(s) Unobservable Input(s) Range
Individually evaluated collateral-dependent loans Market approach Appraised value less estimated selling costs 8%
OREO and other repossessed assets Market approach Lower of appraised value or listing price less estimated selling costs 8%

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 June 30, 2025 and September 30, 2024. Because GAAP excludes certain items from fair value disclosure requirements, any aggregation of the fair value amounts presented would not represent the underlying value of the Company. Additionally, the Company uses the exit price notion in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

The recorded amounts and estimated fair values of financial instruments were as follows as of June 30, 2025 and September 30, 2024 (dollars in thousands):

June 30, 2025
Fair Value Measurements Using:
Recorded<br>Amount Estimated Fair Value Level 1 Level 2 Level 3
Financial assets
Cash and cash equivalents $ 193,627 $ 193,627 $ 193,627 $ — $ —
CDs held for investment 8,462 8,462 8,462 — —
Investment securities 228,045 222,097 80,948 141,149 —
Investments in equity securities 855 855 855 — —
FHLB stock 2,045 2,045 2,045 — —
Other investments 3,000 3,000 3,000 — —
Loans held for sale 1,763 1,800 1,800 — —
Loans receivable, net 1,441,496 1,412,845 — — 1,412,845
Accrued interest receivable 7,174 7,174 7,174 — —
Financial liabilities
Certificates of deposit 417,297 417,098 — — 417,098
FHLB borrowings 20,000 19,974 — — 19,974
Accrued interest payable 1,740 1,740 1,740 — —
September 30, 2024
--- --- --- --- --- --- --- --- --- --- ---
Fair Value Measurements Using:
Recorded<br>Amount Estimated Fair Value Level 1 Level 2 Level 3
Financial assets
Cash and cash equivalents $ 164,728 $ 164,728 $ 164,728 $ — $ —
CDs held for investment 10,209 10,209 10,209 — —
Investment securities 244,354 238,264 92,124 146,140 —
Investments in equity securities 866 866 866 — —
FHLB stock 2,037 2,037 2,037 — —
Other investments 3,000 3,000 3,000 — —
Loans receivable, net 1,421,523 1,387,642 — — 1,387,642
Accrued interest receivable 6,990 6,990 6,990 — —
Financial liabilities
Certificates of deposit 368,308 368,312 — — 368,312
FHLB borrowings 20,000 20,035 — — 20,035
Accrued interest payable 2,132 2,132 2,132 — —

(10) RECENT ACCOUNTING PRONOUNCEMENTS

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU are intended to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income tax paid information. The ASU requires disclosure in the rate reconciliation of specific categories as well as additional information for reconciling items that meet a quantitative threshold. The amendment requires on an annual basis a reconciliation broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity should apply the amendments in this ASU on a prospective basis. The Company expects this ASU to only impact its disclosure requirements and does not expect the adoption of this ASU to have a material impact on its business operations or the Company's consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures. The amendments in this ASU require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses. In conjunction with recent standards that enhanced the disaggregation of revenue and income tax information, the disaggregated expense information will enable investors to better understand the major components of an entity's income statement. The new standard is effective for annual periods beginning after December 15, 2026, with early adoption permitted. The Company expects this ASU to only impact its disclosure requirements and does not expect the adoption of the ASU to have a material impact on its business operations or the Company's consolidated financial statements.

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.

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

(11) REVENUE FROM CONTRACTS WITH CUSTOMERS

ASU 2014-09 Revenue from Contracts with Customers ("ASC 606") applies to all contracts with customers to provide goods or services in the ordinary course of business, except for contracts that are specifically excluded from its scope. The majority of the Company's revenues are composed of interest income, deferred loan fee accretion, premium/discount accretion, gains on sales of loans and investments, BOLI net earnings, servicing income on loans sold and other loan fee income, which are not within the scope of ASC 606. Revenue reported as service charges on deposits, ATM and debit card interchange transaction fees, merchant services fees, non-deposit investment fees and escrow fees are within the scope of ASC 606. All of the Company's revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income with the exception of gains on sales of OREO and gains on sales/disposition of premises and equipment, which are included in non-interest expense. For the three months ended June 30, 2025, the Company recognized $966,000 in service charges on deposits, $1.26 million in ATM and debit card interchange transaction fees, $32,000 in escrow fees, and $9,000 in fee income from non-deposit investment sales included in "Other" on the consolidated statement of income, all considered within the scope of ASC 606. For the nine months ended June 30, 2025, the Company recognized $2.92 million in service charges on deposits, $3.71 million in ATM and debit card interchange transaction fees, $66,000 in escrow fees, and $12,000 in fee income from non-deposit investment sales. For the three months ended June 30, 2024, the Company recognized $1.01 million in service charges on deposits, $1.30 million in ATM and debit card interchange transaction fees, $18,000 in escrow fees, and $3,000 in fee income from non-deposit investment sales. For the nine months ended June 30, 2024, the Company recognized $3.02 million in service charges on deposits, $3.77 million in ATM and debit card interchange transaction fees, $51,000 in escrow fees, and $6,000 in fee 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 June 30, 2025 and 2024, are listed below (in thousands):

June 30, 2025 June 30, 2024
Undisbursed portion of construction loans in process (see Note 4) $ 76,272 $ 87,196
Undisbursed lines of credit 125,623 118,050
Commitments to extend credit 35,233 14,278
$ 237,128 $ 219,524

The Company maintains a separate ACL related to unfunded loan commitments. Management estimates the amount of expected losses related to unfunded, off-balance sheet commitments over the contractual period during which it is exposed to credit risk from its obligation to extend credit, unless the Company has determined that obligation is unconditionally cancellable. The methodology for calculating the ACL on unfunded loan commitments is similar to the methodology for calculating the ACL on loans but also includes an estimate of the future utilization of the commitment as determined by historical utilization. Credit risk associated with the unfunded commitments is consistent with the loss ratio for each loan segment within the ACL for loans. The ACL on unfunded commitments is recognized in other liabilities and accrued expenses in the consolidated balance sheets and is adjusted as a provision for (recapture of) credit losses on the consolidated income statements. The ACL on unfunded loan commitments totaled $413,000 and $267,000 at June 30, 2025 and 2024, respectively

The following table sets forth information for the three and nine months ended June 30, 2025 and 2024 regarding activity in the ACL on unfunded loan commitments (dollars in thousands):

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024
Beginning ACL $ 320 $ 276
Provision for (recapture of) credit losses 93 (9) *
Ending ACL $ 413 $ 267 ACL Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024
--- --- --- --- --- ---
Beginning ACL $ 327 $ 332
Impact of adopting CECL (ASU 2016-13) — 65
Provision for (recapture of) credit losses 86 * (130)
Ending ACL $ 413 $ 267

*Amount differs from Income Statement due to rounding.

The Bank has an employee severance compensation plan which expires in 2027 that provides severance pay benefits to eligible employees in the event of a change in control of Timberland Bancorp or the Bank (as defined in the plan).  In general, all employees with two or more years of service are eligible to participate in the plan.  Under the plan, in the event of a change in control of Timberland Bancorp or the Bank, eligible employees who are terminated or who terminate employment (but only upon the occurrence of events specified in the plan) within 12 months of the effective date of a change in control would be entitled to a payment based on years of service or officer rank with the Bank. The maximum payment for any eligible employee would be equal to 18 months of the employee’s current compensation.

Timberland Bancorp has entered into employment agreements with its Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Lending Officer, Chief Credit Officer and Chief Technology Officer. These agreements provide for severance payments and other benefits in the event of an involuntary termination of employment following a change in control of Timberland Bancorp or its subsidiary, Timberland 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.

(13) SUBSEQUENT EVENTS

On July 24, 2025, the Company learned of the passing of a former officer on which the Company has BOLI policies. The Company is in the process of filing claims relating to these policies. Based on initial information, the Company anticipates recording death benefit claim income of approximately $1.00 million during the September 30, 2025 quarter. The transaction will be recorded once the insurance carriers have confirmed the final values of the policies.

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 and nine months ended June 30, 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-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to:

•adverse impacts to economic conditions in our local markets or other markets where we have lending relationships

•effects of employment levels, labor shortages, inflation, recessionary pressures or slowing economic growth;

•changes in interest rate levels, including actions by the Board of Governors of the Federal Reserve System (“Federal Reserve”), which could adversely affect our revenues and expenses, the values of our assets and obligations, and the availability and cost of capital and liquidity;

•the impact of inflation and monetary and fiscal policy responses thereto, and their impact on consumer behavior;

•the effects of a Federal government shutdown, debt ceiling standoff, or other fiscal policy uncertainty;

•credit risks of lending activities, including loan delinquencies, write-offs, changes in our ACL, and provision for credit losses;

•fluctuations in the demand for loans, the number of unsold homes, land and other properties, and real estate values in our market areas;

•secondary market conditions for loans and our ability to sell loans in the secondary market;

•results of examinations of us by regulatory authorities, which may the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or our bank subsidiary which could require us to increase our allowance for credit losses ("ACL"), write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings;

•the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment;

•legislation or regulatory changes, including but not limited to shifts in capital requirements, banking, securities and tax laws, or consumer protection laws;

•our ability to attract and retain deposits;

•our ability to control operating costs and expenses;

•use of estimates in determining the fair value of assets, which may prove incorrect;

•vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks;

•the ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity;

•our ability to retain key members of our senior management team;

•costs and effects of litigation, including settlements and judgments;

•our ability to implement our business strategies, including expectations regarding key growth initiatives and strategic priorities;

•increased competitive pressures among financial services companies, including repricing and competitors' pricing initiatives, and their impact on our market position, loan and deposit products;

•changes in consumer spending, borrowing and savings habits;

•the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions;

•our ability to pay dividends on our common stock;

•quality and composition of our securities portfolio and the impact of adverse changes in the securities markets;

•inability of key third-party providers to perform their obligations;

•changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board (“FASB”);

•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, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors; environmental, social and governance goals and targets;

•effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, 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, 2024 (the "2024 Form 10-K”).

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

Overview

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 offices (including its main office in Hoquiam). At June 30, 2025, the Company had total assets of $1.96 billion, net loans receivable of $1.44 billion, total deposits of $1.67 billion and total shareholders’ equity of $256.66 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 2025, interest rate trends were significantly influenced by monetary policy actions taken by the Federal Open Market Committee (“FOMC”) of the Federal Reserve. In response to ongoing improvements in inflation, the FOMC lowered the target range for the federal funds rate three times during 2024, resulting in a range of 4.25% to 4.50% at June 30, 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, but at a slower pace, which moderated the overall benefit to our net interest margin.

The provision for (recapture of) credit losses is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio as well as prevailing economic and market conditions.  The ACL on loans reflects the amount that management has determined is adequate to cover probable expected credit losses in the loan portfolio. As the loan portfolio increases, or due to an increase in probable expected losses inherent in the loan portfolio, the ACL may increase, resulting in a decrease to net interest income after the provision. Improvement in loan risk ratings, increase in property values, or receipts of recoveries of amounts previously charged off may partially or fully offset any required increases to the ACL on loans due to loan growth or an increase in the probable expected credit losses. The Company recorded a provision for credit losses on loans of $351,000 and $640,000 for the three and nine months ended June 30, 2025, respectively, due to loan portfolio growth and the annual update of model assumptions. The annual update of model assumptions reflects routine adjustments to key inputs used in the credit loss estimation process, including changes in economic forecasts, historical loss experience, prepayment speeds, and other risk factors that influence expected credit losses under the Company's current expected credit loss (“CECL”) methodology. The Company recorded a provision for credit losses on loans of $264,000 and $810,000 for the three and nine months ended June 30, 2024, respectively.

Net income is also impacted by levels of non-interest income and non-interest expense. For the three and nine months ended June 30, 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 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 2024 Form 10-K under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Estimates.” That discussion highlights estimates that the Company makes that involve uncertainty or potential for substantial change. There have been no material changes in the Company’s critical accounting policies and estimates as previously disclosed in the Company’s 2024 Form 10-K.

Comparison of Financial Condition at June 30, 2025 and September 30, 2024

General: Total assets increased by $33.72 million, or 1.8%, to $1.96 billion at June 30, 2025 from $1.92 billion at September 30, 2024.  The increase was primarily due to increases in cash and cash equivalents and loans receivable which were partially offset by decreases in investment securities. The increase in assets was primarily funded by an increase in deposits.

Net loans receivable increased by $19.97 million, or 1.4%, to $1.44 billion at June 30, 2025 from $1.42 billion at September 30, 2024, primarily due to increases in multi-family, one- to four-family, commercial real estate, and land loans as well as smaller increases in other loan categories. These increases were partially offset by a decrease in construction and commercial business loans as well as smaller decreases in other loan categories.

Total deposits increased by $21.81 million, or 1.3%, to $1.67 billion at June 30, 2025 from $1.65 billion at September 30, 2024, primarily due to increases in certificates of deposit "CDs" account balances. This increase was partially offset by decreases in money market and non-interest-bearing account balances.

Shareholders’ equity increased by $11.25 million, or 4.6%, to $256.66 million at June 30, 2025 from $245.41 million at September 30, 2024.  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 nine months ended June 30, 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 $27.15 million, or 15.5%, to $202.09 million at June 30, 2025 from $174.94 million at September 30, 2024. The increase was due to a $28.90 million increase in cash and cash equivalents, resulting primarily from an increase in deposits and maturities, prepayments and scheduled amortizations of investment securities. The overall increase was partially offset by a $1.75 million decrease in CDs held for investment.

Investment Securities:  Investment securities (including investments in equity securities) decreased by $16.32 million, or 6.7%, to $228.90 million at June 30, 2025 from $245.22 million at September 30, 2024. This decrease was primarily due to maturities, prepayments and scheduled amortizations. Partially offsetting the decrease were purchases of additional U.S. government agency mortgage-backed and U.S. Treasury investment securities. During the quarter ended June 30, 2025, the Bank initiated a partial restructuring of investment securities which resulted in the sale of $13.86 million of US Treasury and mortgage-backed investment securities with an average yield of 3.87% and the purchase of $13.68 million of mortgage-backed investment securities with an average yield of 4.83%. The restructuring resulted in a net gain on sale of investment securities of $24,000. For additional information on investment securities, see Note 2 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

FHLB Stock: FHLB stock increased $8,000, or 0.4%, to $2.05 million at June 30, 2025 from $2.04 million at September 30, 2024. The increase was due to FHLB's required annual share assessment, which is based on total assets.

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 June 30, 2025 and September 30, 2024. This investment is utilized to help satisfy compliance with the Bank's Community Reinvestment Act investment test requirements.

Loans: Net loans receivable increased by $19.97 million, or 1.4%, to $1.44 billion at June 30, 2025 from $1.42 billion at September 30, 2024.  The increase was primarily due to a $23.06 million increase in multi-family loans, an $18.45 million increase in one- to four-family loans, an $8.71 million increase in commercial real estate loans and, and smaller increases in other loan categories. These increases were partially offset by a $16.52 million decrease in construction loans, a $12.2 million decrease in commercial business loans, a $6.39 million increase in the undisbursed portion of construction loans and smaller decreases in other loan categories.

Loan originations increased by $8.20 million, or 4.0%, to $210.81 million for the nine months ended June 30, 2025 from $202.62 million for the nine months ended June 30, 2024.  The increase was primarily due to an increase in originations of commercial real estate and one- to four-family loans. This increase was partially offset by a decrease in commercial business and construction loan originations.

The Company generally sells longer-term fixed-rate one- to four-family mortgage loans for asset liability management purposes and to generate non-interest income. Sales of fixed-rate one- to four-family loans increased by $4.47 million, or 49.01%, to $13.60 million for the nine months ended June 30, 2025 from $9.12 million for the nine months ended June 30, 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 $4,000, or less than 1%, to $21.49 million at both June 30, 2025 and September 30, 2024.  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 June 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. At September 30, 2024, total OREO and other repossessed assets consisted of one land parcel with no recorded value.

BOLI (Bank Owned Life Insurance): BOLI increased by $502,000, or 2.1%, to $24.11 million at June 30, 2025 from $23.61 million at September 30, 2024. The increase was due to net BOLI earnings, representing the increase in the cash surrender value of the BOLI policies.

Goodwill and CDI:  The recorded amount of goodwill remained unchanged at $15.13 million at both June 30, 2025 and September 30, 2024. CDI decreased by $135,000, or 29.9%, to $316,000 at June 30, 2025 from $451,000 at September 30, 2024 due to scheduled amortization. For additional information on goodwill and CDI, see Note 3 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Loan Servicing Rights, Net: Loan servicing rights, net decreased by $461,000, or 33.60%, to $911,000 at June 30, 2025 from $1.37 million at September 30, 2024 primarily due to the amortization of servicing rights. The principal amount of loans serviced for Freddie Mac and the U.S. Small Business Administration decreased by $13.05 million to $357.51 million at June 30, 2025 from $370.56 million at September 30, 2024.

Other Assets: Other assets increased $1.05 million, or 16.87% to $7.30 million at June 30, 2025 from $6.24 million at September 30, 2024. This was due to a $724,000 balance due from the SBA and a $397,000 increase in federal income tax benefit.

Deposits: Deposits increased by $21.81 million, or 1.32%, to $1.67 billion at June 30, 2025 from $1.65 billion at September 30, 2024. The increase was primarily due to a $48.99 million increase in certificates of deposit account balances and a $1.59 million increase in NOW checking accounts. These increases were partially offset by a $21.72 million decrease in money market account balances, and a $6.89 million decrease in non-interest bearing demand account balances.

The shift in the deposit mix toward higher-cost funding sources, such as certificates of deposits, reflects continued competitive pricing pressures in the market and customer preferences for higher-yielding deposit products amid the current interest rate environment. Conversely, balances in non-interest-bearing and money market accounts declined, contributing to a modest increase in the Company’s overall cost of deposits.

At June 30, 2025, the loan-to-deposit ratio was approximately 86.39%, unchanged from September 30, 2024, 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 June 30, 2025 and September 30, 2024 (dollars in thousands):

June 30, 2025 September 30, 2024
Amount Percent Amount Percent
Non-interest-bearing demand $ 406,222 24.3 % $ 413,116 25.1 %
NOW checking 334,922 20.1 333,329 20.2
Savings 205,829 12.3 205,993 12.5
Money market 305,207 18.3 326,922 19.8
Certificates of deposit under $250 244,063 14.6 205,970 12.4
Certificates of deposit $250 and over 126,254 7.6 113,579 6.9
Certificates of deposit - brokered 46,980 2.8 48,759 3.1
Total $ 1,669,477 100.0 % $ 1,647,668 100.0 %

FHLB Borrowings: The Company has short- and long-term borrowing lines with the FHLB with total credit available on the lines equal to 45% of the Bank's total assets, limited by available collateral. FHLB borrowings remained unchanged at $20.00 million at both June 30, 2025 and September 30, 2024. 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 $11.25 million, or 4.6%, to $256.66 million at June 30, 2025 from $245.41 million at September 30, 2024.  The increase was primarily due to net income of $20.72 million and proceeds of $817,000 from the exercise of stock options. This increase was partially offset by dividend payments to common shareholders of $6.03 million, the repurchase of 123,404 shares of the Company's common stock for $3.85 million and a $795,000 other comprehensive loss for fair value adjustment on available for sale investment securities, resulting from changes in market interest rates during the period.

Asset Quality and Commercial Real Estate Portfolio Breakdown:

Non-performing assets to total assets was 0.21% at June 30, 2025 and 0.20% at September 30, 2024. Non-performing assets increased by $166,000, or 4.2%, to $4.10 million at June 30, 2025 from $3.94 million at September 30, 2024. The increase was primarily due to a $221,000 increase in OREO and repossessed assets which was partially offset by a $42,000 decrease in non-accrual loans. The decrease in non-accrual loans was driven by the reductions in the commercial real estate and commercial business portfolios, partially offset by an increase in the one- to four- family portfolio. Decreases in the commercial real estate and commercial business categories were primarily attributable to loan payoffs.

Substandard loans increased $23.94 million to $32.37 million at June 30, 2025 from $8.43 million at September 30, 2024. As of June 30, 2025, substandard loans are 1.55% of total loans receivable. The increase is primarily a result of downgrading three relationships that were previously classified watch and special mention. The loans are not classified as non-accrual and were performing according to their repayment terms.

The following table sets forth information with respect to the Company’s non-performing assets at June 30, 2025 and September 30, 2024 (dollars in thousands):

June 30,<br>2025 September 30,<br>2024
Loans accounted for on a non-accrual basis:
Mortgage loans:
One- to four-family (1) $ 1,781 $ 49
Commercial real estate 161 1,158
Consumer loans:
Home equity and second mortgage 575 618
Commercial business loans 1,326 2,060
Total loans accounted for on a non-accrual basis 3,843 3,885
Accruing loans which are contractually past due 90 days or more — —
Total of non-accrual and 90 days or more past due loans 3,843 3,885
Non-accrual investment securities 38 51
OREO and other repossessed assets, net 221 —
Total non-performing assets $ 4,102 $ 3,936
Non-accrual and 90 days or more past due loans as a percentage of loans receivable 0.26 % 0.27 %
Non-accrual and 90 days or more past due loans as a percentage of total assets 0.20 % 0.20 %
Non-performing assets as a percentage of total assets 0.21 % 0.20 %
Loans receivable (2) $ 1,459,374 $ 1,439,001
Total assets $ 1,957,192 $ 1,923,475

___________________________________

(1) At June 30, 2025 there was one one- to four-family property in the process of foreclosure. At September 30, 2024, there were no one-to four-family properties in the process of foreclosure.

(2)  Does not include loans held for sale. Loan balances are before any reduction of the ACL.

The following tables provide a breakdown of commercial real estate ("CRE") loans by collateral types as of June 30, 2025 and September 30, 2024:

CRE Loan Portfolio Breakdown by Collateral at June 30, 2025
( in thousands)
Collateral Type Percent of CRE Portfolio Percent of Total Loan Portfolio Average Balance per Loan Non-Accrual
Industrial warehouse 128,822 21.2 % 8.4 % $ 1,301 $ 161
Medical/dental offices 13.4 5.3 1,269 —
Office buildings 11.3 4.5 801 —
Other retail buildings 9.0 3.5 567 —
Mini-storage 6.3 2.5 1,539 —
Hotel/motel 5.2 2.1 2,638 —
Restaurants 4.5 1.8 585 —
Gas stations/convenience stores 4.0 1.6 1,015 —
Churches 2.4 1.0 918 —
Nursing homes 2.2 0.9 2,255 —
Shopping centers 1.7 0.7 1,751 —
Mobile home parks 1.5 0.6 444 —
Other 17.3 6.8 760 —
Total CRE 607,924 100.0 % 39.7 % $ 951 $ 161

All values are in US Dollars.

CRE Loan Portfolio Breakdown by Collateral at September 30, 2024
( in thousands)
Collateral Type Percent of CRE Portfolio Percent of Total Loan Portfolio Average Balance per Loan Non-Accrual
Industrial warehouse 125,852 21.0 % 8.3 % $ 1,246 $ 195
Medical/dental offices 13.9 5.5 1,262 —
Office buildings 11.4 4.5 779 —
Other retail buildings 8.4 3.3 533 —
Mini-storage 6.4 2.6 1,430 —
Hotel/motel 5.2 2.1 2,835 —
Restaurants 4.6 1.8 557 273
Gas stations/convenience stores 4.2 1.7 1,048 —
Nursing homes 3.1 1.2 2,304 —
Churches 2.7 1.1 854 —
Mobile home parks 1.8 0.7 491 —
Shopping centers 1.8 0.7 1,786 —
Other 15.5 6.1 705 690
Total CRE 599,219 100.0 % 39.6 % $ 926 $ 1,158

All values are in US Dollars.

Comparison of Operating Results for the Three and Nine Months Ended June 30, 2025 and 2024

Net income increased by $1.18 million, or 19.9%, to $7.10 million for the quarter ended June 30, 2025 from $5.92 million for the quarter ended June 30, 2024. Net income per diluted common share increased by $0.16, or 21.6%, to $0.90 for the quarter ended June 30, 2025 from $0.74 for the quarter ended June 30, 2024. The increases in net income and diluted earnings per share for the three months ended June 30, 2025, were primarily due to a $1.64 million increase in net interest income and an $84,000 increase in non-interest income. These increases were partially offset by a $255,000 increase in the provision for income taxes, a $196,000 increase in the provision for credit losses and a $98,000 increase in non-interest expense.

Net income increased $2.79 million, or 15.6%, to $20.72 million for the nine months ended June 30, 2025 from $17.93 million for the nine months ended June 30, 2024. Net income per diluted common share increased by $0.39, or 17.7% to $2.60 for the nine months ended June 30, 2025 from $2.21 for the nine months ended June 30, 2024. The increases in net income and diluted earnings per share were due to a $4.19 million increase in net interest income and a $55,000 increase in non-interest income. These increases were partially offset by a $744,000 increase in non-interest expense, a $656,000 increase in the provision for income taxes and a $53,000 increase in the provision for credit losses.

Net Interest Income: Net interest income increased by $1.64 million, or 10.3%, to $17.62 million for the quarter ended June 30, 2025 from $15.98 million for the quarter ended June 30, 2024. This increase was due to a 17 basis point increase in the weighted average yield of interest-earning assets to 5.50% at June 30, 2025 from 5.33% at June 30, 2024, and a $39.55 million increase in average total interest-earning assets. Offsetting some of the benefits was a $33.72 million increase in the average balance of total interest-bearing liabilities.

Total interest and dividend income increased by $1.41 million, or 5.8%, to $25.54 million for the quarter ended June 30, 2025 from $24.14 million for the quarter ended June 30, 2024, primarily due to increases in the average yield earned on and average balance of loans receivable, as well as an increase in the average balance of interest-bearing deposits in banks and CDs and a higher average yield on investment securities. These increases were partially offset by a decrease in the average balance of investment securities and, to a lesser extent, a decrease in the average yield on interest-bearing deposits in banks and CDs.

The average balance of total interest-earning assets increased by $39.55 million, or 2.2%, to $1.86 billion for the quarter ended June 30, 2025 from $1.82 billion for the quarter ended June 30, 2024. The average balance of loans receivable increased by $58.77 million, or 4.2%, and the average balance of interest-bearing deposits in banks and CDs increased by $17.47 million, or 10.8%. These increases were partially offset by a decrease in the average balance of investment securities of $36.71 million, or 14.0%. During the quarter ended June 30, 2025, there was a total of $170,000 of pre-payment penalties, non-accrual interest and late fees collected compared to $133,000 collected for the quarter ended June 30, 2024. The average yield on interest-earning assets increased by 17 basis points to 5.50% for the quarter ended June 30, 2025 from 5.33% for the quarter ended June 30, 2024. The average yield on investment securities increased nine basis points to 3.66% for the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024, while the average yield on loans receivable increased 27 basis points to 5.92% during the same period.

Total interest expense decreased by $236,000, or 2.9%, to $7.92 million for the quarter ended June 30, 2025 from $8.16 million for the quarter ended June 30, 2024. This decrease was due to a decrease in the average cost of interest-bearing liabilities. The average balance of interest-bearing liabilities increased by $33.72 million, or 2.7%, to $1.27 billion for the quarter ended June 30, 2025 from $1.24 billion for the quarter ended June 30, 2024, primarily due to increases in the average balances of certificate of deposit and NOW checking accounts, partially offset by decreases in the average balance of money market and savings accounts. The average cost of interest-bearing liabilities decreased to 2.49% for the quarter ended June 30, 2025 from 2.64% for the quarter ended June 30, 2024.

As a result of changes above, the net interest margin ("NIM") increased to 3.80% for the quarter ended June 30, 2025 from 3.53% for the quarter ended June 30, 2024.

Net interest income increased by $4.19 million, or 8.8%, to $51.81 million for the nine months ended June 30, 2025 from $47.62 million for the nine months ended June 30, 2024. This increase was due to a 29 basis point increase in the weighted average yield on interest-earning assets to 5.46% for the nine months ended June 30, 2025 from 5.17% for the same period in 2024, and a $49.96 million increase in average total interest-earning assets, partially offset by a $58.86 million increase in the average balance of total interest-bearing liabilities and a seven basis point increase in the weighted average yield of interest-bearing liabilities to 2.53% for the nine months ended June 30, 2025 from 2.46% for the same period in 2024.

Total interest and dividend income increased $5.88 million, or 8.42%, to $75.67 million for the nine months ended June 30, 2025 from $69.79 million for the nine months ended June 30, 2024, primarily due to increases in the average yield and average balance of loans receivable, the average balance of interest bearing deposits in bank and CDs held for investment and a higher average yield on investment securities. These increases were partially offset by a decrease in the average balance of investment securities and a decrease in the average yield on interest-bearing deposits in banks and CDs held for investment.

The average balance of total interest-earning assets increased by $49.96 million, or 2.8%, to $1.85 billion for the nine months ended June 30, 2025 from $1.80 billion for the nine months ended June 30, 2024. The average balance of loans receivable increased by $78.29 million, or 5.7%, and the average balance of interest-bearing deposits in banks and CDs increased by $29.05 million or 20.2%. These increases were partially offset by a decrease in the average balance of investment securities of $57.04 million or 19.8% between the periods. During the nine months ended June 30, 2025, there was a total of $510,000 of pre-payment penalties, non-accrual interest and late fees collected compared to $384,000 collected for the nine months ended June 30, 2024. The average yield on interest-earning assets increased by 29 basis points to 5.46 for nine months ended June 30, 2025 from 5.17% for the nine months ended June 30, 2024. The average yield on investment securities increased 39 basis points to 3.58% for the nine months ended June 30, 2025, compared to the same period in 2024. This increase was primarily due to the reinvestment of matured or called lower-yielding securities into higher-yielding instruments, as well as upward adjustments in the yields of variable-rate securities in response to the higher interest rate environment. Similarly, the average yield on loans receivable increased 30 basis points to 5.87% during the same period.

Total interest expense increased by $1.69 million, or 7.6%, to $23.86 million for the nine months ended June 30, 2025 from $22.17 million for the nine months ended June 30, 2024. The increase in interest expense was due to an increase in the average cost of interest bearing liabilities and an increase in the average balance of interest-bearing liabilities. The average balance of interest-bearing liabilities increased $58.86 million, or 4.9%, to $1.26 billion for the nine months ended June 30, 2025 from $1.20 billion for the nine months ended June 30, 2024, primarily due to increases in the average balances of certificates of deposit and money market accounts, partially offset by decreases in NOW checking and savings accounts. The average cost of interest-bearing liabilities increased to 2.53% for the nine months ended June 30, 2025 from 2.46% for the nine months ended June 30, 2024.

NIM expanded to 3.74% for the nine months ended June 20, 2025 from 3.53% for the nine months ended June 30, 2024.

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 June 30,
2025 2024
Average<br>Balance Interest and<br>Dividends Yield/<br>Cost Average<br>Balance Interest and<br>Dividends Yield/<br>Cost
Interest-earning assets:
Loans receivable (1)(2) $ 1,450,350 $ 21,411 5.92 % $ 1,391,582 $ 19,537 5.65 %
Investment securities (2) 226,375 2,064 3.66 263,087 2,335 3.57
Dividends from mutual funds, FHLB stock and other investments 5,897 83 5.65 5,867 94 6.41
Interest-bearing deposits in banks and CDs 178,887 1,986 4.45 161,421 2,173 5.41
Total interest-earning assets 1,861,509 25,544 5.50 1,821,957 24,139 5.33
Non-interest-earning assets 79,715 82,008
Total assets $ 1,941,224 $ 1,903,965
Interest-bearing liabilities:
NOW checking $ 333,074 1,151 1.39 $ 329,344 1,054 1.29
Money market 304,526 2,398 3.16 326,023 2,882 3.56
Savings 205,592 177 0.35 208,488 140 0.27
Certificates of deposit 363,342 3,417 3.77 311,545 3,261 4.21
Brokered CDs 48,028 578 4.83 45,442 601 5.32
Short-term borrowings 8,794 102 4.65 5,001 70 5.63
Long-term borrowings 11,209 99 3.54 15,000 150 4.02
Total interest-bearing liabilities 1,274,565 7,922 2.49 1,240,843 8,158 2.64
Non-interest-bearing deposits 402,717 413,494
Other liabilities 10,265 10,245
Total liabilities 1,687,547 1,664,582
Shareholders' equity 253,677 239,383
Total liabilities and
shareholders' equity $ 1,941,224 $ 1,903,965
Net interest income $ 17,622 $ 15,981
Interest rate spread 3.01 % 2.69 %
Net interest margin (3) 3.80 % 3.53 %
Ratio of average interest-earning  assets to average interest- bearing liabilities 146.05 % 146.83 %

_______________

(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.

Nine Months Ended June 30,
2025 2024
Average<br>Balance Interest and<br>Dividends Yield/<br>Cost Average<br>Balance Interest and<br>Dividends Yield/<br>Cost
Interest-earning assets:
Loans receivable (1)(2) $ 1,441,506 $ 63,339 5.87 % $ 1,363,213 $ 56,841 5.57 %
Investment securities (2) 231,510 6,205 3.58 288,554 6,892 3.19
Dividends from mutual funds, FHLB stock and other investments 5,890 252 5.70 6,235 266 5.71
Interest-bearing deposits in banks and CDs 172,591 5,870 4.55 143,537 5,791 5.39
Total interest-earning assets 1,851,497 75,666 5.46 1,801,539 69,790 5.17
Non-interest-earning assets 77,595 81,650
Total assets $ 1,929,092 $ 1,883,189
Interest-bearing liabilities:
NOW checking $ 329,883 3,364 1.36 $ 358,052 3,958 1.48
Money market 311,762 7,597 3.26 273,683 6,326 3.09
Savings 205,764 461 0.30 214,275 386 0.24
Certificates of deposit 346,313 10,077 3.89 291,707 8,989 4.12
Brokered CDs 48,169 1,760 4.89 42,856 1,724 5.37
Short-term borrowings 2,932 102 4.65 7,457 335 6.00
Long-term borrowings 17,070 500 3.92 15,000 452 4.03
Total interest-bearing liabilities 1,261,893 23,861 2.53 1,203,030 22,170 2.46
Non-interest-bearing deposits 406,906 431,849
Other liabilities 10,158 11,273
Total liabilities 1,678,957 1,646,152
Shareholders' equity 250,135 237,037
Total liabilities and
shareholders' equity $ 1,929,092 $ 1,883,189
Net interest income $ 51,805 $ 47,620
Interest rate spread 2.93 % 2.71 %
Net interest margin (3) 3.74 % 3.53 %
Ratio of average interest-earning  assets to average interest- bearing liabilities 146.72 % 149.75 %

_______________

(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.

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<br>June 30, 2025<br>compared to three months<br>ended June 30, 2024<br>increase (decrease) due to Nine months ended<br>June 30, 2025<br>compared to nine months<br>ended June 30, 2024<br>increase (decrease) due to
Rate Volume Net<br>Change Rate Volume Net<br>Change
Interest-earning assets:
Loans receivable and loans held for sale $ 1,029 $ 845 $ 1,874 $ 3,143 $ 3,355 $ 6,498
Investment securities 63 (334) (271) 85 (772) (687)
Dividends from mutual funds, FHLB stock and other investments (11) — (11) — (15) (15)
Interest-bearing deposits in banks and CDs (407) 220 (187) (215) 295 80
Total net increase in income on interest-earning assets 674 731 1,405 3,013 2,863 5,876
Interest-bearing liabilities:
NOW checking 85 12 97 (536) (58) (594)
Money market (302) (182) (484) 1,107 164 1,271
Savings 39 (2) 37 81 (6) 75
Certificates of deposit (422) 555 133 (41) 1,165 1,124
Short-term FHLB borrowings (14) 46 32 (63) (170) (233)
Long-term borrowings (16) (35) (51) 2 46 48
Total net increase (decrease) in expense on interest-bearing liabilities (630) 394 (236) 550 1,141 1,691
Net increase in net interest income $ 1,304 $ 337 $ 1,641 $ 2,463 $ 1,722 $ 4,185

Provision for Credit Losses: A $440,000 provision for credit losses was recorded for the quarter ended June 30, 2025, consisting of a $351,000 provision for credit losses on loans which was due to loan portfolio growth and the annual update of model assumptions, a $4,000 recapture of credit losses on investment securities, and a $93,000 provision for credit losses on unfunded commitments which was due to the annual update of model assumptions. The annual update of model assumptions reflects revised macroeconomic indicators, including slower projected economic growth and modest increases in unemployment, as well as refinements to loss estimates within certain loan segments, particularly commercial real estate. A $244,000 provision for credit losses was recorded for the quarter ended June 30, 2024, consisting of a $264,000 provision for credit losses on loans, a $12,000 recapture of credit losses on investment securities and an $8,000 recapture of credit losses on unfunded commitments.

We recorded a $713,000 provision for credit losses for the nine months ended June 30, 2025, consisting of a $640,000 provision for credit losses on loans which was due to an increase in loans receivable and the annual update of model assumptions, a $14,000 recapture of credit losses on investment securities which was due to maturities and principal repayments, and a $87,000 provision for credit losses on unfunded loan commitments which was due the annual update of model assumptions. A $660,000 provision for credit losses was recorded for the nine months ended June 30, 2024, consisting of a $810,000 provision for credit losses on loan, a $20,000 recapture of credit losses on investment securities, and a $130,000 recapture of credit losses on unfunded loan commitments.

For the quarter ended June 30, 2025, net recoveries totaled $2,000 compared to net-charge offs of $36,000 for the quarter ended June 30, 2024. Non-accrual loans decreased by $42,000, or 1.1%, to $3.84 million at June 30, 2025 from $3.89 million at September 30, 2024, and decreased by $277,000, or 6.7%, from $4.12 million at June 30, 2024. Total delinquent loans (past

due 30 days or more) and non-accrual loans increased by $1.69 million, or 37.8%, to $6.17 million at June 30, 2025, from $4.48 million at September 30, 2024 and increased by $1.94 million, or 45.8%, from $4.23 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 examination process, which may result in the adjustment of reserves based upon their judgment of information available to them at the time of their examination and have a material adverse impact on the financial condition and results of operations.

In accordance with GAAP, acquired loans are recorded at their estimated fair value, resulting in a net discount to the loans' contractual amounts, with a portion of this discount reflecting possible credit losses. Credit discounts are included in the determination of fair value. With the adoption of CECL, purchased loans are evaluated for impairment in the same manner as the rest of the loan portfolio. The remaining fair value discount associated with acquired loans was $63,000 at June 30, 2025. This discount will continue to accrete into income as these loans continue to pay down.

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

Non-interest Income: Total non-interest income increased by $84,000, or 3.0%, to $2.88 million for the quarter ended June 30, 2025 from $2.79 million for the quarter ended June 30, 2024. This increase was primarily due to a $70,000 increase in gain on sale of loans, reflecting a higher volume of fixed-rate one- to four-family mortgages into the secondary market, a $24,000 net gain on sale of investment securities and a $20,000 increase in servicing income on loans sold. These increases were partially offset by a $48,000 decrease in service charges on deposits, reflecting lower overdraft-related fee activity and a $35,000 decrease in ATM and debit card interchange fees, primarily due to lower transaction volume.

Total non-interest income for the nine months ended June 30, 2025 increased 55,000, or 0.7%, to $8.26 million from $8.20 million for the nine months ended June 30, 2024. The modest increase reflects offsetting movements across several components. The primary reasons for the increase were a $115,000 increase in gain on sales of loans, a $64,000 increase in servicing income on loans sold and a $32,000 increase in BOLI net earnings. These increases were largely offset by a $100,000 decrease in service charges on deposits, reflecting continued moderation in customer overdraft activity, and a $67,000 decrease in ATM and debit card interchange fees consistent with lower card-based transaction volume.

Non-interest Expense:  Total non-interest expense increased by $98,000, or 0.9%, to $11.17 million for the quarter ended June 30, 2025 from $11.07 million for the quarter ended June 30, 2024. This increase was mainly due to a $235,000 increase in state and local taxes expense and a $78,000 increase in ATM and debit card interchange transaction expense. These increases were partially offset by a $103,000 decrease in salary and employee benefits and a $93,000 decrease in technology and communications expenses. The efficiency ratio for the current quarter was 54.48% compared to 58.97% 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.

Total non-interest expense increased by $744,000, or 2.3%, to $33.43 million for the nine months ended June 30, 2025 from $32.68 million for the nine months ended June 30, 2024. The increase was primarily due to a $272,000 increase in state and local taxes expense, a $210,000 increase in professional fees expense and a $152,000 increase in technology and communications expense. These increases were partially offset by a $97,000 decrease in deposit operations expense, a $96,000 decrease in ATM and debit card interchange transaction expense, due to lower transaction volume and a $67,000 decrease in premises and equipment expense due to lower repair and maintenance costs. The efficiency ratio improved to 55.65% for the nine months ended June 30, 2025 compared to 58.55% for the same period 2024.

Provision for Income Taxes: The provision for income taxes increased by $255,000, or 16.6%, to $1.79 million for the quarter ended June 30, 2025 from $1.54 million for the quarter ended June 30, 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 20.1% for the quarter ended June 30, 2025 and 20.6% for the quarter ended June 30, 2024. The provision for income taxes increased by $656,000, or 14.4%, to $5.21 million for the nine months ended June 30, 2025 from $4.55 million for the nine months ended June 30, 2024.

The increase was primarily due to higher pre-tax income. The Company's effective tax rate was 20.1% for the nine months ended June 30, 2025 compared to 20.2% for the nine months ended June 30, 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 greatly influenced by general interest rates, economic conditions, and competition.

The Bank must maintain an adequate level of liquidity to help ensure the availability of sufficient funds to fund its operations. The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs.  At June 30, 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 14.02%. The Bank maintains a credit facility with the FHLB that provides for immediately available borrowings up to an aggregate amount equal to 45% of total assets, limited by available collateral. At June 30, 2025, the Bank had a total of $624.06 million available for borrowings with the FHLB of which $20.00 million was outstanding. The Bank maintains a short-term borrowing line with the FRB with total credit based on eligible collateral: Borrower-in-Custody ("BIC").  At June 30, 2025, the Bank had no outstanding balance on the BIC line, under which $70.19 million was available for future borrowings. The Bank also maintains a $50.00 million overnight borrowing line with Pacific Coast Bankers' Bank ("PCBB"). At June 30, 2025, the Bank did not have an outstanding balance on this borrowing line. Subject to market conditions, the Bank expects to utilize these borrowing facilities from time to time in the future to fund loan originations and deposits withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible.

Liquidity management is both a short and long-term responsibility of the Bank's management.  The Bank adjusts its investments in liquid assets based upon management's assessment of (i) expected loan demand, (ii) projected loan sales, (iii) expected deposit flows, and (iv) yields available on interest-bearing deposits.  Excess liquidity is invested generally in interest-bearing overnight deposits, CDs held for investment and short-term government and agency obligations.  If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB, the FRB and PCBB.

The Bank's primary investing activity is the origination of loans and, to a lesser extent, the purchase of investment securities. During the nine months ended June 30, 2025 and 2024, the Bank originated $210.81 million and $202.62 million of loans, respectively. At June 30, 2025, the Bank had undisbursed lines of credit and commitments to extend credit totaling $160.86 million and undisbursed construction loans in process totaling $76.27 million.  Investment securities purchased during the nine months ended June 30, 2025 and 2024 totaled $45.99 million and $38.01 million, respectively.

The Bank’s liquidity is also affected by the volume of loans sold and loan principal payments.  During the nine months ended June 30, 2025 and 2024, the Bank sold $13.60 million and $14.92 million, respectively, in loans and loan participation interests.  During the nine months ended June 30, 2025 and 2024, the Bank received $170.45 million and $105.43 million in principal repayments, respectively.

The Bank's liquid assets in the form of cash and cash equivalents, CDs held for investment, and investment securities available for sale (including equity securities) increased to $289.42 million at June 30, 2025 from $248.06 million at September 30, 2024. CDs that are scheduled to mature in less than one year from June 30, 2025 totaled $374.46 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 2025 fiscal year, the Bank projects that fixed commitments will include approximately $85,000 of operating lease payments. During the final three months of the fiscal year ending September 30, 2025 the Bank anticipates pre-tax capital expenditures of approximately $650,000, related to remodeling a leased building for a new branch location. The branch is expected to open in October 2025. The Bank has entered into a lease agreement for the new branch which will

increase fixed lease commitments by approximately $96,000 in the 2026 fiscal year. No FHLB borrowings are scheduled to mature during fiscal year 2025. In addition, at June 30, 2025, the Bank had other future obligations and accrued expenses totaling $9.70 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 June 30, 2025, Timberland Bancorp (on an unconsolidated basis) had liquid assets of $1.24 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 current cash dividend rate is $0.26 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 June 30, 2025, continued payment at this rate would result in an average total quarterly dividend of approximately $2.05 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 new stock repurchase program replaces the existing stock repurchase program, which had 31,762 shares available to be repurchased. 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.

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 June 30, 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 June 30, 2025, to its minimum regulatory capital requirements at that date (dollars in thousands):

Actual Regulatory<br>Minimum To<br>Be “Adequately<br>Capitalized” To Be “Well Capitalized”<br>Under Prompt<br>Corrective Action<br>Provisions
Amount Ratio Amount Ratio Amount Ratio
Leverage Capital Ratio:
Tier 1 capital $241,598 12.56 % $76,949 4.00 % $96,186 5.00 %
Risk-based Capital Ratios:
Common equity Tier 1 capital 241,598 19.16 56,743 4.50 81,963 6.50
Tier 1 capital 241,598 19.16 75,658 6.00 100,877 8.00
Total capital 257,392 20.41 100,877 8.00 126,097 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 June 30, 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 June 30, 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 June 30, 2025 (dollars in thousands):

Actual
Amount Ratio
Leverage Capital Ratio:
Tier 1 capital $243,320 12.63 %
Risk-based Capital Ratios:
Common equity Tier 1 capital 243,320 19.29
Tier 1 capital 243,320 19.29
Total capital 259,121 20.54

Key Financial Ratios and Data

Three Months Ended June 30, Nine Months Ended<br>June 30,
2025 2024 2025 2024
PERFORMANCE RATIOS:
Return on average assets 1.47 % 1.25 % 1.44 % 1.27 %
Return on average equity 11.23 % 9.95 % 11.07 % 10.10 %
Net interest margin 3.80 % 3.53 % 3.74 % 3.53 %
Efficiency ratio 54.48 % 58.97 % 55.65 % 58.55 %

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in information concerning market risk from the information provided in the Company’s 2024 Form 10-K.

Item 4.  Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures:  An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of the Company’s Chief Executive Officer (principal executive officer), Chief Financial Officer (principal financial officer) and several other members of the Company’s senior management as of the end of the period covered by this report.  The Company’s Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 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 June 30, 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.

Item 1A.    Risk Factors

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

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

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

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

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

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

(a)    Not applicable

(b)    Not applicable

(c)    Stock Repurchases

The following table sets forth the shares repurchased by the Company during the quarter ended June 30, 2025:

Period Total No. of Shares Repurchased Average Price Paid Per Share Total No. of Shares Purchased as Part of Publicly Announced Plan Maximum No. of Shares that May Yet Be Purchased Under the Plan (1)
4/01/2025 - 4/30/2025 4,015 $ 30.03 4,015 61,983
5/01/2025 - 5/31/2025 19,377 31.15 19,377 42,606
6/01/2025 - 6/30/2025 10,844 30.34 10,844 31,762
Total 34,236 $ 30.76 34,236 31,762

(1)     On July 22, 2025, the Company terminated its stock repurchase program originally announced on July 25, 2023, which had authorized the repurchase of up to 404,708 shares of the Company’s common stock. At the time of termination, 31,762 shares remained available for repurchase under the program.

On July 22, 2025, the Company announced the adoption of a new stock repurchase program authorizing the repurchase of up to 393,842 shares, representing approximately 5% of the Company’s outstanding common stock. The new program replaces the prior repurchase program and does not have a fixed expiration date; it will remain in effect until the authorized amount has been repurchased. The repurchase program permits shares to be repurchased in open market or private transactions, including through block trades and pursuant to any trading plan adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission (“SEC”). Repurchases will be made at management’s discretion, at prices deemed attractive and in the best interests of the Company and its shareholders, and will be subject to factors such as stock availability, general market conditions, the trading price of the Company’s common stock, alternative uses of capital, and the Company’s financial performance. Open market purchases will be conducted in accordance with the limitations of SEC Rule 10b-18 and other applicable legal requirements. The repurchase program may be suspended, modified, or terminated at any time and for any reason, including changes in market conditions, repurchase costs, the availability of alternative investment opportunities, liquidity considerations, or other factors deemed appropriate. These factors may also influence the timing and amount of any share repurchases. The program does not obligate the Company to repurchase any specific number of shares.

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

Item 3.      Defaults Upon Senior Securities

Not applicable.

Item 4.     Mine Safety Disclosures

Not applicable.

Item 5.     Other Information

a.None to be reported.

b.None to be reported.

c.During the quarter ended June 30, 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.

Item 6.         Exhibits

(a)   Exhibits

3.1 Articles of Incorporation of the Registrant (1)
3.2 Amended and Restated Bylaws of the Registrant (2)
4.1 Form of Certificate of Timberland Bancorp, Inc. Common Stock (1)
10.1 Employee Severance Compensation Plan, as revised (3)
10.2 Employee Stock Ownership Plan (4)
10.3 Form of Incentive Stock Option Agreement (5)
10.4 Form of Non-qualified Stock Option Agreement (5)
10.5 Employment Agreement with Dean J. Brydon, as amended (6)
10.6 Employment Agreement with Jonathan A. Fischer, as amended (6)
10.7 Employment Agreement with Marci A. Basich (6)
10.8 Employment Agreement with Matthew J. DeBord (6)
10.9 Employment Agreement with Todd Van Cise (7)
10.10 Employment Agreement with Breanne Antich (7)
10.12 Timberland Bancorp, Inc. 2019 Equity Incentive Plan (9)
10.13 Form of Restricted Stock Grant Agreement (10)
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act
32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act
101 The following materials from Timberland Bancorp Inc's Quarterly Report 10-Q for the quarter ended June 30, 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
104 Cover 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.

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: August 8, 2025 By:  /s/ Dean J. Brydon
Dean J. Brydon
Chief Executive Officer
(Duly Authorized Officer)
Date: August 8, 2025 By:  /s/Marci A. Basich
Marci A. Basich
Chief Financial Officer
(Principal Financial Officer)

59

Document

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act

I, Dean J. Brydon, certify that:

1.I have reviewed this Form 10-Q of Timberland Bancorp, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 8, 2025

/s/ Dean J. Brydon
Dean J. Brydon
Chief Executive Officer

Document

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act

I, Marci A. Basich, certify that:

1.I have reviewed this Form 10-Q of Timberland Bancorp, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 8, 2025

/s/ Marci A. Basich
Marci A. Basich
Chief Financial Officer

Document

EXHIBIT 32

Certification Pursuant to Section 906 of the Sarbanes Oxley Act

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

OF TIMBERLAND BANCORP, INC.

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), each of the undersigned hereby certifies in his capacity as an officer of Timberland Bancorp, Inc. (the “Company”) and in connection with the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025 (“Report”), that:

•the Report fully complies with the requirements of Sections 13(a)  and 15(d) of the Securities Exchange Act of 1934, as amended, and

•the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in the Report.

/s/ Dean J. Brydon /s/ Marci A. Basich
Dean J. Brydon Marci A. Basich
Chief Executive Officer Chief Financial Officer

Date: August 8, 2025

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