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What changed in TIMBERLAND BANCORP INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of TIMBERLAND BANCORP INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+500 added−523 removedSource: 10-K (2025-12-09) vs 10-K (2024-12-11)

Top changes in TIMBERLAND BANCORP INC's 2025 10-K

500 paragraphs added · 523 removed · 414 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

189 edited+13 added−23 removed206 unchanged
Biggest changeThe following table sets forth the ACL by loan category at the dates indicated: At September 30, 2024 2023 2022 Amount Percent of Loans in Category to Total Loans Amount Percent of Loans in Category to Total Loans Amount Percent of Loans in Category to Total Loans (Dollars in thousands) Mortgage loans: One- to four-family $ 2,632 19.75 % $ 2,417 17.75 % $ 1,658 14.05 % Multi-family 1,308 11.71 1,156 8.91 855 7.58 Commercial 6,934 39.57 7,209 39.84 6,682 42.81 Construction - custom and owner/builder 1,328 8.72 750 9.09 675 9.51 Construction - speculative one- to four-family 128 0.76 148 1.20 130 0.98 Construction - commercial 537 1.95 316 3.58 343 3.22 Construction - multi-family 456 1.88 602 4.01 447 5.14 Construction - land development 335 1.17 274 1.32 233 1.54 Land 793 1.94 406 1.87 397 2.14 Non-mortgage loans: Consumer loans 387 3.37 572 2.88 482 2.98 Commercial business loans 2,640 9.18 1,967 9.55 1,801 10.05 Total allowance for credit losses (1) $ 17,478 100.00 % $ 15,817 100.00 % $ 13,703 100.00 % ________________________________ (1) Amounts for fiscal 2024 were calculated using the CECL methodology to determine the allowance for credit losses.
Biggest change(2) Loans receivable, net for this table includes the deductions for the undisbursed portion of construction loans in process and net deferred loan origination fees and does not include the deduction for the ACL/allowance for loan losses. 18 The following table sets forth the ACL by loan category at the dates indicated: At September 30, 2025 2024 2023 Amount Percent of Loans in Category to Total Loans Amount Percent of Loans in Category to Total Loans Amount Percent of Loans in Category to Total Loans (Dollars in thousands) Mortgage loans: One- to four-family $ 2,892 20.16 % $ 2,632 19.75 % $ 2,417 17.75 % Multi-family 1,625 13.19 1,308 11.71 1,156 8.91 Commercial 7,147 38.76 6,934 39.57 7,209 39.84 Construction - custom and owner/builder 1,268 8.27 1,328 8.72 750 9.09 Construction - speculative one- to four-family 112 0.69 128 0.76 148 1.20 Construction - commercial 348 1.38 537 1.95 316 3.58 Construction - multi-family 400 2.90 456 1.88 602 4.01 Construction - land development 412 0.98 335 1.17 274 1.32 Land 797 2.28 793 1.94 406 1.87 Non-mortgage loans: Consumer loans 493 3.33 387 3.37 572 2.88 Commercial business loans 2,597 8.06 2,640 9.18 1,967 9.55 Total ACL (1) $ 18,091 100.00 % $ 17,478 100.00 % $ 15,817 100.00 % _______________________________ (1) Amounts for fiscal 2025 and 2024 were calculated using the CECL methodology to determine the ACL.
See “Lending Activities - Loan Solicitation and Processing.” Prior to approval of any construction loan application, an independent fee appraiser inspects the site and prepares an appraisal on an "as completed" basis, and the Bank reviews the existing or proposed improvements, identifies the market for the proposed project and analyzes the pro-forma data and assumptions on the project.
See “Lending Activities - Loan Solicitation and Processing.” Prior to approval of any construction loan application, an independent fee appraiser inspects the site and prepares an appraisal on an "as completed" basis, and the Bank reviews the existing or proposed improvements, identifies the market for the proposed project and analyzes the pro-forma data and assumptions.
After this preliminary review, the application is processed, which includes obtaining credit reports, financial statements and tax returns or verification of income on the 10 borrowers and guarantors, an independent appraisal of the project, and any other expert reports necessary to evaluate the proposed project.
After this preliminary review, the application is processed, which 10 includes obtaining credit reports, financial statements and tax returns or verification of income on the borrowers and guarantors, an independent appraisal of the project, and any other expert reports necessary to evaluate the proposed project.
A downturn in the housing or the real estate market could increase loan delinquencies, defaults, and foreclosures, and significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. Some builders who have borrowed from us to fund construction projects on a speculative basis have more than one loan outstanding with us.
A downturn in the housing or real estate market could increase loan delinquencies, defaults, and foreclosures, and significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. Some builders who have borrowed from us to fund construction projects on a speculative basis have more than one loan outstanding with us.
In determining the terms of its deposit accounts, the Bank considers current market interest rates, profitability to the Bank, matching deposit and loan products and its customer preferences and concerns. The Bank actively seeks consumer and commercial checking accounts through checking account acquisition marketing programs.
In determining the terms of its deposit accounts, the Bank considers current market interest rates and profitability to the Bank, matching deposit and loan products and its customer preferences and concerns. The Bank actively seeks consumer and commercial checking accounts through checking account acquisition marketing programs.
Failure by an institution to comply 26 with applicable capital requirements would, if unremedied, result in progressively more severe restrictions on its activities and lead to enforcement actions, including, but not limited to, the issuance of a capital directive to ensure the maintenance of required capital levels and, ultimately, the appointment of the FDIC as receiver or conservator.
Failure by an institution to comply with applicable capital requirements would, if unremedied, result in progressively more severe restrictions on its activities and 26 lead to enforcement actions, including, but not limited to, the issuance of a capital directive to ensure the maintenance of required capital levels and, ultimately, the appointment of the FDIC as receiver or conservator.
To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potentially hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property. Federal Reserve System.
To the extent that legal uncertainty exists in this area, all creditors, including the Bank, which have made loans secured by properties with potentially hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property. Federal Reserve System.
While the list set forth below is not exhaustive, these include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices, and various regulations that implement some or all of the foregoing.
While the list set forth below is not exhaustive, these include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, 29 the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices, and various regulations that implement some or all of the foregoing.
All employees receive semi-annual performance reviews, and new employees undergo a formal 90-day assessment at the end of their probationary period. Additionally, we conduct an annual Employee Survey to gather feedback, with results informing ongoing engagement strategies. The Company’s culture is built on values of integrity, honesty, hard work, and community.
Employees receive semi-annual performance reviews, and new employees undergo a formal 90-day assessment at the end of their probationary period. Additionally, we conduct an annual Employee Survey to gather feedback, with results informing ongoing engagement strategies. The Company’s culture is built on values of integrity, honesty, hard work, and community.
The Bank considers its primary market area to include six sub-markets: primarily rural Grays Harbor County with its historical dependence on the timber and fishing industries; Thurston and Kitsap counties with their dependence on state and federal government; Pierce and King counties with their broadly diversified economic bases; and Lewis County with its dependence on retail trade, manufacturing, industrial services and local government.
The Bank considers its primary market area to include six sub-markets: primarily rural Grays Harbor County with its historical dependence on the timber and fishing industries; Thurston and Kitsap counties with their dependence on state and federal government employment; Pierce and King counties with their broadly diversified economic bases; and Lewis County with its dependence on retail trade, manufacturing, industrial services and local government.
However, the Bank usually obtains private mortgage insurance (“PMI”) on the portion of the principal amount that exceeds 80% of the appraised value of the security property. The maximum loan-to-value ratio on mortgage loans secured by non-owner-occupied properties is generally 80% 8 (90% for loans originated for sale in the secondary market to Freddie Mac or the FHLB).
However, the Bank usually obtains private mortgage insurance (“PMI”) on the portion of the principal amount that exceeds 80% of the appraised value of the security property. The maximum loan-to-value ratio on mortgage loans secured by non-owner-occupied properties is generally 80% (90% for loans originated for sale in the secondary market to Freddie Mac or the FHLB).
The loan servicing spread is generally a minimum of 1.00% on all SBA 7(a) loans. The Bank generally offers SBA 7(a) loans within a range of $50,000 to $1.50 million. Commercial business lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and commercial real estate lending.
The loan servicing spread is generally a minimum of 1.00% on all SBA 7(a) loans. The Bank generally offers SBA 7(a) loans within a range of $50,000 to $1.50 million. 12 Commercial business lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and commercial real estate lending.
To support this, the Company implemented a formal program designed to create an inclusive environment that ensures equitable access to growth and development opportunities while building a workforce that reflects the communities we serve. This program is overseen by our Human Resources Director and focuses on education, training, recruitment, and hiring practices.
To support this, the Company implemented a formal program designed to create an inclusive environment that ensures access to growth and development opportunities while building a workforce that reflects the communities we serve. This program is overseen by our Human Resources Director and focuses on education, training, recruitment, and hiring practices.
According to Washington law, the Bank may not declare or pay a cash dividend on its capital stock if it would cause its net worth to be reduced below (i) the amount required for liquidation accounts or (ii) the net worth requirements, if any, imposed by the Director of the DFI.
According to Washington law, the Bank may not declare or pay a cash dividend on its capital stock if it would cause its net worth to be reduced below (i) the amount 28 required for liquidation accounts or (ii) the net worth requirements, if any, imposed by the Director of the DFI.
Interest received on loans secured by mortgages or deeds of trust on residential properties, certain residential mortgage-backed securities, and certain U.S. government and agency securities is not subject to this tax. Competition The Bank operates in an intensely competitive market for the attraction of deposits and in the origination of loans.
Interest received on loans secured by mortgages or deeds of trust on residential properties, certain residential mortgage-backed securities, and certain U.S. government and agency securities is not subject to this tax. 31 Competition The Bank operates in an intensely competitive market for the attraction of deposits and the origination of loans.
Fischer had served as the Compliance Officer from January 2000 to October 2012 and the Chief Risk Officer from October 2010 to January 2014. Marci A. Basich has been affiliated with the Bank since 1999 and was promoted to Executive Vice President and Chief Financial Officer of the Bank and Company on February 1, 2023. Previously Ms.
Fischer served as the Compliance Officer from January 2000 to October 2012 and the Chief Risk Officer from October 2010 to January 2014. Marci A. Basich has been affiliated with the Bank since 1999 and was promoted to Executive Vice President and Chief Financial Officer of the Bank and Company on February 1, 2023. Previously Ms.
SBA 7(a) loans are all adjustable-rate loans based on the Prime Rate. Under the SBA 7(a) program, the Bank can sell in the secondary market the guaranteed portion of its SBA 7(a) loans and retain the related unguaranteed portion of these loans, as 12 well as the servicing on such loans, for which it is paid a fee.
SBA 7(a) loans are all adjustable-rate loans based on the Prime Rate. Under the SBA 7(a) program, the Bank can sell in the secondary market the guaranteed portion of its SBA 7(a) loans and retain the related unguaranteed portion of these loans, as well as the servicing on such loans, for which it is paid a fee.
Benefit programs available to eligible employees may include 401(k) savings plan, employee stock ownership plan, health and life insurance, health savings accounts and flexible spending accounts, employee assistance program, paid holidays, paid time off, paid volunteer time, paid time off for the employee’s birthday and other leave as applicable.
Benefit programs available to eligible employees may include 401(k) savings plan, employee stock ownership plan, health and life insurance, health savings accounts 32 and flexible spending accounts, employee assistance program, paid holidays, paid time off, paid volunteer time, paid time off for the employee’s birthday and other leave as applicable.
Any company that acquires control becomes subject to regulation as a bank holding company. Depending on circumstances, a notice or application may be required to be filed with appropriate state banking regulators and may be subject to their approval or non-objection. Dividends.
Any company that acquires control becomes subject to regulation as a bank holding company. Depending on circumstances, a notice or application may be required to be filed with appropriate state banking regulators and may be subject to their approval or non-objection. 30 Dividends.
Companies must provide the annual disclosures about cybersecurity risk management and governance beginning with their Form 10-K for fiscal years ending on or after December 15, 2023. 29 Other Consumer Protection Laws and Regulations.
Companies must provide the annual disclosures about cybersecurity risk management and governance beginning with their Form 10-K for fiscal years ending on or after December 15, 2023. Other Consumer Protection Laws and Regulations.
The Bank is subject to consumer protection regulations issued by the CFPB, but as a smaller financial institution, is generally subject to supervision and enforcement by the FDIC and DFI with respect to its compliance with federal and state consumer financial protection laws and regulations.
The Bank is subject to consumer protection regulations issued by the CFPB, but as a smaller financial institution is subject to supervision and enforcement by the FDIC and DFI with respect to its compliance with federal and state consumer financial protection laws and regulations.
If the borrower is other than an individual, the Bank also generally obtains personal guarantees from the principals (with ownership interests of 20% or more) based on a review of personal financial statements. At September 30, 2024, all multi-family loans were performing according to their repayment terms. See "Lending Activities - Non-performing Loans and Delinquencies." Commercial Real Estate Lending .
If the borrower is other than an individual, the Bank also generally obtains personal guarantees from the principals (with ownership interests of 20% or more) based on a review of personal financial statements. At September 30, 2025, all multi-family loans were performing according to their repayment terms. See "Lending Activities - Non-performing Loans and Delinquencies." Commercial Real Estate Lending .
To support this, eligible employees are provided with 20 hours of paid time annually to volunteer with non-profit organizations within the Company’s geographic footprint, directly benefiting the communities we serve. 33 Executive Officers of the Registrant The following table sets forth certain information with respect to the executive officers of the Company and the Bank: Executive Officers of the Company and Bank Age at September 30, 2024 Position Name Company Bank Dean J.
To support this, eligible employees are provided with 20 hours of paid time annually to volunteer with non-profit organizations within the Company’s geographic footprint, directly benefiting the communities we serve. 33 Executive Officers of the Registrant The following table sets forth certain information with respect to the executive officers of the Company and the Bank: Executive Officers of the Company and Bank Age at September 30, 2025 Position Name Company Bank Dean J.
The Bank has historically attempted to minimize this risk by generally limiting the maximum loan-to-value ratio on land and land development loans to 75% of the estimated developed value of the secured property. At September 30, 2024 the largest land development loan was for $11.55 million for a mixed-use development, one- to four-family units and multi-family, located in Thurston County.
The Bank has historically attempted to minimize this risk by generally limiting the maximum loan-to-value ratio on land and land development loans to 75% of the estimated developed value of the secured property. At September 30, 2025 the largest land development loan was for $11.55 million for a mixed-use development, one- to four-family units and multi-family, located in Thurston County.
The Bank had no outstanding balance on this borrowing line of credit at September 30, 2024. For additional information regarding our borrowings, see "Note 11 - FHLB Borrowings and Other Borrowings" of the Notes to Consolidated Financial Statements contained in Item 8 of this report. 24 Bank Owned Life Insurance The Bank has purchased life insurance policies covering certain officers.
The Bank had no outstanding balance on this borrowing line of credit at September 30, 2025. For additional information regarding our borrowings, see "Note 11 - FHLB Borrowings and Other Borrowings" of the Notes to Consolidated Financial Statements contained in Item 8 of this report. 24 Bank Owned Life Insurance The Bank has purchased life insurance policies covering certain officers.
Banking regulators will take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements. Additionally, approval of any regulatory application filed for their review may be dependent on compliance with capital requirements. At September 30, 2024, the Bank was categorized as “well capitalized” under the prompt corrective action regulations of the FDIC.
Banking regulators will take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements. Additionally, approval of any regulatory application filed for their review may be dependent on compliance with capital requirements. At September 30, 2025, the Bank was categorized as “well capitalized” under the prompt corrective action regulations of the FDIC.
If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at September 30, 2024, the Company would have exceeded all regulatory requirements. For additional information, see "Note 17 - Regulatory Matters" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report. Federal Securities Laws.
If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at September 30, 2025, the Company would have exceeded all regulatory requirements. For additional information, see "Note 17 - Regulatory Matters" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report. Federal Securities Laws.
The corporate dividends-received deduction is generally 50.0% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank owns more than 20.0% and less than 80% of the stock of a corporation distributing a dividend, then 65.0% of any dividends received may be deducted. 31 Audits .
The corporate dividends-received deduction is generally 50.0% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank owns more than 20.0% and less than 80% of the stock of a corporation distributing a dividend, then 65.0% of any dividends received may be deducted.
Construction lending affords the Bank the opportunity to achieve higher interest rates and fees with shorter terms to maturity than does its single-family permanent mortgage lending.
Construction lending affords the Bank the opportunity to achieve higher interest rates and fees with shorter terms to maturity than its single-family permanent mortgage lending.
The following table sets forth certain information at September 30, 2024 regarding the dollar amount of loans maturing in the Bank’s portfolio based on their contractual terms to maturity but does not include potential prepayments. Loans having no stated maturity and overdrafts are reported as due in one year or less.
The following table sets forth certain information at September 30, 2025 regarding the dollar amount of loans maturing in the Bank’s portfolio based on their contractual terms to maturity but does not include potential prepayments. Loans having no stated maturity and overdrafts are reported as due in one year or less.
At September 30, 2024, the Bank maintained a credit facility with the FHLB that provided for immediately available borrowings up to an aggregate amount to 45% of the Bank’s total assets, limited by available collateral, under which long-term borrowings totaling $20.00 million and no short-term borrowings were outstanding at September 30, 2024.
At September 30, 2025, the Bank maintained a credit facility with the FHLB that provided for immediately available borrowings up to an aggregate amount to 45% of the Bank’s total assets, limited by available collateral, under which short-term borrowings totaling $20.00 million and no long-term borrowings were outstanding at September 30, 2025.
At September 30, 2024, the Bank met the requirements to be "well capitalized," and the Bank's CET1 capital exceeded the required conservation buffer. For additional information regarding the Bank's regulatory capital requirements, see "Note 17-Regulatory Matters" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report. Prompt Corrective Action.
At September 30, 2025, the Bank met the requirements to be "well capitalized," and the Bank's CET1 capital exceeded the required conservation buffer. For additional information regarding the Bank's regulatory capital requirements, see "Note 17-Regulatory Matters" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report. Prompt Corrective Action.
Savings Bonds; real estate and personal property appraising; providing tax planning and preparation services; and, subject to certain limitations, providing securities brokerage 30 services for customers.
Savings Bonds; real estate and personal property appraising; providing tax planning and preparation services; and, subject to certain limitations, providing securities brokerage services for customers.
Treasury securities adjusted to a constant maturity of one year plus a margin o f 2.75% to 4.00%. The Bank also offers ARM loans tied to the Wall Street Journal prime lending rate ("Prime Rate") index which typically do not have periodic or lifetime adjustment limits.
Treasury securities adjusted to a constant maturity of one year plus a margin o f 2.50% to 4.00%. The Bank also offers ARM loans tied to the Wall Street Journal prime lending rate ("Prime Rate") index which typically do not have periodic or lifetime adjustment limits.
The home buyer may be identified either during or after the construction period, with the risk that the builder will have to debt service the speculative construction loan and pay real estate taxes and other carrying costs of the completed home for a significant time after the completion of construction until the home buyer is identified and a sale is consummated.
The home buyer may be identified either during or after the construction period, with the risk that the builder will have to debt service the speculative construction loan and pay real estate taxes and other carrying costs for a significant time after completion until the home buyer is identified and a sale is consummated.
The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. The Federal Reserve reduced reserve requirement ratios to zero percent effective on March 26, 2020. At September 30, 2024, the reserve requirement of zero percent was still in place. Transactions with Affiliates.
The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. The Federal Reserve reduced the reserve requirement ratios to zero percent effective on March 26, 2020. At September 30, 2025, the reserve requirement of zero percent was still in place. Transactions with Affiliates.
To further promote wellness, we provide initiatives through DEI programs and benefits administration that emphasize self-care, nutrition, work-life balance, and financial education. This sustained focus on health and safety reflects our dedication to fostering a secure and supportive work environment. Total Rewards (Compensation and Benefits).
To further promote wellness, we provide initiatives through the programs and benefits administration that emphasize self-care, nutrition, work-life balance, and financial education. This sustained focus on health and safety reflects our dedication to fostering a secure and supportive work environment. Total Rewards (Compensation and Benefits).
For additional information, see “Item 2. Properties.” Hoquiam, with a population of approximately 8,800, is located in Grays Harbor County which is situated along Washington State’s central Pacific coast. Hoquiam is located approximately 110 miles southwest of Seattle, Washington and 145 miles northwest of Portland, Oregon.
For additional information, see “Item 2. Properties.” Hoquiam, with a population of approximately 8,800, is located in Grays Harbor County along Washington State’s central Pacific coast. Hoquiam is approximately 110 miles southwest of Seattle, Washington and 145 miles northwest of Portland, Oregon.
Each of these markets presents operating risks to the Bank. The Bank’s expansion into Pierce, Thurston, Kitsap, King and Lewis counties represents the Bank’s strategy to expand and diversify its primary market area to become less reliant on the economy of Grays Harbor County.
Each of these markets presents operating risks to the Bank. The Bank’s expansion into Pierce, Thurston, Kitsap, King and Lewis counties reflects the Bank’s strategy to expand and diversify its primary market area and to become less reliant on the economy of Grays Harbor County.
Washington Taxation The Company and the Bank are subject to a business and occupation tax imposed under Washington law at the rate of 1.8% of gross receipts at September 30, 2024. In addition, various municipalities also assess business and occupation taxes at differing rates.
Washington Taxation The Company and the Bank are subject to a business and occupation tax imposed under Washington law at the rate of 1.8% of gross receipts at September 30, 2025. In addition, various municipalities also assess business and occupation taxes at differing rates.
The Company is no longer subject to U.S. federal tax examination by tax authorities for years ended on or before September 30, 2020. For additional information regarding our federal income taxes, see "Note 13-Income Taxes" of the Notes to Consolidated Financial Statements contained in Item 8 of this report.
Audits . The Company is no longer subject to U.S. federal tax examination by tax authorities for years ended on or before September 30, 2021. For additional information regarding our federal income taxes, see "Note 13-Income Taxes" of the Notes to Consolidated Financial Statements contained in Item 8 of this report.
The Bank’s determination of the classification of its assets and the amount of its valuation allowances is subject to review by the FDIC and the DFI which can require a different classification and the establishment of additional loss allowances.
The Bank’s determination of the classification of its assets and the amount of its ACL is subject to review by the FDIC and the DFI which can require a different classification and the establishment of additional loss allowances.
These participation loans are underwritten in accordance with the Bank’s underwriting guidelines and are without recourse to the seller other than for fraud. During the years ended September 30, 2024, 2023 and 2022, the Bank did not purchase any loan participation interests.
These participation loans are underwritten in accordance with the Bank’s underwriting guidelines and are without recourse to the seller other than for fraud. During the years ended September 30, 2025, 2024 and 2023, the Bank did not purchase any loans or loan participation interests.
At September 30, 2024, the Bank’s largest multi-family loan had an outstanding principal balance of $10.07 million and was secured by an apartment complex located in Pierce County. At September 30, 2024, this loan was performing according to its repayment terms. The maximum loan-to-value ratio for multi-family loans is generally limited to not more than 80%.
At September 30, 2025, the Bank’s largest multi-family loan had an outstanding principal balance of $10.22 million and was secured by an apartment complex located in Pierce County. At September 30, 2025, this loan was performing according to its repayment terms. The maximum loan-to-value ratio for multi-family loans is generally limited to not more than 80%.
Borrowings through the FHLB and the Federal Reserve Bank of San Francisco ("FRB") may be used to compensate for reductions in the availability of funds from other sources. Deposit Accounts . Substantially all the Bank's depositors are residents of Washington.
Borrowings through the FHLB and the Federal Reserve Bank of San Francisco ("FRB") may be used to compensate for reductions in the availability of funds from other sources. Deposit Accounts . Substantially all the Bank's depositors (excluding brokered deposits) are residents of Washington.
The Bank has five branches located in Pierce County, and these branches have historically been responsible for a substantial portion of the Bank’s construction lending activities. Thurston County has a population of 299,000 according to the U.S. Census Bureau 2023 estimates and a median family income of $116,700 according to 2024 HUD estimates.
The Bank has five branches located in Pierce County, and these branches have historically been responsible for a substantial portion of the Bank’s construction lending activities. Thurston County has a population of 303,000 according to the U.S. Census Bureau 2024 estimates and a median family income of $116,700 according to 2025 HUD estimates.
With regard to loans originated to builders for speculative projects, changes in the demand, such as for new housing and higher than anticipated building costs, may cause actual results to vary significantly from those estimated.
With regard to loans originated to builders for speculative projects, changes in demand for new housing and higher than anticipated building costs, may cause actual results to vary significantly from those estimated.
However, the Bank believes these risks are less pronounced in its consumer loan portfolio, as a significant portion consists of second mortgage loans and home equity lines of credit. These loans are underwritten to maintain credit risk comparable to one- to four-family residential mortgage loans. At September 30, 2024, three consumer loans totaling $618,000 were on non-accrual status.
However, the Bank believes these risks are less pronounced in its consumer loan portfolio, as a significant portion consists of second mortgage loans and home equity lines of credit. These loans are underwritten to maintain credit risk comparable to one- to four-family residential mortgage loans. At September 30, 2025, five consumer loans totaling $624,000 were on non-accrual status.
Unamortized net deferred loan origination fees totaled $5.43 million at September 30, 2024. Non-performing Loans and Delinquencies. The Bank assesses late fees or penalty charges on delinquent loans of approximately 5% of the monthly loan payment amount.
Unamortized net deferred loan origination fees totaled $5.53 million at September 30, 2025. Non-performing Loans and Delinquencies. The Bank assesses late fees or penalty charges on delinquent loans of approximately 5% of the monthly loan payment amount.
Thurston County is home of Washington State’s capital (Olympia), and its economic base is largely driven by state government related employment. According to the Washington State Employment Security Department, the unemployment rate for the Thurston County area increased to 3.8% at September 30, 2024 from 3.4% at September 30, 2023.
Thurston County is home of Washington State’s capital (Olympia), and its economic base is largely driven by state government related employment. According to the Washington State Employment Security Department, the unemployment rate for the Thurston County area increased to 4.5% at August 31, 2025 from 3.8% at September 30, 2024.
Construction loans must be approved by a member of one of the Bank's Loan Committees or the Bank's Board of Directors. For one- to four-family construction loans meeting Freddie Mac guidelines, approval may be granted by the Regional Manager of Community Lending, the Loan Department Supervisor, or a Bank underwriter, subject to their individual or Loan Committee limits.
Construction loans must be approved by a member of one of the Bank's Loan Committees or the Bank's Board of Directors. For one- to four-family construction loans meeting Freddie Mac guidelines, approval may be granted by the Chief Residential Loan Manager, the Loan Department Supervisor, or a Bank underwriter, subject to their individual or Loan Committee limits.
Loan Originations, Purchases and Sales . During the years ended September 30, 2024, 2023 and 2022, the Bank’s total gross loan originations were $251.44 million, $361.79 million and $572.46 million, respectively. Periodically, the Bank purchases loan participation interests in construction, commercial real estate and multi-family loans, secured by properties generally located in Washington State, from other banks.
Loan Originations, Purchases and Sales . During the years ended September 30, 2025, 2024 and 2023, the Bank’s total gross loan originations were $310.90 million, $251.44 million and $361.79 million, respectively. Periodically, the Bank purchases loan participation interests in construction, commercial real estate and multi-family loans, secured by properties generally located in Washington State, from other banks.
The Bank has two branches located in Kitsap County. The economic base of Kitsap County is largely supported by military related government employment through the U.S. Navy. According to the Washington State Employment Security Department, the unemployment rate for the Kitsap County area increased to 3.8% at September 30, 2024 from 3.5% at September 30, 2023.
The Bank has two branches located in Kitsap County. The economic base of Kitsap County is largely supported by military related government employment through the U.S. Navy. According to the Washington State Employment Security Department, the unemployment rate for the Kitsap County area increased to 4.3% at August 31, 2025 from 3.8% at September 30, 2024.
The Bank conducts operations from: • its main office in Hoquiam (Grays Harbor County); • five branch offices in Grays Harbor County (Ocean Shores, Montesano, Elma and two branches in Aberdeen); • five branch offices in Pierce County (Edgewood, Puyallup, Spanaway, Tacoma and Gig Harbor); 4 • six branch offices in Thurston County (Tumwater, Yelm, two branches in Lacey and two branches in Olympia); • two branch offices in Kitsap County (Poulsbo and Silverdale); • a branch office in King County (Auburn); and • three branch offices in Lewis County (Winlock, Toledo and Chehalis).
The Bank conducts operations from: 4 • its main office in Hoquiam (Grays Harbor County); • five branch offices in Grays Harbor County (Ocean Shores, Montesano, Elma and two branches in Aberdeen); • five current branch offices in Pierce County (Edgewood, Puyallup, Spanaway, Tacoma, and Gig Harbor and another location opening soon (University Place)); • six branch offices in Thurston County (Tumwater, Yelm, two branches in Lacey and two branches in Olympia); • two branch offices in Kitsap County (Poulsbo and Silverdale); • a branch office in King County (Auburn); and • three branch offices in Lewis County (Winlock, Toledo and Chehalis).
These initiatives collectively underscore our commitment to fostering a workforce deeply connected to the needs and values of our community. We are dedicated to continued growth, guided by the principles of service, integrity, and community stewardship. Workforce Representation. As of September 30, 2024, the Company had 274 full-time employees and 14 part-time and on-call employees.
These initiatives collectively underscore our commitment to fostering a workforce deeply connected to the needs and values of our community. We are dedicated to continued growth, guided by the principles of service, integrity, and community stewardship. Workforce Representation. As of September 30, 2025, the Company had 271 full-time employees and 9 part-time and on-call employees.
At September 30, 2024, the largest outstanding custom and owner/builder construction loan had an outstanding balance of $2.00 million (fully disbursed) and was performing according to its repayment terms.
At September 30, 2025, the largest outstanding custom and owner/builder construction loan had an outstanding balance of $2.36 million (fully disbursed) and was performing according to its repayment terms.
The workforce's ethnic composition was 76% White, 9% Hispanic or Latinx, 4% Asian, 5% two or more races, 3% Native Hawaiian or Pacific Islander, 2% American Indian or Alaska Native, and 1% African American or Black.
The workforce's ethnic composition was 77% White, 9% Hispanic or Latinx, 4% Asian, 4% two or more races, 2% Native Hawaiian or Pacific Islander, 2% American Indian or Alaska Native, and 1% African American or Black.
The Bank maintains one short-term borrowing line with the FRB with total credit based on eligible collateral. At September 30, 2024, the Bank had no outstanding balance on this line, with $86.63 million available for future borrowings. A short-term borrowing line of credit of $50.00 million is also maintained at Pacific Coast Bankers' Bank ("PCBB").
The Bank maintains one short-term borrowing line with the FRB with total credit based on eligible collateral. At September 30, 2025, the Bank had no outstanding balance on this line, with $70.57 million available for future borrowings. A short-term borrowing line of credit of $50.00 million is also maintained at Pacific Coast Bankers' Bank ("PCBB").
All construction loans must be approved by a member of one of the Bank’s Loan Committees or the Bank’s Board of Directors, or in the case of one- to four-family construction loans that meet Freddie Mac guidelines, by the Regional Manager of Community Lending, the Loan Department Supervisor or a Bank underwriter.
All construction loans must be approved by a member of one of the Bank’s Loan Committees or the Bank’s Board of Directors, or in the case of one- to four-family construction loans that meet Freddie Mac guidelines, by the Chief Residential Loan Manager, the Loan Department Supervisor or a Bank underwriter.
(2) Amounts for fiscal 2024 were calculated using the Current Expected Credit Loss (“CECL”) methodology to determine the allowance for credit losses. Amounts reported prior to October 1, 2023, were based on the previous incurred loss methodology, which is not directly comparable to the allowance for credit losses calculated under the CECL methodology. 7 Residential One- to Four-Family Lending .
(2) Amounts for fiscal years 2025 and 2024 were calculated using the Current Expected Credit Loss (“CECL”) methodology to determine the ACL. Amounts reported prior to October 1, 2023, were based on the previous incurred loss methodology, which is not directly comparable to the ACL calculated under the CECL methodology. 7 Residential One- to Four-Family Lending .
As of September 30, 2024, $177.40 million of the Bank's uninsured deposits were public funds, all of which were fully secured by qualified investment securities. The following table sets forth the portion of our time deposits that are in excess of the FDIC insurance limit, by remaining time until maturity, as of September 30, 2024 (dollars in thousands).
As of September 30, 2025, $154.67 million of the Bank's uninsured deposits were public funds, all of which were fully secured by qualified investment securities. The following table sets forth the portion of our time deposits that are in excess of the FDIC insurance limit, by remaining time until maturity, as of September 30, 2025 (dollars in thousands).
These policies are recorded at their cash surrender value, net of any cash surrender charges. Increases in cash surrender value, net of policy premiums, and proceeds from death benefits are recorded in non-interest income. At September 30, 2024, the cash surrender value of bank owned life insurance (“BOLI”) was $23.61 million. How We Are Regulated General.
These policies are recorded at their cash surrender value, net of any cash surrender charges. Increases in cash surrender value, net of policy premiums, and proceeds from death benefits are recorded in non-interest income. At September 30, 2025, the cash surrender value of bank owned life insurance (“BOLI”) was $21.83 million. How We Are Regulated General.
The economy in Pierce County is diversified with the presence of military related government employment (Joint Base Lewis-McChord), transportation and shipping employment (Port of Tacoma), and aerospace related employment. According to the Washington State Employment Security Department, the unemployment rate for the Pierce County area increased to 4.5% at September 30, 2024 from 3.9% at September 30, 2023.
The economy in Pierce County is diversified with the presence of military related government employment (Joint Base Lewis-McChord), transportation and shipping employment (Port of Tacoma), and aerospace related employment. According to the Washington State Employment Security Department, the unemployment rate for the Pierce County area increased to 5.0% at August 31, 2025 from 4.5% at September 30, 2024.
Speculative one- to four-family construction loans are made to home builders and are termed “speculative” because the home builder does not have, at the time of loan origination, a signed contract with a home buyer who has a commitment for permanent financing with either the Bank or another lender for the finished home.
Speculative one- to four-family construction loans are made to home builders and are termed “speculative” because the home builder does not have, at the time of loan origination, a signed contract with a home buyer who has a commitment for permanent financing.
To promote diversity, we continue to refine our approach by advertising open positions on platforms that reach diverse audiences. We are committed to a fair and equitable hiring process, ensuring all roles are posted both internally and externally. 32 Diversity, Equity, and Inclusion (“DEI”). The Company values the unique identities, perspectives, and contributions of its employees.
To promote diversity, we continue to refine our approach by advertising open positions on platforms that reach diverse audiences. We are committed to a fair and equitable hiring process, ensuring roles are posted both internally and externally. Corporate Citizenship. The Company values the unique identities, perspectives, and contributions of its employees.
Currently, the Bank is originating land development loans on a limited basis. Land development loans are secured by a lien on the property and typically are made for a period of two to five years with fixed or variable interest rates, with loan-to-value ratios generally not exceeding 75%.
Land development loans are secured by a lien on the property and typically are made for a period of two to five years with fixed or variable interest rates, with loan-to-value ratios generally not exceeding 75%.
Grays Harbor County has a population of 77,000 according to the United States ("U.S.") Census Bureau 2023 estimates and a median family income of $90,000 according to 2024 estimates from the Department of Housing and Urban Development (“HUD”). The economic base in Grays Harbor County has been historically dependent on the timber and fishing industries.
Grays Harbor County has a population of 78,000 according to the United States ("U.S.") Census Bureau 2024 estimates and a median family income of $94,800 according to 2025 estimates from the Department of Housing and Urban Development (“HUD”). The economic base in Grays Harbor County has been historically dependent on the timber and fishing industries.
Our efforts reflect our commitment to fostering a robust and engaged workforce, highlighting our focus on talent, well-being, development, and strategic alignment. We are proud of the progress made in enhancing our human capital, recognizing it as a fundamental driver of the Company’s sustained growth.
Our emphasis on nurturing a dynamic, engaged, and resilient workforce remains central to our success. Our efforts reflect our commitment to fostering a robust and engaged workforce, highlighting our focus on talent, well-being, development, and strategic alignment. We are proud of the progress made in enhancing our human capital, recognizing it as a fundamental driver of the Company’s sustained growth.
The construction phase of these loans generally lasts up to 12 months with fixed interest rates typically ranging from 4.88% to 9.50% and with loan-to-value ratios of 80% (or up to 95% with PMI) of the appraised estimated value of the completed property.
The construction phase generally lasts up to 12 months, with fixed-interest rates typically ranging from 4.88% to 9.00% and loan-to-value ratios of up to 80% (or up to 95% with PMI) of the appraised "as completed" value of the property.
According to the Washington Administrative Code, capital and surplus are defined as a bank's Tier 1 capital, Tier 2 capital and the balance of a bank's allowance for credit losses not included in the bank's Tier 2 capital as reported in the bank's call report.
According to the Washington Administrative Code, capital and surplus are defined as a bank's Tier 1 capital, Tier 2 capital and the balance of a bank's ACL not included in the bank's Tier 2 capital as reported in the bank's call report.
Other industries that support the economic base are tourism, agriculture, shipping, transportation and technology. According to the Washington State Employment Security Department, the unemployment rate in Grays Harbor County increased to 5.5% at September 30, 2024 from 4.8% at September 30, 2023.
Other industries that support the economic base are tourism, agriculture, shipping, transportation and technology. According to the Washington State Employment Security Department, the unemployment rate in Grays Harbor County increased to 5.6% at August 31, 2025 from 5.5% at September 30, 2024.
Lewis County has a population of 86,000 according to the U.S. Census Bureau 2022 estimates and a median family income of $90,000 according to 2024 HUD estimates. The economic base in Lewis County is supported by manufacturing, retail trade, local government and industrial services.
Lewis County has a population of 87,000 according to the U.S. Census Bureau 2024 estimates and a median family income of $94,800 according to 2025 HUD estimates. The economic base in Lewis County is supported by manufacturing, retail trade, local government and industrial services.
The Bank has six branches located in Thurston County. This county has historically had a stable economic base primarily attributable to the state government presence. Kitsap County has a population of 278,000 according to the U.S. Census Bureau 2023 estimates and a median family income of $119,700 according to 2024 HUD estimates.
The Bank has six branches located in Thurston County. This county has historically had a stable economic base primarily attributable to the state government presence. Kitsap County has a population of 281,000 according to the U.S. Census Bureau 2024 estimates and a median family income of $124,300 according to 2025 HUD estimates.
At September 30, 2024, the largest aggregate outstanding balance to one borrower for speculative one- to four-family construction loans to taled $2.38 million (including $897,000 of undisbursed loans in process) and was comprised of four loans that were performing according to their repayment terms. The Bank also provides construction financing for multi-family and commercial properties.
At September 30, 2025, the largest aggregate outstanding balance to one borrower for speculative one- to four-family construction loans to taled $1.50 million (including $854,000 of undisbursed loans in process) and was comprised of two loans that were performing according to their repayment terms. The Bank also provides construction financing for multi-family and commercial properties.
Amounts reported prior to October 1, 2023, were based on the previous incurred loss methodology, which is not directly comparable to the allowance for credit losses calculated under the CECL methodology.
Amounts reported prior to October 1, 2023, were based on the previous incurred loss methodology, which is not directly comparable to the ACL calculated under the CECL methodology.
Substandard loans are classified as those loans that are inadequately protected by the current net worth and paying capacity of the obligor, or of the collateral pledged. Assets classified as substandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt.
There are three classifications for problem assets: substandard, doubtful and loss. Substandard loans are classified as those loans that are inadequately protected by the current net worth and paying capacity of the obligor, or of the collateral pledged. Assets classified as substandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt.
The Bank has six branches (including its home office) located in the county. Pierce County is the second most populous county in the state and has a population of 929,000 according to the U.S. Census Bureau 2023 estimates. The county’s median family income is $112,300 according to 2024 HUD estimates.
The Bank has six branches (including its home office) located in the county. Pierce County is the second most populous county in the state and has a population of 941,000 according to the U.S. Census Bureau 2024 estimates. The county’s median family income is $120,800 according to 2025 HUD estimates.
Speculative construction loans are generally originated for a term of 12 months, with current rates generally ranging fr om 6.50% to 10.50%, and with a loan-to-value ratio of no more than 80 % of the appraised value of the completed property.
Speculative construction loans are generally originated for a term of 12 months, with current rates generally ranging fr om 8.00% to 9.25%, and with a loan-to-value ratio of no more than 80% of the appraised value of the completed property.
At September 30, 2024, the Bank had $2.04 million in FHLB stock, which was in compliance with this requirement. The FHLB pays dividends quarterly, and the Bank received $158,000 in dividends during the year ended September 30, 2024.
At September 30, 2025, the Bank had $2.05 million in FHLB stock, which was in compliance with this requirement. The FHLB pays dividends quarterly, and the Bank received $156,000 in dividends during the year ended September 30, 2025.
A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk: • Total reported loans for construction, land development and other land represent 100% or more of the bank’s total regulatory capital; or 27 • Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total regulatory capital and the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.
A bank that has experienced rapid growth in commercial real estate lending has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk: • Total reported loans for construction, land development and other land represent 100% or more of the bank’s total regulatory capital; or • Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total regulatory capital and the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. 27 The guidance provides that the strength of an institution’s lending and risk management practices with respect to such concentrations will be taken into account in supervisory guidance on evaluation of capital adequacy.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA deterioration in economic conditions in the market areas we serve as a result of inflation, a recession, war, geopolitical conflicts, adverse weather or other factors could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations: • loan delinquencies, problem assets and foreclosures may increase; • we may increase our ACL; • the sale of foreclosed assets may slow; • demand for our products and services may decline possibly resulting in a decrease in our total loans, total deposits, or assets; • collateral for loans made may decline in value, exposing us to increased risk loans, reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans; • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and • reduction in our low-cost or noninterest-bearing deposits.
Biggest changeA deterioration in economic conditions in the market areas we serve could result in: • Higher loan delinquencies, problem assets and foreclosures; • an increase in our ACL; • the slowing of foreclosed asset sales; • a decline in demand for our products and services; • a decline in collateral values linked to our loans, thereby diminishing borrowing capacities and asset values tied to existing loans; • a decline in the net worth and liquidity of loan guarantors, which may impair their ability to honor commitments to us; and • a reduction in our low-cost or non-interest-bearing deposits.
We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations that could increase our costs of operations. The financial services industry is extensively regulated. Federal banking regulations are designed primarily to protect the deposit insurance funds and consumers, not to benefit a company's shareholders.
We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations that could increase our costs of operations. The financial services industry is extensively regulated. Federal banking regulations are designed primarily to protect deposit insurance funds and consumers, not to benefit a company’s shareholders.
We are susceptible to fraudulent activity that may be committed against us or our customers which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our customers' information, misappropriation of assets, privacy breaches against our customers, litigation or damage to our reputation.
We are susceptible to fraudulent activity that may be committed against us or our customers which may result in financial losses, increased costs, disclosure or misuse of our information or our customers' information, misappropriation of assets, privacy breaches, litigation or damage to our reputation.
During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the 40 decline in loan originations.
During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations.
Risks Related to Cybersecurity, Third-Parties and Technology As of September 30, 2024 there has not been any cybersecurity or related breach of the risk factors discussed below that would require disclosure. The financial services market is undergoing rapid technological changes and, if we are unable to stay current with those changes, we may not be able to effectively compete.
Risks Related to Cybersecurity, Third Parties and Technology As of September 30, 2025 there has not been any cybersecurity or related breach of the risk factors discussed below that would require disclosure. The financial services market is undergoing rapid technological changes and, if we are unable to stay current with those changes, we may not be able to effectively compete.
Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our balance sheet or projected operating results.
Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. Also, our interest rate risk modeling techniques and assumptions may not fully capture the impact of actual interest rate changes on our balance sheet or projected operating results.
As a result, our ability to effectively compete to retain or acquire new business may be impaired, and our business, financial condition or results of operations may be adversely affected. We are subject to certain risks in connection with our use of technology. Our security measures may not be sufficient to mitigate the risk of a cyber-attack.
As a result, our ability to effectively compete to retain or acquire new business may be impaired, and our business, financial condition or results of operations may be adversely affected. We are subject to certain risks in connection with our use of technology. Our security measures may not be sufficient to prevent the risk of a cyber-attack.
Increases in criminal activity levels and sophistication, advances in computer capabilities, vulnerabilities in third-party technologies (including browsers and operating systems) or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our clients and underlying transactions.
Increases in criminal activity levels and sophistication, advances in computer capabilities, vulnerabilities in third-party technologies (including browsers and operating systems) or other developments increases the likelihood of a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our clients and underlying transactions.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity” of this Form 10-K. Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be exceedingly high.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity” of this Form 10-K. Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be exceedingly high.
If delinquencies increase and we are unable to effectively manage our non-performing assets, our losses and troubled assets could increase significantly, materially impacting our financial condition and results of operations. Risk Related to our Business Strategy We may be adversely affected by risks associated with completed and potential acquisitions.
If delinquencies increase and we are unable to effectively manage our non-performing assets, our losses and troubled assets could increase significantly, which could materially and adversely impact our financial condition and results of operations. Risk Related to our Business Strategy We may be adversely affected by risks associated with completed and potential acquisitions.
For loans that do not share similar risk characteristics and cannot be evaluated on a collective basis, the Company will evaluate the loan individually using the present value of the expected future cash flows or the fair value of the underlying collateral.
For loans that do not share similar risk characteristics and cannot be evaluated on a collective basis, we evaluate the loan individually using the present value of the expected future cash flows or the fair value of the underlying collateral.
The appropriate level of the allowance of credit losses is determined by management through periodic comprehensive reviews and consideration of several factors, including, but not limited to our collective loss reserve, for loans evaluated on a pool basis with similar risk characteristics based on our life of loan historical default and loss experience, certain macroeconomic factors, reasonable and supportable forecasts, regulatory requirements, management’s expectations of future events and certain qualitative factors.
The level of the ACL is determined by management through periodic comprehensive reviews and consideration of several factors, including, but not limited to our collective loss reserve, for loans evaluated on a pool basis with similar risk characteristics based on our life of loan historical default and loss experience, certain macroeconomic factors, reasonable and supportable forecasts, regulatory requirements, management’s expectations of future events and certain qualitative factors.
Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. The USA PATRIOT and Bank Secrecy Acts require financial institutions to implement programs to prevent their operations from being used for money laundering, terrorist financing, or other illicit activities.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and the policies of governmental and regulatory agencies, particularly the Federal Reserve.
Our methodology for estimating the fair value of loan servicing rights is highly sensitive to changes in assumptions, such as prepayment speeds. The effect of changes in market interest rates on estimated rates of loan prepayments represents the predominant risk characteristic underlying the loan servicing rights portfolio.
Our methodology for estimating the fair value of loan servicing rights is highly sensitive to changes in assumptions, such as prepayment speeds, mortgage refinance activity, and housing market conditions. The effect of changes in market interest rates on estimated rates of loan prepayments represents the predominant risk characteristic underlying the loan servicing rights portfolio.
As part of our general growth strategy, on October 1, 2018, we completed the acquisition of South Sound Bank, a Washington-state chartered bank, headquartered in Olympia, Washington. Although our business strategy emphasizes organic expansion, we also look for and evaluate potential acquisition opportunities.
As part of our general growth strategy, on October 1, 2018, we completed the acquisition of South Sound Bank, a Washington-state chartered bank, headquartered in Olympia, Washington. Although our business strategy emphasizes organic expansion, we continue to evaluate potential acquisition opportunities.
We have concluded that we do not have a concentration in commercial real estate lending because our balance in commercial real estate loans (including owner-occupied loans) at September 30, 2024 represented 290.74% of total capital.
We have concluded that we do not have a concentration in commercial real estate lending because our balance in commercial real estate loans (including owner-occupied loans) at September 30, 2025 represented 283.05% of total capital.
Significant charge-offs to our OREO may have an adverse effect on our financial condition and results of operations. Other Risks Related to Our Business Ineffective liquidity management could adversely affect our financial results and condition. Liquidity is essential to our business. We rely on several sources to meet our potential liquidity demands.
Significant charge-offs to our OREO may have an adverse effect on our financial condition and results of operations. Other Risks Related to Our Business Ineffective liquidity management could adversely affect our financial results and condition. Liquidity is essential to our business.
Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Nationally, reported incidents of fraud and other financial crimes have increased. We have also experienced losses due to apparent fraud and other financial crimes.
Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Nationally, reported incidents of fraud and other financial crimes have increased.
This type of lending is highly sensitive to regional economic conditions, which can affect borrowers' ability to meet their payment obligations and make loss levels difficult to predict.
This type of lending is particularly sensitive to regional economic conditions, which may impair borrowers’ ability to meet their payment obligations and make loss levels difficult to predict.
If any of the circumstances described in the following risk factors actually occur to a significant degree, the value of our common stock could decline, and you could lose all or part of your investment. This report is qualified in its entirety by these risk factors.
If any of the circumstances described in the following risk factors actually occur to a significant degree, the value of our common stock could decline, and you could lose all or part of your investment.
If the interest rates paid on deposits and borrowings increase at a faster rate than the interest received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected.
If the interest rates paid on deposits and borrowings increase at a faster rate than the interest received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Similarly, if rates earned decline more rapidly than rates paid, our margins may compress.
Factors such as higher interest rates, recessionary conditions, lower real estate sales volumes and prices, and elevated unemployment may lead to higher loan delinquencies, problem assets, and reduced demand for our products and services, adversely impacting our capital, liquidity, and financial condition.
Factors such as higher interest rates, recessionary conditions, declining real estate sales volumes and prices, and elevated unemployment may contribute to higher loan delinquencies, problem assets, and reduced demand for our lending products, which could adversely affect our capital, liquidity, and financial condition.
Risks Related to Economic Conditions Our business may be adversely affected by downturns in the national economy and in the economies in our market areas. Substantially all our loans are to businesses and individuals in the state of Washington.
This report is qualified in its entirety by these risk factors. 34 Risks Related to Economic Conditions Our business may be adversely affected by downturns in the national economy and in the economies in our market areas. Substantially all our loans are to businesses and individuals in the state of Washington.
There can be no assurance that the declines in market value will not result in ACL on investments, and lead to accounting charges that could have a material adverse effect on our business, financial condition and results of operations.
There can be no assurance that declines in market value will not result in credit-related losses or accounting charges, which could have a material adverse effect on our business, financial condition, and results of operations.
The Company analyzes investment securities to determine whether there have been any events or economic circumstances to indicate that a security has incurred a credit-related loss. The Company considers many factors including recent events specific to the issuer or industry, and for securities, external credit ratings and recent downgrades.
We regularly analyze investment securities to determine whether there have been 39 any events or economic circumstances to indicate that a security has incurred a credit-related loss. In making these assessments, we consider many factors including recent events specific to the issuer or industry, and for securities, external credit ratings and recent downgrades.
Credit component losses are reported in allowance for credit losses in the income statement when the present value of expected future cash flows is less than the amortized cost.
Credit-related losses are recorded in the ACL in the income statement when the present value of expected future cash flows is less than the amortized cost.
Our business may be adversely affected by credit risk associated with residential property. At September 30, 2024, $347.04 million, or 22.9% of our total loan portfolio was secured by one- to four-family mortgage loans and home equity loans.
Our business may be adversely affected by credit risk associated with residential property. At September 30, 2025, $368.17 million, or 23.4% of our total loan portfolio, was comprised of one- to four-family mortgage loans and home equity loans.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances, yet might result in the Company’s reporting materially different results than would have been reported under a different alternative. 43 Certain accounting policies, most notably the accounting for credit losses, are critical to presenting the Company’s financial condition and results of operations.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances, yet might result in the Company’s reporting materially different results than would have been reported under a different alternative.
The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes.
The determination of the appropriate level of the ACL inherently involves a high degree of subjectivity and requires us to make significant estimates of credit risks and future trends, all of which may change materially.
Some of our competitors have substantially greater resources to invest in technological improvements and will be able to invest more heavily in developing and adopting new technologies, which may put us at a competitive disadvantage. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.
Some of our competitors have substantially greater resources to invest in technological improvements and will be able to invest more heavily in developing and adopting new technologies, which may put us at a competitive disadvantage.
These regulations may sometimes impose significant limitations on our operations. These regulations, along with existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures.
These regulations may sometimes impose significant limitations on our operations. Along with existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations, they govern how financial institutions conduct business, implement strategic initiatives, comply with tax obligations, and report financial results.
If our estimates are incorrect, the allowance for credit losses for loans may not be sufficient to cover losses inherent in our loan portfolio, resulting in the need for increases in our allowance for credit losses through the provision for credit losses which is charged against income.
If our estimates are incorrect, the ACL for loans may not be sufficient to cover losses inherent in our loan portfolio, resulting in the need for increases in the ACL 37 through additional provisions, which would reduce income.
Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but these changes could also affect: (1) our ability to originate and/or sell loans and obtain deposits; (2) the fair value of our financial assets and liabilities, which could negatively impact shareholders’ equity, and our ability to realize gains from the sale of such assets; (3) our ability to obtain and retain deposits in competition with other available investment alternatives; (4) the ability of our borrowers to repay adjustable or variable rate loans; and (5) the average duration of our investment securities portfolio and other interest-earning assets.
Changes in monetary policy, including interest rate shifts, may affect: (1) the interest we earn on loans and investments and the interest we pay on deposits and borrowings; (2) our ability to originate and/or sell loans and attract deposits; (3) the fair value of our financial assets and liabilities, which may impact shareholders’ equity and our ability to realize gains from the sale of such assets; (4) our competitiveness in attracting and retaining deposits relative to other investment alternatives; (5) the ability of our borrowers to repay adjustable or variable rate loans; and (6) the average duration of our investment securities and other interest-earning assets.
Risk Related to Market Interest Rates Changes in interest rates may reduce our net interest income and may result in higher defaults in a rising rate environment. Our earnings and cash flows are largely dependent upon our net interest income.
If integration efforts are unsuccessful, acquisitions may not be accretive to earnings in the short or long term. 38 Risk Related to Market Interest Rates Changes in interest rates may reduce our net interest income and may result in higher defaults in a rising rate environment. Our earnings and cash flows are largely dependent upon our net interest income.
Noncredit component losses are recorded in other comprehensive income (loss) when the Company (1) does not intend to sell the security or (2) is not more likely than not to have to sell the security prior to the security’s anticipated recovery.
Losses not related to credit are recorded in other comprehensive income (loss) when we (1) do not intend to sell the security, or (2) are not more likely than not to sell the security prior to its anticipated recovery.
At September 30, 2024, we had $313.82 million in certificates of deposit that mature within one year and $1.28 billion in non-interest bearing, NOW checking, savings and money market accounts. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment.
At September 30, 2025, we had $406.99 million in certificates of deposit that mature within one year and $1.27 billion in non-interest bearing, NOW checking, savings and money market accounts. Retaining these deposits in a rising rate environment may require us to offer higher rates, increasing our cost of funds.
As a result, these loans may experience a higher rate of default in a rising interest rate environment. Changes in interest rates also affect the value of our investment securities available for sale. Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates.
In addition, a substantial amount of our residential mortgage loans and home equity lines of credit have adjustable interest rates. As a result, these loans may experience a higher rate of default in a rising interest rate environment. Changes in interest rates also affect the fair value of our investment securities available for sale.
Any decline in available funding in amounts adequate to finance our activities or on terms which are acceptable could adversely impact our ability to originate loans, invest in securities, meet our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could, in turn, have a material adverse effect on our business, financial condition and results of operations.
Any decline in available funding in amounts sufficient to finance our operations or on acceptable terms could impair our ability to originate loans, invest in securities, meet operating expenses, repay borrowings, or satisfy deposit withdrawal demands. These events could have a material adverse effect on our business, financial condition, and results of operations. See “Item 7.
There can be no assurance that we will successfully identify suitable acquisition candidates, complete acquisitions or successfully integrate acquired operations into our existing operations or expand into new markets.
There can be no assurance that we will successfully identify suitable acquisition candidates, complete acquisitions or successfully integrate acquired operations into our existing operations or expand into new markets. The consummation of any future acquisitions may dilute shareholder value or adversely affect our operating results during the integration period.
If our non-performing assets increase, our earnings will be adversely affected. At September 30, 2024, our non-performing assets (which consisted solely of non-accruing loans, non-accrual investment securities, and OREO) were $3.94 million, or 0.2% of total assets.
At September 30, 2025, our non-performing assets (which consisted solely of non-accruing loans, non-accrual investment securities, and OREO) were $4.66 million, or 0.23% of total assets.
Management also recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our allowance may be insufficient to absorb losses without significant additional provisions.
Management also recognizes that significant growth in loan portfolios, new loan products and the refinancing of existing loans may result in unseasoned portfolios that do not perform in line with historical or projected trends, increasing the risk that our ACL may be insufficient.
The financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. Our future success will depend, in part, on our ability to keep pace with the technological changes and to use technology to satisfy and grow customer demand for our products and services and to create additional efficiencies in our operations.
Our future success will depend, in part, on our ability to keep pace with technological innovation, including digital banking platforms, artificial intelligence, and data analytics, and to use technology to satisfy and grow customer demand for our products and services, enhance the customer experience, and to create additional efficiencies in 41 our operations.
Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a downturn in the Washington markets in which our loans and deposits are concentrated, negative operating results, or adverse regulatory action against us.
Factors that could limit our access to liquidity include a decrease in business activity in the Washington markets where our loans and deposits are concentrated, negative operating results, adverse regulatory action, disruptions in the financial markets, or negative views and expectations regarding the financial services industry.
If our investments in real estate are not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation allowances, our earnings could be reduced .
Future decreases in interest rates could decrease the fair value of our loan servicing rights below their recorded amount, which would decrease our earnings. If our investments in real estate are not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation allowances, our earnings could be reduced .
Recessionary conditions or adverse economic conditions in our local market areas of Grays Harbor, Pierce, Thurston, King, Kitsap and Lewis counties Washington, which we consider to be our primary market area, may reduce our rate of growth, affect our customers' ability to repay loans and adversely impact our business, financial condition, and results of operations.
Adverse economic developments in our primary market areas of Grays Harbor, Pierce, Thurston, King, Kitsap, and Lewis counties Washington, could also slow our growth, impair our customers’ ability to repay loans, and otherwise negatively impact our business, financial condition, and results of operations.
Every loan carries a risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment.
Our allowance for credit losses on loans may not be sufficient to absorb losses in our loan portfolio. Lending money is a substantial part of our business. Every loan carries a risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment.
A decline in residential real estate values, particularly in the Washington housing market, may reduce the value of collateral securing these loans and increase our risk of loss if borrowers default. Some of our residential mortgage loans are secured by properties with little or no borrower equity, either due to high loan-to-value ratios at origination or declining home values.
Some of our residential mortgage loans are secured by properties with little or no borrower equity, either due to high loan-to-value ratios at origination or subsequent declines in property values. These loans are more vulnerable to default and loss in a declining market. Additionally, home equity lines of credit secured by second mortgages present heightened risk.
Any of these results could have a material adverse effect on our business, financial condition, results of operations and growth prospects. 41 Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations. Climate change continues to be a pressing concern, prompting heightened awareness and action on a global scale.
Any of these outcomes could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations. The effects of climate change continue to raise significant concerns about the state of the environment.
We cannot assure you that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third-parties on which we rely.
We cannot assure you that these failures, interruptions, or breaches will not occur or that they will be adequately addressed by us or by the third parties on which we rely. We may not be insured against all types of losses associated with these events, and available coverage may be inadequate.
This risk is affected by, among other things: • the cash flow of the borrower and/or the project being financed; • the changes and uncertainties as to the future value of the collateral, in the case of a collateralized loan; • the duration of the loan; • the credit history of a particular borrower; and • changes in economic and industry conditions. 37 To address these risks, we maintain an allowance for credit losses on loans, which is a reserve established through a provision for credit losses on loans charged against operating income, that we believe is appropriate to provide for expected losses in our loan portfolio.
This risk is affected by, among other things: • the cash flow of the borrower and/or the project being financed; • the changes and uncertainties as to the future value of the collateral, in the case of a collateralized loan; • the duration of the loan; • the credit history of a particular borrower; and • changes in economic and industry conditions.
Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our business financial condition and results of operations.
Any such occurrence may damage our reputation, result in a loss of customers and business, increase regulatory scrutiny, or expose us to legal liability, any of which may have a material adverse effect on our business, financial condition, and results of operations. Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
Real estate values are affected by various other factors, including changes in general or regional economic conditions, government rules or policies and natural disasters such as fires and earthquakes. If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected.
Real estate values are affected by a range of factors, including economic conditions, regulatory changes, natural disasters, and trade-related issues affecting construction costs and material availability. If we must liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected.
Any such charge could have a material adverse effect on our results of operations. We are subject to an extensive body of accounting rules and best practices. Periodic changes to such rules may change the treatment and recognition of critical financial line items and affect our profitability.
Changes in market conditions, regulatory developments, or economic uncertainty could increase the likelihood of goodwill impairment. Any such charge could have a material adverse effect on our results of operations. We are subject to an extensive body of accounting rules and best practices.
Commercial real estate loans also expose a lender to greater credit risk than loans secured by residential real estate, because the collateral securing these loans typically cannot be sold as easily as residential real estate. In addition, many of our commercial real estate loans are not fully amortizing and contain large balloon payments upon maturity.
Commercial real estate loans also expose a lender to greater credit risk than loans secured by residential real estate due to the relative illiquidity of the collateral. Many of these loans are not fully amortizing and include large balloon payments at maturity, which may require the borrower to refinance or sell the property.
They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. For more information, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” contained in this 2024 Form 10-K.
Materially different amounts could be reported under different conditions or using different assumptions or estimates, particularly in the current environment of inflationary pressures, interest rate volatility, changing credit quality trends, and evolving regulatory guidance. For more information, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” contained in this 2025 Form 10-K.
Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may also require an increase in the allowance for credit losses.
Deterioration in economic conditions, new information regarding existing loans, identification of additional problem loans, and other factors, both within and outside of our control, may also require an increase in the ACL. Bank regulatory agencies also periodically review our ACL and may require us to increase the provision or recognize further charge-offs based on their judgment.
As discussed below, we are required to assess our goodwill for impairment at least annually, and any goodwill impairment charge could have a material adverse effect on our results of operation and financial condition; and • We expect that our net income will increase following an acquisition; however, we also expect our general and administrative expenses to increase, which could result to an increase in our efficiency ratio.
We are required to assess goodwill for impairment at least annually, and any impairment charge could materially and adversely affect our results of operations and financial condition; and • While we expect acquisitions to contribute to net income , they may also increase general and administrative expenses, which could raise our efficiency ratio.
We may experience decreases in the fair value of our loan servicing rights, which could reduce our earnings. Loan servicing rights are capitalized at estimated fair value when acquired through the origination of loans that are subsequently sold with servicing rights retained. At September 30, 2024, our loan servicing rights totaled $1.37 million.
Loan servicing rights are capitalized at estimated fair value when acquired through the origination of loans that are subsequently sold with servicing rights retained. At September 30, 2025, our loan servicing rights totaled $815,000. Loan servicing rights are amortized to servicing income on loans sold over the period of estimated net servicing income.
If these issues or liabilities exceed our estimates, our results of operations and financial condition may be materially negatively affected; • We could experience higher than expected deposit attrition; • The acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity into our company to make the transaction economically successful.
If these issues or liabilities exceed our estimates, our results of operations and financial condition may be materially and adversely affected; • We could experience higher than expected deposit attrition, which could reduce funding sources and impact liquidity; • The integration of systems, procedures, and personnel is complex and time-consuming, and may disrupt customer relationships and internal operations.
Interest rates do not necessarily move in the same direction or by the same magnitude as the prices of goods and services. Risks Related to our Lending Activities Our real estate construction and land loans expose us to significant risks. We specialize in real estate construction loans for individuals and builders, mainly focusing on residential property development.
Risks Related to our Lending Activities Our real estate construction and land loans expose us to significant risks. We specialize in real estate construction lending to individuals and builders, mainly focusing on residential property development. These loans are often originated regardless of whether the collateral property is subject to a sales contract.
If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially affected. Changes in interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations or by reducing our margins and profitability.
In a volatile rate environment, we may not be able to manage this risk effectively, which could materially affect our business, financial condition, and results of operations. Interest rate changes may also impair borrowers’ ability to repay existing obligations or reduce our margins and profitability.
If our risk management framework proves ineffective, we could suffer unexpected losses which could have a material adverse effect on our financial condition and results of operations. We are dependent on key personnel, and the loss of one or more of those key personnel may materially and adversely affect our prospects.
We are dependent on key personnel, and the loss of one or more of those key personnel may materially and adversely affect our prospects.
Any new regulations or legislation, change in existing regulations or oversight, whether a change in regulatory policy or a change in a regulator's interpretation of a law or regulation, could have a material impact on our operations, increase our costs of regulatory compliance and of doing business and adversely affect our profitability. In this regard, the U.S.
These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time. Any new regulations or legislation, changes in existing regulations or oversight, or changes in regulatory interpretation could materially impact our operations, increase our costs of compliance and doing business, and adversely affect our profitability. 40 For example, the U.S.
Our primary sources of liquidity are increases in deposit accounts, cash flows from loan payments and our securities portfolio. Borrowings also provide us with a source of funds to meet liquidity demands. An inability to raise funds through deposits, borrowings, the sale of loans or other sources could have a substantial negative effect on our liquidity.
We rely on several sources to meet our liquidity needs, including deposits, cash flows from loan repayments, our securities portfolio, and borrowings. An inability to raise funds from these sources could have a 44 substantial negative effect on our liquidity.
Notably, approximately $132.10 million of our residential construction loans are structured to convert into permanent loans upon construction completion. Construction lending involves inherent risks due to estimating costs in relation to project values. Uncertainties in construction costs, market value, and regulatory impacts make accurately evaluating total project funds and loan-to-value ratios challenging.
Approximately $130.34 million of our residential construction loans are structured to convert into permanent loans upon construction completion. 35 Construction lending is inherently risky due to the difficulty in accurately estimating project costs and values.
One such significant change in fiscal 2024 was the implementation of the CECL model, which we adopted on October 1, 2023. Under the CECL model, financial assets carried at amortized cost, such as loans and held-to-maturity debt securities, are presented at the net amount expected to be collected.
Under the CECL model, financial assets carried at amortized cost, such as loans and held-to-maturity debt securities, are presented at the net amount expected to be collected. This forward-looking approach in estimating expected credit losses contrasts with the prior, "incurred loss" model, which delays recognition until a loss is probable.
Accordingly, charge-offs on commercial real estate loans may be larger as a percentage of the total principal outstanding than those incurred with our residential or consumer loan portfolios. Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.
Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. 36 At September 30, 2025, we had $127.0 million, or 8.1%, of total loans in commercial business loans.
We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities.
Further rate decreases could negatively impact our net interest income, although they may benefit the housing market by increasing refinancing activity and new home purchases. We principally manage interest rate risk by managing the volume and mix of our earning assets and funding liabilities.
We may also experience greater than anticipated customer losses even if the integration process is successful; • To the extent that our costs of an acquisition exceed the fair value of the net assets acquired, the acquisition will generate goodwill.
If integration is not executed effectively, we may fail to realize anticipated synergies or economic benefits, and may lose customers or employees of the acquired business; • To the extent that our acquisition costs exceed the fair value of net assets acquired, we will record goodwill.
Although we have historically been able to replace maturing deposits and borrowings if desired, we may not be able to replace such funds in the future if, among other things, our financial condition, the financial condition of the FHLB or FRB, or market conditions change.
Replacing maturing deposits and borrowings may be challenging due to changes in our financial condition, the financial condition of the FHLB or FRB, or broader market conditions.
If any of our third-party service providers experience financial, operational or technological difficulties, or if there is any other disruption in our relationships with them, we may be required to identify alternative sources of such services, and we cannot assure that we could negotiate terms that are as favorable to us or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all.
If a third-party service provider experiences financial, operational, or technological difficulties, or if there is any other disruption in our relationship with that provider, we may be required to identify alternative sources of service, which may not be available on comparable terms or without significant additional resources.
Although we have developed and continue to invest in systems and processes that are designed to detect and prevent security breaches and cyberattacks and periodically test our security, these 42 precautions may not protect our systems from compromises or breaches of our security measures, and could result in losses to us or our customers, our loss of business and/or customers, damage to our reputation, the incurrence of additional expenses, disruption to our business, our inability to grow our online services or other businesses, additional regulatory scrutiny or penalties, or our exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition and results of operation.
Any compromise or breach of our security measures could result in losses to us or our customers, the loss of business and/or customers, damage to our reputation, additional expenses, disruptions to our operations, limitations on our ability to grow our online services or other businesses, increased regulatory scrutiny or penalties, or exposure to civil litigation and potential financial liability.
While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur. We rely on other companies to provide key components of our business infrastructure. We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations.
We have also experienced losses due to apparent fraud and other financial crimes. 42 While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur.
Further, transaction-related expenses may adversely affect our earnings. These adverse effects on our earnings and results of operations may have a negative impact on the value of our common stock.
Once integrated, acquired operations may not achieve levels of profitability comparable to our existing operations or otherwise perform as expected. In addition, transaction-related expenses may reduce earnings. These adverse effects on our earnings and results of operations may negatively impact the value of our common stock.
These loans typically involve higher principal amounts than other types of loans, and repayment is dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions.
These loans typically involve larger principal amounts and rely on income generated, or expected to be generated, by the underlying property to meet operating expenses and debt service. Any deterioration in economic conditions or local market conditions, such as reduced leasing activity or non-renewal of leases, may impair the borrower’s ability to repay the loan.
Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN"), published guidelines in 2014 for financial institutions servicing marijuana businesses that are legal under state law. These guidelines allow us to work with marijuana-related businesses that are operating in accordance with state laws and regulations as long as we comply with required regulatory oversight of their accounts with us.
Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published guidance in 2014, supplemented by subsequent updates, allowing financial institutions to serve cannabis-related businesses operating legally under state law, provided institutions comply with required regulatory oversight.
For example, a decrease in interest rates typically increases the prepayment speeds of loan servicing rights and therefore decreases the fair value of the loan servicing rights. 44 Future decreases in interest rates could decrease the fair value of our loan servicing rights below their recorded amount, which would decrease our earnings.
For example, a decrease in interest rates typically increases the prepayment speeds of loan servicing rights and therefore decreases the fair value of the loan servicing rights. Conversely, slower-than-expected prepayments or rising interest rates may increase the fair value of these assets, but may also affect the timing of income recognition.
Our emphasis on commercial real estate lending may expose us to increased lending risks. Our current business strategy includes an emphasis on commercial real estate lending. This type of lending activity, while potentially more profitable than single-family residential lending, is generally more sensitive to regional and local economic conditions, making loss levels more difficult to predict.
While this type of lending may offer higher yields than single-family residential lending, it is generally more sensitive to regional and local economic conditions, which can make loss levels more difficult to predict. Evaluating collateral and analyzing borrower financial information for commercial real estate loans requires more detailed underwriting and ongoing monitoring compared to residential lending.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Bank’s plan is based on the National Infrastructure Protection Center ("NIPC") guidelines, with the addition of specific reporting and notification requirements required by regulation. The Incident Response Policy prescribes points of escalation and mechanisms for collaboration should the need arise to engage outside partnerships such as external counsel, cybersecurity forensic examiners, cyber insurance vendors, government agencies and regulatory bodies.
Biggest changeIncident Response Response to cyber incidents is guided by the Bank’s Incident Response Policy. The Bank’s plan is based on the National Infrastructure Protection Center ("NIPC") guidelines, with the addition of specific reporting and notification requirements required by regulation.
Third Party Service Provider Monitoring The Bank maintains a robust Vendor Management Program to appropriately measure, monitor and control risks associated with outsourcing products and services, including cybersecurity risks. Under the program, vendors are assigned a risk rating based 46 on an assessment of the vendor and its access to network, systems and confidential information.
Third Party Service Provider Monitoring The Bank maintains a robust Vendor Management Program to appropriately measure, monitor and control risks associated with outsourcing products and services, including cybersecurity risks. Under the program, vendors are assigned a risk rating based on an assessment of the vendor and its access to network, systems and confidential information.
Cybersecurity is a critical component of our risk management program; thus we have implemented a Cyber and Information Security Program to protect the confidentiality, integrity and availability of our information and information technology environment.
Cybersecurity is a critical component of our risk management program; thus, we have implemented a Cyber and Information Security Program to protect the confidentiality, integrity and availability of our information and information technology 45 environment.
The Board Technology Committee meets regularly and receives reports from the CTO and ISA on cybersecurity and information technology risks. The Board Technology Committee reports to the Board of Directors through Committee minutes. The Board’s Audit Committee also has oversight responsibility for audits related to information technology, security and information technology governance.
The Board Technology Committee meets regularly and receives reports from the CTO and the ISO on cybersecurity and information technology risks. The Board Technology Committee reports to the Board of Directors through Committee minutes. The Board’s Audit Committee also has oversight responsibility for audits related to information technology, security and information technology governance.
The Technology Steering Committee is comprised of numerous members of the management team, Chief Technology Officer ("CTO") and ISA. The Technology Steering committee reports to the Board of Directors through Committee minutes.
The Technology Steering 46 Committee is comprised of numerous members of the management team, the CTO and the ISO. The Technology Steering committee reports to the Board of Directors through Committee minutes.
The Bank’s Board of Directors is currently comprised of the Chief Executive Officer and seven non-employee directors; one of which has completed and received Cybersecurity Oversight Certification from the National Association of Corporate Directors (“NACD”). The Bank’s primary responsibility for managing cyber risk is vested in the Bank’s Information Security Analyst ("ISA").
Cybersecurity Governance Timberland Bank’s Board of Directors (“Board”) recognizes the significance of cybersecurity risks and provides oversight of the Bank’s Cyber and Information Security Program. The Bank’s Board of Directors is currently comprised of the Chief Executive Officer and seven non-employee directors; one of which has completed and received Cybersecurity Oversight Certification from the National Association of Corporate Directors (“NACD”).
The ISA reports to the Chief Risk Officer and serves as the primary custodian of the Bank’s Cyber Security and Information Security Program. The Technology Steering Committee meets on a regular basis and is tasked with providing oversight and guidance regarding both information technology and cybersecurity related issues of strategic importance to the Bank.
Members of the Technology Steering Committee bring substantial experience in IT operations, cybersecurity, and risk management, providing guidance on technology strategy, operational performance, and cybersecurity oversight. The Technology Steering Committee meets on a regular basis and is tasked with providing oversight and guidance regarding both information technology and cybersecurity related issues of strategic importance to the Bank.
Quarterly employee training is performed on cybersecurity, information security, identify theft prevention and data privacy. The Bank has not experienced any material losses relating to cybersecurity threats or incidents to date. Incident Response Response to cyber incidents is guided by the Bank’s Incident Response Policy.
Quarterly employee training is performed on cybersecurity, information security, identify theft prevention and data privacy. The Bank has not experienced any material losses relating to cybersecurity threats or incidents as of September 30, 2025. Material cybersecurity incidents are escalated to the Board and evaluated for disclosure in accordance with SEC reporting requirements.
The Bank’s Information Security Officer conducts regular periodic reviews of the adequacy of its oversight of controls over third party relationships. Cybersecurity Governance Timberland Bank’s Board of Directors (“Board”) recognizes the significance of cybersecurity risks and provides oversight of the Bank’s Cyber and Information Security Program.
Critical and high-risk vendors are reassessed at least annually, and remediation plans are implemented for identified deficiencies. The Bank’s Information Security Officer ("ISO")conducts regular periodic reviews of the adequacy of its oversight of controls over third party relationships.
Added
The Incident Response Policy prescribes points of escalation and mechanisms for collaboration should the need arise to engage outside partnerships such as external counsel, cybersecurity forensic examiners, cyber insurance vendors, government agencies and regulatory bodies. The Incident Response Policy also specifies that material incidents are promptly reported to the Board and considered for disclosure under applicable SEC rules.
Added
The Board receives cybersecurity updates at least quarterly, including risk metrics, incident reports, and progress on mitigation strategies. The Bank’s primary responsibility for managing cyber risk is vested in the Bank’s Information Security Officer ("ISO"). The Bank’s ISO, who reports to the Chief Risk Officer, has four years of experience in information security and risk management.
Added
The ISO is responsible for the day-to-day management of the Cyber and Information Security Program, including oversight of risk assessments, incident response, employee training, and third-party vendor cybersecurity controls. The Chief Technology Officer ("CTO") has over 13 years of experience in IT and cybersecurity leadership, including managing enterprise IT operations and technology risk.
Added
The CTO also holds a Certified Community Bank Information Technology Officer designation from the ICBA, and a CompTIA Security+ certification and has completed the Graduate School of Banking at the University of Wisconsin's Bank Technology Management program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe lease terms for our branches are not individually material. In addition, the Bank operated 24 proprietary automated teller machines ("ATMs") that are part of a nationwide cash exchange network as of September 30, 2024.
Biggest changeIn addition, the Bank operated 24 proprietary automated teller machines ("ATMs") that are part of a nationwide cash exchange network as of September 30, 2025. In the opinion of management, all properties are adequately covered by insurance, are in a good state of repair and are suitable for the Company's needs.
Item 2. Properties At September 30, 2024, the Company maintained its headquarters in Hoquiam, Washington, along with 23 full-service bank branches and four administrative offices with an aggregate net book value of $18.51 million. The Company's owns all properties except for one administrative office, the Tacoma branch and the Downtown Lacey branch, which are leased.
Item 2. Properties At September 30, 2025, the Company maintained its headquarters in Hoquiam, Washington, along with 23 full-service bank branches and four administrative offices with an aggregate net book value of $18.31 million.
In the opinion of management, all properties are adequately covered by insurance, are in a good state of repair and are suitable for the Company's needs. For additional information see "Note 5 - Premises and Equipment" and "Note 9 - Leases" of the Notes to Consolidated Financial Statements contained in Item 8 of this report.
For additional information see "Note 5 - Premises and Equipment" and "Note 9 - Leases" of the Notes to Consolidated Financial Statements contained in Item 8 of this report.
Added
The Company's owns all properties except for one administrative office, the Tacoma branch, the Downtown Lacey branch, and a new branch in University Place that is expected to open during the first quarter of fiscal 2026. The lease terms for our branches are not individually material.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Repurchases The following table sets forth the Company's repurchases of its outstanding common stock during the fourth quarter of the year ended September 30, 2024: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number of Shares that May Yet Be Purchased Under the Plans (1) July 1, 2024 - July 31, 2024 — $ — — 192,025 August 1, 2024 - August 31, 2024 19,471 29.03 19,471 172,554 September 1, 2024 - September 30, 2024 17,388 30.26 17,388 155,166 Total 36,859 $ 29.61 36,859 155,166 ____________________________ (1) On July 25, 2023, the Company announced a stock repurchase program to purchase up to 404,708 shares of the Company's common stock, which replaced the Company's then existing repurchase plan which had 74,212 shares available to be repurchased prior to termination.
Biggest changeOur future payment of dividends may depend, in part, upon receipt of dividends from the Bank, which are restricted by banking regulations. 47 Stock Repurchases The following table sets forth the Company's repurchases of its outstanding common stock during the fourth quarter of the year ended September 30, 2025: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number of Shares that May Yet Be Purchased Under the Plans (1) July 1, 2025 - July 31, 2025 — $ — — 393,842 August 1, 2025 - August 31, 2025 33,836 33.25 33,836 360,006 September 1, 2025 - September 30, 2025 22,726 33.47 22,726 337,280 Total 56,562 $ 33.34 56,562 337,280 ____________________________ (1) On July 22, 2025, the Company announced a stock repurchase program to purchase up to 393,842 shares of the Company's common stock, which replaced the Company's then existing repurchase plan which had 31,762 shares available to be repurchased prior to termination.
The July 2023 repurchase program does not have a set expiration date and will expire upon repurchase of the full amount of authorized shares. Shares may be repurchased from time to time in the open market or in privately negotiated transactions based upon market conditions and available liquidity.
The July 2025 repurchase program does not have a set expiration date and will expire upon repurchase of the full amount of authorized shares. Shares may be repurchased from time to time in the open market or in privately negotiated transactions based upon market conditions and available liquidity.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders 47 The Company's common stock is traded on the Nasdaq Global Market under the symbol “TSBK.” As of December 4, 2024, there were approximately 401 shareholders of record of the Company's common stock. 48 Dividends Our cash dividend payout policy is reviewed regularly by management and the Board of Directors.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders The Company's common stock is traded on the Nasdaq Global Market under the symbol “TSBK.” As of December 2, 2025, there were approximately 440 shareholders of record of the Company's common stock.
Our Board of Directors has declared quarterly cash dividends on our common stock for 48 consecutive quarters. Any dividends declared and paid in the future would depend upon a number of factors, including capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions.
Any dividends declared and paid in the future would depend upon a number of factors, including capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in future periods.
Total return assumes the reinvestment of all dividends and that the value of the Company’s Common Stock and each index was $100 on September 30, 2019. 49 Year Ended Index 9/30/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 Timberland Bancorp, Inc. $ 100.00 $ 68.14 $ 113.61 $ 112.27 $ 113.83 $ 131.61 NASDAQ Composite Index 100.00 140.96 183.61 135.41 170.76 236.74 S&P US SmallCap Banks Index 100.00 68.74 130.92 118.76 96.92 135.37 * Source: S&P Global Market Intelligence Item 6.
Total return assumes the reinvestment of all dividends and that the value of the Company’s Common Stock and each index was $100 on September 30, 2020. 48 Year Ended Index 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 9/30/2025 Timberland Bancorp, Inc. $ 100.00 $ 166.72 $ 164.77 $ 167.05 $ 193.15 $ 219.44 NASDAQ Composite Index 100.00 130.26 96.06 121.14 167.95 210.64 S&P US SmallCap Banks Index 100.00 190.43 172.77 141.00 196.93 223.82 * Source: S&P Global Market Intelligence Item 6.
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No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in future periods. Our future payment of dividends may depend, in part, upon receipt of dividends from the Bank, which are restricted by banking regulations.
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Dividends Our cash dividend payout policy is reviewed regularly by management and the Board of Directors. Our Board of Directors has declared quarterly cash dividends on our common stock for 52 consecutive quarters.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations 49 General 49 Overview 49 Operating Strategy 50 Selected Financial Data 51 Critical Accounting Estimates 54 Market Risk and Asset and Liability Management 55 Comparison of Financial Condition at September 30, 2024 and September 30, 2023 57 Comparison of Operating Results for the Years Ended September 30, 2024 and 2023 59 Average Balances, Interest and Average Yields/Cost 61 Rate/Volume Analysis 63 Liquidity and Capital Resources 63 New Accounting Pronouncements 65 Item 7A.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations 49 General 49 Overview 49 Operating Strategy 50 Selected Financial Data 51 Critical Accounting Estimates 54 Market Risk and Asset and Liability Management 55 Comparison of Financial Condition at September 30, 2025 and September 30, 2024 56 Comparison of Operating Results for the Years Ended September 30, 2025 and 2024 59 Comparison of Operating Results for the Years Ended September 30. 2024 and 2023 61 Average Balances, Interest and Average Yields/Cost 61 Rate/Volume Analysis 63 Liquidity and Capital Resources 63 New Accounting Pronouncements 65 Item 7A.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe consolidated data is derived in part from, and should be read in conjunction with, the Consolidated Financial Statements of the Company and its subsidiary presented herein. 52 At September 30, 2024 2023 2022 2021 2020 (In thousands) SELECTED FINANCIAL CONDITION DATA: Total assets $ 1,923,475 $ 1,839,905 $ 1,860,508 $ 1,792,180 $ 1,565,978 Loans receivable, net 1,421,523 1,302,305 1,132,426 968,454 1,013,875 Investment securities held-to-maturity 172,097 270,218 266,608 69,102 27,890 Investment securities available-for-sale 72,257 41,771 41,415 63,176 57,907 FHLB stock 2,037 3,602 2,194 2,103 1,922 Other investments 3,000 3,000 3,000 3,000 3,000 Cash and due from financial institutions and interest-bearing deposits in banks 164,728 128,721 316,755 580,196 314,452 Certificate of deposits held for investments 10,209 15,188 22,894 28,482 65,545 BOLI 23,611 22,966 22,806 22,193 21,583 OREO and other repossessed assets — — — 157 1,050 Deposits 1,647,668 1,560,935 1,632,176 1,570,555 1,358,406 FHLB borrowings 20,000 35,000 — 5,000 10,000 Shareholders' equity 245,413 233,073 218,569 206,899 187,630 Year Ended September 30, 2024 2023 2022 2021 2020 (In thousands, except per share data) SELECTED OPERATING DATA: Interest and dividend income $ 94,825 $ 79,951 $ 58,508 $ 54,962 $ 55,583 Interest expense 30,658 11,592 2,674 3,104 4,701 Net interest income 64,167 68,359 55,834 51,858 50,882 Provision for credit losses - net 1,151 2,132 270 — 3,700 Net interest income after provision for credit losses 63,016 66,227 55,564 51,858 47,182 Non-interest income 11,136 11,140 12,624 17,161 17,188 Non-interest expense 43,746 43,373 38,626 34,591 34,063 Income before income taxes 30,406 33,994 29,562 34,428 30,307 Provision for federal income taxes 6,123 6,876 5,962 6,845 6,038 Net income $ 24,283 $ 27,118 $ 23,600 $ 27,583 $ 24,269 Net income per common share: Basic $ 3.02 $ 3.32 $ 2.84 $ 3.31 $ 2.91 Diluted $ 3.01 $ 3.29 $ 2.82 $ 3.27 $ 2.88 Dividends per common share $ 0.95 $ 1.01 $ 0.87 $ 1.03 $ 0.85 Dividend payout ratio (1) 31.50 % 30.48 % 30.64 % 31.14 % 29.19 % ______________ (1) Cash dividends to common shareholders divided by net income to common shareholders. 53 At September 30, 2024 2023 2022 2021 2020 OTHER DATA: Number of real estate loans outstanding 2,593 2,537 2,332 2,290 2,508 Deposit accounts 57,424 56,675 58,380 58,454 58,566 Full-service offices 23 23 23 24 24 At or For the Year Ended September 30, 2024 2023 2022 2021 2020 KEY FINANCIAL RATIOS: Performance Ratios: Return on average assets (1) 1.28 % 1.50 % 1.27 % 1.64 % 1.75 % Return on average equity (2) 10.19 12.01 11.14 13.98 13.59 Interest rate spread (3) 2.72 3.56 3.07 3.13 3.70 Net interest margin (4) 3.54 3.95 3.16 3.25 3.90 Average interest-earning assets to average interest-bearing liabilities 148.97 158.36 160.67 162.08 155.98 Non-interest expense as a percent of average total assets 2.31 2.39 2.09 2.06 2.45 Efficiency ratio (5) 58.09 54.56 56.42 50.12 50.04 Asset Quality Ratios: Non-accrual and 90 days or more past due loans as a percent of total loans receivable, net 0.27 % 0.12 % 0.18 % 0.29 % 0.28 % Non-performing assets as a percent of total assets (6) 0.20 0.09 0.12 0.18 0.27 Allowance for credit losses as a percent of total loans receivable, net (7) 1.21 1.20 1.20 1.37 1.31 Allowance for credit losses as a percent of non-performing loans (8) 449.88 1,044.72 665.52 471.93 461.76 Net charge-offs (recoveries) to average outstanding loans — — — — — Capital Ratios: Total equity-to-assets ratio 12.76 % 12.67 % 11.75 % 11.54 % 11.98 % Average equity to average assets 12.59 12.46 11.43 11.74 12.85 __________________ (1) Net income divided by average total assets.
Biggest changeAt September 30, 2025 2024 2023 2022 2021 (In thousands) SELECTED FINANCIAL CONDITION DATA: Total assets $ 2,012,779 $ 1,923,475 $ 1,839,905 $ 1,860,508 $ 1,792,180 Loans receivable, net 1,463,590 1,421,523 1,302,305 1,132,426 968,454 Investment securities held to maturity 136,861 172,097 270,218 266,608 69,102 Investment securities available for sale 78,240 72,257 41,771 41,415 63,176 FHLB stock 2,045 2,037 3,602 2,194 2,103 Other investments 3,000 3,000 3,000 3,000 3,000 Cash and due from financial institutions and interest-bearing deposits in banks 243,428 164,728 128,721 316,755 580,196 Certificate of deposits held for investments 7,217 10,209 15,188 22,894 28,482 BOLI 21,830 23,611 22,966 22,806 22,193 OREO and other repossessed assets 221 — — — 157 Deposits 1,716,635 1,647,668 1,560,935 1,632,176 1,570,555 FHLB borrowings 20,000 20,000 35,000 — 5,000 Shareholders' equity 262,614 245,413 233,073 218,569 206,899 Year Ended September 30, 2025 2024 2023 2022 2021 (In thousands, except per share data) SELECTED OPERATING DATA: Interest and dividend income $ 102,277 $ 94,825 $ 79,951 $ 58,508 $ 54,962 Interest expense 32,077 30,658 11,592 2,674 3,104 Net interest income 70,200 64,167 68,359 55,834 51,858 Provision for credit losses - net 934 1,151 2,132 270 — Net interest income after provision for credit losses 69,266 63,016 66,227 55,564 51,858 Non-interest income 12,352 11,136 11,140 12,624 17,161 Non-interest expense 45,387 43,746 43,373 38,626 34,591 Income before income taxes 36,231 30,406 33,994 29,562 34,428 Provision for income taxes 7,070 6,123 6,876 5,962 6,845 Net income $ 29,161 $ 24,283 $ 27,118 $ 23,600 $ 27,583 Net income per common share: Basic $ 3.68 $ 3.02 $ 3.32 $ 2.84 $ 3.31 Diluted $ 3.67 $ 3.01 $ 3.29 $ 2.82 $ 3.27 Dividends per common share $ 1.02 $ 0.95 $ 1.01 $ 0.87 $ 1.03 Dividend payout ratio (1) 27.73 % 31.50 % 30.48 % 30.64 % 31.14 % ______________ (1) Cash dividends to common shareholders divided by net income to common shareholders. 52 At September 30, 2025 2024 2023 2022 2021 OTHER DATA: Number of real estate loans outstanding 2,580 2,593 2,537 2,332 2,290 Deposit accounts 58,179 57,424 56,675 58,380 58,454 Full-service offices 23 23 23 23 24 At or For the Year Ended September 30, 2025 2024 2023 2022 2021 KEY FINANCIAL RATIOS: Performance Ratios: Return on average assets (1) 1.50 % 1.28 % 1.50 % 1.27 % 1.64 % Return on average equity (2) 11.56 10.19 12.01 11.14 13.98 Interest rate spread (3) 2.95 2.72 3.56 3.07 3.13 Net interest margin (4) 3.76 3.54 3.95 3.16 3.25 Average interest-earning assets to average interest-bearing liabilities 146.89 148.97 158.36 160.67 162.08 Non-interest expense as a percent of average total assets 2.33 2.31 2.39 2.09 2.06 Efficiency ratio (5) 54.98 58.09 54.56 56.42 50.12 Asset Quality Ratios: Non-accrual and 90 days or more past due loans as a percent of total loans receivable, net 0.30 % 0.27 % 0.12 % 0.18 % 0.29 % Non-performing assets as a percent of total assets (6) 0.23 0.20 0.09 0.12 0.18 Allowance for credit losses as a percent of total loans receivable, net (7) 1.22 1.21 1.20 1.20 1.37 Allowance for credit losses as a percent of non-performing loans (8) 410.51 449.88 1,044.72 665.52 471.93 Net charge-offs (recoveries) to average outstanding loans 0.02 — — — — Capital Ratios: Total equity-to-assets ratio 13.05 % 12.76 % 12.67 % 11.75 % 11.54 % Average equity to average assets 12.97 12.59 12.46 11.43 11.74 __________________ (1) Net income divided by average total assets.
Provision for Credit Losses: A $1.15 million provision for credit losses was recorded for the year ended September 30, 2024 consisting of a $1.25 million provision for credit losses on loans which was primarily due to an increase in loans receivable, a $32,000 recapture of credit losses on investment securities which was primarily due to lower balances resulting from maturities and principal payments and a $71,000 recapture of credit losses on unfunded commitments which was primarily due to a decrease in the balance of unfunded loan commitments.
A $1.15 million provision for credit losses was recorded for the year ended September 30, 2024 consisting of a $1.25 million provision for credit losses on loan, primarily due to an increase in loans receivable, a $32,000 recapture of credit losses on investment securities, primarily due to lower balances resulting from maturities and principal payments and a $71,000 recapture of credit losses on unfunded commitments,primarily due to a decrease in the balance of unfunded loan commitments.
The Company seeks to achieve these results by focusing on the following objectives: Expand our presence within our existing market areas by capturing opportunities resulting from changes in the competitive environment. We currently conduct our business primarily in western Washington. We have a community bank strategy that emphasizes responsive and personalized service to our customers.
The Company seeks to achieve these results by focusing on the following objectives: 50 Expand our presence within our existing market areas by capturing opportunities resulting from changes in the competitive environment. We currently conduct our business primarily in western Washington. We have a community bank strategy that emphasizes responsive and personalized service to our customers.
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. The qualitative assessment involves judgment by management on determining whether there have been any triggering events that have occurred which would indicate potential impairment.
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. The qualitative assessment involves judgment by management on determining whether there have been any triggering events that have occurred which 54 would indicate potential impairment.
Subject to market conditions, the Bank expects to utilize these borrowing facilities from time to time in the 64 future to fund loan originations and deposit 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.
Subject to market conditions, the Bank expects to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit 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 Company's primary objective is to operate the Bank as a well-capitalized, profitable, independent, community-oriented financial institution, serving 51 customers in its primary market area of Grays Harbor, Pierce, Thurston, Kitsap, King and Lewis counties. The Company's strategy is to provide products and superior service to small businesses and individuals located in its primary market area.
The Company's primary objective is to operate the Bank as a well-capitalized, profitable, independent, community-oriented financial institution, serving customers in its primary market area of Grays Harbor, Pierce, Thurston, Kitsap, King and Lewis counties. The Company's strategy is to provide products and superior service to small businesses and individuals located in its primary market area.
The principal element in achieving this objective is to increase the interest rate sensitivity of the Bank's interest-earning assets by retaining in its portfolio, short-term loans and loans with interest rates subject to periodic adjustments. The Bank 56 relies on retail deposits as its primary source of funds.
The principal element in achieving this objective is to increase the interest rate sensitivity of the Bank's interest-earning assets by retaining in its portfolio short-term loans and loans with interest rates subject to periodic adjustments. The Bank relies on retail deposits as its primary source of funds.
A further decline in national and local economic 61 conditions, as a result of the effects of inflation, a 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.
A further decline in national and local economic conditions, as a result of the effects of inflation, a 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.
Average Balances, Interest and Average Yields/Cost The earnings of the Company depend largely on the spread between the yield on interest-earning assets and the cost of interest-bearing liabilities, as well as the relative amount of the Company's interest-earning assets and interest- bearing liability portfolios. 62 The following table sets 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.
Average Balances, Interest and Average Yields/Cost The earnings of the Company depend largely on the spread between the yield on interest-earning assets and the cost of interest-bearing liabilities, as well as the relative amount of the Company's interest-earning assets and interest- bearing liability portfolios. 61 The following table sets 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.
At September 30, 2024, Timberland Bancorp and the Bank were in compliance with all applicable capital requirements. For additional details, see "Note 17 - Regulatory Matters" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report and “Item 1. Business - Regulation of the Bank - Capital Requirements".
At September 30, 2025, Timberland Bancorp and the Bank were in compliance with all applicable capital requirements. For additional details, see "Note 17 - Regulatory Matters" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report and “Item 1. Business - Regulation of the Bank - Capital Requirements".
The Company performed its annual review of goodwill during the quarter ended June 30, 2024 and determined that there was no impairment. As of September 30, 2024, management believes that there had been no subsequent events or changes in circumstances that would indicate a potential impairment of goodwill.
The Company performed its annual review of goodwill during the quarter ended June 30, 2025 and determined that there was no impairment. As of September 30, 2025, management believes that there had been no subsequent events or changes in circumstances that would indicate a potential impairment of goodwill.
The current quarterly common stock dividend rate is $0.25 per share, as approved by the Board of Directors, which is a dividend rate per share that enables the Company to balance multiple objectives of managing and investing in the Bank and returning a substantial portion of cash to shareholders.
The current quarterly common stock dividend rate is $0.28 per share, as approved by the Board of Directors, which is a dividend rate per share that enables the Company to balance multiple objectives of managing and investing in the Bank and returning a substantial portion of cash to shareholders.
For periods prior to 2024, TDRs that were on accrual status are not included. 54 Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions.
For periods prior to 2024, TDRs that were on accrual status are not included. 53 Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions.
Comparison of Results of Operations for the Years Ended September 30, 2023 and 2022 See Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2023 previously filed with the SEC.
Comparison of Results of Operations for the Years Ended September 30, 2024 and 2023 See Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2024 previously filed with the SEC.
(4) Net interest income divided by total average interest-earning assets. 63 Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on net interest income on the Company.
(4) Net interest income divided by total average interest-earning assets. 62 Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on net interest income on the Company.
At September 30, 2024, Timberland Bancorp (on an unconsolidated basis) had liquid assets of $1.43 million. The Company currently expects to continue the current practice of paying quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice.
At September 30, 2025, Timberland Bancorp (on an unconsolidated basis) had liquid assets of $1.16 million. The Company currently expects to continue the current practice of paying quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice.
Based on current objectives, there are no projects scheduled for capital investments in premises and equipment during the fiscal year ending September 30, 2025 that would materially impact liquidity. For the fiscal year ending September 30, 2025, the Bank projects that fixed commitments will include $336,000 of operating lease payments.
Based on current objectives, there are no projects scheduled for capital investments in premises and equipment during the fiscal year ending September 30, 2026 that would materially impact liquidity. For the fiscal year ending September 30, 2026, the Bank projects that fixed commitments will include $377,000 of operating lease payments.
The incremental accretion and the impact on loan yield will change during any period based on the volume of prepayments, and has decreased over time as the balance of the net discount declines. The remaining net discount on acquired loans was $155,000 at September 30, 2024.
The incremental accretion and the impact on loan yield will change during any period based on the volume of prepayments, and has decreased over time as the balance of the net discount declines. The remaining net discount on acquired loans was $51,000 at September 30, 2025.
The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs. At September 30, 2024, the Bank's regulatory liquidity ratio (net cash, and short-term and marketable assets, as a percentage of net deposits and short-term liabilities) was 12.6%.
The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs. At September 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 16.6%.
The percentage of non-performing assets to total assets at September 30, 2024 was 0.20% compared to 0.09% at September 30, 2023. We remain focused on reducing the level of non-performing assets through collections, write-downs and modifications.
The percentage of non-performing assets to total assets at September 30, 2025 was 0.22% compared to 0.20% at September 30, 2024. We remain focused on reducing the level of non-performing assets through collections, write-downs and modifications.
Accretion of the fair value discount on loans for the years ended September 30, 2024, 2023 and 2022 of $37, $75 and $182 respectively, is included with interest and dividends. (2) Average balances include loans and investment securities on non-accrual status. (3) Includes FHLB borrowings with original maturities of one year or greater.
Accretion of the fair value discount on loans for the years ended September 30, 2025, 2024 and 2023 of $104, $37 and $75 respectively, is included with interest and dividends. (2) Average balances include loans and investment securities on non-accrual status. (3) Includes FHLB borrowings with original maturities of one year or more.
During the year ended September 30, 2024, a total of $376,000 in non-accrual interest, pre-payment penalties and late fees was collected compared to $398,000 for the year ended September 30, 2023.
During the year ended September 30, 2025, a total of $520,000 in non-accrual interest, pre-payment penalties and late fees was collected compared to $376,000 for the year ended September 30, 2024.
During the year ended September 30, 2024, the accretion of the purchase accounting fair value discount on loans acquired increased interest income on loans by $37,000 compared to $75,000 for the year ended September 30, 2023.
During the year ended September 30, 2025, the accretion of the purchase accounting fair value discount on loans acquired increased interest income on loans by $104,000 compared to $37,000 for the year ended September 30, 2024.
The Bank maintains a short-term borrowing line with the FRB with total credit based on eligible collateral. At September 30, 2024, the Bank had no outstanding balance on the FRB borrowing line, under which $86.63 million was available for future borrowings. The Bank also maintains a $50.00 million overnight borrowing line with Pacific Coast Bankers' Bank ("PCBB").
The Bank maintains a short-term borrowing line with the FRB with total credit based on eligible collateral. At September 30, 2025, the Bank had no outstanding balance on the FRB borrowing line, under which $70.57 million was available for future borrowings. The Bank also maintains a $50.00 million overnight borrowing line with Pacific Coast Bankers' Bank ("PCBB").
At September 30, 2024, the Bank maintained an unused credit facility with the FHLB that provided for immediately available borrowings up to an aggregate amount equal to 45% of total assets, limited by available collateral, under which $20.00 million of the $626.04 million available for borrowings with the FHLB was outstanding at September 30, 2024.
At September 30, 2025, the Bank maintained an unused credit facility with the FHLB that provided for immediately available borrowings up to an aggregate amount equal to 45% of total assets, limited by available collateral, under which $20.00 million of the $639.92 million available for borrowings with the FHLB was outstanding at September 30, 2025.
At September 30, 2024, FHLB borrowings consisted of three long-term borrowings: two totaling $15.00 million with scheduled maturities in May 2026, both bearing interest at 3.95% and one $5.00 million borrowing maturing in August 2026 with an interest rate of 4.03%.
At September 30, 2025, FHLB borrowings consisted of three short-term borrowings: two totaling $15.00 million with scheduled maturities in May 2026, each bearing interest at 3.95% and one $5.00 million borrowing maturing in August 2026 with an interest rate of 4.03%.
Investment securities purchased during the years ended September 30, 2024, 2023 and 2022 totaled $44.95 million, $32.60 million and $208.78 million, respectively. The Bank’s liquidity is also affected by the volume of loans sold and loan principal payments.
Investment securities purchased during the years ended September 30, 2025, 2024 and 2023 totaled $52.89 million, $44.95 million and $32.60 million, respectively. The Bank’s liquidity is also affected by the volume of loans sold and loan principal payments.
The Company recorded a provision for credit losses on loans of $1.25 million for the year ended September 30, 2024, primarily due to increased loan portfolio growth. The Company recorded a provision for loan losses of $2.1 million for the year ended September 30, 2023, primarily due to increased loan portfolio growth.
The Company recorded a provision for credit losses on loans of $853,000 for the year ended September 30, 2025, primarily due to increased loan portfolio growth. The Company recorded a provision for credit losses on loans of $1.25 million for the year ended September 30, 2024, primarily due to increased loan portfolio growth.
Non-interest income is also increased by a gain on sale and net recoveries of OTTI on investment securities, if any. Non-interest income is also decreased by valuation allowances on loan servicing rights and increased by recoveries of valuation allowances on loan servicing rights, if any.
Non-interest income is also increased by a gain on sale and net recoveries of OTTI on investment securities, if any. Non-interest income in certain periods can also be decreased by valuation allowances on loan servicing rights and increased by recoveries of valuation allowances on loan servicing rights, if any.
The accretion of the net fair value discount on acquired loans had a minor effect on the average yield on loans for the year ended September 30, 2024 and a one basis point increase for the year ended September 30, 2023.
The accretion of the net fair value discount on acquired loans had a two basis-point effect on the average yield on loans for the year ended September 30, 2025 and a minor effect for the year ended September 30, 2024.
At September 30, 2024, the Bank did not have an outstanding balance on this borrowing line.
At September 30, 2025, the Bank did not have an outstanding balance on this 63 borrowing line.
The Bank’s liquidity has been impacted by changes in deposit levels. During the year ended September 30, 2024, deposits increased by $86.73 million. During the years ended September 30, 2023 and 2022, deposits decreased by $71.24 million and increased $61.60 million, respectively.
The Bank’s liquidity has been impacted by changes in deposit levels. During the years ended September 30, 2025 and 2024, deposits increased by $68.97 million and $86.73 million, respectively. During the year ended September 30, 2023, deposits decreased by $71.24 million.
Based on an interest rate shock analysis prepared by Kinective using data at September 30, 2024, an immediate increase in interest rates of 100 basis points would decrease the Bank’s projected net interest income by approximately 1.5%. An immediate decrease in interest rates of 100 basis points would decrease the Bank's projected net interest income by approximately 1.4%.
Based on an interest rate shock analysis prepared by Kinective using data at September 30, 2025, an immediate increase in interest rates of 100 basis points would decrease the Bank’s projected net interest income by approximately 0.5%. An immediate decrease in interest rates of 100 basis points would decrease the Bank's projected net interest income by approximately 2.6%.
Assuming continued payment during fiscal year 2025 at the rate of $0.25 per share, the average total dividend paid each quarter would be approximately $1.99 million based on the number of current outstanding shares at September 30, 2024. 65 In addition, from time to time, our Board of Directors has authorized stock repurchase plans.
Assuming continued payment during fiscal year 2026 at the rate of $0.28 per share, the average total dividend paid each quarter would be approximately $2.21 million based on the number of current outstanding shares at September 30, 2025. 64 In addition, from time to time, our Board of Directors has authorized stock repurchase plans.
Net income is also affected by non-interest income and non-interest expense. For the year ended September 30, 2024, non-interest income consisted primarily of service charges on deposit accounts, gain on sales of loans, ATM and debit card interchange transaction fees, an increase in the cash surrender value of BOLI, escrow fees and other operating income.
Net income is also affected by non-interest income and non-interest expense. For the year ended September 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 cash surrender value increases and death benefit, servicing income on loans, escrow fees and other operating income.
For additional information on deposits, see "Item 1. Business - Deposit Activities and Other Sources of Funds" and "Note 10 - Deposits" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
Business - Deposit Activities and Other Sources of Funds" and "Note 10 - Deposits" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
These decreases were partially offset by an increase in originations of multi-family and land loans. For additional information on loans, see "Item 1. Business - Lending Activities" and "Note 4-Loans Receivable and Allowance for Credit Losses" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
These increases were partially offset by a decrease in originations of commercial business loans. For additional information on loans, see "Item 1. Business - Lending Activities" and "Note 4 - Loans Receivable and Allowance for Credit Losses" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
For additional information on goodwill, see "Note 7 - Goodwill and CDI" of the Notes to Consolidated Financial Statements contained in Item 8 of this report. CDI: CDI decreased by $226,000 or 33.4%, to $451,000 at September 30, 2024 from $677,000 at September 30, 2023 due to scheduled amortization.
For additional information on goodwill, see "Note 7 - Goodwill and CDI" of the Notes to Consolidated Financial Statements contained in Item 8 of this report. CDI: CDI decreased by $180,000 or 39.9%, to $271,000 at September 30, 2025 from $451,000 at September 30, 2024 due to scheduled amortization.
The average yield on interest-earning assets increased to 5.24% for the year ended September 30, 2024 from 4.63% for the year ended September 30, 2023.
The average yield on interest-earning assets increased to 5.48% for the year ended September 30, 2025 from 5.24% for the year ended September 30, 2024.
Non-performing assets, consisting of nonaccrual loans and investment securities, totaled $3.94 million at September 30, 2024, compared to $1.60 million at September 30, 2023. The percentage of non-performing loans to loans receivable, net was 0.27% and 0.11% at September 30, 2024 and 2023, respectively.
Non-performing assets, consisting of nonaccrual loans and investment securities, and OREO, totaled $4.44 million at September 30, 2025, compared to $3.94 million at September 30, 2024. The percentage of non-performing loans to loans receivable, net was 0.30% and 0.27% at September 30, 2025 and 2024, respectively.
Average total interest-earning 60 assets increased by $82.49 million, or 4.77%, to $1.81 billion for the year ended September 30, 2024 from $1.73 billion for the year ended September 30, 2023, due to an increase in the average balance of loans receivable which was partially offset by a decrease in the average balance of investment securities and interest-bearing deposits in banks and CDs.
Average total interest-earning assets increased by $55.19 million, or 3.05%, to $1.87 billion for the year ended September 30, 2025 from $1.81 billion for the year ended September 30, 2024, due to an increase in the average balance of loans receivable and an increase in the average balance of interest-bearing deposits in banks and CDs, which was partially offset by a decrease in the average balance of investment securities.
Includes loans held for sale and interest earned on loans held for sale. Amortized net deferred loan fees, late fees, extension fees and prepayment penalties (year ended September 30, 2024 - $1,429; year ended September 30, 2023 - $1,373 and year ended September 30, 2022 - $3,600) are included with interest and dividends.
Includes loans held for sale and interest earned on loans held for sale. Amortized net deferred loan fees, late fees, extension fees and prepayment penalties (year ended September 30, 2025 - $1,640; year ended September 30, 2024 - $1,430 and year ended September 30, 2023 - $1,370) are included with interest and dividends.
During the years ended September 30, 2024, 2023 and 2022, the Bank sold $14.75 million, $11.54 million and $73.50 million, respectively, in loans and loan participation interests. During the years ended September 30, 2024, 2023 and 2022, the Bank received $142.78 million, $177.31 million and $324.23 million, respectively, in loan principal repayments.
During the years ended September 30, 2025, 2024 and 2023, the Bank sold $22.60 million, $14.75 million and $11.54 million, respectively, in loans and loan participation interests. During the years ended September 30, 2025, 2024 and 2023, the Bank received $227.11 million, $142.78 million and $177.31 million, respectively, in loan principal repayments.
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. At September 30, 2024, the Company had an available borrowing capacity of $606.04 million.
FHLB Borrowings: The Company maintains 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. At September 30, 2025, the Company had an available borrowing capacity of $619.92 million. The Company had $20.00 million in FHLB borrowings at September 30, 2025 and 2024.
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.
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. Purchased loans are evaluated for impairment in the same manner as the rest of the loan portfolio.
Interest income on investment securities decreased by $255,000, or 2.7%, to $9.13 million for the year ended September 30, 2024 from $9.38 million for the year ended September 30, 2023, due to a $45.91 million decrease in the average balance of investment securities, partially offset by a 49 basis point increase in the average yield on investment securities.
Interest income on investment securities decreased by $932,000, or 10.2%, to $8.20 million for the year ended September 30, 2025 from $9.13 million for the year ended September 30, 2024, due to a $49.21 million decrease in the average balance of investment securities, partially offset by a 29 basis point increase in the average yield on investment securities.
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 $31.03 million, or 21.6%, to $174.94 million at September 30, 2024 from $143.91 million at September 30, 2023. The increase was primarily a result of increased deposits.
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 $75.71 million, or 43.3%, to $250.65 million at September 30, 2025 from $174.94 million at September 30, 2024. The increase was primarily a result of increased deposits.
During the years ended September 30, 2024, 2023 and 2022, the Bank originated $251.44 million, $361.79 million and $572.46 million of loans, respectively. At September 30, 2024, the Bank had loan commitments, consisting of undisbursed lines of credit and commitment to extend credit, totaling $146.15 million and undisbursed construction loans in process totaling $69.88 million.
During the years ended September 30, 2025, 2024 and 2023, the Bank originated $310.90 million, $251.44 million and $361.79 million of loans, respectively. At September 30, 2025, the Bank had loan commitments, consisting of undisbursed lines of credit and commitments to extend credit, totaling $158.26 million and undisbursed construction loans in process totaling $88.29 million.
There are no scheduled payments and maturities of FHLB borrowings during fiscal year 2025. In addition, at September 30, 2024, there were other future obligations and accrued expenses of $8.82 million. For additional information, see "Note 12 - FHLB Borrowings and Other Borrowings" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
FHLB borrowings of $20.0 million mature during the fiscal year 2026. In addition, at September 30, 2025, there were other future obligations and accrued expenses of $10.45 million. For additional information, see "Note 11 - FHLB Borrowings and Other Borrowings" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
The decrease was due to higher interest expense resulting from increases in both the average yields and balances of interest-bearing liabilities, which outpaced the increase in interest income and dividend income resulting from increases in the average yield and balance on loans and, to a lesser extent, the average yields on investment securities and interest-bearing deposit in banks and CDs.
The increase was primarily due to higher interest and dividend income resulting from increases in both the average yields and balances of loans, which outpaced the increase in interest expense resulting from increases in the average balance on interest-bearing liabilities.
Properties" and "Note - 5 Premises and Equipment" of the Notes of the Consolidated Financial Statements contained in Item 8 of this report. Bank Owned Life Insurance ("BOLI"): BOLI increased by $645,000, or 2.8%, to $23.61 million at September 30, 2024 from $22.97 million at September 30, 2023.
Properties" and "Note 5 - Premises and Equipment" of the Notes of the Consolidated Financial Statements contained in Item 8 of this report. Bank Owned Life Insurance ("BOLI"): BOLI decreased by $1.78 million, or 7.5%, to $21.83 million at September 30, 2025 from $23.61 million at September 30, 2024.
For additional information on leases, see "Note 9 - Leases" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report. 59 Other Assets: Other assets increased by $2.67 million, or 74.7%, to $6.24 million at September 30, 2024 from $3.57 million at September 30, 2023.
For additional information on leases, see "Note 9 - Leases" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report. Other Assets: Other assets decreased by $129,000, or 2.07%, to $6.11 million at September 30, 2025 from $6.24 million at September 30, 2024.
(2) No rates in the model are allowed to go below zero. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan repayments and deposit decay, and should not be relied upon as indicative of actual results.
Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan repayments and deposit decay, and should not be relied upon as indicative of actual results. The computations do not reflect any actions management may undertake in response to changes in interest rates.
Investment securities (including investments in equity securities) decreased by $67.58 million, or 21.6%, to $245.22 million at September 30, 2024 from $312.80 million at September 30, 2023, primarily due to the maturities of U.S. Treasury investment securities and to a lesser extent, scheduled amortization.
Investment securities (including investments in equity securities) decreased by $29.26 million, or 11.9%, to $215.97 million at September 30, 2025 from $245.22 million at September 30, 2024, primarily due to the maturities of U.S. Treasury investment securities and to a lesser extent, scheduled amortization.
Year Ended September 30, 2024 2023 2022 Average Balance Interest and Dividends Yield/ Cost Average Balance Interest and Dividends Yield/ Cost Average Balance Interest and Dividends Yield/ Cost (Dollars in thousands) Interest-earning assets: Loans receivable (1)(2) $ 1,379,529 $ 77,430 5.61 % $ 1,230,101 $ 63,154 5.13 % $ 1,055,635 $ 51,324 4.86 % Investment securities (2) 278,531 9,129 3.28 324,436 9,384 2.89 224,850 3,488 1.55 Dividends from mutual funds, FHLB stock and other investments 6,147 361 5.87 6,315 270 4.28 6,021 120 1.99 Interest-bearing deposits in banks and CDs 146,855 7,905 5.38 167,718 7,143 4.26 482,162 3,576 0.74 Total interest-earning assets 1,811,062 94,825 5.24 1,728,570 79,951 4.63 1,768,668 58,508 3.31 Non-interest-earning assets 81,470 84,205 83,895 Total assets $ 1,892,532 $ 1,812,775 $ 1,852,563 Interest-bearing liabilities: NOW checking accounts $ 353,000 $ 5,148 1.46 % $ 407,679 $ 3,562 0.87 % $ 449,574 $ 650 0.14 % Money market accounts 285,615 9,248 3.24 215,465 1,600 0.74 244,498 766 0.31 Savings accounts 212,562 529 0.25 261,006 415 0.16 278,025 230 0.08 Certificates of deposit accounts 298,039 12,337 4.14 188,534 5,096 2.70 127,277 1,011 0.79 Brokered deposits 44,330 2,397 5.41 11,942 629 5.27 — — — Short-term borrowings 6,394 361 5.65 975 53 5.44 3 — — Long-term borrowings (3) 15,820 638 4.03 5,973 237 3.97 1,427 17 1.19 Total interest-bearing liabilities 1,215,760 30,658 2.52 1,091,574 11,592 1.06 1,100,804 2,674 0.24 Non-interest-bearing deposits 427,514 484,795 529,702 Other liabilities 10,865 10,557 10,224 Total liabilities 1,654,139 1,586,926 1,640,730 Shareholders' equity 238,393 225,849 211,833 Total liabilities and shareholders' equity $ 1,892,532 $ 1,812,775 $ 1,852,563 Net interest income $ 64,167 $ 68,359 $ 55,834 Interest rate spread 2.72 % 3.57 % 3.07 % Net interest margin (4) 3.54 % 3.95 % 3.16 % Ratio of average interest-earning assets to average interest-bearing liabilities 148.97 % 158.36 % 160.67 % _______________________________________________ (1) Does not include interest on loans on non-accrual status.
Year Ended September 30, 2025 2024 2023 Average Balance Interest and Dividends Yield/ Cost Average Balance Interest and Dividends Yield/ Cost Average Balance Interest and Dividends Yield/ Cost (Dollars in thousands) Interest-earning assets: Loans receivable (1)(2) $ 1,448,803 $ 85,525 5.90 % $ 1,379,529 $ 77,430 5.61 % $ 1,230,101 $ 63,154 5.13 % Investment securities (2) 229,317 8,197 3.57 278,531 9,129 3.28 324,436 9,384 2.89 Dividends from mutual funds, FHLB stock and other investments 5,893 335 5.68 6,147 361 5.87 6,315 270 4.28 Interest-bearing deposits in banks and CDs 182,239 8,220 4.51 146,855 7,905 5.38 167,718 7,143 4.26 Total interest-earning assets 1,866,252 102,277 5.48 1,811,062 94,825 5.24 1,728,570 79,951 4.63 Non-interest-earning assets 78,000 81,470 84,205 Total assets $ 1,944,252 $ 1,892,532 $ 1,812,775 Interest-bearing liabilities: NOW checking accounts $ 332,392 $ 4,611 1.39 % $ 353,000 $ 5,148 1.46 % $ 407,679 $ 3,562 0.87 % Money market accounts 308,319 9,882 3.21 285,615 9,248 3.24 215,465 1,600 0.74 Savings accounts 205,488 639 0.31 212,562 529 0.25 261,006 415 0.16 Certificates of deposit accounts 357,444 13,786 3.86 298,039 12,337 4.14 188,534 5,096 2.70 Brokered deposits 46,896 2,354 5.02 44,330 2,397 5.41 11,942 629 5.27 Short-term borrowings 6,782 270 3.99 6,394 361 5.65 975 53 5.44 Long-term borrowings (3) 13,220 535 4.04 15,820 638 4.03 5,973 237 3.97 Total interest-bearing liabilities 1,270,541 32,077 2.53 1,215,760 30,658 2.52 1,091,574 11,592 1.06 Non-interest-bearing deposits 411,007 427,514 484,795 Other liabilities 10,506 10,865 10,557 Total liabilities 1,692,054 1,654,139 1,586,926 Shareholders' equity 252,198 238,393 225,849 Total liabilities and shareholders' equity $ 1,944,252 $ 1,892,532 $ 1,812,775 Net interest income $ 70,200 $ 64,167 $ 68,359 Interest rate spread 2.95 % 2.72 % 3.57 % Net interest margin (4) 3.76 % 3.54 % 3.95 % Ratio of average interest-earning assets to average interest-bearing liabilities 146.89 % 148.97 % 158.36 % _______________________________________________ (1) Does not include interest on loans on non-accrual status.
Interest income on loans receivable and loans held for sale increased by $14.28 million, or 22.61%, to $77.43 million for the year ended September 30, 2024 from $63.15 million for the year ended September 30, 2023, primarily due to a $149.43 million increase in the average balance of loans receivable coupled with an increase in the average yield on loans receivable to 5.61% for the year ended September 30, 2024 from 5.13% for the year ended September 30, 2023.
Interest income on loans receivable and loans held for sale increased by $8.10 million, or 10.45%, to $85.53 million for the year ended September 30, 2025 from $77.43 million for the year ended September 30, 2024, primarily due to a $69.27 million increase in the average balance of loans receivable coupled with an increase in the average yield on loans receivable to 5.90% for the year ended September 30, 2025 from 5.61% for the year ended September 30, 2024.
At September 30, 2024, the Company had total assets of $1.92 billion, net loans receivable of $1.42 billion, total 50 deposits of $1.65 billion and total shareholders’ equity of $245.41 million. The Company’s business activities generally are limited to passive investment activities and oversight of its investment in the Bank.
At September 30, 2025, the Company had total assets of $2.01 billion, net loans receivable of $1.46 billion, total deposits of $1.72 billion and total shareholders’ equity of $262.61 million. The Company’s business activities generally are 49 limited to passive investment activities and oversight of its investment in the Bank.
Total interest and dividend income increased by $14.87 million, or 18.6%, to $94.83 million for the year ended September 30, 2024 from $79.95 million for the year ended September 30, 2023, due to an increase in the average yields on interest-earning assets, as well as an increase in the average balance of loans.
Total interest and dividend income increased by $7.45 million, or 7.9%, to $102.28 million for the year ended September 30, 2025 from $94.83 million for the year ended September 30, 2024, due to an increase in the average yields on interest-earning assets, specifically loans and investment securities, as well as an increase in the average balance of loans.
Loans Receivable, Net of Allowance for Credit Losses: Net loans receivable increased by $119.22 million, or 9.2%, to $1.42 billion at September 30, 2024 from $1.30 billion at September 30, 2023.
Loans Receivable, Net of Allowance for Credit Losses: Net loans receivable increased by $42.07 million, or 3.0%, to $1.46 billion at September 30, 2025 from $1.42 billion at September 30, 2024.
Since March 2022, in response to inflation, the Federal Open Market Committee ("FOMC") of the Federal Reserve has increased the target range for the federal funds, which stood at 4.75% to 5.00% as of September 30, 2024.
Since March 2022, in response to inflation, the Federal Open Market Committee ("FOMC") of the Federal Reserve has increased the target range for the federal funds, which stood at 4.00% to 4.25% as of September 30, 2025. Subsequent to fiscal year end, the FOMC reduced the target federal funds rate by 25 basis points.
Loan Servicing Rights, Net: Loan servicing rights decreased by $752,000, or 35.4%, to $1.37 million at September 30, 2024 from $2.12 million at September 30, 2023, primarily due to the amortization of servicing rights and partially offset by additional capitalized Freddie Mac servicing rights for loans being sold with servicing retained.
Loan Servicing Rights, Net: Loan servicing rights decreased by $557,000, or 40.6%, to $815,000 at September 30, 2025 from $1.37 million at September 30, 2024, primarily due to the amortization of servicing rights, which was partially offset by additional capitalized Freddie Mac servicing rights for loans sold with servicing retained during the period.
At September 30, 2024, the consumer, commercial business and construction loan portfolios amounted to $51.04 million, $139.00 million and $219.20 million, respectively, or 3.4%, 9.2% and 14.5%, respectively, of total loans receivable. Quantitative Aspects of Market Risk.
At September 30, 2025, the consumer, commercial business and construction loan portfolios amounted to $52.51 million, $127.00 million and $223.89 million, respectively, or 3.3%, 8.1% and 14.2%, respectively, of total loans receivable. Quantitative Aspects of Market Risk.
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 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.
On July 25, 2023, the Company announced the adoption of a stock repurchase program authorizing the repurchase of up to 404,708 shares of Company common stock, of which 155,166 shares remained available for future purchases as of September 30, 2024.
On July 22, 2025, the Company announced the adoption of a stock repurchase program authorizing the repurchase of up to 393,842 shares of Company common stock, of which 337,280 shares remained available for future purchases as of September 30, 2025.
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 $155,000 at September 30, 2024. This discount will continue to accrete into income as these loans continue to pay down. For additional information, see "Item 1.
The remaining fair value discount associated with acquired loans was $51,000 at September 30, 2025. This discount will continue to accrete into income as these loans continue to pay down. For additional information, see "Item 1.
The increase was primarily due to increases in miscellaneous receivables (including income tax receivables) and prepaid expenses. Deposits: Deposits increased by $86.73 million, or 5.6%, to $1.65 billion at September 30, 2024 from $1.56 billion at September 30, 2023.
The decrease was primarily due to decreases in miscellaneous receivables (including income tax receivables) and prepaid expenses. Deposits: Deposits increased by $68.97 million, or 4.2%, to $1.72 billion at September 30, 2025 from $1.65 billion at September 30, 2024.
For more information regarding fair value accounting, please refer to "Note 21-Fair Value Measurements" in the Notes to the Consolidated Financial Statements contained in Item 8 of this report. Loan Servicing Rights Loan servicing rights are recognized as separate assets when rights are acquired through purchase or through sale of loans.
For more information regarding fair value accounting, please refer to "Note 21-Fair Value Measurements" in the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
For additional information on shareholders' equity, see the Consolidated Statements of Shareholders' Equity contained in Item 8 of this report.
For additional information on income taxes, see "Note 13 - Income Taxes" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
Net income per diluted common share decreased by $0.28, or 8.5%, to $3.01 for the year ended September 30, 2024 from $3.29 for the year ended September 30, 2023.
Net income per diluted common share increased by $0.66, or 21.9%, to $3.67 for the year ended September 30, 2025 from $3.01 for the year ended September 30, 2024.
Business - Lending Activities -- Allowance for Credit Losses" and "Note 4 - Loans Receivable and Allowance for Credit Losses" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report. Non-interest Income: Total non-interest income was $11.14 million for both the years ended September 30, 2024 and 2023.
Business - Lending Activities -- Allowance for Credit Losses" and "Note 4 - Loans Receivable and Allowance for Credit Losses" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.
The increase was primarily due to net income for the year ended September 30, 2024 of $24.28 million, partially offset by $7.65 million in dividends paid to shareholders and the repurchase of 218,976 shares of common stock for $5.96 million.
The increase was primarily due to net income for the year ended September 30, 2025 of $29.16 million, 56 partially offset by $8.09 million in dividends paid to shareholders and the repurchase of 179,966 shares of common stock for $5.76 million.
In the event of a 100 basis point increase in interest rates, a 0.3% decrease in EVE and a 1.5% decrease in net interest income would be expected. Based upon the modeling described above, the Bank's asset and liability structure generally results in modest decreases in net interest income and EVE in both rising and falling interest rate scenarios.
In the event of a 100 basis point increase in interest rates, a 0.1% decrease in EVE and a 0.5% decrease in net interest income would be expected. The Bank’s asset and liability structure generally results in decreases in net interest income and EVE under the hypothetical interest rate scenarios modeled, with changes more pronounced in larger rate movements.
Net Interest Income: Net interest income decreased by $4.19 million, or 6.1%, to $64.17 million for the year ended September 30, 2024 from $68.36 million for the year ended September 30, 2023.
Net Interest Income: Net interest income increased by $6.03 million, or 9.4%, to $70.20 million for the year ended September 30, 2025 from $64.17 million for the year ended September 30, 2024.
Premises and Equipment, Net: Premises and equipment decreased by $156,000, or 0.7%, to $21.49 million at September 30, 2024 from $21.64 million at September 30, 2023. The decrease was primarily due to normal depreciation. For additional information on premises and equipment, see "Item 2.
Premises and Equipment, Net: Premises and equipment increased by $198,000, or 0.9%, to $21.68 million at September 30, 2025 from $21.49 million at September 30, 2024. The increase was primarily due to increases to furniture and equipment, and building and improvements that was partially offset by normal depreciation. For additional information on premises and equipment, see "Item 2.
The decrease was primarily due to timing differences in the normal course of business and an increase in accrued interest payable. Shareholders' Equity: Total shareholders' equity increased by $12.34 million, or 5.3%, to $245.41 million at September 30, 2024 from $233.07 million at September 30, 2023.
The increase was primarily due to timing differences in the normal course of business, partially offset by a decrease in accrued interest payable. 58 Shareholders' Equity: Total shareholders' equity increased by $17.20 million, or 7.0%, to $262.61 million at September 30, 2025 from $245.41 million at September 30, 2024.
While the Company continues to emphasize lending in areas such as commercial real estate loans, construction loans, and commercial business loans, we remain committed to managing credit risk through the expertise of seasoned bankers and a conservative lending strategy.
While the Company continues to emphasize lending in areas such as commercial real estate loans, construction loans, and commercial business loans, we remain committed to managing credit risk through the expertise of seasoned bankers and a conservative lending strategy. 51 Selected Financial Data The following table sets forth certain information concerning the consolidated financial position and results of operations of the Company and its subsidiary at and for the dates indicated.
Interest income on interest-bearing deposits in banks and CDs increased by $762,000, or 10.7%, to $7.91 million for the year ended September 30, 2024 from $7.14 million for the year ended September 30, 2023, due to an 112 basis point increase in the average yield resulting from increased market interest rates, partially offset by a $20.85 million decrease in the average balance of interest-bearing deposits in banks and CDs.
Interest income on interest-bearing deposits in banks and CDs increased by $315,000, or 4.0%, to $8.22 million for the year ended September 30, 2025 from $7.91 million for the year ended September 30, 2024, due to a $35.38 million increase in the average balance of interest-bearing deposits in banks and CDs, and was partially offset by an 87 basis point decrease in the average yield resulting from decreased market interest rates. 59 Total interest expense increased by $1.42 million, or 4.6%, to $32.08 million for the year ended September 30, 2025 from $30.66 million for the year ended September 30, 2024.
Year Ended September 30, 2024 Compared to Year Ended September 30, 2023 Increase (Decrease) Due to Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 Increase (Decrease) Due to Rate Volume Net Change Rate Volume Net Change (Dollars in thousands) Interest-earning assets: Loans receivable (1) $ 6,199 $ 8,077 $ 14,276 $ 2,993 $ 8,837 $ 11,830 Investment securities 1,163 (1,418) (255) 3,899 1,997 5,896 Dividends from mutual funds, FHLB stock and other investments 98 (7) 91 144 6 150 Interest-bearing deposits in banks and CDs 1,726 (964) 762 7,236 (3,669) 3,567 Total net change in income on interest-earning assets 9,186 5,688 14,874 14,272 7,171 21,443 Interest-bearing liabilities: Savings accounts 202 (88) 114 199 (15) 184 Money market accounts 6,973 675 7,648 935 (101) 834 NOW checking accounts 2,117 (531) 1,586 2,978 (66) 2,912 Certificates of deposit accounts 3,760 5,249 9,009 3,860 855 4,715 FHLB borrowings 6 703 709 119 154 273 Total net change in expense on interest-bearing liabilities 13,058 6,008 19,066 8,091 827 8,918 Net change in net interest income $ (3,872) $ (320) $ (4,192) $ 6,181 $ 6,344 $ 12,525 ______________ (1) Excludes interest on loans on non-accrual status.
Year Ended September 30, 2025 Compared to Year Ended September 30, 2024 Increase (Decrease) Due to Year Ended September 30, 2024 Compared to Year Ended September 30, 2023 Increase (Decrease) Due to Rate Volume Net Change Rate Volume Net Change (Dollars in thousands) Interest-earning assets: Loans receivable (1) $ 4,108 $ 3,987 $ 8,095 $ 6,199 $ 8,077 $ 14,276 Investment securities 778 (1,710) (932) 1,163 (1,418) (255) Dividends from mutual funds, FHLB stock and other investments (12) (14) (26) 98 (7) 91 Interest-bearing deposits in banks and CDs (1,405) 1,720 315 1,726 (964) 762 Total net change in income on interest-earning assets 3,469 3,983 7,452 9,186 5,688 14,874 Interest-bearing liabilities: Savings accounts 128 (18) 110 202 (88) 114 Money market accounts (95) 729 634 6,973 675 7,648 NOW checking accounts (244) (293) (537) 2,117 (531) 1,586 Certificates of deposit accounts (1,123) 2,529 1,406 3,760 5,249 9,009 Short-term borrowings (111) 20 (91) — — — Long-term borrowings 2 (105) (103) 6 703 709 Total net change in expense on interest-bearing liabilities (1,443) 2,862 1,419 13,058 6,008 19,066 Net change in net interest income $ 4,912 $ 1,121 $ 6,033 $ (3,872) $ (320) $ (4,192) ______________ (1) Excludes interest on loans on non-accrual status.
Our liquid assets in the form of cash and cash equivalents, CDs held for investment and investment securities available for sale increased to $247.19 million at September 30, 2024 from $185.68 million at September 30, 2023. The increase was primarily a result of increased deposits and a decrease in total investment securities, due to maturities and prepayments outpacing purchases.
Our liquid assets in the form of cash and cash equivalents, CDs held for investment and investment securities available for sale increased to $328.89 million at September 30, 2025 from $247.19 million at September 30, 2024.
Comparison of Operating Results for the Years Ended September 30, 2024 and 2023 Net income for the year ended September 30, 2024 decreased by $2.84 million, or 10.5%, to $24.28 million from $27.12 million for the year ended September 30, 2023.
Comparison of Operating Results for the Years Ended September 30, 2025 and 2024 Net income for the year ended September 30, 2025 increased by $4.88 million, or 20.1%, to $29.16 million from $24.28 million for the year ended September 30, 2024.

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