TIMBERLAND BANCORP INC

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the consolidated financial statements and accompanying notes to the consolidated financial statements contained in Item 1 of this Form 10-Q. The following analysis discusses the material changes in the consolidated financial condition and results of operations of the Company at and for the three and nine months ended June 30, 2025.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the consolidated financial statements and accompanying notes to the consolidated financial statements contained in Item 1 of this Form 10-Q. The following analysis discusses the material changes in the consolidated financial condition and results of operations of the Company at and for the three months ended December 31, 2025.

Previous wording

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

Current wording

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

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

Current wording

•changes in employment levels, labor shortages inflation, a recession or slowed economic growth;

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

Current wording

•changes in interest rate levels and the duration volatility, and the timing and pace of such changes, including actions by the Board of Governors of the Federal Reserve System (“Federal Reserve”), which could materially affect our net interest margin, funding costs, asset values, access to capital and liquidity;

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

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

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•geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors; environmental, social and governance goals and targets;

Current wording

•Geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, could disrupt financial markets, global supply chains, energy commodity prices, or economic activity in specific industry sectors;

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

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

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

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•credit risks of associated with lending activities, including loan delinquencies, write-offs, changes in our allowance for credit losses ("ACL"), and provision for credit losses;

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

Current wording

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

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

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

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

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

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

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

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

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•increased competitive pressures among financial services companies;

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•effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, domestic political unrest, and other external events;

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•effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil domestic political unrest, and other external events;

Previous wording

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

Current wording

Any of the forward-looking statements that we make in this Form 10-Q and in the other public statements we make are based upon management's beliefs and assumptions at the time they are made. We do not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements included in this quarterly report to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except as may be required by law. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur and we caution readers not to place undue reliance on any forward-looking statements. These risks could cause our actual results for fiscal 2026 and beyond to differ materially from those expressed or implied in any forward-looking statements by, or on behalf of, us, and could negatively affect the Company's consolidated financial condition and results of operations as well as its stock price performance.

Previous wording

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 offices (including its main office in Hoquiam). At June 30, 2025, the Company had total assets of $1.96 billion, net loans receivable of $1.44 billion, total deposits of $1.67 billion and total shareholders’ equity of $256.66 million. The Company's business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including the unaudited consolidated financial statements and related data, relates primarily to the Bank's operations.

Current wording

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 offices (including its main office in Hoquiam). At December 31, 2025, the Company had total assets of $2.01 billion, net loans receivable of $1.46 billion, total deposits of $1.70 billion and total shareholders’ equity of $268.41 million. The Company's business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including the unaudited consolidated financial statements and related data, relates primarily to the Bank's operations.

Previous wording

Our net interest income, net interest margin, and net interest spread are primarily influenced by changes in market interest rates, the shape of the yield curve, and the interest rates we earn on interest-earning assets or pay on interest-bearing liabilities. These components of net interest income are also affected by the volume and composition of our interest-earning assets, interest-bearing and non-interest-bearing liabilities, and shareholders’ equity. During the first fiscal quarter of 2025, interest rate trends were significantly influenced by monetary policy actions taken by the Federal Open Market Committee (“FOMC”) of the Federal Reserve. In response to ongoing improvements in inflation, the FOMC lowered the target range for the federal funds rate three times during 2024, resulting in a range of 4.25% to 4.50% at June 30, 2025. Despite the decline in market rates, asset yields increased due to the origination of new loans at higher rates and upward repricing of adjustable-rate loans. At the same time, funding costs declined, but at a slower pace, which moderated the overall benefit to our net interest margin.

Current wording

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

Previous wording

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

Current wording

The provision for (recapture of) credit losses on loans is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio as well as prevailing economic and market conditions. The ACL on loans reflects the amount that management has determined is adequate to cover probable expected credit losses in the loan portfolio. As the loan portfolio increases, or due to an increase in probable expected losses inherent in the loan portfolio, the ACL may increase, resulting in a decrease to net interest income after the provision. Improvement in loan risk ratings, increase in property values, or receipts of recoveries of amounts previously charged off may partially or fully offset any required increases to the ACL on loans due to loan growth or an increase in the probable expected credit losses. The Company recorded a provision for credit losses on loans of $16,000 for the three months ended December 31, 2025 compared to a provision for credit losses on loans of $52,000 for the three months ended December 31, 2024.

Previous wording

Net income is also impacted by levels of non-interest income and non-interest expense. For the three and nine months ended June 30, 2025, non-interest income consisted primarily of service charges on deposit accounts, gain on sales of loans, ATM and debit card interchange transaction fees, BOLI net earnings, servicing income on loans sold, escrow fees and other operating income. Non-interest income may also be affected by net recoveries on investment securities and the reversal of previously recognized OTTI losses, if applicable. Additionally, it is reduced by valuation allowances on loan servicing rights and increased by recoveries of such allowances, when recognized. Non-interest expense for the same periods primarily included salaries and employee benefits, premises and equipment costs, advertising, ATM and debit card interchange transaction fees, postage and courier expenses, state and local taxes, professional fees, FDIC insurance premiums, loan administration and foreclosure-related expenses, technology and communications expenses, deposit operation expenses, amortization of CDI, and other general operating expenses. In certain periods, non-interest expense may be offset by gains on the sale of premises and equipment or OREO. Both non-interest income and non-interest expense are influenced by the Company’s overall growth and the expansion of its loan and deposit account base.

Current wording

Net income is also impacted by levels of non-interest income and non-interest expense. For the three months ended December 31, 2025, non-interest income consisted primarily of service charges on deposit accounts, gain on sales of loans, ATM and debit card interchange transaction fees, BOLI net earnings, servicing income on loans sold, escrow fees and other operating income. Non-interest income may also be affected by net recoveries on investment securities and the reversal of previously recognized OTTI losses, if applicable. Additionally, it is reduced by valuation allowances on loan servicing rights and increased by recoveries of such allowances, when recognized. Non-interest expense for the same periods primarily included salaries and employee benefits, premises and equipment costs, advertising, ATM and debit card interchange transaction fees, postage and courier expenses, state and local taxes, professional fees, FDIC insurance premiums, loan administration and foreclosure-related expenses, technology and communications expenses, deposit operation expenses, amortization of CDI, and other general operating expenses. In certain periods, non-interest expense may be offset by gains on the sale of premises and equipment or OREO. Both non-interest income and non-interest expense are influenced by the Company’s overall growth and the expansion of its loan and deposit account base.

Previous wording

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

Current wording

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

Previous wording

Shareholders’ equity increased by $11.25 million, or 4.6%, to $256.66 million at June 30, 2025 from $245.41 million at September 30, 2024. The increase was primarily due to net income earned during the current period, partially offset by the payment of dividends to common shareholders, and repurchases of common stock during the nine months ended June 30, 2025.

Current wording

Shareholders’ equity increased by $5.80 million, or 2.2%, to $268.41 million at December 31, 2025 from $262.61 million at September 30, 2025. The increase was primarily due to net income earned during the current period, partially offset by the payment of dividends to common shareholders, and repurchases of common stock during the three months ended December 31, 2025.

Previous wording

Cash and Cash Equivalents and CDs Held for Investment: Cash and cash equivalents and CDs held for investment increased by $27.15 million, or 15.5%, to $202.09 million at June 30, 2025 from $174.94 million at September 30, 2024. The increase was due to a $28.90 million increase in cash and cash equivalents, resulting primarily from an increase in deposits and maturities, prepayments and scheduled amortizations of investment securities. The overall increase was partially offset by a $1.75 million decrease in CDs held for investment.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Loan originations increased by $992,000, or 1.4%, to $73.06 million for the three months ended December 31, 2025 from $72.07 million for the three months ended December 31, 2024. The increase was primarily due to increases in originations of commercial business, multi-family and one- to four-family loans. These increases were partially offset by decreases in construction and commercial real estate loan originations.

Previous wording

The Company generally sells longer-term fixed-rate one- to four-family mortgage loans for asset liability management purposes and to generate non-interest income. Sales of fixed-rate one- to four-family loans increased by $4.47 million, or 49.01%, to $13.60 million for the nine months ended June 30, 2025 from $9.12 million for the nine months ended June 30, 2024, primarily due to an increase in one- to four-family construction loans refinancing to permanent loans and being sold into the secondary market.

Current wording

The Company generally sells longer-term fixed-rate one- to four-family mortgage loans for asset liability management purposes and to generate non-interest income. Sales of fixed-rate one- to four-family loans increased by $1.36 million, or 58.7%, to $3.66 million for the three months ended December 31, 2025 from $2.31 million for the three months ended December 31, 2024, primarily due to an increase in one- to four-family construction loans refinancing to permanent loans and being sold into the secondary market.

Previous wording

Premises and Equipment: Premises and equipment increased by $4,000, or less than 1%, to $21.49 million at both June 30, 2025 and September 30, 2024. The modest increase reflects capitalized additions related to facility improvements and equipment purchases during the period, which were largely offset by scheduled depreciation expense.

Current wording

Premises and Equipment: Premises and equipment increased by $142,000, or 0.7%, to $21.83 million at December 31, 2025 from $21.68 million at September 30, 2025. The modest increase reflects capitalized additions related to facility improvements and equipment purchases during the period, which were largely offset by scheduled depreciation expense.

Previous wording

OREO (Other Real Estate Owned): At June 30, 2025, total OREO and other repossessed assets consisted of one commercial real estate property with a value of $221,000 and one land parcel with no recorded value. At September 30, 2024, total OREO and other repossessed assets consisted of one land parcel with no recorded value.

Current wording

OREO (Other Real Estate Owned): At December 31, 2025 and September 30, 2025, total OREO and other repossessed assets consisted of one commercial real estate property with a value of $221,000 and one land parcel with no recorded value.

Previous wording

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

Current wording

BOLI (Bank Owned Life Insurance): BOLI increased by $158,000, or 0.7%, to $21.99 million at December 31, 2025 from $21.83 million at September 30, 2025. The increase was due to net BOLI earnings, representing the increase in the cash surrender value of the BOLI policies.

Previous wording

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

Current wording

Goodwill and CDI: The recorded amount of goodwill remained unchanged at $15.13 million at both December 31, 2025 and September 30, 2025. CDI decreased by $34,000, or 12.5%, to $237,000 at December 31, 2025 from $271,000 at September 30, 2025 due to scheduled amortization. For additional information on goodwill and CDI, see Note 3 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Previous wording

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

Current wording

Loan Servicing Rights, Net: Loan servicing rights, net decreased by $137,000, or 16.8%, to $678,000 at December 31, 2025 from $815,000 at September 30, 2025 primarily due to the amortization of servicing rights. The principal amount of loans serviced for Freddie Mac and the U.S. Small Business Administration decreased by $4.99 million to $352.02 million at December 31, 2025 from $357.01 million at September 30, 2025.

Previous wording

At June 30, 2025, the loan-to-deposit ratio was approximately 86.39%, unchanged from September 30, 2024, reflecting continued disciplined loan growth largely funded by core deposit activity. Management continues to monitor deposit pricing and mix in the context of liquidity management and efforts to support net interest income and profitability.

Current wording

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

Previous wording

Shareholders’ Equity: Total shareholders’ equity increased by $11.25 million, or 4.6%, to $256.66 million at June 30, 2025 from $245.41 million at September 30, 2024. The increase was primarily due to net income of $20.72 million and proceeds of $817,000 from the exercise of stock options. This increase was partially offset by dividend payments to common shareholders of $6.03 million, the repurchase of 123,404 shares of the Company's common stock for $3.85 million and a $795,000 other comprehensive loss for fair value adjustment on available for sale investment securities, resulting from changes in market interest rates during the period.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

(1) At both December 31, 2025 and September 30, 2025 there was one one- to four-family property in the process of foreclosure.

Previous wording

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

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Provision for Credit Losses: A $35,000 recapture of credit losses was recorded for the quarter ended December 31, 2025, consisting of a $16,000 provision for credit losses on loans, a $2,000 recapture of credit losses on investment securities, and a $49,000 recapture of credit losses on unfunded commitments which was due to construction loans converting to permanent financing. A $27,000 provision for credit losses was recorded for the quarter ended December 31, 2024, consisting of a $52,000 provision for credit losses on loans, a $5,000 recapture of credit losses on investment securities and an $20,000 recapture of credit losses on unfunded commitments.