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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM		10-K
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended September 30, 2024
	For the Fiscal Year Ended September 30, 2025
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to
Commission File Number:		0-23333
TIMBERLAND BANCORP, INC.
(Exact name of registrant as specified in its charter)

Washington

91-1863696

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

624 Simpson Avenue,

Hoquiam,

Washington

98550

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(360)

533-4747

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $.01 par value	TSBK	The NASDAQ Stock Market LLC


Securities registered pursuant to Section 12(g) of the Act:						None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1.b. ☐

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

As of December 42, ~~2024~~2025, the registrant had 7,~~967~~880,~~916~~773 shares of common stock issued and outstanding. The aggregate market value of the common stock held by nonaffiliates of the registrant, based on the closing sales price of the registrant’s common stock as quoted on the NASDAQ Global Market on March 31, ~~2024~~2025, was $~~215~~238.9829 million (87,~~023~~903,~~121~~489 shares at $2630.9215). For purposes of this calculation, common stock held by officers and directors of the registrant was included.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of Definitive Proxy Statement for the ~~2024~~2025 Annual Meeting of Shareholders (Part III).

TIMBERLAND BANCORP, INC.

~~2024~~2025 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I.

Page

Item 1.

Business

General

Market Area

Lending Activities

Investment Activities

Deposit Activities and Other Sources of Funds

Bank Owned Life Insurance

How We Are Regulated

Taxation

Competition

Subsidiary Activities

Employees and Human Capital Resources

Executive Officers of the Registrant

Item 1A.

Risk Factors

3534

Item 1B.

Unresolved Staff Comments

4645

Item 1C.

Cybersecurity

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

PART II.

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6.

Reserved

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Overview

Operating Strategy

Selected Financial Data

Critical Accounting Estimates

Market Risk and Asset and Liability Management

Comparison of Financial Condition at September 30, 2024 and September 30, 2023

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

Comparison of Operating Results for the Years Ended September 30, 2024 and 2023

Comparison of Operating Results for the Years Ended September 30, 2025 and 2024

Comparison of Operating Results for the Years Ended September 30. 2024 and 2023

Average Balances, Interest and Average Yields/Cost

Rate/Volume Analysis

Liquidity and Capital Resources

New Accounting Pronouncements

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements ~~With~~with Accountants on Accounting and Financial Disclosure

125

Item 9A.

Controls and Procedures

125

Item 9B.

Other Information

127

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

127

PART III.

Item 10.

Directors, Executive Officers and Corporate Governance

127

Item 11.

Executive Compensation

128

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

128

Item 13.

Certain Relationships and Related Transactions, and Director Independence

129

Item 14.

Principal Accountant Fees and Services

129

PART IV.

Item 15.

Exhibits and Financial Statement Schedules

130

Item 16.

Form 10-K Summary

131

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

Special Note Regarding Forward-Looking Statements

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

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

•effects of employment levels, labor shortages inflation, a recession or slowed economic growth;

•changes in ~~the~~ interest rate ~~environment,~~levels ~~including~~and the ~~past~~duration ~~increases~~of ~~and~~such ~~decreases~~changes, inincluding actions by the Board of Governors of the Federal Reserve System (“Federal Reserve”) ~~benchmark rate and duration of such changed levels~~, which could ~~adversely~~materially affect our ~~revenues~~net ~~and~~interest ~~expenses~~margin, ~~the~~funding ~~values~~costs, ofasset ~~our assets and obligations~~values, ~~and~~access ~~the~~to ~~availability and cost of~~ capital and liquidity;

•the impact of inflation, including monetary and fiscal policy responses thereto, and the ~~Federal~~impact ~~Reserve~~on ~~monetary~~consumer ~~policy~~and business behavior;

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

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

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

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

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

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

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

•legislative or regulatory changes, including changes in banking, securities and tax law, in regulatory policies and principles, or the interpretation of regulatory capital or other rules;

•our ability to attract and retain deposits;

•our ability to control operating costs and expenses;

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

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

•staffing fluctuations in response to product demand or corporate implementation strategies;

•~~disruptions~~vulnerabilities orin ~~security~~information ~~breaches~~systems or ~~other~~third-party ~~adverse~~service ~~events~~providers, ~~failures~~including ordisruptions, ~~interruptions~~breaches, in or attacks ~~on our information technology systems or on the third-party vendors~~;

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

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

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

•increased competitive pressures among financial services companies;

•changes in consumer spending, borrowing and savings habits;

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

•our ability to pay dividends on our common stock;

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

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

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

•environmental, social and governance goals and targets;

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

•other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and

3•other risks described elsewhere in this Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the “2025 Form 10-K”) and in the Company's other reports filed with or furnished to the Securities and Exchange Commission.

~~•other~~Any ~~risks~~of ~~described~~the ~~elsewhere~~forward-looking instatements ~~this~~that ~~Annual~~we ~~Report~~make onin this 2025 Form 10-K ~~for~~and in the ~~fiscal~~other ~~year~~public ~~ended~~statements ~~September~~we 30make 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 annual 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, ~~2024~~whether (as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the ~~“2024~~forward-looking ~~Form~~statements 10discussed in this document might not occur and we caution readers not to place undue reliance on any forward-~~K”)~~looking statements. These risks could cause our actual results for fiscal 2026 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 ~~other~~consolidated ~~reports~~financial ~~filed~~condition ~~with~~and orresults ~~furnished~~of tooperations ~~the~~as ~~Securities~~well ~~and~~as ~~Exchange~~its ~~Commission~~stock price performance.

Any of the forward-looking statements that we make in this 2024 Form 10-K 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 annual 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.

PART I

Item 1. Business

General

Timberland Bancorp, Inc. (“Timberland Bancorp"), a Washington corporation, was organized on September 8, 1997 for the purpose of becoming the holding company for Timberland Bank (the "Bank"). At September 30, ~~2024~~2025, on a consolidated basis, the Company had total assets of $12.9201 billion, net loans receivable of $1.4246 billion, total deposits of $1.6572 billion and total shareholders’ equity of $~~245~~262.4161 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 consolidated financial statements and related data, relates primarily to the Bank and its subsidiary, Timberland Service Corp.

The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Pierce, Thurston, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 branches (including its main office in Hoquiam). The Bank’s deposits are insured up to applicable legal limits by the Federal Deposit Insurance Corporation (the “FDIC”). The Bank has been a member of the Federal Home Loan Bank System since 1937. The Bank is regulated by the Washington State Department of Financial Institutions - Division of Banks (the “DFI”) and the FDIC. The Company is regulated by the Federal Reserve.

Timberland Bank is a community-oriented bank which has traditionally offered a variety of savings products to its retail customers while concentrating its lending activities on real estate mortgage loans. Lending activities have been focused primarily on the origination of loans secured by real estate, including residential and commercial / multi-family construction loans, one- to four-family residential loans, multi-family loans, commercial real estate loans and land loans. The Bank originates adjustable-rate residential mortgage loans that do not qualify for sale in the secondary market. The Bank also originates commercial business loans and other consumer loans.

The Company maintains a website at www.timberlandbank.com. The information contained on that website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. Other than an investor’s own internet access charges, the Company makes available free of charge through that website the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after these materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). These reports are also available on the SEC's website at http://www.sec.gov.

Market Area

The Bank considers Grays Harbor, Pierce, Thurston, King, Kitsap and Lewis counties, Washington as its primary market areas. 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 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).

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.

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. Each of these markets presents operating risks to the Bank. The Bank’s expansion into Pierce, Thurston, Kitsap, King and Lewis counties ~~represents~~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.

Grays Harbor County has a population of 7778,000 according to the United States ("U.S.") Census Bureau ~~2023~~2024 estimates and a median family income of $9094,~~000~~800 according to ~~2024~~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. 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 5.56% at ~~September 30~~August 31, ~~2024~~2025 from 45.85% at September 30, ~~2023~~2024. The median price of a resale home in Grays Harbor County for the quarter ended ~~September~~June 30, ~~2024~~2025 increased 42.09% to $~~365~~368,400 from $~~351~~358,~~300~~100 for the comparable prior year period. The number of home sales ~~decreased~~increased 139.72% for the quarter ended ~~September~~June 30, ~~2024~~2025 compared to the same quarter one year earlier. 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~~941,000 according to the U.S. Census Bureau ~~2023~~2024 estimates. The county’s median family income is $~~112~~120,~~300~~800 according to ~~2024~~2025 HUD estimates. 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 4.5.0% at ~~September 30~~August 31, ~~2024~~2025 from 34.95% at September 30, ~~2023~~2024. The median price of a resale home in Pierce County for the quarter ended ~~September~~June 30, ~~2024~~2025 increased 51.7% to $~~576~~579,~~400~~500 from $~~545~~569,~~200~~600 for the comparable prior year period. The number of home sales decreased 131.93% for the quarter ended ~~September~~June 30, ~~2024~~2025 compared to the same quarter one year earlier. 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~~303,000 according to the U.S. Census Bureau ~~2023~~2024 estimates and a median family income of $116,700 according to ~~2024~~2025 HUD estimates. 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 34.85% at ~~September 30~~August 31, ~~2024~~2025 from 3.48% at September 30, ~~2023~~2024. The median price of a resale home in Thurston County for the quarter ended ~~September~~June 30, ~~2024~~2025 increased 26.4% to $~~528~~547,~~800~~000 from $~~516~~514,~~300~~100 for the same quarter one year earlier. The number of home sales ~~decreased~~increased 121.26% for the quarter ended ~~September~~June 30, ~~2024~~2025 compared to the same quarter one year earlier. 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~~281,000 according to the U.S. Census Bureau ~~2023~~2024 estimates and a median family income of $~~119~~124,~~700~~300 according to ~~2024~~2025 HUD estimates. 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 34.83% at ~~September 30~~August 31, ~~2024~~2025 from 3.58% at September 30, ~~2023~~2024. The median price of a resale home in Kitsap County for the quarter ended September 30, 2024 increased 0.3% to $554,100 from $552,700 for the same quarter one year earlier. The number of home sales decreased 7.8% for the quarter ended September 30, 2024 compared to the same quarter one year earlier.

~~King~~June County is the most populous county in the state and has a population of 2.3 million according to the U.S. Census Bureau 2023 estimates. The Bank has one branch located in King County. The county’s median family income is $15830,~~700~~ ~~according~~2025 to 2024 HUD estimates. King County’s economic base is diversified with many industries including shipping, transportation, aerospace, computer technology and biotech. According to the Washington State Employment Security Department, the unemployment rate for the King County area increased ~~to 4.~~2~~% at September 30, 2024 from 3~~.69% ~~at September 30, 2023. The median price of a resale home in King County for the quarter ended September 30, 2024 increased 8.4%~~ to $~~984~~589,~~200~~900 from $~~908~~573,~~100~~400 for the same quarter one year earlier. The number of home sales ~~decreased~~increased 63.15% for the quarter ended ~~September~~June 30, ~~2024~~2025 compared to the same quarter one year earlier.

~~Lewis~~King County is the most populous county in the state and has a population of ~~86,000~~2.3 million according to the U.S. Census Bureau ~~2022~~2024 estimates. The ~~and~~Bank ahas one branch located in King County. The county’s median family income ofis $90166,~~000~~900 according to ~~2024~~2025 HUD estimates. ~~The~~ King County’s economic base inis ~~Lewis~~diversified ~~County~~with ismany ~~supported~~industries byincluding ~~manufacturing~~shipping, ~~retail~~transportation, ~~trade~~aerospace, ~~local~~computer ~~government~~technology and ~~industrial services~~biotech. According to the Washington State Employment Security Department, the unemployment rate infor ~~Lewis~~the King County area increased to 4.75% at ~~September 30~~August 31, ~~2024~~2025 from 4.32% at September 30, ~~2023~~2024. The median price of a resale home in ~~Lewis~~King County for the quarter ended ~~September~~June 30, ~~2024~~2025 increased 3.60% to $~~425,800~~1.03 million from $~~410~~999,~~900~~300 for the same quarter one year earlier. The number of home sales decreased 143.4% for the quarter ended ~~September~~June 30, ~~2024~~2025 compared to the same quarter one year earlier. ~~The Bank has three branches located in Lewis County.~~

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. According to the Washington State Employment Security Department, the unemployment rate in Lewis County increased to 5.5% at August 31, 2025 from 4.7% at September 30, 2024. The median price of a resale home in Lewis County for the quarter ended June 30, 2025 increased 3.0% to $424,000 from $411,600 for the same quarter one year earlier. The number of home sales decreased 1.1% for the quarter ended June 30, 2025 compared to the same quarter one year earlier. The Bank has three branches located in Lewis County.

Lending Activities

General. Historically, the principal lending activity of the Bank has consisted of ~~the~~originating ~~origination of~~ loans secured by first mortgages on owner-occupied, one- to four-family residences, multi-family properties, commercial real estate, ~~and on~~ raw or developed land, ~~and~~as ~~the~~well ~~origination~~as oforiginating construction loans~~, primarily for the construction of one- to four-family residences~~. The Bank’s net loans receivable totaled $1.4246 billion at September 30, ~~2024~~2025, representing 7372.97% of consolidated total assets,. ~~and~~At at that date, commercial real estate, construction (including undisbursed loans in process), multi-family and land loans were $1.0308 billion, or 6773.74% of total loans. Commercial real estate, construction, multi-family, and land loans typically have higher ~~rates~~yields ~~of return~~ than one- to four-family loans; however, they also present a higher degree of risk.

The Bank’s internal loan policy limits the maximum amount of loans to one borrower to 90% of its legal lending limit (which is 20% of its capital plus surplus). 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~~ACL ~~for credit losses~~ not included in the bank's Tier 2 capital as reported in the bank's call report. At September 30, ~~2024~~2025, the maximum amount which the Bank could have lent to any one borrower and the borrower’s related entities was approximately $4947.3510 million under this policy. At September 30, ~~2024~~2025, the largest amount outstanding to any one borrower and the borrower’s related entities was $4241.5457 million (including $59.8338 million in available lines of credit), which was secured by various commercial real estate and residential properties and other business assets located primarily in King and Pierce counties,. ~~and~~These ~~these~~ loans were performing according to their repayment terms at September 30, ~~2024~~2025. The next largest amount outstanding to any one borrower and the borrower’s related entities was $3241.4835 million (including $28.4445 million of undisbursed construction loan proceeds). These loans were secured by multi-family, one- to four-family and commercial real estate properties located primarily in Thurston County and were performing according to their repayment terms at September 30, ~~2024~~2025.

Loan Portfolio Analysis. The following table sets forth the composition of the Bank’s loan portfolio by type of loan at the dates indicated.

	At September 30,
	2024				2023				2022
	2025				2024				2023
	Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
Mortgage Loans:
One- to four-family (1)	$	~~299~~317,~~123~~691	1920.7516	%	$	~~253~~299,~~227~~123	1719.75	%	$	~~176~~253,~~116~~227	1417.0575	%
Multi-family	~~177~~207,~~350~~767		1113.7119		~~127~~177,~~176~~350		811.9171		95127,~~025~~176		78.5891
Commercial	~~599~~610,~~219~~692		3938.5776		~~568~~599,~~265~~219		39.8457		~~536~~568,~~650~~265		4239.8184
Construction - custom and owner/builder	~~132~~130,~~101~~341		8.7227		~~129~~132,~~699~~101		98.0972		~~119~~129,~~240~~699		9.5109
Construction - speculative one- to four-family	1110,~~495~~745		0.7669		1711,~~099~~495		10.2076		1217,~~254~~099		01.9820
Construction - commercial	2921,~~463~~818		1.9538		5129,~~064~~463		31.5895		4051,~~364~~064		3.2258
Construction - multi-family	2845,~~401~~660		12.8890		5728,~~140~~401		41.0188		6457,~~480~~140		54.1401
Construction - land development	1715,~~741~~324		10.1798		1817,~~841~~741		1.3217		1918,~~280~~841		1.5432
Land	2935,~~366~~952		12.9428		2629,~~726~~366		1.8794		26,~~854~~726		21.1487
Total mortgage loans	1,~~324~~395,~~259~~990		8788.4561		1,~~249~~324,~~237~~259		87.5745		1,~~090~~249,~~263~~237		8687.9757
Consumer Loans:
Home equity and second mortgage	4750,~~913~~479		3.1620		3847,~~281~~913		23.6816		3538,~~187~~281		2.8168
Other	32,~~129~~034		0.2113		23,~~772~~129		0.2021		2,~~128~~772		0.1720
Total consumer loans	5152,~~042~~513		3.3733		4151,~~053~~042		23.8837		3741,~~315~~053		2.9888
Commercial Loans:
Commercial business	~~138~~126,~~743~~937		98.1606		~~135~~138,~~802~~743		9.5216		~~125~~135,~~039~~802		9.9752
U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP")	~~260~~58		~~0.02~~—		~~466~~260		0.0302		~~1,001~~466		0.0803
Total commercial business and SBA PPP loans	139,003		9.18		136,268		9.55		126,040		10.05
Total commercial loans	126,995		8.06		139,003		9.18		136,268		9.55
Total loans receivable	1,~~514~~575,~~304~~498		100.00	%	1,~~426~~514,~~558~~304		100.00	%	1,~~253~~426,~~618~~558		100.00	%
Less:
Undisbursed portion of construction loans in process	(6988,~~878~~289)				(~~103~~69,~~194~~878)				(103,~~168~~194)
Deferred loan origination fees, net	(5,~~425~~528)				(5,~~242~~425)				(45,~~321~~242)
Allowance for credit losses (2)	(17,478)				(15,817)				(13,703)
ACL (2)	(18,091)				(17,478)				(15,817)
Total loans receivable, net	$	1,~~421~~463,~~523~~590			$	1,~~302~~421,~~305~~523			$	1,~~132~~302,~~426~~305

___________

(1)Does not include loans held for sale of $01,127, $~~400~~0, and $~~748~~400 at September 30, ~~2024~~2025, ~~2023~~2024, and ~~2022~~2023, respectively.

(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.

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.

Residential One- to Four-Family Lending. At September 30, ~~2024~~2025, $~~299~~317.1269 million, or 1920.82%, of the Bank’s loan portfolio consisted of loans secured by one- to four-family residences. The Bank originates both fixed-rate loans and adjustable-rate loans.

Generally, one- to four-family fixed-rate loans are originated to meet the requirements for sale in the secondary market to the Federal Home Loan Mortgage Corporation ("Freddie Mac") ~~or the Federal Home Loan Bank of Des Moines ("FHLB")~~. From time to time, however, a portion of these fixed-rate loans may be retained in the loan portfolio to meet the Bank’s asset/liability management objectives. The Bank uses an automated underwriting program, which preliminarily qualifies a loan as conforming to Freddie Mac underwriting standards when the loan is originated. At September 30, ~~2024~~2025, $~~121~~113.70 million, or 4035.78%, of the Bank’s one- to four-family loan portfolio consisted of fixed-rate mortgage loans.

The Bank also offers adjustable-rate mortgage (“ARM”) loans. All the Bank’s ARM loans are retained in its loan portfolio. The Bank offers several ARM products which adjust annually or every three to five years after an initial period ranging from one to five years and are typically subject to a limitation on the annual interest rate increase of 2% and an overall limitation of 6%. These ARM products generally are re-priced utilizing the weekly average yield on one-year U.S. Treasury securities adjusted to a constant maturity of one year plus a margin of 2.7550% 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. Loans tied to the Prime Rate normally have margins ranging up to 3.0%. ARM loans held in the Bank’s portfolio do not permit negative amortization of principal. Borrower demand for ARM loans versus fixed-rate mortgage loans is a function of the level of interest rates, the expectations of changes in the level of interest rates and the difference between the initial interest rates and fees charged for each type of loan. The relative amount of fixed-rate mortgage loans and ARM loans that can be originated at any time is largely determined by the demand for each in a competitive environment. At September 30, ~~2024~~2025, $~~177~~203.4299 million, or 5964.32%, of the Bank’s one- to four- family loan portfolio consisted of ARM loans.

A portion of the Bank’s ARM loans are “non-conforming,” because they do not satisfy acreage limits or various other requirements imposed by Freddie Mac. Some of these loans are also originated to meet the needs of borrowers who cannot otherwise satisfy Freddie Mac credit requirements because of personal and financial reasons (i.e., divorce, bankruptcy, length of time employed, etc.), and other aspects, which do not conform to Freddie Mac’s guidelines. Such borrowers may have higher debt-to-income ratios, or the loans are secured by unique properties in rural markets for which there are no sales of comparable properties to support the value according to secondary market requirements. These loans are known as non-conforming loans, and the Bank may require additional collateral or lower loan-to-value ratios to reduce the risk of these loans. The Bank believes that these loans satisfy a need in its local market area. As a result, subject to market conditions, the Bank intends to continue to originate these types of loans.

The retention of ARM loans in the Bank’s loan portfolio helps reduce the Bank’s exposure to changes in interest rates. There are, however, unquantifiable credit risks resulting from the potential of increased interest to be paid by the customer as a result of increases in interest rates. It is possible that during periods of rising interest rates, the risk of default on ARM loans may increase as a result of repricing and the increased costs to the borrower. The Bank attempts to reduce the potential for delinquencies and defaults on ARM loans by qualifying the borrower based on the borrower’s ability to repay the ARM loan assuming a 2.0% increase in the initial interest rate. Another consideration is that although ARM loans allow the Bank to increase the sensitivity of its asset base due to changes in the interest rates, the extent of this interest sensitivity is limited by the periodic and lifetime interest rate adjustment limits. Because of these considerations, the Bank has no assurance that yield increases on ARM loans will be sufficient to offset increases in the Bank’s cost of funds.

While fixed-rate, single-family residential mortgage loans are normally originated with 15 to 30 year terms to maturity, these loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full upon sale of the property pledged as security or upon refinancing the original loan. In addition, substantially all mortgage loans in the Bank’s loan portfolio contain due-on-sale clauses providing that the Bank may declare the unpaid amount due and payable upon the sale of the property securing the loan. Typically, the Bank enforces these due-on-sale clauses to the extent permitted by law and as business judgment dictates. Thus, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates received on outstanding loans.

The Bank requires that fire and extended coverage casualty insurance, and flood insurance if appropriate, be maintained on the collateral for all of its real estate secured loans.

The Bank’s lending policies generally limit the maximum loan-to-value ratio on mortgage loans secured by owner-occupied properties to 85% of the lesser of the appraised value or the purchase price. 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). At September 30, 2025, there was one

~~(90% for loans originated for sale in the secondary market to Freddie Mac or the FHLB). At September 30, 2024,~~ one ~~one~~- to four-family loan oftotaling $~~49,000~~1.78 ~~was~~million on non-accrual status. See “Lending Activities - Non-performing Loans and Delinquencies.”

Multi-Family Lending. At September 30, ~~2024~~2025, $~~177~~207.3577 million, or 1113.72%, of the Bank’s total loan portfolio was secured by multi-family dwelling units (more than four units) located primarily in the Bank’s primary market area. Multi-family loans are generally originated with variable rates of interest ranging from 1.00% to 3.50% over the one-year constant maturity U.S. Treasury Bill Index, the Prime Rate or a matched term FHLB borrowing, with principal and interest payments fully amortizing over terms of up to 30 years. At September 30, ~~2024~~2025, the Bank’s largest multi-family loan had an outstanding principal balance of $10.0722 million and was secured by an apartment complex located in Pierce County. At September 30, ~~2024~~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%. The Bank generally requests its multi-family loan borrowers with loan balances in excess of $750,000 to submit financial statements and rent rolls annually on the properties securing such loans. The Bank also inspects such properties annually. The Bank generally imposes a minimum debt coverage ratio of 1.20 for loans secured by multi-family properties.

Multi-family mortgage lending affords the Bank an opportunity to receive interest at rates higher than those generally available from one- to four- family residential lending. However, loans secured by multi-family properties usually are greater in amount, more difficult to evaluate and monitor and, therefore, may involve a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by multi-family properties are often dependent on the successful operation and management of the properties, repayment of such loans may be affected by adverse conditions in the real estate market or the economy. The Bank seeks to minimize these risks by scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan. 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~~2025, all multi-family loans were performing according to their repayment terms. See "Lending Activities - Non-performing Loans and Delinquencies."

Commercial Real Estate Lending. Commercial real estate loans totaled $~~599~~610.2269 million, or 3938.68%, of the total loan portfolio at September 30, ~~2024~~2025. The Bank originates commercial real estate loans generally at variable interest rates with principal and interest payments fully amortizing over terms of up to 30 years. These loans are secured by properties, such as industrial warehouses, medical/dental offices, office buildings, retail/wholesale facilities, mini-storage facilities, hotel/motels, nursing homes, restaurants, convenience stores, shopping centers and mobile home parks, generally located in the Bank’s primary market area. At September 30, ~~2024~~2025, the largest commercial real estate loan was secured by a medical office building in Thurston County, had a balance of $7.5941 million and was performing according to its repayment terms. At September 30, ~~2024~~2025, ~~six~~one commercial real estate ~~loans~~loan ~~totaling~~of $~~1.16~~159,000 ~~million~~was ~~were~~ on non-accrual status. See “Lending Activities - Non-performing Loans and Delinquencies.”

The Bank typically requires appraisals of properties securing commercial real estate loans. For loans that are less than $250,000, the Bank may use an evaluation provided by a third-party vendor in lieu of an appraisal. Appraisals are performed by independent appraisers designated by the Bank. The Bank considers the quality and location of the real estate, the credit history of the borrower, the cash flow of the project and the quality of management involved with the property when making these loans. The Bank generally imposes a minimum debt coverage ratio of approximately 1.20 for loans secured by income producing commercial properties. Loan-to-value ratios on commercial real estate loans are generally limited to not more than 80%. 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.

Commercial real estate lending affords the Bank an opportunity to receive interest at rates higher than those generally available from one- to four-family residential lending. However, loans secured by such properties usually are greater in amount, more difficult to evaluate and monitor and, therefore, involve a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by commercial properties often depend upon the successful operation and management of the properties, repayment of these loans may be affected by adverse conditions in the real estate market or the economy. The Bank seeks to minimize these risks by generally limiting the maximum loan-to-value ratio to 80% and scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan. The Bank also generally requests annual financial information and rent rolls on the subject property from the borrowers on loans over $750,000.

Construction Lending. The Bank currently originates two types of residential construction loans: (i) custom ~~construction~~ and owner/builder construction loans and (ii) speculative construction loans. The Bank believes that its ~~lengthy~~extensive experience in ~~providing~~ residential construction ~~loans~~lending has ~~enabled~~allowed it to ~~establish~~develop processing and disbursement procedures tothat ~~meet~~address ~~the~~borrower needs ~~of its borrowers~~ while ~~reducing many of the risks inherent with construction lending. The Bank also originates construction loans~~

~~for~~mitigating ~~commercial~~many ~~properties, multi-family properties, and land development projects. The Bank's construction loans generally provide for the payment~~ of ~~interest only during~~ the ~~construction~~risks ~~phase,~~inherent ~~which~~in ~~is billed monthly, although during the term of some~~ construction ~~loans, no payment from the borrower is required since the accumulated interest is added to the principal of the loan through an interest reserve~~lending. At ~~September~~The ~~30,~~Bank ~~2024,~~also ~~the~~originates ~~Bank's~~ construction loans ~~totaled~~for ~~$219.20~~commercial ~~million~~properties, ormulti-family ~~14.5% of the Bank's total loan portfolio~~properties, ~~including~~and ~~undisbursed~~land ~~loans~~development ~~in process of $69~~projects.~~88 million. All construction loans were performing according to their repayment terms at September 30, 2024. See "Lending Activities - Non-performing Loans and Delinquencies."~~

The Bank’s construction loans generally provide for interest-only payments during the construction phase, which are billed monthly. In some cases, however, borrower payments are not required during construction because accrued interest is added to the loan principal through the use of an interest reserve. At September 30, ~~2024~~2025, ~~and~~the ~~2023~~Bank's construction loans totaled $223.89 million, ~~the~~or ~~composition~~14.2% of the Bank’'s ~~construction~~total loan portfolio, including undisbursed loans in process of $88.29 million. At September 30, 2025, one construction loan of $553,000 was ason ~~follows:~~non-accrual. See "Lending Activities - Non-performing Loans and Delinquencies."

	At September 30,
	2024				2023
	Balance		Percent ofTotal		Balance		Percent ofTotal
	(Dollars in thousands)
Custom and owner/builder	$	132,101	60.27	%	$	129,699	47.36	%
Speculative one- to four-family	11,495		5.24		17,099		6.24
Commercial real estate	29,463		13.44		51,064		18.65
Multi-family	28,401		12.96		57,140		20.87
Land development	17,741		8.09		18,841		6.88
Total	$	219,201	100.00	%	$	273,843	100.00	%

At September 30, 2025 and 2024, the composition of the Bank’s construction loan portfolio was as follows:

Custom and owner/builder construction loans are originated to home owners and are typically converted to or refinanced into permanent loans at the completion of construction. 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. At the completion of construction, the loan is converted to or refinanced into either a fixed-rate mortgage loan, which conforms to secondary market standards, or an ARM loan for retention in the Bank’s portfolio. 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				2024
	Balance		Percent of Total		Balance		Percent of Total
	(Dollars in thousands)
Custom and owner/builder	$	130,341	58.22	%	$	132,101	60.27	%
Speculative one- to four-family	10,745		4.80		11,495		5.24
Commercial real estate	21,818		9.75		29,463		13.44
Multi-family	45,660		20.39		28,401		12.96
Land development	15,324		6.84		17,741		8.09
Total	$	223,888	100.00	%	$	219,201	100.00	%

~~Speculative~~Custom ~~one-~~and toowner/builder ~~four-family~~ construction loans are ~~made~~originated to ~~home~~homeowners ~~builders~~ and are ~~termed~~typically ~~“speculative”~~converted ~~because~~to ~~the~~or ~~home~~refinanced ~~builder~~into ~~does~~permanent ~~not~~mortgage ~~have,~~loans atupon ~~the~~completion ~~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~~construction. The ~~home~~construction ~~buyer~~phase ~~may~~generally belasts ~~identified~~up ~~either~~to ~~during~~12 ~~or after the construction period~~months, with ~~the~~fixed-interest ~~risk~~rates ~~that~~typically ~~the~~ranging ~~builder~~from ~~will~~4.88% ~~have~~ to ~~debt~~9.00% ~~service~~and ~~the~~loan-to-value ~~speculative~~ratios ~~construction~~of ~~loan~~up ~~and~~to ~~pay~~80% ~~real~~(or ~~estate~~up ~~taxes~~to ~~and~~95% ~~other~~with ~~carrying~~PMI) ~~costs~~ of the ~~completed~~appraised ~~home~~"as ~~for~~completed" avalue ~~significant time after the completion~~ of ~~construction until~~ the ~~home buyer is identified and a sale is consummated~~property. ~~Rather~~Upon ~~than~~completion ~~originating lines~~ of ~~credit to home builders to construct several homes at once~~construction, ~~the~~these ~~Bank generally originates and underwrites a separate loan for each home. Speculative construction~~ loans are ~~generally~~either ~~originated~~converted ~~for~~to aor ~~term~~refinanced ofinto 12a ~~months,~~fixed-rate ~~with~~mortgage ~~current~~loan ~~rates~~that ~~generally~~conforms ~~ranging~~to ~~from~~secondary ~~6.50%~~market ~~to 10.50%~~standards, ~~and~~or ~~with~~into aan ~~loan~~adjustable-~~to-value~~rate ~~ratio~~mortgage ofloan noretained ~~more~~in ~~than 80% of~~ the ~~appraised~~Bank’s ~~value of the completed property~~portfolio. At September 30, ~~2024~~2025, the largest ~~aggregate~~ outstanding ~~balance~~custom toand ~~one~~owner/builder ~~borrower~~construction ~~for~~loan ~~speculative~~had ~~one-~~an tooutstanding ~~four-family~~balance ~~construction~~of ~~loans totaled~~ $2.3836 million (~~including~~fully ~~$897,000 of undisbursed loans in process~~disbursed) and was ~~comprised of four loans that were~~ performing according to ~~their~~its repayment terms.

~~The~~Speculative ~~Bank~~one- ~~also~~to ~~provides~~four-family construction ~~financing~~loans ~~for multi-family~~are made to home builders and ~~commercial~~are ~~properties. At~~termed ~~September~~“speculative” ~~30,~~because ~~2024~~the home builder does not have, ~~these~~at ~~loans~~the ~~amounted~~time toof ~~$57.86~~loan ~~million~~origination, ora ~~26.4%,~~signed ofcontract ~~construction~~with ~~loan~~a ~~balances~~home buyer who has a commitment for permanent financing. ~~These~~The ~~loans~~home ~~are~~buyer ~~typically~~may ~~secured~~be byidentified ~~apartment~~either ~~buildings,~~during ~~condominiums,~~or ~~mini-storage~~after ~~facilities,~~the ~~office~~construction ~~buildings~~period, ~~hotels~~with the risk that the builder will have to debt service the speculative construction loan and ~~retail~~pay ~~rental~~real ~~space~~estate ~~predominantly~~taxes ~~located~~and inother carrying costs for a significant time after completion until the ~~Bank’s~~home ~~primary~~buyer ~~market~~is ~~area~~identified and a sale is consummated. AtRather ~~September 30,~~than ~~2024~~originating lines of credit to home builders to construct several homes at once, the ~~largest~~Bank ~~outstanding~~generally ~~multi-family~~originates ~~construction~~and underwrites a separate loan ~~was~~for each home. Speculative construction loans are generally originated for ~~$10~~a term of 12 months, with current rates generally ranging from 8.00% to 9.25%, ~~million~~and ~~(including~~with ~~$384,000~~a ofloan-to-value ~~undisbursed~~ratio ~~loans~~of inno ~~process)~~more ~~secured~~than by80% anof ~~apartment~~the ~~building~~appraised ~~project~~value inof ~~Pierce~~the ~~County~~completed property. At September 30, ~~2024~~2025, the largest aggregate outstanding ~~commercial~~balance ~~real~~to ~~estate~~one ~~construction~~borrower ~~loan~~for ~~was~~speculative ~~secured~~one- byto ~~a mini~~four-~~storage~~family ~~facility~~construction inloans ~~Snohomish~~totaled ~~County~~$1.50 million (including $854,000 ~~Washington~~of ~~and~~undisbursed ~~had~~loans ain ~~balance~~process) ofand ~~$5.92~~was ~~million.~~comprised ~~These~~of two loans that were performing according to their repayment terms ~~at September 30, 2024~~.

~~All~~The ~~construction~~Bank ~~loans~~also ~~must~~provides beconstruction ~~approved~~financing byfor multi-family aand ~~member~~commercial ofproperties. At ~~one~~September of30, ~~the~~2025, ~~Bank’s~~these ~~Loan~~loans ~~Committees~~totaled or$67.48 ~~the Bank’s Board of Directors~~million, or in30.1%, ~~the case~~ of ~~one-~~construction toloan ~~four-family~~balances. These ~~construction~~ loans ~~that~~are ~~meet~~typically ~~Freddie~~secured ~~Mac guidelines,~~ by ~~the~~apartment ~~Regional~~buildings, ~~Manager~~condominiums, ofmini-storage ~~Community Lending~~facilities, ~~the~~office ~~Loan~~buildings, ~~Department~~hotels ~~Supervisor~~and orretail arental ~~Bank~~space ~~underwriter.~~predominantly ~~See~~located ~~“Lending~~in ~~Activities~~the -Bank’s ~~Loan~~primary ~~Solicitation~~market ~~and Processing~~area.” ~~Prior~~At toSeptember 30, ~~approval~~2025, ofthe ~~any~~largest outstanding multi-family construction loan ~~application,~~was anfor ~~independent~~$11.40 ~~fee~~million ~~appraiser~~(including ~~inspects~~$2.96 ~~the~~million ~~site~~of ~~and~~undisbursed ~~prepares~~loans anin ~~appraisal~~process) onand ansecured ~~"as~~by ~~completed"~~an ~~basis,~~apartment ~~and~~building ~~the~~project ~~Bank~~in ~~reviews~~Pierce ~~the~~County. At ~~existing~~September 30, ~~or proposed improvements~~2025, ~~identifies~~ the ~~market~~largest ~~for~~outstanding ~~the~~commercial ~~proposed~~real ~~project~~estate ~~and~~construction ~~analyzes~~loan ~~the~~was ~~pro-forma~~secured ~~data~~by ~~and assumptions on the project. In the case of~~ a ~~speculative~~industrial orwarehouse ~~custom~~facility ~~construction~~in ~~loan~~Thurston County, ~~the~~Washington ~~Bank~~and ~~reviews~~had ~~the~~a ~~experience~~balance ~~and expertise~~ of ~~the builder~~$4. ~~After~~50 ~~this~~million ~~preliminary~~(including ~~review,~~$1.21 ~~the~~million ~~application~~of isundisbursed ~~processed,~~loans ~~which~~in ~~includes~~process). ~~obtaining~~These ~~credit~~loans ~~reports,~~were ~~financial~~performing ~~statements~~according ~~and~~to ~~tax~~their ~~returns~~repayment orterms ~~verification~~at ofSeptember ~~income~~30, on2025. ~~the~~

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. 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. In the case of a speculative or custom construction loan, the Bank reviews the experience and expertise of the builder. After this preliminary review, the application is processed, which

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. In the event of cost overruns, the Bank generally requires ~~that~~ the borrower ~~increase~~to ~~the~~provide additional funds ~~available for construction~~ by paying the cost of such overruns directly or by depositing its own funds into a secured savings account, ~~the proceeds of which are used to pay construction costs~~ or, to, the extent available, authorizes disbursements from a loan contingency line in the construction budget.

Loan disbursements during the construction period are made to the builder, materials supplier or subcontractor, based on a line item budget. Periodic on-site inspections are made by qualified independent inspectors to document the reasonableness of draw requests. For most builders, the Bank disburses loan funds by providing vouchers to borrowers, which when used by the borrower to purchase supplies are submitted by the supplier to the Bank for payment.

The Bank originates construction loan applications primarily through customer referrals, contacts in the business community and, occasionally, real estate brokers seeking financing for their clients.

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, however, is generally considered to involve a higher degree of risk than single-family permanent mortgage lending, because funds are advanced ~~upon the collateral for the project~~ based on anestimates ~~estimate~~ of ~~the~~construction costs ~~that~~and ~~will~~the ~~produce a~~ future value atof ~~completion~~the completed project. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation on real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the completed project loan-to-value ratio. 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. 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. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss.

In addition, during the term of many of our construction loans granted to builders who are building residential units for sale, no payment from the borrower is required since the accumulated interest is added to the principal of the loan through an interest reserve. As a result, these loans often involve the disbursement of funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction ~~of the project~~ and may incur a loss. Because construction loans require active monitoring of the building process, including cost comparisons and on-site inspections, these loans are more difficult and costly to monitor. Increases in market rates of interest may have a more pronounced effect on construction loans by rapidly increasing the end-purchasers' borrowing costs, thereby reducing the overall demand for the project. Properties under construction are often difficult to sell and typically must be completed in order to be successfully sold, which also complicates the process of working out problem construction loans. This may require us to advance additional funds and/or contract with another builder to complete construction. Furthermore, in the case of speculative construction loans, there is an added risk associated with identifying an end-purchaser for the finished project.

The Bank historically originated loans to real estate developers with whom it had established relationships for the purpose of developing residential subdivisions (i.e., installing roads, sewers, water and other utilities) generally with ten to 50 lots. 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 generally structured so that the Bank is repaid in full upon the sale by the borrower of approximately 80% of the subdivision lots. In addition, in the ~~case of a corporate borrower, the~~ Bank also generally obtains personal guarantees from corporate principals (with ownership interests in the borrowing entity of 20% or more) and reviews their personal financial statements. Land development loans secured by land under development involve greater risks than one- to four-family residential mortgage loans, because these loan funds are advanced upon the predicted future value of the developed property upon completion. If the estimate of the future value proves to be inaccurate, in the event of default and foreclosure, the Bank may be confronted with a property the value of which is insufficient to assure full repayment. 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~~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. This loan was classified as ~~watch~~substandard and was performing in accordance with its repayment terms at September 30, ~~2024~~2025. This loan paid off in full subsequent to September 30, 2025.

Land Lending. The Bank originates loans for the acquisition of land upon which the purchaser can then build or make improvements necessary to build or to use for recreational purposes. Land loans originated by the Bank generally have maturities of one to ten years. The largest land loan is secured by land in Multnomah County, Oregon, had an outstanding balance of $2.60 million and was performing according to its repayment terms at September 30, ~~2024~~2025. At September 30, ~~2024~~2025, all land loans were performing according to their repayment terms. See “Lending Activities - Non-performing Loans and Delinquencies.”

Loans secured by undeveloped land or improved lots involve greater risks than one- to four-family residential mortgage loans because these loans are more difficult to evaluate. If the estimate of value proves to be inaccurate, in the event of default and foreclosure, the Bank may be confronted with a property the value of which is insufficient to assure full repayment. Land loans also pose additional risk because of the lack of income being produced by the property and potential illiquid nature of the collateral. These risks can be significantly impacted by supply and demand conditions. The Bank attempts to minimize these risks by generally limiting the maximum loan-to-value ratio on land loans to 65%.

Consumer Lending. Consumer loans generally have shorter terms to maturity and may have higher interest rates than mortgage loans. Consumer loans include home equity lines of credit, second mortgage loans, savings account loans, automobile loans, boat loans, motorcycle loans, recreational vehicle loans and unsecured loans. Consumer loans are made with both fixed and variable interest rates and with varying terms.

Home equity lines of credit and second mortgage loans are made for purposes such as the improvement of residential properties, debt consolidation and education expenses, among others. The majority of these loans are made to existing customers and are secured by a first or second mortgage on residential property. The loan-to-value ratio is typically 90% or less, when considering both the first and second mortgage loans. Second mortgage loans typically carry fixed interest rates with a fixed payment over a term between five and 15 years. Home equity lines of credit are generally made at interest rates tied to the Prime Rate. Second mortgage loans and home equity lines of credit have greater credit risk than one- to four-family residential mortgage loans in which the Bank is in the first lien position, because they are generally secured by mortgages subordinated to the existing first mortgage on the property. For those second mortgage loans and home equity lines credit on which the Bank does not hold the existing first mortgage on the property, it is unlikely that the Bank will be successful in recovering all or a portion of the loan balance in the event of default unless the Bank is prepared to repay the first mortgage loan and such repayment and the costs associated with a foreclosure are justified by the value of the property.

Consumer loans generally carry greater risk than residential mortgage loans, especially when they are unsecured or secured by assets that depreciate quickly, such as automobiles. In such cases, repossessed collateral from a defaulted loan may not fully cover the outstanding balance due to depreciation, damage, or loss. Often, the remaining deficiency does not justify significant collection efforts beyond obtaining a deficiency judgment. Additionally, the repayment of consumer loans relies heavily on the borrower’s financial stability, making them more susceptible to disruptions caused by job loss, divorce, illness, or personal bankruptcy. Federal and state laws, including bankruptcy and insolvency regulations, can further limit recovery efforts on these loans. 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~~2025, ~~three~~five consumer loans totaling $~~618~~624,000 were on non-accrual status. One of these loans with a balance of $302,000 was paid off subsequent to September 30, 2025. See “Lending Activities - Non-performing Loans and Delinquencies.”

Commercial Business Lending. Commercial business loans ~~(including SBA PPP loans)~~ totaled $~~139~~127.00 million, or 98.181%, of the loan portfolio at September 30, ~~2024~~2025. Commercial business loans are generally secured by business equipment, accounts receivable, inventory and/or other property and are made at variable rates of interest equal to a negotiated margin above the Prime Rate. The Bank also generally obtains personal guarantees from the principals based on a review of personal financial statements. The largest commercial business loan had an outstanding balance of $3.1810 million at September 30, ~~2024~~2025 and was performing according to its repayment terms. At September 30, ~~2024~~2025, ~~eight~~nine commercial business loans totaling $21.0629 million were on non-accrual status. See “Lending Activities - Non-performing Loans and Delinquencies.”

The Bank has increased commercial business loan originations made under the U.S. Small Business Administration ("SBA") 7(a) program. Loans made by the Bank under the SBA 7(a) program generally are made to small businesses to provide working capital or to provide funding for the purchase of businesses, real estate, or equipment. These loans generally are secured by a combination of assets that may include equipment, receivables, inventory, business real property, and sometimes a lien on the personal residence of the borrower. The terms of these loans vary by purpose and type of underlying collateral. The loans are primarily underwritten on the basis of the borrower's ability to service the loan from income. Under the SBA 7(a) program, the loans carry an SBA guaranty for up to 75% of the loan. Typical maturities for this type of loan vary but can be up to ten years. 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. 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.

well as the servicing on such loans, for which it is paid a fee. 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. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable and/or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories and equipment may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment.

Loan Maturity. The following table sets forth certain information at September 30, ~~2024~~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.

Within1 Year

After1 YearThrough5 Years

After5 YearsThrough15 Years

After15 Years

Total

(Dollars in thousands)

Mortgage loans:

One- to four-family

116,~~075~~088

1024,~~389~~978

8567,~~083~~733

~~192~~218,~~576~~892

~~299~~317,~~123~~691

Multi-family

83,~~928~~642

2879,~~498~~162

~~139~~124,~~829~~904

9559

~~177~~207,~~350~~767

Commercial

2019,~~705~~459

~~127~~249,~~517~~631

~~446~~339,~~328~~723

41,~~669~~879

~~599~~610,~~219~~692

Construction (1)

~~219~~223,~~201~~888

—

~~219~~223,~~201~~888

Land

917,~~746~~169

15,~~957~~519

32,~~605~~908

58356

2935,~~366~~952

Consumer loans:

Home equity and second mortgage

54,~~582~~243

912,~~145~~766

32,~~325~~981

~~861~~489

4750,~~913~~479

Other

~~1,487~~532

~~381~~512

~~541~~292

~~720~~698

32,~~129~~034

Commercial business

109,~~341~~887

5865,~~121~~793

5437,~~486~~086

1514,~~795~~171

~~138~~126,~~743~~937

SBA PPP

—58

~~260~~—

—

~~260~~58

Total

~~287~~284,~~065~~966

~~250~~448,~~268~~361

~~762~~605,~~197~~627

~~214~~236,~~774~~544

1,~~514~~575,~~304~~498

Less:

Undisbursed portion of construction loans in process

(6988,~~878~~289)

Deferred loan origination fees, net

(5,~~425~~528)

Allowance for credit losses

(17,478)

ACL

(18,091)

Total loans receivable, net

1,~~421~~463,~~523~~590

_____________

(1) Includes $~~132~~130.1034 million of custom and owner/building construction/permanent loans, a portion of which may convert to permanent

mortgage loans once construction is completed.

The following table sets forth the dollar amount of all loans due after one year from September 30, ~~2024~~2025, which have fixed interest rates and floating or adjustable interest rates:

FixedRates

Floating orAdjustable Rates

Total

(Dollars in thousands)

Mortgage loans:

One- to four-family

~~112~~109,~~180~~785

~~175~~201,~~868~~818

~~288~~311,~~048~~603

Multi-family

5057,~~650~~341

~~117~~146,~~772~~784

~~168~~204,~~422~~125

Commercial

~~215~~204,~~726~~483

~~362~~386,~~788~~750

~~578~~591,~~514~~233

Land

1415,~~104~~690

53,~~516~~093

1918,~~620~~783

Consumer loans:

Home equity and second mortgage

1413,~~195~~840

2832,~~136~~396

4246,~~331~~236

Other

1,~~444~~300

~~198~~202

1,~~642~~502

Commercial business

8575,~~890~~427

4241,~~512~~623

~~128~~117,~~402~~050

SBA PPP

260

—

260

Total

477,866

812,666

1,290,532

Total

494,449

732,790

1,227,239

Scheduled contractual principal repayments of loans do not reflect the actual life of these assets. The average life of loans is substantially less than their contractual terms because of prepayments. In addition, due-on-sale clauses on loans generally give the Bank the right to declare loans immediately due and payable in the event, among other things, that the borrower sells the real property subject to the mortgage and the loan is not repaid. The average life of mortgage loans tends to increase when current mortgage loan interest rates are substantially higher than interest rates on existing mortgage loans and, conversely, decrease when interest rates on existing mortgage loans are substantially higher than current mortgage loan interest rates.

Loan Solicitation and Processing. Loan originations are obtained from a variety of sources, including walk-in customers and referrals from builders and realtors. Upon receipt of a loan application from a prospective borrower, a credit report and other data are obtained to verify specific information relating to the loan applicant’s employment, income and credit standing. An appraisal of the real estate offered as collateral generally is undertaken by a certified appraiser retained by the Bank.

Loan applications are initiated by loan officers and must be approved by an authorized loan officer, Bank underwriter, the Bank’s Loan Committees, or the Bank’s Board of Directors. The Bank’s Consumer Loan Committee consists of underwriters who can approve one- to four-family mortgage loans and other consumer loans up to the current Freddie Mac single-family limit. Loan officers may be granted individual approval authority for loans up to $250,000 on a case-by-case basis by the Bank's Chief Credit Officer or Chief Executive Officer.

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~~Chief ~~Manager~~Residential ofLoan ~~Community Lending~~Manager, the Loan Department Supervisor, or a Bank underwriter, subject to their individual or Loan Committee limits. The Bank’s Commercial Loan Committee, composed of the Bank’s Chief Executive Officer, Chief Credit Officer, Chief Lending Officer, and a commercial underwriter may approve commercial real estate and business loans up to $3.00 million.

The Bank’s Chief Executive Officer, Chief Credit Officer, and Chief Lending Officer have individual authority to approve loans up to $750,000. The Bank’s Board Loan Committee, which includes one permanent non-employee Director, one rotating non-employee Director, and the Bank’s Chief Executive Officer, may approve loans up to $5.00 million. Loans exceeding $5.00 million, as well as loans of any amount that cause a single borrower’s total loans to exceed $5.00 million, must be approved by the Bank’s Board of Directors.

Loan Originations, Purchases and Sales. During the years ended September 30, ~~2024~~2025, ~~2023~~2024 and ~~2022~~2023, the Bank’s total gross loan originations were $~~251~~310.4490 million, $~~361~~251.7944 million and $~~572~~361.4679 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. 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~~2025, ~~2023~~2024 and ~~2022~~2023, the Bank did not purchase any loans or loan participation interests.

Consistent with its asset/liability management strategy, the Bank’s policy generally is to retain in its portfolio all ARM loans originated and to sell fixed-rate one- to four-family mortgage loans in the secondary market to Freddie Mac; however, from time to time, a portion of fixed-rate loans may be retained in the Bank’s portfolio to meet its asset-liability objectives. The Bank also sells the guaranteed portion of some of its SBA 7(a) loans in the secondary market. Loans sold in the secondary market are generally sold on a servicing retained basis. At September 30, 2025, the Bank’s loan servicing portfolio, which is not included in the Company’s consolidated financial statements, totaled $357.02 million.

~~market~~The ~~are~~Bank ~~generally~~also ~~sold~~periodically onsells aparticipation ~~servicing~~interests ~~retained~~in ~~basis. At~~construction ~~September 30~~loans, ~~2024~~commercial real estate loans, ~~the~~multi-family ~~Bank’s~~and commercial business loans to other lenders. These sales are usually made to avoid concentrations in a particular loan ~~servicing~~type ~~portfolio~~or borrower, ~~which~~and isto generate fee income. The Bank did not ~~included~~sell inloan participation interests during the ~~Company’s~~years ~~consolidated~~ended ~~financial~~September ~~statements~~30, ~~totaled~~2025 and 2023. During the year ended September 30, 2024, the Bank sold loan participation interests of $~~370~~5.5680 million.

The Bank also periodically sells participation interests in construction loans, commercial real estate loans, multi-family and commercial business loans to other lenders. These sales are usually made to avoid concentrations in a particular loan type or concentrations to a particular borrower and to generate fee income. During the year ended September 30, 2024, the Bank sold loan participation interests of $5.80 million. The Bank did not sell loan participation interests during the year ended September 30, 2023. During the year ended September 30, 2022, the Bank sold loan participation interests of $14.39 million.

The following table shows total loans originated, purchased, sold and repaid during the years indicated.

Year Ended September 30,

2024

2023

2022

2025

2024

2023

Loans originated:

(Dollars in thousands)

Mortgage loans:

One- to four-family

3037,~~131~~600

4530,~~825~~131

~~123~~45,~~149~~825

Multi-family

1316,~~287~~362

1113,~~158~~287

811,~~647~~158

Commercial

2650,~~836~~886

7026,~~117~~836

~~127~~70,~~951~~117

Construction

~~122~~145,~~939~~764

~~174~~122,~~914~~939

~~204~~174,~~911~~914

Land

1013,~~843~~871

710,~~144~~843

197,~~281~~144

Consumer

2023,~~647~~784

2420,~~160~~647

2724,~~350~~160

Commercial business loans

2622,~~755~~635

2826,~~470~~755

6128,~~174~~470

Total loans originated

~~251~~310,~~438~~902

~~361~~251,~~788~~438

~~572~~361,~~463~~788

Loans and loan participations purchased:

Total loans purchased

—

Total loans and loan participations purchased

—

Total loans originated, acquired and purchased

~~251~~310,~~438~~902

~~361~~251,~~788~~438

~~572~~361,~~463~~788

Loans sold:

Loan participation interests sold

~~(5,800)~~—

—(5,800)

~~(14,389)~~—

Whole loans sold

(1422,~~746~~601)

(1114,~~538~~746)

(5911,~~115~~538)

Total loans sold

(2022,~~546~~601)

(1120,~~538~~546)

(7311,~~504~~538)

Loan principal repayments

(~~142~~227,~~783~~107)

(~~177~~142,~~310~~783)

(~~324~~177,~~233~~310)

Other items, net

31(19,~~109~~127)

(331,~~061)~~109

(103,~~754~~061)

Net increase in loans receivable

~~119~~42,~~218~~067

~~169~~119,~~879~~218

~~163~~169,~~972~~879

Loan Origination Fees. The Bank receives loan origination fees on many of its mortgage loans and commercial business loans. Loan fees are a percentage of the loan which are charged to the borrower for funding the loan. The amount of fees charged by the Bank is generally up to 2.0% of the loan amount.

Accounting principles generally accepted in the United States of America ("GAAP") require fees received and certain loan origination costs for originating loans to be deferred and amortized into interest income over the contractual life of the loan. Net deferred fees or costs associated with loans that are prepaid are recognized as income/expense at the time of prepayment. Unamortized net deferred loan origination fees totaled $5.4353 million at September 30, ~~2024~~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. A majority of loan payments are due on the first day of the month; however, the borrower is given a 15-day grace period to make the loan payment. When a mortgage loan borrower fails to make a required payment when due, the Bank institutes collection procedures. A notice is mailed to the borrower 16 days after the date the payment was due. Attempts to contact the borrower by telephone generally begin on or before the 30th day of delinquency. If a satisfactory response is not obtained, continuous follow-up contacts are attempted until the loan has been brought current. Before the 90th day of delinquency, attempts are made to establish (i) the cause of the delinquency, (ii) whether the cause is temporary, (iii) the attitude of the borrower toward repaying the debt, and (iv) a mutually satisfactory arrangement for curing the default.

If the borrower is chronically delinquent and all reasonable means of obtaining payment on time have been exhausted, foreclosure is initiated according to the terms of the security instrument and applicable law. Interest income on loans in foreclosure is reduced by the full amount of accrued and uncollected interest.

When a consumer loan borrower or commercial business borrower fails to make a required payment on a loan by the payment due date, the Bank institutes similar collection procedures as for its mortgage loan borrowers. All loans becoming 90 days or more past due are placed on non-accrual status, with any accrued interest reversed against interest income, unless they are well secured and in the process of collection.

The Bank’s Board of Directors is updated monthly as to the status of loans that are delinquent by more than 30 days and the status of all foreclosed and repossessed property owned by the Bank.

The following table sets forth information with respect to the Company's non-performing assets at the dates indicated:

	At September 30,
	2024			2023			2022
	2025			2024			2023
Loans accounted for on a non-accrual basis:	(Dollars in thousands)
Mortgage loans:
One- to four-family (1)	$	491,781		$	~~368~~49		$	~~388~~368
Commercial	~~1,158~~159			~~683~~1,158			~~657~~683
Land	—			—			450
Construction	553			—			—
Consumer loans	~~618~~624			~~177~~618			~~255~~177
Commercial business loans	21,~~060~~290			~~286~~2,060			~~309~~286
Total	34,~~885~~407			13,~~514~~885			21,~~059~~514
Accruing loans which are contractually past due 90 days or more	—			—			—
Total of non-accrual and 90 days or more past due loans	34,~~885~~407			13,~~514~~885			21,~~059~~514
Non-accrual investment securities	5135			8251			~~106~~82
Total non-performing assets (2)	$	3,936		$	1,596		$	2,165
Other real estate owned and other repossessed assets	221			—			—
Troubled debt restructured loans on accrual status (3)	N/A			$	2,495		$	2,472
Total non-performing assets (2)	$	4,663		$	3,936		$	1,596
Non-accrual and 90 days or more past due loans as a percentage of loans receivable, net (4)	0.27		%	0.11		%	0.18		%
Troubled debt restructured loans on accrual status	N/A			N/A			$	2,495
Non-accrual and 90 days or more past due loans as a percentage of total assets	0.20		%	0.08		%	0.11		%
Non-accrual and 90 days or more past due loans as a percentage of loans receivable, net (3)	0.30		%	0.27		%	0.11		%
Non-performing assets as a percentage of total assets	0.20		%	0.09		%	0.12		%
Non-accrual and 90 days or more past due loans as a percentage of total assets	0.22		%	0.20		%	0.08		%
Loans receivable, net (4)	$	1,439,001		$	1,318,122		$	1,146,129
Non-performing assets as a percentage of total assets	0.23		%	0.20		%	0.09		%
Total assets	$	1,923,475		$	1,839,905		$	1,860,508
Loans receivable, net (3)	$	1,481,681		$	1,439,001		$	1,318,122
Total assets	$	2,012,779		$	1,923,475		$	1,839,905

_______________

(1)Includes non-accrual one- to four-family properties in the process of foreclosure totaling $302, $0, and $0 as of September 30, 2025, 2024, and 2023, respectively.

~~and~~(2) For $0the asyear ofended September 30, ~~2024,~~ 2023, ~~and~~does ~~2022,~~not ~~respectively.~~include troubled debt restructured loans on accrual status.

(23) ~~For~~Loans receivable, net for purposes of this table includes the ~~years~~deductions ~~ended~~for ~~September~~the ~~30,~~undisbursed ~~2023~~portion of construction loans in process and ~~2022,~~deferred loan origination fees and does not include ~~troubled~~the ~~debt~~deduction ~~restructured~~for ~~loans~~the ~~on accrual status~~ACL.

~~(3)For~~Non-accrual ~~the~~Loans. ~~years~~The ~~ended~~Bank’s non-accrual loans increased by $522,000 to $4.41 million at September 30, 2025 from $3.89 million at September 30, ~~2023~~2024, ~~and~~primarily ~~2022~~due ~~does~~to ~~not~~increases ~~include~~of ~~troubled~~$1.73 ~~debt~~million ~~restructured~~in one- to four-family loans ~~totaling~~and $06,000 in consumer loans, partially offset by decreases of $999,000 in commercial real estate loans and $~~142~~770,000 ~~recorded~~in ascommercial ~~non-accrual~~business loans.

~~(4) Loans~~The ~~receivable,~~Bank ~~net~~evaluates ~~for~~each ~~purposes~~loan ofon ~~this~~a ~~table~~case-by-case ~~includes~~basis when determining non-accrual status, considering factors such as the ~~deductions~~borrower's financial strength, collateral value, payment history, reason for delay, the ~~undisbursed~~amount ~~portion~~past due, and the number days past due. A discussion of ~~construction~~the Bank's largest non-performing loans inis ~~process~~set forth below under “Asset Classification.” For additional information on non-accrual loans, see "Note 1 - Summary of Significant Accounting Policies" and ~~deferred~~"Note ~~loan~~4 ~~origination~~- ~~fees~~Loans Receivable and ~~does~~Allowance ~~not~~for ~~include~~Credit Losses" of the ~~deduction~~Notes ~~for~~to the ~~ACL~~Consolidated Financial Statements contained in Item 8 of this report.

The Bank’s non-accrual loans increased by $2.37 million to $3.89 million at September 30, 2024 from $1.51 million at September 30, 2023, as a result of increases in non-accrual loans of $1.77 million in commercial business loans, $475,000 in commercial real estate loans and $441,000 in consumer loans, partially offset by a $319,000 decrease in one- to four-family mortgage loans on non-accrual status. A discussion of the Bank's largest non-performing loans is set forth below under “Asset Classification.”

Other Real Estate Owned and Other Repossessed Assets. Real estate acquired by the Bank as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until sold. When property is acquired, it is recorded at the estimated fair market value less estimated costs to sell.

Restructured Loans. On October 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments - Credit Losses (ASU 2016-13). This ASU eliminated the accounting guidance for troubled debt restructured loans ("TDR") for creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences

~~enhancing~~financial ~~disclosure~~difficulty. Two ~~requirements~~loans ~~for~~to ~~certain~~borrowers ~~loan~~experiencing ~~refinancing~~financial ~~and~~difficulties ~~restructurings~~were bymodified ~~creditors~~in ~~when~~the ayear ~~borrower~~ended ~~experiences~~September ~~financial~~30. ~~difficulty~~2025. No loans to borrowers experiencing financial difficulty were modified in the years ended September 30, 2024 and 2023. The Bank had TDRs at September 30, 2023 ~~and 2022~~ totaling $2.50 million ~~and $2.61 million~~, none of which were on non-accrual status. None of the ACL was allocated to TDRs at September 30, 2023 ~~or 2022~~.

~~Non-accrual~~Asset ~~Loans~~Classification. ~~The~~ Applicable ~~Bank~~regulations ~~considers~~require ~~all~~that ~~circumstances~~each ~~regarding~~insured ~~the~~institution ~~loan~~review and ~~borrower~~classify its assets on ana ~~individual~~regular basis. In ~~when~~addition, ~~determining~~in ~~whether~~connection awith ~~loan~~examinations ~~should~~of ~~remain~~insured oninstitutions, ~~non-accrual~~regulatory ~~status~~examiners have authority to identify problem assets and, ~~such~~if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. Substandard loans are classified as those loans that are inadequately protected by the ~~financial~~current ~~strength~~net worth and paying capacity of the ~~borrower~~obligor, or of the collateral ~~value~~pledged. Assets classified as substandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. If the weakness or weaknesses are not corrected, ~~reasons~~there ~~for~~is ~~delay~~the distinct possibility that some loss will be sustained. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, ~~payment~~conditions ~~record~~and values questionable, and there is a high possibility of loss. An asset classified as loss is considered uncollectible and of such little value that continuance as an asset of the Bank is not warranted. When the Bank classifies problem assets as either substandard or doubtful, it is required to establish an ACL in an amount ~~past~~deemed ~~due~~prudent by management. These allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities and the ~~number~~risks associated with problem assets. When the Bank classifies problem assets as loss, it charges off the balance of ~~days~~the ~~past~~asset ~~due~~against the ACL. AtAssets ~~September 30,~~which ~~2024,~~do not currently expose the Bank ~~had~~to ~~$3.89~~sufficient ~~million~~risk to warrant classification in ~~non-accrual~~one ~~loans. For~~of ~~additional~~the ~~information~~aforementioned oncategories ~~non-accrual~~but possess weaknesses are designated by the Bank as special mention. Special mention loans are defined as those credits deemed by management to have some potential weakness that deserve management’s close attention. If left uncorrected, ~~see~~these ~~"Note~~potential 1weaknesses -may ~~Summary~~result in the deterioration of ~~Significant~~the ~~Accounting~~payment ~~Policies"~~prospects ~~and~~of ~~"Note~~the 4loan. Assets -in ~~Loans~~this ~~Receivable~~category are not adversely classified and ~~Allowance~~currently ~~for~~do ~~Credit~~not ~~Losses"~~expose the Bank to sufficient risk to warrant a substandard classification. The Bank’s determination of the ~~Notes~~classification of its assets and the amount of its ACL is subject to review by the ~~Consolidated~~FDIC ~~Financial~~and ~~Statements~~the ~~contained~~DFI inwhich ~~Item~~can 8require a different classification and the establishment of ~~this~~additional ~~report.~~loss allowances.

Asset Classification. Applicable regulations require that each insured institution review and classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, regulatory examiners have authority to identify problem assets and, if appropriate, require them to be classified. 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. If the weakness or weaknesses are not corrected, there is the distinct possibility that some loss will be sustained. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified as loss is considered uncollectible and of such little value that continuance as an asset of the Bank is not warranted. When the Bank classifies problem assets as either substandard or doubtful, it is required to establish an ACL in an amount deemed prudent by management. These allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities and the risks associated with problem assets. When the Bank classifies problem assets as loss, it charges off the balance of the asset against the ACL. Assets which do not currently expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated by the Bank as special mention. Special mention loans are defined as those credits deemed by management to have some potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the payment prospects of the loan. Assets in this category are not adversely classified and currently do not expose the Bank to sufficient risk to warrant a substandard classification. 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 aggregate amounts of the Bank’s classified and special mention loans (as determined by the Bank), and the ACL at the dates indicated, were as follows:

	At September 30,
	2024		2023		2022
	2025		2024		2023
	(Dollars in thousands)
Loss	$	—	$	—	$	—
Doubtful	202		—202		—
Substandard (1)	832,~~435~~805		68,~~386~~435		76,~~387~~386
Special mention	45,~~401~~570		—4,401		~~237~~—
Total classified and special mention loans	$	1338,~~038~~577	$	613,~~386~~038	$	76,~~624~~386
Allowance for credit losses	$	17,478	$	15,817	$	13,703
ACL	$	18,091	$	17,478	$	15,817

_____________

(1)Includes non-performing loans.

Loans classified as substandard increased by $224.0537 million to $832.4481 million at September 30, ~~2024~~2025 from $68.3944 million at September 30, ~~2023~~2024. At September 30, ~~2024~~2025, 2223 loans were classified as substandard., Ofof ~~the~~which $84.4420 million ~~in loans classified as substandard at September 30, 2024, $3.68 million~~ were on non-accrual status. The largest ~~loan classified as~~ substandard ~~at September 30~~loan, ~~2024~~with ~~had~~ a balance of $411.62 55 million, ~~and~~ was secured by a ~~commercial~~land ~~real~~development ~~estate~~ property in ~~King~~Thurston County. This loan was not on non-accrual status ~~at September 30, 2024,~~ as ~~the~~it ~~loan~~ was ~~making~~current ~~payments~~and inadequately ~~accordance~~collateralized ~~with~~at ~~its~~September 30, 2025, ~~repayment terms~~ and was ~~adequately collateralized. This loan was~~ paid in full onin ~~December 2, 2024~~October 2025. The ~~next~~second largest ~~loan classified as~~ substandard atloan ~~September 30, 2024~~ had a balance of $19.19 66 million, ~~and was~~ secured by aan ~~commercial~~apartment ~~real estate~~ property in ~~Snohomish~~Thurston County., ~~This~~and ~~loan~~ was onalso ~~non-accrual~~current ~~status at September 30, 2024~~ and ~~has~~adequately ~~a 75% guarantee from the SBA~~collateralized. One commercial business loan of $202,000 was classified as doubtful at September  30, 2025 and 2024.; ~~Timberland~~the unguaranteed portion has been charged off and the ~~unguaranteed~~remaining ~~portion~~balance ofis ~~this~~expected ~~loan~~to ~~and~~be recovered under the ~~remaining~~SBA ~~$202~~guarantee. Six loans were classified as special mention at September 30,~~000~~ 2025, ~~balance~~all ~~represents~~of ~~the~~which ~~amount~~were ~~that~~performing isin ~~expected~~accordance towith betheir ~~covered~~repayment byterms. At September 30, 2024, two commercial real estate loans were classified as special mention and were performing according to terms.

Allowance for Credit Losses. The ACL is maintained to absorb expected losses inherent in the loan portfolio. The Bank adopted the new accounting standard for the ACL, commonly referred to as the CECL methodology, as of October 1, 2023. The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. For loans that do not share similar risk characteristics and cannot be evaluated on a collective basis, the Company will evaluate the loan individually. The Bank estimates the expected credit losses over the loans' contractual terms, adjusted for expected prepayments. Management has adopted the discounted cash flow ('DCF") methodology for all loan segments.

the SBA guarantee. There were no loans classified as doubtful at September 30, 2023 and 2022. Two commercial real estate loans were classified as special mention at September 30, 2024 and were performing according to repayment terms. There were no loans classified as special mention at September 30, 2023 and 2022.

Allowance for Credit Losses. The ACL is maintained to absorb expected losses inherent in the loan portfolio. The Bank adopted the new accounting standard for the ACL, commonly referred to current expected credit losses ("CECL") methodology, as of October 1, 2023. The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. For loans that do not share similar risk characteristics and cannot be evaluated on a collective basis, the Company will evaluate the loan individually. The Bank estimates the expected credit losses over the loans' contractual terms, adjusted for expected prepayments. Management has adopted the discounted cash flow ('DCF") methodology for all loan segments.

Management's evaluation of the ACL is based on ongoing assessments of the known and inherent risks in the loan portfolio. Loss factors are based on the Company's historical loss experience with additional consideration and adjustments made for changes in economic conditions, changes in the amount and composition of the loan portfolio, delinquency rates, changes in collateral values, seasoning of the loan portfolio, duration of the business cycle, a detailed analysis of individually evaluated loans and other factors as deemed appropriate. Management also assesses the risk related to reasonable and supportable forecasts that are used. These factors are evaluated at least quarterly. Loss rates used by the Bank are affected as changes in these factors increase or decrease.

In originating loans, the Bank recognizes that losses will be experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the security for the loan. The Bank increases its ACL by charging provisions for credit losses against the Bank's operating income.

The Board of Directors reviews the adequacy of the ACL at least quarterly based on management's assessment of current economic conditions, past loss and collection experience, and risk characteristics of the loan portfolio.

The Bank’s ACL as a percentage of total loans receivable and as a percentage of non-performing loans was 1.2122% and ~~449~~410.8851%, at September 30, ~~2024~~2025 and 1.2021% and ~~1,044~~449.7288%, at September 30, ~~2023, respectively. The $260,000 and $466,000 of SBA PPP loans were omitted from the foregoing percentages at September 30,~~ 2024 ~~and 2023~~, respectively~~, as these loans are fully guaranteed by the SBA~~.

Based on its comprehensive analysis, management believes that the amount maintained in the ACL is adequate to absorb expected losses inherent in the portfolio. Although management believes that it uses the best information available to make its determinations, future adjustments to the ACL may be necessary, and results of operations could be significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

While the Bank believes that it has established its existing ACL in accordance with GAAP, there can be no assurance that regulators, in reviewing the Bank's loan portfolio, will not request the Bank to increase significantly its ACL. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing ACL is adequate or that substantial increases will not be necessary should the quality of any loans deteriorate. A further decline in national and local economic conditions, as a result of the effects of inflation, a recession or slowing economic growth, among other factors could result in a material increase in the ACL which may adversely affect the Company's financial condition and results of operations.

For further explanation of the CECL model, ACL calculation and the effects of adoption of the new accounting ~~standard~~standards see "Note 1 - Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements in Item 8 of this report.

Credit Ratios

The following table sets forth the ratios between the ACL, non-accrual loans and total loans at the dates indicated:

	At September 30,
	2024			2023			2022
	2025			2024			2023
	(Dollars in thousands)
ACL (1)	$	1718,~~478~~091		$	1517,~~817~~478		$	1315,~~703~~817
Non-accrual loans	$	34,~~885~~407		$	13,~~514~~885		$	21,~~059~~514
Loans receivable, net (2)	$	1,~~439~~481,~~001~~681		$	1,~~318~~439,~~122~~001		$	1,~~146~~318,~~129~~122
ACL to loans receivable, net	1.2122		%	1.2021		%	1.20		%
Non-accrual loans to loans receivable, net	0.2730		%	0.1127		%	0.1811		%
ACL to non-accrual loans	~~449~~410.8851		%	~~1044~~449.7288		%	~~665~~1044.5272		%

________________________________

(1)Amounts for fiscal 2025 and 2024 were calculated using the CECL methodology to determine the ~~allowance for credit losses~~ACL. Amounts reported prior to October 1, 2023, were based on the previous incurred loss methodology, which is not directly comparable to the ~~allowance~~ACL ~~for credit losses~~ calculated under the CECL methodology.

(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.

The following table sets forth the ACL by loan category at the dates indicated:

	At September 30,
	2024				2023				2022
	2025				2024				2023
	Amount		Percentof Loansin Categoryto TotalLoans		Amount		Percentof Loansin Categoryto TotalLoans		Amount		Percentof Loansin Categoryto TotalLoans
	(Dollars in thousands)
Mortgage loans:
One- to four-family	$	2,~~632~~892	1920.7516	%	$	2,~~417~~632	1719.75	%	$	12,~~658~~417	1417.0575	%
Multi-family	1,~~308~~625		1113.7119		1,~~156~~308		811.9171		~~855~~1,156		78.5891
Commercial	67,~~934~~147		3938.5776		76,~~209~~934		39.8457		67,~~682~~209		4239.8184
Construction - custom and owner/builder	1,~~328~~268		8.7227		~~750~~1,328		98.0972		~~675~~750		9.5109
Construction - speculative one- to four-family	~~128~~112		0.7669		~~148~~128		10.2076		~~130~~148		01.9820
Construction - commercial	~~537~~348		1.9538		~~316~~537		31.5895		~~343~~316		3.2258
Construction - multi-family	~~456~~400		12.8890		~~602~~456		41.0188		~~447~~602		54.1401
Construction - land development	~~335~~412		10.1798		~~274~~335		1.3217		~~233~~274		1.5432
Land	~~793~~797		12.9428		~~406~~793		1.8794		~~397~~406		21.1487
Non-mortgage loans:
Consumer loans	~~387~~493		3.3733		~~572~~387		23.8837		~~482~~572		2.9888
Commercial business loans	2,~~640~~597		98.1806		12,~~967~~640		9.5518		1,~~801~~967		109.0555
Total allowance for credit losses (1)	$	17,478	100.00	%	$	15,817	100.00	%	$	13,703	100.00	%
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. 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.

(1) Amounts for fiscal 2024 were calculated using the 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.

Analysis of ACL

The table below sets forth the ratio of net charge-offs during the period to average loans outstanding during the period:

	September 30,
	2024							2023								2022
	2025							2024								2023
	(Net Charge-offs) Recoveries			Average Loans		(Net Charge-Offs) Recoveries to Average Loans		(Net Charge-offs) Recoveries			Average Loans		(Net Charge-Offs) Recoveries to Average Loans			(Net Charge-offs) Recoveries		Average Loans		(Net Charge-Offs) Recoveries to Average Loans
	(Dollars in thousands)
Mortgage Loans:
One- to four-family	$	43—		$	~~276~~312,~~864~~582	~~0.02~~—	%	$	—43		$	~~215~~276,~~854~~864	—0.02	%		$	—	$	~~140~~215,~~516~~854	—	%
Multi-family	—			~~162~~186,~~071~~440		—		—			~~104~~162,~~926~~071		—			—		88104,~~469~~926		—
Commercial	—			~~581~~603,~~912~~503		—		—			~~547~~581,~~924~~912		—			—		~~513~~547,~~152~~924		—
Construction	—			~~130~~116,~~202~~540		—		—			~~151~~130,~~149~~202		—			—		~~131~~151,~~960~~149		—
Land	—			4547,~~984~~670		—		—			3945,~~147~~984		—			—		3139,~~034~~147		—
Total mortgage loans	43—			1,~~197~~266,~~033~~735		~~0.02~~—		—43			1,~~059~~197,~~000~~033		—0.02			—		~~905~~1,~~131~~059,000		—
Consumer Loans:
Home equity	—			4248,~~324~~386		—		—			3742,~~550~~324		—			—		3337,~~418~~550		—
Other	(95)			32,~~005~~513		(0.3020)		(39)			23,~~434~~005		(0.1230)			(93)		2,~~369~~434		(0.3812)
Total consumer loans	(95)		(95)	4550,~~329~~899		(0.3020)		(39)		(39,000)	3945,~~984~~329		(0.1230)		-0.~~0012~~003	(93)		3539,~~787~~984		(0.3812)
Commercial Loans:
Commercial business	(88235)			~~137~~131,~~167~~169		(0.0618)		(1588)			~~131~~137,~~117~~167		(0.0106)			(2715)		~~114~~131,~~717~~117		(0.0201)
Total	$	(54240)		$	1,~~379~~448,~~529~~803	—(0.02)	%	$	(1854)		$	1,~~230~~379,~~101~~529	—	%		$	(3618)	$	1,~~055~~230,~~635~~101	—	%

Investment Activities

The investment policies of the Bank are established and monitored by the Board of Directors. The policies are designed primarily to provide and maintain liquidity, to generate a favorable return on investments without incurring undue interest rate and credit risk, and to compliment the Bank’s lending activities. These policies dictate the criteria for classifying investments in debt securities as either available for sale or held to maturity. The policies permit investment in various types of liquid assets permissible under applicable regulations, which include U.S. Treasury obligations, securities of various federal agencies, certificates of deposit of insured banks, federal funds, mortgage-backed securities, municipal bonds and mutual funds. The Company's investment policy also permits investment in equity securities in certain financial service companies.

The investment securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost. Investment securities classified as available for sale are reported at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss), net of of income tax. At September 30, ~~2024~~2025, the Bank’s investment portfolio totaled $~~244~~215.3510 million, consisting of $9269.3165 million of U.S. Treasury and U.S. government agency securities held to maturity, $7766.9611 million of mortgage-backed securities held to maturity, $~~1.33~~605,000 ~~million~~ of municipal securities held to maturity, $~~495~~499,000 of bank issued trust preferred securities held to maturity, $34.9497 million of U.S. government agency securities available for sale and $6873.3227 million of mortgage-backed securities available for sale. The Bank does not maintain a trading account for any investments. This compares with a total investment portfolio of $~~311~~244.9935 million at September 30, ~~2023~~2024, consisting of $~~171~~92.6331 million of U.S. Treasury and U.S. government agency securities held to maturity, $9677.3196 million of mortgage-backed securities held to maturity, $1.7933 million of municipal securities held to maturity, $~~500~~495,000 of bank issued trust preferred securities held to maturity, $3.94 million of U.S. government agency securities available for sale and $4168.7732 million of mortgage-backed securities available for sale.

The following table sets forth the maturities and weighted average yields of the investment securities in the Bank's portfolio at September 30, ~~2024~~2025. ~~The weighted average yields were calculated by multiplying each carrying value by its yield and dividing the sum of these results by the total carrying values.~~

	One Year or Less				After One toFive Years				After Five toTen Years				After TenYears
	Amount		Yield (2)		Amount		Yield (2)		Amount		Yield (2)		Amount		Yield (2)
	(Dollars in thousands)
Held to Maturity:
U.S. Treasury and U.S. government agency securities (1)	$	2322,~~106~~890	12.2753	%	$	6946,~~301~~756	1.6022	%	$	—	—	%	$	—	—	%
Mortgage-backed securities (1)	~~4,366~~657		51.7492		119,~~309~~627		43.0878		~~750~~134		36.9790		6155,~~535~~693		43.0298
Municipal securities (1)	—605		—5.70		~~1,230~~—		~~3.44~~—		—		—		—		—
Bank issued trust preferred securities (1)	—		—		—499		—8.98		~~500~~—		~~4.75~~—		—		—
Available for Sale:
U.S. Treasury and U.S. government agency securities (1)	34,~~939~~968		4.6216	%	—		—		—		—		—		—
Mortgage-backed securities (1)	—2,124		4.98	%	23,~~130~~772		54.9685		~~5,144~~193		5.9646		6167,~~044~~183		54.2576
Total portfolio (1)	$	31,~~411~~244	23.3100	%	$	8360,~~970~~654	21.8092	%	$	~~6,394~~327	56.6305	%	$	122,~~579~~876	4.6341	%

________________________________

(1)Held to maturity investment securities are shown at amortized cost and available for sale investment securities are shown at estimated fair market value.

(2)The weighted average yields are calculated by multiplying each amortized cost value by its yield and dividing the sum of these results by the total amortized cost values. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.

For additional information regarding investment securities, see “Item 1A. Risk Factors – Our investment securities portfolio may be negatively impacted by fluctuations in market value and interest rates and result in losses” and "Note 3-Investment Securities" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.

Deposit Activities and Other Sources of Funds

General. Deposits and loan repayments are the major sources of the Bank's funds for lending and other investment purposes. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by general interest rates and money market conditions. 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. Deposits are attracted from within the Bank's market area through the offering of a broad selection of deposit instruments, including money market deposit accounts, checking accounts, regular savings accounts and certificates of deposit. Deposit account terms vary, according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. 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.

minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. 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~~maintains ~~seeks consumer and commercial~~ checking accounts ~~through checking account acquisition marketing programs. The Bank also has checking accounts~~ owned by businesses associated with the ~~marijuana~~cannabis industry (or Initiative-502) ~~industry~~ in Washington State. ItThe isBank generally ~~permissible~~services inthese ~~Washington~~accounts ~~State~~in tocompliance ~~handle~~with ~~accounts~~applicable ~~associated~~federal ~~with~~and ~~this~~state ~~industry~~regulatory inguidance ~~compliance~~and ~~with~~monitors ~~federal~~associated regulatory ~~guidelines~~and compliance risks. At September 30, ~~2024~~2025, the Bank had $1714.76 million, or 10.19% of total deposits, from businesses associated with the ~~marijuana~~cannabis industry. See "Item 1A. Risk Factors" - 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.

At September 30, ~~2024~~2025, the Bank's ~~had~~deposits included $~~113~~142.5881 million of jumbo certificates of deposit of $250,000 or more~~. The~~, ~~Bank had~~ $6268.8090 million in reciprocal negotiable order of withdrawal ("NOW") checking deposits, ~~and~~ $3018.6759 million in reciprocal money market deposits ~~at September 30~~, ~~2024.~~and ~~At September 30, 2024, the Bank had~~ $4843.7611 million in brokered certificates of deposit. ~~The~~Jumbo ~~Bank believes that its jumbo~~ certificates of deposit, ~~which~~ represented 68.93% of total deposits at September 30, ~~2024~~2025, and the Bank believes they present similar interest rate risks as compared to its other deposits.

The following table sets forth information concerning the Bank's deposits at September 30, ~~2024~~2025:

Deposit Category

Amount

Percentage of Total Deposits

(Dollars in thousands)

Non-interest bearing demand

~~413~~430,~~116~~685

25.0709

NOW

~~333~~345,~~329~~599

20.2313

Savings

~~205~~201,~~993~~678

1211.5075

Money market

~~326~~296,~~922~~152

1917.8425

Subtotal

1,~~279~~274,~~360~~114

7774.6422

Certificates of Deposit (1)

Maturing within 1 year

~~313~~406,~~823~~987

1923.0571

Maturing after 1 year but within 2 years

2428,~~644~~114

1.5064

Maturing after 2 years but within 5 years

296,~~208~~786

10.7740

Maturing after 5 years

~~633~~634

0.0403

Total certificates of deposit

~~368~~442,~~308~~521

2225.3678

Total deposits

1,~~647~~716,~~668~~635

100.00

______________________

(1)Based on remaining maturity of certificates.

The following table indicates the amount of the Bank's jumbo certificates of deposit by time remaining until maturity as of September 30, ~~2024~~2025. Jumbo certificates of deposit have principal balances of $250,000 or more, and the rates paid on these accounts are generally negotiable.

Maturity Period	Amount
	(Dollars in thousands)
Three months or less	$	4469,~~088~~523
Over three through six months	4945,~~515~~894
Over six through twelve months	1624,~~789~~533
Over twelve months	32,~~187~~863
Total	$	~~113~~142,~~579~~813

As of September 30, ~~2024~~2025, ~~2023~~2024 and ~~2022~~2023 approximately $~~471~~491.0819 million, $~~407~~471.6108 million and $~~122~~407.6961 million, respectively, of the Bank’s deposit portfolio was uninsured. These amounts are estimates based on methodologies and assumptions used for regulatory reporting purposes. The Bank is an approved public funds deposit institution in Washington, where applicable laws require public funds to be secured by qualified investment securities. As of September 30, ~~2024~~2025, $~~177~~154.4067 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~~2025 (dollars in thousands).

Maturity Period	Amount
	(Dollars in thousands)
Three months or less	$	2033,~~881~~523
Over three through six months	3432,~~015~~144
Over six through twelve months	810,~~789~~533
Over twelve months	1,~~437~~113
Total	$	6577,~~122~~313

Deposit Flow. The following table sets forth the balances of deposits in the various types of accounts offered by the Bank at the dates indicated:

	At September 30,
	2024						2023						2022
	2025						2024						2023
	Amount		PercentofTotal		Increase(Decrease)		Amount		PercentofTotal		Increase(Decrease)		Amount		PercentofTotal
	(Dollars in thousands)
Non-interest-bearing demand	$	~~413~~430,~~116~~685	25.0709	%	$	~~(42~~17,~~748)~~569	$	~~455~~413,~~864~~116	2925.2107	%	$	(7442,~~194~~748)	$	~~530~~455,~~058~~864	3229.4821	%
NOW checking	~~333~~345,~~329~~599		20.2313		~~(53~~12,~~401)~~270		~~386~~333,~~730~~329		2420.7823		(6153,~~049~~401)		~~447~~386,~~779~~730		2724.4378
Savings	~~205~~201,~~993~~678		1211.5075		(224,~~373~~315)		~~228~~205,~~366~~993		1412.6350		(5422,~~853~~373)		~~283~~228,~~219~~366		1714.3563
Money market	~~326~~296,~~922~~152		1917.8425		~~137~~(30,~~047~~770)		~~189~~326,~~875~~922		1219.1684		~~(58~~137,~~661)~~047		~~248~~189,~~536~~875		1512.2316
Certificates of deposit which mature:
Within 1 year	~~313~~406,~~823~~987		1923.0571		6293,~~086~~164		~~251~~313,~~737~~823		1619.1305		~~175~~62,~~426~~086		76251,~~311~~737		416.6813
After 1 year, but within 2 years	2428,~~644~~114		1.5064		63,~~324~~470		1824,~~320~~644		1.1750		(46,~~394)~~324		2218,~~714~~320		1.3917
After 2 years, but within 5 years	296,~~208~~786		10.7740		(~~821~~22,422)		3029,~~029~~208		1.9277		~~6,540~~(821)		2330,~~489~~029		1.4492
Certificates maturing thereafter	~~633~~634		0.0403		~~619~~1		14633		—0.04		~~(56)~~619		7014		—
Total	$	1,~~647~~716,~~668~~635	100.00	%	$	8668,~~733~~967	$	1,~~560~~647,~~935~~668	100.00	%	$	~~(71~~86,~~241)~~733	$	1,~~632~~560,~~176~~935	100.00	%

Certificates of Deposit by Rates. The following table sets forth the certificates of deposit in the Bank classified by rates as of the dates indicated:

	At September 30,
	2024		2023		2022
	2025		2024		2023
	(Dollars in thousands)
0.00 - 1.99%	$	72,~~088~~805	$	167,~~677~~088	$	~~101~~16,~~070~~677
2.00 - 3.99%	75110,~~091~~235		9275,~~698~~091		2192,~~254~~698
4.00 - 5.99%	~~286~~329,~~129~~481		~~190~~286,~~725~~129		~~260~~190,725
Total	$	~~368~~442,~~308~~521	$	~~300~~368,~~100~~308	$	~~122~~300,~~584~~100

Certificates of Deposit by Maturities. The following table sets forth the amount and maturities of certificates of deposit by rate at September 30, ~~2024~~2025:

Amount Due

Less ThanOne Year

One toTwoYears

AfterTwo toFiveYears

AfterFive Years

Total

(Dollars in thousands)

0.00 - 1.99%

21,~~907~~505

21,~~280~~299

1~~,901~~

—

72,~~088~~805

2.00 - 3.99%

6181,~~252~~527

821,~~332~~923

56,~~507~~785

—

75110,~~091~~235

4.00 - 5.99%

~~249~~323,~~664~~955

144,~~032~~892

~~21,800~~—

~~633~~634

~~286~~329,~~129~~481

Total

~~313~~406,~~823~~987

2428,~~644~~114

296,~~208~~786

~~633~~634

~~368~~442,~~308~~521

Deposit Activities. The following table sets forth the deposit activities of the Bank for the years indicated:

Year Ended September 30,

2024

2023

2022

2025

2024

2023

(Dollars in thousands)

Beginning balance

1,~~560~~647,~~935~~668

1,~~632~~560,~~176~~935

1,~~570~~632,~~555~~176

Net deposits (withdrawals) before interest credited

5737,~~074~~695

~~(82~~57,~~543)~~074

58(82,~~965~~543)

Interest credited

2931,~~659~~272

1129,~~302~~659

211,~~656~~302

Net increase (decrease) in deposits

8668,~~733~~967

~~(71~~86,~~241)~~733

61(71,~~621~~241)

Ending balance

1,~~647~~716,~~668~~635

1,~~560~~647,~~935~~668

1,~~632~~560,~~176~~935

For additional information regarding our deposits, see "Note 10 - Deposits" of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

Borrowings. The Bank may use borrowings from the FHLB to supplement its supply of lendable funds and to meet deposit withdrawal requirements. The FHLB functions as a central reserve bank providing credit for member financial institutions. As a member of the FHLB, the Bank is required to own capital stock in the FHLB and is authorized to apply for borrowings on the security of such stock and certain mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the U.S. government) provided certain creditworthiness standards have been met. Borrowings are made pursuant to several different credit programs. Each credit program has its own interest rate and range of maturities. Depending on the program, limitations on the amount of borrowings are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit. At September 30, ~~2024~~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 ~~long~~ short-term borrowings totaling $20.00 million and no ~~short~~long-term borrowings were outstanding at September 30, ~~2024~~2025. The Bank maintains one short-term borrowing line with the FRB with total credit based on eligible collateral. At September 30, ~~2024~~2025, the Bank had no outstanding balance on this line, with $8670.6357 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 had no outstanding balance on this borrowing line of credit at September 30, ~~2024~~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.

Bank Owned Life Insurance

The Bank has purchased life insurance policies covering certain officers. 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~~2025, the cash surrender value of bank owned life insurance (“BOLI”) was $2321.6183 million.

How We Are Regulated

General. As a bank holding company, Timberland Bancorp is subject to examination and supervision by, and is required to file certain reports with, the Federal Reserve. Timberland Bancorp is also subject to the rules and regulations of the SEC under the federal securities laws. As a state-chartered savings bank, the Bank is subject to regulation and oversight by the DFI and the applicable provisions of Washington law and regulations of the DFI adopted thereunder. The Bank also is subject to regulation and examination by the FDIC, which insures the deposits of the Bank to the maximum extent permitted by law, and requirements established by the Federal Reserve. State law and regulations govern the Bank's ability to take deposits and pay interest thereon, to make loans on or invest in residential and other real estate, to make consumer loans, to invest in securities, to offer various banking services to its customers and to establish branch offices. Under state law, savings banks in Washington also generally have all the powers that federal savings banks have under federal laws and regulations. The Bank is subject to periodic examination by and reporting requirements ~~by and~~ of the DFI, as its state regulator and the FDIC, as the primary federal regulator.

The following is a brief description of certain laws and regulations applicable to Timberland Bancorp and the Bank. Descriptions of laws and regulations here and elsewhere in this report do not purport to be complete and are qualified in their entirety by reference to the actual laws and regulations. Legislation is introduced from time to time in the U.S. Congress or the Washington State Legislature that may affect the operations of Timberland Bancorp and the Bank. In addition, the regulations governing the Company and the Bank may be amended from time to time by the FDIC, DFI, Federal Reserve and the Consumer Financial Protection Bureau ("CFPB"). Any such legislation or regulatory changes in the future could adversely affect the Company's and the Bank's operations and financial condition. We cannot predict whether any such changes may occur.

The DFI and FDIC have extensive enforcement authority over all Washington state-chartered savings banks, including the Bank. The Federal Reserve has the same type of authority over Timberland Bancorp. This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease-and-desist orders and removal orders and initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the regulators.

Regulation of the Bank

The Bank, as a state-chartered savings bank, is subject to regulation and oversight by the FDIC and the DFI extending to all aspects of its operations.

Insurance of Accounts and Regulation by the FDIC. The Bank’s deposits are insured up to $250,000 per separately insured deposit ownership right or category by the Deposit Insurance Fund (‘DIF”) of the FDIC. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of, and to require reporting by, FDIC-insured institutions. The FDIC assesses deposit insurance premiums quarterly on each FDIC-insured institution applied to its deposit base, which is their average consolidated total assets minus its Tier 1 capital. No institution may pay a dividend if it is in default on its federal deposit insurance assessment. Total base assessment rates currently range from 2.5 to 32 basis points subject to certain adjustments.

In October 2022, the FDIC finalized a rule that increased the initial base deposit insurance assessment rates by 2 basis points, beginning with the first quarterly assessment period of 2023 ~~(January~~to 1,support ~~2023~~the ~~through~~DIF's ~~March~~Amended ~~31,~~Restoration ~~2023)~~Plan. The FDIC, asdetermined ~~required~~that ~~under~~without the ~~Federal Deposit Insurance Act~~increase, ~~established a plan in September 2020 to restore~~ the DIF reserve ratio tomight ~~meet~~not orreach ~~exceed~~ the statutory ~~minimum of~~ 1.35% ~~within~~minimum ~~eight~~requirement ~~years.~~by ~~This~~the ~~plan~~September ~~did~~30, ~~not~~2028, ~~include~~deadline. anThe ~~increase~~FDIC inalso ~~the~~concurrently ~~deposit~~maintained ~~insurance~~the ~~assessment~~Designated ~~rate.~~Reserve ~~Based~~Ratio on(“DRR”) for the ~~FDIC’s~~DIF ~~recent~~at ~~projections,~~2% ~~however,~~for ~~the~~2025 ~~FDIC~~and ~~determined~~will ~~that~~maintain ~~the~~it ~~DIF~~at ~~reserve~~that ~~ratio~~level isfor at2026. ~~risk~~The ofrevised ~~not~~assessment ~~reaching~~rate ~~the~~schedules ~~statutory~~will ~~minimum~~remain byin ~~the~~effect ~~statutory~~unless ~~deadline~~and ofuntil ~~September~~the ~~30,~~reserve ~~2028~~ratio ~~without~~meets ~~increasing~~or ~~the~~exceeds ~~deposit~~2% ~~insurance~~to ~~assessment~~support ~~rates.~~growth ~~The~~in ~~increased~~the ~~assessment~~DIF ~~would~~in ~~improve~~progressing toward the ~~likelihood~~FDIC’s ~~that~~long-term ~~the~~goal ~~DIF~~of ~~reserve~~a ~~ratio~~2% ~~would~~DRR. ~~reach~~Progressively ~~the~~lower ~~required~~assessment ~~minimum~~rate byschedules ~~the~~will ~~statutory~~take ~~deadline,~~effect ~~consistent~~when ~~with~~ the ~~FDIC’s~~reserve ~~Amended~~ratio ~~Restoration~~reaches ~~Plan.~~2%, ~~The~~and ~~FDIC~~again ~~also~~when ~~concurrently~~it reaches 2.5%.

maintained the Designated Reserve Ratio (“DRR”) for the DIF at 2% for 2024 and will maintain it at that level for 2025. The revised assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2% to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2% DRR. Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2%, and again when it reaches 2.5%.

In a banking industry emergency, the FDIC may also impose a special assessment. As insurer, the FDIC is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. The FDIC also may prohibit any insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the DIF. The FDIC also has the authority to take enforcement actions against banks and savings associations. Management is not aware of any existing circumstances which would result in termination of the Bank's deposit insurance.

Capital Requirements. Federally insured financial institutions, such as the Bank, and their holding companies, are required to maintain a minimum level of regulatory capital. The Bank is subject to capital regulations adopted by the FDIC, which establish minimum required ratios for a common equity Tier 1 (“CET1”) capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio and a Tier 1 capital to total assets leverage ratio. The capital standards require the maintenance of the following minimum capital ratios: (i) a CET1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. Consolidated regulatory capital requirements identical to those applicable to subsidiary banks generally apply to bank holding companies. However, the Federal Reserve has provided a “Small Bank Holding Company” exception to its consolidated capital requirements, and bank holding companies with less than $3.0 billion of consolidated assets are not subject to the consolidated holding company capital requirements unless otherwise directed by the Federal Reserve.

The Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), enacted in May 2018, required the federal banking agencies, including the FDIC, to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” or “CBLR” of between 8 to 10%. Institutions with capital meeting or exceeding the ratio and otherwise complying with the specified requirements (including off-balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements. The CBLR was established at 9% Tier 1 capital to total average assets, effective January 1, 2020. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. An institution that temporarily ceases to meet any qualifying criteria is provided with a two-quarter grace period to again achieve compliance. Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of greater than 8% requires the institution to comply with the generally applicable capital requirements. . On November 25, 2025, federal banking regulators including the FDIC, issued a proposed rule that would lower the CBLR from 9% to 8% and extend the grace period for falling below the threshold from two to four quarters, reducing compliance pressure on smaller community banks, like the Bank. No assurance can be made as to when and in what form the final rule will be adopted. The Bank has not elected to use the CBLR framework as of September 30, ~~2024~~2025.

To be considered well-capitalized under the prompt corrective action regulations, the Bank must maintain a CET1 risk-based ratio of 6.5%, a Tier 1 risk-based ratio of 8%, a total risk-based capital ratio of 10% and a leverage ratio of 5%, and the Bank must not be subject to an individualized order, directive or agreement under which its primary federal banking regulator requires it to maintain a specific capital level.

In addition to the minimum capital requirements, the Bank must maintain a capital conservation buffer that consists of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital ratios to avoid limitations on paying dividends, repurchasing shares and paying certain discretionary bonuses. At September 30, ~~2024~~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. Federal statutes establish a supervisory framework based on five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. An institution’s category depends upon where its capital levels are in relation to relevant capital measures, which include a risk-based capital measure, a leverage ratio capital measure and certain other factors. An institution that is not well capitalized is subject to certain restrictions on brokered deposits, including restrictions on the rates it can offer on its deposits generally. Any institution which is neither well capitalized nor adequately capitalized is considered undercapitalized. The final rule establishing an elective "community bank leverage ratio" regulatory capital framework provides that a qualifying institution whose capital exceeds the CBLR and opts to use the framework will be considered "well capitalized" for purposes of prompt corrective action.

Undercapitalized institutions are subject to certain prompt corrective action requirements, regulatory controls and restrictions which become more extensive as an institution becomes more severely undercapitalized. Failure by an institution to comply with applicable capital requirements would, if unremedied, result in progressively more severe restrictions on its activities and

~~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. 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~~2025, the Bank was categorized as “well capitalized” under the prompt corrective action regulations of the FDIC. For additional information regarding the Bank's minimum regulatory capital requirements, see "Capital Requirements" above and "Note 17 - Regulatory Matters" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.

Federal Home Loan Bank System. The Bank is a member of the FHLB, one of 11 regional Federal Home Loan Banks that administer the home financing credit function of savings institutions, each serving as a reserve or central bank for its members within its assigned region. The FHLB is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members in accordance with policies and procedures, established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Board. All borrowings from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term borrowings are required to provide funds for residential home financing. See “Deposit Activities and Other Sources of Funds – Borrowings" above.

As a member, the Bank is required to purchase and maintain stock in the FHLB based on the Bank's asset size and level of borrowings from the FHLB. At September 30, ~~2024~~2025, the Bank had $2.0405 million in FHLB stock, which was in compliance with this requirement. The FHLB pays dividends quarterly, and the Bank received $~~158~~156,000 in dividends during the year ended September 30, ~~2024~~2025.

The Federal Home Loan Banks continue to contribute to low- and moderately- priced housing programs through direct loans or interest subsidies on borrowings targeted for community investment and low- and moderate-income housing projects. These contributions have adversely affected the level of FHLB dividends paid and could continue to do so in the future. These contributions could also have an adverse effect on the value of FHLB stock in the future. A reduction in value of the Bank's FHLB stock may result in a decrease in net income and possibly capital.

Standards for Safety and Soundness. Each federal banking agency, including the FDIC, has adopted guidelines establishing general standards relating to internal controls, information and internal audit systems; loan documentation; credit underwriting; interest rate risk exposure; asset growth; asset quality; earnings; and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal shareholder. If the FDIC determines that an institution fails to meet any of these guidelines, it may require an institution to submit to the FDIC an acceptable plan to achieve compliance. Management of the Bank is not aware of any conditions relating to these safety and soundness standards which would require submission of a plan of compliance.

Commercial Real Estate Lending Concentrations. The federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate lending. The particular focus is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be sensitive to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is not to limit a bank’s commercial real estate lending but to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance directs the FDIC and other federal bank regulatory agencies to focus their supervisory resources on institutions that may have significant commercial real estate loan concentration risk. 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.

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. As of September 30, 2024, the Bank’s aggregate recorded loan balances for construction, land development and land loans were 72.42% of regulatory capital. In addition, at September 30, 2024 the Bank’s loans on commercial real estate, as defined by the FDIC, were 290.74% of regulatory capital.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. As of September 30, 2025, the Bank’s aggregate recorded loan balances for construction, land development and land loans were 66.20% of regulatory capital. In addition, at September 30, 2025 the Bank’s loans on commercial real estate, as defined by the FDIC, were 283.05% of regulatory capital.

Activities and Investments of Insured State-Chartered Financial Institutions. Federal law generally limits the activities and equity investments of FDIC-insured state-chartered banks to those that are permissible for national banks. An insured state bank is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary, (ii) investing as a limited partner in a partnership, the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the bank's total assets, (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors' and officers' liability insurance coverage or bankers' blanket bond group insurance coverage for insured depository institutions, and (iv) acquiring or retaining the voting shares of a depository institution owned by another FDIC-insured institution if certain requirements are met.

Under the laws of Washington State, Washington-chartered savings banks may exercise any of the powers of Washington-chartered commercial banks, national banks and federally-chartered savings banks, subject to the approval of the DFI in certain situations. In addition, Washington-chartered savings banks may charge the maximum interest rate allowable for loans and other extensions of credit by federally-chartered financial institutions to Washington residents.

Environmental Issues Associated ~~With~~with Real Estate Lending. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) is a federal statute that generally imposes strict liability on all prior and present "owners and operators" of sites containing hazardous waste. However, Congress acted to protect secured creditors by providing that the term “owner and operator” excludes a person whose ownership is limited to protecting its security interest in the site. Since the enactment of the CERCLA, this “secured creditor exemption” has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan.

To the extent that legal uncertainty exists in this area, all creditors, including the Bank, ~~that~~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. 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, ~~2024~~2025, the reserve requirement of zero percent was still in place.

Transactions with Affiliates. Timberland Bancorp, Inc. and the Bank are separate and distinct legal entities. The Bank is an affiliate of Timberland Bancorp, Inc. Federal laws strictly limit the ability of banks to engage in certain transactions with their affiliates. Transactions deemed to be a “covered transaction” under Section 23A of the Federal Reserve Act between a bank and an affiliate are limited to 10% of the bank's capital and surplus and, with respect to all affiliates, to an aggregate of 20% of the bank's capital and surplus. Further, covered transactions that are loans and extensions of credit generally are required to be secured by eligible collateral in specified amounts. Federal law also requires that covered transactions and certain other transactions listed in Section 23B of the Federal Reserve Act between a bank and its affiliates be on terms as favorable to the bank as transactions with non-affiliates.

Community Reinvestment Act. Banks are also subject to the provisions of the Community Reinvestment Act of 1977 (“CRA”), which requires the appropriate federal bank regulatory agency to assess a bank’s performance under the CRA in meeting the credit needs of the community serviced by the bank, including low- and moderate-income neighborhoods. The regulatory agency’s assessment of the bank’s record is made available to the public. Further, a bank’s performance must be considered in connection with a bank’s application to, among other things, establish a new branch office that will accept deposits, relocate an existing office or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. The Bank received a “satisfactory” rating during its most recent examination.

Onrequired ~~October~~for ~~24,~~liquidation ~~2023,~~accounts or (ii) the ~~federal~~net ~~banking~~worth ~~agencies~~requirements, ~~including~~if ~~the FDIC~~any, ~~issued~~imposed aby ~~final~~the ~~rule~~Director ~~designed~~of ~~to strengthen and modernize regulations implementing~~ the ~~CRA~~DFI. ~~The~~In ~~changes~~addition, ~~are~~dividends ~~designed~~on tothe ~~encourage~~Bank's ~~banks~~capital tostock ~~expand~~may ~~access~~not tobe ~~credit,~~paid ~~investment and banking services~~ in ~~low~~an ~~and~~aggregate ~~moderate~~amount ~~income~~greater ~~communities,~~than ~~adapt to changes in~~ the ~~banking~~aggregate ~~industry~~retained ~~including~~earnings ~~mobile~~of ~~and~~the ~~internet banking~~Bank, ~~provide~~without ~~greater~~the ~~clarity~~approval ~~and~~of ~~consistency in~~ the ~~application~~Director of the ~~CRA~~DFI. ~~regulations~~Dividends ~~and~~payable ~~tailor~~by ~~CRA~~the ~~evaluations~~Bank ~~and~~can ~~data~~be ~~collection~~limited toor ~~bank~~prohibited ~~size~~if ~~and~~the ~~type. The~~ Bank ~~cannot~~does ~~predict~~not ~~the~~meet ~~impact~~ the ~~changes~~capital toconservation ~~the~~buffer ~~CRA will have on its operations at this time~~requirement.

Dividends. Dividends from the Bank constitute the major source of funds available for dividends which may be paid to Company shareholders. The amount of dividends payable by the Bank to the Company depends upon the Bank's earnings and capital position, and is limited by federal and state laws, regulations and policies. 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. In addition, dividends on the Bank's capital stock may not be paid in an aggregate amount greater than the aggregate retained earnings of the Bank, without the approval of the Director of the DFI. Dividends payable by the Bank can be limited or prohibited if the Bank does not meet the capital conservation buffer requirement.

The amount of dividends actually paid during any one period will be strongly affected by the Bank's management policy of maintaining a strong capital position. Federal law further provides that no insured depository institution may pay a cash dividend if it would cause the institution to be “undercapitalized,” as defined in the prompt corrective action regulations. Moreover, the federal bank regulatory agencies also have the general authority to limit the dividends paid by insured banks if such payments should be deemed to constitute an unsafe and unsound practice.

Anti-Money Laundering, Bank Secrecy and Customer Identification. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) was signed into law on October 26, 2001. The USA PATRIOT Act and the Bank Secrecy Act requires financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts, and, effective in 2018, the beneficial owners of accounts. Bank regulators are directed to consider a holding company’s effectiveness in combating money laundering when ruling on Bank Holding Company Act and Bank Merger Act applications.

Privacy Standards and Cybersecurity. The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 modernized the financial services industry by establishing a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers. Federal banking agencies, including the FDIC, have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of the board of directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial services. These regulations require the Bank to disclose its privacy policy, including informing consumers of its information sharing practices and informing consumers of their rights to opt out of certain practices. In addition, Washington and other federal and state cybersecurity and data privacy laws and regulations may expose the Bank to risk and result in certain risk management costs. In addition, on November 18, 2021, the federal banking agencies announced the adoption of a final rule providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents. Specifically, the new rule requires a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours. Compliance with the new rule was required by May 1, 2022. Non-compliance with federal or similar state privacy and cybersecurity laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm. Please see "Item 1C. Cybersecurity".

Further, on July 26, 2023, the SEC adopted final rules that require public companies to promptly disclose material cybersecurity incidents in a Current Report on Form 8-K (“Form 8-K”) and detailed information regarding their cybersecurity risk management and governance on an annual basis in an Annual Report on Form 10-K (Form 10-K”). Companies will be required to report on Form 8-K any cybersecurity incident they determine to be material within four business days of making that determination. Smaller reporting companies, such as the Company, must begin complying with incident reporting on Form 8-K no later than June 15, 2024. 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 Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") established the CFPB as an independent bureau of the Federal Reserve with responsibility for the implementation of federal financial consumer protection and fair lending 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.

~~Other~~the ~~Consumer~~Fair ~~Protection~~Credit ~~Laws~~Reporting ~~and~~Act, ~~Regulations. The~~the ~~Dodd-Frank~~Fair ~~Wall~~Debt ~~Street~~Collection ~~Reform~~Practices Act, the Right to Financial Privacy Act, the Home Ownership and ~~Consumer~~Equity Protection Act, ofthe ~~2010~~Consumer (Leasing Act, the ~~"Dodd-Frank~~Fair ~~Act")~~Credit ~~established~~Billing Act, the ~~CFPB~~Homeowners asProtection anAct, ~~independent~~the ~~bureau~~Check ofClearing for the ~~Federal~~21st ~~Reserve~~Century ~~with~~Act, ~~responsibility~~laws ~~for~~governing flood insurance, laws governing consumer protections in connection with the ~~implementation~~sale of insurance, federal ~~financial~~and ~~consumer~~state ~~protection~~laws prohibiting unfair and ~~fair~~deceptive ~~lending~~business ~~laws~~practices, and various regulations. ~~The~~that ~~Bank~~implement issome ~~subject~~or toall ~~consumer~~of ~~protection~~the foregoing. These laws and regulations ~~issued~~mandate bycertain ~~the~~disclosure ~~CFPB,~~requirements ~~but~~and asregulate athe ~~smaller~~manner in which financial ~~institution~~institutions must deal with customers when taking deposits, ismaking ~~generally~~loans, ~~subject~~collecting loans, and providing other services. Failure to ~~supervision~~comply with these laws and ~~enforcement~~regulations bycan subject the ~~FDIC~~Bank ~~and~~to ~~DFI~~various ~~with~~penalties, ~~respect~~including but not limited to, ~~its~~enforcement ~~compliance~~actions, ~~with~~injunctions, ~~federal~~fines, ~~and~~civil ~~state~~liability, ~~consumer~~criminal ~~financial~~penalties, ~~protection~~punitive ~~laws~~damages, and ~~regulations~~the loss of certain contractual rights.

The Bank is subject to a broad array of federal and state consumer protection laws and regulations that govern almost every aspect of its business relationships with consumers. 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. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans, and providing other services. Failure to comply with these laws and regulations can subject the Bank to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages, and the loss of certain contractual rights.

Regulation of the Company

General. The Company, as the sole shareholder of the Bank, is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the Bank Holding Company Act of 1956, as amended (“BHCA”), and the regulations promulgated thereunder. This regulation and oversight are generally intended to ensure that the Company limits its activities to those allowed by law and that it operates in a safe and sound manner without endangering the financial health of the Bank.

As a bank holding company, the Company is required to file semi-annual reports with the Federal Reserve and any additional information required by the Federal Reserve and is subject to regular examinations by the Federal Reserve. The Federal Reserve also has extensive enforcement authority over bank holding companies, including the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.

BHCA. The Company is supervised by the Federal Reserve under the BHCA. The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary bank and may not conduct its operations in an unsafe or unsound manner. In addition, the Dodd-Frank Act and earlier Federal Reserve policy provide that a bank holding company should serve as a source of strength to its subsidiary bank by having the ability to provide financial assistance to its subsidiary bank during periods of financial distress to the bank. A bank holding company’s failure to meet its obligation to serve as a source of strength to its subsidiary bank will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve’s regulations or both. No regulations have yet been proposed by the Federal Reserve to implement the source of strength provisions required by the Dodd-Frank Act. Timberland Bancorp, Inc. and any subsidiaries that it may control are considered “affiliates” within the meaning of the Federal Reserve Act, and transactions between the Bank and affiliates are subject to numerous restrictions. With some exceptions, Timberland Bancorp, Inc. and its subsidiaries are prohibited from tying the provision of various services, such as extensions of credit, to other services offered by Timberland Bancorp, Inc. or by its affiliates.

Acquisitions. The BHCA prohibits a bank holding company, with certain exceptions, from acquiring ownership or control of more than 5% of the voting shares of any company that is not a bank or bank holding company and from engaging in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. Under the BHCA, the Federal Reserve may approve the ownership of shares by a bank holding company in any company, the activities of which the Federal Reserve has determined to be so closely related to the business of banking or managing or controlling banks as to be a proper incident thereto. These activities include: operating a savings institution, mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing certain investment and financial advice; underwriting and acting as an insurance agent for certain types of credit-related insurance; leasing property on a full-payout, non-operating basis; selling money orders, travelers’ checks and U.S. 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. The Federal Reserve must approve the acquisition (or acquisition of control) of a bank or other FDIC-insured depository institution by a bank holding company, and the appropriate federal banking regulator must approve a bank’s acquisition (or acquisition of control) of another bank or other FDIC-insured institution.

services for customers. The Federal Reserve must approve the acquisition (or acquisition of control) of a bank or other FDIC-insured depository institution by a bank holding company, and the appropriate federal banking regulator must approve a bank’s acquisition (or acquisition of control) of another bank or other FDIC-insured institution.

Acquisition of Control of a Bank Holding Company. Under federal law, a notice or application must be submitted to the appropriate federal banking regulator if any person (including a company), or group acting in concert, seeks to acquire “control” of a bank holding company. An acquisition of control can occur upon the acquisition of 10% or more of the voting stock of a bank holding company or as otherwise defined by federal regulations. In considering such a notice or application, the Federal Reserve takes into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition. 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. Federal Reserve policy limits the payment of cash dividends by bank holding companies, which expresses the Federal Reserve's view that a bank holding company should pay cash dividends only to the extent that the company's net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the company's capital needs, asset quality and overall financial condition, and that it is inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Under Washington corporate law, the Company generally may not pay dividends if after that payment it would not be able to pay its liabilities as they become due in the usual course of business, or its total assets would be less than its total liabilities. The capital conservation buffer requirement can also limit dividends.

Stock Repurchases. Bank holding companies, except for certain “well-capitalized” and highly rated bank holding companies, are required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of their consolidated net worth. The Federal Reserve may disapprove a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order, or any condition imposed by, or written agreement with, the Federal Reserve.

Capital Requirements. As discussed above, pursuant to the “Small Bank Holding Company” exception, effective August 30, 2018, bank holding companies with less than $3.0 billion in consolidated assets were generally no longer subject to the Federal Reserve’s capital regulations, which are generally the same as the capital regulations applicable to the Bank. At the time of this change, Timberland Bancorp, Inc. was considered “well capitalized” as defined for a bank holding company with a total risk-based capital ratio of 10.0% or more and a Tier 1 risk-based capital ratio of 8.0% or more, and was not subject to an individualized order, directive or agreement under which the Federal Reserve requires it to maintain a specific capital level. If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at September 30, ~~2024~~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. Timberland Bancorp, Inc.’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Company is subject to information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

Taxation

Federal Taxation

General. The Company and the Bank report their operations on a fiscal year basis using the accrual method of accounting and are subject to federal income taxation in the same manner as other corporations. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Company.

Dividends-Received Deduction. The Company may exclude from its income 100.0% of dividends received from the Bank as a member of the same affiliated group of corporations. 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.

31Audits. The Company is no longer subject to U.S. federal tax examination by tax authorities for years ended on or before September 30, 2021.

Audits. 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.

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~~2025. In addition, various municipalities also assess business and occupation taxes at differing rates. 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. ~~The~~ ~~Bank~~It competes ~~for loans and deposits~~ with other commercial banks, thrift institutions, credit unions, mortgage bankers ~~and other providers of financial services~~, ~~including~~ finance companies, ~~online-only~~insurance ~~banks~~companies, mutual funds, ~~insurance~~and, ~~companies~~increasingly, ~~and~~financial ~~more~~technology ~~recently~~(“FinTech”) ~~with~~firms, ~~financial~~including ~~technology~~digital-only ~~companies~~banks, ~~that~~online ~~rely~~lending onplatforms, ~~technology~~mobile towallets, ~~provide~~and other technology-driven financial ~~services~~service providers. Many ~~of our~~ competitors have substantially greater financial, technological, and operational resources than wethe doBank, and some offer nationwide products at lower cost. Particularly in ~~times~~periods of high or rising interest rates, the Bank also ~~faces~~competes ~~significant competition~~ for investor's funds ~~from~~with ~~short-term~~ money market ~~securities~~instruments, government and ~~other~~ corporate securities, exchange-traded funds, and ~~government~~other ~~securities~~investment alternatives. The Bank competes for loans ~~principally~~primarily through the range and quality of services ~~we provide~~provided, ~~interest~~pricing ~~rates~~ and loan fees, and ~~robust~~convenient delivery channels, ~~for~~including ~~our~~branch ~~products~~offices, digital banking, mobile applications, and ~~services~~online platforms. The Bank actively solicits ~~deposit-related~~deposits ~~clients~~ and competes ~~for deposits~~ by offering ~~depositors~~ a variety of savings accounts, checking accounts, cash management solutions, and other financial services tailored to its customers.

Subsidiary Activities

The Company has one wholly- owned subsidiary, the Bank. The Bank has one wholly-owned subsidiary, Timberland Service Corp. (“Timberland Service”), whose primary function is to provide escrow services.

Employees and Human Capital Resources

In line with our dedication to transparency and excellence, we are pleased to present an overview of the Company’s human capital strategies and achievements. 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. 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~~2025, the Company had ~~274~~271 full-time employees and 149 part-time and on-call employees. The employees are not represented by a collective bargaining unit, and the Company believes that its relationship with its employees is positive. We recognize that our ability to attract and retain employees is a key to our success, and we strive to offer competitive salaries and benefits while staying aligned with market standards. The average tenure among employees was ~~seven~~7.6 years at September 30, ~~2024~~2025, with women representing 7675% of the workforce and holding 7681% of management roles, including supervisors, managers, and executive leaders. Management tenure averaged ~~12.7~~14 years. The workforce's ethnic composition was 7677% White, 9% Hispanic or Latinx, 4% Asian, 54% two or more races, 32% Native Hawaiian or Pacific Islander, 2% American Indian or Alaska Native, and 1% African American or Black. The Company's Board of Directors is comprised of the Company's Chief Executive Officer and seven non-employee directors, four of whom identify as female and one as a member of a minority community.

Talent Acquisition and Attrition. Our strategic talent acquisition efforts have strengthened our workforce by bringing in diverse skill sets aligned with our goals. We remain focused on managing attrition and fostering a retention-driven culture by working closely with leaders to maintain stability within our teams. Our recruitment strategy prioritizes hiring local talent, enhancing our teams with individuals who have strong connections to the communities we serve. 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.

Corporate Citizenship. The Company values the unique identities, perspectives, and contributions of its employees. 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. Key initiatives include unconscious bias training for hiring managers, inclusive internal events, fair hiring practices, and an Employee Resource Group. These efforts aim to promote fairness, and inclusivity across the organization, fostering meaningful employee engagement.

~~Diversity, Equity,~~ and ~~Inclusion~~flexible ~~(“DEI”).~~spending ~~The~~accounts, ~~Company~~employee ~~values~~assistance ~~the~~program, ~~unique~~paid ~~identities~~holidays, ~~perspectives,~~paid ~~and~~time ~~contributions~~off, ofpaid ~~its~~volunteer ~~employees. To support this~~time, ~~the~~paid ~~Company~~time ~~implemented~~off afor ~~formal~~the ~~program~~employee’s ~~designed~~birthday ~~to create an inclusive environment that ensures equitable access to growth~~ and ~~development~~other ~~opportunities~~leave ~~while~~as ~~building~~applicable. To afurther ~~workforce~~promote ~~that~~wellness, ~~reflects the communities~~ we ~~serve.~~provide ~~This~~initiatives ~~program~~through isthe programs ~~overseen~~and bybenefits ~~our~~administration ~~Human~~that ~~Resources~~emphasize ~~Director and focuses on education~~self-care, ~~training~~nutrition, ~~recruitment~~work-life balance, and ~~hiring~~financial ~~practices~~education. ~~Key~~This ~~initiatives~~sustained ~~include~~focus ~~unconscious~~on ~~bias~~health ~~training for hiring managers, DEI online training for all employees,~~ and ~~the~~safety ~~introduction~~reflects ofour andedication ~~Employee Resource Group. These efforts aim~~ to ~~promote~~fostering ~~equity,~~a ~~fairness,~~secure and ~~inclusivity~~supportive ~~across~~work ~~the organization, fostering meaningful employee engagement~~environment.

Benefits. The Company provides competitive and comprehensive benefits to its employees. We are committed to maintaining a safe and healthy workplace, implementing proactive measures to protect our team. 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. 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). We are committed to offering competitive and equitable total rewards packages that recognize and reinforce the dedication and contributions of our employees. Our total rewards program reflects this commitment through transparent wage and benefit information for posted positions, a 401(k) plan, an employee stock ownership plan, healthcare and insurance benefits, profit sharing for eligible employees, annual merit-based performance increases, organizational celebrations, wellness campaigns, recognition events, and opportunities for career development within the organization.

Employee Engagement and Training. Our community-focused approach has significantly boosted employee engagement, fostering a strong sense of belonging and purpose. The Company’s strategy is to create long term, productive relationships with employees by supporting their developmental growth. To this end, we provide continuous training opportunities throughout their careers using a variety of methods, including third-party resources, in-house programs, and computer-based training. Managers and supervisors participate in monthly training sessions on topics such as performance coaching and employee development, which are designed and delivered in-house and offered virtually. To further support career development, employees are encouraged to shadow and observe other areas of the Company.

~~All~~Employees ~~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 are encouraged to share their ideas and are supported in their professional growth and contributions to the organization. To attract new talent, the Company offers an employee referral incentive. We also reward employees for performance, tenure, process improvements, and efficiencies. Vacation leave accruals increase with length of service, recognizing employees' commitment to the Company.

Talent Development and Succession Planning. The Company recognizes that the skills and knowledge of its employees are critical to the success of the organization and actively supports training and continuing education as an ongoing priority. The Company’s compliance training program provides annual courses to ensure employees and officers are well-versed in the rules and regulations applicable to their jobs. For certain positions, additional training and testing programs are available to enhance skills and recognize mastery within those positions. Employees are encouraged to attend external education opportunities in the form of training, conferences, and networking events. The Company’s comprehensive talent development programs are tailored to meet the unique needs of our employees, fostering growth that aligns with our core values. Succession planning and targeted training initiatives further support a pipeline of capable individuals ready to lead the Company into the future.

Volunteerism. The Company embraces social responsibility, with our workforce actively participating in volunteer initiatives that make a positive impact on our communities. Volunteerism remains a cornerstone of our culture, reflecting our commitment to giving back. 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.

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 atSeptember 30, 2024

Position

Age atSeptember 30, 2025

Position

Name

Company

Bank

Dean J. Brydon

5758

Chief Executive Officer

Jonathan A. Fischer

5051

President, Chief Operating Officer and Secretary

Marci A. Basich

5556

Executive Vice President and Chief Financial Officer

Matthew J. DeBord

4445

Executive Vice President and Chief Lending Officer

Todd W. Van Cise

Executive Vice President and Chief Credit Officer

Breanne D. Antich

Executive Vice President and Chief Technology Officer

Breanne D. Antich

Executive Vice President and Chief Technology Officer

Biographical Information.

Dean J. Brydon has been affiliated with the Bank since 1994 and has served as Chief Executive Officer of the Bank and the Company since February 1, 2023. Prior to his promotion to Chief Executive Officer Mr. Brydon served as President of the Bank and Company from January 2022 to January 2023. Mr. Brydon also served as the Chief Financial Officer of the Company and the Bank from January 2000 to January 2023. Mr. Brydon also served as Secretary of the Company and the Bank from January 2004 to January 2022. Mr. Brydon is a Certified Public Accountant.

Jonathan A. Fischer has been affiliated with the Bank since October 1997 and was promoted to President of the Bank and the Company on February 1, 2023. Mr. Fischer has served as Chief Operating Officer since August 23, 2012 and as Secretary of the Bank and the Company since January 2022. Prior to that, Mr. 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. Basich served as Treasurer of the Bank and Company from January 2002 to January 2023. Ms. Basich is a Certified Public Accountant.

Matthew J. DeBord has been affiliated with the Bank since 2012 and was promoted to Executive Vice President and Chief Lending Officer on April 1, 2023. Prior to being promoted to Chief Lending Officer, Mr. DeBord served as a Commercial Loan Officer and Commercial Lending Team Leader. Prior to joining the Bank, Mr. DeBord was employed by a national bank as a Commercial Resolution Officer from January 2010 to December 2012. Mr. DeBord was a Vice President and Portfolio Manager with a local ~~Savings~~savings ~~Bank~~bank from April 2006 to January 2010 and was employed by the DFI as a Financial Examiner from June of 2003 to April 2006.

Todd W. Van Cise has been affiliated with the Bank since 2012 and has served as Chief Credit Officer since January 2024. Prior to that he had served as a Commercial Lending Team Leader.

Breanne D. Antich, has been affiliated with the Bank since 2007 and was promoted to Chief Technology Officer on January 25, 2022 and was promoted to Executive Vice President on February 1, 2023. Prior to this Ms. Antich served as our Information Technology Manager.

Item 1A. Risk Factors

We assume and manage a certain degree of risk in order to conduct our business. In addition to the risk factors described below, other risks and uncertainties not specifically mentioned, or that are currently known to, or deemed to be immaterial by management, also may materially and adversely affect our financial position, results of operations and/or cash flows. Before making an investment decision, you should carefully consider the risks described below together with all the other information included in this Form 10-K and our other filings with the SEC. 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.

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. ~~Recessionary~~A ~~conditions~~downturn in local or ~~adverse~~regional economic conditions, inas ~~our~~a ~~local~~result ~~market~~of ~~areas~~inflation, ofrising ~~Grays~~interest ~~Harbor~~rates, ~~Pierce~~unemployment, ~~Thurston~~recessions, ~~King,~~natural ~~Kitsap and Lewis counties Washington~~disasters, ~~which~~or weother ~~consider~~adverse ~~to be our primary market area~~events, ~~may~~could ~~reduce~~materially ~~our rate of growth,~~ affect our ~~customers' ability to repay loans and adversely impact our~~ business, financial condition, and results of operations. Adverse ~~General~~ economic ~~conditions,~~developments ~~including~~in ~~inflation,~~our ~~unemployment~~primary ~~and~~market ~~money~~areas ~~supply~~of ~~fluctuations~~Grays Harbor, ~~also~~Pierce, ~~may~~Thurston, ~~adversely~~King, ~~affect~~Kitsap, ~~our profitability. Weakness in the global economy~~ and ~~global~~Lewis ~~supply~~counties ~~chain~~Washington, ~~issues~~could ~~have~~also ~~adversely~~slow ~~affected~~our ~~many~~growth, ~~businesses~~impair ~~operating in~~ our ~~markets~~customers’ ~~that~~ability ~~are~~to ~~dependent~~repay ~~upon~~loans, ~~international trade. Changes in agreements or relationships between the United States~~ and ~~other~~otherwise ~~countries~~negatively ~~may further~~ impact ~~these~~our ~~businesses and~~business, byfinancial ~~extension~~condition, ~~our~~and results of operations.

AWeakness ~~deterioration~~in the global economy, disruptions in ~~economic~~supply ~~conditions~~chains, and changes in ~~the~~U.S. ~~market~~trade ~~areas~~or weimmigration ~~serve~~policies ascould aadversely ~~result~~affect ofbusinesses ~~inflation,~~in aour ~~recession~~markets, ~~war,~~particularly ~~geopolitical~~those ~~conflicts,~~reliant ~~adverse~~on ~~weather~~international trade or ~~other~~key ~~factors~~industries ~~could~~such ~~result~~as inconstruction ~~the~~and ~~following~~manufacturing. ~~consequences~~These developments may exacerbate labor shortages, ~~any~~reduce ofproductivity, ~~which~~impair ~~could~~borrowers’ ~~have~~repayment acapacity, ~~materially~~increase ~~adverse~~costs, ~~impact~~delay onsupply ~~our~~chains, ~~business~~lower credit demand, ~~financial~~and ~~condition~~heighten operational and ~~results~~cybersecurity ofrisks, ~~operations:~~thereby negatively impacting our business and financial performance.

~~•loan~~A ~~delinquencies,~~deterioration ~~problem~~in ~~assets~~economic ~~and~~conditions ~~foreclosures~~in ~~may~~the ~~increase;~~market areas we serve could result in:

•weHigher ~~may~~loan ~~increase~~delinquencies, ~~our~~problem ~~ACL~~assets and foreclosures;

•~~the~~an ~~sale~~increase ofin ~~foreclosed~~our ~~assets may slow~~ACL;

•~~demand~~the ~~for~~slowing ~~our~~of ~~products~~foreclosed ~~and~~asset ~~services may decline possibly resulting in a decrease in our total loans, total deposits, or assets~~sales;

•~~collateral~~a ~~for loans made may~~ decline in ~~value,~~demand ~~exposing~~for usour toproducts ~~increased risk loans, reducing customers’ borrowing power,~~ and ~~reducing the value of assets and collateral associated with existing loans~~services;

•~~the~~a ~~net~~decline ~~worth~~in ~~and~~collateral ~~liquidity~~values oflinked ~~loan~~to ~~guarantors~~our ~~may decline~~loans, ~~impairing~~thereby ~~their~~diminishing ~~ability~~borrowing tocapacities ~~honor~~and ~~commitments~~asset values tied to ~~us;~~existing ~~and~~loans;

•~~reduction~~a decline in ~~our~~the ~~low-cost~~net orworth ~~noninterest-bearing~~and ~~deposits.~~liquidity of loan guarantors, which may impair their ability to honor commitments to us; and

~~A decline in local economic conditions may have~~ •a ~~greater~~reduction ~~effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loans are geographically diverse. Many of the loans~~ in our ~~portfolio~~low-cost are secured by real estate. Deterioration in the real estate markets where collateral for a mortgage loan is located could negatively affect the borrower's ability to repay the loan and the value of the collateral securing the loan. Real estate values are affected by various other factors, including changes in general or ~~regional~~non-interest-bearing ~~economic conditions, government rules or policies and natural disasters such as fires and earthquakes~~deposits. ~~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.~~

~~External~~Because ~~economic~~our ~~factors,~~loan ~~such~~portfolio asis more geographically concentrated than those of larger financial institutions, adverse changes in ~~monetary~~Washington’s ~~policy~~economy, ~~and~~including ~~inflation~~those ~~and~~tied ~~deflation~~to immigration policy shifts, may have ana ~~adverse~~greater ~~effect~~impact on our ~~business~~earnings and capital. Any deterioration in real estate markets could significantly affect borrowers’ repayment capabilities and collateral values. 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 ~~results~~profitability ofcould ~~operations~~be adversely affected.

~~Our~~Monetary ~~financial condition and results of operations are affected by credit policies of monetary authorities~~policy, ~~particularly the Federal Reserve. Actions by monetary and fiscal authorities, including the Federal Reserve, could lead to~~ inflation, deflation, orand other external economic ~~phenomena~~factors ~~that~~ could adversely ~~affect~~impact our financial performance. ~~Inflation has risen sharply since the end of 2021~~ and ~~throughout 2022 at levels not seen for over 40 years~~operations. ~~Inflationary pressures dissipated throughout fiscal 2024, with the annual inflation rate in the United States decreasing to 2.4% during September 2024 from its high of 7.0% in December 2021,~~

35Our financial performance and operations are influenced by monetary, fiscal, and trade policies, including those of the Federal Reserve, the U.S. Treasury, and other governmental authorities. Actions by these authorities may lead to inflation, deflation, changes in interest rates, or other economic conditions that could materially adversely affect our results of operations. Tariffs, supply-chain disruptions, or rising costs could reduce the ability of our clients, particularly small- and medium-sized businesses, to repay loans, negatively affecting credit quality and financial performance. Prolonged inflation may increase operational costs, including wages and benefits, while fluctuations in interest rates and the yield curve can significantly impact our net interest income. Interest rates may not move in alignment with inflation or deflation, adding uncertainty to the economic environment.

as reported by the U.S. Bureau of Labor Statistics. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. Virtually all our assets and liabilities are monetary in nature. As a result, interest rates tend to have a more significant impact on our performance than general levels of inflation or deflation. 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~~lending ~~for~~to individuals and builders, mainly focusing on residential property development. ~~Our~~These loans are ~~initiated~~often originated regardless of whether the ~~property used as~~ collateral property is ~~under~~subject to a sales contract. As of September 30, ~~2024~~2025, our construction loans totaled $~~219~~223.2089 million, comprising 14.52% of our overall loan portfolio. These loans were ~~allocated~~comprised asof ~~follows:~~ $~~172~~186.0075 million for residential real estate projects, $2921.4682 million for commercial projects, and $1715.7432 million for land development projects. ~~Notably,~~Approximately ~~approximately~~ $~~132~~130.1034 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. Factors like shifts in housing demand and unexpected building costs can significantly deviate actual results from estimates. Additionally, this type of lending often involves higher principal amounts and might be concentrated among a few builders. A downturn in housing or real estate markets could escalate delinquencies, defaults, foreclosures, and compromise collateral value.35

~~Some~~Construction ~~builders~~lending ~~have~~is ~~multiple~~inherently ~~outstanding~~risky ~~loans,~~due ~~meaning~~to ~~problems~~the ~~with~~difficulty ~~one~~in ~~loan~~accurately ~~pose~~estimating aproject ~~substantial~~costs ~~risk~~and ~~to us~~values. ~~Moreover,~~Volatility ~~certain~~in construction ~~loans~~costs, domarket ~~not~~demand, ~~require~~and ~~borrower~~regulatory ~~payments~~conditions ~~during~~can ~~the~~result ~~term,~~in ~~accumulating~~significant ~~interest~~deviations ~~into~~from ~~the~~initial ~~principal. Thus~~projections, ~~repayment~~complicating ~~depends~~the ~~heavily~~assessment onof total project ~~success~~funding needs and ~~the~~loan-to-value ~~borrower's~~ratios. ~~ability~~This totype ~~sell,~~of ~~lease,~~lending oroften ~~secure~~involves ~~permanent~~larger ~~financing,~~principal ~~rather~~amounts ~~than~~and ~~their~~may ~~ability~~be toconcentrated ~~repay~~among ~~principal~~a ~~and~~limited ~~interest~~number ~~directly~~of borrowers, increasing our exposure to individual credit relationships.

~~Misjudging~~A adownturn ~~project's~~in ~~value~~the ~~could~~housing ~~leave~~or usbroader ~~with~~real ~~inadequate~~estate ~~security~~markets ~~and~~could ~~potential~~lead ~~losses~~to ~~upon~~increased ~~completion.~~delinquencies, ~~Actively~~defaults, ~~monitoring~~and ~~construction loans~~foreclosures, ~~involving~~and ~~cost~~may ~~comparisons~~impair ~~and~~the ~~on-site~~value ~~inspections,~~of ~~adds~~the ~~complexity~~collateral ~~and~~securing ~~cost~~these loans. ~~Market~~In ~~interest~~cases ~~rate~~where ~~hikes~~borrowers ~~also~~have ~~might~~multiple ~~significantly~~outstanding ~~impact construction~~ loans, ~~affecting~~financial ~~end-purchaser~~distress ~~borrowing~~on ~~costs,~~one ~~potentially~~project ~~reducing~~may ~~demand~~adversely oraffect ~~the~~their ~~homeowner's~~ ability to ~~finance~~service ~~the~~other ~~completed home~~obligations. ~~Further~~Additionally, ~~properties~~certain ~~under~~ construction ~~are~~loans ~~hard~~do tonot ~~sell~~require ~~and~~periodic ~~often~~payments ~~need~~during ~~completion~~the ~~for~~construction ~~successful sales~~phase, ~~complicating~~resulting ~~problem~~in ~~loan~~interest ~~resolution.~~being ~~This~~capitalized ~~might~~into ~~require~~the ~~additional~~loan ~~funds or engaging another builder, incurring additional costs and market risks~~balance. ~~Moreover,~~Repayment ~~speculative~~of ~~construction~~these loans ~~pose~~is ~~additional~~therefore ~~risks,~~highly ~~especially~~dependent ~~regarding~~on ~~finding~~the ~~end-purchasers~~borrower’s ~~for~~ability ~~finished~~to ~~projects. As of September 30~~sell, ~~2024~~lease, ~~$11.50~~or ~~million~~refinance ofthe ~~our~~completed ~~construction portfolio consisted of speculative one- to four-family construction loans~~property.

WeIf ~~also~~we ~~offer~~misjudge ~~land~~the ~~loans~~value ~~for~~of ~~land~~a ~~acquisition,~~project ~~which~~or ~~can~~the beborrower’s ~~used~~ability ~~for~~to ~~building~~complete orand ~~recreational~~monetize ~~purposes.~~it, Aswe ofmay ~~September~~be ~~30,~~left ~~2024,~~with ~~land~~insufficient ~~loans~~collateral ~~accounted~~and ~~for~~incur ~~$29~~losses.37 ~~million,~~Construction orlending ~~1.9%~~also ofrequires ~~our~~active ~~total~~monitoring, ~~loan~~including ~~portfolio.~~cost ~~Loans~~tracking ~~for~~and ~~land~~site ~~development~~inspections, orwhich ~~future~~increases ~~construction~~operational ~~carry~~complexity ~~additional~~and ~~risks~~expense. ~~due~~Rising tointerest ~~longer~~rates ~~development~~may ~~periods,~~further ~~vulnerability~~impact tothe ~~real~~affordability ~~estate~~of ~~value~~completed ~~declines,~~homes ~~economic~~for ~~fluctuations delaying projects~~end-purchasers, ~~political~~potentially ~~changes~~reducing ~~affecting~~demand ~~land use,~~ and impairing the ~~collateral'~~borrower’s ~~illiquid~~ability ~~nature. During this extended financing-~~to~~-completion~~ ~~period, the collateral often generates no cash flow~~repay.

AsProperties ofunder ~~September~~construction ~~30,~~are ~~2024~~generally illiquid and may require completion before they can be sold, ~~all~~complicating ~~our~~resolution ~~construction~~strategies ~~and~~for ~~land~~problem loans. ~~were~~In ~~performing~~some ~~according~~cases, we may need to ~~their~~provide ~~terms~~additional funding or engage alternative builders, which introduces further cost and market risk. ASpeculative ~~significant~~construction ~~rise~~loans, inwhere ~~non~~no end-~~performing~~purchaser ~~construction~~is oridentified ~~land~~at ~~loans~~origination, ~~could~~present ~~materially~~heightened ~~impact~~risk. ~~our~~As ~~financial~~of ~~condition~~September ~~and~~30, ~~results~~2025, $10.75 million of ~~operations~~our construction portfolio consisted of speculative one- to four-family construction loans.

We also originate land loans for acquisition purposes, which may be intended for future development or recreational use. As of September 30, 2025, land loans totaled $35.95 million or 2.3% of our total loan portfolio. These loans carry additional risks due to extended development timelines, susceptibility to real estate market fluctuations, potential delays from economic or political factors, and the generally illiquid nature of land as collateral. During the financing-to-completion period, the collateral typically does not generate cash flow.

As of September 30, 2025, one construction totaling $553,000 was on non-accrual. A significant rise in non-performing construction or land loans could materially and adversely impact our financial condition and results of operations.

Our emphasis on commercial real estate lending may expose us to increased lending risks.

Our ~~current~~ business strategy includes ana ~~emphasis~~significant focus on commercial real estate lending. ~~This~~ While this type of lending ~~activity,~~may ~~while~~offer ~~potentially~~higher ~~more~~yields ~~profitable~~ than single-family residential lending, it is generally more sensitive to regional and local economic conditions, ~~making~~which can make loss levels more difficult to predict. ~~Collateral~~Evaluating ~~evaluation~~collateral and ~~financial~~analyzing ~~statement~~borrower ~~analysis~~financial ininformation ~~these~~for ~~types~~commercial ofreal estate loans requires a more detailed ~~analysis at the time of loan~~ underwriting and onongoing anmonitoring ~~ongoing~~compared ~~basis~~to residential lending. In addition, many of our commercial borrowers ~~have~~maintain ~~more~~multiple ~~than~~credit ~~one~~relationships ~~loan outstanding~~ with us. Consequently, an adverse development ~~with~~affecting ~~respect to~~ one loan or ~~one~~project ~~credit~~may ~~relationship~~impair ~~can~~the ~~expose~~borrower’s usability to arepay ~~significantly~~other ~~greater~~obligations, ~~risk~~increasing ofour ~~loss~~exposure to credit risk.

36At September 30, 2025, we had $610.69 million of commercial real estate loans, representing 38.8% of our total loan portfolio. 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.

At September 30, 2024, we had $599.22 million of commercial real estate loans, representing 39.6% of our total loan portfolio. 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. For example, if the cash flow from the borrower’s project is reduced as a result of leases not being obtained or renewed, the borrower’s ability to repay the loan may be impaired. Commercial real estate loans also expose a lender to greater credit risk than loans secured by residential real estate, ~~because~~due to the ~~collateral~~relative ~~securing~~illiquidity ~~these~~of ~~loans~~the ~~typically cannot be sold as easily as residential real estate~~collateral. In ~~addition,~~Many ~~many~~ of ~~our~~these ~~commercial real estate~~ loans are not fully amortizing and ~~contain~~include large balloon payments ~~upon~~at maturity~~. Such~~, ~~balloon~~which ~~payments~~ may require the borrower to ~~either~~refinance ~~sell~~ or ~~refinance~~sell the ~~underlying~~ property. toIf ~~make~~market ~~the~~conditions ~~payment~~are unfavorable, ~~which~~the borrower may ~~increase~~be unable to do so, increasing the risk of default ~~or non-payment~~.

AUnlike ~~secondary~~residential ~~market~~mortgage ~~for~~loans, ~~most types of~~ commercial real estate loans isgenerally ~~not~~lack ~~readily~~a ~~liquid,~~robust sosecondary wemarket, ~~have~~limiting ~~less~~our ~~opportunity~~ability to mitigate credit risk bythrough ~~selling~~loan ~~part or all our interest in these loans~~sales. As aIn ~~result~~the event of ~~these characteristics~~foreclosure, ifthe ~~we foreclose on a commercial real estate loan, our~~ holding period for ~~the~~commercial ~~collateral~~properties ~~typically~~ is typically longer ~~than~~as ~~for~~a ~~one-~~result toot ~~four-family residential mortgage loans because there are~~ fewer potential ~~purchasers of the collateral. Accordingly~~buyers, ~~charge-offs~~which ~~on commercial real estate loans~~ may beresult in larger ascharge-offs arelative ~~percentage~~to of the ~~total~~ principal ~~outstanding~~amount ~~than those incurred with our residential or consumer loan portfolios~~outstanding.

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.

At September 30, 2024, we had $139.00 million, or 9.2%, of total loans in commercial business loans. Our business loans are primarily made based on borrowers’ cash flow, with collateral as a secondary factor. However, the unpredictability of borrowers' cash flow and the fluctuating value of collateral, often in the form of accounts receivable, inventory, or equipment, present significant risks. Loans secured by accounts receivable are contingent on the borrower's ability to collect from their customers, while other collateral may depreciate, be challenging to assess, lack liquidity, and vary in value based on the success of the business. Additionally, economic fluctuations can significantly impact borrowers' repayment abilities, more so than loans secured by real estate.36

At September 30, 2025, we had $127.0 million, or 8.1%, of total loans in commercial business loans. These loans are primarily underwritten based on the borrower’s projected cash flows, with collateral serving as a secondary source of repayment. This reliance on cash flow introduces significant risk, as borrower revenues may be volatile and subject to economic, industry-specific, or operational disruptions.

Collateral for these loans often consists of accounts receivable, inventory, or equipment, which may fluctuate in value, be difficult to appraise, lack liquidity, or depreciate over time. Loans secured by accounts receivable are particularly vulnerable to the borrower’s ability to collect from their customers, while inventory and equipment may be subject to obsolescence or market shifts.

Economic downturns, supply chain disruptions, inflationary pressures, or other adverse conditions may impair borrowers’ ability to generate sufficient cash flow to service their obligations. Compared to loans secured by real estate, commercial business loans may be more susceptible to rapid deterioration in credit quality, and recovery upon default may be more limited due to the nature of the collateral.

Our business may be adversely affected by credit risk associated with residential property.

At September 30, ~~2024~~2025, $~~347~~368.0417 million, or 2223.94% of our total loan portfolio, was ~~secured~~comprised byof one- to four-family mortgage loans and home equity loans. This type of lending is ~~highly~~particularly sensitive to regional economic conditions, which ~~can~~may ~~affect~~impair borrowers'’ ability to meet their payment obligations and make loss levels difficult to predict. Factors such as higher interest rates, recessionary conditions, ~~lower~~declining real estate sales volumes and prices, and elevated unemployment may ~~lead~~contribute to higher loan delinquencies, problem assets, and reduced demand for our lending products, ~~and~~which ~~services,~~could adversely ~~impacting~~affect our capital, liquidity, and financial condition.

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 ifin ~~borrowers~~the event of borrower 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~~subsequent ~~home~~declines in property values. ~~Loans~~These ~~with~~loans ~~higher loan-to-value ratios~~ are more ~~sensitive~~vulnerable to ~~declining property values, resulting in a higher risk of~~ default and loss. ~~Additionally, for home equity lines of credit secured by second mortgages, recovering loan proceeds~~ in ~~the~~a ~~event~~declining ~~of default may be difficult unless we repay the first mortgage, which may not be justified by the property’s value~~market. ~~Consequently, we may experience higher rates of delinquency, default, and losses on our residential loans.~~

Additionally, home equity lines of credit secured by second mortgages present heightened risk. In the event of default, recovery of loan proceeds may be limited unless the first mortgage is repaid, which may not be economically justified based on the property’s current value. As a result, we may experience higher rates of delinquency, default, and credit losses within our residential loan portfolio, which could materially and adversely impact our financial performance.

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. 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.

To address these risks, we maintain an ACL on loans, which is a reserve established through a provision for credit losses on loans charged against operating income. We believe the ACL is appropriate to provide for expected losses in our loan portfolio. 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.

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. For loans that do not share similar risk characteristics and cannot be evaluated on a collective basis, we evaluate the loan individually using the present value of the expected future cash flows or the fair value of the underlying collateral.

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. 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

Tothrough ~~address~~additional ~~these risks~~provisions, ~~we maintain an allowance for credit losses on loans,~~ which iswould areduce ~~reserve~~income. ~~established~~Management ~~through~~also arecognizes ~~provision~~that ~~for~~significant ~~credit~~growth ~~losses~~in onloan ~~loans charged against operating income~~portfolios, ~~that~~new ~~we believe is appropriate to provide for expected losses in our~~ loan ~~portfolio.~~products ~~The~~and ~~appropriate~~the ~~level~~refinancing of ~~the~~existing ~~allowance~~loans ofmay ~~credit~~result ~~losses~~in isunseasoned ~~determined~~portfolios bythat ~~management~~do ~~through~~not ~~periodic~~perform ~~comprehensive~~in ~~reviews~~line ~~and~~with ~~consideration~~historical ofor ~~several~~projected ~~factors~~trends, ~~including,~~increasing ~~but~~the ~~not~~risk ~~limited~~that to our ~~collective~~ACL ~~loss~~may ~~reserve,~~be ~~for~~insufficient. ~~loans~~Deterioration ~~evaluated~~in oneconomic aconditions, ~~pool~~new ~~basis~~information ~~with~~regarding ~~similar~~existing ~~risk~~loans, ~~characteristics~~identification ~~based on our life~~ of ~~loan~~additional ~~historical~~problem ~~default~~loans, and ~~loss~~other ~~experience, certain macroeconomic~~ factors, ~~reasonable~~both within and ~~supportable~~outside ~~forecasts,~~of ~~regulatory~~our ~~requirements~~control, ~~management’s~~may ~~expectations~~also ofrequire ~~future~~an ~~events~~increase ~~and~~in ~~certain~~the ~~qualitative factors~~ACL.

~~The~~Bank ~~ACL~~regulatory isagencies analso ~~estimate~~periodically ofreview ~~the~~our ~~expected~~ACL ~~credit~~and ~~losses~~may onrequire ~~financial~~us ~~assets~~to ~~measured~~increase atthe ~~amortized~~provision ~~cost.~~or ~~The~~recognize ~~ACL~~further ischarge-offs ~~evaluated~~based ~~and calculated~~ on atheir ~~collective~~judgment. ~~basis~~If ~~for~~charge-offs ~~those~~exceed ~~loans~~the ~~which~~ACL, ~~share~~we ~~similar~~may ~~risk~~need ~~characteristics.~~additional ~~For~~provisions, ~~loans~~which ~~that~~would doreduce ~~not~~net ~~share~~income ~~similar~~and ~~risk~~could ~~characteristics~~materially and ~~cannot~~adversely beaffect ~~evaluated~~our onfinancial ~~a collective basis~~condition, ~~the~~results ~~Company will evaluate the loan individually using the present value~~ of ~~the~~operations, ~~expected~~liquidity, ~~future~~and ~~cash flows or the fair value of the underlying collateral~~capital.

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. 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. 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. 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.

Bank regulatory agencies also periodically review our allowance for credit losses and may require an increase in the provision for possible credit losses or the recognition of further loan charge-offs based on their judgment about information available to them at the time of their examination. If charge-offs in future periods exceed the allowance for credit losses, we may need additional provisions to increase the allowance for credit losses. Any increases in the allowance for credit losses will result in a decrease in net income and may have a material adverse effect on our financial condition, results of operations, liquidity and capital.

If our non-performing assets increase, our earnings will be adversely affected.

At September 30, ~~2024~~2025, our non-performing assets (which consisted solely of non-accruing loans, non-accrual investment securities, and OREO) were $34.9466 million, or 0.223% of total assets. Our non-performing assets adversely affect our net income in various ways:

•We do not record interest income on non-accrual loans or non-performing investment securities, except on a cash basis when the collectability of the principal is not in doubt.

•We must recognize expected credit losses through a current period charge to the provision for credit losses.

•Non-interest expense increases if we must write down the value of OREO properties to reflect market declines.

•Non-interest income decreases when we recognize other-than-temporary impairment on non-performing investment securities.

•There are legal fees and carrying costs (such as taxes, insurance, and maintenance) associated with OREO.

•Managing non-performing assets requires significant management attention, diverting resources from more profitable activities.

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 ~~impacting~~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.

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~~continue ~~look~~to ~~for and~~ evaluate potential acquisition opportunities. 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 may have an~~

The consummation of any future acquisitions may dilute shareholder value or adversely affect our operating results during the integration period. 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.

Acquiring banks, bank branches or businesses involves risks commonly associated with acquisitions, including:

•We may be exposed to potential asset quality issues or unknown or contingent liabilities of the banks, businesses, assets, and liabilities we acquire. 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. 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. 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. If integration efforts are unsuccessful, acquisitions may not be accretive to earnings in the short or long term.

adverse effect upon our operating results while the operations of the acquired business are being integrated into our operations. In addition, once integrated, acquired operations may not achieve levels of profitability comparable to those achieved by our existing operations, or otherwise perform as expected. 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. Acquiring banks, bank branches or businesses involves risks commonly associated with acquisitions, including:

•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. This integration process is complicated and time consuming and can also be disruptive to the customers of the acquired business. If the integration process is not conducted successfully and with minimal adverse effect on the acquired business and its customers, we may not be able to realize the anticipated economic benefits of the acquisition within the expected time frame, and we may lose customers or employees of the acquired business. 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. 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. Ultimately, we would expect our efficiency ratio to improve; however, if we are not successful in our integration process, this may not occur, and our acquisition or branching activities may not be accretive to earnings in the short or long-term.

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. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and the policies of ~~various~~ governmental and regulatory agencies ~~and~~, inparticularly ~~particular,~~ the Federal Reserve. ~~Since~~Following ~~March~~a ~~2022,~~period of monetary easing that began in ~~response~~the tosecond ~~inflation~~half of 2024, the Federal Open Market Committee ("FOMC") of the Federal Reserve ~~has~~reduced ~~increased~~ the target range for the federal funds rate by ~~475~~a ~~basis~~cumulative ~~points,~~125 ~~including 50~~ basis points ~~reduction~~through ~~during~~September 2025, bringing the ~~2024~~target ~~fiscal~~range ~~year,~~ to ~~a range of~~ 4.7500% to 54.0025%. asOn ~~of September 30~~October 29, 2025, ~~2024.~~subsequent ~~The~~to ~~FOMC~~quarter-end, ~~has reduced~~ the ~~target~~FOMC ~~federal~~announced ~~funds~~a ~~rate~~further ~~by an additional~~ 25 ‑basis‑point ~~points~~cut, inbringing ~~November~~the oftarget ~~2024~~range to ~~the~~3.75% ~~target~~to ~~federal~~4.00%. ~~funds~~These ~~rate~~changes ~~and~~have ~~has~~modestly ~~not~~lowered ~~ruled~~funding ~~out~~costs ~~future decreases~~ but ~~hinted~~have ~~that~~also ~~rates~~contributed ~~will~~to ~~remain~~narrower ~~higher~~loan ~~for~~yields ~~longer.~~and Ifreinvestment ~~the~~risk ~~FOMC~~within ~~further decreases~~ the ~~targeted~~investment ~~federal~~securities ~~funds~~portfolio. Further rate, ~~overall~~decreases ~~interest~~could ~~rates will likely decrease, which may~~ negatively impact our net interest income, ~~but~~although ~~could~~they ~~positively~~may ~~impact~~benefit ~~both~~ the housing market by increasing refinancing activity and new home purchases ~~and the U~~.~~S. economy.~~

We principally manage interest rate risk by managing ~~our~~the volume and mix of our earning assets and funding liabilities. Changes in monetary policy, including ~~changes in~~ interest ~~rates~~rate shifts, ~~could~~may ~~influence~~affect: ~~not~~(1) ~~only~~ the interest we ~~receive~~earn on loans and investments and the ~~amount of~~ interest we pay on deposits and borrowings,; ~~but these changes could also affect:~~ (12) our ability to originate and/or sell loans and ~~obtain~~attract deposits; (23) the fair value of our financial assets and liabilities, which ~~could~~may ~~negatively~~ impact shareholders’ equity, and our ability to realize gains from the sale of such assets; (34) our ~~ability~~competitiveness toin ~~obtain~~attracting and ~~retain~~retaining deposits inrelative ~~competition~~to ~~with~~ other ~~available~~ investment alternatives; (45) the ability of our borrowers to repay adjustable or variable rate loans; and (56) the average duration of our investment securities ~~portfolio~~ and other interest-earning assets. 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. Earnings could also be adversely affected if the interest rates received on loans and other investments decline more rapidly than the interest rates paid on deposits and other borrowings. In a changing interest rate environment, we may not be able to manage this risk effectively. If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially affected.

~~Changes~~If inthe interest rates ~~could~~paid ~~also have a negative impact~~ on ~~our~~deposits ~~results of operations by reducing the ability of borrowers to repay their current loan obligations or by reducing our margins~~ and ~~profitability. Net~~borrowings ~~interest~~increase ~~margin~~at isa ~~the~~faster ~~difference~~rate ~~between~~than the ~~yield~~interest wereceived ~~earn~~ on ~~interest-earning~~loans ~~assets~~ and ~~the rate we pay for deposits and~~ other ~~sources~~investments, ~~of funding. Changes in interest rates (up or down) could adversely affect~~ our net interest ~~margin~~income, and, astherefore ~~a result~~earnings, ~~our~~could ~~net~~be ~~interest~~adversely ~~income~~affected. ~~Although~~ ~~the~~Similarly, ~~yield~~if werates ~~earn~~earned ondecline ~~our~~more ~~interest-earning~~rapidly ~~assets~~than ~~and~~rates paid, our ~~funding~~margins ~~costs~~may ~~tends~~compress. toIn ~~move~~a involatile ~~the~~rate ~~same~~environment, ~~direction~~we inmay ~~response~~not be able to ~~changes~~manage inthis ~~interest~~risk ~~rates~~effectively, ~~one~~which ~~can~~could ~~rise~~materially oraffect ~~fall~~our ~~faster~~business, ~~than~~financial ~~the other~~condition, ~~causing~~and ~~our~~results ~~net interest margin to expand or contract. Changes in the slope~~ of ~~the~~ operations.

39Interest rate changes may also impair borrowers’ ability to repay existing obligations or reduce our margins and profitability. Our net interest margin, the difference between the yield on interest-earning assets and the cost of funding, may be negatively impacted if asset yields and funding costs move at different speeds. A flattening or inverted yield curve, where short-term rates approach or exceed long-term rates, may compress our margin due to the shorter duration of our liabilities relative to our assets. Also, falling interest rates may lead to increased prepayments of loans and mortgage-backed securities, requiring us to reinvest proceeds into lower-yielding assets, which could reduce income. A sustained increase or decrease in market interest rates could adversely affect our earnings.

~~"yield~~As ~~curve,"~~is or the ~~spread~~case ~~between~~with ~~short-term~~many ~~and~~financial ~~long-term~~institutions, ~~interest~~our ~~rates~~emphasis on increasing core deposits, ~~could~~those ~~also~~deposits ~~reduce~~bearing ~~our~~no ~~net~~or ~~interest~~a ~~margin. Normally,~~relatively ~~the~~low ~~yield~~rate ~~curve~~of isinterest ~~upward~~with ~~sloping~~no stated maturity, ~~meaning~~has ~~short-term~~resulted ~~rates~~in ~~are~~our ~~lower~~having ~~than~~a ~~long-term~~significant ~~rates. Because~~amount ~~our~~of ~~liabilities~~these ~~tend~~deposits towhich behave a shorter in duration than our assets,. At ~~when~~September ~~the~~30, ~~yield~~2025, ~~curve~~we ~~flattens~~had or$406.99 ~~even~~million ~~inverts,~~in wecertificates ~~could~~of ~~experience~~deposit ~~pressure~~that onmature ~~our~~within ~~net~~one ~~interest~~year ~~margin~~and as$1.27 ~~our~~billion ~~cost~~in ofnon-interest ~~funds~~bearing, ~~increases~~NOW ~~relative~~checking, tosavings ~~the~~and ~~yield~~money wemarket ~~can~~accounts. Retaining ~~earn~~these ondeposits ~~our~~in ~~assets. Also,~~a ~~interest~~rising rate ~~decreases~~environment ~~can~~may ~~lead~~require us to ~~increased~~offer ~~prepayments~~higher ofrates, ~~loans~~increasing ~~and~~our ~~mortgage-backed~~cost ~~securities~~of asfunds. ~~borrowers~~In ~~refinance~~addition, ~~their~~a ~~loans~~substantial toamount ~~reduce~~of ~~borrowing~~our ~~costs. Under~~residential ~~these~~mortgage ~~circumstances~~loans weand ~~are~~home ~~subject~~equity tolines ~~reinvestment~~of ~~risk~~credit ashave weadjustable ~~may~~interest ~~have~~rates. toAs ~~redeploy~~a ~~such~~result, ~~repayment~~these ~~proceeds~~loans ~~into~~may ~~lower~~experience ~~yielding~~a ~~investments,~~higher ~~which~~rate ~~would~~of ~~likely~~default ~~negatively~~in ~~impact~~a ~~our~~rising ~~income~~interest rate environment.

AChanges ~~sustained increase or decrease~~ in ~~market~~ interest rates ~~could~~also ~~adversely~~ affect ~~our earnings. As is~~ the ~~case~~fair ~~with~~value ~~many financial institutions, our emphasis on increasing core deposits, those deposits bearing no or a relatively low rate~~ of ~~interest with no stated maturity, has resulted in~~ our ~~having~~investment asecurities ~~significant~~available ~~amount~~for ~~of these deposits which have a shorter duration than our assets~~sale. At ~~September 30~~Generally, ~~2024, we had $313.82 million in certificates of deposit that mature within one year and $1.28 billion in non~~fixed-~~interest~~rate ~~bearing,~~securities ~~NOW~~decline ~~checking, savings and money market accounts. We would incur a higher cost of funds to retain these deposits~~ in avalue ~~rising~~when interest ~~rate~~rates ~~environment~~rise. IfUnrealized ~~the~~gains ~~interest~~and ~~rates~~losses ~~paid~~ on ~~deposits~~these ~~and~~securities ~~other~~are ~~borrowings~~reported ~~increase~~as at a ~~faster~~separate ~~rate~~component ~~than~~of ~~the interest rates received on loans and other investments~~equity, ~~our~~ net ~~interest~~of ~~income~~tax, ~~and~~through ~~therefore~~accumulated ~~earnings,~~other ~~could~~comprehensive beincome ~~adversely~~(loss) ~~affected~~("AOCI"). InRising ~~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~~reduce athe ~~higher~~fair ~~rate~~value of ~~default~~these insecurities aand ~~rising~~negatively ~~interest~~impact ~~rate~~shareholders’ ~~environment~~equity.

~~Changes~~Any insubstantial, ~~interest~~unexpected ~~rates~~or ~~also~~prolonged ~~affect~~change ~~the~~in ~~value~~market ofinterest ~~our~~rates ~~investment~~could ~~securities~~have ~~available~~a ~~for~~material ~~sale. Generally,~~adverse ~~the~~effect ~~fair~~on ~~value~~our offinancial ~~fixed-rate~~condition, ~~securities~~liquidity ~~fluctuates~~and ~~inversely~~results ~~with~~of ~~changes in interest rates~~operations. ~~Unrealized~~ ~~gains~~Also, ~~and~~our ~~losses~~interest onrate ~~investment~~risk ~~securities~~modeling ~~available~~techniques ~~for~~and ~~sale~~assumptions ~~are~~may ~~reported~~not asfully acapture ~~separate~~the ~~component~~impact of ~~equity,~~actual ~~net~~interest ofrate ~~tax. Increases~~changes inon ~~the~~our ~~fair~~balance ~~value~~sheet ofor ~~investment~~projected ~~securities~~operating ~~available~~results. ~~for~~For ~~sale~~further ~~resulting~~discussion ~~from~~of ~~decreases~~how changes in interest rates could ~~have~~impact aus, ~~positive~~see ~~effect~~"Part onII, ~~stockholders'~~Item ~~equity~~7A. ~~Stockholders'~~Quantitative ~~equity,~~and ~~specifically~~Qualitative ~~accumulated~~Disclosures ~~other~~About ~~comprehensive~~Market ~~income (loss) (~~Risk"~~AOCI"),~~ isfor ~~increased~~additional orinformation ~~decreased~~about ~~by the amount of change in the estimated fair value of~~ our ~~securities available for sale, net of deferred income taxes. Increases in~~ interest ~~rates~~rate ~~generally~~risk ~~decrease the fair value of securities available for sale, which adversely impacts stockholders' equity~~management.

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. For further discussion of how changes in interest rates could impact us, see "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for additional information about our interest rate risk management.

Our securities portfolio may be negatively impacted by fluctuations in market value and interest rates.

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~~. These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by, or other adverse events affecting, the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets. ~~The~~We ~~Company~~regularly ~~analyzes~~analyze 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. 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. 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. 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.

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-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. 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. 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.

An increase in interest rates, change in the programs offered by Freddie Mac or our ability to qualify for their programs may reduce our mortgage revenues, which would negatively impact our non-interest income.

The sale of residential mortgage loans to Freddie Mac has historically provided a significant portion of our noninterest income. Any future changes in its program, including our eligibility to participate in such program, the criteria for loans to be accepted or laws that significantly affect the activity of Freddie Mac could, in turn, materially adversely affect our results of operations if we could not find other purchasers. Mortgage banking is generally considered a volatile source of income because it depends largely on the level of loan volume which, in turn, depends largely on prevailing market interest rates. In a rising or higher interest rate environment, the demand for mortgage loans, particularly refinancing of existing mortgage loans, tends to fall and our originations of mortgage loans may decrease, resulting in fewer loans that are available to be sold. This would result in a decrease in mortgage revenues and a corresponding decrease in non-interest income. In addition, our results of operations are affected by the amount of non-interest expense associated with our loan sale activities, such as salaries and employee benefits, occupancy, equipment and data processing expense and other operating costs. 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. In addition, although we sell loans to Freddie Mac or into the secondary market without recourse, we are required to give customary representations and warranties about the loans we sell. If we breach those representations and warranties, we may be required to repurchase the loans and we may incur a loss on the repurchase.

decline in loan originations. In addition, although we sell loans to Freddie Mac or into the secondary market without recourse, we are required to give customary representations and warranties about the loans we sell. If we breach those representations and warranties, we may be required to repurchase the loans and we may incur a loss on the repurchase.

Risks Related to Laws and Regulations

The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.

The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors (i) total reported loans for construction, land development and other land represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm non-residential properties, loans for construction, land development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. 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~~2025 represented ~~290~~283.7405% of total capital. While we believe that we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us.

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. These regulations may sometimes impose significant limitations on our operations. ~~These~~Along ~~regulations, along~~ with existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations, ~~control~~they ~~the~~govern ~~methods~~how ~~by which~~ financial institutions conduct business, implement strategic initiatives, ~~and~~comply with tax ~~compliance~~obligations, and ~~govern~~report financial ~~reporting and disclosures~~results. These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time. 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. 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. In addition, legislation is currently pending in Congress that would allow banks and financial institutions to serve marijuana businesses in states where it is legal without any risk of federal prosecution. At September 30, 2024, approximately 1.1% of our total deposits and a portion of our service charges from deposits are from legal marijuana-related businesses. Any adverse change in this FinCEN guidance, any new regulations or legislation, any 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 negative impact on our non-interest income, as well as the cost of our operations, increasing our cost of regulatory compliance and of doing business and/or otherwise affect us, which may materially affect our profitability.

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.

For example, the U.S. 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. Pending or proposed federal legislation, such as the SAFER Banking Act (formerly the SAFE Banking Act), has been reintroduced in Congress but has not been enacted as of September 30, 2025. If passed, it could provide additional protections to banks serving cannabis businesses in legal states. Recent Washington State regulatory developments, including limits on retail cannabis licenses per owner, updated reporting requirements, and ongoing rulemaking by the Washington Liquor & Cannabis Board, could affect the financial profile and operations of cannabis-related businesses. At September 30, 2025, approximately 0.9% of our total deposits and a portion of our service charges from deposits were from legal cannabis-related businesses. Any adverse change to FinCEN guidance, continued failure of federal legislation to pass, new regulatory requirements, or changes in federal or state regulatory policy or interpretation could negatively affect our non-interest income, increase our operating costs, and materially impact our profitability.

In addition, evolving regulatory expectations regarding anti-money laundering compliance, cybersecurity, and capital and liquidity requirements could further increase our costs of operations and compliance. State regulations governing financial institutions, including those related to cannabis banking and fintech activities, are also subject to change, which may have additional implications for our business.

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~~implement programs to prevent ~~financial~~their ~~institutions~~operations from being used for money laundering, ~~and~~ terrorist ~~activities. Failure~~financing, ~~to comply with these regulations could result in fines~~ or ~~sanctions~~other ~~and~~illicit ~~limit our ability to get regulatory approval of acquisitions~~activities. ~~While~~Financial weinstitutions ~~have~~must ~~developed~~file ~~policies~~suspicious ~~and~~activity ~~procedures~~reports ~~designed to assist in compliance~~ with ~~these~~the ~~laws~~U.S. ~~and~~Treasury’s ~~regulations,~~Office noof ~~assurance~~Financial ~~can~~Crimes beEnforcement ~~given~~Network ~~that these policies~~ and establish procedures ~~will~~to beverify ~~effective~~the inidentity ~~preventing~~of ~~violations~~customers ofseeking ~~these~~to ~~laws~~open ~~and~~new ~~regulations~~financial accounts. Failure to maintain ~~and~~or implement ~~adequate~~effective ~~programs to combat~~ anti-money laundering and counter-terrorist financing programs could ~~also~~result ~~have~~in ~~serious~~fines, ~~reputational~~sanctions, ~~consequences~~regulatory ~~for~~investigations, uslimitations on strategic transactions, or reputational harm. Any of these ~~results~~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.

~~Climate~~The ~~change~~effects ~~continues~~of toclimate bechange acontinue ~~pressing~~to ~~concern,~~raise ~~prompting~~significant ~~heightened~~concerns ~~awareness~~about ~~and action on a global scale. Efforts include international agreements such as~~ the ~~Paris~~state ~~Agreement,~~of ~~with~~ the ~~United~~environment. ~~States rejoining~~However, ~~and~~under ~~ongoing initiatives at various governmental levels to address climate-related issues. Under~~ the current administration, ~~additional~~federal ~~measures~~policy ~~are~~has ~~anticipated,~~shifted ~~potentially~~to ~~impacting~~reduce ~~banks'~~emphasis ~~risk~~on ~~management~~climate ~~practices,~~change ~~stress~~initiatives ~~testing, credit portfolio concentrations,~~ and ~~investment~~environmental ~~strategies~~regulations. ~~The~~This ~~lack~~includes ofscaling ~~empirical~~back ~~data~~federal ~~makes~~involvement itin ~~challenging~~international toagreements ~~predict~~like the ~~precise~~Paris ~~financial~~Agreement ~~impact~~and ofeasing ~~climate~~regulatory ~~change,~~pressures ~~though~~on ~~its physical effects~~businesses, ~~such~~including ~~as more frequent weather disasters~~banks, ~~could~~to ~~directly~~address ~~affect~~climate-related ~~our~~risks. ~~real~~Legislative ~~estate collateral~~ and ~~loan~~regulatory ~~portfolios.~~proposals ~~Inadequate~~aimed ~~insurance~~at ~~coverage~~combating ~~for borrowers may compound these risks, impacting our financial condition. Furthermore,~~ climate change's ~~broader~~may ~~economic~~face ~~effects~~increased ~~could~~scrutiny ~~adversely~~or ~~affect~~reduced ~~our~~priority ~~customers~~under ~~and~~this ~~the communities we serve, potentially impacting our financial performance~~administration.

OnThe ~~March~~lack 6,of ~~2024,~~empirical data regarding the ~~SEC~~financial ~~implemented~~and ~~new~~credit risks posed by climate~~-related~~ ~~disclosure~~change ~~rules~~still ~~for~~makes ~~U.S.~~it ~~public~~difficult ~~companies~~to predict its specific impact on our financial condition and ~~foreign~~results ~~private~~of ~~issuers~~operations. ~~These~~However, ~~rules~~the ~~introduce~~physical ~~extensive~~effects ~~disclosure~~of ~~requirements~~climate change, ~~increasing~~such ~~reporting~~as ~~costs,~~more ~~risks,~~frequent and ~~complexity.~~severe ~~Challenges~~weather ~~include~~disasters, ~~short~~could ~~compliance~~directly ~~timelines,~~affect ~~interpretive~~us. ~~issues~~For instance, ~~legal~~such ~~liabilities,~~events ~~and~~may ~~global~~damage ~~regulatory~~real ~~overlaps~~property securing loans in our portfolios or reduce the value of that collateral. ~~Lawsuits~~If ~~contesting~~our borrowers' insurance is insufficient to cover these ~~rules~~losses ~~add~~or ~~further~~if ~~uncertainty.~~insurance ~~However~~becomes unavailable, onthe ~~March~~value 15of the collateral securing our loans could be negatively affected, ~~2024~~potentially impacting our financial condition and results of operations. Moreover, ~~the~~climate ~~Fifth~~change ~~Circuit~~may ~~granted~~adversely anaffect ~~administrative~~regional ~~stay~~and local economic activity, ~~temporarily~~harming ~~halting~~our customers and the ~~implementation~~communities in which we operate. Regardless of changes in federal policy, the ~~SEC's~~effects of climate ~~rules~~change and their unknown long-term impacts could still have a material adverse effect on our financial condition and results of operations.

Risks Related to Cybersecurity, Third- Parties and Technology

As of September 30, ~~2024~~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.

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~~innovation, ~~and~~including todigital ~~use~~banking ~~technology~~platforms, toartificial ~~satisfy~~intelligence, and ~~grow~~data ~~customer~~analytics, ~~demand for our products~~ and ~~services and~~ to ~~create~~use ~~additional~~technology ~~efficiencies in our operations. Some of our competitors have substantially greater resources~~ to ~~invest~~satisfy ~~in technological improvements~~ and ~~will~~grow becustomer ~~able~~demand tofor ~~invest~~our ~~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. As a result~~, ~~our~~enhance ~~ability~~the tocustomer ~~effectively compete to retain or acquire new business may be impaired~~experience, and ~~our~~to ~~business,~~create ~~financial~~additional ~~condition~~efficiencies orin ~~results of operations may be adversely affected.~~

our operations. 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 emerging technologies or digital solutions, maintain cybersecurity, prevent system failures, or manage operational disruptions associated with technology, or successfully market these innovations to our customers. 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~~prevent the risk of a cyber-attack. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. ~~Although~~ weOur ~~take protective measures and endeavor to modify them as circumstances warrant, the security of our computer~~ systems, software, and networks ~~may~~are be vulnerable to breaches, fraudulent or unauthorized access, denial or degradation of service attacks, misuse, computer viruses, malware or other malicious code, ~~and~~artificial ~~cyber~~intelligence-driven attacks, ~~that~~and ~~could have a security impact~~cyber-attacks. If ~~one~~any ~~or more~~ of these events occur, ~~this~~they could ~~jeopardize~~compromise our or our ~~customers'~~clients’ confidential ~~and other~~ information ~~processed and stored in~~, ~~and~~disrupt ~~transmitted through~~operations, ~~our computer systems and networks,~~ or ~~otherwise~~harm ~~cause interruptions or malfunctions in~~ our ~~operations~~clients or ~~the operations of our customers or~~ counterparties. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured or not fully covered through any insurance maintained by us. We could also suffer significant reputational damage.

Security breaches in our internet banking activities ~~could~~present ~~further~~additional ~~expose~~risks usof ~~to possible~~ liability and ~~damage~~reputational ~~our reputation~~harm. 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~~increases ~~result~~the inlikelihood 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. Any compromise of our security could deter customers from using our internet banking services that involve the transmission of confidential information. ~~Although~~ weAny ~~have~~compromise ~~developed~~or ~~and~~breach ~~continue~~of toour ~~invest~~security measures could result in ~~systems~~losses to us or our customers, the loss of business and/or ~~processes~~customers, ~~that~~damage ~~are~~to ~~designed~~our reputation, additional expenses, disruptions to ~~detect~~our ~~and~~operations, ~~prevent~~limitations ~~security~~on ~~breaches~~our ~~and~~ability ~~cyberattacks~~to grow our online services or other businesses, increased regulatory scrutiny or penalties, or exposure to civil litigation and ~~periodically~~potential ~~test~~financial liability. Any of these events could have a material adverse effect on our ~~security~~business, ~~these~~financial condition, and results of operations.

42Our security measures may not protect us from system failures or interruptions. Our business depends on the continuous and reliable functioning of our information technology infrastructure, including systems used for data processing, transaction execution, customer communications, and other critical operations. Failures, interruptions, or delays, whether caused by hardware or software defects, human error, cyber-attacks, utility or telecommunications outages, or other disruptions, can impair our ability to process transactions, deliver products and services, and maintain accurate records. We also rely on third-party vendors for significant data processing and operational functions, and their systems and controls are outside our direct oversight. Breakdowns, service interruptions, capacity constraints, cyber-attacks, security breaches, or other operational failures at these providers, as well as failures in communication networks or connectivity, can disrupt our operations and limit our ability to serve customers. Identifying and transitioning to alternate vendors, if available, requires substantial cost, time, and operational effort. Processing customer information through additional vendors and their personnel further increases exposure to information-security, privacy, and operational risks. Any of these failures or interruptions may result in operational delays, financial losses, customer harm, regulatory scrutiny, penalties, reputational damage, and other adverse consequences that may materially affect our business, financial condition, and results of operations.

~~precautions~~We ~~may~~cannot ~~not~~assure ~~protect~~you ~~our~~that ~~systems~~these ~~from~~failures, ~~compromises~~interruptions, or breaches ofwill ~~our~~not ~~security~~occur ~~measures,~~or ~~and~~that ~~could~~they ~~result~~will inbe ~~losses~~adequately toaddressed by us or ~~our~~by ~~customers,~~the ~~our~~third ~~loss~~parties on which we rely. We may not be insured against all types of ~~business~~losses associated with these events, and~~/or~~ ~~customers~~available coverage may be inadequate. If a third-party service provider experiences financial, ~~damage~~operational, toor ~~our~~technological ~~reputation~~difficulties, ~~the~~or ~~incurrence~~if ofthere ~~additional~~is ~~expenses,~~any other disruption toin our ~~business~~relationship with that provider, ~~our~~we ~~inability~~may be required to ~~grow~~identify ~~our~~alternative ~~online~~sources ~~services~~of service, which may not be available on comparable terms or ~~other~~without ~~businesses,~~significant additional ~~regulatory~~resources. ~~scrutiny~~Any orsuch ~~penalties,~~occurrence ormay damage our ~~exposure~~reputation, toresult ~~civil~~in ~~litigation~~a loss of customers and ~~possible~~business, ~~financial~~increase regulatory scrutiny, or expose us to legal liability, any of which ~~could~~may have a material adverse effect on our business, financial condition, and results of ~~operation~~operations.

Our security measures may not protect us from system failures or interruptions. While we have established policies and procedures to prevent or limit the impact of systems failures and interruptions, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. While the Company selects third-party vendors carefully, it does not control their actions. If our third-party providers encounter difficulties, including those resulting from breakdowns, or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher transaction volumes, cyber-attacks and security breaches or if we otherwise have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected, and our ability to deliver products and services to our customers and otherwise conduct business operations could be adversely impacted. Replacing these third-party vendors could also entail significant delay and expense. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

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 may not be insured against all types of losses as a result of third-party failures and insurance coverage may be inadequate to cover all losses, resulting from breaches, systems failures or other disruptions. 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. 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.

Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.

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. 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. ~~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.~~42

WeWhile ~~rely~~we onhave ~~certain~~policies ~~external vendors to provide products~~ and ~~services~~procedures ~~necessary~~designed to ~~maintain~~prevent ~~our~~such ~~day-to-day operations. These third-party vendors are sources of operational and informational security risks to us~~losses, ~~including~~there ~~risks~~can associated with operational errors, information system failures, interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information. If these vendors encounter any of these issues, or if we have difficulty communicating with them, we could be ~~exposed~~no toassurance ~~disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk~~ that ~~could~~such ~~have~~losses awill ~~material~~not ~~adverse effect on our business and, in turn, our financial condition and results of operations~~occur.

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

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

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

Risks Related to Accounting Matters

The Company’s reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates, which, if incorrect, could cause unexpected losses in the future.

The Company’s accounting policies and methods are fundamental to how the Company records and reports its financial condition and results of operations. The Company’s management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with GAAP and reflect management’s judgment regarding the most appropriate manner to report 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.

43Certain accounting policies, most notably the accounting for expected credit losses, are critical to presenting the Company’s financial condition and results of operations. 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, 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.

Certain accounting policies, most notably the accounting for credit losses, are critical to presenting the Company’s financial condition and results of operations. 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.

We may experience future goodwill impairment, which could reduce our earnings.

In accordance with GAAP, we record assets acquired and liabilities assumed in a business combination at their fair value with the excess of the purchase consideration over the net assets acquired resulting in the recognition of goodwill. As a result, acquisitions typically result in recording goodwill. We perform a goodwill evaluation at least annually to test for goodwill impairment. Our test of goodwill for potential impairment is based on a qualitative assessment by management that takes into consideration macroeconomic conditions, industry and market conditions, cost or margin factors, financial performance and share price. Our evaluation of the fair value of goodwill involves a substantial amount of judgment. If our judgment was incorrect, or if events or circumstances change, and an impairment of goodwill was deemed to exist, we would be required to record a non-cash charge to earnings in our financial statements during the period in which such impairment is determined to exist. 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. Periodic changes to such rules may change the treatment and recognition of critical financial line items and affect our profitability.

Our business operations are significantly influenced by the extensive body of accounting regulations in the United States, which are subject to periodic updates and changes. Regulatory bodies, including the FASB and the SEC, periodically issue new guidance, ~~altering~~or alter existing accounting rules and reporting requirements, which can substantially ~~affect~~impact the preparation and reporting of our financial statements. These changes ~~might~~may ~~necessitate~~require ~~retrospective~~us ~~application,~~to ~~potentially~~adopt ~~leading~~new toaccounting ~~restatements~~standards, ofleading ~~prior~~to ~~period~~potential ~~financial statements.~~

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. This forward-looking approach in estimating expected credit losses contrasts starkly with the prior, "incurred loss" model, which delays recognition until a loss is probable. CECL mandates considering historical experience, current conditions, and reasonable forecasts affecting collectability, leading to periodic adjustments of financial asset values. However, this forward-looking methodology, reliant on macroeconomic variables, introduces the potential for increased earnings volatility due to unexpected changes in these indicators between periods. An additional consequence of CECL is an accounting asymmetry between loan-related income, recognized periodically based on the effective interest method, and credit losses, recognized upfront at origination. This asymmetry might create the perception of reduced profitability during loan expansion periods due to the immediate recognition of expected credit losses. Conversely, periods with stable or declining loan levels might seem relatively more profitable as income accrues gradually for loans where losses had been previously recognized.43

Asadjustments ~~a result of the change~~ in ~~methodology~~how ~~from~~we ~~the~~report ~~incurred~~our ~~loss~~financial ~~model to the CECL model~~position, ~~on October 1~~performance, ~~2023,~~and ~~the~~risk ~~Company~~exposures. ~~recorded a one-time~~Additionally, ~~net~~such ofregulatory ~~tax~~changes ~~charge~~could ofnecessitate ~~$488,000~~retrospective ~~to retained earnings~~application, awhich ~~$461,000~~might ~~increase~~result toin the ~~allowance~~restatement ~~for~~of ~~credit~~prior ~~losses~~period onfinancial ~~loans, a $92,000 increase to the allowance for credit losses on investment securities and a $65,000 increase to the allowance for credit losses on unfunded commitments~~statements.

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. This forward-looking approach in estimating expected credit losses contrasts with the prior, "incurred loss" model, which delays recognition until a loss is probable. CECL mandates considering historical experience, current conditions, and reasonable forecasts affecting collectability, leading to periodic adjustments of financial asset values. The methodology incorporates macroeconomic forecasts and assumptions, including trends in interest rates, inflation, unemployment, and industry-specific factors. However, this forward-looking methodology, reliant on macroeconomic variables, introduces the potential for increased earnings volatility due to unexpected changes in these indicators between periods. An additional consequence of CECL is an accounting asymmetry between loan-related income, recognized periodically based on the effective interest method, and credit losses, recognized upfront at origination. This asymmetry might create the perception of reduced profitability during loan expansion periods due to the immediate recognition of expected credit losses. Conversely, periods with stable or declining loan levels might seem relatively more profitable as income accrues gradually for loans where losses had been previously recognized.

Future adjustments under CECL could materially impact our results of operations, financial condition, and reported profitability, particularly under volatile economic conditions or unexpected credit deterioration.

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~~2025, our loan servicing rights totaled $1815,000.37 ~~million.~~ Loan servicing rights are amortized to servicing income on loans sold over the period of estimated net servicing income. The estimated fair value of loan servicing rights at the date of the sale of loans is determined based on the discounted present value of expected future cash flows using key assumptions for servicing income and costs and prepayment rates on the underlying loans. On a quarterly basis, we evaluate the fair value of loan servicing rights for impairment by comparing actual cash flows and estimated cash flows from the loan servicing assets to those estimated at the time loan servicing assets were originated. 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. 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.

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 .

We obtain updated valuations in the form of appraisals and broker price opinions when a loan has been foreclosed and the property is taken in as OREO, and at certain other times during the asset's holding period. Our net book value (“NBV”) in the loan at the time of foreclosure and thereafter is compared to the updated estimated market value of the foreclosed property less estimated selling costs (fair value). A charge-off is recorded for any excess in the asset’s NBV over its fair value. If our valuation process is incorrect or if the property declines in value after foreclosure, the fair value of our OREO may not be sufficient to recover our NBV in such assets, resulting in the need for a valuation allowance.

In addition, bank regulators periodically review any OREO we may have and may require us to recognize further valuation allowances. 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.~~needs, ~~Our~~including ~~primary sources of liquidity are increases in deposit accounts~~deposits, cash flows from loan ~~payments~~repayments, ~~and~~ our securities portfolio., ~~Borrowings~~and ~~also provide us with a source of funds to meet liquidity demands~~borrowings. An inability to raise funds ~~through~~from ~~deposits,~~these ~~borrowings, the sale of loans or other~~ sources could have a substantial negative effect on our liquidity. 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. 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. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry or deterioration in credit markets. 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. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity” of this Form 10-K.

substantial negative effect on our liquidity. 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. 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.

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. 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.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance. If we are able to raise capital, it may not be on terms that are acceptable to us. Accordingly, we cannot make assurances that we will be able to raise additional capital if needed on terms that are acceptable to us, or at all. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, any additional capital we obtain may dilute the interests of existing holders of our common stock. Further, if we are unable to raise additional capital when required by our bank regulators, we may be subject to adverse regulatory action.

Our framework for managing risks may not be effective in mitigating risk and loss to us.

WeOur ~~have~~business ~~established~~is ~~processes~~exposed ~~and procedures intended~~ to ~~identify,~~a ~~measure,~~broad ~~monitor,~~range ~~report, analyze and control the types~~ of ~~risk to which we are subject. These~~ risks, ~~include~~including liquidity ~~risk~~, credit ~~risk~~, market ~~risk~~, interest rate ~~risk~~, operational ~~risk~~, legal and compliance, ~~risk~~reputation, and ~~reputational~~other ~~risk, among others~~risks. WeThese ~~also~~risks ~~maintain~~may aarise ~~compliance~~from ~~program~~internal ~~to identify~~factors, ~~measure,~~the ~~assess~~actions ~~and~~of ~~report~~third onparties, ~~our~~changes ~~adherence~~in toeconomic ~~applicable laws~~conditions, ~~policies~~or ~~and~~other ~~procedures~~unforeseen events. ~~While~~There wemay ~~assess and improve these programs on an ongoing basis, there can~~ be norisks ~~assurance~~ that ~~our~~we ~~risk~~have ~~management~~not anticipated or ~~compliance programs~~identified, ~~along~~and ~~with~~existing ~~other~~or ~~related~~emerging ~~controls,~~risks ~~will~~could ~~effectively~~result ~~mitigate~~in ~~all~~substantial ~~risk~~ and ~~limit~~unexpected losses. inIf our ~~business. As with any~~ risk management ~~framework~~proves ineffective, ~~there~~we ~~are~~may ~~inherent~~incur ~~limitations~~significant tolosses, ~~our~~which ~~risk~~could ~~management~~materially ~~strategies~~and asadversely ~~there~~affect ~~may~~our ~~exist~~business, orfinancial ~~develop~~condition, inresults ~~the~~of ~~future~~operations, ~~risks~~and ~~that~~growth ~~we have not appropriately~~ prospects.

anticipated or identified. 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.

Competition for qualified employees and personnel in the banking industry is intense, and there are a limited number of qualified persons with knowledge of, and experience in, the community banking industry where the Bank conducts its business. The process of recruiting personnel with the combination of skills and attributes required to carry out our strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing and technical personnel and upon the continued contributions of our management and personnel. In particular, our success has been and continues to be highly dependent upon the abilities of key executives, including our Chief Executive Officer and certain other employees. In addition, our success has been and continues to be highly dependent upon the services of our directors, and we may not be able to identify and attract suitable candidates to replace such directors.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 1C. Cybersecurity

Cyber Risk Management and Strategy

Safeguarding the confidentiality, integrity and availability of customer and sensitive financial data, records and transactions is essential to Timberland and Timberland Bank. Our risk management program is designed to identify, assess and mitigate risks across various aspects of the Bank, including financial, operational, regulatory, reputational and legal.

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. Our program aligns with applicable federal and state regulations, industry frameworks such as the Federal Financial Institutions Examination Council ("FFIEC") and best practices from the National Institute of Standards and Technology ("NIST"). The FFIEC framework offers a set of guidelines to help financial institutions effectively manage and mitigate cybersecurity risks. The framework focuses on ensuring the confidentiality, integrity and availability of sensitive information. NIST is part of the U.S. Department of Commerce, which develops cybersecurity standards, guidelines and other resources.

environment. Our program aligns with applicable federal and state regulations, industry frameworks such as the Federal Financial Institutions Examination Council ("FFIEC") and best practices from the National Institute of Standards and Technology ("NIST"). The FFIEC framework offers a set of guidelines to help financial institutions effectively manage and mitigate cybersecurity risks. The framework focuses on ensuring the confidentiality, integrity and availability of sensitive information. NIST is part of the U.S. Department of Commerce, which develops cybersecurity standards, guidelines and other resources.

We have employed a multi-layered, risk-based approach to cyber and information security, incorporating a variety of tools and processes to aid in risk identification, assessment and management. The Bank conducts a variety of information security risk assessments throughout the year. We employ a defense in depth strategy that incorporates preventive, detective, and administrative safeguards including but not limited to, configuration hardening, robust patch management and vulnerability scanning, advanced anti-malware firewall technologies, anti-phishing and web filtering controls. These controls are tested annually by an independent third-party audit firm. 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 ~~date~~the Board and evaluated for disclosure in accordance with SEC reporting requirements.

Incident 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. 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.

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. 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.

on an assessment of the vendor and its access to network, systems and confidential information. 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. 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~~Board ~~primary~~receives ~~responsibility~~cybersecurity ~~for~~updates ~~managing~~at ~~cyber~~least ~~risk~~quarterly, isincluding ~~vested~~risk inmetrics, ~~the~~incident ~~Bank’s Information Security Analyst ("ISA"). The ISA~~ reports, ~~to the Chief Risk Officer~~ and ~~serves~~progress ason ~~the~~mitigation ~~primary custodian of the Bank’s Cyber Security and Information Security Program~~strategies.

The Bank’s ~~Technology~~primary ~~Steering~~responsibility ~~Committee~~for ~~meets~~managing oncyber arisk ~~regular~~is ~~basis~~vested ~~and~~in isthe ~~tasked~~Bank’s ~~with~~Information ~~providing~~Security ~~oversight~~Officer ~~and~~("ISO"). ~~guidance~~The ~~regarding~~Bank’s ~~both~~ISO, ~~information~~who ~~technology~~reports ~~and~~to ~~cybersecurity~~the ~~related~~Chief ~~issues~~Risk ofOfficer, ~~strategic~~has ~~importance~~four toyears ~~the~~of ~~Bank.~~experience ~~The~~in ~~Technology~~information ~~Steering~~security ~~Committee~~and isrisk ~~comprised~~management. ofThe ~~numerous~~ISO ~~members~~is ofresponsible for the day-to-day management ~~team,~~of ~~Chief~~the ~~Technology~~Cyber ~~Officer~~and ~~("CTO")~~Information ~~and~~Security ~~ISA.~~Program, ~~The~~including ~~Technology~~oversight ~~Steering~~of ~~committee~~risk ~~reports~~assessments, toincident ~~the~~response, ~~Board~~employee oftraining, ~~Directors~~and ~~through~~third-party ~~Committee~~vendor ~~minutes~~cybersecurity controls.

The ~~Board~~Chief Technology ~~Committee~~Officer ~~assists~~("CTO") ~~the~~has ~~Board~~over 13 years of ~~Directors~~experience in ~~fulfilling~~IT ~~its~~and ~~oversight~~cybersecurity ~~responsibilities~~leadership, ~~with~~including ~~respect~~managing toenterprise ~~the~~IT ~~overall~~operations ~~role~~and of technology inrisk. ~~executing~~The ~~the~~CTO ~~business~~also ~~strategy~~holds ofa ~~the~~Certified ~~institution,~~Community ~~including~~Bank ~~but~~Information ~~not~~Technology ~~limited~~Officer todesignation ~~major~~from ~~technology~~the ~~investments~~ICBA, ~~technology~~and ~~strategy,~~a ~~operational~~CompTIA ~~performance~~Security+ certification and ~~technology~~has ~~trends~~completed ~~that~~the ~~may~~Graduate ~~affect~~School ~~customers.~~of ~~The~~Banking ~~Board~~at ~~Technology~~the ~~Committee~~University ~~meets~~of ~~regularly~~Wisconsin's ~~and~~Bank ~~receives~~Technology ~~reports~~Management ~~from~~program. Members of the ~~CTO~~Technology ~~and~~Steering ~~ISA~~Committee onbring ~~cybersecurity~~substantial ~~and~~experience ~~information~~in ~~technology~~IT ~~risks.~~operations, ~~The~~cybersecurity, ~~Board~~and ~~Technology~~risk ~~Committee~~management, ~~reports~~providing toguidance ~~the~~on ~~Board~~technology ofstrategy, ~~Directors~~operational ~~through~~performance, ~~Committee~~and ~~minutes~~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. The Technology Steering

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 Board Technology Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the overall role of technology in executing the business strategy of the institution, including but not limited to major technology investments, technology strategy, operational performance and technology trends that may affect customers. 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.

Item 2. Properties

At September 30, ~~2024~~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 $18.5131 million. The Company's owns all properties except for one administrative office, the Tacoma branch, ~~and~~ the Downtown Lacey branch, ~~which~~and ~~are~~a ~~leased~~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. 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~~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. 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.

Item 3. Legal Proceedings

Periodically, there have been various claims and lawsuits involving the Company, such as claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Company's business. The Company is not currently a party to any pending legal proceedings that it believes would have a material adverse effect on the financial condition or operations of the Company.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and Holders

47The 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.

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.

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 4852 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. 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.

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, ~~2024~~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, 2024 - July 31, 2024	—	$	—	—	192,025
July 1, 2025 - July 31, 2025	—	$	—	—	393,842
August 1, 2024 - August 31, 2024	19,471	29.03		19,471	172,554
August 1, 2025 - August 31, 2025	33,836	33.25		33,836	360,006
September 1, 2024 - September 30, 2024	17,388	30.26		17,388	155,166
September 1, 2025 - September 30, 2025	22,726	33.47		22,726	337,280
Total	3656,~~859~~562	$	2933.6134	3656,~~859~~562	~~155~~337,~~166~~280

____________________________

(1) On July 2522, ~~2023~~2025, the Company announced a stock repurchase program to purchase up to ~~404~~393,~~708~~842 shares of the Company's common stock, which replaced the Company's then existing repurchase plan which had 7431,~~212~~762 shares available to be repurchased prior to termination. The July ~~2023~~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.

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

Equity Compensation Plan Information.

The equity compensation plan information presented under subparagraph (d) in Part III, Item 12 of this report is incorporated herein by reference.

Five-Year Stock Performance Graph

The following graph compares the cumulative total shareholder return on our common stock with the cumulative total return on the Nasdaq Composite Index and with the S&P SmallCap Banks Index, peer group indices. 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~~2020.

4948

Copy of Timberland Bancorp Inc. (TSBK) Sept 2025.jpg

Year Ended

Index

9/30/~~2019~~2020

9/30/~~2020~~2021

9/30/~~2021~~2022

9/30/~~2022~~2023

9/30/~~2023~~2024

9/30/~~2024~~2025

Timberland Bancorp, Inc.

100.00

68166.1472

~~113~~164.6177

~~112~~167.2705

~~113~~193.8315

~~131~~219.6144

NASDAQ Composite Index

100.00

~~140~~130.9626

~~183~~96.6106

~~135~~121.4114

~~170~~167.7695

~~236~~210.7464

S&P US SmallCap Banks Index

100.00

68190.7443

~~130~~172.9277

~~118~~141.7600

96196.9293

~~135~~223.3782

* Source: S&P Global Market Intelligence

Item 6. Reserved

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding the consolidated financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying notes thereto included in Item 8 of this Annual Report on Form 10-K.

Overview

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 branches (including its main office in Hoquiam). At September 30, ~~2024~~2025, the Company had total assets of $12.9201 billion, net loans receivable of $1.4246 billion, total deposits of $1.72 billion and total shareholders’ equity of $262.61 million. The Company’s business activities generally are

5049

~~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. Accordingly, the information set forth in this report relates primarily to the Bank’s operations.

The Bank is a community-oriented bank which has traditionally offered a variety of savings products to its retail and business customers while concentrating its lending activities on real estate secured loans. Lending activities have been focused primarily on the origination of loans secured by real estate, including residential construction loans, one- to four-family residential loans, multi-family loans and commercial real estate loans. The Bank originates adjustable-rate residential mortgage loans, some of which do not qualify for sale in the secondary market. The Bank also originates commercial business loans and other consumer loans.

The profitability of the Company’s operations depends primarily on its net interest income after provision for (recapture of) credit losses. Net interest income is the difference between interest income, which is the income that the Company earns on interest-earning assets, which are primarily loans and investments, and interest expense, which is the amount that the Company pays on its interest-bearing liabilities, which are primarily deposits and borrowings (as needed). Net interest income is affected by changes in the volume and mix of interest-earning assets, the interest earned on those assets, the volume and mix of interest-bearing liabilities and the interest paid on those interest-bearing liabilities. Management attempts to maintain a net interest margin and return on average assets ("ROA") placing it within the top quartile of its Washington State peers.

Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and types of interest earning assets, interest bearing and non-interest bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period. Since March 2022, 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 4.7500% to 54.0025% as of September 30, ~~2024~~2025. Subsequent to fiscal year end, the FOMC reduced the target federal funds rate by 25 basis points ~~and has not ruled out future decreases~~.

~~On October 1, 2023, the Company adopted the CECL standard to determine estimates of lifetime expected credit losses on loans and recognize the expected credit losses at inception of the loan.~~ The adoption of CECL changed the allowance calculation methodology from a historical incurred loss model to an expected future loss model. The adjustment recorded upon our adoption of the CECL standard was not significant to the overall ACL (including the reserve for unfunded commitments) as compared to the allowance for loan losses at September 30, 2023. 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 the Company believes is adequate to cover expected credit losses inherent in its loan portfolio. The Company recorded a provision for credit losses on loans of $~~1.25~~853,000 ~~million~~ for the year ended September 30, ~~2024~~2025, primarily due to increased loan portfolio growth. The Company recorded a provision for ~~loan~~credit losses on loans of $2.1.25 million for the year ended September 30, ~~2023~~2024, primarily due to increased loan portfolio growth.

Net income is also affected by non-interest income and non-interest expense. For the year ended September 30, ~~2024~~2025, non-interest income consisted primarily of service charges on deposit accounts, gain on sales of loans, ATM and debit card interchange transaction fees, anBOLI ~~increase in the~~ cash surrender value ofincreases ~~BOLI~~and death benefit, servicing income on loans, escrow fees and other operating income. Non-interest income is also increased by a gain on sale and net recoveries of OTTI on investment securities, if any. Non-interest income isin 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. Non-interest expense consisted primarily of salaries and employee benefits, premises and equipment, advertising, ATM and debit card interchange transaction fees, postage and courier expenses, amortization of CDI, state and local taxes, professional fees, FDIC insurance premiums, loan administration and foreclosure expenses, technology and communications expenses, deposit operation expenses and other non-interest expenses. Non-interest expense in certain periods is reduced by gains on the sale of premises and equipment and by gains on the sale of OREO. Non-interest income and non-interest expense are affected by the growth of the Company's operations and growth in the number and balances of loan and deposit accounts.

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

Operating Strategy

The Company is a bank holding company which operates primarily through its subsidiary, the Bank. 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.

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 goal is to deliver returns to shareholders by focusing on the origination of higher-yielding assets (in particular, commercial real estate, construction, and commercial business loans), increasing core deposit balances, managing problem assets, efficiently managing expenses, and seeking expansion opportunities. 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. As a result of the consolidation of banks in our market areas, we believe that there is an opportunity for a community and customer focused bank to expand its customer base. By offering timely decision making, delivering appropriate banking products and services, and providing customer access to our senior managers, we believe that community banks, such as Timberland Bank, can distinguish themselves from larger banks operating in our market areas. We believe that we have a significant opportunity to attract additional borrowers and depositors and expand our market presence and market share within our extensive branch footprint.

Portfolio diversification. In recent years, we have limited the origination of speculative construction loans and land development loans in favor of loans that possess credit profiles representing less risk to the Bank. We continue originating owner/builder and custom construction loans, multi-family loans, commercial business loans and commercial real estate loans which offer higher risk adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations than fixed-rate one-to four-family loans. We anticipate capturing more of each customer's banking relationship by cross selling our loan and deposit products and offering additional services to our customers.

Increase core deposits and other retail deposit products. We focus on establishing a total banking relationship with our customers with the intent of internally funding our loan portfolio. We anticipate that the continued focus on customer relationships will increase our level of core deposits. In addition to our retail branches, we maintain technology based products such as business cash management and a business remote deposit product that enable us to compete effectively with banks of all sizes.

Managing exposure to fluctuating interest rates. For many years, the majority of the loans the Bank has retained in its portfolio have generally possessed periodic interest rate adjustment features or have been relatively short-term in nature. Loans originated for portfolio retention have generally included ARM loans, short-term construction loans, and, to a lesser extent, commercial business loans with interest rates tied to a market index such as the Prime Rate. Longer term fixed-rate mortgage loans have generally been originated for sale into the secondary market, although from time to time, the Bank may retain a portion of its fixed-rate mortgage loan originations and extend the initial fixed-rate period of its hybrid ARM commercial real estate loans for asset/liability purposes.

Continue generating revenues through mortgage banking operations. The majority of the fixed-rate residential mortgage loans we originate have historically been sold into the secondary market with servicing retained. This strategy produces gains on the sale of such loans and reduces the interest rate and credit risk associated with fixed-rate residential lending. We continue to originate custom construction and owner/builder construction loans for sale into the secondary market upon the completion of construction.

Maintaining strong asset quality. We believe maintaining strong asset quality is key to our long-term financial success. Non-performing assets, consisting of nonaccrual loans and investment securities, and OREO, totaled $34.9444 million at September 30, ~~2024~~2025, compared to $13.6094 million at September 30, ~~2023~~2024. The percentage of non-performing loans to loans receivable, net was 0.2730% and 0.1127% at September 30, ~~2024~~2025 and ~~2023~~2024, respectively. The percentage of non-performing assets to total assets at September 30, ~~2024~~2025 was 0.2022% compared to 0.0920% at September 30, ~~2023~~2024. We remain focused on reducing the level of non-performing assets through collections, write-downs and modifications. Our efforts include proactive steps to resolve our non-performing loans such as negotiating payment plans, forbearances, loan modifications and loan extensions, and accepting short payoffs on delinquent loans when appropriate. 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.

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. The 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.


	At 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		%

______________

	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.

5352

	At September 30,
	2024		2023		2022		2021		2020
	2025		2024		2023		2022		2021
OTHER DATA:
Number of real estate loans outstanding	2,~~593~~580		2,~~537~~593		2,~~332~~537		2,~~290~~332		2,~~508~~290
Deposit accounts	5758,~~424~~179		5657,~~675~~424		5856,~~380~~675		58,~~454~~380		58,~~566~~454
Full-service offices	23		23		23		2423		24
	At or For the Year Ended September 30,
	2024		2023		2022		2021		2020
	2025		2024		2023		2022		2021
KEY FINANCIAL RATIOS:
Performance Ratios:
Return on average assets (1)	1.2850	%	1.5028	%	1.2750	%	1.6427	%	1.7564	%
Return on average equity (2)	1011.1956		1210.0119		1112.1401		1311.9814		13.5998
Interest rate spread (3)	2.7295		32.5672		3.0756		3.1307		3.7013
Net interest margin (4)	3.5476		3.9554		3.1695		3.2516		3.9025
Average interest-earning assets to average interest-bearing liabilities	~~148~~146.9789		~~158~~148.3697		~~160~~158.6736		~~162~~160.0867		~~155~~162.9808
Non-interest expense as a percent of average total assets	2.3133		2.3931		2.0939		2.0609		2.4506
Efficiency ratio (5)	5854.0998		5458.5609		5654.4256		5056.1242		50.0412
Asset Quality Ratios:
Non-accrual and 90 days or more past due loans as a percent of total loans receivable, net	0.2730	%	0.1227	%	0.1812	%	0.2918	%	0.2829	%
Non-performing assets as a percent of total assets (6)	0.2023		0.0920		0.1209		0.1812		0.2718
Allowance for credit losses as a percent of total loans receivable, net (7)	1.2122		1.2021		1.20		1.3720		1.3137
Allowance for credit losses as a percent of non-performing loans (8)	~~449~~410.8851		~~1,044~~449.7288		~~665~~1,044.5272		~~471~~665.9352		~~461~~471.7693
Net charge-offs (recoveries) to average outstanding loans	—0.02		—		—		—		—
Capital Ratios:
Total equity-to-assets ratio	1213.7605	%	12.6776	%	1112.7567	%	11.5475	%	11.9854	%
Average equity to average assets	12.5997		12.4659		1112.4346		11.7443		1211.8574

__________________

(1)Net income divided by average total assets.

(2)Net income divided by average total equity.

(3)Difference between weighted average yield on interest-earning assets and weighted average cost of interest-bearing liabilities.

(4)Net interest income before provision for (recapture of) credit losses as a percentage of average interest-earning assets.

(5)Non-interest expenses divided by the sum of net interest income and non-interest income.

(6)Non-performing assets include non-accrual loans, loans past due 90 days or more and still accruing, non-accrual investment securities, OREO and other repossessed assets.

(7)Loans receivable is before the allowance for credit losses.

(8)Non-performing loans include non-accrual loans and loans past due 90 days or more and still accruing. For periods prior to 2024, TDRs that were on accrual status are not included.

5453

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit committee of our Board of Directors.

See "Note 1-Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements contained in Item 8 of this report for a summary of significant accounting policies and the effect on our financial statements and the following:

Allowance for Credit Losses

The ACL is considered a critical accounting policy due to the significant judgment and subjectivity involved in its determination, as well as the potential for economic changes that could impact its adequacy. Adjustments to the ACL are made through the provision (recapture) for credit losses to ensure the ACL remains at an appropriate level, based on management’s assessment of general and specific loss reserves. Establishing the ACL involves material estimates, including economic conditions, collateral value, guarantor strength, loss exposure at default, the timing and amount of future cash flows on impaired loans, applicable loss factors for portfolio segments, and forecasted cash flow collectability over the contractual term of financial assets. These estimates are inherently subject to change and require careful evaluation. To ensure adequacy, we use systematic methodologies outlined in a formal policy that address both general valuation allowances and specific reserves for individual problem loans. Adjustments to the ACL are reflected through provisions for credit losses, which increase the ACL, or recaptures, which reduce it, both of which impact current period earnings.

The ACL is maintained at a level sufficient to provide for expected credit losses based on evaluating known and inherent risks in the loan portfolio and upon our continuing analysis of the factors underlying the quality of the loan portfolio. The ACL is comprised of a general component and a specific component. The general component establishes a reserve rate using historical life-of-loan default rates, current loan portfolio information, economic forecasts, and business cycle data. Statistical analysis determines life-of-loan default and loss rates for the quantitative component, while qualitative factors adjust expected loss rates for current and forecasted conditions. The qualitative factor methodology involves a blend of quantitative analysis and management judgement, reviewed quarterly. The specific component relates to loans that have been individually evaluated because all contractual amounts of principal and interest will not be paid as scheduled. Based on the individual analysis, a specific reserve may be established. The ACL is based upon factors and trends identified by us at the time financial statements are prepared. Although we use the best information available, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions beyond our control. While we believe the estimates and assumptions used in our determination of the adequacy of the ACL are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not adversely impact our financial condition and results of operations. In addition, the ACL is subject to review the by Bank's regulators as part of the routine examination process, which may result in adjustments to the ACL based upon their judgment of information available to them at the time of their examination.

Fair Value Accounting and Measurement

We use fair value measurements to record fair value adjustments to certain financial assets and liabilities and to determine fair value disclosures. We include in the Notes to the Consolidated Financial Statements information about the extent to which fair value is used to measure financial assets and liabilities, the valuation methodologies used and the impact on our results of operations and financial condition. Additionally, for financial instruments not recorded at fair value we disclose, where required, our estimate of their fair value. 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. Generally, purchased loan servicing rights are capitalized at the cost to acquire the rights. For sales of mortgage loans, the value of the loan servicing right is estimated and capitalized. Fair value is based on market prices for comparable loan servicing contracts. The fair value of the loan servicing rights includes an estimate of the life of the underlying loans which is affected by estimated prepayment speeds. The estimate of prepayment speeds is based on current market conditions. Actual

market conditions could vary significantly from current conditions which could result in the estimated life of the underlying loans being different which would change the fair value of the loan servicing right. Capitalized loan servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

Valuation of OREO

Real estate properties acquired through foreclosure or by deed-in-lieu of foreclosure are recorded at the lower of cost or fair value less estimated costs to sell. Fair value is generally determined by management based on a number of factors, including third-party appraisals of fair value in an orderly sale. Accordingly, the valuation of OREO is subject to significant external and internal judgment. If the carrying value of the loan at the date a property is transferred into OREO exceeds the fair value less estimated costs to sell, the excess is charged to the allowance for credit losses. Management periodically reviews OREO values to determine whether the property continues to be carried at the lower of its recorded book value or fair value, net of estimated costs to sell. Any further decreases in the value of OREO are considered an allowance for credit losses. Expenses and income from the maintenance and operations and any gains or losses from the sales of OREO are included in non-interest expense.

Business Combinations

The Company applies the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity in a business combination recognizes all the identifiable assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes prevailing valuation techniques appropriate for the asset or liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition-related costs are expensed as incurred unless they are directly attributable to the issuance of the Company's common stock in a business combination and the Company chooses to record these acquisition-related costs through stockholders' equity. There were no business combinations during the years ended September 30, 2024, 2023 and 2022, respectively.

Goodwill

Goodwill represents the excess of the purchase consideration paid over the fair value of the assets acquired, net of the fair values of liabilities assumed in a business combination and is not amortized but is reviewed annually, or more frequently as current circumstances and conditions warrant, for 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 would indicate potential impairment. If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed. The quantitative goodwill impairment test is used to identify the existence of impairment and the amount of impairment loss and compares the reporting unit's estimated fair values, including goodwill, to its carrying amount. If the fair value exceeds the carry amount, then goodwill is not considered impaired. If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill allocated to the reporting unit. The impairment loss would be recognized as a charge to earnings.

would indicate potential impairment. If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed. The quantitative goodwill impairment test is used to identify the existence of impairment and the amount of impairment loss and compares the reporting unit's estimated fair values, including goodwill, to its carrying amount. If the fair value exceeds the carry amount, then goodwill is not considered impaired. If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill allocated to the reporting unit. The impairment loss would be recognized as a charge to earnings.

Market Risk and Asset and Liability Management

General. Market risk is the risk of loss from adverse changes in market prices and rates. The Bank's market risk arises primarily from interest rate risk inherent in its lending, investment, deposit and borrowing activities. The Bank, like other financial institutions, is subject to interest rate risk to the extent that its interest-earning assets reprice differently than its interest-bearing liabilities. Management actively monitors and manages its interest rate risk exposure. Although the Bank manages other risks, such as credit quality and liquidity risk, in the normal course of business, management considers interest rate risk to be its most significant market risk that could potentially have the largest material effect on the Bank's financial condition and results of operations. The Bank does not maintain a trading account for any class of financial instruments nor does it engage in hedging activities. Furthermore, the Bank is not subject to foreign currency exchange rate risk or commodity price risk.

Qualitative Aspects of Market Risk. The Bank's principal financial objective is to achieve long-term profitability while reducing its exposure to fluctuating market interest rates. The Bank has sought to reduce the exposure of its earnings to changes in market interest rates by attempting to manage the difference between asset and liability maturities and interest rates. 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. As part of its interest rate risk management strategy, the Bank promotes transaction accounts and certificates of deposit with terms of up to five years.

relies on retail deposits as its primary source of funds. As part of its interest rate risk management strategy, the Bank promotes transaction accounts and certificates of deposit with terms of up to five years.

The Bank has adopted a strategy that is designed to substantially match the interest rate sensitivity of assets relative to its liabilities. The primary elements of this strategy involve originating ARM loans for its portfolio, maintaining residential construction loans as a portion of total net loans receivable because of their generally shorter terms and higher yields than other one- to four-family residential mortgage loans, matching asset and liability maturities, investing in short-term securities, and originating fixed-rate loans for retention or sale in the secondary market while retaining the related loan servicing rights.

Sharp increases or decreases in interest rates may adversely affect the Bank's earnings. Management of the Bank monitors the Bank's interest rate sensitivity using a model provided by Kinective, a company that specializes in providing interest rate risk and balance sheet management services to the financial services industry. Based on an interest rate shock analysis prepared by Kinective using data at September 30, ~~2024~~2025, an immediate increase in interest rates of 100 basis points would decrease the Bank’s projected net interest income by approximately 10.5%. An immediate decrease in interest rates of 100 basis points would decrease the Bank's projected net interest income by approximately 12.46%. See “Quantitative Aspects of Market Risk” below for additional information. Management has sought to sustain the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Pursuant to this strategy, the Bank actively originates adjustable-rate loans for retention in its loan portfolio. Fixed-rate mortgage loans with maturities greater than seven years generally are originated for the immediate or future resale in the secondary mortgage market. Although the Bank has sought to originate ARM loans, the ability to originate such loans depends to a great extent on market interest rates and borrowers' preferences.

Consumer, commercial business and construction loans typically have shorter terms and higher yields than permanent residential mortgage loans and, accordingly, reduce the Bank’s exposure to fluctuations in interest rates. At September 30, ~~2024~~2025, the consumer, commercial business and construction loan portfolios amounted to $5152.0451 million, $~~139~~127.00 million and $~~219~~223.2089 million, respectively, or 3.43%, 98.21% and 14.52%, respectively, of total loans receivable.

Quantitative Aspects of Market Risk. The model provided for the Bank by Kinective estimates the changes in the economic value of equity ("EVE") and net interest income in response to a range of assumed changes in market interest rates. The model first estimates the level of the Bank's EVE (market value of assets, less market value of liabilities, plus or minus the market value of any off-balance sheet items) under the current rate environment. In general, market values are estimated by discounting the estimated cash flows of each instrument by appropriate discount rates. The model then recalculates the Bank's EVE under different interest rate scenarios. The change in EVE under the different interest rate scenarios provides a measure of the Bank's exposure to interest rate risk. The following table is provided by Kinective based on data at September 30, ~~2024~~2025:

Hypothetical	Net Interest Income (1)				Economic Value of Equity
Interest Rate	$ Change		% Change		$ Change		% Change
Scenario (2)	from Base		from Base		from Base		from Base
(Basis Points)	(Dollars in thousands)
+400	$	(5,089)	(7.39)	%	$	(10,349)	(3.23)	%
+300	(3,900)		(5.66)		(9,035)		(2.82)
+200	(2,406)		(3.49)		(4,461)		(1.39)
+100	(1,042)		(1.51)		(952)		(0.30)
BASE	—		—		—		—
-100	(994)		(1.44)		(6,924)		(2.16)
-200	(2,573)		(3.74)		(16,929)		(5.29)
-300	(4,181)		(6.07)		(29,773)		(9.30)
-400	(5,441)		(7.90)		(36,435)		(11.38)


Hypothetical	Net Interest Income (1)				Economic Value of Equity
Interest Rate	$ Change		% Change		$ Change		% Change
Scenario (2)	from Base		from Base		from Base		from Base
(Basis Points)	(Dollars in thousands)
+400	$	(2,377)	(3.11)	%	$	(6,854)	(1.88)	%
+300	(1,822)		(2.39)		(6,027)		(1.65)
+200	(999)		(1.31)		(2,418)		(0.66)
+100	(386)		(0.51)		(351)		(0.10)
BASE	—		—		—		—
-100	(1,997)		(2.62)		(7,856)		(2.15)
-200	(4,289)		(5.62)		(17,600)		(4.82)
-300	(6,477)		(8.49)		(29,263)		(8.01)
-400	(8,144)		(10.67)		(34,745)		(9.52)

___________

(1)Does not include loan fees. ~~and~~Includes ~~includes~~ BOLI income, which is included in non-interest income in the consolidated financial statements.

(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. ~~Furthermore,~~The ~~the~~ computations do not reflect any actions management may undertake in response to changes in interest rates.

57For illustrative purposes, in the event of a 100 basis point decrease in interest rates, the Bank would be expected to experience a 2.2% decrease in EVE and a 2.6% decrease in net interest income. 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.

In the event of a 100 basis point decrease in interest rates, the Bank would be expected to experience a 2.2% decrease in EVE and a 1.4% decrease in net interest income. 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.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag changes in market rates. Additionally, certain assets have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates of deposit could possibly deviate significantly from those assumed in calculating the table.

Comparison of Financial Condition at September 30, ~~2024~~2025 and September 30, ~~2023~~2024

Total assets increased by $8389.5730 million, or 4.56%, to $12.9201 billion at September 30, ~~2024~~2025 from $1.8492 billion at September 30, ~~2023~~2024. The increase ~~in total assets~~ was primarily due to increases in total cash and cash equivalents and loans receivable net, partially offset by a decrease in investment securities.

Net loans receivable increased by $~~119~~42.2207 million, or 93.20%, to $1.4246 billion at September 30, ~~2024~~2025 from $1.3042 billion at September 30, ~~2023,~~2024. ~~primarily~~Loan ~~due~~growth towas ~~increases~~concentrated in ~~one-~~the ~~to four~~mortgage-~~family~~related ~~loans~~portfolios, ~~multi-family~~with ~~loans,~~the ~~commercial~~largest ~~real~~increase ~~estate~~occurring ~~loans,~~in the ~~home~~in ~~equity~~multi-family ~~loans~~portfolio. These ~~and smaller~~ increases ~~in several other loan categories that~~ were partially offset by decreases in ~~construction~~commercial ~~and~~business ~~land development~~ loans.

Investment securities (including investments in equity securities) decreased by $6729.5826 million, or 2111.69%, to $~~245~~215.2297 million at September 30, ~~2024~~2025 from $~~312~~245.8022 million at September 30, ~~2023~~2024, primarily due to the maturities of U.S. Treasury investment securities and to a lesser extent, scheduled amortization. ~~Partially~~These ~~offsetting~~decreases ~~these~~were ~~decreases,~~partially ~~was~~offset by the purchase of additional U.S. government agency mortgage-backed investment securities and U.S. Treasury investment securities~~, all of which were classified as available for sale~~.

Total deposits increased by $8668.7397 million, or 54.62%, to $1.6572 billion at September 30, ~~2024~~2025 from $1.5665 billion at September 30, ~~2023~~2024, primarily due to increases in ~~money market and~~ certificate of deposit, non-interest bearing demand, and NOW checking account balances. These increases were partially offset by decreases in ~~non-interest~~money ~~bearing~~market ~~demand, NOW checking,~~ and savings account balances.

Shareholders' equity increased by $1217.3420 million, or 57.30%, to $~~245~~262.4161 million at September 30, ~~2024~~2025 from $~~233~~245.0741 million at September 30, ~~2023~~2024. The increase was primarily due to net income for the year ended September 30, ~~2024~~2025 of $2429.2816 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.~~

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.

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 $3175.0371 million, or 2143.63%, to $~~174~~250.9465 million at September 30, ~~2024~~2025 from $~~143~~174.9194 million at September 30, ~~2023~~2024. The increase was primarily a result of increased deposits.

Investment Securities: Investment securities (including investments in equity securities) decreased by $6729.5826 million, or 2111.69%, to $~~245~~215.2297 million at September 30, ~~2024~~2025 from $~~312~~245.8022 million at September 30, ~~2023~~2024. The decrease was primarily due to $~~100~~41.8722 million of maturities, prepayments, and scheduled amortization on held to maturity securities, and $1428.1232 million in maturities, prepayments, ~~and~~ scheduled amortization, onand the sale of $13.51 million in available for sale investment securities. The reduction in the portfolio also reflects management’s continued focus on maintaining liquidity and repositioning the investment portfolio in response to the prevailing interest rate environment. These decreases were partially offset by the purchase of $4347.0347 million in available for sale investment securities and $15.9041 million in held to maturity investment securities. For additional details on investment securities, see "Item 1. Business - Investment Activities" and "Note 3 - Investment Securities" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.

FHLB Stock: FHLB stock ~~decreased~~increased by $~~1.57 million~~8,000, or 430.54%, to $2.0405 million at September 30, ~~2024~~2025 from $32.6004 million at September 30, ~~2023~~2024, ~~due~~as toa result of the ~~repayment~~increase ofin atotal ~~portion~~assets ofwhich increased the Bank's required investment in FHLB ~~borrowings~~stock ~~and~~under the ~~restructuring~~Federal ofHome ~~stock~~Loan ~~ownership~~Bank's ~~requirement~~membership byand ~~FHLB~~borrowing requirements.

Other Investments: Other investments consist solely of the Company's investment in the Solomon Hess SBA Loan Fund LLC, which was unchanged at both September 30, 2025 and 2024. This investment is utilized to help satisfy compliance with the Company's Community Reinvestment Act ("CRA") investment test requirements.

Loans Held for Sale: There were $1.13 million in loans held for sale at September 30, 2025 compared to none at September 30, 2024, primarily due to the timing and volume of mortgage banking loan sales. The Company generally sells longer-term fixed-rate residential loans for asset-liability management purposes and to generate non-interest income. The Company sold $22.60 million in loans during the year ended September 30, 2025 compared to $14.75 million for the year ended September 30, 2024. Loan sales increased over the past year primarily due to construction loans converting to permanent financing as higher interest rates continued to slow refinancing and purchase activity and thereby increased the proportion of loans being retained and subsequently sold through normal conversion cycles.

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. The increase was primarily due to a $30.42 million increase in multi-family loans, a $18.57 million increase in one- to four-family loans, an $11.47 million increase in commercial real estate loans, a $6.59 million increase in land loans, a $4.69 million increase in gross construction loans and smaller changes in other categories. These increases were partially offset by a $18.41 million increase in the undisbursed portion of construction loans in process, a $12.01 million decrease in commercial business loans and smaller decreases in several other loan categories.

Loan originations increased by $59.46 million, or 23.6%, to $310.90 million for the year ended September 30, 2025 from $251.44 million for the year ended September 30, 2024. The increase in loan originations was primarily due to increases in originations of commercial real estate, construction, one- to four- family loans, consumer, and smaller increases in other categories. 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.

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. 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. The decrease was primarily due to a death benefit, which was partially offset by an increase in cash surrender values.

Goodwill: The recorded amount of goodwill remained unchanged at $15.13 million at both September 30, 2025 and September 30, 2024. 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. 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. For additional information on CDI, see "Note 7 - Goodwill and CDI" of the Consolidated Financial Statements contained in Item 8 of this report.

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. The principal amount of loans serviced for Freddie Mac and the SBA decreased by $13.55 million to $357.01 million at September 30, 2025 from $370.56 million at September 30, 2024, reflecting normal portfolio runoff and payoffs. For additional information on loan servicing rights, see "Note 8 - Loan Servicing Rights" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.

Operating Lease Right-of-Use Assets: Operating lease ROU assets increased by $1.47 million, or 99.9%, to $2.95 million at September 30, 2025 from $1.48 million at September 30, 2024. The increase was primarily due to the addition of an operating lease for the University Place branch (scheduled to open in December 2025), which was partially offset by the amortization of the ROU assets. Operating lease ROU assets at September 30, 2025 represented the present value of three operating leases on branch facilities and one administrative office. 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. 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. The increase consisted of a $74.21 million increase certificate of deposit account balances, a $17.57 million increase in non-interest bearing account balances and a $12.27 million increase in NOW account balances. These increases were partially offset by a $30.77 million decrease in money market account balances and a $4.32 million decrease in savings account balances. The changes in deposit balances reflect customer preferences in the current interest rate environment, with growth in certificates of deposit and non-interest bearing accounts supporting funding stability, while declines in money market and savings accounts reflect shifts toward higher-yield or short-term investment alternatives. 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.

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. 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%. The borrowings provide the Company with a flexible source of liquidity and support its asset-liability management strategy, allowing the Bank to manage funding needs, respond to changes in deposit flows, and maintain adequate liquidity levels to support ongoing operations and loan growth. For additional information on FHLB borrowings, see "Note 11 - FHLB Borrowings and Other Borrowings" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.

Operating Lease Liabilities: Operating lease liabilities increased by $1.50 million or 95.4%, to $3.08 million at September 30, 2025 from $1.58 million at September 30, 2024, primarily due to the addition of an operating lease for the University Place branch, partially offset by required annual lease payments. The operating lease liability at September 30, 2025 represented the present value of three operating leases on branch facilities and one administrative office. 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 Liabilities and Accrued Expenses: Other liabilities and accrued expenses increased by $1.63 million, or 18.5%, to $10.45 million at September 30, 2025 from $8.82 million at September 30, 2024. The increase was primarily due to timing differences in the normal course of business, partially offset by a decrease in accrued interest payable.

~~Other~~Shareholders' ~~Investments~~Equity: Total ~~Other~~shareholders' ~~investments~~equity ~~consist~~increased ~~solely~~by of$17.20 ~~the~~million, ~~Company's~~or ~~investment~~7.0%, into ~~the~~$262.61 ~~Solomon~~million ~~Hess~~at ~~SBA~~September 30, ~~Loan~~2025 ~~Fund~~from ~~LLC~~$245.41 million at September 30, ~~which~~2024. The increase was ~~unchanged~~primarily atdue ~~both~~to ~~September~~net 30income of $29.16 million , ~~2024~~partially ~~and~~offset ~~2023~~by the payment of $8. ~~This~~09 ~~investment~~million isin ~~utilized~~dividends to ~~help~~common ~~satisfy~~shareholders ~~compliance~~and ~~with~~the repurchase of 179,966 shares of the Company's ~~Community~~common ~~Reinvestment~~stock ~~Act~~for ~~("CRA")~~$5.76 ~~investment~~million. ~~test~~For ~~requirements.~~additional information on shareholders' equity, see the Consolidated Statements of Shareholders' Equity contained in Item 8 of this report.

~~Loans~~Comparison ~~Held for Sale: There were no loans held for sale at September 30, 2024 compared to $400,000 at September 30, 2023, primarily due to the timing and volume~~ of ~~mortgage~~Operating ~~banking~~Results ~~loan sales. The Company generally sells longer-term fixed-rate residential loans and the guaranteed portion of SBA commercial business loans~~ for ~~asset-liability management purposes and to generate non-interest income. The Company sold $14.75 million in loans during~~ the ~~year~~Years ~~ended~~Ended September 30, ~~2024~~2025 compared to $11.54 million for the year ended September 30, 2023. Sales of loans over the past year has increased slightly, primarily due to construction loans converting to permanent financing as higher interest rates have slowed down refinancing and ~~purchase~~2024 ~~activity.~~

~~Loans~~Net ~~Receivable~~income for the year ended September 30, ~~Net~~2025 ofincreased ~~Allowance~~by $4.88 million, or 20.1%, to $29.16 million from $24.28 million for ~~Credit~~the ~~Losses:~~year ended September 30, 2024. Net ~~loans~~income ~~receivable~~per diluted common share increased by $~~119~~0.~~22 million~~66, or 921.29%, to $13.4267 ~~billion~~for atthe year ended September 30, ~~2024~~2025 from $13.3001 ~~billion~~for atthe year ended September 30, ~~2023~~2024. The increase in net income was primarily due to a $506.1703 million increase in ~~multi-family~~net ~~loans~~interest income, reflecting growth in average loan balances and a higher net interest margin, and a $451.9022 million increase in ~~one~~non-interest income, primarily due to ~~four-family~~higher ~~loans~~BOLI earnings, including a ~~$33.32~~death ~~million~~benefit ~~decrease~~received induring the ~~undisbursed~~period. ~~portion~~These ofincreases ~~construction~~were ~~loans,~~partially offset by a $301.9564 million increase in ~~commercial~~non-interest ~~real~~expense. ~~estate~~While ~~loans,~~salaries aand ~~$9.63~~employee ~~million~~benefits ~~increase~~remained inthe ~~home~~largest ~~equity~~component ~~loans~~of ~~and~~non-interest ~~smaller~~expense, ~~changes~~the inincrease ~~other~~was ~~categories.~~modest, ~~These~~with ~~increases~~the ~~were~~increase ~~partially~~in ~~offset~~total byexpense adriven ~~$54.64~~mainly ~~million~~by ~~decrease~~higher instate ~~gross~~and ~~construction~~local ~~loans~~taxes, ~~with~~and ~~the~~professional ~~largest~~fees. ~~decreases~~Net ~~occurring~~income was also partially reduced by a $947,000 increase in ~~commercial~~the ~~and~~provision ~~multi-family~~for ~~construction~~income ~~loans~~taxes, aswhile ~~they~~the ~~converted~~provision tofor ~~permanent~~credit ~~financing~~losses ~~and~~decreased ~~smaller~~$217,000, ~~decreases~~reflecting instable ~~several~~credit ~~other~~quality ~~loan~~during ~~categories~~the period.

Loan originations decreased by $110.35 million, or 30.5%, to $251.44 million for the year ended September 30, 2024 from $361.79 million for the year ended September 30, 2023. The decrease in loan originations was primarily due to decreases in originations of one- to four- family loans, commercial real estate, construction and commercial business loans. 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.

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. 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. The increase was due to net BOLI earnings, representing the increase in the cash surrender value of the BOLI policies.

Goodwill: The recorded amount of goodwill remained unchanged at $15.13 million at both September 30, 2024 and September 30, 2023. 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. 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 CDI, see "Note 7 - Goodwill and CDI" of the Consolidated Financial Statements contained in Item 8 of this report.

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. The principal amount of loans serviced for Freddie Mac and the SBA decreased by $15.94 million to $370.56 million at September 30, 2024 from $386.50 million at September 30, 2023. For additional information on loan servicing rights, see "Note 8 - Loan Servicing Rights" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.

Operating Lease Right-of-Use Assets: Operating lease ROU assets decreased by $297,000, or 16.8%, to $1.48 million at September 30, 2024 from $1.77 million at September 30, 2023, primarily due to the amortization of the ROU assets. The operating lease ROU assets at September 30, 2024 represented the present value of two operating leases on branch facilities and one administrative office. 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 increased by $2.67 million, or 74.7%, to $6.24 million at September 30, 2024 from $3.57 million at September 30, 2023. 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 increase consisted of a $137.05 million increase in money market account balances and a $68.21 million increase in certificate of deposit account balances. The increases were partially offset by a $53.40 million decrease in NOW account balances, a $42.75 million decrease in non-interest bearing account balances and a $22.37 million decrease in savings account balances. 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.

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. The Company had $20.00 million in FHLB borrowings at September 30, 2024 compared to $35.00 million at September 30, 2023. 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%. For additional information on FHLB borrowings, see "Note 11 - FHLB Borrowings and Other Borrowings" of the Notes to the Consolidated Financial Statements contained in Item 8 of this report.

Operating Lease Liabilities: Operating lease liabilities decreased by $292,000 or 15.6%, to $1.58 million at September 30, 2024 from $1.87 million at September 30, 2023, primarily due to required annual lease payments. The operating lease liability at September 30, 2024 represented the present value of two operating leases on branch facilities and one administrative office. 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 Liabilities and Accrued Expenses: Other liabilities and accrued expenses decreased by $211,000, or 2.3%, to $8.82 million at September 30, 2024 from $9.03 million at September 30, 2023. 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 net income of $24.28 million for the year ended September 30, 2024, which was partially offset by the payment of $7.65 million in dividends to common shareholders and the repurchase of 218,976 shares of the Company's common stock for $5.96 million during the year ended September 30, 2024. In addition, shareholder’s equity was positively impacted by unrealized gains on available for sale securities reflecting the decrease in market interest rates during the year, resulting in a recovery of $1.10 million of accumulated other comprehensive loss, net of tax at September 30, 2024. For additional information on shareholders' equity, see the Consolidated Statements of Shareholders' Equity contained in Item 8 of this report.

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. 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. The decrease in net income was primarily due to a $4.19 million decrease in net interest income and a $373,000 increase in non-interest expense, partially offset by a $981,000 decrease in the provision for credit losses and a $753,000 decrease in the provision for income taxes. Non-interest income remained relatively unchanged at $11.14 million for the years ended September 30, 2024 and 2023.

A more detailed explanation of the income statement categories is presented below.

Net Interest Income: Net interest income ~~decreased~~increased by $46.1903 million, or 69.14%, to $6470.1720 million for the year ended September 30, ~~2024~~2025 from $6864.3617 million for the year ended September 30, ~~2023~~2024. The ~~decrease~~increase was primarily due to higher interest ~~expense~~and dividend income resulting from increases in both the average yields and balances of ~~interest-bearing liabilities~~loans, which outpaced the increase in interest ~~income~~expense ~~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~~liabilities.

Total interest and dividend income increased by $147.8745 million, or 187.69%, to $94102.8328 million for the year ended September 30, ~~2024~~2025 from $7994.9583 million for the year ended September 30, ~~2023~~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. The average yield on interest-earning assets increased to 5.2448% for the year ended September 30, ~~2024~~2025 from 45.6324% for the year ended September 30, ~~2023~~2024. 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. 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.

60During 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 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. 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. 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.

~~assets~~Interest ~~increased~~income on investment securities decreased by $~~82.49 million~~932,000, or 410.772%, to $18.8120 ~~billion~~million for the year ended September 30, ~~2024~~2025 from $19.7313 ~~billion~~million for the year ended September 30, ~~2023~~2024, due to ana ~~increase~~$49.21 million decrease in the average balance of ~~loans~~investment ~~receivable~~securities, ~~which was~~ partially offset by a ~~decrease~~29 basis point increase in the average ~~balance~~yield of on investment securities. ~~and~~The ~~interest-bearing~~decline ~~deposits~~ in ~~banks~~average ~~and~~balances ~~CDs. Interest~~reflected ~~income~~portfolio onmaturities ~~loans receivable~~ and ~~loans~~scheduled ~~held for sale increased by $14.28 million~~amortization, orwhile ~~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 onresulted ~~loans~~from ~~receivable~~reinvesting tomaturing ~~5.61%~~or ~~for~~liquidated ~~the~~lower-yielding ~~year~~securities ~~ended~~into ~~September~~higher-yielding 30securities, ~~2024~~as ~~from~~interest ~~5.13%~~rates ~~for~~remain ~~the~~relatively ~~year~~high ~~ended~~compared ~~September~~with ~~30,~~recent ~~2023~~years.

~~During~~Interest ~~the~~income ~~year~~on ~~ended~~interest-bearing ~~September~~deposits ~~30,~~in ~~2024,~~banks ~~the~~and ~~accretion~~CDs ~~of the purchase accounting fair value discount on loans acquired~~ increased ~~interest income on loans~~ by $37315,000, ~~compared~~or 4.0%, to $~~75,000~~8.22 million for the year ended September 30, ~~2023.~~2025 ~~The~~from ~~accretion~~$7.91 ofmillion ~~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~~due to a ~~one~~$35.38 ~~basis~~million ~~point~~ increase ~~for~~in the ~~year~~average ~~ended~~balance ~~September~~of ~~30,~~interest-bearing ~~2023. The~~deposits ~~incremental~~in ~~accretion~~banks and ~~the impact on loan yield will change during any period based on the volume of prepayments~~CDs, and ~~has~~was ~~decreased~~partially ~~over~~offset ~~time~~by asan ~~the~~87 ~~balance~~basis ofpoint ~~the~~decrease ~~net~~in ~~discount declines. The remaining net discount on acquired loans was $155,000 at September 30, 2024. During~~ the ~~year~~average ~~ended~~yield ~~September~~resulting ~~30,~~from ~~2024,~~decreased amarket ~~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~~rates.

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. 59

~~Interest~~Total ~~income on~~ interest~~-bearing~~ ~~deposits~~expense ~~in banks and CDs~~ increased by $~~762~~1.42 million,~~000,~~ or 104.76%, to $732.9108 million for the year ended September 30, ~~2024~~2025 from $730.1466 million for the year ended September 30, ~~2023,~~2024. The increase was primarily due to anhigher ~~112~~average ~~basis~~balances ~~point~~of ~~increase~~certificates inof ~~the~~deposit ~~average~~and ~~yield~~money ~~resulting~~market ~~from~~accounts, which increased ~~market~~$59.41 ~~interest~~million ~~rates~~and $22.70 million, ~~partially~~respectively. These increases more than offset bydeclines ain NOW and savings account balances, which decreased $20.8561 million ~~decrease~~and in$7.07 ~~the~~million, respectively. Interest expense on borrowings decreased, $194,000 due to lower average ~~balance~~borrowings. The average cost of interest-bearing ~~deposits~~liabilities inrose ~~banks~~by one basis point, to 2.53%, reflecting the combined effect of higher-cost certificates of deposit and ~~CDs~~lower-cost borrowings.

~~Total~~As ~~interest~~a ~~expense~~result increased by $19.07 million, or 164.5%, to $30.66 million for the year ended September 30, 2024 from $11.59 million for the year ended September 30, 2023. The increase in interest expense was primarily due to an increase in the average cost of ~~interest-bearing~~these ~~deposits. The average cost of interest-bearing liabilities increased to 2.52% for the year ended September 30~~changes, ~~2024 from 1.06% for~~ the ~~year~~net ~~ended September 30, 2023 as market~~ interest ~~rates~~margin ~~for deposits~~ increased~~. Average~~ ~~interest-bearing~~22 ~~deposits~~basis ~~increased~~points ~~by $108.92 million, or 10.0%,~~ to $13.19 billion for the year ended September 30, 2024 from $1.09 billion for the year ended September 30, 2023, primarily due to competitive pricing pressure which resulted in rate matching to retain deposits. Average short-term borrowings increased by $5.42 million, or 555.876% ~~to $6.4 million~~ for the year ended September 30, ~~2024~~2025 from ~~$975,000 for the year ended September 30, 2023~~3. ~~Average long-term borrowings increased by $9.8 million, or 164.9~~54% ~~to $15.8 million~~ for the year ended September 30, 2024 ~~from $6~~.~~0 million for the year ended September 30, 2023.~~

AsProvision for Credit Losses: A $934,000 provision for credit losses was recorded for the year ended September 30, 2025 consisting of an $853,000 provision for credit losses on loans, primarily due to an increase in loans receivable, a ~~result~~$24,000 recapture of ~~these~~credit ~~changes~~losses on investment securities, ~~the~~primarily ~~net~~due ~~interest~~to ~~margin~~lower ~~decreased~~balances 41resulting ~~basis~~from ~~points~~maturities and principal payments and a $105,000 provision for credit losses on unfunded commitments, primarily due to 3an increase in the balance of unfunded loan commitments.~~54%~~ A $1.15 million provision for credit losses was recorded for the year ended September 30, 2024 ~~from~~consisting 3of a $1.~~95%~~25 million provision for ~~the~~credit ~~year~~losses ~~ended~~on ~~September 30~~loan, ~~2023~~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.

~~Provision~~During ~~for~~the ~~Credit~~year ~~Losses:~~ended ASeptember ~~$1.15~~30, ~~million~~2025, ~~provision~~several ~~for~~credit metrics, including delinquent and substandard loans, showed increases compared with the prior year, but overall credit ~~losses~~quality ~~was~~remains ~~recorded~~sound. Net charge-offs increased to $240,000 for the year ended September 30, 2025 compared to $54,000 for the year ended September 30, 2024, ~~consisting~~although ofnet acharge-offs ~~$1.25~~(recoveries) ~~million~~to ~~provision~~average outstanding loans remained low at 0.0% for ~~credit~~both ~~losses~~periods. onDelinquent loans ~~which~~(loans ~~was~~30 ~~primarily~~or more days past due) toincreased anby ~~increase~~$1.18 inmillion, ~~loans~~or ~~receivable~~26.3%, ato $325.66 million at September 30,~~000~~ ~~recapture~~2025 offrom ~~credit~~$4.48 ~~losses~~million onat ~~investment~~September 30, ~~securities~~2024. ~~which~~Loans ~~was~~classified ~~primarily~~as ~~due~~substandard increased by $24.37 million, or 288.9%, to ~~lower~~$32.81 ~~balances~~million ~~resulting~~at September 30, 2025 from ~~maturities~~$8.44 ~~and~~million ~~principal~~at ~~payments~~September 30, ~~and~~2024, awhile loans classified as doubtful totaled $71202,000 ~~recapture~~at ofboth ~~credit~~September ~~losses~~30, on2025 ~~unfunded~~and ~~commitments~~2024. ~~which~~Loans ~~was~~designated ~~primarily~~as ~~due~~special tomention atotaled ~~decrease~~$5.57 inmillion ~~the~~at ~~balance~~September of30, ~~unfunded~~2025 ~~loan~~compared ~~commitments.~~to A $24.1340 million ~~provision~~at ~~for~~September ~~loan losses~~30, ~~under~~2023. Non-accrual ~~the~~loans ~~prior~~increased ~~incurred~~by ~~loan~~$522,000, ~~loss~~or ~~method~~13.4%, ~~was~~to ~~recorded~~$4.41 ~~for~~million ~~the~~at ~~year~~September 30, ~~ended~~2025 ~~September~~from $3.89 million at September 30, ~~2023~~2024.

~~The~~While ~~Company~~management ~~had~~believes ~~net~~the ~~charge-offs~~estimates ofand ~~$54,000~~assumptions ~~for~~used ~~the~~in ~~year~~its ~~ended~~determination ~~September~~of ~~30,~~the ~~2024~~adequacy ~~compared~~of tothe ~~$18,000~~ACL ~~for~~are ~~the~~reasonable, ~~year~~there ~~ended~~can ~~September 30,~~be ~~2023. Net~~no ~~charge-offs~~assurance ~~(recoveries)~~that tosuch ~~average~~estimates ~~outstanding~~and ~~loans~~assumptions ~~was~~will ~~0.0%~~not ~~for~~be ~~the~~proven ~~years~~incorrect ~~ended~~in ~~September 30~~the future, ~~2024~~or ~~and~~that ~~2023.~~the ~~The~~actual ~~level~~amount of ~~delinquent~~future ~~loans~~provisions ~~(loans~~will 30not orexceed ~~more~~the ~~days~~amount of past ~~due)~~provisions or that any increased byprovisions ~~$2.81~~will ~~million,~~not orhave ~~168.9%,~~a tomaterial ~~$4.48~~adverse ~~million~~impact aton ~~September 30,~~our ~~2024~~financial ~~from~~condition $1and results of operations.67 ~~million~~A atfurther ~~September 30,~~decline ~~2023.~~in ~~Loan~~national ~~classified~~and local economic conditions, as ~~substandard~~a ~~increased~~result byof ~~$2.05~~the ~~million~~effects of inflation, a recession or ~~32.1%,~~slowed toeconomic ~~$8.44~~growth, ~~million~~among atother ~~September 30~~factors, ~~2024~~could ~~from~~result ~~$6.39~~in ~~million~~a atmaterial ~~September 30,~~increase ~~2023,~~in ~~while~~the ~~loans~~ACL ~~classified~~and ashave ~~doubtful~~a ~~totaled~~material ~~$202,000~~adverse atimpact ~~September~~on ~~30,~~the ~~2024~~financial ~~compared~~condition toand ~~none~~results atof ~~September~~operations. 30In addition, ~~2023.~~the ~~Loans~~determination ~~designated~~of asthe ~~special~~amount ~~mention~~of ~~totaled~~the ~~$4.40~~ACL ~~million~~is atsubject ~~September~~to ~~30,~~review ~~2024~~by ~~compared~~bank toregulators ~~none~~as atpart ~~September~~of 30the routine examination process, ~~2023. Non-accrual~~which ~~loans~~may ~~increased~~result byin ~~$2.37~~the ~~million,~~adjustment orof ~~156.6%,~~reserves tobased ~~$3.89~~upon ~~million~~their atjudgment ~~September 30,~~of ~~2024~~information ~~from~~available ~~$1.51~~to ~~million~~them at ~~September 30,~~the ~~2023~~time of their examination and have a material adverse impact on the financial condition and results of operations.

~~While~~In ~~management~~accordance ~~believes~~with ~~the~~GAAP, ~~estimates~~acquired ~~and~~loans ~~assumptions~~are ~~used~~recorded inat ~~its~~their ~~determination~~estimated offair ~~the~~value, ~~adequacy~~resulting ofin ~~the~~a ~~ACL~~net ~~are~~discount ~~reasonable,~~to ~~there~~the ~~can~~loans' becontractual noamounts, ~~assurance~~with ~~that~~a ~~such~~portion ~~estimates~~of ~~and~~this ~~assumptions~~discount ~~will~~reflecting ~~not~~possible becredit ~~proven~~losses. Credit ~~incorrect~~discounts are included in the ~~future,~~determination orof ~~that~~fair ~~the~~value. Purchased ~~actual~~loans ~~amount~~are ofevaluated ~~future~~for ~~provisions~~impairment ~~will~~in ~~not~~the ~~exceed~~same manner as the ~~amount~~rest of ~~past~~the ~~provisions~~loan orportfolio. ~~that~~The ~~any~~remaining ~~increased~~fair ~~provisions~~value ~~will~~discount ~~not~~associated ~~have~~with aacquired ~~material~~loans ~~adverse~~was ~~impact~~$51,000 onat ~~our~~September ~~financial~~30, ~~condition~~2025. This ~~and~~discount ~~results~~will ofcontinue ~~operations.~~to Aaccrete ~~further~~into ~~decline~~income inas ~~national~~these ~~and~~loans ~~local~~continue ~~economic~~to pay down.

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

In accordance with GAAP, acquired loans are recorded at their estimated fair value, resulting in a net discount to the loans' contractual amounts, with a portion of this discount reflecting possible credit losses. Credit discounts are included in the determination of fair value. With the adoption of CECL, purchased loans are evaluated for impairment in the same manner as the rest of the loan portfolio. The remaining fair value discount associated with acquired loans was $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. 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~~increased $111.1422 million, ~~for~~or ~~both~~10.9%, to $12.35 million for the ~~years~~year ended September 30, ~~2024~~2025 ~~and~~from ~~2023~~$11.14 million for the year ended September 30, 2024. ~~Changes~~The inincrease ~~non-interest~~was ~~income~~primarily ~~include~~due to a $~~128,000~~1.06 ~~decrease~~million increase in ~~ATM~~BOLI ~~and~~net ~~debit~~earnings ~~card~~(largely ~~interchange~~the ~~transaction~~result ~~fees~~of death benefits received in excess of cash surrender value), and by a $95189,000 ~~decrease~~increase in ~~net~~ gain on ~~sale~~sales of ~~investment~~loans, ~~securities~~net and smaller ~~decreases~~increases in other categories,. These increases were partially offset by a $~~238~~147,000 ~~increase~~decrease in service charges on deposits, a $91,000 decrease in ATM and debit card interchange transaction fees and smaller ~~increases~~decreases in other categories.

Non-interest Expense: Total non-interest expense increased by $373,000, or 0.9%, to $43.75 million for the year ended September 30, 2024 from $43.37 million for the year ended September 30, 2023. The increase was primarily due to a $719,000 increase in technology and communications, a $397,000 increase in ATM and debit card processing fees, a $172,000 increase in deposit operations, a $168,000 increase in salaries and employee benefits, a $122,000 increase in FDIC insurance expense, a $103,000 increase in state and local taxes, a $83,000 increase in premises and smaller increases in several other expense categories. These increases were partially offset by a $761,000 decrease in professional fees and smaller decreases in several other categories. The increase in technology and communications was primarily due to the addition of several new technology products, increased costs and processing volumes. The increase in ATM and debit card processing fees and deposit operations was mainly due to fraud related expenses. The increase in salaries and employee benefits was primarily due to annual salary adjustments. 60

~~The~~Non-interest ~~efficiency~~Expense: Total ~~ratio~~non-interest expense increased by $1.64 million, or 3.8%, to $45.39 million for the year ended September 30, ~~2024~~2025 ~~was~~from 58$43.~~09%~~75 ~~compared~~million ~~to 54.56%~~ for the year ended September 30, ~~2023~~2024. The ~~change~~increase was primarily due to a $360,000 increase in ~~the~~state ~~efficiency~~and ~~ratio~~local ~~was~~taxes, ~~the~~a ~~result~~$359,000 ofincrease ~~higher~~in ~~non-interest~~professional ~~expenses~~fees, ~~coupled~~a ~~with~~$192,000 increase in salaries and employee benefits, a $114,000 increase in premises and equipment, a $105,000 increase in technology and communications and smaller increases in several other expense categories. These increases were partially offset by a $193,000 decrease in ~~overall~~deposit ~~revenues~~operations, ~~resulting~~a ~~from~~$105,000 ~~the~~decrease ~~decline~~in ATM and debit card processing and smaller decreases in ~~net~~several ~~interest~~other categories. The increase in state and local taxes was primarily due to increased taxable income. The increase in professional fees was primarily due to an increase in audit and consulting fees. The increase in salaries and employee benefits was primarily due to annual salary adjustments. The decrease in deposit operations and ATM and debit card processing was primarily due to reduced customer-related fraud.

~~Provision for Income Taxes:~~ The ~~provision~~efficiency ~~for~~ratio ~~income taxes decreased by $753,000, or 11.0% to $6.12 million~~ for the year ended September ~~30,~~ ~~2024 from $6.88 million for the year ended September~~ 30, ~~2023. The~~2025 ~~decrease~~improved ~~was primarily due~~ to ~~lower pre-tax income~~54.98% ~~The~~compared ~~Company's~~to ~~effective income tax rate was 20~~58.109% for the year ended September 30, 2024 ~~compared~~reflecting ~~to 20.2% for~~ the ~~year~~combined ~~ended~~impact ~~September~~of ~~30,~~higher ~~2023. For~~net ~~additional~~interest ~~information on~~ income ~~taxes,~~and ~~see "Note 13~~non-~~Income~~interest ~~Taxes"~~income ofrelative ~~the Notes~~ to ~~the~~total ~~Consolidated~~operating ~~Financial Statements contained in Item 8 of this report~~expenses.

~~Comparison~~Provision offor ~~Results~~Income ofTaxes: The ~~Operations~~provision for income taxes increased by $947,000, or 15.5% to $7.07 million for the ~~Years~~year ~~Ended~~ended September 30, 2025 from $6.12 million for the year ended September 30, ~~2023~~2024. ~~and~~The ~~2022~~increase was primarily due to higher pre-tax income. The Company's effective income tax rate was 19.5% for the year ended September 30, 2025 compared to 20.1% for the year ended September 30, 2024. The decrease in the effective tax rate was primarily due to a higher percentage of non-taxable income. 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.

~~See~~Comparison ~~Management's Discussion and Analysis~~ of ~~Financial Condition and~~ Results of Operations ~~in our Annual Report on Form 10-K~~ for the ~~year~~Years ~~ended~~Ended September 30, ~~2023~~2024 ~~previously~~and ~~filed with the SEC.~~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.

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.

6261

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. Yields and costs for the periods indicated are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the periods presented.

	Year Ended September 30,
	2024						2023						2022
	2025						2024						2023
	AverageBalance		InterestandDividends		Yield/Cost		AverageBalance		InterestandDividends		Yield/Cost		AverageBalance		InterestandDividends		Yield/Cost
							(Dollars in thousands)
Interest-earning assets:
Loans receivable (1)(2)	$	1,~~379~~448,~~529~~803	$	7785,~~430~~525	5.6190	%	$	1,~~230~~379,~~101~~529	$	6377,~~154~~430	5.1361	%	$	1,~~055~~230,~~635~~101	$	5163,~~324~~154	45.8613	%
Investment securities (2)	~~278~~229,~~531~~317		98,~~129~~197		3.2857		~~324~~278,~~436~~531		9,~~384~~129		23.8928		~~224~~324,~~850~~436		39,~~488~~384		12.5589
Dividends from mutual funds, FHLB stock and other investments	65,~~147~~893		~~361~~335		5.8768		6,~~315~~147		~~270~~361		45.2887		6,~~021~~315		~~120~~270		14.9928
Interest-bearing deposits in banks and CDs	~~146~~182,~~855~~239		78,~~905~~220		54.3851		~~167~~146,~~718~~855		7,~~143~~905		45.2638		~~482~~167,~~162~~718		37,~~576~~143		04.7426
Total interest-earning assets	1,~~811~~866,~~062~~252		94102,~~825~~277		5.2448		1,~~728~~811,~~570~~062		7994,~~951~~825		45.6324		1,~~768~~728,~~668~~570		5879,~~508~~951		34.3163
Non-interest-earning assets	8178,~~470~~000						8481,~~205~~470						8384,~~895~~205
Total assets	$	1,~~892~~944,~~532~~252					$	1,~~812~~892,~~775~~532					$	1,~~852~~812,~~563~~775
Interest-bearing liabilities:
NOW checking accounts	$	~~353~~332,~~000~~392	$	54,~~148~~611	1.4639	%	$	~~407~~353,~~679~~000	$	35,~~562~~148	01.8746	%	$	~~449~~407,~~574~~679	$	~~650~~3,562	0.1487	%
Money market accounts	~~285~~308,~~615~~319		9,~~248~~882		3.2421		~~215~~285,~~465~~615		19,~~600~~248		03.7424		~~244~~215,~~498~~465		~~766~~1,600		0.3174
Savings accounts	~~212~~205,~~562~~488		~~529~~639		0.2531		~~261~~212,~~006~~562		~~415~~529		0.1625		~~278~~261,~~025~~006		~~230~~415		0.0816
Certificates of deposit accounts	~~298~~357,~~039~~444		1213,~~337~~786		43.1486		~~188~~298,~~534~~039		512,~~096~~337		24.7014		~~127~~188,~~277~~534		15,~~011~~096		02.7970
Brokered deposits	4446,~~330~~896		2,~~397~~354		5.4102		1144,~~942~~330		~~629~~2,397		5.2741		—11,942		—629		—5.27
Short-term borrowings	6,~~394~~782		~~361~~270		53.6599		~~975~~6,394		53361		5.4465		3975		—53		—5.44
Long-term borrowings (3)	1513,~~820~~220		~~638~~535		4.0304		515,~~973~~820		~~237~~638		34.9703		15,~~427~~973		17237		13.1997
Total interest-bearing liabilities	1,~~215~~270,~~760~~541		3032,~~658~~077		2.5253		1,~~091~~215,~~574~~760		1130,~~592~~658		12.0652		1,~~100~~091,~~804~~574		211,~~674~~592		01.2406
Non-interest-bearing deposits	~~427~~411,~~514~~007						~~484~~427,~~795~~514						~~529~~484,~~702~~795
Other liabilities	10,~~865~~506						10,~~557~~865						10,~~224~~557
Total liabilities	1,~~654~~692,~~139~~054						1,~~586~~654,~~926~~139						1,~~640~~586,~~730~~926
Shareholders' equity	~~238~~252,~~393~~198						~~225~~238,~~849~~393						~~211~~225,~~833~~849
Total liabilities and shareholders' equity	$	1,~~892~~944,~~532~~252					$	1,~~812~~892,~~775~~532					$	1,~~852~~812,~~563~~775
Net interest income			$	6470,~~167~~200					$	6864,~~359~~167					$	5568,~~834~~359
Interest rate spread					2.7295	%					32.5772	%					3.0757	%
Net interest margin (4)					3.5476	%					3.9554	%					3.1695	%
Ratio of average interest-earning assets to average interest-bearing liabilities					~~148~~146.9789	%					~~158~~148.3697	%					~~160~~158.6736	%

_______________________________________________

(1)Does not include interest on loans on non-accrual status. 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~~2025 - $1,~~429~~640; year ended September 30, ~~2023~~2024 - $1,~~373~~430 and year ended September 30, ~~2022~~2023 - $31,~~600~~370) are included with interest and dividends. Accretion of the fair value discount on loans for the years ended September 30, ~~2024~~2025, ~~2023~~2024 and ~~2022~~2023 of $37104, $7537 and $~~182~~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 ~~greater~~more.

(4)Net interest income divided by total average interest-earning assets.

6362

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on net interest income on the Company. Information is provided with respect to the (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate), (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the net change (sum o

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