[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%2E%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201%2E%20Financial%20Statements%20%28unaudited%29) This section presents the unaudited consolidated financial statements of Timberland Bancorp, Inc. and its subsidiary for the periods ended June 30, 2025, and September 30, 2024, including balance sheets, income statements, comprehensive income, shareholders' equity, and cash flows, along with detailed notes on significant accounting policies, investment securities, loans, leases, and other financial disclosures [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a modest increase in total assets, primarily driven by growth in cash and cash equivalents and loans receivable, funded by an increase in deposits, with shareholders' equity also increasing Consolidated Balance Sheet Highlights (Dollars in thousands) | Metric | June 30, 2025 | September 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :----------------- | :--------- | :--------- | | Total assets | $1,957,192 | $1,923,475 | $33,717 | 1.8% | | Loans receivable, net | $1,441,496 | $1,421,523 | $19,973 | 1.4% | | Total deposits | $1,669,477 | $1,647,668 | $21,809 | 1.3% | | Total shareholders' equity | $256,664 | $245,413 | $11,251 | 4.6% | | Cash and cash equivalents | $193,627 | $164,728 | $28,899 | 17.5% | | Investment securities | $228,045 | $244,354 | $(16,309) | -6.7% | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) The Company reported increased net income for both the three and nine months ended June 30, 2025, primarily driven by higher net interest income, despite increases in provision for credit losses and non-interest expenses Consolidated Statements of Income Highlights (Dollars in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net income | $7,100 | $5,924 | $1,176 | 19.9% | | Basic EPS | $0.90 | $0.74 | $0.16 | 21.6% | | Diluted EPS | $0.90 | $0.74 | $0.16 | 21.6% | | Net interest income | $17,622 | $15,981 | $1,641 | 10.3% | | Provision for (recapture of) credit losses - net | $440 | $244 | $196 | 80.3% | | Non-interest income, net | $2,875 | $2,791 | $84 | 3.0% | | Non-interest expense, net | $11,167 | $11,069 | $98 | 0.9% | | Metric | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Net income | $20,715 | $17,928 | $2,787 | 15.6% | | Basic EPS | $2.61 | $2.22 | $0.39 | 17.6% | | Diluted EPS | $2.60 | $2.21 | $0.39 | 17.6% | | Net interest income | $51,805 | $47,620 | $4,185 | 8.8% | | Provision for (recapture of) credit losses - net | $713 | $660 | $53 | 8.0% | | Non-interest income, net | $8,259 | $8,204 | $55 | 0.7% | | Non-interest expense, net | $33,428 | $32,684 | $744 | 2.3% | [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for the three and nine months ended June 30, 2025, was impacted by net income and an other comprehensive loss primarily due to unrealized holding losses on available-for-sale investment securities Consolidated Statements of Comprehensive Income Highlights (Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :---------------------------------------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $7,100 | $5,924 | $20,715 | $17,928 | | Unrealized holding gain (loss) on investment securities available for sale, net of income taxes | $(105) | $200 | $(795) | $530 | | Total other comprehensive income (loss), net of income taxes | $(105) | $200 | $(795) | $539 | | Total comprehensive income | $6,995 | $6,124 | $19,920 | $18,467 | [Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity increased due to net income, partially offset by common stock dividends and repurchases, and an accumulated other comprehensive loss Consolidated Statements of Shareholders' Equity Highlights (Dollars in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Total shareholders' equity | $256,664 | $241,223 | | Retained earnings | $230,213 | $211,087 | | Accumulated other comprehensive (loss) income | $(775) | $(545) | | Common stock repurchases (9 months) | $(3,846) | $(4,801) | | Dividends paid per common share (9 months) | $0.76 | $0.71 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased, while net cash used in investing activities decreased significantly, and net cash provided by financing activities decreased, leading to a net increase in cash and cash equivalents Consolidated Statements of Cash Flows Highlights (Dollars in thousands) | Metric | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $20,076 | $16,404 | | Net cash used in investing activities | $(3,924) | $(28,676) | | Net cash provided by financing activities | $12,747 | $42,464 | | Net increase in cash and cash equivalents | $28,899 | $30,192 | | Cash and cash equivalents, end of period | $193,627 | $158,913 | [Notes to Unaudited Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the financial statements, covering significant accounting policies, investment securities, loans, goodwill, leases, equity, stock compensation, fair value measurements, recent accounting pronouncements, revenue recognition, commitments, and subsequent events [(1) Summary of Significant Accounting Policies](index=12&type=section&id=%281%29%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation for the unaudited consolidated financial statements, confirming adherence to GAAP for interim reporting, principles of consolidation for the Company and its subsidiaries, and the identification of community banking in western Washington as the sole operating segment - Financial statements prepared in accordance with GAAP for interim financial information[26](index=26&type=chunk) - Consolidated entities include Timberland Bancorp, Inc., Timberland Bank, and Timberland Service Corp[27](index=27&type=chunk) - The Company operates as one reportable operating segment: community banking in western Washington under 'Timberland Bank'[27](index=27&type=chunk) [(2) Investment Securities](index=14&type=section&id=%282%29%20Investment%20Securities) The Company's investment portfolio consists of held-to-maturity and available-for-sale securities, with detailed breakdowns of amortized cost, unrealized gains/losses, and fair values, and the allowance for credit losses (ACL) on held-to-maturity securities decreased Investment Securities Summary (Dollars in thousands) | Category | June 30, 2025 Amortized Cost | June 30, 2025 Estimated Fair Value | June 30, 2025 Gross Unrealized Losses | | :-------------------------------- | :----------------------------- | :--------------------------------- | :-------------------------------- | | Held to Maturity | $141,570 | $135,622 | $(6,169) | | Available for Sale | $87,456 | $86,475 | $(1,186) | | **Total** | **$229,026** | **$222,097** | **$(7,355)** | | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :------------ | :----------------- | | ACL on held-to-maturity securities | $46 | $60 | - Unrealized losses on available-for-sale securities are considered due to fluctuations in market conditions (primarily interest rates) and not credit deterioration; no ACL recorded for AFS securities[35](index=35&type=chunk) - The Company recorded a **$3.00 million net realized loss** on 13 held-to-maturity investment securities for the nine months ended June 30, 2025, all previously recognized as credit losses[31](index=31&type=chunk) [(3) Goodwill and CDI](index=19&type=section&id=%283%29%20Goodwill%20and%20CDI) Goodwill remained unchanged and was determined not to be impaired as of May 31, 2025, following the annual impairment test, while core deposit intangible (CDI) decreased due to scheduled amortization with no impairment indicated - Goodwill remained unchanged at **$15.13 million** at both June 30, 2025, and September 30, 2024[8](index=8&type=chunk)[151](index=151&type=chunk) - Goodwill was determined not to be impaired as of May 31, 2025, based on the fiscal year 2025 impairment test[44](index=44&type=chunk) - CDI decreased by **$135,000 (29.9%)** to **$316,000** at June 30, 2025, from **$451,000** at September 30, 2024, due to scheduled amortization[8](index=8&type=chunk)[151](index=151&type=chunk) [(4) Loans Receivable and Allowance for Credit Losses](index=20&type=section&id=%284%29%20Loans%20Receivable%20and%20Allowance%20for%20Credit%20Losses) Loans receivable, net, increased, primarily in multi-family, one-to-four-family, and commercial real estate loans, while the Allowance for Credit Losses (ACL) on loans increased due to portfolio growth and updated model assumptions, and total delinquent loans increased Loans Receivable and ACL Highlights (Dollars in thousands) | Metric | June 30, 2025 | September 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :----------------- | :--------- | :--------- | | Loans receivable, net | $1,441,496 | $1,421,523 | $19,973 | 1.4% | | Allowance for Credit Losses (ACL) | $17,878 | $17,478 | $400 | 2.3% | | Non-accrual loans | $3,843 | $3,885 | $(42) | -1.1% | | Total delinquent loans (30+ days past due) and non-accrual loans | $6,172 | $4,479 | $1,693 | 37.8% | | Substandard loans | $32,371 | $8,435 | $23,936 | 283.8% | - Provision for credit losses on loans for the three months ended June 30, 2025, was **$351,000**, and for the nine months was **$640,000**, driven by loan growth and annual model assumption updates[66](index=66&type=chunk)[67](index=67&type=chunk)[133](index=133&type=chunk) - Substandard loans increased significantly due to downgrading three relationships that were previously classified as watch and special mention[159](index=159&type=chunk) [(5) Leases](index=32&type=section&id=%285%29%20Leases) The Company holds operating leases for two retail bank branches and an administrative office, with remaining terms of two to seven years, and lease costs remained stable, with a weighted average remaining lease term of 5.5 years and a discount rate of 2.35% at June 30, 2025 Operating Lease Costs (Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Operating lease cost | $87 | $98 | $284 | $283 | - Weighted average remaining lease term for operating leases was **5.5 years** at June 30, 2025[78](index=78&type=chunk) - Weighted average discount rate for operating leases was **2.35%** at June 30, 2025[78](index=78&type=chunk) [(6) Net Income Per Common Share](index=33&type=section&id=%286%29%20Net%20Income%20Per%20Common%20Share) Basic and diluted net income per common share increased for both the three and nine months ended June 30, 2025, reflecting higher net income and a decrease in weighted average common shares outstanding Net Income Per Common Share (Dollars in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Basic net income per common share | $0.90 | $0.74 | $2.61 | $2.22 | | Diluted net income per common share | $0.90 | $0.74 | $2.60 | $2.21 | | Weighted average common shares outstanding (Basic) | 7,893,308 | 8,004,552 | 7,929,626 | 8,067,068 | [(7) Accumulated Other Comprehensive Income (Loss)](index=34&type=section&id=%287%29%20Accumulated%20Other%20Comprehensive%20Income%20%28Loss%29) The Company reported an accumulated other comprehensive loss of **$(775) thousand** at June 30, 2025, primarily due to unrealized holding losses on available-for-sale securities, net of income taxes Accumulated Other Comprehensive Income (Loss) (Dollars in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Balance of AOCI at end of period | $(775) | $(670) | | Metric | Nine Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------ | | Other comprehensive loss (net of income taxes) | $(795) | [(8) Stock Compensation Plans](index=34&type=section&id=%288%29%20Stock%20Compensation%20Plans) The Company operates under the 2019 Equity Incentive Plan, with 162,185 shares available for future issuance, and stock option activity for the nine months ended June 30, 2025, included 41,960 exercised options and 11,300 forfeited options, with unrecognized compensation costs totaling $309,000 for stock options and $1.12 million for restricted stock - **162,185 shares** of common stock remained available for issuance under the 2019 Equity Incentive Plan at June 30, 2025[85](index=85&type=chunk) Stock Option Activity (Nine Months Ended June 30, 2025) | Metric | Number of Shares | Weighted Average Exercise Price | | :-------------------------------- | :--------------- | :------------------------------ | | Options outstanding, beginning of period | 306,240 | $25.21 | | Exercised | (41,960) | $19.47 | | Forfeited | (11,300) | $28.41 | | Options outstanding, end of period | 252,980 | $26.02 | - Unrecognized compensation cost related to unvested stock options was **$309,000**, expected to be recognized over a weighted average period of **1.37 years**[93](index=93&type=chunk) - Unrecognized compensation cost related to unvested restricted stock awards was **$1.12 million**, expected to be recognized over a weighted average period of **2.28 years**[95](index=95&type=chunk) [(9) Fair Value Measurements](index=36&type=section&id=%289%29%20Fair%20Value%20Measurements) The Company measures certain assets at fair value on a recurring basis, primarily investment securities available for sale and equity securities, categorized into Level 1 and Level 2 inputs, while non-recurring fair value measurements are applied to collateral-dependent loans and OREO, classified as Level 3 due to significant unobservable inputs Assets Measured at Fair Value on a Recurring Basis (June 30, 2025, Dollars in thousands) | Asset Type | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | Available for sale investment securities | $14,866 | $71,609 | $— | $86,475 | | Investments in equity securities | $855 | $— | $— | $855 | | **Total** | **$15,721** | **$71,609** | **$—** | **$87,330** | Assets Measured at Fair Value on a Non-Recurring Basis (June 30, 2025, Dollars in thousands) | Asset Type | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | Individually evaluated collateral-dependent loans | $— | $— | $523 | $523 | | OREO and other repossessed assets | $— | $— | $221 | $221 | | **Total** | **$—** | **$—** | **$744** | **$744** | - Collateral-dependent loans and OREO are classified within Level 3 of the fair value hierarchy due to significant unobservable inputs[103](index=103&type=chunk)[104](index=104&type=chunk) [(10) Recent Accounting Pronouncements](index=39&type=section&id=%2810%29%20Recent%20Accounting%20Pronouncements) The FASB issued ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures), which the Company expects to impact only disclosure requirements, with no material effect on its financial position, results of operations, or cash flows - ASU 2023-09 (Income Taxes) requires improved income tax disclosures, effective for annual periods beginning after December 15, 2024[109](index=109&type=chunk) - ASU 2024-03 (Income Statement-Expense Disaggregation Disclosures) requires specified information about certain costs and expenses, effective for annual periods beginning after December 15, 2026[110](index=110&type=chunk)[111](index=111&type=chunk) - The Company expects these ASUs to impact only disclosure requirements and not materially affect its financial position, results of operations, or cash flows[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) [(11) Revenue from Contracts with Customers](index=40&type=section&id=%2811%29%20Revenue%20from%20Contracts%20with%20Customers) The majority of the Company's revenue is outside the scope of ASC 606, with revenue recognized under ASC 606, included in non-interest income, comprising service charges on deposits, ATM and debit card interchange fees, escrow fees, and non-deposit investment sales - The majority of the Company's revenues, such as interest income and gains on loan sales, are not within the scope of ASC 606[113](index=113&type=chunk) - Revenue recognized under ASC 606 includes service charges on deposits, ATM and debit card interchange transaction fees, escrow fees, and fee income from non-deposit investment sales[113](index=113&type=chunk) ASC 606 Revenue (Dollars in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Nine Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :------------------------------ | | Service charges on deposits | $966 | $2,924 | | ATM and debit card interchange transaction fees | $1,262 | $3,706 | | Escrow fees | $32 | $66 | | Fee income from non-deposit investment sales (included in 'Other') | $9 | $12 | | **Total ASC 606 Revenue** | **$2,269** | **$6,708** | [(12) Commitments and Contingencies](index=40&type=section&id=%2812%29%20Commitments%20and%20Contingencies) The Company has off-balance-sheet commitments, primarily undisbursed construction loans, lines of credit, and commitments to extend credit, totaling **$237.13 million** at June 30, 2025, with an Allowance for Credit Losses (ACL) for unfunded commitments increasing to **$413,000** Summary of Commitments (Dollars in thousands) | Commitment Type | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Undisbursed portion of construction loans in process | $76,272 | $87,196 | | Undisbursed lines of credit | $125,623 | $118,050 | | Commitments to extend credit | $35,233 | $14,278 | | **Total Commitments** | **$237,128** | **$219,524** | | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | ACL on unfunded loan commitments | $413 | $267 | - The Company has an employee severance compensation plan and employment agreements with key officers, providing severance benefits in the event of a change in control[119](index=119&type=chunk)[120](index=120&type=chunk) - Management believes liabilities arising from various pending and threatened legal actions in the ordinary course of business will not have a material effect on the future consolidated financial position[121](index=121&type=chunk) [(13) Subsequent Events](index=42&type=section&id=%2813%29%20Subsequent%20Events) The Company anticipates recording approximately **$1.00 million** in death benefit claim income during the quarter ending September 30, 2025, following the passing of a former officer on whom BOLI policies were held - The Company anticipates recording approximately **$1.00 million** in death benefit claim income during the September 30, 2025, quarter[122](index=122&type=chunk) - This income relates to BOLI policies on a former officer[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and operating results, highlighting key trends, significant changes in balance sheet items, income statement performance, asset quality, liquidity, and capital resources for the three and nine months ended June 30, 2025, compared to prior periods [Special Note Regarding Forward-Looking Statements](index=42&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section serves as a cautionary note, identifying various known and unknown risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including economic conditions, interest rate changes, credit risks, regulatory actions, and technological advancements like AI - Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially[125](index=125&type=chunk) - Key risks include adverse impacts to economic conditions, changes in interest rate levels, credit risks of lending activities, legislation or regulatory changes, and vulnerabilities in information systems or third-party service providers[125](index=125&type=chunk)[128](index=128&type=chunk) - The Company does not undertake to publicly update or revise any forward-looking statements[126](index=126&type=chunk) [Overview](index=43&type=section&id=Overview) Timberland Bancorp, Inc. is the holding company for Timberland Bank, a community-oriented bank serving western Washington with 23 offices, whose profitability is primarily driven by net interest income, influenced by market interest rates and the volume/mix of assets and liabilities - Timberland Bancorp, Inc. is the holding company for Timberland Bank, a community-oriented bank operating **23 offices** in western Washington[127](index=127&type=chunk) - As of June 30, 2025, the Company had total assets of **$1.96 billion**, net loans receivable of **$1.44 billion**, total deposits of **$1.67 billion**, and total shareholders' equity of **$256.66 million**[127](index=127&type=chunk) - Profitability primarily depends on net interest income after provision for (recapture of) credit losses, which is influenced by market interest rates and the volume/mix of interest-earning assets and liabilities[131](index=131&type=chunk)[132](index=132&type=chunk) - The Federal Open Market Committee (FOMC) lowered the target range for the federal funds rate three times during 2024, resulting in a range of **4.25% to 4.50%** at June 30, 2025[132](index=132&type=chunk) [Critical Accounting Estimates](index=45&type=section&id=Critical%20Accounting%20Estimates) This section refers to the Company's 2024 Form 10-K for a detailed description of critical accounting estimates, noting that there have been no material changes in these policies or estimates - There have been no material changes in the Company's critical accounting policies and estimates as previously disclosed in the 2024 Form 10-K[137](index=137&type=chunk) [Comparison of Financial Condition at June 30, 2025 and September 30, 2024](index=45&type=section&id=Comparison%20of%20Financial%20Condition%20at%20June%2030%2C%202025%20and%20September%2030%2C%202024) The Company experienced overall asset growth, primarily in cash and loans, funded by increased deposits, while shareholders' equity also rose, and investment securities decreased due to maturities and prepayments Financial Condition Changes (Dollars in thousands) | Metric | June 30, 2025 | September 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :----------------- | :--------- | :--------- | | Total assets | $1,957,192 | $1,923,475 | $33,717 | 1.8% | | Net loans receivable | $1,441,496 | $1,421,523 | $19,973 | 1.4% | | Total deposits | $1,669,477 | $1,647,668 | $21,809 | 1.3% | | Shareholders' equity | $256,664 | $245,413 | $11,251 | 4.6% | | Cash and cash equivalents & CDs held for investment | $202,089 | $174,937 | $27,152 | 15.5% | | Investment securities (incl. equity) | $228,900 | $245,220 | $(16,320) | -6.7% | | Loan originations (9 months) | $210,810 | $202,620 | $8,190 | 4.0% | | Loan servicing rights, net | $911 | $1,372 | $(461) | -33.6% | - The increase in assets was primarily funded by an increase in deposits[138](index=138&type=chunk) - The deposit mix shifted toward higher-cost funding sources, such as certificates of deposits, reflecting competitive pricing pressures[154](index=154&type=chunk) [Asset Quality and Commercial Real Estate Portfolio Breakdown](index=48&type=section&id=Asset%20Quality%20and%20Commercial%20Real%20Estate%20Portfolio%20Breakdown) Non-performing assets slightly increased, primarily due to OREO, while non-accrual loans decreased, and substandard loans significantly increased due to downgrades of existing relationships, with the commercial real estate (CRE) portfolio remaining diversified Asset Quality Metrics (Dollars in thousands) | Metric | June 30, 2025 | September 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :----------------- | :--------- | :--------- | | Non-performing assets | $4,102 | $3,936 | $166 | 4.2% | | Non-performing assets as % of total assets | 0.21% | 0.20% | 0.01% | 5.0% | | Non-accrual loans | $3,843 | $3,885 | $(42) | -1.1% | | Substandard loans | $32,371 | $8,435 | $23,936 | 283.8% | | OREO and other repossessed assets, net | $221 | $— | $221 | N/A | - The increase in substandard loans was primarily a result of downgrading three relationships that were previously classified as watch and special mention[159](index=159&type=chunk) Commercial Real Estate (CRE) Loan Portfolio Breakdown by Collateral (June 30, 2025, Dollars in thousands) | Collateral Type | Balance | Percent of CRE Portfolio | | :-------------------------------- | :------ | :----------------------- | | Industrial warehouse | $128,822 | 21.2% | | Medical/dental offices | $81,238 | 13.4% | | Office buildings | $68,916 | 11.3% | | Other retail buildings | $54,472 | 9.0% | | Mini-storage | $38,483 | 6.3% | | Hotel/motel | $31,656 | 5.2% | | Restaurants | $27,485 | 4.5% | | Gas stations/convenience stores | $24,359 | 4.0% | | Churches | $14,690 | 2.4% | | Nursing homes | $13,532 | 2.2% | | Shopping centers | $10,507 | 1.7% | | Mobile home parks | $8,882 | 1.5% | | Other | $104,882 | 17.3% | | **Total CRE** | **$607,924** | **100.0%** | [Comparison of Operating Results for the Three and Nine Months Ended June 30, 2025 and 2024](index=53&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20and%20Nine%20Months%20Ended%20June%2030%2C%202025%20and%202024) Net income and diluted EPS increased for both the quarter and nine months, driven by higher net interest income, with net interest margin expanding, while non-interest income saw a modest increase and non-interest expense rose due to taxes and professional fees Operating Results Highlights (Dollars in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $7,100 | $5,924 | $20,715 | $17,928 | | Diluted EPS | $0.90 | $0.74 | $2.60 | $2.21 | | Net interest income | $17,622 | $15,981 | $51,805 | $47,620 | | Net interest margin (NIM) | 3.80% | 3.53% | 3.74% | 3.53% | | Total non-interest income | $2,875 | $2,791 | $8,259 | $8,204 | | Total non-interest expense | $11,167 | $11,069 | $33,428 | $32,684 | | Efficiency ratio | 54.48% | 58.97% | 55.65% | 58.55% | | Provision for income taxes | $1,790 | $1,535 | $5,208 | $4,552 | - The increase in net interest income was due to a higher weighted average yield on interest-earning assets and an increase in average total interest-earning assets[168](index=168&type=chunk)[173](index=173&type=chunk) - Non-interest expense increases were mainly due to higher state and local taxes and professional fees[195](index=195&type=chunk)[196](index=196&type=chunk) [Average Balances, Interest and Average Yields/Cost](index=56&type=section&id=Average%20Balances%2C%20Interest%20and%20Average%20Yields%2FCost) The Company experienced an increase in average interest-earning assets and their weighted average yield for both the three and nine months ended June 30, 2025, while interest-bearing liabilities also grew, their average cost decreased for the quarter but slightly increased for the nine months, contributing to an expanded net interest margin Average Yields and Costs (Three Months Ended June 30) | Metric | 2025 | 2024 | Change (bps) | | :-------------------------------- | :--- | :--- | :----------- | | Weighted average yield on interest-earning assets | 5.50% | 5.33% | 17 | | Average cost of interest-bearing liabilities | 2.49% | 2.64% | -15 | | Net interest margin | 3.80% | 3.53% | 27 | Average Yields and Costs (Nine Months Ended June 30) | Metric | 2025 | 2024 | Change (bps) | | :-------------------------------- | :--- | :--- | :----------- | | Weighted average yield on interest-earning assets | 5.46% | 5.17% | 29 | | Average cost of interest-bearing liabilities | 2.53% | 2.46% | 7 | | Net interest margin | 3.74% | 3.53% | 21 | - The average balance of loans receivable increased by **$58.77 million (4.2%)** for the three months and **$78.29 million (5.7%)** for the nine months ended June 30, 2025[170](index=170&type=chunk)[175](index=175&type=chunk) [Rate Volume Analysis](index=58&type=section&id=Rate%20Volume%20Analysis) The analysis shows that for both the three and nine months ended June 30, 2025, the increase in net interest income was primarily driven by changes in interest rates, particularly on loans receivable, with volume changes also contributing positively Net Interest Income Change by Rate and Volume (Dollars in thousands) | Period | Net Change | Increase (Decrease) due to Rate | Increase (Decrease) due to Volume | | :-------------------------------- | :--------- | :------------------------------ | :------------------------------ | | Three months ended June 30, 2025 vs. 2024 | $1,641 | $1,304 | $337 | | Nine months ended June 30, 2025 vs. 2024 | $4,185 | $2,463 | $1,722 | - For the three months, the increase in income on interest-earning assets was **$1.405 million**, with **$674,000** from rate and **$731,000** from volume[187](index=187&type=chunk) - For the nine months, the increase in income on interest-earning assets was **$5.876 million**, with **$3.013 million** from rate and **$2.863 million** from volume[187](index=187&type=chunk) [Liquidity](index=60&type=section&id=Liquidity) The Company maintains adequate liquidity through customer deposits, loan payments, and available credit facilities with FHLB, FRB, and PCBB, with liquid assets increasing, and the Bank projecting future capital expenditures and lease commitments - Primary sources of funds include customer deposits, loan payments, loan sales, maturing investment securities, and borrowings from FHLB and FRB[199](index=199&type=chunk) Liquidity Resources (Dollars in thousands) | Metric | June 30, 2025 | | :-------------------------------- | :------------ | | Regulatory liquidity ratio | 14.02% | | Available FHLB borrowings | $624,060 | | Outstanding FHLB borrowings | $20,000 | | Available FRB borrowing line | $70,190 | | Liquid assets (cash, CDs, AFS securities) | $289,420 | | Timberland Bancorp (unconsolidated) liquid assets | $1,240 | - The Bank projects approximately **$650,000** in pre-tax capital expenditures for the remainder of fiscal 2025, related to remodeling a leased building for a new branch[206](index=206&type=chunk) [Capital Resources](index=61&type=section&id=Capital%20Resources) The Bank maintains a 'well-capitalized' status under FDIC regulations, exceeding all minimum regulatory capital requirements, and Timberland Bancorp also exceeds regulatory capital ratios for bank holding companies, continuing its quarterly cash dividend practice and adopting a new stock repurchase program - The Bank was considered 'well-capitalized' under applicable regulatory requirements at June 30, 2025[212](index=212&type=chunk) Bank Regulatory Capital Ratios (June 30, 2025, Dollars in thousands) | Capital Ratio | Actual Amount | Actual Ratio | Minimum To Be 'Adequately Capitalized' Ratio | To Be 'Well Capitalized' Ratio | | :-------------------------------- | :------------ | :----------- | :------------------------------------------- | :----------------------------- | | Leverage Capital Ratio (Tier 1) | $241,598 | 12.56% | 4.00% | 5.00% | | Common Equity Tier 1 Capital | $241,598 | 19.16% | 4.50% | 6.50% | | Tier 1 Capital | $241,598 | 19.16% | 6.00% | 8.00% | | Total Capital | $257,392 | 20.41% | 8.00% | 10.00% | - Timberland Bancorp (holding company) would have exceeded all regulatory capital requirements if subject to guidelines for banks with **$3.0 billion** or more in assets[215](index=215&type=chunk) - The Company expects to continue its practice of paying quarterly cash dividends on its common stock at a rate of **$0.26 per share**[209](index=209&type=chunk) - A new stock repurchase program was adopted on July 22, 2025, authorizing the repurchase of up to **393,842 shares** (approximately **5%** of outstanding common stock)[210](index=210&type=chunk) [Key Financial Ratios and Data](index=62&type=section&id=Key%20Financial%20Ratios%20and%20Data) Performance ratios for the three and nine months ended June 30, 2025, show improvements in return on average assets, return on average equity, net interest margin, and efficiency ratio compared to the prior year Performance Ratios | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Return on average assets | 1.47% | 1.25% | 1.44% | 1.27% | | Return on average equity | 11.23% | 9.95% | 11.07% | 10.10% | | Net interest margin | 3.80% | 3.53% | 3.74% | 3.53% | | Efficiency ratio | 54.48% | 58.97% | 55.65% | 58.55% | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in the Company's market risk disclosures from those provided in its 2024 Form 10-K - No material changes in market risk information from the Company's 2024 Form 10-K[217](index=217&type=chunk) [Item 4. Controls and Procedures](index=62&type=section&id=Item%204%2E%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures, concluding their effectiveness as of June 30, 2025, and notes no material changes in internal control over financial reporting during the quarter, while acknowledging the inherent limitations of all control procedures - The Company's disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate information disclosure[223](index=223&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[223](index=223&type=chunk) - Acknowledges inherent limitations of control procedures, stating they provide reasonable, not absolute, assurance against errors and fraud[219](index=219&type=chunk) [PART II. OTHER INFORMATION](index=63&type=section&id=PART%20II%2E%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=63&type=section&id=Item%201%2E%20Legal%20Proceedings) The Company and the Bank are not currently party to any material legal proceedings, though they may be involved in various claims and legal actions in the ordinary course of business - Neither the Company nor the Bank is a party to any material legal proceedings at this time[220](index=220&type=chunk) [Item 1A. Risk Factors](index=63&type=section&id=Item%201A%2E%20Risk%20Factors) This section updates the Company's risk factors, specifically introducing new risks associated with the current and future uses of Artificial Intelligence (AI) and other emerging technologies, including model risk, cybersecurity threats, operational risks, and ethical/reputational concerns - New risk factor identified: Current and future uses of Artificial Intelligence (AI) and other emerging technologies[221](index=221&type=chunk) - AI introduces model risk (flawed algorithms, biased data), cybersecurity threats (data breaches, adversarial attacks, data poisoning), and regulatory compliance concerns due to 'black-box' systems[221](index=221&type=chunk) - Operational risks from AI include potential system failures, over-reliance on AI, and integration challenges, while ethical and reputational risks may erode customer trust[222](index=222&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company repurchased **34,236 shares** of common stock during the quarter ended June 30, 2025, at an average price of **$30.76**, and a new stock repurchase program was adopted on July 22, 2025, authorizing the repurchase of up to **393,842 shares**, replacing the prior program Shares Repurchased During Q3 2025 | Period | Total No. of Shares Repurchased | Average Price Paid Per Share | Maximum No. of Shares that May Yet Be Purchased Under the Plan (1) | | :--- | :--- | :--- | :--- | | 4/01/2025 - 4/30/2025 | 4,015 | $30.03 | 61,983 | | 5/01/2025 - 5/31/2025 | 19,377 | $31.15 | 42,606 | | 6/01/2025 - 6/30/2025 | 10,844 | $30.34 | 31,762 | | **Total** | **34,236** | **$30.76** | **31,762** | - A new stock repurchase program was adopted on July 22, 2025, authorizing the repurchase of up to **393,842 shares** (approximately **5%** of the Company's outstanding common stock), replacing the prior program[210](index=210&type=chunk)[225](index=225&type=chunk) - The Company is subject to Federal Reserve restrictions requiring prior written notice for repurchases exceeding **10%** of consolidated net worth over 12 months[226](index=226&type=chunk) [Item 3. Defaults Upon Senior Securities](index=64&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reported period - Not applicable[227](index=227&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reported period - Not applicable[227](index=227&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205%2E%20Other%20Information) This section primarily refers to stock repurchases, noting no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer (as defined in Rule 16a-1(f) under the Act) of the Company adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the quarter ended June 30, 2025[232](index=232&type=chunk) [Item 6. Exhibits](index=66&type=section&id=Item%206%2E%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including articles of incorporation, bylaws, employment agreements, equity incentive plans, certifications, and XBRL formatted financial statements - Includes Articles of Incorporation, Amended and Restated Bylaws, various Employment Agreements, Equity Incentive Plans (2019 Plan), and Certifications (302 and 906 of Sarbanes Oxley Act)[232](index=232&type=chunk) - Financial statements and notes are provided in Extensible Business Reporting Language (XBRL) format as Exhibit 101 and Cover Page Interactive Data File as Exhibit 104[232](index=232&type=chunk) [SIGNATURES](index=67&type=section&id=SIGNATURES) The report is duly signed on behalf of Timberland Bancorp, Inc. by its Chief Executive Officer, Dean J. Brydon, and Chief Financial Officer, Marci A. Basich, on August 8, 2025 - The report was signed by Dean J. Brydon, Chief Executive Officer, and Marci A. Basich, Chief Financial Officer, on August 8, 2025[236](index=236&type=chunk)

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Timberland Bancorp reported strong Q3 2025 results, with net income and EPS growing over 20% year-over-year, driven by NIM expansion Q3 Fiscal 2025 Key Earnings Metrics | Metric | Q3 2025 | Q2 2025 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Net Income | $7.10M | $6.76M | $5.92M | +20% | | Diluted EPS | $0.90 | $0.85 | $0.74 | +22% | Nine-Month Fiscal Performance Comparison | Metric | Nine Months Ended 6/30/2025 | Nine Months Ended 6/30/2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Income | $20.72M | $17.93M | +16% | | Diluted EPS | $2.60 | $2.21 | +18% | Q3 Fiscal 2025 Profitability Ratios | Ratio | Q3 2025 | Q2 2025 | Q3 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin (NIM) | 3.80% | 3.79% | 3.53% | | Return on Average Assets (ROA) | 1.47% | 1.43% | 1.25% | | Return on Average Equity (ROE) | 11.23% | 10.95% | 9.95% | [Operating Results Analysis](index=2&type=section&id=Operating%20Results) Operating revenue grew 9% year-over-year, driven by a 10% increase in net interest income and an improved efficiency ratio of 54.48% - Net interest income for Q3 2025 increased by **10%** year-over-year to **$17.62 million**, driven by a higher average balance of interest-earning assets and an expanded Net Interest Margin (NIM) of **3.80%**[8](index=8&type=chunk) - A provision for credit losses on loans of **$351,000** was recorded, primarily due to loan portfolio growth and changes in its composition[11](index=11&type=chunk) - Non-interest income rose **7%** from the preceding quarter to **$2.88 million**, mainly due to higher ATM and debit card interchange fees[12](index=12&type=chunk) - Operating expenses remained stable, decreasing slightly from the prior quarter, with the efficiency ratio improving to **54.48%**[13](index=13&type=chunk) [Balance Sheet Management](index=3&type=section&id=Balance%20Sheet%20Management) The balance sheet showed steady growth, with total assets increasing 3% year-over-year to **$1.96 billion**, supported by loan and deposit growth [Asset Composition](index=3&type=section&id=Asset%20Composition) Total assets grew 1% to **$1.96 billion**, driven by a 2% increase in net loans receivable to **$1.44 billion**, led by multi-family and commercial real estate - Total assets increased by **$24.46 million (1%)** during the quarter to **$1.96 billion**, and by **$56.56 million (3%)** year-over-year[15](index=15&type=chunk) - The company maintains strong liquidity, with cash, equivalents, and available-for-sale securities representing **17.0%** of total liabilities, and an additional **$674 million** in secured borrowing capacity[16](index=16&type=chunk) - Net loans receivable grew by **2%** during the quarter, driven by a **$21.83 million** increase in multi-family loans and a **$5.67 million** increase in commercial real estate loans[17](index=17&type=chunk) Loan Portfolio Composition ($ in thousands) | Loan Category | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Mortgage Loans | $1,364,788 | $1,336,738 | $1,323,338 | | Total Consumer Loans | $49,687 | $49,833 | $46,800 | | Total Commercial Loans | $126,598 | $131,399 | $136,527 | | **Total Loans** | **$1,541,073** | **$1,517,970** | **$1,506,665** | [Liabilities and Deposits](index=5&type=section&id=Liabilities%20and%20Deposits) Total deposits increased 1% to **$1.67 billion** during the quarter, driven by certificates of deposit, with non-interest-bearing demand deposits at **24%** of the mix - Total deposits grew by **$18.65 million (1%)** during the quarter, led by a **$16.01 million** increase in certificates of deposit[23](index=23&type=chunk) Deposit Composition ($ in thousands) | Deposit Type | June 30, 2025 | % of Total | June 30, 2024 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Non-interest-bearing demand | $406,222 | 24% | $407,125 | 25% | | Interest-bearing | $1,263,255 | 76% | $1,221,419 | 75% | | **Total Deposits** | **$1,669,477** | **100%** | **$1,628,544** | **100%** | - Total borrowings remained stable at **$20.00 million** with a weighted average rate of **3.97%**[26](index=26&type=chunk) [Shareholders' Equity and Capital Adequacy](index=6&type=section&id=Shareholders%27%20Equity%20and%20Capital%20Adequacy) Shareholders' equity grew 2% to **$256.66 million**, supported by net income, with strong capital ratios including a total risk-based capital ratio of **20.54%** - Total shareholders' equity increased by **$4.14 million (2%)** during the quarter, driven by net income, and partially offset by **$2.05 million** in dividends and **$1.02 million** in stock repurchases[27](index=27&type=chunk) Key Capital Ratios | Ratio | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Tier 1 leverage capital | 12.63% | 12.55% | 12.04% | | Total risk-based capital | 20.54% | 20.29% | 19.22% | [Asset Quality](index=7&type=section&id=Asset%20Quality) Asset quality remained generally stable, with the non-performing assets to total assets ratio at **0.21%**, despite an increase in non-accrual loans due to a single well-collateralized loan - The ratio of non-performing assets to total assets was **0.21%** at quarter-end, compared to **0.13%** in the prior quarter and **0.22%** a year ago[31](index=31&type=chunk) - Net recoveries were **$1,000** for the quarter, an improvement from net charge-offs of **$36,000** in the comparable quarter one year ago[31](index=31&type=chunk) - Non-accrual loans increased by **$1.52 million** from the prior quarter to **$3.84 million**, primarily due to one well-collateralized loan secured by single-family homes being past maturity[32](index=32&type=chunk) Non-Accrual Loans by Type ($ in thousands) | Loan Category | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Mortgage loans | $1,942 | $371 | $1,597 | | Consumer loans | $575 | $575 | $615 | | Commercial business loans | $1,326 | $1,381 | $1,908 | | **Total Non-Accrual Loans** | **$3,843** | **$2,327** | **$4,120** | [Shareholder Return Initiatives](index=1&type=section&id=Shareholder%20Return%20Initiatives) The company demonstrated strong commitment to shareholder returns through a **$0.26** per share quarterly cash dividend and a new stock repurchase program for up to **5%** of outstanding shares - A quarterly cash dividend of **$0.26** per share was declared, payable on August 22, 2025, marking the **51st** consecutive quarterly cash dividend[3](index=3&type=chunk) - A new stock repurchase program was adopted, allowing the Company to repurchase up to **5%** of its outstanding shares, or **393,842** shares, replacing the existing program[3](index=3&type=chunk)[29](index=29&type=chunk) - During the third fiscal quarter, the company repurchased **34,236** shares of its common stock for **$1.02 million**, at an average price of **$29.74** per share[9](index=9&type=chunk)[27](index=27&type=chunk) [Financial Statements and Supplementary Data](index=9&type=section&id=Financial%20Statements%20and%20Supplementary%20Data) This section provides detailed unaudited consolidated financial statements, including income statements, balance sheets, key ratios, and non-GAAP reconciliations for periods ended June 30, 2025 [Consolidated Statements of Income](index=9&type=section&id=Consolidated%20Statements%20of%20Income) The income statement details Q3 2025 net interest income of **$17.62 million** and net income of **$7.10 million**, with nine-month figures of **$51.81 million** and **$20.72 million** respectively Quarterly Income Statement Highlights ($ in thousands) | Line Item | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Net Interest Income | $17,622 | $15,981 | | Provision for Credit Losses | $440 | $248 | | Non-interest Income | $2,875 | $2,791 | | Non-interest Expense | $11,167 | $11,069 | | **Net Income** | **$7,100** | **$5,924** | Nine-Month Income Statement Highlights ($ in thousands) | Line Item | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | | Net Interest Income | $51,805 | $47,620 | | Provision for Credit Losses | $640 | $680 | | Non-interest Income | $8,259 | $8,204 | | Non-interest Expense | $33,428 | $32,684 | | **Net Income** | **$20,715** | **$17,928** | [Consolidated Balance Sheets](index=13&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2025, shows total assets of **$1.96 billion**, total liabilities of **$1.70 billion**, and total shareholders' equity of **$256.66 million** Key Balance Sheet Items ($ in thousands) | Line Item | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Cash and Cash Equivalents | $193,627 | $158,913 | | Net Loans Receivable | $1,441,496 | $1,397,019 | | Total Assets | $1,957,192 | $1,900,629 | | Total Deposits | $1,669,477 | $1,628,544 | | Total Liabilities | $1,700,528 | $1,659,406 | | Total Shareholders' Equity | $256,664 | $241,223 | [Key Performance and Capital Ratios](index=14&type=section&id=Key%20Performance%20and%20Capital%20Ratios) Performance ratios improved, with ROA at **1.47%** and ROE at **11.23%**, while capital ratios remained robust, including a total risk-based capital ratio of **20.54%** Quarterly Performance Ratios | Ratio | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Return on average assets (annualized) | 1.47% | 1.25% | | Return on average equity (annualized) | 11.23% | 9.95% | | Net interest margin (annualized) | 3.80% | 3.53% | | Efficiency ratio | 54.48% | 58.97% | [Non-GAAP Financial Measures Reconciliation](index=17&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section reconciles GAAP to non-GAAP measures, adjusting for intangible assets, showing tangible common equity of **$241.22 million** and tangible assets of **$1.94 billion** as of June 30, 2025 Reconciliation of GAAP to Non-GAAP Tangible Equity and Assets ($ in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Shareholders' equity (GAAP) | $256,664 | $241,223 | | Less: Goodwill and CDI | ($15,447) | ($15,639) | | **Tangible common equity (Non-GAAP)** | **$241,217** | **$225,584** | | Total assets (GAAP) | $1,957,192 | $1,900,629 | | Less: Goodwill and CDI | ($15,447) | ($15,639) | | **Tangible assets (Non-GAAP)** | **$1,941,745** | **$1,884,990** |

Core Viewpoint - Timberland Bancorp, Inc. reported strong financial results for the third fiscal quarter of 2025, with significant increases in net income and earnings per share, driven by net interest margin expansion and steady balance sheet growth [3][9]. Earnings Highlights - Net income for the quarter ended June 30, 2025, was $7.10 million, or $0.90 per diluted common share, representing a 5% increase from the previous quarter and a 20% increase year-over-year [1][9]. - For the first nine months of fiscal 2025, net income rose 16% to $20.72 million, or $2.60 per diluted common share, compared to $17.93 million, or $2.21 per diluted common share for the same period in fiscal 2024 [2][9]. - The quarterly return on average assets increased to 1.47%, and return on average equity rose to 11.23% [9][5]. Balance Sheet Highlights - Total assets increased by 1% from the prior quarter to $1.96 billion and grew 3% year-over-year [15][9]. - Total deposits rose by $18.65 million, or 1%, to $1.67 billion during the quarter, with significant increases in certificates of deposit and money market accounts [24][9]. - Total shareholders' equity increased by 2% from the prior quarter to $256.66 million, reflecting strong earnings and a stock repurchase program [28][9]. Net Interest Margin and Income - The net interest margin expanded to 3.80%, a one basis point increase from the prior quarter and a 27 basis point improvement year-over-year [3][9]. - Net interest income for the current quarter increased by 2% to $17.62 million, and for the first nine months of fiscal 2025, it rose by 9% to $51.81 million [8][10]. Stock Repurchase Program - The Board of Directors announced a new stock repurchase program allowing the company to repurchase up to 5% of outstanding shares, replacing the previous program [30][31]. Asset Quality - The non-performing assets to total assets ratio was 0.21% at June 30, 2025, compared to 0.13% at March 31, 2025, and 0.22% at June 30, 2024 [32][9]. - Total delinquent loans increased by 86% to $6.18 million, primarily due to one loan being past maturity [33][9]. Loan Portfolio - Net loans receivable increased by 2% during the quarter to $1.44 billion, with notable growth in multi-family and commercial real estate loans [17][9]. - Timberland originated $81.99 million in loans during the quarter, compared to $56.76 million for the preceding quarter [22][9].

Group 1 - Timberland Bancorp (NASDAQ: TSBK) has a robust balance sheet and a loan book with a low amount of loans past due, making it an attractive investment opportunity [1] - The investment group European Small Cap Ideas focuses on high-quality small-cap investment opportunities in Europe, emphasizing capital gains and dividend income for continuous cash flow [1] - The group offers two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, along with weekly updates and educational content [1]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Timberland Bancorp, Inc.'s unaudited consolidated financial statements, including balance sheets, income statements, and cash flows, for the periods ended March 31, 2025 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets reached $1.93 billion as of March 31, 2025, with shareholders' equity increasing to $252.52 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (Unaudited) | September 30, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$1,932,730** | **$1,923,475** | | Cash and cash equivalents | $191,211 | $164,728 | | Loans receivable, net | $1,420,074 | $1,421,523 | | Total deposits | $1,650,830 | $1,647,668 | | **Total Liabilities** | **$1,680,206** | **$1,678,062** | | **Total Shareholders' Equity** | **$252,524** | **$245,413** | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) Quarterly net income increased to $6.76 million, driven by higher net interest income, with diluted EPS reaching $0.85 Key Income Statement Data (in thousands, except per share amounts) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $17,213 | $15,635 | $34,182 | $31,639 | | Provision for Credit Losses | $246 | $81 | $272 | $417 | | Non-interest Income | $2,687 | $2,615 | $5,384 | $5,413 | | Non-interest Expense | $11,194 | $10,991 | $22,260 | $21,615 | | **Net Income** | **$6,755** | **$5,708** | **$13,615** | **$12,004** | | **Diluted EPS** | **$0.85** | **$0.70** | **$1.71** | **$1.47** | [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for the quarter ended March 31, 2025, was $6.88 million, primarily driven by net income Comprehensive Income (in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $6,755 | $5,708 | $13,615 | $12,004 | | Other Comprehensive Income (Loss) | $122 | $82 | $(690) | $339 | | **Total Comprehensive Income** | **$6,877** | **$5,790** | **$12,925** | **$12,343** | [Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity increased to $252.52 million at March 31, 2025, primarily due to net income, offset by stock repurchases and dividends Changes in Shareholders' Equity (Six Months Ended Mar 31, 2025, in thousands) | Description | Amount | | :--- | :--- | | **Beginning Balance (Sep 30, 2024)** | **$245,413** | | Net Income | $13,615 | | Other Comprehensive Loss | $(690) | | Repurchase of Common Stock | $(2,792) | | Common Stock Dividends | $(3,980) | | Other (Stock Options, etc.) | $968 | | **Ending Balance (Mar 31, 2025)** | **$252,524** | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was $9.30 million and by investing activities $20.11 million, leading to a $26.48 million increase in cash Cash Flow Summary (Six Months Ended, in thousands) | Cash Flow Category | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $9,298 | $8,975 | | Net Cash from Investing Activities | $20,109 | $(13,506) | | Net Cash from Financing Activities | $(2,924) | $56,159 | | **Net Increase in Cash** | **$26,483** | **$51,628** | [Notes to Unaudited Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail accounting policies, investment securities, loans, and the Allowance for Credit Losses, confirming the company operates as a single community banking segment - The company has one reportable operating segment, defined as community banking in western Washington under the name 'Timberland Bank'[27](index=27&type=chunk) - The Allowance for Credit Losses (ACL) on loans was **$17.53 million** at March 31, 2025, compared to $17.48 million at September 30, 2024[47](index=47&type=chunk) - **Non-accrual loans decreased to $2.33 million** at March 31, 2025, from $3.89 million at September 30, 2024[68](index=68&type=chunk)[71](index=71&type=chunk) - As of March 31, 2025, the Company had commitments to extend credit and undisbursed lines of credit totaling **$220.22 million**[116](index=116&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, highlighting an 18.3% increase in quarterly net income, a 3.79% net interest margin, and improved asset quality [Overview](index=45&type=section&id=Overview) Timberland Bancorp, Inc. is a community bank with $1.93 billion in assets, whose profitability primarily depends on net interest income after credit loss provision - As of March 31, 2025, the Company had **total assets of $1.93 billion**, **net loans receivable of $1.42 billion**, and **total deposits of $1.65 billion**[128](index=128&type=chunk) - Profitability is primarily dependent on net interest income after the provision for credit losses[130](index=130&type=chunk) - A provision for credit losses on loans of **$0.24 million** was recorded for the quarter ended March 31, 2025, mainly due to changes in the loan portfolio's composition[132](index=132&type=chunk) [Comparison of Financial Condition](index=46&type=section&id=Comparison%20of%20Financial%20Condition) Total assets grew 0.5% to $1.93 billion, shareholders' equity rose 2.9% to $252.52 million, and non-performing assets decreased 34.2% to $2.59 million Financial Condition Changes (Mar 31, 2025 vs. Sep 30, 2024) | Item | Change ($M) | Change (%) | | :--- | :--- | :--- | | Total Assets | +$9.26 | +0.5% | | Net Loans Receivable | -$1.45 | -0.1% | | Total Deposits | +$3.16 | +0.2% | | Shareholders' Equity | +$7.11 | +2.9% | - **Non-performing assets decreased by $1.35 million (34.2%) to $2.59 million** at March 31, 2025, from $3.94 million at September 30, 2024, primarily due to a decrease in non-accrual loans[157](index=157&type=chunk) - The Commercial Real Estate (CRE) loan portfolio's largest collateral types at March 31, 2025, were **industrial/warehouse (21.2%)** and **medical/dental offices (14.0%)**[161](index=161&type=chunk) [Comparison of Operating Results](index=54&type=section&id=Comparison%20of%20Operating%20Results) Quarterly net income rose 18.3% to $6.76 million, driven by a 10.1% increase in net interest income and a 3.79% Net Interest Margin, reflecting improved efficiency Quarterly Performance Comparison (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $6.76M | $5.71M | +18.3% | | Diluted EPS | $0.85 | $0.70 | +21.4% | | Net Interest Income | $17.21M | $15.64M | +10.1% | | Net Interest Margin | 3.79% | 3.48% | +31 bps | - The **efficiency ratio for Q2 2025 improved to 56.25%** from 60.22% in Q2 2024, indicating better profitability relative to expenses[194](index=194&type=chunk) - For the six months ended March 31, 2025, **net income increased 13.4% to $13.62 million** from $12.00 million in the prior year period[166](index=166&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity and remains 'well-capitalized' with significant borrowing capacity, increasing its quarterly dividend and continuing stock repurchases Bank Regulatory Capital Ratios (March 31, 2025) | Ratio | Actual | To Be "Well Capitalized" | | :--- | :--- | :--- | | Tier 1 Leverage Ratio | 12.49% | 5.00% | | Common Equity Tier 1 Ratio | 18.99% | 6.50% | | Tier 1 Capital Ratio | 18.99% | 8.00% | | Total Capital Ratio | 20.24% | 10.00% | - The Bank has significant available liquidity, including **$618.87 million in FHLB borrowing capacity** and **$76.03 million with the FRB** as of March 31, 2025[198](index=198&type=chunk) - The quarterly dividend was increased to **$0.26 per share**, and the active stock repurchase program had **65,998 shares remaining** for purchase as of March 31, 2025[207](index=207&type=chunk)[208](index=208&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures were reported from the 2024 Form 10-K - There were no material changes in market risk disclosures from those reported in the 2024 Form 10-K[215](index=215&type=chunk) [Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the Company's disclosure controls and procedures were effective[216](index=216&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[216](index=216&type=chunk) [PART II. OTHER INFORMATION](index=64&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings) Neither the company nor its subsidiary is a party to any material legal proceedings, though routine claims arise in the ordinary course of business - Neither the Company nor the Bank is a party to any material legal proceedings at this time[218](index=218&type=chunk) [Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2024 Form 10-K, except for a new risk concerning Artificial Intelligence use - A new risk factor has been added regarding the current and future uses of Artificial Intelligence (AI) and other emerging technologies[219](index=219&type=chunk) - AI-related risks include **model risk from flawed algorithms or biased data**, **cybersecurity threats**, **regulatory compliance issues** due to the opaque nature of some AI models, and potential operational failures[219](index=219&type=chunk)[220](index=220&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 61,764 shares at an average price of $30.85 during the quarter, with 65,998 shares remaining for repurchase Stock Repurchases (Quarter Ended March 31, 2025) | Period | Shares Repurchased | Average Price Paid | | :--- | :--- | :--- | | Jan 2025 | 0 | $— | | Feb 2025 | 41,764 | $31.25 | | Mar 2025 | 20,000 | $30.01 | | **Total** | **61,764** | **$30.85** | - As of March 31, 2025, **65,998 shares remained available for repurchase** under the Company's 19th stock repurchase plan announced on July 25, 2023[223](index=223&type=chunk) [Defaults Upon Senior Securities](index=66&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports that this item is not applicable - Not applicable[225](index=225&type=chunk) [Mine Safety Disclosures](index=66&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports that this item is not applicable - Not applicable[226](index=226&type=chunk) [Other Information](index=66&type=section&id=Item%205.%20Other%20Information) No other material information is disclosed, and no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - During the quarter ended March 31, 2025, no director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement'[229](index=229&type=chunk) [Exhibits](index=67&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, and CEO/CFO certifications - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[231](index=231&type=chunk) - Financial statements and notes formatted in XBRL are included as Exhibit 101[231](index=231&type=chunk)

Financial Performance - Timberland Bancorp reported net income of $6.76 million, or $0.85 per diluted common share for Q2 2025, a decrease of 2% from the previous quarter but an increase of 18% year-over-year[1][9]. - For the first six months of fiscal 2025, net income increased 13% to $13.62 million, or $1.71 per diluted common share, compared to $12.00 million, or $1.47 per diluted common share for the same period in fiscal 2024[2][9]. - Net income for Q2 2025 was $6,755,000, a decrease of 1.53% from $6,860,000 in Q1 2025 and an increase of 18.34% from $5,708,000 in Q2 2024[39]. - Net income for the six months ended March 31, 2025, was $13,615,000, an increase of 13.43% from $12,004,000 for the same period in 2024[40]. Asset and Deposit Growth - Total assets increased by 1% to $1.93 billion, with a $27.14 million increase in cash and cash equivalents contributing to this growth[15][9]. - Total deposits increased by $20 million, or 1%, during the quarter, driven by increases in checking and certificates of deposit account balances[3][9]. - Total deposits rose by $20.41 million, or 1%, to $1.65 billion at March 31, 2025, driven by increases in certificates of deposit and NOW checking accounts[24]. - Total assets increased to $1,932,730 thousand as of March 31, 2025, up from $1,909,480 thousand at December 31, 2024, representing a growth of 1.3%[41]. - Total deposits reached $1,650,830 thousand, an increase from $1,630,416 thousand at the end of 2024, marking a growth of 1.3%[41]. Loan Portfolio - The loan portfolio grew by 1% from the prior quarter and 4% year-over-year, with net loans receivable reaching $1.42 billion[3][9][17]. - Total mortgage loans increased to $1,336.74 million, representing 88% of total loans as of March 31, 2025, compared to $1,277.46 million and 88% a year ago[19]. - Commercial loans totaled $131.40 million, accounting for 9% of total loans, with a slight decrease from $135.87 million in the previous year[19]. - Timberland originated $56.76 million in loans during the quarter, a decrease from $72.07 million in the prior quarter[22]. - Net loans receivable rose to $1,420,074 thousand, compared to $1,411,819 thousand at the end of 2024, reflecting an increase of 0.9%[41]. Income and Expenses - Total interest and dividend income for Q2 2025 was $24,865,000, a decrease of 1.55% from $25,257,000 in Q1 2025 and an increase of 7.37% from $23,156,000 in Q2 2024[39]. - Net interest income for Q2 2025 was $17,213,000, up 1.43% from $16,970,000 in Q1 2025 and up 9.73% from $15,635,000 in Q2 2024[39]. - Total non-interest income for Q2 2025 was $2,687,000, a slight decrease from $2,697,000 in Q1 2025 and an increase from $2,615,000 in Q2 2024[39]. - Total non-interest expense for Q2 2025 was $11,194,000, an increase from $11,067,000 in Q1 2025 and from $10,991,000 in Q2 2024[39]. Capital and Efficiency - The efficiency ratio improved to 56.25% from 56.27% in the previous quarter and 60.22% a year ago[9][13]. - Shareholders' equity increased by $3.32 million, or 1%, to $252.52 million, supported by net income of $6.76 million for the quarter[28]. - The total risk-based capital ratio stood at 20.29%, indicating strong capitalization as of March 31, 2025[29]. - Return on average assets improved to 1.43% for the three months ended March 31, 2025, up from 1.41% in the previous quarter and 1.22% a year ago[42]. - Return on average equity was 10.95% for Q2 2025, slightly down from 11.03% in Q1 2025 but up from 9.67% in Q2 2024[42]. - The efficiency ratio improved to 56.25% for Q2 2025, down from 56.27% in Q1 2025 and significantly better than 60.22% in Q2 2024[42]. Credit Quality - A provision for credit losses of $237,000 was recorded for the quarter, reflecting loan portfolio growth and changes in composition[11]. - Non-performing assets to total assets ratio improved to 0.13%, down from 0.19% a year ago, reflecting enhanced asset quality[30]. - Total delinquent loans decreased by $697,000, or 17%, to $3.32 million compared to the previous quarter[31]. - Non-performing assets decreased to $2,589 thousand, down from $2,999 thousand at December 31, 2024, indicating improved asset quality[42]. - The allowance for credit losses for loans was 1.22% of loans receivable, consistent with the previous year[30]. Dividends - The Board of Directors announced a 4% increase in the quarterly cash dividend to $0.26 per share, marking the 50th consecutive quarter of dividend payments[3][4]. Economic Outlook - The company anticipates continued challenges from economic conditions, including inflation and potential recession risks, which may impact future performance[37].

Core Viewpoint - Timberland Bancorp, Inc. reported a net income of $6.76 million for the quarter ended March 31, 2025, reflecting a slight decrease from the previous quarter but a significant increase compared to the same quarter last year, driven by improved net interest margins and a solid capital position [1][6][10]. Earnings Highlights - Net income for the first six months of fiscal 2025 increased 13% to $13.62 million, or $1.71 per diluted common share, compared to $12.00 million, or $1.47 per diluted common share for the same period in fiscal 2024 [2][6]. - Quarterly earnings per diluted common share (EPS) decreased 1% to $0.85 from $0.86 in the preceding quarter but increased 21% from $0.70 in the comparable quarter one year ago [5][6]. - The net interest margin (NIM) expanded to 3.79% for the current quarter, up from 3.64% in the previous quarter and 3.48% a year ago [5][10]. Balance Sheet Highlights - Total assets increased 1% to $1.93 billion at March 31, 2025, compared to $1.91 billion at December 31, 2024, and also increased 1% year-over-year [15][30]. - Total deposits rose by $20 million, or 1%, during the quarter to $1.65 billion, with increases in various account types including certificates of deposit and checking accounts [25][27]. - Total shareholders' equity increased 1% to $252.52 million, driven by net income and partially offset by dividends and stock repurchases [29][30]. Operating Results - Operating revenue for the current quarter increased 1% to $19.90 million from $19.67 million in the preceding quarter and increased 9% from $18.25 million a year ago [8]. - Net interest income rose by $243,000, or 1%, to $17.21 million for the current quarter, with a 10% increase year-over-year [9][10]. - Non-interest income decreased slightly by less than 1% to $2.69 million for the current quarter but increased 3% from the comparable quarter one year ago [12]. Loan Portfolio and Asset Quality - The loan portfolio grew by 1% from the prior quarter and 4% year-over-year, with net loans receivable at $1.42 billion [17][31]. - The non-performing assets to total assets ratio improved to 0.13% at March 31, 2025, down from 0.16% at December 31, 2024, and 0.19% a year ago [31][32]. - Provisions for credit losses on loans totaled $237,000 for the quarter, reflecting growth in the loan portfolio [10][31]. Dividend Announcement - The Board of Directors announced a 4% increase in the quarterly cash dividend to $0.26 per share, marking the 50th consecutive quarter of dividend payments [3][5].

Financial Position - Total assets decreased by $14.00 million, or 0.7%, to $1.91 billion at December 31, 2024, from $1.92 billion at September 30, 2024[136]. - Total deposits decreased by $17.25 million, or 1.0%, to $1.63 billion at December 31, 2024, primarily due to decreases in money market and non-interest bearing account balances[138]. - Cash and cash equivalents and CDs held for investment decreased by $3.40 million, or 1.9%, to $171.54 million at December 31, 2024[140]. - Investment securities decreased by $11.19 million, or 4.6%, to $234.03 million at December 31, 2024, primarily due to maturities and prepayments[141]. - The principal amount of loans serviced for Freddie Mac and SBA decreased by $7.46 million to $363.10 million at December 31, 2024, from $370.56 million at September 30, 2024[148]. - The Bank's liquid assets increased to $249.46 million at December 31, 2024, up from $248.06 million at September 30, 2024[185]. - Timberland Bancorp had liquid assets of $1.73 million on an unconsolidated basis as of December 31, 2024[189]. Loan Performance - Net loans receivable decreased by $9.70 million, or 0.7%, to $1.41 billion at December 31, 2024, primarily due to decreases in commercial business and commercial real estate loans[137]. - Loan originations decreased by $16.86 million, or 19.1%, to $72.07 million for the three months ended December 31, 2024, from $88.93 million for the same period in 2023[144]. - The Company recorded a decrease in commercial business loans by $3.43 million and commercial real estate loans by $2.17 million during the reporting period[143]. - The Bank originated $72.07 million in loans during the three months ended December 31, 2024, compared to $88.93 million in the same period of 2023[183]. Income and Expenses - Net income increased by $564,000, or 9.0%, to $6.86 million for the quarter ended December 31, 2024, compared to $6.30 million for the same quarter in 2023[160]. - Total interest and dividend income increased by $2.76 million, or 12.3%, to $25.26 million for the quarter ended December 31, 2024, from $22.50 million for the same quarter in 2023[162]. - Net interest income rose by $966,000, or 6.0%, to $16.97 million for the quarter ended December 31, 2024, from $16.00 million for the same quarter in 2023[161]. - Total non-interest income decreased by $101,000, or 3.6%, to $2.70 million for the quarter ended December 31, 2024, from $2.80 million for the same quarter in 2023[176]. - Total non-interest expense increased by $443,000, or 4.2%, to $11.07 million for the quarter ended December 31, 2024, from $10.62 million for the same quarter in 2023[177]. - Total interest expense increased by $1.80 million, or 27.6%, to $8.29 million for the quarter ended December 31, 2024, from $6.49 million for the same quarter in 2023[164]. Credit Quality - The provision for credit losses on loans was $52,000 for the three months ended December 31, 2024, compared to $379,000 for the same period in 2023[131]. - A provision for credit losses of $27,000 was recorded for the quarter ended December 31, 2024, compared to $336,000 for the same quarter in 2023[171]. - Net charge-offs were $242,000 for the quarter ended December 31, 2024, compared to $2,000 for the same quarter in 2023[172]. - Non-performing assets decreased by $937,000, or 23.8%, to $3.00 million at December 31, 2024, from $3.94 million at September 30, 2024[152]. Shareholders' Equity - Shareholders' equity increased by $3.79 million, or 1.5%, to $249.20 million at December 31, 2024, primarily due to net income and proceeds from stock option exercises[139]. - Total shareholders' equity increased by $3.79 million, or 1.5%, to $249.20 million at December 31, 2024, from $245.41 million at September 30, 2024[151]. - The current quarterly common stock dividend rate is $0.25 per share, resulting in an average total dividend of approximately $1.99 million per quarter[190]. Regulatory and Capital Ratios - The Bank's Tier 1 capital was $233.57 million, with a Tier 1 capital ratio of 12.23% as of December 31, 2024[195]. - As of December 31, 2024, the Bank's regulatory liquidity ratio was 12.92%[180]. - The Bank had undisbursed lines of credit and commitments to extend credit totaling $131.54 million as of December 31, 2024[183]. Efficiency Metrics - The efficiency ratio improved slightly to 56.27% for the current quarter compared to 56.50% for the same quarter one year ago[177]. - The efficiency ratio improved to 56.27% for the three months ended December 31, 2024, compared to 56.50% in 2023[197]. Interest Margin - The net interest margin increased to 3.64% for the quarter ended December 31, 2024, up from 3.60% for the same quarter in 2023[165]. - The average balance of total interest-earning assets increased by $75.76 million, or 4.3%, to $1.85 billion for the quarter ended December 31, 2024, compared to $1.78 billion for the same quarter in 2023[163]. - The average balance of loans receivable increased by $105.17 million, or 7.9%, while the average balance of interest-bearing deposits in banks and CDs increased by $40.51 million, or 32.1%[163]. Taxation - The provision for income taxes increased by $167,000, or 10.8%, to $1.71 million for the quarter ended December 31, 2024, from $1.55 million for the same quarter in 2023[178].

[Financial Performance Summary (Q1 FY2025)](index=1&type=section&id=Financial%20Performance%20Summary%20(Q1%20FY22025)) Timberland Bancorp reported strong Q1 FY2025 results with increased net income, improved profitability ratios, and expanded net interest margin [Overview of Quarterly Results](index=1&type=section&id=Overview%20of%20Quarterly%20Results) Timberland Bancorp reported strong Q1 FY2025 net income of **$6.86 million** and **$0.86** diluted EPS, reflecting sequential and year-over-year growth, alongside a declared quarterly dividend | Metric | Q1 FY2025 (ended Dec 31, 2024) | Q4 FY2024 (ended Sep 30, 2024) | Q1 FY2024 (ended Dec 31, 2023) | | :--- | :--- | :--- | :--- | | Net Income | $6.86 million | $6.36 million | $6.30 million | | Diluted EPS | $0.86 | $0.79 | $0.77 | - Year-over-year, net income and EPS increased by **9%** and **12%**, respectively. Sequentially, they grew by **8%** and **9%**[2](index=2&type=chunk) - The Board of Directors announced a quarterly cash dividend of **$0.25 per share**, marking the 49th consecutive quarterly cash dividend[2](index=2&type=chunk) [Key Performance Metrics](index=1&type=section&id=Key%20Performance%20Metrics) Key profitability ratios improved in Q1 FY2025, with ROA at **1.41%**, ROE at **11.03%**, NIM at **3.64%**, and an improved efficiency ratio of **56.27%** | Performance Metric | Q1 FY2025 (ended Dec 31, 2024) | Q4 FY2024 (ended Sep 30, 2024) | Q1 FY2024 (ended Dec 31, 2023) | | :--- | :--- | :--- | :--- | | Return on Average Assets (ROA) | 1.41% | 1.32% | 1.36% | | Return on Average Equity (ROE) | 11.03% | 10.43% | 10.75% | | Net Interest Margin (NIM) | 3.64% | 3.58% | 3.60% | | Efficiency Ratio | 56.27% | 56.79% | 56.50% | - Tangible book value per share continued its upward trend, increasing to **$29.37** at quarter-end[2](index=2&type=chunk)[5](index=5&type=chunk) [Operating Results](index=2&type=section&id=Operating%20Results) Operating results for the quarter showed increased net interest income driven by an expanded net interest margin, reduced credit loss provisions, and stable non-interest expenses [Net Interest Income and Margin (NIM)](index=2&type=section&id=Net%20Interest%20Income%20and%20Margin%20(NIM)) Net interest income for the quarter increased **3%** sequentially to **$16.97 million**, with the net interest margin expanding to **3.64%** due to lower funding costs - Net interest income rose to **$16.97 million**, a **3%** increase from the preceding quarter and a **6%** increase from the year-ago quarter[7](index=7&type=chunk) - The NIM expanded to **3.64%** from **3.58%** in the prior quarter, driven by a reduction in funding costs as the weighted average cost of interest-bearing liabilities fell **8 basis points**[2](index=2&type=chunk)[7](index=7&type=chunk) - The current quarter's NIM was positively impacted by approximately **3 basis points** due to the collection of **$115,000** in pre-payment penalties, non-accrual interest, and late fees[7](index=7&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) The company recorded a modest provision for credit losses on loans of **$52,000**, a significant decrease from the prior quarter, partially offset by recaptures on unfunded commitments and investment securities | Provision/Recapture Category | Q1 FY2025 (ended Dec 31, 2024) | Q4 FY2024 (ended Sep 30, 2024) | | :--- | :--- | :--- | | Provision for credit losses - loans | $52,000 | $444,000 | | Recapture of credit losses - unfunded commitments | ($20,000) | ($59,000 provision) | | Recapture of credit losses - investment securities | ($5,000) | ($13,000) | [Non-Interest Income and Expense](index=3&type=section&id=Non-Interest%20Income%20and%20Expense) Non-interest income decreased by **8%** sequentially to **$2.70 million**, mainly due to lower gain on sales of loans, while non-interest expenses remained relatively flat - Non-interest income fell to **$2.70 million** from **$2.93 million** in the prior quarter, primarily due to a decrease in gain on sales of loans[10](index=10&type=chunk) - Operating expenses were stable at **$11.07 million**, a slight increase from **$11.06 million** in the preceding quarter[11](index=11&type=chunk) [Balance Sheet Analysis](index=3&type=section&id=Balance%20Sheet%20Analysis) The balance sheet reflects a slight decrease in total assets and deposits, a stable loan portfolio composition, and robust capital adequacy with strong liquidity [Asset and Liquidity Position](index=3&type=section&id=Asset%20and%20Liquidity%20Position) Total assets decreased by **1%** to **$1.91 billion**, while the company maintained a strong liquidity position with substantial secured borrowing capacity and a diversified deposit base - Total assets stood at **$1.91 billion** as of December 31, 2024, a **1%** decrease from the prior quarter but a **1%** increase year-over-year[5](index=5&type=chunk)[13](index=13&type=chunk) - The company has significant off-balance sheet liquidity, with **$656 million** in available secured borrowing line capacity through the FHLB and the Federal Reserve[5](index=5&type=chunk)[14](index=14&type=chunk) - Only **19%** of Timberland's deposits were uninsured or uncollateralized at December 31, 2024, indicating a strong and diversified deposit base[14](index=14&type=chunk) [Loan Portfolio](index=3&type=section&id=Loan%20Portfolio) Net loans receivable decreased by **1%** to **$1.41 billion** despite higher originations, with mortgage loans comprising **88%** of the stable portfolio composition - Net loans receivable decreased by **$9.70 million**, or **1%**, during the quarter to **$1.41 billion**[15](index=15&type=chunk) - Loan originations increased to **$72.07 million** during the quarter, compared to **$48.82 million** in the preceding quarter[20](index=20&type=chunk) [Overall Loan Portfolio Composition](index=4&type=section&id=Overall%20Loan%20Portfolio%20Composition) As of December 31, 2024, total loans were **$1.52 billion**, with commercial real estate and one- to four-family mortgage loans being the largest categories | Loan Category | Amount (Dec 31, 2024) | Percent of Total | | :--- | :--- | :--- | | **Mortgage Loans** | **$1,332.6M** | **88%** | | - Commercial | $597.1M | 39% | | - One- to four-family | $306.4M | 20% | | - Multi-family | $177.9M | 12% | | - Construction (all types) | $220.0M | 15% | | **Commercial Loans** | **$135.5M** | **9%** | | **Consumer Loans** | **$51.7M** | **3%** | | **Total Loans** | **$1,519.9M** | **100%** | [Commercial Real Estate (CRE) Portfolio](index=5&type=section&id=Commercial%20Real%20Estate%20(CRE)%20Portfolio) The Commercial Real Estate (CRE) portfolio totaled **$597.1 million**, representing **39%** of the total loan portfolio, diversified across various collateral types with industrial warehouse properties as the largest segment | CRE Collateral Type | Balance | % of CRE Portfolio | % of Total Loan Portfolio | | :--- | :--- | :--- | :--- | | Industrial warehouse | $126.4M | 21% | 8% | | Medical/dental offices | $84.8M | 14% | 6% | | Office buildings | $67.6M | 11% | 4% | | Other retail buildings | $52.3M | 9% | 3% | | **Total CRE** | **$597.1M** | **100%** | **39%** | [Deposits](index=5&type=section&id=Deposits) Total deposits decreased by **1%** to **$1.63 billion**, driven by shifts from non-interest-bearing accounts to higher-yielding certificates of deposit - Total deposits decreased by **$17.25 million**, or **1%**, to **$1.63 billion** at December 31, 2024[22](index=22&type=chunk) | Deposit Category | Amount (Dec 31, 2024) | Percent of Total | | :--- | :--- | :--- | | Non-interest-bearing demand | $402.9M | 25% | | NOW checking | $323.4M | 20% | | Money market | $311.4M | 19% | | Savings | $206.8M | 13% | | Certificates of deposit (CDs) | $385.8M | 23% | | **Total Deposits** | **$1,630.4M** | **100%** | [Shareholders' Equity and Capital Adequacy](index=6&type=section&id=Shareholders'%20Equity%20and%20Capital%20Adequacy) Shareholders' equity increased by **2%** to **$249.20 million**, supported by net income and share repurchases, with capital ratios remaining well above regulatory requirements - Total shareholders' equity increased by **$3.79 million** (**2%**) during the quarter to **$249.20 million**[26](index=26&type=chunk) - The company repurchased **27,260 shares** of common stock at an average price of **$32.38 per share**[26](index=26&type=chunk) - The bank remains well-capitalized, with a total risk-based capital ratio of **19.95%** and a tangible common equity to tangible assets ratio of **12.34%**[27](index=27&type=chunk) [Asset Quality](index=6&type=section&id=Asset%20Quality) Asset quality improved with a decrease in non-performing assets and non-accrual loans, while the allowance for credit losses remained strong [Non-Performing Assets and Delinquencies](index=6&type=section&id=Non-Performing%20Assets%20and%20Delinquencies) Asset quality metrics improved, with non-performing assets to total assets decreasing to **0.16%** and non-accrual loans falling **30%** to **$2.73 million** - The non-performing assets to total assets ratio improved to **0.16%** at Dec 31, 2024, down from **0.20%** at Sep 30, 2024[28](index=28&type=chunk) - Non-accrual loans decreased by **$1.15 million**, or **30%**, to **$2.73 million** from **$3.89 million** in the prior quarter[29](index=29&type=chunk) | Non-Accrual Loan Category | Amount (Dec 31, 2024) | Amount (Sep 30, 2024) | | :--- | :--- | :--- | | Commercial business loans | $1,401k | $2,060k | | Mortgage loans | $745k | $1,207k | | Consumer loans | $587k | $618k | | **Total Non-Accrual Loans** | **$2,733k** | **$3,885k** | - The allowance for credit losses (ACL) for loans was **1.21%** of loans receivable, stable with the prior quarter, and provided coverage of **633%** of non-accrual loans[28](index=28&type=chunk)[38](index=38&type=chunk) [Financial Statements](index=9&type=section&id=Financial%20Statements) The consolidated financial statements provide a detailed overview of the company's income and financial position for the quarter [Consolidated Statements of Income](index=9&type=section&id=Consolidated%20Statements%20of%20Income) For the three months ended December 31, 2024, the company reported total interest income of **$25.26 million** and net income of **$6.86 million** after provisions and non-interest items | Income Statement (in thousands) | Three Months Ended Dec 31, 2024 | | :--- | :--- | | Net Interest Income | $16,970 | | Provision for Credit Losses (Net) | $27 | | Net Interest Income after Provision | $16,943 | | Total Non-interest Income | $2,697 | | Total Non-interest Expense | $11,067 | | Income Before Income Taxes | $8,573 | | **Net Income** | **$6,860** | [Consolidated Balance Sheets](index=11&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2024, Timberland Bancorp's balance sheet showed total assets of **$1.91 billion**, with **$1.41 billion** in net loans and **$1.63 billion** in total deposits | Balance Sheet (in thousands) | As of Dec 31, 2024 | | :--- | :--- | | **Assets** | | | Total Cash and Cash Equivalents | $164,071 | | Net Loans Receivable | $1,411,819 | | Investment Securities (Net) | $234,025 | | **Total Assets** | **$1,909,480** | | **Liabilities & Equity** | | | Total Deposits | $1,630,416 | | FHLB Borrowings | $20,000 | | **Total Liabilities** | **$1,660,281** | | **Total Shareholders' Equity** | **$249,199** | [Supplementary Information](index=12&type=section&id=Supplementary%20Information) Supplementary information includes reconciliations of GAAP to non-GAAP financial measures, providing additional insights into capital adequacy [Non-GAAP Financial Measures](index=14&type=section&id=Non-GAAP%20Financial%20Measures) The company provides non-GAAP measures like tangible common equity and tangible assets to offer a broader understanding of capital adequacy by excluding intangible assets Reconciliation of GAAP to Non-GAAP Measures (in thousands) | Measure | Dec 31, 2024 | Sep 30, 2024 | | :--- | :--- | :--- | | Shareholders' Equity (GAAP) | $249,199 | $245,413 | | Less: Goodwill and CDI | ($15,537) | ($15,582) | | **Tangible Common Equity (Non-GAAP)** | **$233,662** | **$229,831** | | Total Assets (GAAP) | $1,909,480 | $1,923,475 | | Less: Goodwill and CDI | ($15,537) | ($15,582) | | **Tangible Assets (Non-GAAP)** | **$1,893,943** | **$1,907,893** |

Core Viewpoint - Timberland Bancorp, Inc. reported a solid start to its 2025 fiscal year with improvements in net income, earnings per share, and profitability metrics compared to the prior quarter and the same quarter last year [2][5]. Earnings Highlights - Net income for the quarter ended December 31, 2024, was $6.86 million, or $0.86 per diluted common share, representing an 8% increase from $6.36 million in the previous quarter and a 9% increase from $6.30 million a year ago [1][5]. - Earnings per diluted common share increased 9% from $0.79 in the previous quarter and 12% from $0.77 a year ago [4][5]. - Return on average assets rose to 1.41% and return on average equity increased to 11.03% [4][11]. Balance Sheet Highlights - Total assets decreased by 1% to $1.91 billion from the previous quarter but increased by 1% year-over-year [14][11]. - Total deposits decreased by $17 million, or 1%, during the quarter, while total borrowings remained unchanged at $20 million [11][24]. - Total shareholders' equity increased by 2% from the previous quarter to $249.20 million, reflecting a strong capital position [28][11]. Operating Results - Operating revenue increased by 1% to $19.67 million from the previous quarter and by 5% from a year ago [7]. - Net interest income rose by 3% to $16.97 million compared to the previous quarter and by 6% from the same quarter last year [8]. - Non-interest income decreased by 8% to $2.70 million from the previous quarter, primarily due to a decrease in gains on sales of loans [10]. Loan Portfolio - Net loans receivable decreased by 1% to $1.41 billion during the quarter, influenced by an increase in loan payoffs [16][11]. - Timberland originated $72.07 million in loans during the quarter, compared to $48.82 million in the previous quarter [22]. Asset Quality - Non-performing assets to total assets ratio improved to 0.16% from 0.20% in the previous quarter [30]. - Total delinquent loans decreased by 10% to $4.02 million, and non-accrual loans decreased by nearly 30% to $2.73 million [31][30]. Liquidity - Liquidity remained strong, with cash and cash equivalents representing 15.0% of total liabilities at December 31, 2024 [15]. - Timberland had secured borrowing line capacity of $656 million available through the Federal Home Loan Bank and the Federal Reserve [15].