Timberland Bancorp(TSBK) - 2025 Q1 - Quarterly Results

Financial Performance Summary (Q1 FY2025) Timberland Bancorp reported strong Q1 FY2025 results with increased net income, improved profitability ratios, and expanded net interest margin Overview of Quarterly Results 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] - The Board of Directors announced a quarterly cash dividend of $0.25 per share, marking the 49th consecutive quarterly cash dividend[2] Key Performance Metrics 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][5] Operating Results 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) 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] - 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][7] - 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] Provision for Credit Losses 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 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] - Operating expenses were stable at $11.07 million, a slight increase from $11.06 million in the preceding quarter[11] Balance Sheet Analysis 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 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][13] - 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][14] - Only 19% of Timberland's deposits were uninsured or uncollateralized at December 31, 2024, indicating a strong and diversified deposit base[14] Loan Portfolio 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] - Loan originations increased to $72.07 million during the quarter, compared to $48.82 million in the preceding quarter[20] Overall Loan Portfolio Composition 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 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 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] | 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 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] - The company repurchased 27,260 shares of common stock at an average price of $32.38 per share[26] - 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] Asset Quality 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 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] - Non-accrual loans decreased by $1.15 million, or 30%, to $2.73 million from $3.89 million in the prior quarter[29] | 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][38] Financial Statements The consolidated financial statements provide a detailed overview of the company's income and financial position for the quarter Consolidated Statements of Income 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 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 Supplementary information includes reconciliations of GAAP to non-GAAP financial measures, providing additional insights into capital adequacy Non-GAAP Financial Measures 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 |