Timberland Bancorp(TSBK) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (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 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 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 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 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 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 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] - 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] - Non-accrual loans decreased to $2.33 million at March 31, 2025, from $3.89 million at September 30, 2024[68][71] - As of March 31, 2025, the Company had commitments to extend credit and undisbursed lines of credit totaling $220.22 million[116] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - Profitability is primarily dependent on net interest income after the provision for credit losses[130] - 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] Comparison of Financial Condition 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] - 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] Comparison of Operating Results 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] - 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] Liquidity and Capital Resources 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] - 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][208] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] - 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][220] Unregistered Sales of Equity Securities and Use of Proceeds 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] Defaults Upon Senior Securities The company reports that this item is not applicable - Not applicable[225] Mine Safety Disclosures The company reports that this item is not applicable - Not applicable[226] Other Information 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] Exhibits 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] - Financial statements and notes formatted in XBRL are included as Exhibit 101[231]