Timberland Bancorp(TSBK) - 2024 Q2 - Quarterly Results

Financial Performance Summary Q2 2024 Earnings Overview Timberland Bancorp reported $5.71 million net income and $0.70 diluted EPS for Q2 2024, primarily due to net interest margin compression Net Income and Diluted EPS (Quarterly) | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Income | $5.71 million | $6.30 million | $6.66 million | | Diluted EPS | $0.70 | $0.77 | $0.80 | Net Income and Diluted EPS (Six Months) | Metric | Six Months Ended 3/31/2024 | Six Months Ended 3/31/2023 | | :--- | :--- | :--- | | Net Income | $12.00 million | $14.17 million | | Diluted EPS | $1.47 | $1.70 | - Management noted Q2 earnings were strong but lower than the year-ago quarter, which was near the peak of the net interest margin cycle[4] - The Board declared a $0.24 per share quarterly cash dividend, marking the 46th consecutive payment[4] - The COO stated that net interest margin contraction is stabilizing, with deposit costs believed to be near peak, potentially aiding future margin stability or improvement[5] Operating Results Operating revenue decreased to $18.25 million in Q2 2024, leading to lower net interest income and a 60.22% efficiency ratio Key Operating Metrics | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Operating Revenue | $18.25M | $18.80M | $19.79M | | Net Interest Income | $15.64M | $16.00M | $17.15M | | Net Interest Margin (NIM) | 3.48% | 3.60% | 3.99% | | Efficiency Ratio | 60.22% | 56.50% | 55.31% | - Net interest income decreased primarily due to the weighted average cost of interest-bearing liabilities rising to 2.50% from 2.22%[10] - A $166,000 provision for credit losses was recorded, driven by loan portfolio growth, partially offset by reduced construction loan balances[12] - Non-interest income decreased 7% sequentially to $2.62 million, primarily due to lower ATM/debit card fees and reduced gain on sale of loans[13] - Operating expenses increased 3% to $10.99 million, driven by higher salaries, premises, and technology costs[14] Balance Sheet and Asset Quality Analysis Balance Sheet Management and Liquidity Total assets grew 1% to $1.91 billion, driven by loans and cash, maintaining strong liquidity - Total assets grew by $12.12 million (1%) during the quarter, primarily from a $22.83 million increase in net loans and a $22.33 million increase in cash, partially offset by a $34.22 million decrease in investment securities[16] - Liquidity remains strong with cash and available-for-sale securities representing 15.2% of total liabilities, up from 12.7% in the prior quarter[17] - The company has access to $707 million in additional secured borrowing capacity through the FHLB and Federal Reserve[17] Loan Portfolio Net loans receivable grew 2% to $1.36 billion, shifting from construction to multi-family and one-to-four-family loans Loan Portfolio Composition | Loan Category | March 31, 2024 ($M) | Dec 31, 2023 ($M) | March 31, 2023 ($M) | | :--- | :--- | :--- | :--- | | Commercial Real Estate | $577.4 | $579.0 | $547.9 | | One- to four-family | $276.4 | $263.1 | $216.6 | | Multi-family | $167.3 | $147.3 | $103.9 | | Total Construction | $224.6 | $265.2 | $267.0 | | Commercial business | $135.5 | $136.9 | $129.3 | | Total Loans Receivable, Net | $1,359.1 | $1,336.3 | $1,210.2 | - Net loans receivable increased by $22.83 million (2%) during the quarter, with a notable shift from construction loans (-$40.53 million) to multi-family (+$19.95 million) and one-to-four-family loans (+$13.31 million) as projects converted to permanent financing[18] - The Commercial Real Estate (CRE) portfolio of $577.4 million is diversified, with the largest concentrations in Industrial warehouse (20%), Medical/dental offices (14%), and Office buildings (12%)[22] - Loan originations totaled $39.37 million for the quarter, a decrease from $88.93 million in the preceding quarter and $77.15 million in the comparable quarter one year ago[22] Deposits and Borrowings Total deposits increased 1% to $1.64 billion, shifting to higher-cost money market and CD accounts Deposit Composition | Deposit Category | March 31, 2024 ($M) | % of Total | Dec 31, 2023 ($M) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Non-interest-bearing demand | $424.9 | 26% | $433.1 | 27% | | NOW checking | $336.6 | 20% | $389.5 | 24% | | Money market | $312.0 | 19% | $269.7 | 17% | | Certificates of deposit | $354.0 | 22% | $318.9 | 19% | | Total Deposits | $1,638.6 | 100% | $1,627.1 | 100% | - Deposits saw a shift into higher-cost products: money market accounts increased by $42.31 million and CDs by $35.04 million, while NOW checking accounts decreased by $52.84 million and non-interest-bearing demand deposits fell by $8.16 million[24] - Total borrowings were stable at $20.00 million at the end of the quarter, with a weighted average rate of 4.34%[28] Capital and Shareholder Returns Shareholders' equity reached $238.70 million, maintaining strong capital ratios well above regulatory requirements Capital Ratios | Capital Ratio | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total risk-based capital | 19.33% | 19.50% | | Tier 1 leverage capital | 12.01% | 12.14% | | Tangible common equity / Tangible assets (non-GAAP) | 11.79% | 11.79% | - Shareholders' equity increased by $1.31 million, reflecting $5.71 million in net income, partially offset by $1.94 million in dividends and $2.67 million in common stock repurchases[29] - At March 31, 2024, 262,025 shares remained available for repurchase under the existing stock repurchase plan[29] Asset Quality Asset quality remained stable and strong, with non-performing assets at 0.19% and negligible net charge-offs Asset Quality Metrics | Metric | March 31, 2024 | Dec 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Non-performing assets to total assets (%) | 0.19% | 0.18% | 0.12% | | Net charge-offs (quarterly) ($) | $3,000 | $2,000 | $6,000 | | Non-accrual loans ($M) | $3.61M | $3.37M | $1.97M | | ACL for loans to loans receivable (%) | 1.22% | 1.23% | 1.20% | - The increase in non-accrual loans was mainly due to a $466,000 rise in commercial real estate loans on non-accrual status, partially offset by a $222,000 decrease in one- to four-family non-accrual loans[32] Consolidated Financial Statements (Unaudited) Consolidated Statements of Income The income statement details Q2 2024 net income of $5.71 million, with six-month net income at $12.00 million Consolidated Statements of Income (Quarterly) | ($ in thousands) | Q2 2024 (3 Mo) | Q1 2024 (3 Mo) | Q2 2023 (3 Mo) | | :--- | :--- | :--- | :--- | | Net Interest Income | $15,635 | $16,004 | $17,151 | | Provision for Credit Losses (Net) | $81 | $336 | $475 | | Non-interest Income | $2,615 | $2,798 | $2,636 | | Non-interest Expense | $10,991 | $10,624 | $10,944 | | Net Income | $5,708 | $6,296 | $6,663 | Consolidated Statements of Income (Six Months) | ($ in thousands) | FY2024 (6 Mo) | FY2023 (6 Mo) | | :--- | :--- | :--- | | Net Interest Income | $31,639 | $34,894 | | Net Income | $12,004 | $14,169 | Consolidated Balance Sheets The balance sheet shows total assets of $1.91 billion, supported by $1.64 billion in deposits and equity Consolidated Balance Sheets | ($ in thousands) | March 31, 2024 | Dec 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Total Assets | $1,907,234 | $1,895,115 | $1,786,618 | | Net Loans Receivable | $1,359,116 | $1,336,283 | $1,210,193 | | Total Deposits | $1,638,554 | $1,627,069 | $1,548,767 | | Total Shareholders' Equity | $238,679 | $237,369 | $227,661 | Key Ratios and Metrics This section provides detailed performance, asset quality, and capital ratios, including average balance sheet data Performance Ratios (Quarterly) | Performance Ratios (Quarterly) | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Return on average assets (ROA) | 1.22% | 1.36% | 1.48% | | Return on average equity (ROE) | 9.67% | 10.75% | 11.86% | | Net interest margin (NIM) | 3.48% | 3.60% | 3.99% | | Efficiency ratio | 60.22% | 56.50% | 55.31% | Capital Ratios | Capital Ratios | March 31, 2024 | Dec 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Tier 1 leverage capital (%) | 12.01% | 12.14% | 11.95% | | Total risk-based capital (%) | 19.33% | 19.50% | 19.41% | | Book value per common share ($) | $29.75 | $29.23 | $27.75 | Other Information About the Company Timberland Bancorp is the holding company for Timberland Bank, a community bank with 23 branches in Washington state - Timberland Bank, founded in 1915, serves consumers and businesses in Grays Harbor, Thurston, Pierce, King, Kitsap, and Lewis counties, Washington, through its 23 branches[35] Disclaimer and Forward-Looking Statements This section disclaims forward-looking statements, noting risks that could cause actual results to differ materially - The press release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations[36] - Key risks include adverse economic conditions, credit risks in lending, interest rate fluctuations, regulatory changes, and competition[36][37] Non-GAAP Financial Measures Reconciliation The company provides non-GAAP financial measures like tangible common equity for clearer capital adequacy insights Non-GAAP Financial Measures Reconciliation | ($ in thousands) | March 31, 2024 | Dec 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Shareholders' equity (GAAP) | $238,679 | $237,369 | $227,661 | | Less: Goodwill and CDI | ($15,695) | ($15,752) | ($15,944) | | Tangible common equity (non-GAAP) | $222,984 | $221,617 | $211,717 | | Total assets (GAAP) | $1,907,234 | $1,895,115 | $1,786,618 | | Less: Goodwill and CDI | ($15,695) | ($15,752) | ($15,944) | | Tangible assets (non-GAAP) | $1,891,539 | $1,879,363 | $1,770,674 |