Timberland Bancorp(TSBK) - 2024 Q2 - Quarterly Report

Part I. Financial Information Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, detailing financial position, operating results, and cash flows, including CECL adoption Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at period-end - Total assets increased by 3.7% to $1.91 billion at March 31, 2024, from $1.84 billion at September 30, 2023, primarily driven by an increase in net loans receivable and cash equivalents, funded by a rise in total deposits[143] Consolidated Balance Sheet Summary (in thousands USD) | Account | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Assets | | | | Total cash and cash equivalents | $180,349 | $128,721 | | Loans receivable, net | $1,359,116 | $1,302,305 | | Investment securities (AFS & HTM) | $273,564 | $311,989 | | Total Assets | $1,907,234 | $1,839,905 | | Liabilities & Equity | | | | Total deposits | $1,638,554 | $1,560,935 | | FHLB borrowings | $20,000 | $35,000 | | Total Liabilities | $1,668,555 | $1,606,832 | | Total Shareholders' Equity | $238,679 | $233,073 | | Total Liabilities & Equity | $1,907,234 | $1,839,905 | Consolidated Statements of Income This section details the company's revenues, expenses, and net income over specific periods - Net income for the quarter ended March 31, 2024, decreased by 14.3% year-over-year, primarily due to a significant increase in interest expense which compressed net interest income, partially offset by a lower provision for credit losses[170] Income Statement Highlights (in thousands USD, except per share data) | Metric | Q2 2024 | Q2 2023 | Change | 6 Months 2024 | 6 Months 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $15,635 | $17,151 | -8.8% | $31,639 | $34,894 | -9.3% | | Provision for Credit Losses | $81 | $475 | -82.9% | $417 | $1,000 | -58.3% | | Net Income | $5,708 | $6,663 | -14.3% | $12,004 | $14,169 | -15.3% | | Diluted EPS | $0.70 | $0.80 | -12.5% | $1.47 | $1.70 | -13.5% | Consolidated Statements of Cash Flows This section outlines the sources and uses of cash from operating, investing, and financing activities - For the six months ended March 31, 2024, the company experienced a net increase in cash and cash equivalents of $51.6 million, driven by strong net cash from financing activities ($56.2 million) primarily from an increase in deposits, offsetting net cash used in operating and investing activities[27] Cash Flow Summary for Six Months Ended March 31 (in thousands USD) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,975 | $15,364 | | Net cash used in investing activities | ($13,506) | ($100,772) | | Net cash provided by (used in) financing activities | $56,159 | ($88,864) | | Net increase (decrease) in cash | $51,628 | ($174,272) | Notes to Unaudited Consolidated Financial Statements This section provides detailed disclosures on accounting policies, financial statement line items, and the impact of CECL adoption - Effective October 1, 2023, the Company adopted ASU 2016-13 (CECL), resulting in a cumulative effect adjustment that increased the ACL on loans by $461,000, the ACL on investment securities by $92,000, and the ACL on unfunded commitments by $65,000, with a net-of-tax charge of $488,000 to retained earnings[118] - The loan portfolio is primarily composed of mortgage loans (87.6%), with commercial real estate loans representing the largest single category at 39.6% of total loans receivable[53] - The investment securities portfolio is primarily composed of U.S. Treasury, government agency, and mortgage-backed securities, with gross unrealized losses of $11.34 million in held-to-maturity and $977,000 in available-for-sale categories as of March 31, 2024, primarily due to interest rate changes[31][32] Management's Discussion and Analysis (MD&A) This section provides management's perspective on the company's financial condition, operating results, and liquidity, highlighting key performance drivers and trends Comparison of Financial Condition This section analyzes changes in the company's balance sheet, including assets, liabilities, and equity over time - Total assets grew by $67.33 million (3.7%) to $1.91 billion at March 31, 2024, from September 30, 2023, mainly due to a $56.81 million (4.4%) increase in net loans receivable[143][144] - Total deposits increased by $77.62 million (5.0%) to $1.64 billion, primarily driven by a $122.12 million increase in money market accounts and a $53.85 million increase in certificates of deposit, partially offset by decreases in non-interest-bearing demand and NOW checking accounts[145][156] - Shareholders' equity rose by $5.61 million (2.4%) to $238.68 million, reflecting net income of $12.00 million, partially offset by $3.82 million in dividends and $3.03 million in stock repurchases over the six-month period[146][159] Comparison of Operating Results This section compares the company's financial performance across different periods, focusing on revenue, expenses, and profitability - Quarterly net income decreased 14.3% YoY to $5.71 million, and six-month net income decreased 15.3% to $12.00 million, with the decline primarily caused by a decrease in net interest income[170][171] - Net interest margin (NIM) compressed to 3.48% for the quarter ended March 31, 2024, down from 3.99% in the prior-year quarter, driven by a 236.4% increase in total interest expense as the average cost of interest-bearing liabilities rose from 0.84% to 2.50%[173][176][179] - The efficiency ratio deteriorated to 60.22% for the quarter, compared to 55.31% a year ago, reflecting lower total revenue and slightly higher non-interest expense[201] Asset Quality This section assesses the quality of the company's loan and investment portfolios, including non-performing assets and credit loss provisions - Non-performing assets (NPAs) increased by 130.8% to $3.68 million at March 31, 2024, from $1.60 million at September 30, 2023, with the NPA to total assets ratio rising to 0.19% from 0.09%[161] Non-Performing Assets (in thousands USD) | Category | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Non-accrual loans | $3,605 | $1,514 | | Non-accrual investment securities | $79 | $82 | | Total non-performing assets | $3,684 | $1,596 | | NPA as a % of total assets | 0.19% | 0.09% | Liquidity and Capital Resources This section discusses the company's ability to meet its financial obligations and maintain adequate capital levels - The Bank is considered 'well-capitalized' under all regulatory requirements as of March 31, 2024[218] Bank Regulatory Capital Ratios (March 31, 2024) | Ratio | Actual | To Be "Well Capitalized" | | :--- | :--- | :--- | | Tier 1 leverage Capital Ratio | 11.92% | > 5.00% | | Common equity Tier 1 capital Ratio | 17.97% | > 6.50% | | Tier 1 capital Ratio | 17.97% | > 8.00% | | Total capital Ratio | 19.22% | > 10.00% | - The company has significant available liquidity, including $596.00 million in borrowing capacity with the FHLB (with $20.00 million outstanding) and $111.22 million with the FRB[205] Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes in market risk disclosures since the prior annual report - There were no material changes in market risk disclosures from the company's most recent Form 10-K[223] Controls and Procedures This section confirms the effectiveness of disclosure controls and outlines modifications to internal controls due to CECL adoption - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[228] - Internal controls were modified during the quarter to accommodate the adoption of the CECL accounting standard (ASU 2016-13), particularly around the modeling of expected credit losses[228] Part II. Other Information This section provides additional information not covered in the financial statements, including legal proceedings and equity matters Legal Proceedings and Risk Factors This section confirms no material legal proceedings and no significant changes to previously disclosed risk factors - The Company is not a party to any material legal proceedings[225] - There have been no material changes in Risk Factors from the 2023 Form 10-K[226] Use of Proceeds and Stock Repurchases This section details the company's stock repurchase activities and remaining authorization under its current plan Stock Repurchases for Quarter Ended March 31, 2024 | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2024 | 0 | $ - | | Feb 2024 | 80,000 | $26.91 | | Mar 2024 | 19,787 | $26.21 | | Total | 99,787 | $26.77 | - As of March 31, 2024, 262,025 shares remained available for purchase under the company's 19th stock repurchase plan, which was announced on July 25, 2023[230]