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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024

OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____.

Commission file number 000-23333

TIMBERLAND BANCORP, INC.
(Exact name of registrant as specified in its charter) 
Washington 91-1863696 
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 
 
624 Simpson Avenue, Hoquiam, Washington 
98550
(Address of principal executive offices) (Zip Code)
(360) 533-4747
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $.01 par valueTSBKThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒     No ___

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes _☒_   No __
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐    Non-accelerated filer ☒ Smaller reporting company    Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ___    No   __

As of May 1, 2024, there were 8,022,556 shares of the registrant's common stock, $.01 par value per share outstanding.



INDEX

 
Page
   
  Item 1.    
 
   
 
   
 
   
 
   
 
   
 
   
 
   
  Item 2.     
   
  Item 3.    
   
  Item 4.     
   
 
   
  Item 1.     
    
  Item 1A.     
   
  Item 2.     
   
  Item 3.     
   
  Item 4.
   
  Item 5.     
57 
   
  Item 6.     
   
 
Certifications  
 Exhibit 31.1 
 Exhibit 31.2 
 Exhibit 32 
Exhibit 101
Exhibit 104

2


PART I.    FINANCIAL INFORMATION
Item 1.    Financial Statements (unaudited)

TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 2024 and September 30, 2023
(Dollars in thousands, except per share amounts)
March 31,
2024
September 30,
2023
(Unaudited)*
Assets  
Cash and cash equivalents:  
Cash and due from financial institutions$22,310 $25,390 
Interest-bearing deposits in banks158,039 103,331 
Total cash and cash equivalents180,349 128,721 
Certificates of deposit (“CDs”) held for investment (at cost, which
     approximates fair value)
11,204 15,188 
Investment securities held to maturity, at amortized cost (net of allowance for credit losses of $85 at March 31, 2024), (estimated fair value of $200,807 and $253,766)
211,818 270,218 
Investment securities available for sale, at fair value61,746 41,771 
Investments in equity securities, at fair value839 811 
Federal Home Loan Bank of Des Moines (“FHLB”) stock, at cost2,037 3,602 
Other investments, at cost3,000 3,000 
Loans held for sale1,311 400 
Loans receivable, net of allowance for credit losses of $16,818 and $15,817
1,359,116 1,302,305 
Premises and equipment, net21,718 21,642 
Accrued interest receivable7,108 6,004 
Bank owned life insurance (“BOLI”)23,278 22,966 
Goodwill15,131 15,131 
Core deposit intangible (“CDI”), net564 677 
Loan servicing rights, net1,717 2,124 
Operating lease right-of-use ("ROU") assets1,624 1,772 
Other assets4,674 3,573 
Total assets$1,907,234 $1,839,905 
Liabilities and shareholders’ equity  
Liabilities  
Deposits:
     Non-interest-bearing demand$424,906 $455,864 
     Interest-bearing1,213,648 1,105,071 
Total deposits1,638,554 1,560,935 
FHLB borrowings20,000 35,000 
Operating lease liabilities1,723 1,867 
Other liabilities and accrued expenses8,278 9,030 
Total liabilities$1,668,555 $1,606,832 
* Derived from audited consolidated financial statements.
See notes to unaudited consolidated financial statements
3


TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (continued)
March 31, 2024 and September 30, 2023
(Dollars in thousands, except per share amounts)
 
March 31,
2024
September 30,
2023
(Unaudited)*
Commitments and contingent liabilities (see Note 12)
Shareholders’ equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued
$ $ 
Common stock, $0.01 par value; 50,000,000 shares authorized;
8,023,121 shares issued and outstanding - March 31, 2024 8,105,338 shares issued and outstanding - September 30, 2023
32,338 34,771 
Retained earnings207,086 199,386 
Accumulated other comprehensive loss(745)(1,084)
Total shareholders’ equity238,679 233,073 
Total liabilities and shareholders’ equity$1,907,234 $1,839,905 
* Derived from audited consolidated financial statements.


See notes to unaudited consolidated financial statements

4


TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended March 31, 2024 and 2023
(Dollars in thousands, except per share amounts)
(Unaudited)

 Three Months Ended March 31,Six Months Ended
March 31,
 2024202320242023
Interest and dividend income  
Loans receivable and loans held for sale$18,909 $14,950 $37,304 $29,407 
Investment securities2,246 2,460 4,556 4,674 
Dividends from mutual funds, FHLB stock and other investments82 64 173 115 
Interest-bearing deposits in banks and CDs1,919 1,913 3,618 4,304 
Total interest and dividend income23,156 19,387 45,651 38,500 
Interest expense  
Deposits7,301 2,236 13,444 3,606 
FHLB borrowings220  568  
Total interest expense7,521 2,236 14,012 3,606 
Net interest income15,635 17,151 31,639 34,894 
Provision for (recapture of) credit losses
Provision for credit losses - loans166 475 545 1,000 
Provision for (recapture of) credit losses - investment securities3  (7) 
Recapture of credit losses - unfunded commitments(88) (121) 
Total provision for credit loss - net81475417 1,000 
Net interest income after provision for (recapture of) credit losses15,554 16,676 31,222 33,894 
Non-interest income  
Net recoveries on investment securities2 2 7 5 
Service charges on deposits988 893 2,011 1,840 
ATM and debit card interchange transaction fees1,212 1,275 2,476 2,526 
BOLI net earnings156 157 312 313 
Gain on sales of loans, net41 46 120 67 
Escrow fees15 29 33 59 
Other, net201 234 454 531 
Total non-interest income, net2,615 2,636 5,413 5,341 


 See notes to unaudited consolidated financial statements
5


TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (continued)
For the three and six months ended March 31, 2024 and 2023
(Dollars in thousands, except per share amounts)
(Unaudited)
 Three Months Ended March 31,Six Months Ended
March 31,
 2024202320242023
Non-interest expense  
Salaries and employee benefits$6,024 $6,046 $11,936 $11,946 
Premises and equipment1,081 1,001 2,054 1,925 
Advertising159 178 345 372 
ATM and debit card interchange transaction fees601 489 1,216 972 
Postage and courier145 147 271 268 
State and local taxes325 298 644 597 
Professional fees319 473 572 902 
Federal Deposit Insurance Corporation ("FDIC") insurance206 202 416 326 
Loan administration and foreclosure134 138 239 259 
Technology and communications1,040 880 2,014 1,668 
Deposit operations324 246 644 592 
Amortization of CDI57 67 113 135 
Other576 779 1,151 1,517 
Total non-interest expense, net10,991 10,944 21,615 21,479 
Income before income taxes7,178 8,368 15,020 17,756 
Provision for income taxes1,470 1,705 3,016 3,587 
     Net income
$5,708 $6,663 $12,004 $14,169 
Net income per common share  
Basic$0.71 $0.81 $1.48 $1.72 
Diluted$0.70 $0.80 $1.47 $1.70 
Weighted average common shares outstanding  
Basic8,081,924 8,220,532 8,098,155 8,226,467 
Diluted8,121,109 8,304,370 8,143,701 8,311,630 
Dividends paid per common share$0.24 $0.23 $0.47 $0.55 

See notes to unaudited consolidated financial statements
6


TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three and six months ended March 31, 2024 and 2023
(Dollars in thousands)
(Unaudited) 
 Three Months Ended March 31,Six Months Ended 
March 31,
 2024202320242023
Comprehensive income
Net income$5,708 $6,663 $12,004 $14,169 
Other comprehensive income
Unrealized holding gain on investment securities available for sale, net of income taxes of $22, $64, $88 and $58, respectively
82 239 330 220 
Change in other than temporary impairment ("OTTI") on investment securities held to maturity, net of income taxes:  
Accretion of OTTI on investment securities held to maturity, net of income taxes of $0,$0, $2, and $1, respectively
 1 9 2 
Total other comprehensive income, net of income taxes82 240 339 222 
Total comprehensive income$5,790 $6,903 $12,343 $14,391 



See notes to unaudited consolidated financial statements
7


TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the three and six months ended March 31, 2024 and 2023
(Dollars in thousands, except per share amounts)
(Unaudited)
 Number of SharesAmount Accumulated
Other
Compre-hensive
Income (Loss)
 
 Common
Stock
Common
Stock
Retained
Earnings
Total
Balance, December 31, 20228,231,197$38,878$185,406$(735)$223,549 
Net income6,6636,663
Other comprehensive income240240
Repurchase of common stock(34,263)(1,098)(1,098)
Exercise of stock options6,240121121
Common stock dividends ($0.23 per common share)
(1,892)(1,892)
Stock -based compensation expense7878
Balance, March 31, 20238,203,174$37,979$190,177$(495)$227,661
Balance, December 31, 20238,120,708$34,869$203,327$(827)$237,369
Net income5,7085,708
Other comprehensive income8282
Repurchase of common stock(99,787)(2,672)(2,672)
Exercise of stock options 2,2003535
Common stock dividends ($0.24 per common share)
(1,949)(1,949)
Stock-based compensation expense106106
Balance, March 31, 20248,023,121$32,338$207,086$(745)$238,679
 Common Stock Accumulated
Other
Compre-hensive
Income (Loss)
 
 Number of SharesAmountRetained
Earnings
Total
Balance, September 30, 20228,221,952 $38,751 $180,535 $(717)$218,569 
Net income— — 14,169 — 14,169 
Other comprehensive income— — — 222 222 
Repurchase of common stock(44,833)(1,445)— — (1,445)
Exercise of stock options26,055 517 — — 517 
Common stock dividends ($0.55 per common share)
— — (4,527)— (4,527)
Stock-based compensation expense— 156 — — 156 
Balance, March 31, 20238,203,174 $37,979 $190,177 $(495)$227,661 
Balance, September 30, 20238,105,338 $34,771 $199,386 $(1,084)$233,073 
Net income— — 12,004 — 12,004 
Other comprehensive income— — — 339 339 
Repurchase of common stock(112,117)(3,034)— — (3,034)
Exercise of stock options 29,900 390 — — 390 
Common stock dividends ($0.47 per common share)
— — (3,816)— (3,816)
Stock-based compensation expense— 211 — — 211 
Adoption of ASU 2016-13, net of tax
— — (488)— (488)
Balance, March 31, 20248,023,121 $32,338 $207,086 $(745)$238,679 

See notes to unaudited consolidated financial statements
8


TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended March 31, 2024 and 2023
(Dollars in thousands)
(Unaudited)
 Six Months Ended March 31,
 20242023
Cash flows from operating activities  
Net income$12,004 $14,169 
Adjustments to reconcile net income to net cash provided by operating activities:  
Provision for credit losses417 1,000 
Depreciation720 672 
Accretion of discount on purchased loans(20)(43)
Amortization of CDI113 135 
Stock-based compensation expense211 156 
Net recoveries on investment securities(7)(5)
Change in fair value of investments in equity securities(28)(15)
Accretion of discounts and premiums on securities(574)(631)
Gain on sales of loans, net(120)(67)
Loans originated for sale(6,865)(2,931)
Proceeds from sales of loans6,074 3,546 
Amortization of loan servicing rights467 522 
BOLI net earnings(312)(313)
Increase (decrease) in deferred loan origination fees(63)438 
Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses(3,042)(1,269)
Net cash provided by operating activities8,975 15,364 
Cash flows from investing activities  
Net decrease in CDs held for investment3,984 2,726 
Purchase of investment securities held to maturity(1,919)(15,602)
Purchase of investment securities available for sale(22,207)(16,994)
Proceeds from maturities and prepayments of investment securities held to maturity60,810 4,865 
Proceeds from maturities and prepayments of investment securities available for sale2,667 3,921 
Purchase of FHLB stock (8)
Redemption of FHLB stock1,565  
Increase in loans receivable, net(57,610)(79,162)
Purchases of premises and equipment(796)(518)
Net cash used in investing activities(13,506)(100,772)

See notes to unaudited consolidated financial statements
9


TIMBERLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the six months ended March 31, 2024 and 2023
(Dollars in thousands)
(Unaudited)
 Six Months Ended March 31,
 20242023
Cash flows from financing activities  
Net increase (decrease) in deposits$77,619 $(83,409)
Repayments of FHLB borrowings(15,000) 
Proceeds from exercise of stock options390 517 
Repurchase of common stock(3,034)(1,445)
Payment of dividends(3,816)(4,527)
Net cash provided by (used in) financing activities56,159 (88,864)
  
Net increase (decrease) in cash and cash equivalents51,628 (174,272)
Cash and cash equivalents  
Beginning of period128,721 316,755 
End of period$180,349 $142,483 
Supplemental disclosure of cash flow information  
Income taxes paid$3,388 $4,634 
Interest paid$13,473 $3,214 
Supplemental disclosure of non-cash investing activities  
Other comprehensive income related to investment securities$339 $222 
Adjustment to retained earnings, net of deferred tax; - adoption of ASU 2016-13$(488)$ 

See notes to unaudited consolidated financial statements
10


Timberland Bancorp, Inc. and Subsidiary
Notes to Unaudited Consolidated Financial Statements

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  Basis of Presentation:  The accompanying unaudited consolidated financial statements of Timberland Bancorp, Inc. and its wholly-owned subsidiary, Timberland Bank (the "Bank") (collectively, "the Company") were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with GAAP. However, all adjustments which are, in the opinion of management, necessary for a fair presentation of the interim consolidated financial statements have been included.  All such adjustments are of a normal recurring nature. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023 (“2023 Form 10-K”).  The unaudited consolidated results of operations for the six months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2024.

(b)  Principles of Consolidation:  The unaudited consolidated financial statements include the accounts of the Company and the Bank’s wholly-owned subsidiary, Timberland Service Corporation.   All significant inter-company transactions and balances have been eliminated in consolidation.

(c)  Operating Segment:  The Company has one reportable operating segment which is defined as community banking in western Washington under the operating name, "Timberland Bank."

(d)  The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, as of the date of the consolidated balance sheets, and the reported amounts of income and expenses during the reporting period.  Actual results could differ from those estimates.

(e)  Certain prior period amounts have been reclassified to conform to the March 31, 2024 presentation with no change to previously reported net income or total shareholders’ equity.

(2) INVESTMENT SECURITIES

Held to maturity and available for sale investment securities have been classified according to management’s intent and were as follows as of March 31, 2024 and September 30, 2023 (dollars in thousands):
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Allowance for Credit Losses ("ACL")
March 31, 2024    
Held to Maturity    
U.S. Treasury and U.S. government agency securities$122,087 $ $(6,952)$115,135 $ 
Mortgage-backed securities ("MBS"):
U.S. government agencies52,218 3 (2,676)49,545  
Private label residential35,153 328 (1,658)33,823 77 
Municipal securities1,868  (24)1,844  
Bank issued trust preferred securities492  (32)460 8 
Total held to maturity$211,818 $331 $(11,342)$200,807 $85 
11





March 31, 2024Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available for Sale
MBS:    
U.S. government agencies$62,689 $34 $(977)$61,746 
Total$62,689 $34 $(977)$61,746 
September 30, 2023
Held to Maturity
U.S. treasury and U.S. government agency securities$171,626 $ $(10,088)$161,538 
MBS:
U.S. government agencies52,294  (3,950)48,344 
     Private label residential 44,011 295 (2,611)41,695 
Municipal securities1,787  (47)1,740 
Bank issued trust preferred securities500  (51)449 
Total$270,218 $295 $(16,747)$253,766 
Available for Sale
MBS: U.S. government agencies$43,132 $ $(1,361)$41,771 
$43,132 $ $(1,361)$41,771 

Held to maturity and available for sale investment securities with unrealized losses were as follows as of March 31, 2024 (dollars in thousands):
 Less Than 12 Months12 Months or LongerTotal
 Estimated
 Fair
 Value
Gross
Unrealized
Losses
QuantityEstimated
 Fair
 Value
Gross
Unrealized
Losses
QuantityEstimated
 Fair
 Value
Gross
Unrealized
Losses
Held to maturity
U.S. Treasury and U.S. government agency securities$9,609 $(59)1 $105,526 $(6,893)20 $115,135 $(6,952)
MBS:
U.S. government agencies15,686 (150)3 33,660 (2,526)55 49,346 (2,676)
Private label residential   30,398 (1,658)29 30,398 (1,658)
Municipal securities   1,744 (24)1 1,744 (24)
Bank issued trust
  preferred securities
   460 (32)1 460 (32)
     Total
$25,295 $(209)4 $171,788 $(11,133)106 $197,083 $(11,342)
Available for sale
MBS: U.S. government agencies$25,293 $(166)3 $27,561 $(811)31 $52,854 $(977)
     Total
$25,293 $(166)3 $27,561 $(811)31 $52,854 $(977)


12





Held to maturity and available for sale investment securities with unrealized losses were as follows as of September 30, 2023 (dollars in thousands):
 Less Than 12 Months12 Months or LongerTotal
 Estimated
 Fair
 Value
Gross
Unrealized Losses
QuantityEstimated
 Fair
 Value
Gross
Unrealized Losses
QuantityEstimated
 Fair
 Value
Gross
Unrealized Losses
Held to maturity        
U.S. Treasury and U.S. government agency securities$9,455 $(129)1 $152,082 $(9,959)26 $161,537 $(10,088)
MBS:
U.S. government agencies16,432 (549)13 31,703 (3,401)51 48,135 (3,950)
 Private label
    residential
1,288 (2)1 38,205 (2,609)32 39,493 (2,611)
Municipal securities   1,740 (47)1 1,740 (47)
Bank issued trust preferred securities   449 (51)1 449 (51)
     Total
$27,175 $(680)15 $224,179 $(16,067)111 $251,354 $(16,747)
Available for sale
MBS: U.S. government agencies$10,635 $(308)3 $30,809 $