Timberland Bancorp : Annual Report - 2023

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2023 Annual Report

		Lewis	Gig Harbor
Aberdeen		Winlock
(2 branches)
	Elma	Toledo
	Lacey
		Olympia (2 branches)
		(2 branches)
		Chehalis

Dean J. Brydon

Dear Fellow Shareholders of Timberland Bancorp, Inc.:

On behalf of the Directors and Employees of Timberland Bancorp, Inc. and its subsidiary, Timberland Bank, it is our privilege to invite you to attend the annual meeting for our scal year ended September 30, 2023. The meeting will be convened on January 23, 2024 at 1:00 p.m. and will be conducted virtually. Instructions to access the virtual meeting are included on your proxy card and are also included in the instructions accompanying your proxy materials. During the meeting we will review the Company's operating results for the recently concluded scal year and the subsequent rst scal quarter, conduct an election of Directors, vote on other matters described in the proxy statement and

respond to appropriate questions from shareholders. We encourageJonathan A. Fischer you to review the information contained in the Form 10-K

following this letter to acquaint yourself with the Company's 2023 scal year nancial performance.

It was a challenging year for the banking industry as short-term interest rates continued to increase and further inverted the yield curve. The Federal Reserve increased short-term interest rates by 225 basis points this past scal year, bringing the cumulative increase to 525 basis points since March 2022. This rapid increase in short-term interest rates initially resulted in a net interest margin expansion for much of the industry, but as funding cost increases began to outpace the ability to re-price assets, the industry began experiencing margin compression and lower protability. The banking industry also experienced deposit outows over the past year, which led to liquidity pressure and a higher reliance on wholesale funding sources (brokered deposits and borrowings).

Despite the headwinds and the challenging environment for nancial institutions this past year, Timberland generated strong protability numbers, reported solid asset quality metrics, and continued to maintain a strong and conservative balance sheet.

A few of the highlights from the 2023 scal year include:

• Diluted Earnings Per Share ("EPS") increased 17% to $3.29 (an all-time record for TSBK);
• Net Income increased 15% to $27.12 million;
• Return on Average Assets increased to 1.50%;
• Return on Average Equity increased to 12.01%;
• Net Loans Receivable increased by 15%;
• Liquidity (both on-balance sheet and off-balance sheet) remained strong with only $35 million in borrowings and additional secured borrowing line capacity of $680 million available through the Federal Home Loan Bank and the Federal Reserve;
• Non-performingassets to total assets ratio improved to 0.09% at September 30, 2023;
• Tier 1 Leverage Capital Ratio increased to 12.09% at September 30, 2023; and
• Paid quarterly cash dividends for the 44th consecutive quarter.

We would like to thank our employees for their hard work and dedication to serving all of our customers, communities and shareholders.

We believe Timberland is well-positioned to navigate through the current economic headwinds and continue to implement initiatives to grow the Company.

Thank you for choosing to be a shareholder of the Company. We encourage you to participate in our virtual annual meeting.

We wish you a Merry Christmas and a Happy New Year!

Sincerely,

Dean J. Brydon	Jonathan A. Fischer
CEO	President & COO

FINANCIAL HIGHLIGHTS

TIMBERLAND BANCORP, INC. AND SUBSIDIARY

The following table presents selected nancial information concerning the consolidated nancial position and results of operations of Timberland Bancorp, Inc. ("Company") at and for the dates indicated. The consolidated data is derived in part from, and should be read in conjunction with, the Consolidated Financial Statements of the Company and its subsidiary presented herein. (Dollars in thousands except share data)

Total Assets

$1,792,180 $1,860,508 $1,839,905

2021 2022 2023

Loans Receivable, Net

$1,132,426 $1,302,305

$968,454

2021 2022 2023

Total Deposits

		September 30,
	2021	2022	2023
SELECTED FINANCIAL DATA	$1,792,180	$1,860,508	$1,839,905
Total Assets
Loans Receivable, Net	968,454	1,132,426	1,302,305
Total Deposits	1,570,555	1,632,176	1,560,935
Shareholders' Equity	206,899	218,569	233,073

OPERATING DATA

Interest and Dividend Income	$	54,962	$	58,508	$	79,951
Interest Expense		3,104		2,674		11,592
Net Interest Income		51,858		55,834		68,359
Provision for Loan Losses		-		270		2,132
Net Interest Income after Provision for Loan Losses		51,858		55,564		66,227
Non-Interest Income		17,161		12,624		11,140
Non-Interest Expense		34,591		38,626		43,373
Income before Income Taxes		34,428		29,562		33,994
Provision for Income Taxes		6,845		5,962		6,876
Net Income	$	27,583	$	23,600	$	27,118

	$1,632,176
$1,570,555		$1,560,935
2021	2022	2023

NET INCOME PER COMMON SHARE

Basic	$	3.31	$	2.84	$	3.32
Diluted		3.27		2.82		3.29

Net Income

$27,583	$23,600	$27,118
2021	2022	2023

KEY FINANCIAL RATIOS

Return on Average Assets Return on Average Equity Net Interest Margin Efciency Ratio

Non-Performing Assets to Total Assets (1) Total Equity-to-Assets

__________________

1.64% 1.27% 1.50%

13.98 11.14 12.01

3.25 3.16 3.95

50.12 56.42 54.56

0.18 0.12 0.09

11.54 11.75 12.67

1. Non-performingassets include non-accrual loans, loans past due 90 days or more and still accruing, non-accrual investment securities, other real estate owned and other repossessed assets.

2023 FORM 10-K

We have included our Form 10-K, as led with the Securities and Exchange Commission, with our annual report to give you more complete information about our Company. A table of contents can be found facing page one.

Written requests to obtain a copy of any exhibit listed in Part IV should be sent to Timberland Bancorp, Inc., 624 Simpson Avenue, Hoquiam, Washington 98550, attention: Investor Relations Department.

[THIS PAGE INTENTIONALLY LEFT BLANK.]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Fiscal Year Ended	September 30, 2023	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
	Commission File Number: 0-23333
	TIMBERLAND BANCORP, INC.
	(Exact name of registrant as specified in its charter)
	Washington			91-1863696
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)
	624 Simpson Avenue, Hoquiam, Washington	98550
	(Address of principal executive offices)			(Zip Code)
	Registrant's telephone number, including area code:			(360)	533-4747

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $.01 par value	TSBK	The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:	None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ☐No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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, a 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1.b.☐

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

As of December 4, 2023, the registrant had 8,110,608 shares of common stock issued and outstanding. The aggregate market value of the common stock held by nonaffiliates of the registrant, based on the closing sales price of the registrant's common stock as quoted on the NASDAQ Global Market on March 31, 2023, was $221.65 million (8,203,174 shares at $27.02). For purposes of this calculation, common stock held by officers and directors of the registrant was included.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders (Part III).

1

[THIS PAGE INTENTIONALLY LEFT BLANK.]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Fiscal Year Ended	September 30, 2023	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
	Commission File Number: 0-23333
	TIMBERLAND BANCORP, INC.
	(Exact name of registrant as specified in its charter)
	Washington			91-1863696
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)
	624 Simpson Avenue, Hoquiam, Washington	98550
	(Address of principal executive offices)			(Zip Code)
	Registrant's telephone number, including area code:			(360)	533-4747

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $.01 par value	TSBK	The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:	None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ☐No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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, a 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1.b.☐

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

As of December 4, 2023, the registrant had 8,110,608 shares of common stock issued and outstanding. The aggregate market value of the common stock held by nonaffiliates of the registrant, based on the closing sales price of the registrant's common stock as quoted on the NASDAQ Global Market on March 31, 2023, was $221.65 million (8,203,174 shares at $27.02). For purposes of this calculation, common stock held by officers and directors of the registrant was included.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders (Part III).

1

	TIMBERLAND BANCORP, INC.
	2023 ANNUAL REPORT ON FORM 10-K
	TABLE OF CONTENTS
PART I.		Page
Item 1.	Business
	General	4
	Market Area	4
	Lending Activities	6
	Investment Activities	22
	Deposit Activities and Other Sources of Funds	22
	Bank Owned Life Insurance	25
	How We Are Regulated	25
	Taxation	32
	Competition	33
	Subsidiary Activities	33
	Employees and Human Capital Resources	34
	Executive Officers of the Registrant	35
Item 1A.	Risk Factors	36
Item 1B.	Unresolved Staff Comments	47
Item 2.	Properties	47
Item 3.	Legal Proceedings	47
Item 4.	Mine Safety Disclosures	48
PART II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	48
Item 6.	Reserved	49
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	49
	General	49
	Overview	50
	Operating Strategy	51
	Selected Financial Data	52
	Critical Accounting Policies and Estimates	53
	Market Risk and Asset and Liability Management	56
	Comparison of Financial Condition at September 30, 2023 and September 30, 2022	57
	Comparison of Operating Results for the Years Ended September 30, 2023 and 2022	60
	Average Balances, Interest and Average Yields/Cost	62
	Rate/Volume Analysis	64
	Liquidity and Capital Resources	64
	New Accounting Pronouncements	66
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 8.	Financial Statements and Supplementary Data	66
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	123
Item 9A. Controls and Procedures	123
Item 9B.	Other Information	124
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	124
PART III.
Item 10. Directors, Executive Officers and Corporate Governance	124
Item 11.	Executive Compensation	125
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	125
Item 13. Certain Relationships and Related Transactions, and Director Independence	126
Item 14. Principal Accountant Fees and Services	126
PART IV.
Item 15. Exhibits and Financial Statement Schedules	127
Item 16.	Form 10-K Summary	127

As used throughout this report, the terms "we," "our," or "us," refer to Timberland Bancorp, Inc. and its consolidated subsidiary, unless the context otherwise requires.

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