TIMBERLAND BANCORP INC

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the consolidated financial statements and accompanying notes to the consolidated financial statements contained in Item 1 of this Form 10-Q. The following analysis discusses the material changes in the consolidated financial condition and results of operations of the Company at and for the three and six months ended March 31, 2024.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the consolidated financial statements and accompanying notes to the consolidated financial statements contained in Item 1 of this Form 10-Q. The following analysis discusses the material changes in the consolidated financial condition and results of operations of the Company at and for the three and nine months ended June 30, 2024.

Previous wording

Certain matters discussed in this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future economic performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to: potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth; continuing elevated levels of inflation and the impact of current and future monetary policies of the Board of Governors of the Federal Reserve System ("Federal Reserve") in response thereto; the effects of any federal government shutdown; credit risks of lending activities, including any deterioration in the housing and commercial real estate markets which may lead to increased losses and non-performing loans in our loan portfolio resulting in our ACL not being adequate to cover actual losses and thus requiring us to materially increase our ACL through the provision for credit losses; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long-term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Federal Reserve and of our bank subsidiary by the Federal Deposit Insurance Corporation (“FDIC”), the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against …

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain matters discussed in this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future economic performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to:

Previous wording

Any of the forward-looking statements that we make in this Form 10-Q and in the other public statements we make are based upon management's beliefs and assumptions at the time they are made. We do not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements included in this quarterly report to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise.

Current wording

Any of the forward-looking statements that we make in this Form 10-Q and in the other public statements we make are based upon management's beliefs and assumptions at the time they are made. We do not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements included in this quarterly report to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur and we caution readers not to place undue reliance on any forward-looking statements. These risks could cause our actual results for fiscal 2024 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect the Company's consolidated financial condition and results of operations as well as its stock price performance.

Previous wording

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 offices (including its main office in Hoquiam). At March 31, 2024, the Company had total assets of $1.91 billion, net loans receivable of $1.36 billion, total deposits of $1.64 billion and total shareholders’ equity of $238.68 million. The Company's business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including the unaudited consolidated financial statements and related data, relates primarily to the Bank's operations.

Current wording

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 offices (including its main office in Hoquiam). At June 30, 2024, the Company had total assets of $1.90 billion, net loans receivable of $1.40 billion, total deposits of $1.63 billion and total shareholders’ equity of $241.22 million. The Company's business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including the unaudited consolidated financial statements and related data, relates primarily to the Bank's operations.

Previous wording

The profitability of the Company’s operations depends primarily on its net interest income after provision for (recapture of) credit losses. Net interest income is the difference between interest income, which is the income that the Company earns on interest-earning assets, which are primarily loans and investments, and interest expense, the amount that the Company pays on its interest-bearing liabilities, which are primarily deposits and borrowings (as needed). Net interest income is affected by changes in the volume and mix of interest-earning assets, the interest earned on those assets, the volume and mix of interest-bearing liabilities and the interest paid on those interest-bearing liabilities. Management attempts to maintain a net interest margin placing it within the top quartile of its Washington State peers.

Current wording

The profitability of the Company’s operations depends primarily on its net interest income after provision for (recapture of) credit losses. Net interest income is the difference between interest income, which is the income that the Company earns on interest-earning assets, which are primarily loans and investments, and interest expense, the amount that the Company pays on its interest-bearing liabilities, which are primarily deposits and borrowings (as needed). Net interest income is affected by changes in the volume and mix of interest-earning assets, the interest earned on those assets, the volume and mix of interest-bearing liabilities and the interest paid on those interest-bearing liabilities.

Previous wording

Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and types of interest earning assets, interest bearing and non-interest bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period. Since March 2022, in response to inflation, the Federal Open Market Committee ("FOMC") of the Federal Reserve has increased the target range for the federal funds rate by 525 basis points, to a range of 5.25% to 5.50% as of March 31, 2024, taking benchmark borrowing costs to their highest level in more than 22 years.

Current wording

Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and types of interest earning assets, interest bearing and non-interest bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period. Since March 2022, through July 2023, in response to inflation, the Federal Open Market Committee ("FOMC") of the Federal Reserve has increased the target range for the federal funds rate by 525 basis points, to a range of 5.25% to 5.50%, where it remained as of June 30, 2024.

Previous wording

The provision for (recapture of) credit losses is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio as well as prevailing economic and market conditions. The ACL on loans reflects the amount that management has determined is adequate to cover probable expected credit losses in the loan portfolio. As the loan portfolio increases, or due to an increase in probable expected losses inherent in the loan portfolio, the ACL may increase, resulting in a decrease to net interest income after the provision. Improvement in loan risk ratings, increase in property values, or receipts of recoveries of amounts previously charged off may partially or fully offset any required increases to ACL on loans due to loan growth or an increase in the probable expected credit losses. The Company recorded a provision for credit losses on loans of $166,000 and $545,000 for the three and six months ended March 31, 2024 (using the CECL methodology), primarily due to loan portfolio growth. The Company recorded a provision for loan losses (using the prior incurred loss methodology) of $475,000 and $1.00 million for the three and six months ended March 31, 2023.

Current wording

The provision for (recapture of) credit losses is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio as well as prevailing economic and market conditions. The ACL on loans reflects the amount that management has determined is adequate to cover probable expected credit losses in the loan portfolio. As the loan portfolio increases, or due to an increase in probable expected losses inherent in the loan portfolio, the ACL may increase, resulting in a decrease to net interest income after the provision. Improvement in loan risk ratings, increase in property values, or receipts of recoveries of amounts previously charged off may partially or fully offset any required increases to ACL on loans due to loan growth or an increase in the probable expected credit losses. The Company recorded a provision for credit losses on loans of $264,000 and $810,000 for the three and nine months ended June 30, 2024, respectively (using the CECL methodology), primarily due to loan portfolio growth. The Company recorded a provision for loan losses (using the prior incurred loss methodology) of $610,000 and $1.61 million for the three and nine months ended June 30, 2023, respectively.

Previous wording

Net income is also affected by non-interest income and non-interest expense. For the three and six months ended March 31, 2024, non-interest income consisted primarily of service charges on deposit accounts, gain on sales of loans, ATM and debit card interchange transaction fees, BOLI net earnings, servicing income on loans sold, escrow fees and other operating income. Non-interest income is also increased by net recoveries on investment securities and for periods prior to the adoption of CECL reduced by net OTTI losses on investment securities, if any. Non-interest income is also decreased by valuation allowances on loan servicing rights and increased by recoveries of valuation allowances on loan servicing rights, if any. Non-interest expense consisted primarily of salaries and employee benefits, premises and equipment, advertising, ATM and debit card interchange transaction fees, postage and courier expenses, state and local taxes, professional fees, FDIC insurance premiums, loan administration and foreclosure expenses, data processing and telecommunication expenses, deposit operation expenses, amortization of CDI, and other non-interest expenses. Non-interest expense in certain periods is reduced by gains on the sale of premises and equipment and gains on the sale of OREO. Non-interest income and non-interest expense are affected by the growth of the Company's operations and growth in the number of loan and deposit accounts.

Current wording

Net income is also affected by non-interest income and non-interest expense. For the three and nine months ended June 30, 2024, non-interest income consisted primarily of service charges on deposit accounts, gain on sales of loans, ATM and debit card interchange transaction fees, BOLI net earnings, servicing income on loans sold, escrow fees and other operating income. Non-interest income is also increased by net recoveries on investment securities and for periods prior to the adoption of CECL reduced by net OTTI losses on investment securities, if any. Non-interest income is also decreased by valuation allowances on loan servicing rights and increased by recoveries of valuation allowances on loan servicing rights, if any. Non-interest expense consisted primarily of salaries and employee benefits, premises and equipment, advertising, ATM and debit card interchange transaction fees, postage and courier expenses, state and local taxes, professional fees, FDIC insurance premiums, loan administration and foreclosure expenses, data processing and telecommunication expenses, deposit operation expenses, amortization of CDI, and other non-interest expenses. Non-interest expense in certain periods is reduced by gains on the sale of premises and equipment and gains on the sale of OREO. Non-interest income and non-interest expense are affected by the growth of the Company's operations and growth in the number of loan and deposit accounts.

Previous wording

The Company's critical accounting estimates are described in the Company’s 2023 Form 10-K under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Estimates.” That discussion highlights estimates that the Company makes that involve uncertainty or potential for substantial change. Other than the adoption of CECL, there have been no material changes in the Company’s critical accounting policies and estimates as previously disclosed in the Company’s 2023 Form 10-K.

Current wording

The Company's critical accounting estimates are described in the Company’s 2023 Form 10-K under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Estimates.” That discussion highlights estimates that the Company makes that involve uncertainty or potential for substantial change. Other than the adoption of CECL (for additional information on CECL, see Note 4 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”), there have been no material changes in the Company’s critical accounting policies and estimates as previously disclosed in the Company’s 2023 Form 10-K.

Previous wording

General: Total assets increased by $67.33 million, or 3.7%, to $1.91 billion at March 31, 2024 from $1.84 billion at September 30, 2023. The increase in total assets was primarily due to increases in loans receivable and total cash and cash equivalents, which was partially offset by decreases in investment securities and CDs held for investment. The increase in assets was primarily funded by an increase in deposits,which was partially offset by a decrease in FHLB borrowings.

Current wording

General: Total assets increased by $60.72 million, or 3.3%, to $1.90 billion at June 30, 2024 from $1.84 billion at September 30, 2023. The increase in total assets was primarily due to increases in loans receivable, investment securities available for sale and total cash and cash equivalents, which was partially offset by decreases in investment securities held to maturity and CDs held for investment. The increase in assets was primarily funded by an increase in deposits, which was partially offset by a decrease in FHLB borrowings.

Previous wording

Net loans receivable increased by $56.81 million, or 4.4%, to $1.36 billion at March 31, 2024 from $1.30 billion at September 30, 2023, primarily due to increases in multi-family loans, one- to four-family loans, commercial real estate loans, as well as smaller increases in several other loan categories. These increases to net loans receivable were partially offset by decreases in construction and land development loans as well as smaller decreases in several other loan categories.

Current wording

Net loans receivable increased by $94.71 million, or 7.3%, to $1.40 billion at June 30, 2024 from $1.30 billion at September 30, 2023, primarily due to increases in multi-family loans, one- to four-family loans, commercial real estate loans, as well as smaller increases in several other loan categories. These increases to net loans receivable were partially offset by decreases in various construction loan categories.

Previous wording

Total deposits increased by $77.62 million, or 5.0%, to $1.64 billion at March 31, 2024 from $1.56 billion at September 30, 2023, primarily due to increases in money market account and certificates of deposit balances. These increases were partially offset by decreases in NOW checking account, non-interest bearing deposit and savings account balances.

Current wording

Total deposits increased by $67.61 million, or 4.3%, to $1.63 billion at June 30, 2024 from $1.56 billion at September 30, 2023, primarily due to increases in money market account and certificates of deposit balances. These increases were partially offset by decreases in NOW checking account, non-interest bearing deposit and savings account balances.

Previous wording

Shareholders’ equity increased by $5.61 million, or 2.4%, to $238.68 million at March 31, 2024 from $233.07 million at September 30, 2023. The increase in shareholders' equity was primarily due to net income and proceeds from stock option exercises along with a reduction in accumulated other comprehensive loss during the current period. These increases were partially offset by the payment of dividends to common shareholders, repurchases of common stock and a reduction of retained earnings related to adoption of the new CECL accounting standard during the six months ended March 31, 2024.

Current wording

Shareholders’ equity increased by $8.15 million, or 3.5%, to $241.22 million at June 30, 2024 from $233.07 million at September 30, 2023. The increase in shareholders' equity was primarily due to net income, a reduction in accumulated other comprehensive loss and proceeds from stock option exercises during the current period. These increases were partially offset by the payment of dividends to common shareholders, repurchases of common stock and a reduction of retained earnings related to adoption of the new CECL accounting standard during the nine months ended June 30, 2024.

Previous wording

Cash and Cash Equivalents and CDs Held for Investment: Cash and cash equivalents and CDs held for investment increased by $47.64 million, or 33.1%, to $191.55 million at March 31, 2024 from $143.91 million at September 30, 2023.

Current wording

Cash and Cash Equivalents and CDs Held for Investment: Cash and cash equivalents and CDs held for investment increased by $25.46 million, or 17.7%, to $169.37 million at June 30, 2024 from $143.91 million at September 30, 2023.

Previous wording

The increase was primarily due to increased deposits and a decrease in investment securities, partially offset by an increase in loans and a decrease in FHLB borrowings.

Current wording

The increase was primarily due to an increase in deposits and a decrease in investment securities, which was partially offset by an increase in loans and a decrease in FHLB borrowings.

Previous wording

Investment Securities: Investment securities (including investments in equity securities) decreased by $38.39 million, or 12.3%, to $274.41 million at March 31, 2024 from $312.80 million at September 30, 2023. This decrease was primarily due to maturities, prepayments and scheduled amortizations exceeding purchases. For additional information on investment securities, see Note 2 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Current wording

Investment Securities: Investment securities (including investments in equity securities) decreased by $60.65 million, or 19.4%, to $252.15 million at June 30, 2024 from $312.80 million at September 30, 2023. This decrease was primarily due to maturities, prepayments and scheduled amortizations exceeding purchases. For additional information on investment securities, see Note 2 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Previous wording

FHLB Stock: FHLB stock decreased $1.57 million, or 43.5% to $2.04 million at March 31, 2024 from $3.60 million at September 30, 2023, due to the repayment of a portion of FHLB borrowings and the restructuring of stock requirements by FHLB.

Current wording

FHLB Stock: FHLB stock decreased $1.56 million, or 43.5% to $2.04 million at June 30, 2024 from $3.60 million at September 30, 2023, due to the repayment of a portion of FHLB borrowings and the restructuring of stock ownership requirements by FHLB.

Previous wording

Other Investments: Other investments consist solely of the Company's investment in the Solomon Hess SBA Loan Fund LLC, which was unchanged at $3.00 million at both March 31, 2024 and September 30, 2023. This investment is utilized to help satisfy compliance with the Bank's Community Reinvestment Act investment test requirements.

Current wording

Other Investments: Other investments, consisting solely of the Company's investment in the Solomon Hess SBA Loan Fund LLC, was unchanged at $3.00 million at both June 30, 2024 and September 30, 2023. This investment is utilized to help satisfy compliance with the Bank's Community Reinvestment Act investment test requirements.

Previous wording

Loans: Net loans receivable increased by $56.81 million, or 4.4%, to $1.36 billion at March 31, 2024 from $1.30 billion at September 30, 2023. The increase was due to increases of $40.10 million in multi-family loans, $23.21 million in one- to four-family loans, $9.11 million in commercial real estate loans and smaller increases in other categories. These increases were partially offset by a $46.49 million decrease in construction and land development loans, with the largest decreases occurring in commercial and multi-family construction loans, and smaller decreases in several other loan categories. The increase in multi-family and one-to-four family loans and the decrease in construction loans were in part due to the construction portion of these loans beings completed and moved to permanent financing categories.

Current wording

Loans: Net loans receivable increased by $94.71 million, or 7.3%, to $1.40 billion at June 30, 2024 from $1.30 billion at September 30, 2023. The increase was primarily due to increases of $50.77 million in multi-family loans, $35.38 million in one- to four-family loans and $29.60 million in commercial real estate loans. These increases were partially offset by a $47.58 million decrease in various construction loan categories, with the largest decreases occurring in commercial and multi-family construction loans. The increase in multi-family and one-to-four family loans and the decrease in construction loans were in part due to the construction phase of these loans beings completed and then reclassified to permanent financing categories.

Previous wording

Loan originations decreased by $50.51 million, or 28.3%, to $128.30 million for the six months ended March 31, 2024 from $178.81 million for the six months ended March 31, 2023. The decrease in loan originations was primarily due to a decrease in commercial real estate, one- to four-family and construction loans originated. The decrease was partially offset by increases in multi-family and commercial business loan originations. The Company generally sells longer-term fixed-rate one- to four-family mortgage loans for asset liability management purposes and to generate non-interest income. Sales of fixed-rate one- to four-family loans increased by $2.53 million, or 71.3%, to $6.07 million for the six months ended March 31, 2024 from $3.55 million for the six months ended March 31, 2023, primarily due to an increase in one- to four-family construction loans refinancing to permanent loans and being sold into the secondary market.

Current wording

Loan originations decreased by $69.92 million, or 25.8%, to $202.62 million for the nine months ended June 30, 2024 from $272.54 million for the nine months ended June 30, 2023. The decrease in loan originations was primarily due to a decrease in construction, commercial real estate, one- to four-family and commercial business loans originated. The decrease was partially offset by increases in multi-family and land loan originations. The Company generally sells longer-term fixed-rate one- to four-family mortgage loans for asset liability management purposes and to generate non-interest income. Sales of fixed-rate one- to four-family loans increased by $2.17 million, or 31.1%, to $9.12 million for the nine months ended June 30, 2024 from $6.96 million for the nine months ended June 30, 2023, primarily due to an increase in one- to four-family construction loans refinancing to permanent loans and being sold into the secondary market.

Previous wording

Premises and Equipment: Premises and equipment increased by $76,000, or 0.4%, to $21.72 million at March 31, 2024 from $21.64 million at September 30, 2023. This increase was primarily due to additions from remodeling projects that were partially offset by scheduled depreciation.

Current wording

Premises and Equipment: Premises and equipment decreased by $84,000, or 0.4%, to $21.56 million at June 30, 2024 from $21.64 million at September 30, 2023. This decrease was primarily due to scheduled depreciation that was partially offset by additions from remodeling projects.

Previous wording

BOLI (Bank Owned Life Insurance): BOLI increased by $312,000 or 1.4%, to $23.28 million at March 31, 2024 from $22.97 million at September 30, 2023. The increase was due to net BOLI earnings, representing the increase in the cash surrender value of the BOLI policies.

Current wording

BOLI (Bank Owned Life Insurance): BOLI increased by $470,000, or 2.0%, to $23.44 million at June 30, 2024 from $22.97 million at September 30, 2023. The increase was due to net BOLI earnings, representing the increase in the cash surrender value of the BOLI policies.

Previous wording

Goodwill and CDI: The recorded amount of goodwill remained unchanged at $15.13 million at both March 31, 2024 and September 30, 2023. CDI decreased by $113,000, or 16.7%, to $564,000 at March 31, 2024 from $677,000 at September 30, 2023 due to scheduled amortization. For additional information on goodwill and CDI, see Note 3 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Current wording

Goodwill and CDI: The recorded amount of goodwill remained unchanged at $15.13 million at both June 30, 2024 and September 30, 2023. CDI decreased by $169,000, or 25.0%, to $508,000 at June 30, 2024 from $677,000 at September 30, 2023 due to scheduled amortization. For additional information on goodwill and CDI, see Note 3 of the Notes to Unaudited Consolidated Financial Statements contained in “Item 1, Financial Statements.”

Previous wording

Loan Servicing Rights, Net: Loan servicing rights, net decreased by $407,000 or 19.2%, to $1.72 million at March 31, 2024 from $2.12 million at September 30, 2023 primarily due to the amortization of servicing rights. The principal amount of loans serviced for Freddie Mac and SBA decreased by $7.63 million to $378.87 million at March 31, 2024 from $386.50 million at September 30, 2023.

Current wording

Loan Servicing Rights, Net: Loan servicing rights, net decreased by $598,000, or 28.15%, to $1.53 million at June 30, 2024 from $2.12 million at September 30, 2023 primarily due to the amortization of servicing rights. The principal amount of loans serviced for Freddie Mac and SBA decreased by $14.27 million to $372.23 million at June 30, 2024 from $386.50 million at September 30, 2023.

Previous wording

Deposits: Deposits increased by $77.62 million, or 5.0%, to $1.64 billion at March 31, 2024 from $1.56 billion at September 30, 2023. The increase was primarily due to a $122.12 million increase in money market account balances and a $53.85 million increase in certificates of deposit balances. These increases were partially offset by a $50.11 million decrease in NOW checking accounts balances, a $30.96 million decrease in non-interest bearing demand account balances and a $17.28 million decrease in savings account balances. The increase in money market account balances was primarily due to several larger balance increases with commercial customers.

Current wording

Deposits: Deposits increased by $67.61 million, or 4.3%, to $1.63 billion at June 30, 2024 from $1.56 billion at September 30, 2023. The increase was primarily due to a $137.29 million increase in money market account balances and a $61.44 million increase in certificates of deposit balances. These increases were partially offset by a $61.94 million decrease in NOW checking accounts balances, a $48.74 million decrease in non-interest bearing demand account balances and a $20.45 million decrease in savings account balances. The increase in money market account balances was primarily due to several larger balance increases with commercial customers.

Previous wording

Shareholders’ Equity: Total shareholders’ equity increased by $5.61 million, or 2.4%, to $238.68 million at March 31, 2024 from $233.07 million at September 30, 2023. The increase was primarily due to net income of $12.00 million and proceeds of $390,000 from the exercise of stock options along with a $339,000 reduction in the accumulated other comprehensive loss category for the fair value adjustment on available for sale investment securities. This increase was partially offset by dividend payments to common shareholders of $3.82 million, the repurchase of 112,117 shares of the Company's common stock for $3.03 million and a $488,000 adjustment to equity for the adoption of the new CECL accounting standard.

Current wording

Shareholders’ Equity: Total shareholders’ equity increased by $8.15 million, or 3.5%, to $241.22 million at June 30, 2024 from $233.07 million at September 30, 2023. The increase was primarily due to net income of $17.93 million, proceeds of $395,000 from the exercise of stock options and a $539,000 reduction in the accumulated other comprehensive loss for the fair value adjustment on available for sale investment securities. This increase was partially offset by dividend payments to common shareholders of $5.74 million, the repurchase of 182,117 shares of the Company's common stock for $4.80 million and a $488,000 adjustment to equity for the adoption of the new CECL accounting standard.

Previous wording

Non-performing assets to total assets was 0.19% at March 31, 2024 and 0.09% at September 30, 2023. Non-performing assets increased by $2.09 million, or 130.8%, to $3.68 million at March 31, 2024 from $1.60 million at September 30, 2023. The increase in non-performing assets was primarily due to a $2.09 million increase in non-accrual loans, with the largest increases occurring in the commercial business and commercial real estate portfolios.

Current wording

Non-performing assets to total assets was 0.22% at June 30, 2024 and 0.09% at September 30, 2023. Non-performing assets increased by $2.60 million, or 162.7%, to $4.19 million at June 30, 2024 from $1.60 million at September 30, 2023. The increase in non-performing assets was primarily due to a $2.61 million increase in non-accrual loans, with the largest increases occurring in the commercial business and commercial real estate portfolios.

Previous wording

(1) As of March 31, 2024, there was one one- to four-family property in the process of foreclosure. At September 30, 2023, there were no one- to four-family properties in the process of foreclosure.

Current wording

(1) At June 30, 2024 and September 30, 2023, there were no one- to four-family properties in the process of foreclosure.

Previous wording

(2) Does not include TDRs on accrual status as of September 30, 2023. For more information regarding TDRs please see Note 4 of the Notes to Unaudited Financial Statements contained in "Item 1 Financial Statements".

Current wording

(2) Does not include TDRs on accrual status as of September 30, 2023. For more information regarding TDRs, see Note 4 of Notes to Unaudited Consolidated Financial Statements contained in "Item 1 Financial Statements".

Previous wording

(3) Does not include TDRs on non-accrual status at September 30, 2023. For more information regarding TDRs please see Note 4 of the Notes to Unaudited Financial Statements contained in "Item 1 Financial Statements".

Current wording

(3) Does not include TDRs on non-accrual status at September 30, 2023. For more information regarding TDRs, see Note 4 of Notes to Unaudited Consolidated Financial Statements contained in "Item 1 Financial Statements".

Previous wording

Comparison of Operating Results for the Three and Six Months Ended March 31, 2024 and 2023

Current wording

Comparison of Operating Results for the Three and Nine Months Ended June 30, 2024 and 2023

Previous wording

Net income decreased by $955,000, or 14.3%, to $5.71 million for the quarter ended March 31, 2024 from $6.66 million for the quarter ended March 31, 2023. Net income per diluted common share decreased by $0.10, or 12.5%, to $0.70 for the quarter ended March 31, 2024 from $0.80 for the quarter ended March 31, 2023. The decreases in net income and net income per diluted common share for the three months ended March 31, 2024, were primarily due to a $1.52 million decrease in net interest income, a $47,000 increase in non-interest expense and a $21,000 decrease in non-interest income. This decrease was partially offset by a $394,000 decrease in the provision for credit losses and a $235,000 decrease in the provision for income taxes.

Current wording

Net income decreased by $382,000, or 6.1%, to $5.92 million for the quarter ended June 30, 2024 from $6.31 million for the quarter ended June 30, 2023. Net income per diluted common share decreased by $0.03, or 3.9%, to $0.74 for the quarter ended June 30, 2024 from $0.77 for the quarter ended June 30, 2023. The decreases in net income and net income per diluted common share for the three months ended June 30, 2024, were primarily due to a $653,000 decrease in net interest income, a $142,000 increase in non-interest expense and an $84,000 decrease in non-interest income. These decreases were partially offset by a $366,000 decrease in the provision for credit losses and a $131,000 decrease in the provision for income taxes.

Previous wording

Net income decreased by $2.17 million, or 15.3%, to $12.00 million for the six months ended March 31, 2024 from $14.17 million for the six months ended March 31, 2023. Net income per diluted common share decreased by $0.23, or 13.5% to $1.47 for the six months ended March 31, 2024 from $1.70 for the six months ended March 31, 2023. The decreases in net income and net income per diluted common share were due to a $3.26 million decrease in net interest income and a $136,000 increase in non-interest expense. This decrease was partially offset by a $583,000 decrease in the provision for credit losses, a $571,000 decrease in the provision for income taxes and a $72,000 increase in non-interest income.

Current wording

Net income decreased by $2.55 million, or 12.4%, to $17.93 million for the nine months ended June 30, 2024 from $20.48 million for the nine months ended June 30, 2023. Net income per diluted common share decreased by $0.26, or 10.53% to $2.21 for the nine months ended June 30, 2024 from $2.47 for the nine months ended June 30, 2023. The decreases in net income and net income per diluted common share were due to a $3.91 million decrease in net interest income, a $278,000 increase in non-interest expense and a $12,000 decrease in non-interest income. These decreases were partially offset by a $950,000 decrease in the provision for credit losses and a $700,000 decrease in the provision for income taxes.

Previous wording

Net Interest Income: Net interest income decreased by $1.52 million, or 8.8%, to $15.64 million for the quarter ended March 31, 2024 from $17.15 million for the quarter ended March 31, 2023. This decrease was primarily due to an increase in the weighted average cost of interest-bearing liabilities to 2.50% at March 31, 2024 from 0.84% at March 31, 2023 and, to a lesser extent, a $131.60 million increase in the average balance of total interest-bearing liabilities. Partially offsetting the increase in funding costs, was an increase in the average yields of interest-earning assets to 5.16% for the current quarter from 4.51% at March 31, 2023 and a $87.60 million increase in average total interest-earning assets.

Current wording

Net Interest Income: Net interest income decreased by $653,000, or 3.9%, to $15.98 million for the quarter ended June 30, 2024 from $16.63 million for the quarter ended June 30, 2023. This decrease was due to an increase in the weighted average cost of interest-bearing liabilities to 2.64% at June 30, 2024 from 1.22% at June 30, 2023 and, to a lesser extent, a $169.73 million increase in the average balance of total interest-bearing liabilities. Partially offsetting the increase in funding costs, was an increase in the average yields of interest-earning assets to 5.33% for the current quarter from 4.72% for the quarter ended June 30, 2023 and a $134.73 million increase in average total interest-earning assets.

Previous wording

Total interest and dividend income increased by $3.77 million, or 19.4%, to $23.16 million for the quarter ended March 31, 2024 from $19.39 million for the quarter ended March 31, 2023, primarily due to increases in the average yield and average balance of loans receivable, and the average yields on interest-bearing deposits in banks and CDs, and investment securities. These increases were partially offset by a decrease in the average balance of interest-bearing deposits in banks and CDs, and investment securities.

Current wording

Total interest and dividend income increased by $4.25 million, or 21.4%, to $24.14 million for the quarter ended June 30, 2024 from $19.89 million for the quarter ended June 30, 2023, primarily due to increases in the average yield and average balance of loans receivable and interest-bearing deposits in banks and CDs, and the average yield on investment securities. These increases were partially offset by a decrease in the average balance of investment securities.

Previous wording

The average balance of total interest-earning assets increased by $87.60 million, or 5.1%, to $1.81 billion for the quarter ended March 31, 2024 from $1.72 billion for the quarter ended March 31, 2023. The average balance of loans receivable increased by $164.55 million, or 13.7%, which was partially offset by a decrease in the average balance of investment securities of $42.13 million, or 12.6% and a decrease in the average balance of interest-bearing deposits in banks and CDs of $34.63 million, or 19.5% between the periods. During both quarters ended March 31, 2024 and 2023, there was a total of $99,000 of pre-payment penalties, non-accrual interest and late fees collected . The average yield on interest-earning assets increased by 65 basis points to 5.16% for the quarter ended March 31, 2024 from 4.51% for the quarter ended March 31, 2023. The average yield on interest-bearing deposits in banks and CDs and on investment securities increased 109 basis points and 15 basis points to 5.39% and 3.09%, respectively, for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023, while the average yield on loans receivable increased 59 basis points to 5.57% during the same period.

Current wording

The average balance of total interest-earning assets increased by $134.73 million, or 8.0%, to $1.82 billion for the quarter ended June 30, 2024 from $1.69 billion for the quarter ended June 30, 2023. The average balance of loans receivable increased by $137.54 million, or 11.0% and the average balance of interest-bearing deposits in banks and CDs increased by $59.62 million or 58.6%. These increases were partially offset by a decrease in the average balance of investment securities of $61.76 million or 19.0% between the periods. During the quarter ended June 30, 2024, there was a total of $133,000 of pre-payment penalties, non-accrual interest and late fees collected compared to $87,000 collected for the quarter ended June 30, 2023. The average yield on interest-earning assets increased by 61 basis points to 5.33% for the quarter ended June 30, 2024 from 4.72% for the quarter ended June 30, 2023. The average yield on interest-bearing deposits in banks and CDs and on investment securities increased 62 basis points and 63 basis points to 5.41% and 3.57%, for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023, respectively, while the average yield on loans receivable increased 48 basis points to 5.65% during the same period.

Previous wording

Total interest expense increased by $5.29 million, or 236.4%, to $7.52 million for the quarter ended March 31, 2024 from $2.24 million for the quarter ended March 31, 2023. The increase in interest expense was due to an increase in the average cost and, to a lesser extent, an increase in the average balance of interest-bearing liabilities, primarily deposits. The average cost of interest-bearing liabilities increased to 2.50% for the quarter ended March 31, 2024 from 0.84% for the quarter ended March 31, 2023. The average balance of interest-bearing liabilities increased by $131.60 million, or 12.2%, to $1.21 billion for the quarter ended March 31, 2024 from $1.08 billion for the quarter ended March 31, 2023, primarily due to increases in the average balances of money market accounts, certificate of deposit accounts and borrowings, partially offset by decreases in the average balance of NOW checking accounts, and savings accounts.

Current wording

Total interest expense increased by $4.90 million, or 150.6%, to $8.16 million for the quarter ended June 30, 2024 from $3.26 million for the quarter ended June 30, 2023. The increase in interest expense was due to an increase in the average cost and, to a lesser extent, an increase in the average balance of interest-bearing liabilities, primarily deposits. The average cost of interest-bearing liabilities increased to 2.64% for the quarter ended June 30, 2024 from 1.22% for the quarter ended June 30, 2023. The average balance of interest-bearing liabilities increased by $169.73 million, or 15.8%, to $1.24 billion for the quarter ended June 30, 2024 from $1.07 billion for the quarter ended June 30, 2023, primarily due to increases in the average balances of money market accounts, certificate of deposit accounts and borrowings, partially offset by decreases in the average balance of NOW checking and savings accounts.

Previous wording

Interest expense on deposits increased by $5.07 million, or 226.5%, to $7.30 million for the quarter ended March 31, 2024 from $2.24 million for the quarter ended March 31, 2023, driven by an increase in the average cost of interest-bearing deposits in all categories and an increase in the average balance of money market accounts and certificates of deposit. The average cost of interest bearing deposits increased 166 basis points to 2.50% for the three months ended March 31, 2024, which included a 212 basis point increase in the cost of certificates of deposit, including brokered certificates of deposit, to 4.34%, compared to the same period last year. The average balance of certificates of deposit increased $165.06 million, or 96.8%, to $335.60 million for the three months ended March 31, 2024, compared to the same period last year, which includes $40.40 million in brokered certificates of deposit.

Current wording

Interest expense on deposits increased by $4.82 million, or 154.2%, to $7.94 million for the quarter ended June 30, 2024 from $3.12 million for the quarter ended June 30, 2023, driven by an increase in the average cost of interest-bearing deposits in all categories and an increase in the average balance of money market accounts and certificates of deposit. The average cost of interest bearing deposits increased 144 basis points to 2.62% for the three months ended June 30, 2024, which included a 132 basis point increase in the cost of certificates of deposit, including brokered certificates of deposit, to 4.35%, compared to the same period last year. The average balance of certificates of deposit, including brokered certificate of deposits, increased $146.04 million, or 69.2%, to $356.99 million for the three months ended June 30, 2024, compared to the same period last year.

Previous wording

As a result of the increase in interest expense, the net interest margin ("NIM") decreased to 3.48% for the quarter ended March 31, 2024 from 3.99% for the quarter ended March 31, 2023.

Current wording

As a result of increases in interest expense, the net interest margin ("NIM") decreased to 3.53% for the quarter ended June 30, 2024 from 3.94% for the quarter ended June 30, 2023.

Previous wording

Total interest and dividend income increased $7.15 million, or 18.6%, to $45.65 million for the six months ended March 31, 2024 from $38.50 million for the six months ended March 31, 2023, primarily due to increases in the average yield and average balance of loans receivable, and the average yields on interest-bearing deposits in banks and CDs and investment securities. These increases were partially offset by a decrease in the average balances of interest-bearing deposits in banks and CDs, and investment securities.

Current wording

Total interest and dividend income increased $11.40 million, or 19.5%, to $69.79 million for the nine months ended June 30, 2024 from $58.39 million for the nine months ended June 30, 2023, primarily due to increases in the average yield and average balance of loans receivable, and the average yields on interest-bearing deposits in banks and CDs and investment securities. These increases were partially offset by a decrease in the average balances of interest-bearing deposits in banks and CDs, and investment securities.