Timberland Bancorp Reports Second Fiscal Quarter Net Income of $5.71 Million
Quarterly EPS of $0.70Quarterly Return on Average Assets of 1.22%Quarterly Net Interest Margin of 3.48%Net Loans Increased by 12% Year-Over-YearDeposits Increased by 6% Year-Over-YearAnnounces Quarterly Cash Dividend HOQUIAM, Wash., April 23, 2024 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”), the holding company for Timberland Bank (the “Bank”), today reported net income of $5.71 million, or $0.70 per diluted common share, for the quarter ended March 31, 2024. This compares to net income of $6.30 million, or $0.77 per diluted common share, for the preceding quarter and $6.66 million, or $0.80 per diluted common share, for the comparable quarter one year ago. For the first six months of fiscal 2024, Timberland’s net income decreased 15% to $12.00 million, or $1.47 per diluted common share, compared to $14.17 million, or $1.70 per diluted common share for the first six months of fiscal 2023. “Our second quarter of fiscal year 2024 operating results were highlighted by solid earnings, moderate growth in loans and deposits, and continued stable asset quality metrics,” stated Dean Brydon, Chief Executive Officer. “While second quarter earnings and performance metrics were strong, they were lower compared to the year ago quarter, which was near the highest point of our margin in this interest rate cycle before deposit cost increases began compressing margins.” As a result of Timberland’s solid earnings and strong capital position, its Board of Directors announced a quarterly cash dividend to shareholders to $0.24 per share, payable on May 24, 2024, to shareholders of record on May 10, 2024. This represents the 46th consecutive quarter Timberland will have paid a cash dividend. “Our loan portfolio continues to grow, but not at the robust pace we’ve experienced during the past two years,” Brydon continued. “Construction loan balances declined during the quarter, in part due to construction projects completing and being transferred to permanent loan categories. Although loan origination volumes slowed during the quarter, net loans receivable increased by $23 million during the quarter. We continue to remain optimistic regarding the overall strength of our loan portfolio and the opportunities for growth in our markets, even in this anticipated ‘higher for longer’ interest rate environment. Credit quality continues to be monitored closely and our credit metrics remain relatively strong with only $3,000 in net charge-offs for the quarter and non-performing assets at only 19 basis points of total assets at the end of the second quarter.” “The net interest margin was 3.48% for the second quarter, a 12 basis points contraction compared to the preceding quarter as the increase in cost of funds continued to outpace the growth in yields on interest-earning assets,” said Jonathan Fischer, President and Chief Operating Officer. “We believe the pace of net interest margin contraction has started to stabilize at current levels. Total deposits increased $11 million during the quarter, with increases in money market and certificates of deposit balances more than offsetting decreases in checking account balances. We believe we are near the peak for deposit costs, which should help our net interest margin stabilize or improve going forward.” Earnings and Balance Sheet Highlights (at or for the periods ended March 31, 2024, compared to March 31, 2023, or December 31, 2023): Earnings Highlights: Earnings per diluted common share (“EPS”) decreased 9% to $0.70 for the current quarter from $0.77 for the preceding quarter and decreased 13% from $0.80 for the comparable quarter one year ago; EPS for the first six months of fiscal 2024 decreased 14% to $1.47 from $1.70 for the first six months of fiscal 2023;Net income decreased 9% to $5.71 million for the current quarter from $6.30 million for the preceding quarter and decreased 14% from $6.66 million for the comparable quarter one year ago; Net income decreased 15% to $12.00 million for the first six months of fiscal 2024 compared to $14.17 million for the first six months of fiscal 2023;Return on average equity (“ROE”) and return on average assets (“ROA”) for the current quarter were 9.67% and 1.22%, respectively;Net interest margin (“NIM”) for the current quarter compressed to 3.48% from 3.60% for the preceding quarter and from 3.99% for the comparable quarter one year ago; andThe efficiency ratio for the current quarter was 60.22% compared to 56.50% for the preceding quarter and 55.31% for the comparable quarter one year ago. Balance Sheet Highlights: Total assets increased 1% from the prior quarter and increased 7% year-over-year;Net loans receivable increased 2% from the prior quarter and increased 12% year-over-year;Total deposits increased 1% from the prior quarter and increased 6% year-over-year;Total shareholders’ equity increased 1% from the prior quarter and increased 5% year-over-year;Non-performing assets to total assets ratio was 0.19% at March 31, 2024 compared to 0.18% at December 31, 2023 and 0.12% at March 31, 2023;Book and tangible book (non-GAAP) values per common share increased to $29.75 and $27.79, respectively, at March 31, 2024; andLiquidity (both on-balance sheet and off-balance sheet) remained strong at March 31, 2024 with only $20 million in borrowings and additional secured borrowing line capacity of $707 million available through the Federal Home Loan Bank (“FHLB”) and the Federal Reserve. Operating Results Operating revenue (net interest income before the provision for credit losses plus non-interest income) for the current quarter decreased 3% to $18.25 million from $18.80 million for the preceding quarter and decreased 8% from $19.79 million for the comparable quarter one year ago. The decrease in operating revenue compared to the preceding quarter was primarily due to an increase in funding costs, and to a lesser extent, a decrease in non-interest income. These decreases to operating revenue were partially offset by an increase in interest income from loans and overnight funds. Operating revenue decreased by 8%, to $37.05 million for the first six months of fiscal 2024 from $40.24 million for the first six months of fiscal 2023, primarily due to an increase in funding costs, which outpaced the increase in interest income. Net interest income decreased $369,000, or 2%, to $15.64 million for the current quarter from $16.00 million for the preceding quarter and decreased $1.52 million, or 9%, from $17.15 million for the comparable quarter one year ago. The decrease in net interest income compared to the preceding quarter was primarily due to an increase in the weighted average cost of interest-bearing liabilities to 2.50% from 2.22% for the preceding quarter. Partially offsetting the increase in funding costs, was an increase in the weighted average yield of interest-earning assets to 5.16% from 5.07% for the preceding quarter and a $30.15 million increase in average total interest-earning assets. Timberland’s NIM for the current quarter compressed to 3.48% from 3.60% for the preceding quarter and from 3.99% for the comparable quarter one year ago. The NIM for the current quarter was increased by approximately three basis points due to the collection of $90,000 in pre-payment penalties, non-accrual interest, and late fees and the accretion of $10,000 of the fair value discount on acquired loans. The NIM for the preceding quarter was increased by approximately three basis points due to the collection of $142,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $10,000 of the fair value discount on acquired loans. The NIM for the comparable quarter one year ago was increased by approximately three basis points due to the collection of $99,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $15,000 of the fair value discount on acquired loans. Net interest income for the first six months of fiscal 2024 decreased $3.26 million, or 9%, to $31.64 million from $34.89 million for the first six months of fiscal 2023, primarily due to funding cost increases, which outpaced the increase in interest income. Timberland’s NIM compressed to 3.53% for the first six months of fiscal 2024 from 4.02% for the first six months of fiscal 2023. A $166,000 provision for credit losses on loans was recorded for the quarter ended March 31, 2024. The provision was primarily due to loan portfolio growth, which was partially offset by changes in the composition of the loan portfolio, as construction loan balances (which have a higher reserve factor) decreased. This compares to a $379,000 provision for credit losses on loans for the preceding quarter and a $475,000 provision for credit losses on loans for the comparable quarter one year ago. In addition, an $88,000 recapture of credit losses for unfunded commitments was recorded for the current quarter, primarily as a result of a decrease in the level of unfunded commitments for construction loans. Non-interest income decreased $183,000 or 7%, to $2.62 million for the current quarter from $2.80 million for the preceding quarter and decreased $21,000, or 1%, from $2.64 million for the comparable quarter one year ago. The decrease in non-interest income compared to the preceding quarter was primarily due to a $52,000 decrease in ATM and debit card interchange transaction fees, a $37,000 decrease in gain on sale of loans, a $35,000 decrease in service charges on deposits, and smaller changes in several other categories. Fiscal year-to-date non-interest income increased by 1% to $5.41 million from $5.34 million for the first six months of fiscal 2023. Total operating (non-interest) expenses for the current quarter increased $367,000, or 3%, to $10.99 million from $10.62 million for the preceding quarter and increased $47,000 (less than 1%) from $10.94 million for the comparable quarter one year ago. The increase in operating expenses compared to the preceding quarter was primarily due to increases in salaries and employee benefits, premises and equipment, technology and communications, and professional fees and smaller changes in several other categories. The efficiency ratio for the current quarter was 60.22% compared to 56.50% for the preceding quarter and 55.31% for the comparable quarter one year ago. Fiscal year-to-date operating expenses increased 1% to $21.62 million from $21.48 million for the first six months of fiscal 2023. The efficiency ratio for the first six months of fiscal 2024 was 58.34% compared to 53.38% for the first six months of fiscal 2023. The provision for income taxes for the current quarter decreased $76,000, or 5%, to $1.47 million from $1.55 million for the preceding quarter, primarily due to lower taxable income. Timberland’s effective income tax rate was 20.5% for the quarter ended March 31, 2024 compared to 19.7% for the quarter ended December 31, 2023 and 20.4% for the quarter ended March 31, 2023. Timberland’s effective income tax rate was 20.1% for the first six months of fiscal 2024 compared to 20.2% for the first six months of fiscal 2023. Balance Sheet Management Total assets increased $12.12 million, or 1%, during the quarter to $1.91 billion at March 31, 2024 from $1.90 billion at December 31, 2023 and increased $120.62 million, or 7%, from $1.79 billion one year ago. The increase during the current quarter was primarily due to a $22.83 million increase in net loans receivable and a $22.33 million increase in total cash and cash equivalents, which was partially offset by a $34.22 million decrease in investment securities and CDs held for investment. The quarterly increase in assets was primarily funded by an $11.49 million increase in deposits. Liquidity Timberland has maintained a strong liquidity position (both on-balance sheet and off-balance sheet) while continuing to grow the loan portfolio. Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment, and available for sale investment securities, was 15.2% of total liabilities at March 31, 2024, compared to 12.7% at December 31, 2023, and 14.0% one year ago. Timberland had secured borrowing line capacity of $707 million available through the FHLB and the Federal Reserve at March 31, 2024. With a strong and diversified deposit base, only 18% of Timberland’s deposits were uninsured or uncollateralized at March 31, 2024. (Note: This calculation excludes public deposits that are fully collateralized.) Loans Net loans receivable increased $22.83 million, or 2%, during the quarter to $1.36 billion at March 31, 2024 from $1.34 billion at December 31, 2023. This increase was primarily due to a $19.95 million increase in multi-family loans, a $13.31 million increase in one- to four-family loans and smaller increases in several other loan categories. Also impacting the quarterly comparison was a $27.18 million decrease in the undisbursed portion of construction loans in process. These increases to net loans receivable were partially offset by a $40.53 million decrease in construction and land development loans and smaller decreases in several other loan categories. The increases in multi-family loans and one-to-four family loans and the corresponding decrease in construction loans were, in large part, due to the construction portion of these loans being completed and moved into permanent financing categories. Loan Portfolio($ in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Amount Percent Amount Percent Amount PercentMortgage loans: One- to four-family (a) $276,433 19% $263,122 18% $216,639 16%Multi-family 167,275 12 147,321 10 103,870 8 Commercial 577,373 40 579,038 40 547,876 41 Construction - custom and owner/builder 122,988 8 134,878 9 124,071 9 Construction - speculative one-to four-family 16,407 1 17,609 1 11,343 1 Construction - commercial 32,318 2 36,702 3 31,458 3 Construction - multi-family 36,795 3 57,019 4 83,051 6 Construction - land development 16,051 1 18,878 1 17,018 1 Land 31,821 2 28,697 2 24,520 2 Total mortgage loans 1,277,461 88 1,283,264 88 1,159,846 87 Consumer loans: Home equity and second mortgage 42,357 3 39,403 3 36,896 3 Other 2,925 -- 2,926 -- 2,283 -- Total consumer loans 45,282 3 42,329 3 39,179 3 Commercial loans: Commercial business loans 135,505 9 136,942 9 129,306 10 SBA PPP loans 367 -- 423 -- 572 -- Total commercial loans 135,872 9 137,365 9 129,878 10 Total loans 1,458,615 100% 1,462,958 100% 1,328,903 100%Less: Undisbursed portion of construction loans in process (77,502) (104,683) (99,253) Deferred loan origination fees (5,179) (5,337) (4,759) Allowance for credit losses (16,818) (16,655) (14,698) Total loans receivable, net $1,359,116 $1,336,283 $1,210,193 _______________________(a) Does not include one- to four-family loans held for sale totaling $1,311, $1,425, and $200 at March 31 2024, December 31, 2023, and March 31, 2023, respectively. The following table provides a breakdown of commercial real estate (“CRE”) mortgage loans by collateral type as of March 31, 2024: CRE Loan Portfolio Breakdown by Collateral($ in thousands) Collateral Type Balance Percent ofCREPortfolio Percent ofTotal LoanPortfolio AverageBalance PerLoan Non-AccrualIndustrial warehouse $112,318 20% 8% $1,123 $195 Medical/dental offices 81,335 14 6 1,291 -- Office buildings 71,518 12 5 777 -- Other retail buildings 51,422 9 3 547 -- Mini-storage 39,228 7 3 1,453 -- Hotel/motel 31,713 5 2 2,883 -- Restaurants 27,583 5 2 563 -- Gas stations/conv. stores 20,977 4 1 912 -- Nursing homes 18,630 3 1 2,329 -- Mobile home parks 10,869 2 1 494 -- Shopping centers 10,854 2 1 1,809 -- Churches 6,976 1 1 498 -- Additional CRE 93,950 16 6 706 954 Total CRE $577,373 100% 40% $899 $1,149 Timberland originated $39.37 million in loans during the quarter ended March 31, 2024, compared to $88.93 million for the preceding quarter and $77.15 million for the comparable quarter one year ago. Timberland continues to originate fixed-rate one- to four-family mortgage loans, a portion of which are sold into the secondary market for asset-liability management purposes and to generate non-interest income. During the current quarter, fixed-rate one- to four-family mortgage loans totaling $2.28 million were sold compared to $3.80 million for the preceding quarter and $2.39 million for the comparable quarter one year ago. Investment Securities Timberland’s investment securities and CDs held for investment decreased $34.22 million, or 11%, to $285.61 million at December 31, 2023, from $319.83 million at December 31, 2023. The decrease was primarily due to maturities of U.S. Treasury investment securities (classified as held to maturity) totaling $48.00 million and, to a lesser extent, scheduled amortization. Partially offsetting these decreases, was the purchase of additional U.S. government agency mortgage-backed investment securities and U.S. Treasury investment securities, all of which were classified as available for sale. Deposits Total deposits increased $11.49 million, or 1%, during the quarter to $1.64 billion at March 31, 2024, from $1.63 billion at December 31, 2023. The quarter’s increase consisted of a $42.31 million in money market account balances and a $35.04 million increase in certificates of deposit balances. These increases were partially offset by a $52.84 million decrease in NOW checking account balances, an $8.16 million decrease in non-interest bearing deposit balances and a $4.86 million decrease in savings account balances. Deposit Breakdown($ in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Amount Percent Amount Percent Amount PercentNon-interest-bearing demand $424,906 26% $433,065 27% $479,283 31%NOW checking 336,621 20 389,463 24 403,463 26 Savings 211,085 13 215,948 13 269,522 17 Money market 311,994 19 269,686 17 210,390 14 Certificates of deposit under $250 190,762 12 181,762 11 129,331 8 Certificates of deposit $250 and over 118,698 7 96,145 6 56,778 4 Certificates of deposit – brokered 44,488 3 41,000 2 -- -- Total deposits $1,638,554 100% $1,627,069 100% $1,548,767 100% Borrowings Total borrowings were $20.00 million at both March 31, 2024 and December 31, 2023. At March 31, 2024, the weighted average rate on the borrowings was 4.34%. Shareholders’ Equity and Capital Ratios Total shareholders’ equity increased $1.31 million, or 1%, to $238.70 million at March 31, 2024, from $237.37 million at December 31, 2023. The increase in shareholders’ equity was primarily due to net income of $5.71 million for the quarter and an $82,000 reduction in the accumulated other comprehensive loss category for fair value adjustments on available for sale investment securities. These increases to shareholders’ equity were partially offset by the payment of $1.94 million in dividends to shareholders and the repurchase of 99,787 shares of common stock for $2.67 million (an average price of $26.77 per share). Timberland had 262,025 shares available to be repurchased in accordance with the terms of its existing stock repurchase plan at March 31, 2024. Timberland remains well capitalized with a total risk-based capital ratio of 19.33%, a Tier 1 leverage capital ratio of 12.01%, a tangible common equity to tangible assets ratio (non-GAAP) of 11.79%, and a shareholders’ equity to total assets ratio of 12.51% at March 31, 2024. Timberland’s held to maturity investment securities were $211.82 million at March 31, 2024, with a net unrealized loss of $13.53 million (pre-tax). Although not permitted by U.S. Generally Accepted Accounting Principles (“GAAP”), including these unrealized losses in accumulated other comprehensive income (loss) (“AOCI”) would result in a ratio of shareholders’ equity to total assets of 12.02%, compared to 12.51%, as reported. Asset Quality Timberland’s non-performing assets to total assets ratio was 0.19% at March 31, 2024 compared to 0.18% at December 31, 2023 and 0.12% at March 31, 2023 There were net charge-offs of $3,000 for the current quarter, compared to net charge-offs of $2,000 for the preceding quarter and net charge-offs of $6,000 for the comparable quarter one year ago. During the current quarter, provisions for credit losses on loans of $166,000 and on investment securities of $3,000 were made, which were partially offset by an $88,000 recapture of credit losses on unfunded commitments. The ACL for loans as a percentage of loans receivable was 1.22% at March 31, 2024, compared to 1.23% at December 31, 2023 and 1.20% one year ago. Total delinquent loans (past due 30 days or more) and non-accrual loans increased $598,000 or 17%, to $4.20 million at March 31, 2024, from $3.60 million at December 31, 2023. Non-accrual loans increased $239,000, or 7%, to $3.61 million at March 31, 2024, from $3.37 million at December 31, 2023. The quarterly increase in non-accrual loans was primarily due to a $466,000 increase in commercial real estate loans on non-accrual status, which was partially offset by a $222,000 decrease in one- to four-family loans on non-accrual status. Non-Accrual Loans($ in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Amount Quantity Amount Quantity Amount QuantityMortgage loans: One- to four-family $380 3 $602 4 $378 2Commercial 1,149 3 683 2 694 2Construction – custom and owner/builder 152 1 150 1 -- --Land -- -- -- -- 362 1Total mortgage loans 1,681 7 1,435 7 1,434 5 Consumer loans: Home equity and second mortgage 165 1 171 1 241 2Other -- -- -- -- 1 1Total consumer loans 165 1 171 1 242 3 Commercial business loans 1,759 6 1,760 6 293 4Total loans $3,605 14 $3,366 14 $1,969 12 About Timberland Bancorp, Inc.Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and primarily 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 branches (including its main office in Hoquiam). Disclaimer Certain matters discussed in this press release 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 caused by increasing geopolitical instability (including wars, conflicts, terrorist attacks, natural disasters, and other unexpected events outside of our control), as well as increasing oil prices and supply chain disruptions, and any governmental or societal responses to novel coronavirus disease 2019 ("COVID-19") pandemic, including the possibility of new COVID-19 variants; credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets which may lead to increased losses and non-performing loans in our loan portfolio may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our loan loss reserves; 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; uncertainty regarding the future of the London Interbank Offered Rate ("LIBOR"), and the transition away from LIBOR toward new interest rate benchmarks; 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, 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 us or our bank subsidiary which could require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in banking, securities and tax law, in regulatory policies and principles, or the interpretation of regulatory capital or other rules and including changes as a result of COVID-19; our ability to attract and retain deposits; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risks associated with the loans in our consolidated balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common stock; the quality and composition of our securities portfolio and the impact if any adverse changes in the securities markets, including on market liquidity; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board ("FASB"), including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks described in our reports filed with or furnished to the Securities and Exchange Commission. Any of the forward-looking statements that we make in this press release 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 press release 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. TIMBERLAND BANCORP INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME Three Months Ended($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31, 2024 2023 2023 Interest and dividend income Loans receivable $18,909 $18,395 $14,950 Investment securities 2,246 2,311 2,460 Dividends from mutual funds, FHLB stock and other investments 82 91 64 Interest bearing deposits in banks 1,919 1,699 1,913 Total interest and dividend income 23,156 22,496 19,387 Interest expense Deposits 7,301 6,143 2,236 Borrowings 220 349 -- Total interest expense 7,521 6,492 2,236 Net interest income 15,635 16,004 17,151 Provision for credit losses – loans 166 379 475 Provision for (recapture of ) credit losses – investment securities 3 (10) -- Recapture of credit losses - unfunded commitments (88) (33) -- Net int. income after provision for (recapture of) credit losses 15,554 15,668 16,676 Non-interest income Service charges on deposits 988 1,023 893 ATM and debit card interchange transaction fees 1,212 1,264 1,275 Gain on sales of loans, net 41 78 46 Bank owned life insurance (“BOLI”) net earnings 156 156 157 Recoveries on investment securities, net 2 5 2 Other 216 272 263 Total non-interest income, net 2,615 2,798 2,636 Non-interest expense Salaries and employee benefits 6,024 5,911 6,046 Premises and equipment 1,081 973 1,001 Advertising 159 186 178 ATM and debit card processing 601 615 489 Postage and courier 145 126 147 State and local taxes 325 319 298 Professional fees 319 253 473 FDIC insurance expense 206 210 202 Loan administration and foreclosure 134 105 138 Technology and communication expense 1,040 974 880 Deposit operations 324 320 246 Amortization of core deposit intangible (“CDI”) 57 56 67 Other, net 576 576 779 Total non-interest expense, net 10,991 10,624 10,944 Income before income taxes 7,178 7,842 8,368 Provision for income taxes 1,470 1,546 1,705 Net income $5,708 $6,296 $6,663 Net income per common share: Basic $0.71 $0.78 $0.81 Diluted 0.70 0.77 0.80 Weighted average common shares outstanding: Basic 8,081,924 8,114,209 8,220,532 Diluted 8,121,109 8,166,048 8,304,370 TIMBERLAND BANCORP INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME Six Months Ended($ in thousands, except per share amounts) (unaudited) March 31, March 31, 2024 2023 Interest and dividend income Loans receivable $37,304 $29,407 Investment securities 4,556 4,674 Dividends from mutual funds, FHLB stock and other investments 173 115 Interest bearing deposits in banks 3,618 4,304 Total interest and dividend income 45,651 38,500 Interest expense Deposits 13,444 3,606 Borrowings 568 -- Total interest expense 14,012 3,606 Net interest income 31,639 34,894 Provision for credit losses – loans 545 1,000 Recapture of credit losses – investment securities (7) -- Recapture of credit losses - unfunded commitments (121) -- Net int. income after provision for (recapture of) credit losses 31,222 33,894 Non-interest income Service charges on deposits 2,011 1,840 ATM and debit card interchange transaction fees 2,476 2,526 Gain on sales of loans, net 120 67 Bank owned life insurance (“BOLI”) net earnings 312 313 Recoveries on investment securities, net 7 5 Other 487 590 Total non-interest income, net 5,413 5,341 Non-interest expense Salaries and employee benefits 11,936 11,946 Premises and equipment 2,054 1,925 Advertising 345 372 ATM and debit card processing 1,216 972 Postage and courier 271 268 State and local taxes 644 597 Professional fees 572 902 FDIC insurance expense 416 326 Loan administration and foreclosure 239 259 Technology and telecommunications 2,014 1,668 Deposit operations 644 592 Amortization of CDI 113 135 Other, net 1,151 1,517 Total non-interest expense, net 21,615 21,479 Income before income taxes 15,020 17,756 Provision for income taxes 3,016 3,587 Net income $12,004 $14,169 Net income per common share: Basic $1.48 $1.72 Diluted 1.47 1.70 Weighted average common shares outstanding: Basic 8,098,155 8,226,467 Diluted 8,143,701 8,311,630 TIMBERLAND BANCORP INC. AND SUBSIDIARYCONSOLIDATED BALANCE SHEETS ($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31, 2024 2023 2023Assets Cash and due from financial institutions $22,310 $28,656 $26,015 Interest-bearing deposits in banks 158,039 129,365 116,468 Total cash and cash equivalents 180,349 158,021 142,483 Certificates of deposit (“CDs”) held for investment, at cost 11,204 12,449 20,168 Investment securities: Held to maturity, at amortized cost (net of ACL – investment securities) 211,818 266,085 277,911 Available for sale, at fair value 61,746 40,446 54,838 Investments in equity securities, at fair value 839 848 850 FHLB stock 2,037 2,001 2,202 Other investments, at cost 3,000 3,000 3,000 Loans held for sale 1,311 1,425 200 Loans receivable 1,375,934 1,352,938 1,224,891 Less: ACL – loans (16,818) (16,655) (14,698)Net loans receivable 1,359,116 1,336,283 1,210,193 Premises and equipment, net 21,718 21,584 21,744 BOLI 23,278 23,122 23,119 Accrued interest receivable 7,108 6,731 5,295 Goodwill 15,131 15,131 15,131 CDI 564 621 813 Loan servicing rights, net 1,717 1,925 2,535 Operating lease right-of-use assets 1,624 1,698 1,844 Other assets 4,674 3,745 4,292 Total assets $1,907,234 $1,895,115 $1,786,618 Liabilities and shareholders’ equity Deposits: Non-interest-bearing demand $424,906 $433,065 $479,283 Deposits: Interest-bearing 1,213,648 1,194,004 1,069,484 Total deposits 1,638,554 1,627,069 1,548,767 Operating lease liabilities 1,723 1,796 1,935 FHLB borrowings 20,000 20,000 -- Other liabilities and accrued expenses 8,278 8,881 8,255 Total liabilities 1,668,555 1,657,746 1,558,957 Shareholders’ equity Common stock, $.01 par value; 50,000,000 shares authorized; 8,023,121 shares issued and outstanding – March 31, 2024 8,120,708 shares issued and outstanding – December 31, 2023 8,203,174 shares issued and outstanding – March 31, 2023 32,338 34,869 37,979 Retained earnings 207,086 203,327 190,177 Accumulated other comprehensive loss (745) (827) (495)Total shareholders’ equity 238,679 237,369 227,661 Total liabilities and shareholders’ equity $1,907,234 $1,895,115 $1,786,618 Three Months Ended PERFORMANCE RATIOS: March 31,2024 Dec. 31,2023 March 31,2023Return on average assets (a) 1.22% 1.36% 1.48%Return on average equity (a) 9.67% 10.75% 11.86%Net interest margin (a) 3.48% 3.60% 3.99%Efficiency ratio 60.22% 56.50% 55.31% Six Months EndedPERFORMANCE RATIOS: March 31,2024 March 31,2023Return on average assets (a) 1.28% 1.55%Return on average equity (a) 10.18% 12.74%Net interest margin (a) 3.53% 4.02%Efficiency ratio 58.34% 53.38% Three Months EndedASSET QUALITY RATIOS AND DATA: March 31,2024 Dec. 31,2023 March 31,2023Non-accrual loans $3,605 $3,366 $1,969 Loans past due 90 days and still accruing -- -- -- Non-performing investment securities 79 85 93 OREO and other repossessed assets -- -- -- Total non-performing assets (b) $3,684 $3,451 $2,062 Non-performing assets to total assets (b) 0.19% 0.18% 0.12%Net charge-offs (recoveries) during quarter $3 $2 $6 Allowance for credit losses - loans to non-accrual loans, 467% 495% 746%Allowance for credit losses - loans to loans receivable (c) 1.22% 1.23% 1.20% CAPITAL RATIOS: Tier 1 leverage capital 12.01% 12.14% 11.95%Tier 1 risk-based capital 18.08% 18.22% 18.16%Common equity Tier 1 risk-based capital 18.08% 18.22% 18.16%Total risk-based capital 19.33% 19.50% 19.41%Tangible common equity to tangible assets (non-GAAP) 11.79% 11.79% 11.96% BOOK VALUES: Book value per common share $29.75 $29.23 $27.75 Tangible book value per common share (d) 27.79 27.29 25.81 _____________________________________ (a) Annualized(b) Non-performing assets include non-accrual loans, loans past due 90 days and still accruing, non-performing investment securities and OREO and other repossessed assets. (c) Does not include loans held for sale and is before the allowance for loan losses.(d) Tangible common equity divided by common shares outstanding (non-GAAP). AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY ($ in thousands)(unaudited) For the Three Months Ended March 31, 2024 December 31, 2023 March 31, 2023 Amount Rate Amount Rate Amount Rate Assets Loans receivable and loans held for sale$1,365,417 5.57% $1,332,971 5.52% $1,200,872 4.98%Investment securities and FHLB stock (1) 298,003 3.14 317,164 3.03 340,317 2.97 Interest-earning deposits in banks and CDs 143,121 5.39 126,253 5.38 177,748 4.30 Total interest-earning assets 1,806,541 5.16 1,776,388 5.07 1,718,937 4.51 Other assets 81,337 81,612 84,072 Total assets$1,887,878 $1,858,000 $1,803,009 Liabilities and Shareholders’ Equity NOW checking accounts$367,924 1.61% $376,682 1.51% $412,642 0.83%Money market accounts 270,623 3.14 224,939 2.34 218,718 0.68 Savings accounts 214,233 0.23 220,042 0.22 274,877 0.14 Certificates of deposit accounts 295,202 4.16 268,628 3.97 170,547 2.22 Brokered CDs 40,402 5.40 42,725 5.38 -- -- Total interest-bearing deposits 1,188,384 2.47 1,133,016 2.18 1,076,784 0.84 Borrowings 20,001 4.42 28,804 4.81 6 5.43 Total interest-bearing liabilities 1,208,385 2.50 1,161,820 2.22 1,076,790 0.84 Non-interest-bearing demand deposits 431,826 450,027 492,294 Other liabilities 10,182 11,878 9,136 Shareholders’ equity 237,485 234,275 224,789 Total liabilities and shareholders’ equity$1,887,878 $1,858,000 $1,803,009 Interest rate spread 2.66% 2.85% 3.67%Net interest margin (2) 3.48% 3.60% 3.99%Average interest-earning assets to average interest-bearing liabilities 149.50% 152.90% 159.64% _____________________________________(1) Includes other investments(2) Net interest margin = annualized net interest income / average interest-earning assets For the Six Months Ended March 31, 2024 March 31, 2023 Amount Rate Amount Rate Assets Loans receivable and loans held for sale$1,349,105 5.53% $1,182,420 4.97%Investment securities and FHLB stock (1) 307,636 3.08 332,815 2.88 Interest-earning deposits in banks and CDs 134,643 5.37 222,569 3.87 Total interest-earning assets 1,791,384 5.10 1,737,804 4.43 Other assets 81,473 86,171 Total assets$1,872,857 $1,823,975 Liabilities and Shareholders’ Equity NOW checking accounts$372,327 1.56% $426,345 0.63%Money market accounts 247,656 2.78 229,185 0.60 Savings accounts 217,153 0.23 277,382 0.13 Certificates of deposit accounts 281,842 4.07 152,814 1.84 Brokered CDs 41,570 5.39 -- -- Total interest-bearing deposits 1,160,548 2.32 1,085,726 0.67 Borrowings 24,427 4.65 3 5.43 Total interest-bearing liabilities 1,184,975 2.37 1,085,729 0.67 Non-interest-bearing demand deposits 440,976 505,949 Other liabilities 11,035 9,813 Shareholders’ equity 235,871 222,484 Total liabilities and shareholders’ equity$1,872,857 $1,823,975 Interest rate spread 2.73% 3.76%Net interest margin (2) 3.53% 4.02%Average interest-earning assets to average interest-bearing liabilities 151.17% 160.06% _____________________________________(1) Includes other investments(2) Net interest margin = annualized net interest income / average interest-earning assets Non-GAAP Financial MeasuresIn addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. Timberland believes that certain non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with GAAP results as reported. Financial measures that exclude intangible assets are non-GAAP measures. To provide investors with a broader understanding of capital adequacy, Timberland provides non-GAAP financial measures for tangible common equity, along with the GAAP measure. Tangible common equity is calculated as shareholders’ equity less goodwill and CDI. In addition, tangible assets equal total assets less goodwill and CDI. The following table provides a reconciliation of ending shareholders’ equity (GAAP) to ending tangible shareholders’ equity (non-GAAP) and ending total assets (GAAP) to ending tangible assets (non-GAAP). ($ in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Shareholders’ equity $ 238,679 $ 237,369 $ 227,661 Less goodwill and CDI (15,695) (15,752) (15,944)Tangible common equity $ 222,984 $ 221,617 $ 211,717 Total assets $ 1,907,234 $ 1,895,115 $ 1,786,618 Less goodwill and CDI (15,695) (15,752) (15,944)Tangible assets $ 1,891,539 $ 1,879,363 $ 1,770,674 Contact:Dean J. Brydon, CEO Jonathan A. Fischer, President & COO Marci A. Basich, CFO (360) 533-4747 www.timberlandbank.com
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