EX-99.1 2 timb8k42324exh991.htm
Exhibit 99.1


   Contact:
Dean J. Brydon, CEO 
Jonathan A. Fischer, President & COO 
Marci A. Basich, CFO   
(360) 533-4747 
www.timberlandbank.com


Timberland Bancorp Reports Second Fiscal Quarter Net Income of $5.71 Million

•
Quarterly EPS of $0.70
•
Quarterly Return on Average Assets of 1.22%
•
Quarterly Net Interest Margin of 3.48%
•
Net Loans Increased by 12% Year-Over-Year
•
Deposits Increased by 6% Year-Over-Year
•
Announces Quarterly Cash Dividend


HOQUIAM, WA – April 23, 2024– 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.”




Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 2

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; and
•
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.

  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; and
•
Liquidity (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.


Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 3


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.


Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 4
Loan Portfolio
($ in thousands)
   
March 31, 2024
    
December 31, 2023
    

March 31, 2023
  
   
Amount
    
Percent
    
Amount
    
Percent
    
Amount
    
Percent
  
Mortgage 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.


Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 5


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 of
CRE
Portfolio
    
Percent of
Total Loan
Portfolio
    
Average
Balance Per
Loan
    
Non-
Accrual
  
Industrial 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.



Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 6



Deposit Breakdown
($ in thousands)

  
   
March 31, 2024
    
December 31, 2023
    
March 31, 2023
  
   
Amount
    
Percent
    
Amount
    
Percent
    
Amount
    
Percent
  
Non-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.



Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 7
Non-Accrual Loans
($ in thousands)

   
March 31, 2024
    
December 31, 2023
    
March 31, 2023
  
   
Amount
    
Quantity
    
Amount
    
Quantity
    
Amount
    
Quantity
  
Mortgage loans:
                                    
     One- to four-family
  
$
380
      
3
    
$
602
      
4
    
$
378
      
2
  
     Commercial
    
1,149
      
3
      
683
      
2
      
694
      
2
  
     Construction – custom and
                                                
          owner/builder
    
152
      
1
      
150
      
1
      
--
      
--
  
     Land
    
--
      
--
      
--
      
--
      
362
      
1
  
          Total mortgage loans
    
1,681
      
7
      
1,435
      
7
      
1,434
      
5
  
                                                 
Consumer loans:
                                                
     Home equity and second
                                                
          mortgage
    
165
      
1
      
171
      
1
      
241
      
2
  
     Other
    
--
      
--
      
--
      
--
      
1
      
1
  
          Total consumer loans
    
165
      
1
      
171
      
1
      
242
      
3
  
                                                 
Commercial business loans
    
1,759
      
6
      
1,760
      
6
      
293
      
4
  
Total 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


Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 8

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 Fiscal Q2 2024 Earnings
April 23, 2024
Page 9

TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED 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 Fiscal Q2 2024 Earnings
April 23, 2024
Page 10

TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED 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 Fiscal Q2 2024 Earnings
April 23, 2024
Page 11

TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
      
($ in thousands, except per share amounts) (unaudited)
  
March 31,
    
Dec. 31,
    
March 31,
  
   
2024
    
2023
    
2023
  
Assets
                  
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
  


Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 12

   
Three Months Ended
  
PERFORMANCE RATIOS:
  
March 31,
2024
    
Dec. 31,
2023
    
March 31,
2023
  
Return 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 Ended
  
PERFORMANCE RATIOS:
  
March 31,
2024
            
March 31,
2023
  
Return 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 Ended
  
ASSET QUALITY RATIOS AND DATA:
  
March 31,
2024
    
Dec. 31,
2023
    
March 31,
2023
  
Non-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).




Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 13

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






Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 14



   
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







Timberland Fiscal Q2 2024 Earnings
April 23, 2024
Page 15


Non-GAAP Financial Measures
In 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