Timberland Bancorp Reports Second Fiscal Quarter Net Income of $6.76 Million

• Quarterly EPS Increases 21% to $0.85 from $0.70 One Year Ago
• Quarterly Net Interest Margin Increases to 3.79%
• Quarterly Return on Average Assets of 1.43%
• Quarterly Return on Average Equity of 10.95%
• Announces a 4% Increase in the Quarterly Cash Dividend

HOQUIAM, Wash., April 22, 2025 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) ("Timberland” or "the Company”), the holding company for Timberland Bank (the "Bank”), today reported net income of $6.76 million, or $0.85 per diluted common share for the quarter ended March 31, 2025. This compares to net income of $6.86 million, or $0.86 per diluted common share for the preceding quarter and $5.71 million, or $0.70 per diluted common share, for the comparable quarter one year ago.

For the first six months of fiscal 2025, Timberland's net income increased 13% to $13.62 million, or $1.71 per diluted common share, from $12.00 million, or $1.47 per diluted common share for the first six months of fiscal 2024.

"Our second fiscal quarter operating results were strong, highlighted by net interest margin expansion and modest balance sheet growth,” stated Dean Brydon, Chief Executive Officer. "Second fiscal quarter net income and earnings per share increased 18% and 21%, respectively, compared to the second fiscal quarter a year ago, reflecting an improvement in our net interest margin. Compared to the prior quarter, net income and earnings per share decreased 2% and 1%, respectively, as the increase in net interest income was offset by a higher provision for credit losses and a modest increase in expenses. All profitability metrics improved compared to the year ago quarter, and tangible book value per share (non-GAAP) continued to trend upward.”

"As a result of Timberland's solid earnings and strong capital position, our Board of Directors announced a 4% increase to the quarterly cash dividend to shareholders to $0.26 per share, payable on May 23, 2025, to shareholders of record on May 9, 2025,” stated Jonathan Fischer, President and Chief Operating Officer. "This represents the 50th consecutive quarter Timberland will have paid a cash dividend.”

"During the second fiscal quarter our net interest margin continued to improve, expanding 15 basis points to 3.79%, compared to the preceding quarter,” said Marci Basich, Chief Financial Officer. "The improvement was primarily driven by a reduction in funding costs as the weighted average cost of interest-bearing liabilities decreased by 15 basis points during the quarter. Total deposits increased $20 million, or 1% during the quarter, due to increases in checking and certificates of deposit account balances.”

"The loan portfolio continues to grow at a moderate pace, increasing 1% from the prior quarter and 4% year-over year,” Brydon continued. "We continue to monitor credit quality closely and saw improvements in several metrics during the quarter. The non-performing asset ratio improved to just 13 basis points, non-accrual loans decreased by 15%, and net charge-offs were less than $1,000 during the quarter. However, we experienced an increase in loans graded "Substandard”, as two loans related to one borrowing relationship were downgraded. Both of the loans are performing and Timberland remains well collateralized based on recent appraisals, but the loans were downgraded primarily because the borrower is experiencing a legal issue stemming from an unrelated project. We view this as an isolated event, and remain encouraged by the overall strength of our loan portfolio.”

Earnings and Balance Sheet Highlights (at or for the periods ended March 31, 2025, compared to March 31, 2024, or December 31, 2024):

Earnings Highlights:

• Earnings per diluted common share ("EPS”) decreased 1% to $0.85 for the current quarter from $0.86 for the preceding quarter and increased 21% from $0.70 for the comparable quarter one year ago; EPS increased 16% to $1.71 for the first six months of fiscal 2025 from $1.47 for the first six months of fiscal 2024;
• Net income decreased 2% to $6.76 million for the current quarter from $6.86 million for the preceding quarter and increased 18% from $5.71 million for the comparable quarter one year ago; Net income increased 13% to $13.62 million for the first six months of fiscal 2025 from $12.00 million for the first six months of fiscal 2024;
• Return on average equity ("ROE”) and return on average assets ("ROA”) for the current quarter were 10.95% and 1.43%, respectively;
• Net interest margin ("NIM”) for the current quarter expanded to 3.79% from 3.64% for the preceding quarter and 3.48% for the comparable quarter one year ago; and
• The efficiency ratio for the current quarter improved to 56.25% from 56.27% for the preceding quarter and 60.22% for the comparable quarter one year ago.

Balance Sheet Highlights:

• Total assets increased 1% from the prior quarter and increased 1% year-over-year;
• Net loans receivable increased 1% from the prior quarter and increased 4% year-over-year;
• Total deposits increased 1% from the prior quarter and increased 1% year-over-year;
• Total shareholders' equity increased 1% from the prior quarter and increased 6% year-over-year; 61,764 shares of common stock were repurchased during the current quarter for $1.91 million;
• Non-performing assets to total assets ratio improved to 0.13% at March 31, 2025 compared to 0.16% at December 31, 2024 and 0.19% at March 31, 2024;
• Book and tangible book (non-GAAP) values per common share increased to $31.95 and $29.99, respectively, at March 31, 2025; and
• Liquidity (both on-balance sheet and off-balance sheet) remained strong at March 31, 2025 with only $20 million in borrowings and additional secured borrowing line capacity of $675 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 increased 1% to $19.90 million from $19.67 million for the preceding quarter and increased 9% from $18.25 million for the comparable quarter one year ago. The increase in operating revenue compared to the preceding quarter was primarily due to a decrease in funding costs, which was partially offset by a decrease in total interest and dividend income. Operating revenue increased 7%, to $39.57 million for the first six months of fiscal 2025 from $37.05 million for the first six months of fiscal 2024, primarily due to increases in interest income from loans and interest-bearing deposits in banks, which was partially offset by an increase in funding costs and a decrease in interest income on investment securities.

Net interest income increased $243,000, or 1%, to $17.21 million for the current quarter from $16.97 million for the preceding quarter and increased $1.58 million, or 10%, from $15.64 million for the comparable quarter one year ago. The increase in net interest income compared to the preceding quarter was primarily due to a 15 basis point decrease in the weighted average cost of total interest-bearing liabilities to 2.47% from 2.62% and a six basis point increase in the weighted average yield on total interest-earning assets to 5.48% from 5.42%. These increases to net interest income were partially offset by an $11.44 million decrease in the average balance of total interest-earning assets.   Timberland's NIM for the current quarter expanded to 3.79% from 3.64% for the preceding quarter and 3.48% for the comparable quarter one year ago.   The NIM for the current quarter was increased by approximately five basis points due to the collection of $201,000 in pre-payment penalties, non-accrual interest, and late fees and the accretion of $17,000 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 $115,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $8,000 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 $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. Net interest income for the first six months of fiscal 2025 increased $2.54 million, or 8%, to $34.18 million from $31.64 million for the first six months of fiscal 2024, primarily due to a $55.11 million increase in the average balance of total interest-earning assets and a 34 basis point increase in the weighted average yield of total interest-earning assets to 5.44% from 5.10%. These increases to net interest income were partially offset by an 18 basis point increase in the weighted average cost of interest-bearing liabilities to 2.55% from 2.37%. Timberland's NIM expanded to 3.71% for the first six months of fiscal 2025 from 3.53% for the first six months of fiscal 2024.

A $237,000 provision for credit losses on loans was recorded for the quarter ended March 31, 2025. The provision was primarily due to loan portfolio growth and changes in the composition of the loan portfolio. This compares to a $52,000 provision for credit losses on loans for the preceding quarter and a $166,000 provision for credit losses on loans for the comparable quarter one year ago. In addition, a $14,000 provision for credit losses on unfunded commitments and a $5,000 recapture of credit losses on investment securities were recorded for the current quarter.  

Non-interest income decreased $10,000, (less than 1%) to $2.69 million for the current quarter from $2.70 million for the preceding quarter and increased $72,000, or 3%, from $2.62 million for the comparable quarter one year ago. The decrease in non-interest income compared to the preceding quarter was primarily due to a decrease in ATM and debit card interchange transaction fees and smaller changes in several other categories, which was partially offset by an increase in gain on sales of loans and smaller changes in several other categories. Fiscal year-to-date non-interest income decreased by 1%, to $5.38 million from $5.41 million for the first six months of fiscal 2024.

Total operating (non-interest) expenses for the current quarter increased $127,000, or 1%, to $11.19 million from $11.07 million for the preceding quarter and increased $203,000, or 2%, from $10.99 million for the comparable quarter one year ago.   The increase in operating expenses compared to the preceding quarter was primarily due to increases in premises and equipment expenses, professional fees and smaller increases in several other expense categories. These increases were partially offset by decreases in salaries and employee benefits and smaller decreases in several other expense categories. The efficiency ratio for the current quarter was 56.25% compared to 56.27% for the preceding quarter and 60.22% for the comparable quarter one year ago. Fiscal year-to-date operating expenses increased 3% to $22.26 million from $21.62 million for the first six months of fiscal 2024.

The provision for income taxes for the current quarter decreased $8,000, or less than 1%, to $1.71 million from $1.71 million for the preceding quarter, primarily due to lower taxable income. Timberland's effective income tax rate was 20.2% for the quarter ended March 31, 2025, compared to 20.0% for the quarter ended December 31, 2024 and 20.5% for the quarter ended March 31, 2024. Timberland's effective income tax rate was 20.1% for the first six months of fiscal 2025 and fiscal 2024.

Balance Sheet Management

Total assets increased $23.25 million, or 1%, during the quarter to $1.93 billion at March 31, 2025 from $1.91 billion at December 31, 2024 and increased $25.50 million, or 1%, from $1.91 billion one year ago.   The increase during the current quarter was primarily due to a $27.14 million increase in total cash and cash equivalents, an $8.26 million increase in net loans receivable and smaller increases in several other categories. These increases were partially offset by a $7.42 million decrease in investment securities and smaller decreases in several other categories.

Liquidity

Timberland has continued to maintain a strong liquidity position, both on-balance sheet and off-balance sheet. Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment, and available for sale investment securities, was 16.9% of total liabilities at March 31, 2025, compared to 15.0% at December 31, 2024, and 15.2% one year ago. Timberland had secured borrowing line capacity of $675 million available through the FHLB and the Federal Reserve at March 31, 2025. With a strong and diversified deposit base, only 18% of Timberland's deposits were uninsured or uncollateralized at March 31, 2025. (Note: This calculation excludes public deposits that are fully collateralized.)

Loans

Net loans receivable increased $8.26 million, or 1%, during the quarter to $1.42 billion at March 31, 2025 from $1.41 billion at December 31, 2024. This increase was primarily due to a $10.31 million decrease in the undisbursed portion of construction loans in process, an $8.98 million increase in one- to four-family loans and a $5.19 million increase in commercial real estate loans. These increases were partially offset by a $12.57 million decrease in construction loans and smaller decreases in several other loan categories.