Timberland Bancorp's First Fiscal Quarter Net Income Increases to $6.86 Million

• Quarterly EPS Increases 12% to $0.86 from $0.77 One Year Ago
• Quarterly Return on Average Assets Increases to 1.41%
• Quarterly Return on Average Equity Increases to 11.03%
• Quarterly Net Interest Margin Increases to 3.64%

HOQUIAM, Wash., Jan. 27, 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 $6.86 million, or $0.86 per diluted common share for the quarter ended December 31, 2024.  This compares to net income of $6.36 million, or $0.79 per diluted common share for the preceding quarter and $6.30 million, or $0.77 per diluted common share, for the comparable quarter one year ago.

"We started off our 2025 fiscal year on solid footing, with net income, earnings per share and profitability metrics all improving compared to the prior quarter,” stated Dean Brydon, Chief Executive Officer.  "Fiscal first quarter net income and earnings per share increased 8% and 9%, respectively, compared to the prior quarter, reflecting an improvement in our net interest margin and lower provisions for credit losses compared to the prior quarter.  Compared to the first fiscal quarter a year ago, net income and earnings per share increased 9% and 12%, respectively.  In addition to all key performance metrics improving compared to the prior quarter and year ago quarter, tangible book value per share continued to trend upward.”

"As a result of Timberland's solid earnings and strong capital position, our Board of Directors announced a quarterly cash dividend to shareholders of $0.25 per share, payable on February 28, 2025, to shareholders of record on February 14, 2025,” stated Jonathan Fischer, President and Chief Operating Officer.  "This represents the 49th consecutive quarter Timberland will have paid a cash dividend.” 

"A highlight of the quarter was our net interest margin expanding six basis points to 3.64%, 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 eight basis points during the quarter.  Total deposits decreased $17 million, or 1%, during the quarter, in part due to some larger customers ending the calendar year with lower balances, while total borrowings stayed unchanged at $20 million compared to the prior quarter end.”

"While we experienced an increase in loan originations during the quarter, they were more than offset by a significant increase in loan payoffs, resulting in a 1% decrease in net loans compared to the prior quarter end,” Brydon continued.  "Some of the larger payoffs were on participation loans, as well as our largest substandard loan.  Credit quality metrics are also holding up relatively well.  While we experienced higher than normal net charge-offs during the quarter of $242,000 related to one loan, all other credit quality metrics improved.  Non-performing assets improved to 16 basis points of total assets at the end of the first quarter, compared to 20 basis points three months earlier, total delinquencies decreased by 10% during the quarter and non-accrual loans decreased by nearly 30%.  We remain encouraged by the overall strength of our loan portfolio and opportunities for loan growth in our markets.” 

"During the quarter we were excited to partner with the Federal Home Loan Bank of Des Moines and their Member Impact Fund grant program.  Timberland applied for grants on behalf of 43 local non-profit organizations in our market areas and we were pleased that all were approved.  The Member Impact Fund provided $3 for every $1 we donated to an eligible non-profit organization in our community.  In total, $772,000 was donated to 43 local non-profit organizations.  We were thrilled to be a part of the grant program that helped make a positive impact and advance housing and community development needs in the communities we serve,” added Fischer.

Earnings and Balance Sheet Highlights (at or for the periods ended December 31, 2024, compared to December 31, 2023, or September 30, 2024):

   Earnings Highlights:

• Earnings per diluted common share ("EPS”) increased 9% to $0.86 for the current quarter from $0.79 for the preceding quarter and 12% from $0.77 for the comparable quarter one year ago;
• Net income increased 8% to $6.86 million for the current quarter from $6.36 million for the preceding quarter and 9% from $6.30 million for the comparable quarter one year ago;
• Return on average equity ("ROE”) and return on average assets ("ROA”) for the current quarter were 11.03% and 1.41%, respectively;
• Net interest margin ("NIM”) for the current quarter expanded to 3.64% from 3.58% for the preceding quarter and 3.60% for the comparable quarter one year ago; and
• The efficiency ratio for the current quarter improved to 56.27% from 56.79% for the preceding quarter and 56.50% for the comparable quarter one year ago.

  Balance Sheet Highlights:

• Total assets decreased 1% from the prior quarter and increased 1% year-over-year;
• Net loans receivable decreased 1% from the prior quarter and increased 6% year-over-year;
• Total deposits decreased 1% from the prior quarter and increased slightly (less than 1%) year-over-year;
• Total shareholders' equity increased 2% from the prior quarter and increased 5% year-over-year; 27,260 shares of common stock were repurchased during the current quarter for $883,000;
• Non-performing assets to total assets ratio was 0.16% at December 31, 2024 compared to 0.20% at September 30, 2024 and 0.18% at December 31, 2023;
• Book and tangible book (non-GAAP) values per common share increased to $31.33 and $29.37, respectively, at December 31, 2024; and
• Liquidity (both on-balance sheet and off-balance sheet) remained strong at December 31, 2024 with only $20 million in borrowings and additional secured borrowing line capacity of $656 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 $19.67 million from $19.48 million for the preceding quarter and increased 5% from $18.80 million for the comparable quarter one year ago.  The increase in operating revenue compared to the preceding quarter was primarily due to an increase in interest income from loans and a decrease in funding costs, which was partially offset by a decrease in non-interest income and decreases in interest income on investment securities and interest bearing deposits in banks.

Net interest income increased $423,000, or 3%, to $16.97 million for the current quarter from $16.55 million for the preceding quarter and increased $966,000 or 6%, from $16.00 million for the comparable quarter one year ago.  The increase in net interest income compared to the preceding quarter was primarily due a $12.72 million increase in average total interest-earning assets and a decrease in the weighted average cost of interest-bearing liabilities to 2.62% from 2.70% for the preceding quarter.  Timberland's NIM for the current quarter expanded to 3.64% from 3.58% for the preceding quarter and 3.60% for the comparable quarter one year ago.  The NIM for the current quarter was increased by approximately 3 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 preceding quarter was increased by approximately one basis point due to the collection of $20,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $7,000 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 $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.

A $52,000 provision for credit losses on loans was recorded for the quarter ended December 31, 2024.  The provision was primarily due to changes in the composition of the loan portfolio and net charge-offs.  This compares to a $444,000 provision for credit losses on loans for the preceding quarter and a $379,000 provision for credit losses on loans for the comparable quarter one year ago.  In addition, a $20,000 recapture of 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 $235,000, or 8% to $2.70 million for the current quarter from $2.93 million for the preceding quarter and decreased $101,000, or 4%, from $2.80 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 gain on sales of loans and smaller changes in several other categories.  

Total operating (non-interest) expenses for the current quarter increased $5,000, or less than 1%, to $11.07 million from $11.06 million for the preceding quarter and increased $443,000, or 4%, from $10.62 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 and smaller increases in several other expense categories.  These increases were partially offset by decreases in deposit operations expense, and smaller decreases in several other expense categories.  The efficiency ratio for the current quarter was 56.27% compared to 56.79% for the preceding quarter and 56.50% for the comparable quarter one year ago.  

The provision for income taxes for the current quarter increased $141,000, or 9%, to $1.71 million from $1.57 million for the preceding quarter, primarily due to higher taxable income. Timberland's effective income tax rate was 20.0% for the quarter ended December 31, 2024 compared to 19.8% for the quarter ended September 30, 2024 and 19.7% for the quarter ended December 31, 2023.  

Balance Sheet Management

Total assets decreased $14.00 million, or 1%, during the quarter to $1.91 billion at December 31, 2024 from $1.92 billion at September 30, 2024 and increased $14.37 million, or 1%, from $1.90 billion one year ago.  The decrease during the current quarter was primarily due to an $11.20 million decrease in investment securities, a $9.70 million decrease in net loans receivable and smaller decreases in several other categories.  These decreases were partially offset by smaller increases in several other asset 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 15.0% of total liabilities at December 31, 2024, compared to 14.7% at September 30, 2024, and 12.7% one year ago.  Timberland had secured borrowing line capacity of $656 million available through the FHLB and the Federal Reserve at December 31, 2024.  With a strong and diversified deposit base, only 19% of Timberland's deposits were uninsured or uncollateralized at December 31, 2024.  (Note: This calculation excludes public deposits that are fully collateralized.)

Loans

Net loans receivable decreased $9.70 million, or 1%, during the quarter to $1.41 billion at December 31, 2024 from $1.42 billion at September 30, 2024.  This decrease was primarily due to a $15.47 million increase in the undisbursed portion of construction loans, a $3.43 million decrease in commercial business loans and a $2.17 million decrease in commercial real estate loans.  These decreases were partially offset by a $7.32 million increase in one- to four-family loans, a $1.55 million increase in construction loans and smaller increases in several other loan categories.

Loan Portfolio

($ in thousands)