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

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Timberland Bancorp reports second fiscal quarter net income of $5.71 million with a quarterly EPS of $0.70. Quarterly return on average assets of 1.22% and a net interest margin of 3.48%. Net loans increased by 12% year-over-year and deposits increased by 6% year-over-year. Timberland announced a quarterly cash dividend of $0.24 per share.
Timberland Bancorp ha riportato un reddito netto di $5,71 milioni per il secondo trimestre fiscale, con un EPS trimestrale di $0,70. Il rendimento trimestrale sugli asset medi è del 1,22% e il margine di interesse netto è del 3,48%. I prestiti netti sono aumentati del 12% su base annua e i depositi del 6% su base annua. Timberland ha annunciato un dividendo trimestrale in contanti di $0,24 per azione.
Timberland Bancorp reportó una ganancia neta de $5.71 millones en el segundo trimestre fiscal, con un EPS trimestral de $0.70. La rentabilidad trimestral sobre activos promedio fue del 1.22% y el margen de interés neto del 3.48%. Los préstamos netos aumentaron un 12% en comparación anual y los depósitos un 6% en comparación anual. Timberland anunció un dividendo trimestral en efectivo de $0.24 por acción.
팀버랜드 밴콥은 두 번째 회계 분기에 571만 달러의 순수익과 분기별 주당 수익 0.70달러를 보고했습니다. 평균 자산에 대한 분기 수익률은 1.22%, 순이자 마진은 3.48%입니다. 순대출은 전년 대비 12% 증가했으며 예금은 6% 증가했습니다. 팀버랜드는 주당 0.24달러의 분기 현금 배당을 발표했습니다.
Timberland Bancorp a annoncé un revenu net de 5,71 millions de dollars pour le deuxième trimestre fiscal, avec un BPA trimestriel de 0,70 dollar. Le retour sur actifs moyen trimestriel s'élève à 1,22% et la marge d'intérêt nette à 3,48%. Les prêts nets ont augmenté de 12% sur un an et les dépôts de 6% sur un an. Timberland a annoncé un dividende en espèces trimestriel de 0,24 dollar par action.
Timberland Bancorp meldet für das zweite Geschäftsquartal einen Nettogewinn von 5,71 Millionen Dollar und eine Quartals-EPS von 0,70 Dollar. Die vierteljährliche Rendite auf durchschnittliche Vermögenswerte beträgt 1,22% und die Nettomarge für Zinsen liegt bei 3,48%. Die Netto-Kredite stiegen im Jahresvergleich um 12% und die Einlagen um 6%. Timberland kündigte eine vierteljährliche Bardividende von 0,24 Dollar pro Aktie an.
Positive
  • Timberland reported a decrease in net income for the first six months of fiscal 2024 compared to the same period in fiscal 2023.
  • The net interest margin compressed in the second quarter due to increasing costs of funds.
  • Loan portfolio growth slowed, with construction loan balances declining during the quarter.
  • Operating revenue decreased primarily due to an increase in funding costs and a decrease in non-interest income.
  • Total deposits increased, with money market and certificates of deposit balances offsetting decreases in checking account balances.
  • The efficiency ratio increased for the current quarter compared to the preceding quarter and the comparable quarter one year ago.
  • Total assets, net loans receivable, total deposits, and total shareholders' equity all increased year-over-year.
  • Non-performing assets to total assets ratio increased slightly compared to the previous quarter.
  • Total delinquent loans and non-accrual loans increased from the previous quarter.
  • Timberland remains well capitalized with strong liquidity and capital ratios.
Negative
  • Net income decreased for the first six months of fiscal 2024 compared to the same period in fiscal 2023.
  • Loan origination volumes slowed during the quarter.
  • Operating revenue decreased due to increased funding costs.
  • Efficiency ratio increased for the current quarter.
  • Non-performing assets to total assets ratio increased slightly.
  • Total delinquent loans and non-accrual loans increased from the previous quarter.

Insights

Timberland Bancorp's reported decrease in net income for the second fiscal quarter, standing at $5.71 million, a 9% and 14% drop from the preceding quarter and the year-ago quarter respectively, indicates a contraction in profitability. Furthermore, the report projects a 15% decrease in six-month net income compared to the previous fiscal year, which may raise concerns among investors about the company's revenue generation capability in a possibly tightening economic environment.

Undoubtedly, the company's acknowledgment of increased deposit costs eating into margins is a critical factor for potential investment consideration. Despite the growth in net loans and deposits by 12% and 6% respectively year-over-year, these must be weighed against the contracting net interest margin (NIM) now at 3.48%, a decline from both the preceding quarter and the same quarter last year. This squeeze on NIM is reflective of broader industry challenges faced by financial institutions in managing interest rate risk during periods of rate hikes.

The stability in asset quality, as indicated by a mere $3,000 in net charge-offs and non-performing assets standing at 0.19% of total assets, demonstrates the bank's prudent credit risk management. However, the dynamic interest rate environment warrants close monitoring, as indicated by the executives in the report. The diversification of Timberland's loan portfolio, with increments in multi-family and one- to four-family loans, shows a strategic shift that might cushion the bank from sector-specific downturns.

Investors should note the positive liquidity position with $707 million in secured borrowing line capacity through the FHLB and the Federal Reserve. In the context of potentially 'higher for longer' interest rates, as suggested in the report, Timberland's liquidity measures may provide a degree of resilience. Furthermore, the declaration of a quarterly cash dividend, marking the 46th consecutive quarter of such payouts, could be seen as a sign of confidence in the bank's capital management and its commitment to shareholder returns.

The increase in operating expenses and the efficiency ratio now at 60.22% could signal rising costs of business operations that investors should be aware of. In comparison to the preceding quarter and the same quarter last year, these figures have ascended, potentially indicating less optimal use of revenue in generating income. Yet, the report also shows growth in shareholder equity, a modest but positive indicator of the company's financial health.

From a retail investor's standpoint, the key takeaway would be Timberland's ability to manage growth amidst economic pressure. The bank's strategic adjustments, specifically in its loan portfolio, along with stable asset quality and liquidity, are critical points signaling resilience. Nonetheless, the pressure on margins and increased operational costs may require strategic responses that investors should watch for in future financial disclosures.

  • 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, 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; 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.

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 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.


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.

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.

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 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 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 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 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 


 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).                                

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 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 

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


FAQ

What was Timberland Bancorp's net income for the second fiscal quarter?

Timberland Bancorp reported a net income of $5.71 million for the second fiscal quarter.

What was Timberland Bancorp's quarterly EPS?

Timberland Bancorp's quarterly EPS was $0.70.

By how much did net loans increase year-over-year?

Net loans increased by 12% year-over-year for Timberland Bancorp.

What was the quarterly return on average assets?

Timberland Bancorp had a quarterly return on average assets of 1.22%.

How much did deposits increase year-over-year?

Deposits increased by 6% year-over-year for Timberland Bancorp.

When is Timberland Bancorp's quarterly cash dividend payable?

Timberland Bancorp's quarterly cash dividend of $0.24 per share is payable on May 24, 2024.

What caused the decrease in net income for the first six months of fiscal 2024?

The decrease in net income for the first six months of fiscal 2024 was primarily due to lower earnings compared to the same period in fiscal 2023.

Why did the net interest margin compress in the second quarter?

The net interest margin compressed in the second quarter due to the increase in the cost of funds outpacing the growth in yields on interest-earning assets.

How did the loan portfolio perform during the quarter?

The loan portfolio growth slowed, with construction loan balances declining during the quarter for Timberland Bancorp.

What factors contributed to the decrease in operating revenue?

The decrease in operating revenue was primarily due to an increase in funding costs and a decrease in non-interest income.

What led to the increase in total deposits?

Total deposits increased with money market and certificates of deposit balances offsetting decreases in checking account balances for Timberland Bancorp.

Why did the efficiency ratio increase for the current quarter?

The efficiency ratio increased for the current quarter primarily due to increases in various operating expenses.

How did Timberland Bancorp's total assets change year-over-year?

Total assets increased by 1% from the previous year for Timberland Bancorp.

What is the current non-performing assets to total assets ratio for Timberland Bancorp?

The non-performing assets to total assets ratio was 0.19% at March 31, 2024 for Timberland Bancorp.

Were there any increases in delinquent loans and non-accrual loans compared to the previous quarter?

Total delinquent loans and non-accrual loans increased from the previous quarter for Timberland Bancorp.

Timberland Bancorp Inc

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