• Timberland Bancorp’s 2023 Fiscal Year Net Income Increases to $27.12 Million

    来源: Nasdaq GlobeNewswire / 30 10月 2023 19:06:22   America/New_York

    • Fiscal Year EPS Increased 17% to $3.29
    • Quarterly EPS Increased 5% to $0.81 from $0.77 for Preceding Quarter
    • Quarterly Return on Average Assets of 1.45%
    • Quarterly Return on Average Equity of 11.52%
    • Quarterly Net Interest Margin of 3.85%
    • Announces $0.23 Quarterly Cash Dividend

    HOQUIAM, Wash., Oct. 30, 2023 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”), the holding company for Timberland Bank (the “Bank”), today reported that net income increased 15% to $27.12 million for the fiscal year ended September 30, 2023 from $23.60 million for the fiscal year ended September 30, 2022. Earnings per diluted common share (“EPS”) increased 17% to $3.29 for the 2023 fiscal year from $2.82 for the 2022 fiscal year.

    Timberland also announced quarterly net income of $6.64 million, or $0.81 per diluted common share, for the quarter ended September 30, 2023. This compares to net income of $6.31 million, or $0.77 per diluted common share, for the preceding quarter and $7.05 million, or $0.85 per diluted common share, for the comparable quarter one year ago.

    “For fiscal 2023, Timberland generated increases in both net income and earnings per share, which were up 15% and 17%, respectively, compared to fiscal 2022,” stated Dean Brydon, Chief Executive Officer.   “Further, net income and EPS for the current quarter increased 5% compared to the prior quarter, driven by continued growth in the loan portfolio. As a result of the Company’s strong earnings and capital position, Timberland’s Board of Directors announced a quarterly cash dividend of $0.23 per share, payable on November 27, 2023, to shareholders of record on November 13, 2023. This represents the 44th consecutive quarter Timberland will have paid a cash dividend.”  

    “Credit quality metrics continue to perform well, with non-performing assets at just 9 basis points at fiscal year-end,” Brydon continued. “Loan origination volumes remained steady and net loans receivable grew by nearly $42 million during the quarter. Due primarily to loan portfolio growth, a $522,000 provision for loan losses was booked for the quarter. While the possibility of continued economic headwinds and an industry-wide negative credit cycle still exist, we remain optimistic regarding the overall strength of our loan portfolio and the markets that we operate in.”

    “Net interest margin remained strong at 3.85% for the quarter, just 9 basis points lower than the prior quarter’s margin and 21 basis points higher compared to the year ago quarter,” said Jonathan Fischer, President and Chief Operating Officer. “Total deposits increased $8 million during the quarter, as we continued to see customers moving funds from Checking and Savings accounts into Certificate of Deposits to gain higher yields. We anticipate additional margin compression going forward as funding costs continue to trend upward. While we are fortunate to have loyal customers, we will continue to work hard to retain rate sensitive customer deposits.”

    Earnings and Balance Sheet Highlights (at or for the periods ended September 30, 2023, compared to September 30, 2022, or June 30, 2023):
      
        Earnings Highlights:

    • EPS increased 5% to $0.81 for the current quarter from $0.77 for the preceding quarter and decreased 5% from $0.85 for the comparable quarter one year ago; EPS for fiscal year 2023 increased 17% to $3.29 from $2.82 for fiscal year 2022;
    • Net income increased 5% to $6.64 million for the current quarter from $6.31 million for the preceding quarter and decreased 6% from $7.05 million for the comparable quarter one year ago; Net income increased 15% to $27.12 million for fiscal year 2023 from $23.60 million for fiscal year 2022;
    • Return on average equity (“ROE”) and return on average assets (“ROA”) for the current quarter were 11.52% and 1.45%, respectively;
    • Net interest margin (“NIM”) for the current quarter compressed to 3.85% from 3.94% for the preceding quarter and expanded from 3.64% for the comparable quarter one year ago; and
    • The efficiency ratio for the current quarter was 55.52% compared to 56.01% for the preceding quarter and 52.72% for the comparable quarter one year ago.

       Balance Sheet Highlights:

    • Total assets increased 2% from the prior quarter and decreased 1% year-over-year;
    • Net loans receivable increased 3% from the prior quarter and increased 15% year-over-year;
    • Total deposits increased 1% from the prior quarter and decreased 4% year-over-year;
    • Total shareholders’ equity increased 2% from the prior quarter and increased 7% year-over-year;
    • Non-performing assets to total assets ratio improved to 0.09% from 0.12% one year ago;
    • Book and tangible book (non-GAAP) values per common share increased to $28.76 and $26.81, respectively, at September 30, 2023; and
    • Liquidity (both on-balance sheet and off-balance sheet) remained strong at September 30, 2023 with only $35 million in borrowings and additional secured borrowing line capacity of $680 million available through the FHLB and the Federal Reserve.

    Operating Results

    Operating revenue (net interest income before the provision for loan losses plus non-interest income) for the current quarter increased 1% to $19.76 million from $19.51 million for the preceding quarter and increased 3% from $19.26 million for the comparable quarter one year ago. The increase in operating revenue compared to the preceding quarter was primarily due to increased interest income from loans and overnight funds, which were partially offset by an increase in total interest expense. Operating revenue increased 16% to $79.50 million for the 2023 fiscal year from $68.46 million for the 2022 fiscal year, primarily due to increased interest income from loans, overnight funds, and investment securities, which were partially offset by an increase in total interest expense and a decrease in gain on sales of loans. The increased interest income in these categories was primarily a result of increased short-term market interest rates and the deployment of liquidity into higher-yielding loans and investment securities.

    Net interest income increased $197,000, or 1%, to $16.83 million for the current quarter from $16.63 million for the preceding quarter and increased $568,000, or 3%, from $16.26 million for the comparable quarter one year ago. The increase in net interest income compared to the preceding quarter was primarily due to a $59.53 million increase in average interest-earning assets and an increase in the weighted average yield on total interest-earning assets to 4.94% from 4.72% from the preceding quarter. Partially offsetting the increase in interest income was an increase in the weighted average cost of interest-bearing liabilities to 1.69% from 1.22% for the preceding quarter. Timberland’s NIM for the current quarter compressed to 3.85% from 3.94% for the preceding quarter and expanded from 3.64% for the comparable quarter one year ago.   The NIM for the current quarter was increased by approximately two basis points due to the accretion of $11,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $92,000 in pre-payment penalties, non-accrual interest, and late fees. The NIM for the preceding quarter was increased by approximately three basis points due to the accretion of $22,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $87,000 in pre-payment penalties, non-accrual interest and late fees. The NIM for the comparable quarter one year ago was increased by approximately three basis points due to the accretion of $28,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $91,000 in pre-payment penalties, non-accrual interest and late fees. Net interest income for the 2023 fiscal year increased $12.53 million, or 22%, to $68.36 million from $55.83 million for the 2022 fiscal year. Timberland’s net interest margin for the 2023 fiscal year expanded to 3.95% from 3.16% for the 2022 fiscal year.

    U.S. Small Business Administration (“SBA”) PPP loans contribute to interest income through the 1.00% interest rate earned on outstanding loan balances and also through the accretion of loan origination fees into interest income over the life of each PPP loan. At September 30, 2023, Timberland had SBA PPP deferred loan origination fees of $16,000 remaining to be accreted into interest income over the remaining life of the loans. The following table details the interest income recognized from SBA PPP loans:

    SBA PPP Loan Income
    ($ in thousands)
     Three Months Ended
     Sept. 30, 2023 June 30, 2023 Sept. 30, 2022
    Interest income$1 $1 $3
    Loan origination fee accretion 3  2  10
    Total SBA PPP loan income$4 $3 $13


                                                                                                                                      Year Ended
     Sept. 30, 2023 Sept. 30, 2022
    Interest income$6 $                114
    Loan origination fee accretion 26  1,792
    Total SBA PPP loan income$32 $                1,906

    A $522,000 provision for loan losses was recorded for the quarter ended September 30, 2023, primarily due to loan portfolio growth. This compares to a $610,000 provision for loans losses for the preceding quarter and a $270,000 provision for loan losses for the comparable quarter one year ago. The provisions for loan losses totaled $2.13 million for the 2023 fiscal year compared to provisions for loan losses of $270,000 for the 2022 fiscal year.

    Non-interest income increased $49,000 or 2%, to $2.92 million for the current quarter from $2.88 million for the preceding quarter and decreased $72,000, or 2%, from $3.00 million for the comparable quarter one year ago. The increase in non-interest income compared to the preceding quarter was primarily due to an $80,000 increase in BOLI net earnings (as a result of a death benefit claim) and a $45,000 increase in service charges on deposits and smaller increases in several other categories. These increases were partially offset by a $95,000 decrease in gain on sale of investment securities.   Non-interest income for the 2023 fiscal year decreased $1.48 million, or 12%, to $11.14 million from $12.62 million for the 2022 fiscal year, primarily due to a $1.27 million decrease in gain on sales of loans as the dollar amount of fixed-rate one-to four-family loans originated and sold decreased as demand slowed and a larger portion of single family loan originations were retained in the portfolio rather than being sold.

    Total operating (non-interest) expenses for the current quarter increased slightly (less than 1%) to $10.97 million from $10.93 million for the preceding quarter and increased $813,000, or 8%, from $10.15 million for the comparable quarter one year ago.   The increase in operating expenses compared to the preceding quarter was primarily due to a $56,000 increase in advertising expense and smaller increases in several other expense categories. These increases were partially offset by a $104,000 decrease in salaries and employee benefits (primarily due to fewer employees) and smaller decreases in several other expense categories.   The efficiency ratio for the current quarter was 55.52% compared to 56.01% for the preceding quarter and 52.72% for the comparable quarter one year ago.

    For the 2023 fiscal year, total operating expenses increased 12% to $43.37 million from $38.63 million for the 2022 fiscal year. The increase in operating expenses was primarily due to a $2.75 million increase in salaries and employee benefits, an $826,000 increase in data processing and telecommunications expense, and smaller increases in several other expense categories. The increase in salaries and benefits was primarily due to wage inflation related adjustments and the increase in data processing and telecommunication expense was primarily due to the addition of several technology products and increased processing volumes. The efficiency ratio for fiscal year 2023 improved to 54.56% from 56.42% for fiscal year 2022.

    The provision for income taxes for the current quarter decreased $42,000, or 3%, to $1.62 million from $1.67 million for the preceding quarter, primarily due to a higher percentage of non-taxable income and tax adjustments from the exercise of stock options.   Timberland’s effective income tax rate was 19.6% for the quarter ended September 30, 2023 compared to 20.9% for the quarter ended June 30, 2023 and 20.2% for the quarter ended September 30, 2022.   Timberland’s effective income tax rate was 20.2% for both the 2023 fiscal year and the 2022 fiscal year.

    Balance Sheet Management

    Total assets increased $32.19 million, or 2%, during the quarter to $1.84 billion at September 30, 2023 from $1.81 billion at June 30, 2023 and decreased $20.23 million, or 1%, from $1.86 billion one year ago. The increase during the current quarter was primarily due to a $41.66 million increase in net loans receivable which was partially offset by an $8.68 million decrease in investment securities and CDs held for investment. The quarterly increase in assets was primarily funded by FHLB borrowings and increased deposits.

    Liquidity

    Timberland has continued to maintain a strong liquidity position (both on-balance sheet and off-balance sheet) while deploying overnight funds into loans during the past year. Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment, and available for sale investment securities, was 11.6% of total liabilities at September 30, 2023, compared to 12.1% at June 30, 2023, and 23.2% one year ago. Timberland had secured borrowing line capacity of $680 million available through the FHLB and the Federal Reserve at September 30, 2023. With a strong and diversified deposit base, only 19% of Timberland’s deposits were uninsured or uncollateralized at September 30, 2023. (Note: This calculation excludes public deposits that are fully collateralized.)

    Loans

    Net loans receivable increased $41.66 million, or 3%, during the quarter to $1.30 billion at September 30, 2023 from $1.26 billion at June 30, 2023. This increase was primarily due to a $23.95 million increase in one- to four-family loans, a $15.40 million increase in multi-family loans, an $11.25 million increase in commercial real estate loans, and smaller increases in several other loan categories. These increases to net loans receivable were partially offset by a $7.76 million decrease in construction and land development loans and smaller decreases in several other loan categories.

    Net loan receivable increased $169.88 million, or 15%, during the fiscal year to $1.30 billion at September 30, 2023 from $1.13 billion at September 30, 2022. This increase was primarily due to a $77.11 million increase in one- to four-family loans, a $32.15 million increase in multi-family loans, a $31.62 million increase in commercial real estate loans, an $18.23 million increase in construction and land development loans, a $10.76 million increase in commercial business loans and smaller changes in other categories.

    Loan Portfolio
    ($ in thousands)
     
     September 30, 2023 June 30, 2023 September 30, 2022
     Amount Percent Amount Percent Amount Percent
    Mortgage loans:           
    One- to four-family (a)$253,227  18% $229,274  17% $176,116  14%
    Multi-family 127,176  9  111,777  8  95,025  8
    Commercial 568,265  40  557,015  40  536,650  43
    Construction - custom and           
    owner/builder 129,699  9  136,595  10  119,240  9
    Construction - speculative one-to four-family 17,099  1  12,522  1  12,254  1
    Construction - commercial 51,064  4  42,657  3  40,364  3
    Construction - multi-family 57,140  4  73,859  5  64,480  5
    Construction - land           
    development 18,841  1  15,968  1  19,280  2
    Land 26,726  2  25,908  2  26,854  2
    Total mortgage loans 1,249,237  88  1,205,575  87  1,090,263  87
                
    Consumer loans:           
    Home equity and second           
    mortgage 38,281  3  40,008  3  35,187  3
    Other 2,772  --  2,469  --  2,128  --
    Total consumer loans 41,053  3  42,477  3  37,315  3
                
    Commercial loans:           
    Commercial business loans 135,802  9  137,114  10  125,039  10
    SBA PPP loans 466  --  519  --  1,001  --
    Total commercial loans 136,268  9  137,633  10  126,040  10
    Total loans 1,426,558  100%  1,385,685  100%  1,253,618  100%
    Less:           
    Undisbursed portion of           
    construction loans in           
    process (103,194)    (104,774)    (103,168)  
    Deferred loan origination           
    fees (5,242)    (4,957)    (4,321)  
    Allowance for loan losses (15,817)    (15,307)    (13,703)  
    Total loans receivable, net$1,302,305    $1,260,647    $1,132,426   

    _______________________
    (a)   Does not include one- to four-family loans held for sale totaling $400, $0, and $748 at September 30, 2023, June 30, 2023, and September 30, 2022, respectively.  

    The following table provides a breakdown of commercial real estate (“CRE”) mortgage loans by collateral type as of September 30, 2023:                

    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 $115,804 20% 8% $1,135 $195
    Medical/dental offices  76,498 14 5  1,319  --
    Office buildings  66,108 12 5  760  --
    Other retail buildings  51,730 9 4  545  --
    Hotel/motels  30,718 5 2  3,072  --
    Mini-storage  27,750 5 2  1,156  --
    Restaurants  27,640 5 2  564  --
    Gas stations/Conv. Stores  21,588 4 1  939  --
    Nursing homes  18,051 3 1  3,008  --
    Shopping centers  10,790 2 1  2,158  --
    Mobile home parks  9,696 2 1  510  --
    Churches  7,253 1 1  484  --
    Additional CRE  104,639 18 7  731  488
    Total CRE $568,265 100% 40% $893 $683

    Timberland originated $89.25 million in loans during the quarter ended September 30, 2023, compared to $93.72 million for the preceding quarter and $136.55 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 past year, a larger percentage of single-family loan originations were retained in the portfolio rather than being sold due to the increased yield available on such loans.   During the current quarter, fixed-rate one- to four-family mortgage loans totaling $4.58 million were sold compared to $3.41 million for the preceding quarter and $8.06 million for the comparable quarter one year ago.

    Investment Securities
            
    Timberland’s investment securities and CDs held for investment decreased $8.68 million, or 3%, to $327.99 million at September 30, 2023, from $336.66 million at June 30, 2023. The decrease was primarily due to maturities and scheduled amortization.

    Investment securities and CDs held for investment decreased $3.76 million, or 1%, during the fiscal year to $327.99 million at September 30, 2023, from $331.75 million at September 30, 2022. The decrease was primarily due to the sale of $8.86 million of available for sale investment securities (for a gain of $95,000), maturities and scheduled amortization, which were partially offset by additional purchases during the first quarter of the fiscal year.

    Deposits

    Total deposits increased $8.21 million, or 1%, during the quarter to $1.56 billion at September 30, 2023, from $1.55 billion at June 30, 2022. The quarter’s increase consisted of a $48.79 million increase in certificates of deposit balances and a $3.15 million increase in non-interest bearing deposit balances. These increases were partially offset by a $19.40 million decrease in money market account balances, a $13.29 million decrease in savings account balances, and an $11.03 million decrease in NOW checking account balances.

    Total deposits decreased $71.24 million, or 4%, during the fiscal year to $1.56 billion at September 30, 2023 from $1.63 billion at September 30, 2022. The decrease consisted of a $74.19 million decrease in non-interest bearing deposit balances, a $61.05 million decrease in NOW checking account balances, a $58.66 million decrease in money market account balances and a $54.85 million decrease in savings account balances. These decreases were partially offset by a $177.52 million increase in certificate of deposit balances (including $38.17 million in brokered accounts).

    Deposit Breakdown
    ($ in thousands)
     
     September 30, 2023 June 30, 2023 September 30, 2022
     Amount  Percent
     Amount  Percent Amount
      Percent
    Non-interest-bearing demand$455,864  29% $452,729  29% $530,058   33%
    NOW checking 386,730  25  397,761  26  447,779   28
    Savings 228,366  15  241,651  16  283,219   17
    Money market 189,875  12  209,276  13  248,536   15
    Certificates of deposit under $250 170,221  11  148,142  10  100,754   6
    Certificates of deposit $250 and over 91,714  6  64,849  4  21,830   1
    Certificates of deposit – brokered 38,165  2  38,322  2  --   --
    Total deposits$1,560,935  100% $1,552,730  100% $1,632,176   100%

    Borrowings

    Total borrowings increased to $35.00 million at September 30, 2023 from $15.00 million at June 30, 2023, as the Company utilized borrowings to supplement on-balance sheet liquidity during the current quarter. At September 30, 2023, the weighted average rate on the borrowings was 4.87%.

    Shareholders’ Equity and Capital Ratios

    Total shareholders’ equity increased $3.81 million, or 2%, to $233.07 million at September 30, 2023, from $229.26 million at June 30, 2023. The increase in shareholders’ equity was primarily due to net income of $6.64 million for the quarter and $164,000 from the exercise of stock options, which was partially offset by the payment of $1.86 million in dividends to shareholders, the repurchase of 30,566 shares of common stock for $878,000 (an average price of $28.74 per share), and a $340,000 increase in the accumulated other comprehensive loss category for fair value adjustments on available for sale investment securities.   Timberland had 374,142 shares available to be repurchased in accordance with the terms of its existing stock repurchase plan at September 30, 2023.

    Timberland remains well capitalized with a total risk-based capital ratio of 19.38%, a Tier 1 leverage capital ratio of 12.10%, a tangible common equity to tangible assets ratio (non-GAAP) of 11.91%, and a shareholders’ equity to total assets ratio of 12.67% at September 30, 2023. Timberland’s held to maturity investment securities were $270.22 million at September 30, 2023, with a net unrealized loss of $16.46 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 12.04%, compared to 12.67%, as reported.

    Asset Quality

    Timberland’s non-performing assets to total assets ratio was 0.09% at September 30, 2023 compared to 0.09% at June 30, 2023 and 0.12% at September 30, 2022. There were net charge-offs of $12,000 for the current quarter, compared to net charge-offs of $1,000 for the preceding quarter and no charge-offs for the comparable quarter one year ago. Due primarily to loan portfolio growth, a $522,000 provision for loan losses was made for the quarter ended September 30, 2023, a $610,000 provision for loan losses was made for the quarter ended June 30, 2023 and a $270,000 provision for loan losses was made during the quarter ended September 30, 2022.

    The allowance for loan losses (“ALL”) as a percentage of loans receivable was 1.20% at September 30, 2023, compared to 1.20% at June 30, 2023 and 1.20% one year ago.

    The ALL as a percentage of loans receivable is also impacted by the loans acquired in the South Sound Acquisition. Included in the recorded value of loans acquired in acquisitions are net discounts which may reduce the need for an allowance for loan losses on such loans because they are carried at an amount below their outstanding principal balance. The initial recorded value of loans acquired in the South Sound Acquisition was $123.62 million and the related fair value discount was $2.08 million, or 1.68% of the loans acquired. The remaining fair value discount on loans acquired in the South Sound Acquisition was $192,000 at September 30, 2023. The allowance for loan losses to loans receivable (excluding SBA PPP loan balances and the remaining aggregate balance of the loans acquired in the South Sound Acquisition) was 1.21% (non-GAAP) at September 30, 2023.

    Total delinquent loans (past due 30 days or more) and non-accrual loans decreased $431,000 or 21%, to $1.67 million at September 30, 2023, from $2.01 million one year ago, and decreased $178,000, or 10%, from $1.84 million at June 30, 2023. Non-accrual loans decreased $545,000, or 26%, to $1.51 million at September 30, 2023, from $2.06 million one year ago, and decreased $72,000, or 5%, from $1.59 million at June 30, 2023.

    Non-Accrual Loans
    ($ in thousands)
     
     September 30, 2023 June 30, 2023 September 30, 2022
     Amount Quantity Amount Quantity Amount Quantity
    Mortgage loans:           
    One- to four-family$368 2 $373 2 $388 2
    Commercial 683 2  686 2  657 2
    Land -- --  54 1  450 2
    Total mortgage loans 1,051 4  1,113 5  1,495 6
                
    Consumer loans:           
    Home equity and second           
    Mortgage 177 1  184 1  252 2
    Other -- 1  -- 1  3 1
    Total consumer loans 177 2  184 2  255 3
                
    Commercial business loans 286 5  289 4  309 6
    Total loans$1,514 11 $1,586 11 $2,059 15

    Acquisition of South Sound Bank
    On October 1, 2018, the Company completed the acquisition of South Sound Bank, a Washington-state chartered bank, headquartered in Olympia, Washington (“South Sound Acquisition”). The Company acquired 100% of the outstanding common stock of South Sound Bank, and South Sound Bank was merged into Timberland Bank and the Company. Pursuant to the terms of the merger agreement, South Sound Bank shareholders received 0.746 of a share of the Company’s common stock and $5.68825 in cash per share of South Sound Bank common stock. The Company issued 904,826 shares of its common stock (valued at $28,267,000 based on the Company’s closing stock price on September 30, 2018 of $31.24 per share) and paid $6,903,000 in cash in the transaction for total consideration paid of $35,170,000.

    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)Sept. 30, June 30, Sept. 30,
     2023 2023 2022
    Interest and dividend income     
    Loans receivable$17,532 $16,215  $13,454
    Investment securities 2,326  2,384   1,476
    Dividends from mutual funds, FHLB stock and other investments 85  70   40
    Interest bearing deposits in banks 1,619  1,220   2,048
    Total interest and dividend income 21,562  19,889   17,018
          
    Interest expense     
    Deposits 4,574  3,123   755
    Borrowings 157  132   --
    Total interest expense 4,731  3,255   755
    Net interest income 16,831  16,634   16,263
    Provision for loan losses 522  610   270
    Net interest income after provision for loan losses 16,309  16,024   15,993
          
    Non-interest income     
    Service charges on deposits 1,015  970   985
    ATM and debit card interchange transaction fees 1,333  1,335   1,341
    Gain on sales of loans, net 97  80   173
    Bank owned life insurance (“BOLI”) net earnings 237  157   157
    Gain on sale of investment securities, net --  95   --
    Recoveries on investment securities, net 2  2   6
    Other 240  236   334
    Total non-interest income, net 2,924  2,875   2,996
          
    Non-interest expense     
    Salaries and employee benefits 5,756  5,860   5,210
    Premises and equipment 982  1,010   921
    Loss (gain) on sale of premises and equipment, net 12  (32)  13
    Advertising 235  179   182
    OREO and other repossessed assets, net --  --   1
    ATM and debit card processing 524  491   514
    Postage and courier 135  128   137
    State and local taxes 325  297   308
    Professional fees 599  577   574
    FDIC insurance expense 194  191   129
    Loan administration and foreclosure 118  126   128
    Data processing and telecommunications 933  944   739
    Deposit operations 346  430   358
    Amortization of core deposit intangible (“CDI”) 68  68   79
    Other, net 740  658   861
    Total non-interest expense, net 10,967  10,927   10,154
          
    Income before income taxes 8,266  7,972   8,835
    Provision for income taxes 1,624  1,666   1,786
    Net income$6,642 $6,306  $7,049
          
    Net income per common share:     
    Basic$0.82 $0.77  $0.86
    Diluted 0.81  0.77   0.85
          
    Weighted average common shares outstanding:     
    Basic 8,094,719  8,156,831   8,243,557
    Diluted 8,156,497  8,213,975   8,313,178


    TIMBERLAND BANCORP INC. AND SUBSIDIARY
    CONSOLIDATED STATEMENTS OF INCOME
    Year Ended
    ($ in thousands, except per share amounts) (unaudited)Sept. 30, Sept. 30,
     2023
     2022
    Interest and dividend income   
    Loans receivable$63,154  $51,324 
    Investment securities 9,384   3,488 
    Dividends from mutual funds, FHLB stock and other investments 270   120 
    Interest bearing deposits in banks 7,143   3,576 
    Total interest and dividend income 79,951   58,508 
        
    Interest expense   
    Deposits 11,302   2,657 
    Borrowings 290   17 
    Total interest expense 11,592   2,674 
    Net interest income 68,359   55,834 
    Provision for loan losses 2,132   270 
    Net interest income after provision for loan losses 66,227   55,564 
        
    Non-interest income   
    Service charges on deposits 3,824   3,964 
    ATM and debit card interchange transaction fees 5,194   5,210 
    Gain on sales of loans, net 244   1,510 
    BOLI net earnings 706   613 
    Valuation recovery on loan servicing rights, net --   119 
    Gain on sale of investment securities, net 95   -- 
    Recoveries on investment securities, net 9   22 
    Other 1,068   1,186 
    Total non-interest income, net 11,140   12,624 
        
    Non-interest expense   
    Salaries and employee benefits 23,562   20,816 
    Premises and equipment 3,915   3,736 
    (Gain) loss on sales of premises and equipment, net (19)  13 
    Advertising 786   695 
    OREO and other repossessed assets, net 1   (17)
    ATM and debit card processing 1,987   1,943 
    Postage and courier 532   577 
    State and local taxes 1,219   1,062 
    Professional fees 2,078   1,747 
    FDIC insurance expense 711   506 
    Loan administration and foreclosure 503   508 
    Data processing and telecommunications 3,545   2,719 
    Deposit operations 1,368   1,235 
    Amortization of CDI 271   316 
    Other, net 2,914   2,770 
    Total non-interest expense, net 43,373   38,626 
        
    Income before income taxes 33,994   29,562 
    Provision for income taxes 6,876   5,962 
    Net income$27,118  $23,600 
        
    Net income per common share:   
    Basic$3.32  $2.84 
    Diluted 3.29   2.82 
        
    Weighted average common shares outstanding:   
    Basic 8,175,898   8,304,002 
    Diluted 8,248,181   8,383,335
     


    TIMBERLAND BANCORP INC. AND SUBSIDIARY
    CONSOLIDATED BALANCE SHEETS
     
    ($ in thousands, except per share amounts) (unaudited)Sept. 30, June 30, Sept. 30,
     2023
     2023
     2022
    Assets     
    Cash and due from financial institutions$25,390  $28,308  $24,808 
    Interest-bearing deposits in banks 103,331   101,645   291,947 
     Total cash and cash equivalents 128,721   129,953   316,755 
           
    Certificates of deposit (“CDs”) held for investment, at cost 15,188   16,931   22,894 
    Investment securities:     
     Held to maturity, at amortized cost 270,218   275,053   266,608 
     Available for sale, at fair value 41,771   43,842   41,415 
    Investments in equity securities, at fair value 811   837   835 
    FHLB stock 3,602   2,802   2,194 
    Other investments, at cost 3,000   3,000   3,000 
    Loans held for sale 400   --   748 
          
    Loans receivable 1,318,122   1,275,954   1,146,129 
    Less: Allowance for loan losses (15,817)  (15,307)  (13,703)
     Net loans receivable 1,302,305   1,260,647   1,132,426 
           
    Premises and equipment, net 21,642   21,574   21,898 
    BOLI 22,966   23,276   22,806 
    Accrued interest receivable 6,004   5,451   4,483 
    Goodwill 15,131   15,131   15,131 
    CDI 677   745   948 
    Loan servicing rights, net 2,124   2,321   3,023 
    Operating lease right-of-use assets 1,772   1,845   1,980 
    Other assets 3,573   4,305   3,364 
     Total assets$1,839,905  $1,807,713  $1,860,508 
           
    Liabilities and shareholders’ equity     
    Deposits: Non-interest-bearing demand$455,864  $452,729  $530,058 
    Deposits: Interest-bearing 1,105,071   1,100,001   1,102,118 
     Total deposits 1,560,935   1,552,730   1,632,176 
           
    Operating lease liabilities 1,867   1,939   2,066 
    FHLB borrowings 35,000   15,000   -- 
    Other liabilities and accrued expenses 9,030   8,781   7,697 
     Total liabilities 1,606,832   1,578,450   1,641,939 
          
    Shareholders’ equity     
    Common stock, $.01 par value; 50,000,000 shares authorized;     
    8,105,338 shares issued and outstanding – September 30, 2023     
    8,094,174 shares issued and outstanding – June 30, 2023     
    8,221,952 shares issued and outstanding – September 30, 2022 34,771   35,401   38,751 
    Retained earnings 199,386   194,606   180,535 
    Accumulated other comprehensive loss (1,084)  (744)  (717)
     Total shareholders’ equity 233,073   229,263   218,569 
     Total liabilities and shareholders’ equity$1,839,905  $1,807,713  $1,860,508 


    KEY FINANCIAL RATIOS AND DATA        
    ($ in thousands, except per share amounts) (unaudited)
     
     Three Months Ended
    PERFORMANCE RATIOS:Sept. 30, 2023 June 30, 2023 Sept. 30, 2022
    Return on average assets (a) 1.45%  1.42%  1.51%
    Return on average equity (a) 11.52%  11.07%  13.06%
    Net interest margin (a) 3.85%  3.94%  3.64%
    Efficiency ratio 55.52%  56.01%  52.72%
          
     Year Ended
    PERFORMANCE RATIOS:Sept. 30, 2023   Sept. 30, 2022
    Return on average assets (a) 1.50%    1.27%
    Return on average equity (a) 12.01%    11.14%
    Net interest margin (a) 3.95%    3.16%
    Efficiency ratio 54.56%    56.42%
          
     At or for the Period Indicated
    ASSET QUALITY RATIOS AND DATA:Sept. 30, 2023 June 30, 2023 Sept. 30, 2022
    Non-accrual loans$1,514 $1,586 $2,059
    Loans past due 90 days and still accruing --  --  --
    Non-performing investment securities 82  87  106
    OREO and other repossessed assets --  --  --
    Total non-performing assets (b)$1,596 $1,673 $2,165
          
    Non-performing assets to total assets (b) 0.09%  0.09%  0.12%
    Net charge-offs (recoveries) during quarter$12 $1 $--
    ALL to non-accrual loans, 1,045%  965%  666%
    ALL to loans receivable (c) 1.20%  1.20%  1.20%
    ALL to loans receivable (excluding SBA PPP loans) (d) (non-GAAP) 1.21%  1.20%  1.20%
    ALL to loans receivable (excluding SBA PPP loans and South Sound Acquisition loans) (d) (e) (non-GAAP) 1.21%  1.21%  1.22%
    Troubled debt restructured loans on accrual status (f)$2,495 $2,604 $2,472
          
    CAPITAL RATIOS:     
    Tier 1 leverage capital 12.10%  12.27%  11.03%
    Tier 1 risk-based capital 18.13%  18.11%  18.02%
    Common equity Tier 1 risk-based capital 18.13%  18.11%  18.02%
    Total risk-based capital 19.38%  19.36%  19.45%
    Tangible common equity to tangible assets (non-GAAP) 11.91%  11.91%  10.98%
          
    BOOK VALUES:     
    Book value per common share$28.76 $28.32 $26.58
    Tangible book value per common share (g) 26.81  26.36  24.63

    ________________________________________________

    (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. Troubled debt restructured loans on accrual status are not included.
    (c) Does not include loans held for sale and is before the allowance for loan losses.
    (d) Does not include PPP loans totaling $466, $519 and $1,001 at September 30, 2023, June 30, 2023 and September 30, 2022, respectively.
    (e) Does not include loans acquired in the South Sound Acquisition totaling $11,717, $13,043 and $19,042 at September 30, 2023, June 30, 2023 and September 30, 2022, respectively.
    (f) Does not include troubled debt restructured loans totaling $0, $0 and $142 reported as non-accrual loans at September 30, 2023, June 30, 2023 and September 30, 2022, respectively.
    (g) Tangible common equity divided by common shares outstanding (non-GAAP).                                

    AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
    ($ in thousands)
    (unaudited)

     For the Three Months Ended
     September 30, 2023 June 30, 2023 September 30, 2022
     Amount Rate Amount Rate Amount Rate
                
    Assets           
    Loans receivable and loans held for sale$1,300,743  5.39% $1,254,044  5.17% $1,122,290  4.80%
    Investment securities and FHLB stock (1) 322,122  2.99  331,385  2.96  287,841  2.11
    Interest-earning deposits in banks and CDs 123,894  5.23  101,798  4.79  376,220  2.18
    Total interest-earning assets 1,746,759  4.94  1,687,227  4.72  1,786,351  3.81
    Other assets 84,191     84,255     83,922   
    Total assets$1,830,950    $1,771,482    $1,870,273   
                
    Liabilities and Shareholders’ Equity           
    NOW checking accounts$390,787  1.27% $387,426  1.02% $454,161  0.18%
    Money market accounts 198,650  0.98  205,023  0.84  252,699  0.37
    Savings accounts 234,094  0.21  255,463  0.19  284,974  0.08
    Certificates of deposit accounts 284,403  3.85  210,950  3.03  122,803  0.80
    Total interest-bearing deposits 1,107,934  1.66  1,058,862  1.18  1,114,637  0.27
    Borrowings 15,435  4.04  12,255  4.32  --  --
    Total interest-bearing liabilities 1,123,369  1.69  1,071,117  1.22  1,114,637  0.27
                
    Non-interest-bearing demand deposits 465,183     462,315     528,706   
    Other liabilities 11,873     10,199     11,078   
    Shareholders’ equity 230,525     227,851     215,852   
    Total liabilities and shareholders’ equity$1,830,950    $1,771,482    $1,820,273   
                
    Interest rate spread  3.25%   3.50%   3.54%
    Net interest margin (2)  3.85%   3.94%   3.64%
    Average interest-earning assets to           
    average interest-bearing liabilities 155.49%    157.52%    160.26%  

    _____________________________________
    (1) Includes other investments
    (2) Net interest margin = annualized net interest income / average interest-earning assets
            

     For the Year Ended
     September 30, 2023
     September 30, 2022
     Amount Rate Amount Rate
            
    Assets       
    Loans receivable and loans held for sale$1,230,101  5.13% $1,055,635  4.86%
    Investment securities and FHLB stock (1) 330,751  2.92  230,871  1.56
    Interest-earning deposits in banks and CDs 167,718  4.26  482,162  0.74
    Total interest-earning assets 1,728,570  4.63  1,768,668  3.31
    Other assets 84,205     83,895   
    Total assets$1,812,775    $1,852,563   
            
    Liabilities and Shareholders’ Equity       
    NOW checking accounts$407,679  0.87% $449,574  0.14%
    Money market accounts 215,465  0.74  244,498  0.31
    Savings accounts 261,006  0.16  278,025  0.08
    Certificates of deposit accounts 200,476  2.86  127,277  0.79
    Total interest-bearing deposits 1,084,626  1.04  1,099,374  0.24
    Borrowings 6,948  4.17  1,430  1.19
    Total interest-bearing liabilities 1,091,574  1.06  1,100,804  0.24
            
    Non-interest-bearing demand deposits 484,795     529,702   
    Other liabilities 10,557     10,224   
    Shareholders’ equity 225,849     211,833   
    Total liabilities and shareholders’ equity$1,812,775    $1,852,563   
            
    Interest rate spread  3.57%   3.07%
    Net interest margin (2)  3.95%   3.16%
    Average interest-earning assets to       
    average interest-bearing liabilities 158.36%    160.67%  

    _____________________________________
    (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)September 30, 2023 June 30, 2023 September 30, 2022
          
    Shareholders’ equity$233,073  $229,263  $218,569 
    Less goodwill and CDI (15,808)  (15,876)  (16,079)
    Tangible common equity$217,265  $213,387  $202,490 
          
    Total assets$1,839,905  $1,807,713  $1,860,508 
    Less goodwill and CDI (15,808)  (15,876)  (16,079)
    Tangible assets$1,824,097  $1,791,837  $1,844,429 

            

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

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