• Timberland Bancorp Announces Second Fiscal Quarter Earnings

    ソース: Nasdaq GlobeNewswire / 26 4 2022 16:22:03   America/Chicago

    • Second Fiscal Quarter Net Income of $5.33 Million
    • Quarterly Return on Average Equity of 10.10%
    • Loan Portfolio (Excluding PPP Loans) Increased 6% During Quarter
    • Announces $0.22 Quarterly Cash Dividend


    HOQUIAM, Wash., April 26, 2022 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”), the holding company for Timberland Bank (the “Bank”), today reported net income of $5.33 million, or $0.63 per diluted common share, for the quarter ended March 31, 2022. This compares to net income of $5.49 million, or $0.65 per diluted common share, for the preceding quarter and $7.25 million, or $0.86 per diluted common share, for the comparable quarter one year ago.

    For the first six months of fiscal 2022, Timberland earned $10.81 million, or $1.28 per diluted common share, compared to $14.54 million or $1.73 per diluted common share for the first six months of fiscal 2021.

    Timberland’s Board of Directors declared a quarterly cash dividend to shareholders of $0.22 per share, payable on May 27, 2022, to shareholders of record on May 13, 2022.

    “We are pleased to report strong growth during the past quarter,” stated Michael Sand, CEO.  “Net loans receivable, excluding Paycheck Protection Program loans (“PPP”), increased 5.7% (22.8% annualized) primarily due to increases in commercial real estate and commercial business loans originated within our western Washington market footprint.  We continue to see opportunities for loan originations within our local markets and are pleased to observe reduced prepayment activity which has allowed loan originations to be more additive to net loans receivable.”

    “In addition to using excess liquidity to fund loan growth, we also deployed funds into short and moderate duration investments to supplement interest income,” said Sand.  “The Bank continues to be positioned to benefit from Federal Reserve actions to increase interest rates and we anticipate continued opportunities to invest excess liquidity during the next several quarters as the Fed begins reducing its balance sheet in conjunction with anticipated rate increases.”


    Second Fiscal Quarter 2022 Earnings and Balance Sheet Highlights (at or for the period ended March 31, 2022, compared to March 31, 2021, or December 31, 2021):
      
        Earnings Highlights:

    • Net income was $5.33 million for the current quarter compared to $5.49 million for the preceding quarter and $7.25 million for the comparable quarter one year ago; EPS was $0.63 for the current quarter compared to $0.65 for the preceding quarter and $0.86 for the comparable quarter one year ago;
    • Net income was $10.81 million for the first six months of fiscal 2022 compared to $14.54 million for the first six months of fiscal 2021; EPS was $1.28 for the first six months of fiscal 2022 compared to $1.73 for the first six months of fiscal 2021;
    • Return on average equity (“ROE”) and return on average assets (“ROA”) for the current quarter were 10.10% and 1.16%, respectively;
    • Net interest margin (“NIM”) was 2.95% for the current quarter compared to 2.92% for the preceding quarter and 3.21% for the comparable quarter one year ago; and
    • The efficiency ratio was 58.42% for the current quarter compared to 57.40% for the preceding quarter and 48.99% for the comparable quarter one year ago.

        Balance Sheet Highlights:

    • Total assets increased 10% year-over-year and 3% from the prior quarter;
    • Total deposits increased 12% year-over-year and 3% from the prior quarter;
    • Net loans receivable (excluding SBA PPP loans) increased 15% year-over-year and 6% from the prior quarter;
    • Net loans receivable (including SBA PPP loans) increased 4% from the prior quarter;
    • Non-performing assets to total assets ratio improved to 0.16% from 0.17% at December 31, 2021; and
    • Book and tangible book (non-GAAP) values per common share increased to $25.56 and $23.60, respectively, at March 31, 2022.


    Operating Results

    Operating revenue (net interest income before the provision for loan losses plus non-interest income) decreased 1% to $15.98 million for the first fiscal quarter from $16.14 million for the preceding quarter and decreased 8% from $17.45 million for the comparable quarter one year ago. The decrease in operating revenue compared to the preceding quarter was primarily due to a $259,000 decrease in PPP loan income and a $247,000 decrease in gain on sales of loans. Operating revenue decreased 8% to $32.11 million for the first six months of fiscal 2022 from $35.04 million for the comparable period one year ago, primarily due to a $2.68 million decrease in gain on sales of loans and a $1.15 million decrease in PPP loan income.

    Net interest income increased 2% to $12.89 million for the current quarter from $12.70 million for the preceding quarter and increased 3% from $12.57 million for the comparable quarter one year ago.   Timberland’s NIM for the current quarter was 2.95% compared to 2.92% for the preceding quarter and 3.21% for the comparable quarter one year ago.   The NIM for the current quarter was increased by approximately six basis points due to the accretion of $34,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $246,000 in pre-payment penalties, non-accrual interest, and late fees. The NIM for the preceding quarter was increased by approximately four basis points due to the accretion of $57,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $114,000 in pre-payment penalties, non-accrual interest and late fees. The NIM for the comparable quarter one year ago was increased by approximately six basis points due to the accretion of $86,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $129,000 in pre-payment penalties, non-accrual interest and late fees. Net interest income was $25.59 million for both the first six months of fiscal 2022 and fiscal 2021. Timberland’s net interest margin for the first six months of fiscal 2022 was 2.93% compared to 3.34% for the first six months of fiscal 2021.

    U.S. Small Business Administration (“SBA”) PPP loans contributed 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 March 31, 2022, Timberland had SBA PPP deferred loan origination fees of $199,000 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
     March 31, 2022 Dec. 31, 2021 March 31, 2021
    Interest income$31 $      71    $306
    Loan origination fee accretion 708  927  1,143
    Total SBA PPP loan income$739 $   998 $                   1,449
          

    No provision for loan losses was made during the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021.

    Non-interest income decreased 10% to $3.08 million for the current quarter from $3.44 million for the preceding quarter and decreased 37% from $4.89 million for the comparable quarter one year ago. The decrease in non-interest income compared to the preceding quarter was primarily due to a $247,000 decrease in gain on sales of loans, a $119,000 decrease in the valuation recovery on loan servicing rights, and smaller decreases in several other categories. These decreases were partially offset by a $101,000 increase in service charges on deposits. The year-over-year decrease in non-interest income was primarily due to a $1.34 million decrease in gain on sales of loans and a $438,000 decrease in the valuation recovery on loan servicing rights. The decrease in gain on sales of loans was primarily due to a decrease in the dollar amount of fixed-rate one- to four-family loans originated and sold during the current quarter (as refinance demand slowed) and a decrease in the average pricing margin compared to the same period last year. Fiscal year-to-date non-interest income decreased 31% to $6.53 million from $9.45 million for the first six months of fiscal 2021, primarily due to a $2.68 million decrease in gain on sales of loans.

    Total operating expenses for the current quarter increased $69,000, or 1%, to $9.33 million from $9.26 million for the preceding quarter and increased $782,000, or 9%, from $8.55 million for the comparable quarter one year ago.   The increase in operating expenses compared to the preceding quarter was primarily due to a $73,000 increase in professional fee expense and smaller increases in several other expense categories. These increases were partially offset by smaller decreases in several expense categories. Fiscal year-to-date operating expenses increased 10% to $18.60 million from $16.96 million for the first six months of fiscal 2021. The year-to-date increase in operating expenses was primarily due to annual salary adjustments (effective October 1st) and the hiring of additional lending personnel. The efficiency ratio for the current quarter was 58.42% compared to 57.40% for the preceding quarter and 48.99% for the comparable quarter one year ago. The efficiency ratio for the first six months of fiscal 2022 was 57.91% compared to 48.41% for the first six months of fiscal 2022.

    The provision for income taxes for the current quarter decreased $73,000 to $1.32 million from $1.39 million for the preceding quarter, primarily due to lower taxable income. Timberland’s effective income tax rate was 19.8% for the quarter ended March 31, 2022 compared to 20.2% for the quarter ended December 31, 2021 and 18.6% for the quarter ended quarter ended March 31, 2021. Timberland’s effective income tax rate was 20.0% for the first six months of fiscal 2022 compared to 19.6% for the first six months of fiscal 2021.

    Balance Sheet Management

    Total assets increased $46.20 million, or 3%, to $1.88 billion at March 31, 2022 from $1.83 billion at December 31, 2021. The quarter’s increase was primarily due to a $72.80 million increase in investment securities and CDs held for investment, a $40.07 million increase in net loans receivable, and smaller increases in several other categories. These increases were partially offset by a $66.02 million decrease in total cash and cash equivalents, and smaller decreases in several other categories. The increase in total assets was funded primarily by an increase in total deposits.

    Loans

    Net loans receivable increased $40.07 million, or 4%, to $1.03 billion at March 31, 2022 from $994.01 million at December 31, 2021. This increase was primarily due to a $26.12 million increase in commercial real estate loans, a $23.64 million increase in commercial business loans (non-PPP), a $5.29 million decrease in the undisbursed portion of construction loans in process, a $4.77 million increase in one- to four-family loans and smaller increases in other loan categories. These increases to net loans receivable were partially offset by a $15.46 million decrease in SBA PPP loans, a $5.45 million decrease in construction loans, and smaller decreases in several other loan categories.

    Loan Portfolio
    ($ in thousands)

     March 31, 2022 December 31, 2021 March 31, 2021
     Amount Percent Amount Percent Amount Percent
    Mortgage loans:           
    One- to four-family (a)$133,925  12% $129,151  12% $117,184  10%
    Multi-family 82,526  7   84,180  7   92,435  8 
    Commercial 523,479  45   497,361  44   461,966  40 
    Construction - custom and           
    owner/builder 114,394  10   116,267   10   105,305  9 
    Construction - speculative
         one-to four-family    		 15,438  1   18,255  2   17,289  2 
    Construction - commercial 35,416  3   42,611  4   42,340  4 
    Construction - multi-family 64,141  6   54,710  5   44,266  4 
    Construction - land           
         development 10,687  1   13,680  1   2,238  -- 
    Land 22,192  2   18,568  2   19,041  2 
    Total mortgage loans 1,002,198  87   974,783  87   902,064  79 
                
    Consumer loans:           
    Home equity and second           
    mortgage 32,980  3   34,375  3   32,026  3 
    Other 2,277  --   2,462  --   2,756  -- 
    Total consumer loans 35,257  3   36,837  3   34,782  3 
                
    Commercial loans:           
    Commercial business loans 108,644  9   85,006  8   66,645  6 
    SBA PPP loans 5,934  1   21,397  2   138,175  12 
    Total commercial loans 114,578  10   106,403  10   204,820  18 
    Total loans 1,152,033  100%  1,118,023  100%  1,141,666  100%
    Less:           
    Undisbursed portion of           
    construction loans in           
    process (100,719)    (106,009)    (90,550)  
    Deferred loan origination           
    fees (3,801)    (4,539)    (6,999)  
    Allowance for loan losses (13,433)    (13,468)    (13,434)  
    Total loans receivable, net$1,034,080    $994,007    $1,030,683   

    _______________________
    (a)   Does not include one- to four-family loans held for sale totaling $2,772, $3,700 and $8,455 at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.  

    The following table provides a breakdown of commercial real estate (“CRE”) mortgage loans by collateral type as of March 31, 2022:
                                                      CRE Loan Portfolio Breakdown by Collateral
                                                                             ($ in thousands)



    Collateral Type    		 

    Amount    		 Percent
    of CRE
    Portfolio    		 Percent of
    Total Loan
    Portfolio    		    
    Industrial warehouse $               101,045       19%            9%    
    Office buildings  72,613       14             6     
    Medical/dental offices  65,500 12            5     
    Other retail buildings  47,518 9  4     
    Restaurants  29,532        6             3     
    Hotel/motel  26,152         5         2     
    Mini-storage  23,226         4        2     
    Convenience stores  22,645         4        2     
    Nursing homes  18,591         4             2     
    Shopping centers  10,655          2  1     
    Churches  8,173 2  1     
    Additional CRE  97,829       19        8     
          Total CRE $            523,479    100%         45%    

    Timberland originated $130.41 million in loans during the quarter ended March 31, 2022, compared to $167.15 million for the comparable quarter one year ago and $178.84 million in loans for the preceding quarter. Timberland continues to sell fixed-rate one- to four-family mortgage loans into the secondary market for asset-liability management purposes and to generate non-interest income. Timberland also periodically sells the guaranteed portion of SBA loans. During the current quarter, fixed-rate one- to four-family mortgage loans totaling $16.88 million were sold compared to $41.29 million for the comparable quarter one year ago and $22.56 million for the preceding quarter. The decrease in loans sold during the current quarter compared to the prior year was primarily due to a decrease in single-family refinance loans originated as mortgage refinance activity diminished.
            
    Timberland’s investment securities and CDs held for investment increased $72.80 million, or 37%, to $269.55 million at March 31, 2022, from $196.75 million at December 31, 2021. The increase was primarily due to the purchase of additional U.S Treasury securities, mortgage-backed investment securities, and CDs held in other financial institutions.

    Timberland’s liquidity continues to remain strong. Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment, and available for sale investment securities, was 34.3% of total liabilities at March 31, 2022, compared to 39.5% at December 31, 2021, and 36.1% one year ago.  

    Deposits

    Total deposits increased $49.80 million, or 3%, during the current quarter to $1.66 billion at March 31, 2022, from $1.61 billion at December 31, 2021. The quarter’s increase consisted of a $35.60 million increase in money market account balances, an $18.94 million increase in savings account balances, and a $1.97 million increase in non-interest bearing account balances. These increases were partially offset by a $5.51 million decrease in certificates of deposit account balances and a $1.21 million decrease in NOW checking account balances.

    Deposit Breakdown
    ($ in thousands)

    		   
      March 31, 2022   December 31, 2021 March 31, 2021    
      Amount Percent Amount Percent Amount Percent  
    Non-interest-bearing demand $525,488 32% $523,518 33% $499,541 34%  
    NOW checking  457,874 28   459,079 28   403,811 27   
    Savings  288,361 18   269,423 17   250,736 17   
    Money market  251,631 15   211,837 13   171,896 11   
    Money market – reciprocal  6,426 --   10,619 1   13,094 1   
    Certificates of deposit under $250  106,208 6   110,168 7   119,388 8   
    Certificates of deposit $250 and over  20,438 1   21,987 1   23,393 2   
    Total deposits $1,656,426  100% $1,606,631 100%  $1,481,859  100% 

    Shareholders’ Equity and Capital Ratios

    Total shareholders’ equity increased $1.89 million, or 1%, to $212.27 million at March 31, 2022, from $210.37 million at December 31, 2021. The increase in shareholders’ equity was primarily due to net income of $5.33 million for the quarter, which was partially offset by the payment of $1.84 million in dividends to shareholders and the repurchase of 61,565 shares of common stock for $1.72 million (an average price of $27.88 per share).   Timberland had 322,169 shares available to be repurchased on its existing stock repurchase plan at March 31, 2022.

    Timberland remains well capitalized with a total risk-based capital ratio of 20.75% and a Tier 1 leverage capital ratio of 10.86% at March 31, 2022.

    Asset Quality

    Timberland’s non-performing assets to total assets ratio was 0.16% at March 31, 2022, compared to 0.17% at December 31, 2021 and 0.16% one year ago. There were net charge-offs of $35,000 for the current quarter compared to net charge-offs of $1,000 for the preceding quarter and net recoveries of $2,000 for the comparable quarter one year ago.   No provisions for loan losses were made during the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021.

    Timberland has consistently worked with borrowers affected by the COVID-19 pandemic by offering loan deferral and forbearance plans during the pandemic.   Deferrals were primarily approved for 90-day periods with interest continuing to accrue or with interest scheduled to be paid monthly. All borrowers that were granted COVID-19 deferrals have resumed making regular payments as of March 31, 2022.

    The allowance for loan losses (“ALL”) as a percentage of loans receivable was 1.28% at March 31, 2022, compared to 1.29% one year ago and 1.34% at December 31, 2021. If SBA PPP loans, which are 100% SBA guaranteed, are excluded, the ALL to loans receivable (excluding SBA PPP loans) at March 31, 2022 was 1.29% (non-GAAP).  

    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 $358,000 at March 31, 2022. 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 1.33% (non-GAAP) at March 31, 2022.

    The following table details the ALL as a percentage of loans receivable:

      March 31, Dec. 31, March 31,
      2022  2021  2021 
    ALL to loans receivable 1.28% 1.34% 1.29%
    ALL to loans receivable (excluding SBA PPP loans) (non-GAAP) 1.29% 1.37% 1.48%
    ALL to loans receivable (excluding SBA PPP loans and South Sound
         Acquisition loans) (non-GAAP)    		 
    1.33
    %    		 
    1.41
    %    		 
    1.56
    %

    Total delinquent loans (past due 30 days or more) and non-accrual loans decreased $290,000, or 9%, to $2.95 million at March 31, 2022, from $3.24 million at December 31, 2021, and decreased $982,000, or 25%, from $3.93 million one year ago. Non-accrual loans decreased $202,000, or 7%, to $2.65 million at March 31, 2022, from $2.85 million at December 31, 2021 and increased $346,000, or 15%, from $2.31 million one year ago.

    Non-Accrual Loans
    ($ in thousands)

     March 31, 2022 December 31, 2021 March 31, 2021
     Amount Quantity Amount Quantity Amount Quantity
    Mortgage loans:           
    One- to four-family$578 3 $582 3 $415 2
    Commercial 671 3  675 2  643 2
    Land 723 4  676 3  173 2
    Total mortgage loans 1,972 10  1,933 8  1,231 6
                
    Consumer loans           
    Home equity and second           
    mortgage 269 2  456 4  539 6
    Other 5 1  5 1  8 1
    Total consumer loans 274 3  461 5  547 7
                
    Commercial business loans 405 6  459 7  527 7
    Total loans$2,651 19 $2,853 20 $2,305 20

            

    OREO and other repossessed assets were $157,000 at March 31, 2022, December 31, 2021 and March 31, 2021. At March 31, 2022, the OREO and other repossessed asset portfolio consisted of three individual land parcels. No OREO properties were sold during the quarter ended March 31, 2022.

    OREO and Other Repossessed Assets
    ($ in thousands)

     March 31, 2022 December 31, 2021 March 31, 2021
     Amount Quantity Amount Quantity Amount Quantity
    Land$    157 3 $157 3 $157 3
    Total$       157 3 $      157 3 $     157 3

            
    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 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 24 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, plan, 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: the effect of the novel coronavirus of 2019 (“COVID-19”) pandemic, including the Company’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; the 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 assets in our loan portfolio, and 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 potential 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 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 regulatory policies and principles, or the interpretation of regulatory capital or other rules including as a result of Basel III; the impact of the Dodd Frank Wall Street Reform and Consumer Protection Act and implementing regulations; 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 risk associated with the loans on 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 and stock; adverse changes in the securities markets; 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 war or any terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations; pricing, products and services including the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), the Consolidated Appropriations Act, 2021 (“CAA”), and the American Rescue Plan Act of 2021; and other risks detailed in our reports filed with 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 report 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 2022 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,
      2022 2021 2021
     Interest and dividend income      
     Loans receivable $12,620 $12,622  $12,790 
     Investment securities  590  405   284 
     Dividends from mutual funds, FHLB stock and other investments  27  27   27 
     Interest bearing deposits in banks  283  288   259 
      Total interest and dividend income  13,520  13,342   13,360 
            
     Interest expense      
     Deposits  625  631   764 
     Borrowings  2  15   29 
      Total interest expense  627  646   793 
      Net interest income  12,893  12,696   12,567 
     Provision for loan losses  --  --   -- 
      Net interest income after provision for loan losses  12,893  12,696   12,567 
            
     Non-interest income      
     Service charges on deposits  1,014  913   941 
     ATM and debit card interchange transaction fees  1,247  1,277   1,237 
     Gain on sales of loans, net  416  663   1,758 
     Bank owned life insurance (“BOLI”) net earnings  152  154   146 
     Valuation recovery on loan servicing rights, net  --  119   438 
     Recoveries on investment securities, net  3  8   3 
     Other  251  308   363 
      Total non-interest income, net  3,083  3,442   4,886 
            
     Non-interest expense      
     Salaries and employee benefits  5,192  5,171   4,778 
     Premises and equipment  988  928   998 
     Advertising  161  166   155 
     OREO and other repossessed assets, net  2  (18)  (68)
     ATM and debit card processing  450  464   445 
     Postage and courier  164  136   149 
     State and local taxes  235  255   255 
     Professional fees  322  271   181 
     FDIC insurance expense  126  128   105 
     Loan administration and foreclosure  96  104   90 
     Data processing and telecommunications  669  613   634 
     Deposit operations  262  299   245 
     Amortization of core deposit intangible (“CDI”)  79  79   91 
     Other, net  587  668   493 
      Total non-interest expense, net  9,333  9,264   8,551 
            
     Income before income taxes  6,643  6,874   8,902 
     Provision for income taxes  1,316  1,389   1,651 
      Net income $5,327 $5,485  $7,251 
            
     Net income per common share:      
     Basic $0.64 $0.66  $0.87 
     Diluted  0.63  0.65   0.86 
            
     Weighted average common shares outstanding:      
     Basic  8,337,407  8,356,066   8,331,121 
     Diluted  8,421,875  8,448,900   8,444,798
    		 


    TIMBERLAND BANCORP INC. AND SUBSIDIARY
    CONSOLIDATED STATEMENTS OF INCOME    		 Six Months Ended
    ($ in thousands, except per share amounts) (unaudited) March 31,   March 31,
      2022   2021
     Interest and dividend income      
     Loans receivable $25,242    $26,108 
     Investment securities  996     585 
     Dividends from mutual funds, FHLB stock and other investments  54     55 
     Interest bearing deposits in banks  571     569 
      Total interest and dividend income  26,863     27,317 
            
     Interest expense      
     Deposits  1,257     1,668 
     Borrowings  17     58 
      Total interest expense  1,274     1,726 
      Net interest income  25,589     25,591 
     Provision for loan losses  --     -- 
      Net interest income after provision for loan losses  25,589     25,591 
            
     Non-interest income      
     Service charges on deposits  1,927     1,996 
     ATM and debit card interchange transaction fees  2,523     2,393 
     Gain on sales of loans, net  1,079     3,760 
     Bank owned life insurance (“BOLI”) net earnings  305     295 
     Valuation recovery on loan servicing rights, net  119     202 
     Recoveries on investment securities, net  11     8 
     Other  561     791 
      Total non-interest income, net  6,525     9,445 
            
     Non-interest expense      
     Salaries and employee benefits  10,363     9,391 
     Premises and equipment  1,916     1,955 
     Advertising  327     311 
     OREO and other repossessed assets, net  (16)    (94)
     ATM and debit card processing  914     876 
     Postage and courier  300     287 
     State and local taxes  489     538 
     Professional fees  593     412 
     FDIC insurance expense  254     201 
     Loan administration and foreclosure  200     171 
     Data processing and telecommunications  1,282     1,240 
     Deposit operations  561     529 
     Amortization of CDI  158     181 
     Other, net  1,256     963 
      Total non-interest expense, net  18,597     16,961 
            
     Income before income taxes  13,517     18,075 
     Provision for income taxes  2,705     3,534 
      Net income $10,812    $14,541 
            
     Net income per common share:      
     Basic $1.30    $1.75 
     Diluted  1.28     1.73 
            
     Weighted average common shares outstanding:      
     Basic  8,346,839     8,322,210 
     Diluted  8,435,536     8,428,595
    		 


    TIMBERLAND BANCORP INC. AND SUBSIDIARY
    CONSOLIDATED BALANCE SHEETS    		 
    ($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31,
       2022   2021   2021 
    Assets      
    Cash and due from financial institutions $26,500  $20,539  $21,707 
    Interest-bearing deposits in banks  465,802   537,789   411,635 
     Total cash and cash equivalents  492,302   558,328   433,342 
            
    Certificates of deposit (“CDs”) held for investment, at cost  28,619   24,648   39,674 
    Investment securities:      
     Held to maturity, at amortized cost  189,405   114,600   36,465 
     Available for sale, at fair value  50,624   56,552   69,184 
    Investments in equity securities, at fair value  902   946   957 
    FHLB stock  2,194   2,103   2,303 
    Other investments, at cost  3,000   3,000   3,000 
    Loans held for sale  2,772   3,700   8,455 
           
    Loans receivable  1,047,513   1,007,475   1,044,117 
    Less: Allowance for loan losses  (13,433)  (13,468)  (13,434)
     Net loans receivable  1,034,080   994,007   1,030,683 
            
    Premises and equipment, net  21,878   22,108   22,763 
    OREO and other repossessed assets, net  157   157   157 
    BOLI  22,498   22,347   21,891 
    Accrued interest receivable  3,927   3,938   4,471 
    Goodwill  15,131   15,131   15,131 
    CDI  1,106   1,185   1,444 
    Loan servicing rights, net  3,390   3,524   3,604 
    Operating lease right-of-use assets  2,129   2,206   2,436 
    Other assets  3,356   2,795   3,284 
     Total assets $1,877,470  $1,831,275  $1,699,244 
            
    Liabilities and shareholders’ equity      
    Deposits: Non-interest-bearing demand $525,488  $523,518  $499,541 
    Deposits: Interest-bearing  1,130,938   1,083,113   982,318 
     Total deposits  1,656,426   1,606,631   1,481,859 
            
    Operating lease liabilities  2,210   2,285   2,499 
    FHLB borrowings  --   5,000   10,000 
    Other liabilities and accrued expenses  6,565   6,984   6,343 
     Total liabilities  1,665,201   1,620,900   1,500,701 
           
    Shareholders’ equity      
    Common stock, $.01 par value; 50,000,000 shares authorized;
             8,305,826 shares issued and outstanding – March 31, 2022
             8,348,821 shares issued and outstanding – December 31, 2021
             8,361,457 shares issued and outstanding – March 31, 2021    		  


    40,988    		   


    42,436    		   


    42,949    		 
    Retained earnings  171,388   167,897   155,473 
    Accumulated other comprehensive income (loss)  (107)  42   121 
     Total shareholders’ equity  212,269   210,375   198,543 
     Total liabilities and shareholders’ equity $1,877,470  $1,831,275  $1,699,244 



    KEY FINANCIAL RATIOS AND DATA    		Three Months Ended
    ($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31,
      2022 2021 2021
    PERFORMANCE RATIOS:      
    Return on average assets (a)  1.16%  1.20%  1.75%
    Return on average equity (a)  10.10%  10.55%  14.89%
    Net interest margin (a)  2.95%  2.92%  3.21%
    Efficiency ratio  58.42%  57.40%  48.99%
           
     Six Months Ended
      March 31,   March 31,
      2022   2021
    PERFORMANCE RATIOS:  1.18%    1.80%
    Return on average assets (a)  10.33%    15.14%
    Return on average equity (a)  2.93%    3.34%
    Net interest margin (a)  57.91%    48.41%
    Efficiency ratio      
      March 31, Dec. 31, March 31,
      2022 2021 2021
    ASSET QUALITY RATIOS AND DATA:      
    Non-accrual loans $2,651  $2,853  $2,305 
    Loans past due 90 days and still accruing  --   --   -- 
    Non-performing investment securities  127   140   188 
    OREO and other repossessed assets  157   157   157 
    Total non-performing assets (b) $2,935  $3,150  $2,650 
           
    Non-performing assets to total assets (b)  0.16%  0.17%  0.16%
    Net charge-offs (recoveries) during quarter $35  $1  $(2)
    ALL to non-accrual loans,  507%  472%  583%
    ALL to loans receivable (c)  1.28%  1.34%  1.29%
    ALL to loans receivable (excluding SBA PPP loans) (d) (non-GAAP)  1.29%  1.37%  1.48%
    ALL to loans receivable (excluding SBA PPP loans and South Sound Acquisition loans) (d) (e) (non-GAAP)  

    1.33

    %    		  

    1.41

    %    		  

    1.56

    %
    Troubled debt restructured loans on accrual status (f) $2,496  $2,361  $2,864 
           
    CAPITAL RATIOS:      
    Tier 1 leverage capital  10.86%  10.81%  11.19%
    Tier 1 risk-based capital  19.50%  20.24%  19.47%
    Common equity Tier 1 risk-based capital  19.50%  20.24%  19.47%
    Total risk-based capital  20.75%  21.49%  20.72%
    Tangible common equity to tangible assets (non-GAAP)  10.53%  10.69%  10.81%
           
    BOOK VALUES:      
    Book value per common share $25.56  $25.20  $23.75 
    Tangible book value per common share (g)  23.60   23.24   21.76 

    ________________________________________________

    (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 $5,934, $21,397 and $138,175 at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
    (e) Does not include loans acquired in the South Sound Acquisition totaling $28,459, $31,907 and $46,626 at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
    (f) Does not include troubled debt restructured loans totaling $172, $177 and $192 reported as non-accrual loans at March 31, 2022, December 31, 2021 and March 31, 2021, 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 
     March 31, 2022 December 31, 2021 March 31, 2021 
     Amount Rate Amount Rate Amount Rate
                
    Assets           
    Loans receivable and loans held for sale$1,029,582  4.90% $997,358  5.06% $1,044,476  4.90%
    Investment securities and FHLB stock (1) 209,868  1.18   162,077  1.07   101,675  1.23 
    Interest-earning deposits in banks and CDs 510,211  0.22   580,337  0.20   422,286  0.24 
    Total interest-earning assets 1,749,661  3.09   1,739,772  3.07   1,568,437  3.41 
    Other assets 84,252     83,563     85,203   
    Total assets$1,833,913    $1,823,335    $1,653,640   
                
    Liabilities and Shareholders’ Equity           
    NOW checking accounts$441,259  0.13% $440,744  0.13% $394,612  0.16%
    Money market accounts 244,250  0.29   222,945  0.29   178,768  0.30 
    Savings accounts 277,888  0.08   264,651  0.08   236,504  0.08 
    Certificates of deposit accounts 128,588  0.80   132,590  0.83   146,065  1.19 
    Total interest-bearing deposits 1,091,985  0.23   1,060,930  0.24   955,949  0.32 
    Borrowings 677  1.18   5,000  1.20   10,003  1.17 
    Total interest-bearing liabilities 1,092,662  0.23   1,065,930  0.24   965,952  0.33 
                
    Non-interest-bearing demand deposits 521,284     538,865     482,528   
    Other liabilities 9,072     10,567     10,365   
    Shareholders’ equity 210,895     207,973     194,795   
    Total liabilities and shareholders’ equity$1,833,913    $1,823,335    $1,653,640   
                
    Interest rate spread  2.86%   2.83%   3.08%
    Net interest margin (2)  2.95%   2.92%   3.21%
    Average interest-earning assets to           
    average interest-bearing liabilities 160.13%    163.22%    162.37%  

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

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

     For the Six Months Ended 
     March 31, 2022   March 31, 2021 
     Amount Rate     Amount Rate
                
    Assets           
    Loans receivable and loans held for sale$1,013,293  4.98%     $1,037,304  5.03%
    Investment securities and FHLB stock (1) 185,710  1.13       97,812  1.31 
    Interest-earning deposits in banks and CDs 545,651  0.21       398,067  0.29 
    Total interest-earning assets 1,744,654  3.08       1,533,183  3.56 
    Other assets 83,908         84,635   
    Total assets$1,828,562        $1,617,818   
                
    Liabilities and Shareholders’ Equity           
    NOW checking accounts$440,999  0.13%     $386,093  0.17%
    Money market accounts 233,480  0.29       173,579  0.31 
    Savings accounts 271,197  0.08       229,610  0.08 
    Certificates of deposit accounts 130,611  0.81       150,645  1.29 
    Total interest-bearing deposits 1,076,287  0.23       939,927  0.36 
    Borrowings 2,862  1.19       10,002  1.16 
    Total interest-bearing liabilities 1,079,149  0.24       949,929  0.36 
                
    Non-interest-bearing demand deposits 530,171         465,251   
    Other liabilities 9,824         10,528   
    Shareholders’ equity 209,418         192,110   
    Total liabilities and shareholders’ equity$1,828,562        $1,617,818   
                
    Interest rate spread  2.84%       3.20%
    Net interest margin (2)  2.93%       3.34%
    Average interest-earning assets to           
    average interest-bearing liabilities 161.67%        161.40%  

    _____________________________________
    (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 generally accepted accounting principles (“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, 2022 December 31, 2021 March 31, 2021
           
    Shareholders’ equity $212,269  $210,375  $198,543 
    Less goodwill and CDI  (16,237)  (16,316)  (16,575)
    Tangible common equity $196,032  $194,059  $181,968 
           
    Total assets $1,877,470  $1,831,275  $1,699,244 
    Less goodwill and CDI  (16,237)  (16,316)  (16,575)
    Tangible assets $1,861,233  $1,814,959  $1,682,669 


    Contact:Michael R. Sand, CEO
    Dean J. Brydon, President & CFO
    (360) 533-4747
    www.timberlandbank.com

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