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

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Timberland Bancorp posts 21% YoY EPS growth with expanding 3.79% net interest margin and improved efficiency amid strong asset quality.

Timberland Bancorp delivered robust second fiscal quarter results, with $6.76 million in net income translating to $0.85 per diluted share - a substantial 21% year-over-year increase despite a slight 1% decline from the preceding quarter. The bank's performance demonstrates effective margin management in the current rate environment, with net interest margin expanding to 3.79% from 3.64% in the previous quarter and 3.48% a year ago.

The 10% year-over-year growth in net interest income reflects successful balance sheet management, as the bank improved the yield on interest-earning assets while reducing funding costs. The weighted average cost of interest-bearing liabilities decreased 15 basis points to 2.47% during the quarter, a significant contributor to margin expansion.

Asset quality metrics showed improvement, with the non-performing asset ratio declining to just 0.13%, down from 0.16% last quarter and 0.19% a year ago. Net charge-offs were negligible at less than $1,000 for the quarter. However, investors should note the increase in loans graded "Substandard" due to one borrowing relationship experiencing legal issues, though management views this as an isolated event.

The 4% dividend increase to $0.26 per share marks the 50th consecutive quarter of cash dividends, signaling management's confidence in sustained profitability. Efficiency continues to improve with the efficiency ratio at 56.25%, down from 60.22% a year ago, indicating effective expense management despite a 1% increase in operating expenses.

Timberland maintains exceptional liquidity with $675 million in available secured borrowing capacity and just 18% of deposits being uninsured or uncollateralized, positioning the bank well in the current economic environment.

Timberland's Q2 shows banking resilience with expanding NIM, strong credit quality, and efficient capital deployment supporting increased dividends.

Timberland Bancorp's Q2 results highlight how community banks can thrive amid interest rate pressures through disciplined balance sheet management. The 15 basis point reduction in funding costs during the quarter demonstrates successful deposit strategy execution, allowing the bank to expand its net interest margin to 3.79% without sacrificing asset quality.

The bank's profitability metrics are particularly impressive within the regional banking sector, with 1.43% return on average assets and 10.95% return on average equity. These returns significantly exceed industry averages for similar-sized institutions and showcase management's ability to generate consistent shareholder value despite modest 1% asset growth.

Timberland's capital allocation strategy balances growth, shareholder returns, and risk management effectively. The bank repurchased 61,764 shares for $1.91 million during the quarter while simultaneously increasing its quarterly dividend by 4%, maintaining a tangible book value per share of $29.99. This multi-faceted approach to capital management provides flexibility as economic conditions evolve.

The improvement in the efficiency ratio to 56.25% from 60.22% year-over-year is noteworthy, as many community banks struggle to control operating expenses in an inflationary environment. Timberland has effectively balanced technology investments with traditional operating costs while growing revenue.

The isolated credit issue noted in the report - involving one borrowing relationship with legal problems - warrants monitoring, but overall credit metrics remain exceptionally strong with minimal charge-offs and declining non-performing assets. The bank's diversified loan portfolio, with no excessive concentration in construction lending (only 13% of total loans), provides additional risk mitigation.

04/22/2025 - 06:04 PM

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

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

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

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

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

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

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

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

Earnings Highlights:

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

Balance Sheet Highlights:

Total assets increased 1% from the prior quarter and increased 1% year-over-year;
Net loans receivable increased 1% from the prior quarter and increased 4% year-over-year;
Total deposits increased 1% from the prior quarter and increased 1% year-over-year;
Total shareholders’ equity increased 1% from the prior quarter and increased 6% year-over-year; 61,764 shares of common stock were repurchased during the current quarter for $1.91 million;
Non-performing assets to total assets ratio improved to 0.13% at March 31, 2025 compared to 0.16% at December 31, 2024 and 0.19% at March 31, 2024;
Book and tangible book (non-GAAP) values per common share increased to $31.95 and $29.99, respectively, at March 31, 2025; and
Liquidity (both on-balance sheet and off-balance sheet) remained strong at March 31, 2025 with only $20 million in borrowings and additional secured borrowing line capacity of $675 million available through the Federal Home Loan Bank (“FHLB”) and the Federal Reserve.

Operating Results

Operating revenue (net interest income before the provision for credit losses plus non-interest income) for the current quarter increased 1% to $19.90 million from $19.67 million for the preceding quarter and increased 9% from $18.25 million for the comparable quarter one year ago. The increase in operating revenue compared to the preceding quarter was primarily due to a decrease in funding costs, which was partially offset by a decrease in total interest and dividend income. Operating revenue increased 7%, to $39.57 million for the first six months of fiscal 2025 from $37.05 million for the first six months of fiscal 2024, primarily due to increases in interest income from loans and interest-bearing deposits in banks, which was partially offset by an increase in funding costs and a decrease in interest income on investment securities.

Net interest income increased $243,000, or 1%, to $17.21 million for the current quarter from $16.97 million for the preceding quarter and increased $1.58 million, or 10%, from $15.64 million for the comparable quarter one year ago. The increase in net interest income compared to the preceding quarter was primarily due to a 15 basis point decrease in the weighted average cost of total interest-bearing liabilities to 2.47% from 2.62% and a six basis point increase in the weighted average yield on total interest-earning assets to 5.48% from 5.42%. These increases to net interest income were partially offset by an $11.44 million decrease in the average balance of total interest-earning assets. Timberland’s NIM for the current quarter expanded to 3.79% from 3.64% for the preceding quarter and 3.48% for the comparable quarter one year ago. The NIM for the current quarter was increased by approximately five basis points due to the collection of $201,000 in pre-payment penalties, non-accrual interest, and late fees and the accretion of $17,000 of the fair value discount on acquired loans. The NIM for the preceding quarter was increased by approximately three basis points due to the collection of $115,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $8,000 of the fair value discount on acquired loans. The NIM for the comparable quarter one year ago was increased by approximately three basis points due to the collection of $90,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $10,000 of the fair value discount on acquired loans. Net interest income for the first six months of fiscal 2025 increased $2.54 million, or 8%, to $34.18 million from $31.64 million for the first six months of fiscal 2024, primarily due to a $55.11 million increase in the average balance of total interest-earning assets and a 34 basis point increase in the weighted average yield of total interest-earning assets to 5.44% from 5.10%. These increases to net interest income were partially offset by an 18 basis point increase in the weighted average cost of interest-bearing liabilities to 2.55% from 2.37%. Timberland’s NIM expanded to 3.71% for the first six months of fiscal 2025 from 3.53% for the first six months of fiscal 2024.

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

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

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

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

Balance Sheet Management

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

Liquidity

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

Loans

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

Loan Portfolio
($ in thousands)

	March 31, 2025				December 31, 2024					March 31, 2024
	Amount			Percent	Amount			Percent		Amount			Percent
Mortgage loans:
One- to four-family (a)	$	315,421		21%	$	306,443		20%		$	276,433		19%
Multi-family		178,590		12		177,861		12			167,275		12
Commercial		602,248		40		597,054		39			577,373		40
Construction - custom and
owner/builder		114,401		7		124,104			8		122,988		8
Construction - speculative one-to four-family		9,791		1		8,887		1			16,407		1
Construction - commercial		22,352		1		22,841		2			32,318		2
Construction - multi-family		46,602		3		48,940		3			36,795		3
Construction - land
development		15,032		1		15,977		1			16,051		1
Land		32,301		2		30,538		2			31,821		2
Total mortgage loans		1,336,738		88		1,332,645		88			1,277,461		88

Consumer loans:
Home equity and second
mortgage		47,458		3		48,851		3			42,357		3
Other		2,375		--		2,889		--			2,925		--
Total consumer loans		49,833		3		51,740		3			45,282		3

Commercial loans:
Commercial business loans		131,243		9		135,312		9			135,505		9
SBA PPP loans		156		--		204		--			367		--
Total commercial loans		131,399		9		135,516		9			135,872		9
Total loans		1,517,970		100%		1,519,901		100%			1,458,615		100%
Less:
Undisbursed portion of
construction loans in
process		(75,042	)			(85,350	)				(77,502	)
Deferred loan origination
fees		(5,329	)			(5,444	)				(5,179	)
Allowance for credit losses		(17,525	)			(17,288	)				(16,818	)
Total loans receivable, net	$	1,420,074			$	1,411,819				$	1,359,116

_______________________
(a) Does not include one- to four-family loans held for sale totaling $1,151, $411, and $1,311 at March 31, 2025, December 31, 2024, and March 31, 2024, respectively.

The following table provides a breakdown of commercial real estate (“CRE”) mortgage loans by collateral type as of March 31, 2025:

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	$	127,898	21%	8%	$	1,255	$	163
Medical/dental offices		84,013	14	5		1,254		--
Office buildings		68,239	11	5		784		--
Other retail buildings		53,121	9	3		553		--
Mini-storage		32,596	5	2		1,358		--
Hotel/motel		31,967	5	2		2,664		--
Restaurants		27,374	5	2		582		161
Gas stations/conv. stores		24,622	4	2		1,026		--
Churches		14,823	3	1		988		--
Nursing homes		13,606	2	1		2,268		--
Shopping centers		10,578	2	1		1,762		--
Mobile home parks		8,968	2	1		448		--
Additional CRE		104,443	17	7		762		--
Total CRE	$	602,248	100%	40%	$	938	$	324

Timberland originated $56.76 million in loans during the quarter ended March 31, 2025, compared to $72.07 million for the preceding quarter and $39.37 million for the comparable quarter one year ago. Timberland continues to originate fixed-rate one- to four-family mortgage loans, a portion of which are sold into the secondary market for asset-liability management purposes and to generate non-interest income. During the current quarter, fixed-rate one- to four-family mortgage loans totaling $5.17 million were sold compared to $2.31 million for the preceding quarter and $2.28 million for the comparable quarter one year ago.

Investment Securities

Timberland’s investment securities and CDs held for investment decreased $6.17 million, or 3%, to $235.33 million at March 31, 2025, from $241.50 million at December 31, 2024. The decrease was primarily due to maturities of U.S. Treasury investment securities (classified as held to maturity) and scheduled amortization. Partially offsetting these decreases, was the purchase of additional U.S. government agency mortgage-backed investment securities and U.S. Treasury investment securities, all of which were classified as available for sale.

Deposits

Total deposits increased $20.41 million, or 1%, during the quarter to $1.65 billion at March 31, 2025, from $1.63 billion at December 31, 2024. The quarter’s increase consisted of a $15.45 million increase in certificates of deposit account balances, a $9.91 million increase in NOW checking account balances, a $4.90 million increase in non-interest bearing account balances, and a $1.01 million increase in savings account balances. These decreases were partially offset by a $10.86 million decrease in money market account balances.

Deposit Breakdown ($ in thousands)

	March 31, 2025			December 31, 2024			March 31, 2024
	Amount		Percent	Amount		Percent	Amount		Percent
Non-interest-bearing demand	$	407,811	25%	$	402,911	25%	$	424,906	26%
NOW checking		333,325	20		323,412	20		336,621	20
Savings		207,857	13		206,845	13		211,085	13
Money market		300,552	18		311,413	19		311,994	19
Certificates of deposit under $250		227,137	14		212,764	13		190,762	12
Certificates of deposit $250 and over		124,009	7		122,997	7		118,698	7
Certificates of deposit – brokered		50,139	3		50,074	3		44,488	3
Total deposits	$	1,650,830	100%	$	1,630,416	100%	$	1,638,554	100%

Borrowings

Total borrowings were $20.00 million at both March 31, 2025 and December 31, 2024. At March 31, 2025, the weighted average rate on the borrowings was 3.97%.

Shareholders’ Equity and Capital Ratios

Total shareholders’ equity increased $3.32 million, or 1%, to $252.52 million at March 31, 2025, from $249.20 million at December 31, 2024, and increased $13.84 million, or 6%, from $238.68 million at March 31, 2024. The quarter’s increase in shareholders’ equity was primarily due to net income of $6.76 million, which was partially offset by the payment of $1.99 million in dividends to shareholders and the repurchase of 61,764 shares of common stock for $1.91 million (an average price of $30.85 per share). There were 65,995 shares available to be repurchased in accordance with the terms of its existing stock repurchase plan at March 31, 2025.

Timberland remains well capitalized with a total risk-based capital ratio of 20.29%, a Tier 1 leverage capital ratio of 12.55%, a tangible common equity to tangible assets ratio (non-GAAP) of 12.36%, and a shareholders’ equity to total assets ratio of 13.07% at March 31, 2025. Timberland’s held to maturity investment securities were $140.95 million at March 31, 2025, with a net unrealized loss of $6.62 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 12.83%, compared to 13.07%, as reported.

Asset Quality

Timberland’s non-performing assets to total assets ratio improved to 0.13% at March 31, 2025, compared to 0.16% at December 31, 2024 and 0.19% at March 31, 2024. Net charge-offs totaled less than $1,000 for the current quarter compared to net charge-offs of $242,000 for the preceding quarter and net charge-offs of $3,000 for the comparable quarter one year ago. During the current quarter, provisions for credit losses of $237,000 on loans and $14,000 unfunded commitments were made, which was partially offset by a $5,000 recapture of credit losses on investment securities. The allowance for credit losses (“ACL”) for loans as a percentage of loans receivable was 1.22% at March 31, 2025, compared to 1.21% at December 31, 2024 and 1.22% one year ago.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased $697,000 or 17%, to $3.32 million at March 31, 2025, from $4.02 million at December 31, 2024 and decreased $879,000, or 21%, from $4.20 million at March 31, 2024. Non-accrual loans decreased $406,000, or 15%, to $2.33 million at March 31, 2025 from $2.73 million at December 31, 2024 and decreased $1.28 million, or 35%, from $3.61 million at March 31, 2024. The quarterly decrease in non-accrual loans was primarily due to decreases in commercial business loans and commercial real estate loans on non-accrual status. Loans graded “Substandard”, however, increased to $23.51 million at March 31, 2025 from $2.12 million at December 31, 2024 and $8.42 million at March 31, 2024. The increase in loans graded “Substandard” was primarily a result of two loans (totaling $21.30 million) to one borrowing relationship being downgraded during the March 31, 2025 quarter. Both of these loans are performing and Timberland remains well collateralized (based on recent appraisals), but the loans were downgraded primarily because the borrower is experiencing a legal issue stemming from an unrelated project.

Non-Accrual Loans
($ in thousands)

	March 31, 2025			December 31, 2024			March 31, 2024
	Amount		Quantity	Amount		Quantity	Amount		Quantity
Mortgage loans:
One- to four-family	$	47	1	$	47	1	$	380	3
Commercial		324	3		698	5		1,149	3
Construction – custom and
owner/builder		--	--		--	--		152	1
Total mortgage loans		371	4		745	6		1,681	7

Consumer loans:
Home equity and second
mortgage		575	3		587	3		165	1
Other		--	--		--	--		--	--
Total consumer loans		575	3		587	3		165	1

Commercial business loans		1,381	11		1,401	11		1,759	6
Total loans	$	2,327	18	$	2,733	20	$	3,605	14

Timberland had two properties classified as other real estate owned (“OREO”) at March 31, 2025:

	March 31, 2025			December 31, 2024			March 31, 2024
	Amount		Quantity	Amount		Quantity	Amount		Quantity
Other real estate owned:
Commercial	$	221	1	$	221	1	$	--	--
Land		--	1		--	1		--	1
Total mortgage loans	$	221	2	$	221	2	$	--	1

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; continuing elevated levels of inflation and the impact of current and future monetary policies of the Board of Governors of the Federal Reserve System ("Federal Reserve") in response thereto; the effects of any federal government shutdown; credit risks of lending activities, including any deterioration in the housing and commercial real estate markets which may lead to increased losses and non-performing loans in our loan portfolio resulting in our ACL not being adequate to cover actual losses and thus requiring us to materially increase our ACL through the provision for credit losses; 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; 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 (“FDIC”), 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 ACL, 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; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; 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; 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, civil unrest 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 elsewhere in this press release and in the Company's other 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 2025 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,
			2025					2024						2024
	Interest and dividend income
	Loans receivable		$	20,896				$	21,032					$	18,909
	Investment securities			2,003					2,138						2,246
	Dividends from mutual funds, FHLB stock and other investments			82					86						82
	Interest bearing deposits in banks			1,884					2,001						1,919
	Total interest and dividend income			24,865					25,257						23,156

	Interest expense
	Deposits			7,454					8,084						7,301
	Borrowings			198					203						220
	Total interest expense			7,652					8,287						7,521
	Net interest income			17,213					16,970						15,635
	Provision for credit losses – loans			237					52						166
	Prov. for (recapture of) credit losses – investment securities			(5			)		(5		)				3
	Prov. for (recapture of ) credit losses - unfunded commitments			14					(20		)				(88	)
	Net int. income after provision for (recapture of) credit losses			16,967					16,943						15,554

	Non-interest income
	Service charges on deposits			959					999						988
	ATM and debit card interchange transaction fees			1,176					1,267						1,212
	Gain on sales of loans, net			122					43						41
	Bank owned life insurance (“BOLI”) net earnings			165					167						156
	Recoveries on investment securities, net			4					3						2
	Other			261					218						216
	Total non-interest income, net			2,687					2,697						2,615

	Non-interest expense
	Salaries and employee benefits			5,977					6,092						6,024
	Premises and equipment			1,075					950						1,081
	Advertising			189					181						159
	OREO and other repossessed assets, net			9					--						--
	ATM and debit card processing			521					521						601
	Postage and courier			142					121						145
	State and local taxes			335					346						325
	Professional fees			431					346						319
	FDIC insurance			219					210						206
	Loan administration and foreclosure			155					128						134
	Technology and communications			1,121					1,140						1,040
	Deposit operations			319					332						324
	Amortization of core deposit intangible (“CDI”)			45					45						57
	Other, net			656					655						576
	Total non-interest expense, net			11,194					11,067						10,991

	Income before income taxes			8,460					8,573						7,178
	Provision for income taxes			1,705					1,713						1,470
	Net income		$	6,755				$	6,860					$	5,708

	Net income per common share:
	Basic		$	0.85				$	0.86					$	0.71
	Diluted			0.85					0.86						0.70

	Weighted average common shares outstanding:
	Basic			7,937,063					7,958,275						8,081,924
	Diluted			7,968,632					7,999,504						8,121,109

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME			Six Months Ended
($ in thousands, except per share amounts) (unaudited)			March 31,											March 31,
			2025											2024
	Interest and dividend income
	Loans receivable		$	41,928										$	37,304
	Investment securities			4,141											4,556
	Dividends from mutual funds, FHLB stock and other investments			168											173
	Interest bearing deposits in banks			3,885											3,618
	Total interest and dividend income			50,122											45,651

	Interest expense
	Deposits			15,538											13,444
	Borrowings			402											568
	Total interest expense			15,940											14,012
	Net interest income			34,182											31,639
	Provision for credit losses – loans			289											545
	Recapture of credit losses – investment securities			(10			)								(7	)
	Recapture of credit losses - unfunded commitments			(7			)								(121	)
	Net int. income after provision for (recapture of) credit losses			33,910											31,222

	Non-interest income
	Service charges on deposits			1,958											2,011
	ATM and debit card interchange transaction fees			2,443											2,476
	Gain on sales of loans, net			165											120
	Bank owned life insurance (“BOLI”) net earnings			331											312
	Recoveries on investment securities, net			7											7
	Other			480											487
	Total non-interest income, net			5,384											5,413

	Non-interest expense
	Salaries and employee benefits			12,068											11,936
	Premises and equipment			2,025											2,054
	Advertising			370											345
	OREO and other repossessed assets, net			9											--
	ATM and debit card processing			1,043											1,216
	Postage and courier			264											271
	State and local taxes			680											644
	Professional fees			777											572
	FDIC insurance			429											416
	Loan administration and foreclosure			283											239
	Technology and communications			2,261											2,014
	Deposit operations			652											644
	Amortization of core deposit intangible (“CDI”)			90											113
	Other, net			1,309											1,151
	Total non-interest expense, net			22,260											21,615

	Income before income taxes			17,034											15,020
	Provision for income taxes			3,419											3,016
	Net income		$	13,615										$	12,004

	Net income per common share:
	Basic		$	1.71										$	1.48
	Diluted			1.71											1.47

	Weighted average common shares outstanding:
	Basic			7,947,786											8,098,155
	Diluted			7,984,238											8,143,701

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts) (unaudited)			March 31,					Dec. 31,				March 31,
			2025					2024				2024
Assets
Cash and due from financial institutions			$		26,010			$	24,538			$	22,310
Interest-bearing deposits in banks					165,201				139,533				158,039
		Total cash and cash equivalents			191,211				164,071				180,349

Certificates of deposit (“CDs”) held for investment, at cost					8,711				7,470				11,204
Investment securities:
		Held to maturity, at amortized cost (net of ACL – investment securities)			140,954				156,105				211,818
		Available for sale, at fair value			84,807				77,080				61,746
Investments in equity securities, at fair value					853				840				839
FHLB stock					2,045				2,037				2,037
Other investments, at cost					3,000				3,000				3,000
Loans held for sale					1,151				411				1,311

Loans receivable					1,437,599				1,429,107				1,375,934
Less: ACL – loans					(17,525	)			(17,288	)			(16,818			)
		Net loans receivable			1,420,074				1,411,819				1,359,116

Premises and equipment, net					21,436				21,617				21,718
OREO and other repossessed assets, net					221				221				--
BOLI					23,942				23,777				23,278
Accrued interest receivable					7,127				7,095				7,108
Goodwill					15,131				15,131				15,131
CDI					361				406				564
Loan servicing rights, net					1,051				1,195				1,717
Operating lease right-of-use assets					1,324				1,400				1,624
Other assets					9,331				15,805				4,674
		Total assets	$		1,932,730				1,909,480			$	1,907,234

Liabilities and shareholders’ equity
Deposits: Non-interest-bearing demand			$		407,811				402,911			$	424,906
Deposits: Interest-bearing					1,243,019				1,227,505				1,213,648
		Total deposits			1,650,830				1,630,416				1,638,554

Operating lease liabilities					1,426				1,501				1,723
FHLB borrowings					20,000				20,000				20,000
Other liabilities and accrued expenses					7,950				8,364				8,278
		Total liabilities			1,680,206				1,660,281				1,668,555

Shareholders’ equity
Common stock, $.01 par value; 50,000,000 shares authorized;
7,903,489 shares issued and outstanding – March 31, 2025
7,954,673 shares issued and outstanding – December 31, 2024
8,023,121shares issued and outstanding – March 31, 2024					28,028				29,593				32,338
Retained earnings					225,166				220,398				207,086
Accumulated other comprehensive loss					(670	)			(792	)			(745			)
		Total shareholders’ equity			252,524				249,199				238,679
		Total liabilities and shareholders’ equity	$		1,932,730				1,909,480			$	1,907,234

	Three Months Ended
PERFORMANCE RATIOS:	March 31, 2025			Dec. 31, 2024			March 31, 2024
Return on average assets (a)		1.43	%		1.41	%		1.22	%
Return on average equity (a)		10.95	%		11.03	%		9.67	%
Net interest margin (a)		3.79	%		3.64	%		3.48	%
Efficiency ratio		56.25	%		56.27	%		60.22	%

	Six Months Ended
	March 31, 2025						March 31, 2024
Return on average assets (a)		1.42	%					1.28	%
Return on average equity (a)		10.99	%					10.18	%
Net interest margin (a)		3.71	%					3.53	%
Efficiency ratio		56.26	%					58.34	%

	Three Months Ended
ASSET QUALITY RATIOS AND DATA: ($ in thousands)	March 31, 2025			Dec. 31, 2024			March 31, 2024
Non-accrual loans	$	2,327		$	2,733		$	3,605
Loans past due 90 days and still accruing		--			--			--
Non-performing investment securities		41			45			79
OREO and other repossessed assets		221			221			--
Total non-performing assets (b)	$	2,589		$	2,999		$	3,684

Non-performing assets to total assets (b)		0.13	%		0.16	%		0.19	%
Net charge-offs during quarter	$	--		$	242		$	3
Allowance for credit losses - loans to non-accrual loans		753	%		633	%		467	%
Allowance for credit losses - loans to loans receivable (c)		1.22	%		1.21	%		1.22	%


CAPITAL RATIOS:
Tier 1 leverage capital		12.55	%		12.32	%		12.01	%
Tier 1 risk-based capital		19.04	%		18.69	%		18.08	%
Common equity Tier 1 risk-based capital		19.04	%		18.69	%		18.08	%
Total risk-based capital		20.29	%		19.95	%		19.33	%
Tangible common equity to tangible assets (non-GAAP)		12.36	%		12.34	%		11.79	%

BOOK VALUES:
Book value per common share	$	31.95		$	31.33		$	29.75
Tangible book value per common share (d)		29.99			29.37			27.79

________________________________________________

(a) Annualized
(b) Non-performing assets include non-accrual loans, loans past due 90 days and still accruing, non-performing investment securities and OREO and other repossessed assets.
(c) Does not include loans held for sale and is before the allowance for credit losses.
(d) Tangible common equity divided by common shares outstanding (non-GAAP).

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

	For the Three Months Ended
	March 31, 2025					December 31, 2024					March 31, 2024
	Amount			Rate		Amount			Rate		Amount			Rate

Assets
Loans receivable and loans held for sale	$	1,435,999		5.90	%	$	1,438,144		5.80	%	$	1,365,417		5.57	%
Investment securities and FHLB stock (1)		232,532		3.64			247,236		3.57			298,003		3.14

Interest-earning deposits in banks and CDs		172,175		4.44			166,764		4.76			143,121		5.39
Total interest-earning assets		1,840,706		5.48			1,852,144		5.42			1,806,541		5.16
Other assets		77,563					75,534					81,337
Total assets	$	1,918,269				$	1,927,678				$	1,887,878

Liabilities and Shareholders’ Equity
NOW checking accounts	$	328,115		1.32	%	$	328,455		1.38	%	$	367,924		1.61	%
Money market accounts		306,137		3.18			324,424		3.42			270,623		3.14
Savings accounts		206,054		0.28			205,650		0.28			214,233		0.23
Certificates of deposit accounts		343,945		3.82			331,785		4.09			295,202		4.16
Brokered CDs		50,104		4.85			46,414		4.98			40,402		5.40
Total interest-bearing deposits		1,234,355		2.45			1,236,728		2.59			1,188,384		2.47
Borrowings		20,000		4.04			20,000		4.03			20,001		4.42
Total interest-bearing liabilities		1,254,355		2.47			1,256,728		2.62			1,208,385		2.50

Non-interest-bearing demand deposits		403,738					414,149					431,826
Other liabilities		10,064					10,146					10,182
Shareholders’ equity		250,112					246,655					237,485
Total liabilities and shareholders’ equity	$	1,918,269				$	1,927,678				$	1,887,878

Interest rate spread				3.01	%				2.80	%				2.66	%
Net interest margin (2)				3.79	%				3.64	%				3.48	%
Average interest-earning assets to
average interest-bearing liabilities		146.75	%				147.38	%				149.50	%

_____________________________________
(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, 2025					March 31, 2024
	Amount			Rate		Amount			Rate

Assets
Loans receivable and loans held for sale	$	1,437,081		5.85	%	$	1,349,105		5.53	%
Investment securities and FHLB stock (1)		239,966		3.60			307,636		3.08
Interest-earning deposits in banks and CDs		169,444		4.60			134,643		5.37
Total interest-earning assets		1,846,491		5.44			1,791,384		5.10
Other assets		76,535					81,473
Total assets	$	1,923,026				$	1,872,857

Liabilities and Shareholders’ Equity
NOW checking accounts	$	328,287		1.35	%	$	372,327		1.56	%
Money market accounts		315,381		3.31			247,656		2.78
Savings accounts		205,849		0.28			217,153		0.23
Certificates of deposit accounts		337,798		3.95			281,842		4.07
Brokered CDs		48,239		4.91			41,570		5.39
Total interest-bearing deposits		1,235,554		2.52			1,160,548		2.32
Borrowings		20,000		4.02			24,427		4.65
Total interest-bearing liabilities		1,255,554		2.55			1,184,975		2.37

Non-interest-bearing demand deposits		409,000					440,976
Other liabilities		10,107					11,035
Shareholders’ equity		248,365					235,871
Total liabilities and shareholders’ equity	$	1,923,026				$	1,872,857

Interest rate spread				2.89	%				2.73	%
Net interest margin (2)				3.71	%				3.53	%
Average interest-earning assets to
average interest-bearing liabilities		147.07	%				151.17	%

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

Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. Timberland believes that certain non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with GAAP results as reported.

Financial measures that exclude intangible assets are non-GAAP measures. To provide investors with a broader understanding of capital adequacy, Timberland provides non-GAAP financial measures for tangible common equity, along with the GAAP measure. Tangible common equity is calculated as shareholders’ equity less goodwill and CDI. In addition, tangible assets equal total assets less goodwill and CDI.

The following table provides a reconciliation of ending shareholders’ equity (GAAP) to ending tangible shareholders’ equity (non-GAAP) and ending total assets (GAAP) to ending tangible assets (non-GAAP).

($ in thousands)	March 31, 2025			December 31, 2024			March 31, 2024

Shareholders’ equity	$	252,524		$	249,199		$	238,679
Less goodwill and CDI		(15,492	)		(15,537	)		(15,695	)
Tangible common equity	$	237,032		$	233,662		$	222,984

Total assets	$	1,932,730		$	1,909,480		$	1,907,234
Less goodwill and CDI		(15,492	)		(15,537	)		(15,695	)
Tangible assets	$	1,917,238		$	1,893,943		$	1,891,539

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

FAQ

What was Timberland Bancorp's (TSBK) earnings per share for Q2 2025?

Timberland Bancorp reported earnings of $0.85 per diluted share for Q2 2025, representing a 21% increase from $0.70 in Q2 2024.

How much did TSBK increase its quarterly dividend in 2025?

Timberland Bancorp announced a 4% increase in its quarterly cash dividend to $0.26 per share, payable on May 23, 2025.

What was Timberland Bancorp's net interest margin in Q2 2025?

TSBK's net interest margin expanded to 3.79% in Q2 2025, up from 3.64% in the previous quarter and 3.48% year-over-year.

How much did TSBK's total deposits grow in Q2 2025?

Total deposits increased by $20 million, or 1%, during Q2 2025, driven by increases in checking and certificates of deposit account balances.

What was TSBK's loan growth in Q2 2025 compared to the previous year?

Net loans receivable increased 4% year-over-year and 1% from the previous quarter.

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

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

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