EX-99.1 2 timb8k42622exh991.htm
Exhibit 99.1


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

Timberland Bancorp Announces Second Fiscal Quarter Earnings

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, WA – April 26, 2022 – 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.



Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 2


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.


Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 3

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.









Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 4



   
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.





Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 5



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.





Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 6


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.






Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 7


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.




Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 8


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.




Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 9


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 Fiscal Q2 2022 Earnings
April 26, 2022
Page 10

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 Fiscal Q2 2022 Earnings
April 26, 2022
Page 11


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 Fiscal Q2 2022 Earnings
April 26, 2022
Page 12

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
 


Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 13

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).



Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 14


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









Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 15


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










Timberland Fiscal Q2 2022 Earnings
April 26, 2022
Page 16


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