Timberland Bancorp Reports Fourth Fiscal Quarter Net Income of $6.36 Million
Quarterly EPS of $0.79 and Fiscal Year EPS of $3.01
Quarterly Return on Average Assets of 1.32%
Quarterly Return on Average Equity of 10.43%
Quarterly Net Interest Margin improves to 3.58%
Net Loans Increased by 9% Year-Over-Year
Deposits Increased by 6% Year-Over-Year
Announces a 4% Increase in the Quarterly Cash Dividend
HOQUIAM, Wash., Oct. 31, 2024 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company"), the holding company for Timberland Bank (the "Bank"), today reported net income of $6.36 million, or $0.79 per diluted common share for the quarter ended September 30, 2024. This compares to net income of $5.92 million, or $0.74 per diluted common share for the preceding quarter and $6.64 million, or $0.81 per diluted common share, for the comparable quarter one year ago.
Timberland also announced net income of $24.28 million, or $3.01 per diluted common share, for the fiscal year ended September 30, 2024. This compares to net income of $27.12 million, or $3.29 per diluted common share, for the fiscal year ended September 30, 2023.
"Timberland generated strong fiscal fourth quarter financial results," stated Dean Brydon, Chief Executive Officer. "Compared to the prior quarter, fourth quarter net income and EPS increased by 7%, primarily due to an improvement in our net interest margin and, to a lesser extent, higher non-interest income. Additionally, key financial metrics improved compared to the prior quarter and tangible book value per share continued its upward trajectory. As a result of Timberland's solid earnings, our Board of Directors announced a 4% increase to the quarterly cash dividend to shareholders to $0.25 per share, payable on November 29, 2024, to shareholders of record on November 15, 2024. Timberland's continued solid financial performance has allowed us to increase the quarterly cash dividend to our shareholders while continuing to maintain a strong capital position." This represents the 48th consecutive quarter Timberland will have paid a cash dividend.
"The loan portfolio continues to grow, although at a more moderate pace than we've experienced over the last couple of years," Brydon continued. "Net loans receivable grew by $25 million, or 2%, during the quarter, with increases primarily in construction loan funds on existing loans being disbursed and in the 1-4 family loan portfolio. For the fiscal year, net loans receivable increased $119 million, or 9%. We are encouraged by the overall strength of our loan portfolio and the continued opportunities for loan growth in our markets. Credit quality metrics are still holding up relatively well, with only $12,000 in net charge-offs for the quarter and non-performing assets at 20 basis points of total assets at the end of the fourth quarter."
"Timberland's net interest margin expanded five basis points to 3.58% for the fourth quarter, compared to the preceding quarter, as the yield improvements on interest-earning assets continued to outpace the increase in cost of funds," said Jonathan Fischer, President and Chief Operating Officer. "Total deposits increased $19 million, or 1%, during the quarter and $87 million, or 6% year-over-year, while total borrowings stayed unchanged at $20 million compared to the prior quarter end."
"In September, Timberland was one of only 30 banks in the U.S. to be named a "Sm-All Star" in Piper Sandler's annual list of top-performing small-cap banks and thrifts in its "Class of 2024." This elite annual list reflects the top banks and thrifts in the industry across various metrics including growth, profitability, credit quality and capital strength. We are honored to be recognized by Piper Sandler as one of the top performing community banks in the nation, a validation of Timberland's solid foundation," added Brydon. "In addition, Timberland was named Best Bank in Pierce County (by The News Tribune), Best Bank in Grays Harbor County (by The Daily World), and Best Bank in the South Sound (by The Olympian) during the year. These local recognitions are a testament to the dedication of our employees, who continue to work diligently to support our customers," added Fischer.
Earnings and Balance Sheet Highlights (at or for the periods ended September 30, 2024, compared to September 30, 2023, or June 30, 2024):
Earnings Highlights:
Earnings per diluted common share ("EPS") increased 7% to $0.79 for the current quarter from $0.74 for the preceding quarter and decreased 2% from $0.81 for the comparable quarter one year ago; EPS for the 2024 fiscal year decreased 9% to $3.01 from $3.29 for the 2023 fiscal year;
Net income increased 7% to $6.36 million for the current quarter from $5.92 million for the preceding quarter and decreased 4% from $6.64 million for the comparable quarter one year ago; Net income decreased 10% to $24.28 million for the 2024 fiscal year compared to $27.12 million for the 2023 fiscal year;
Return on average equity ("ROE") and return on average assets ("ROA") for the current quarter were 10.43% and 1.32%, respectively;
Net interest margin ("NIM") for the current quarter expanded to 3.58% from 3.53% for the preceding quarter and compressed from 3.85% for the comparable quarter one year ago; and
The efficiency ratio for the current quarter was 56.79% compared to 58.97% for the preceding quarter and 55.52% for the comparable quarter one year ago.
Balance Sheet Highlights:
Total assets increased 1% from the prior quarter and increased 5% year-over-year;
Net loans receivable increased 2% from the prior quarter and increased 9% year-over-year;
Total deposits increased 1% from the prior quarter and increased 6% year-over-year;
Total shareholders' equity increased 2% from the prior quarter and increased 5% year-over-year; 36,859 shares of common stock were repurchased during the current quarter for $1.09 million and 218,976 shares of common stock were repurchased during the 2024 fiscal year for $5.89 million;
Non-performing assets to total assets ratio was 0.20% at September 30, 2024 compared to 0.22% at June 30, 2024 and 0.09% at September 30, 2023;
Book and tangible book (non-GAAP) values per common share increased to $30.83 and $28.87 respectively, at September 30, 2024; and
Liquidity (both on-balance sheet and off-balance sheet) remained strong at September 30, 2024 with only $20 million in borrowings and additional secured borrowing line capacity of $692 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 4% to $19.48 million from $18.77 million for the preceding quarter and decreased 1% from $19.76 million for the comparable quarter one year ago. The increase in operating revenue compared to the preceding quarter was primarily due to an increase in interest income from loans and an increase in non-interest income, which was partially offset by an increase in funding costs and a decrease in interest income on investment securities and interest bearing deposits in banks. Operating revenue decreased by 5%, to $75.30 million for the 2024 fiscal year from $79.50 million for the 2023 fiscal year, primarily due to an increase in funding costs, which outpaced the increase in interest income.
Net interest income increased $566,000, or 4%, to $16.55 million for the current quarter from $15.98 million for the preceding quarter and decreased $284,000, or 2%, from $16.83 million for the comparable quarter one year ago. The increase in net interest income compared to the preceding quarter was primarily due to an increase in the weighted average yield of interest-earning assets to 5.41% from 5.33% for the preceding quarter and a $17.47 million increase in average total interest-earning assets. Partially offsetting the increase in the weighted average yield of interest-earning assets, was in increase in the weighted average cost of interest-bearing liabilities to 2.70% from 2.64% for the preceding quarter. Timberland's NIM for the current quarter expanded to 3.58% from 3.53% for the preceding quarter and compressed from 3.85% for the comparable quarter one year ago. The NIM for the current quarter was increased by approximately one basis point due to the collection of $20,000 in pre-payment penalties, non-accrual interest, and late fees and the accretion of $7,000 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 $124,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $9,000 of the fair value discount on acquired loans. The NIM for the comparable quarter one year ago was increased by approximately two basis points due to the collection of $92,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $11,000 of the fair value discount on acquired loans.
Net interest income for the 2024 fiscal year decreased $4.19 million, or 6%, to $64.17 million from $68.36 million for the 2023 fiscal year, primarily due to increased funding costs, which outpaced the increase in interest income. The weighted average cost of interest-bearing liabilities increased to 2.52% for the 2024 fiscal year from 1.06% for the 2023 fiscal year. Partially offsetting the increased funding costs was an increase in the weighted average yield of interest-earning assets to 5.24% for the 2024 fiscal year from 4.63% for the 2023 fiscal year and an $82.49 million increase in average total interest-earning assets for the current year. As a result of these changes, Timberland's NIM compressed to 3.54% for the 2024 fiscal year from 3.95% for the 2023 fiscal year.
A $444,000 provision for credit losses on loans was recorded for the quarter ended September 30, 2024. The provision was primarily due to loan portfolio growth and changes in the composition of the loan portfolio. This compares to a $264,000 provision for credit losses on loans for the preceding quarter and a $522,000 provision for credit losses on loans for the comparable quarter one year ago. In addition, a $59,000 provision for credit losses on unfunded commitments and a $13,000 recapture of credit losses on investment securities were recorded for the current quarter. The provisions for credit losses on loans totaled $1.25 million for the 2024 fiscal year compared to provisions of $2.13 million for the 2023 fiscal year.
Non-interest income increased $141,000, or 5% to $2.93 million for the current quarter from $2.79 million for the preceding quarter and increased $8,000, less than 1%, from $2.92 million for the comparable quarter one year ago. The increase in non-interest income compared to the preceding quarter was primarily due to an increase in gain on sales of loans and smaller changes in several other categories.
Non-interest income for the 2024 fiscal year decreased slightly, less than 1%, to $11.136 million from $11.140 million for the 2023 fiscal year, primarily due to a decrease in ATM and debit card interchange fees and smaller decreases in several other categories, which were partially offset by an increase in services charges on deposits and smaller increases in several other categories.
Total operating (non-interest) expenses for the current quarter decreased $7,000, or less than 1%, to $11.06 million from $11.07 million for the preceding quarter and increased $95,000, or 1%, from $10.97 million for the comparable quarter one year ago. The decrease in operating expenses compared to the preceding quarter was primarily due to decreases in premises and equipment, salaries and employee benefits and smaller decreases in several other expense categories. These decreases were partially offset by increases in technology and communications, professional fees, and smaller increases in several other expense categories. The efficiency ratio for the current quarter was 56.79% compared to 58.97% for the preceding quarter and 55.52% for the comparable quarter one year ago.
For the 2024 fiscal year, operating expenses increased 1% to $43.75 million from $43.37 million for the 2023 fiscal year. The increase in operating expenses was primarily due to increases in technology and communications, ATM and debit card processing, and smaller increases in several other expense categories. These increases were partially offset by a decrease in professional fees and smaller decreases in several other expense categories. The efficiency ratio for the 2024 fiscal year was 58.09% compared to 54.56% for the 2023 fiscal year.
The provision for income taxes for the current quarter increased $37,000, or 2%, to $1.57 million from $1.54 million for the preceding quarter, primarily due to higher taxable income. Timberland's effective income tax rate was 19.8% for the quarter ended September 30, 2024 compared to 20.6% for the quarter ended June 30, 2024 and 19.6% for the quarter ended September 30, 2023. Timberland's effective income tax rate was 20.1% for the 2024 fiscal year compared to 20.2% for the 2023 fiscal year.
Balance Sheet Management
Total assets increased $22.85 million, or 1%, during the quarter to $1.92 billion at September 30, 2024 from $1.90 billion at June 30, 2024 and increased $83.57 million, or 5%, from $1.84 billion one year ago. The increase during the current quarter was primarily due to increases of $24.50 million in net loans receivable and $5.82 million in cash and cash equivalents, and smaller increases in several other categories. These increases to total assets were partially offset by a $6.92 million decrease in investment securities and smaller decreases in several other categories. The net increase in total assets during the quarter was primarily funded by increased deposits and retained net income.
Liquidity
Timberland has maintained a strong liquidity position (both on-balance sheet and off-balance sheet) while continuing to grow the loan portfolio. Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment, and available for sale investment securities, was 14.7% of total liabilities at September 30, 2024, compared to 14.7% at June 30, 2024, and 11.6% one year ago. Timberland had secured borrowing line capacity of $692 million available through the FHLB and the Federal Reserve at September 30, 2024. With a strong and diversified deposit base, only 18% of Timberland's deposits were uninsured or uncollateralized at September 30, 2024. (Note: This calculation excludes public deposits that are fully collateralized.)
Loans
Net loans receivable increased $24.50 million, or 2%, during the quarter to $1.42 billion at September 30, 2024 from $1.40 billion at June 30, 2024. This increase was primarily due to a $17.32 million decrease in the undisbursed portion of construction loans, a $10.51 million increase in one- to four-family loans and smaller increases in several other loan categories. These increases to net loans receivable were partially offset by a $7.33 million decrease in gross construction loans and smaller decreases in several other loan categories.
Net loans receivable increased $119.22 million, or 9%, during the fiscal year to $1.42 billion at September 30, 2024 from $1.30 billion at September 30, 2023. This increase was primarily due to a $50.17 million increase in multi-family loans, a $45.90 million increase in one- to four-family loans, a $33.32 million decrease in the undisbursed portion of construction loans, a $30.95 million increases in commercial real estate loans, a $9.63 million increase in home equity loans and smaller increases in several other loan categories. These increases to net loans receivable were partially offset by a $54.64 million decrease in gross construction loans and smaller decreases in several other loan categories.
Loan Portfolio($ in thousands)
September 30, 2024
June 30, 2024
September 30, 2023
Amount
Percent
Amount
Percent
Amount
Percent
Mortgage loans:
One- to four-family (a)
$299,123
20
%
$288,611
19
%
$253,227
18
%
Multi-family
177,350
11
177,950
12
127,176
9
Commercial
599,219
40
597,865
40
568,265
40
Construction - custom and
owner/builder
132,101
9
128,222
9
129,699
9
Construction - speculative
one-to four-family
11,495
1
11,441
1
17,099
1
Construction - commercial
29,463
2
32,130
2
51,064
4
Construction - multi-family
28,401
2
35,631
2
57,140
4
Construction - land
development
17,741
1
19,104
1
18,841
1
Land
29,366
2
32,384
2
26,726
2
Total mortgage loans
1,324,259
88
1,323,338
88
1,249,237
88
Consumer loans:
Home equity and second
Mortgage
47,913
3
43,679
3
38,281
3
Other
3,129
--
3,121
--
2,772
--
Total consumer loans
51,042
3
46,800
3
41,053
3
Commercial loans:
Commercial business loans
138,743
9
136,213
9
135,802
9
SBA PPP loans
260
--
314
--
466
--
Total commercial loans
139,003
9
136,527
9
136,268
9
Total loans
1,514,304
100
%
1,506,665
100
%
1,426,558
100
%
Less:
Undisbursed portion of
construction loans in
process
(69,878
)
(87,196
)
(103,194
)
Deferred loan origination
fees
(5,425
)
(5,404
)
(5,242
)
Allowance for credit losses
(17,478
)
(17,046
)
(15,817
)
Total loans receivable, net
$1,421,523
$1,397,019
$1,302,305
_______________________
(a) Does not include one- to four-family loans held for sale totaling $0, $1,795, and $400 at September 30, 2024, June 30, 2024, and September 30, 2023, respectively.
The following table provides a breakdown of commercial real estate ("CRE") mortgage loans by collateral type as of September 30, 2024:
CRE Loan Portfolio Breakdown by Collateral($ in thousands)
Collateral Type
Balance
Percent of CRE Portfolio
Percent of Total Loan Portfolio
Average Balance Per Loan
Non-Accrual
Industrial warehouse
$125,852
21
%
8
%
$1,246
$195
Medical/dental offices
83,276
14
5
1,262
--
Office buildings
68,526
11
5
779
--
Other retail buildings
50,067
8
3
533
--
Mini-storage
38,600
6
3
1,430
--
Hotel/motel
31,182
5
2
2,835
--
Restaurants
27,269
5
2
557
273
Gas stations/conv. stores
25,145
4
2
1,048
--
Nursing homes
18,434
3
1
2,304
--
Churches
16,235
3
1
854
--
Mobile home parks
10,798
2
1
491
--
Shopping centers
10,718
2
1
1,786
--
Additional CRE
93,117
16
6
705
690
Total CRE
$599,219
100
%
40
%
$926
$1,158
Timberland originated $48.82 million in loans during the quarter ended September 30, 2024, compared to $74.32 million for the preceding quarter and $89.25 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 $5.62 million were sold compared to $3.05 million for the preceding quarter and $4.58 million for the comparable quarter one year ago.
Investment Securities Timberland's investment securities and CDs held for investment decreased $7.17 million, or 3%, to $255.43 million at September 30, 2024, from $262.60 million at June 30, 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.
Investment securities and CDs held for investment decreased $72.56 million, or 22%, during the fiscal year to $255.43 million at September 30, 2024, from $327.99 million at September 30, 2023. The decrease was primarily due to maturities of U.S. Treasury investment securities, and to a lesser extent, scheduled amortization. Partially offsetting these decreases, was the purchase of additional U.S. government agency mortgage-backed investment securities and U.S. Treasury investment securities, all of which were classified as available for sale.
Deposits
Total deposits increased $19.12 million, or 1%, during the quarter to $1.65 billion at September 30, 2024, from $1.63 billion at June 30, 2024. The quarter's increase consisted of an $8.53 million increase in NOW account balances, a $6.77 million increase in certificate of deposit account balances and a $5.99 million increase in non-interest bearing deposit account balances. These increases were partially offset by a $1.93 million decrease in savings account balances and a $240,000 decrease in money market account balances.
Total deposits increased $86.73 million, or 6%, during the fiscal year to $1.65 billion at September 30, 2024 from $1.56 billion at September 30, 2023. The increase consisted of a $137.05 million increase in money market account balances and a $68.21 million increase in certificate of deposit account balances. These increases were partially offset by a $53.40 million decrease in NOW account balances, a $42.75 million decrease in non-interest bearing deposit account balances and a $22.37 million decrease in savings account balances.
Deposit Breakdown($ in thousands)
September 30, 2024
June 30, 2024
September 30, 2023
Amount
Percent
Amount
Percent
Amount
Percent
Non-interest-bearing demand
$413,116
25
%
$407,125
25
%
$455,864
29
%
NOW checking
333,329
20
324,795
20
386,730
25
Savings
205,993
13
207,921
13
228,366
15
Money market
326,922
20
327,162
20
189,875
12
Certificates of deposit under $250
205,970
12
195,022
12
170,221
11
Certificates of deposit $250 and over
113,579
7
117,788
7
91,714
6
Certificates of deposit, brokered
48,759
3
48,731
3
38,165
2
Total deposits
$1,647,668
100
%
$1,628,544
100
%
$1,560,935
100
%
Borrowings
Total borrowings were $20.00 million at both September 30, 2024 and June 30, 2024. At September 30, 2024, the weighted average rate on the borrowings was 3.97%.
Shareholders' Equity and Capital Ratios
Total shareholders' equity increased $4.19 million, or 2%, to $245.41 million at September 30, 2024, from $241.22 million at June 30, 2024, and increased $12.34 million, or 5%, from $233.07 million at September 30, 2023. The quarter's increase in shareholders' equity was primarily due to net income of $6.36 million and a $565,000 change in the accumulated other comprehensive income (loss) category for fair value adjustments on available for sale investment securities. These increases to shareholders' equity during the current quarter were partially offset by the payment of $1.91 million in dividends to shareholders and the repurchase of 36,859 shares of common stock for $1.09 million (an average price of $29.61 per share). During the fiscal year Timberland repurchased 218,976 shares of common stock for $5.89 million (an average price of $26.91 per share) and had 155,166 shares available to be repurchased in accordance with the terms of its existing stock repurchase plan at September 30, 2024.
Timberland remains well capitalized with a total risk-based capital ratio of 19.39%, a Tier 1 leverage capital ratio of 12.12%, a tangible common equity to tangible assets ratio (non-GAAP) of 12.05%, and a shareholders' equity to total assets ratio of 12.76% at September 30, 2024. Timberland's held to maturity investment securities were $172.10 million at September 30, 2024, with a net unrealized loss of $6.07 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 12.54%, compared to 12.76%, as reported.
Asset Quality
Timberland's non-performing assets to total assets ratio was 0.20% at September 30, 2024 compared to 0.22% at June 30, 2024 and 0.09% at September 30, 2023. Net charge-offs totaled $12,000 for the current quarter compared to net charge-offs of $36,000 for the preceding quarter and net charge-offs of $12,000 for the comparable quarter one year ago. During the current quarter, provisions for credit losses of $444,000 on loans and $59,000 on unfunded commitments were made, which were partially offset by a $13,000 recapture of credit losses on investment securities. The ACL for loans as a percentage of loans receivable was 1.21% at September 30, 2024, compared to 1.21% at June 30, 2024 and 1.20% one year ago.
Total delinquent loans (past due 30 days or more) and non-accrual loans increased $244,000 or 6%, to $4.49 million at September 30, 2024, from $4.23 million at June 30, 2024. Non-accrual loans decreased $235,000, or 6%, to $3.88 million at September 30, 2024 from $4.12 million at June 30, 2024. The quarterly decrease in non-accrual loans was primarily due to decreases in construction loans, commercial real estate loans and one- to four-family loans on non-accrual status, which was partially offset by an increase in commercial business loans on non-accrual status.
Non-Accrual Loans($ in thousands)
September 30, 2024
June 30, 2024
September 30, 2023
Amount
Quantity
Amount
Quantity
Amount
Quantity
Mortgage loans:
One- to four-family
$
49
1
$
135
2
$
368
2
Commercial
1,158
6
1,310
4
683
2
Construction, custom and
owner/builder
--
--
152
1
--
--
Total mortgage loans
1,207
7
1,597
7
1,051
4
Consumer loans:
Home equity and second
mortgage
618
3
615
3
177
1
Other
--
--
--
