Quarterly EPS of $0.70 Quarterly Return on Average Assets of 1.22% Quarterly Net Interest Margin of 3.48% Net Loans Increased by 12% Year-Over-Year Deposits Increased by 6% Year-Over-Year Announces Quarterly Cash Dividend HOQUIAM, Wash., April 23, 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 $5.71 million, or $0.70 per diluted common share, for the quarter ended March 31, 2024. This compares to net income of $6.30 million, or $0.77 per diluted common share, for the preceding quarter and $6.66 million, or $0.80 per diluted common share, for the comparable quarter one year ago. For the first six months of fiscal 2024, Timberland's net income decreased 15% to $12.00 million, or $1.47 per diluted common share, compared to $14.17 million, or $1.70 per diluted common share for the first six months of fiscal 2023. "Our second quarter of fiscal year 2024 operating results were highlighted by solid earnings, moderate growth in loans and deposits, and continued stable asset quality metrics," stated Dean Brydon, Chief Executive Officer. "While second quarter earnings and performance metrics were strong, they were lower compared to the year ago quarter, which was near the highest point of our margin in this interest rate cycle before deposit cost increases began compressing margins." As a result of Timberland's solid earnings and strong capital position, its Board of Directors announced a quarterly cash dividend to shareholders to $0.24 per share, payable on May 24, 2024, to shareholders of record on May 10, 2024. This represents the 46th consecutive quarter Timberland will have paid a cash dividend. "Our loan portfolio continues to grow, but not at the robust pace we've experienced during the past two years," Brydon continued. "Construction loan balances declined during the quarter, in part due to construction projects completing and being transferred to permanent loan categories. Although loan origination volumes slowed during the quarter, net loans receivable increased by $23 million during the quarter. We continue to remain optimistic regarding the overall strength of our loan portfolio and the opportunities for growth in our markets, even in this anticipated ‘higher for longer' interest rate environment. Credit quality continues to be monitored closely and our credit metrics remain relatively strong with only $3,000 in net charge-offs for the quarter and non-performing assets at only 19 basis points of total assets at the end of the second quarter." "The net interest margin was 3.48% for the second quarter, a 12 basis points contraction compared to the preceding quarter as the increase in cost of funds continued to outpace the growth in yields on interest-earning assets," said Jonathan Fischer, President and Chief Operating Officer. "We believe the pace of net interest margin contraction has started to stabilize at current levels. Total deposits increased $11 million during the quarter, with increases in money market and certificates of deposit balances more than offsetting decreases in checking account balances. We believe we are near the peak for deposit costs, which should help our net interest margin stabilize or improve going forward." Earnings and Balance Sheet Highlights (at or for the periods ended March 31, 2024, compared to March 31, 2023, or December 31, 2023):       Earnings Highlights: Earnings per diluted common share ("EPS") decreased 9% to $0.70 for the current quarter from $0.77 for the preceding quarter and decreased 13% from $0.80 for the comparable quarter one year ago; EPS for the first six months of fiscal 2024 decreased 14% to $1.47 from $1.70 for the first six months of fiscal 2023; Net income decreased 9% to $5.71 million for the current quarter from $6.30 million for the preceding quarter and decreased 14% from $6.66 million for the comparable quarter one year ago; Net income decreased 15% to $12.00 million for the first six months of fiscal 2024 compared to $14.17 million for the first six months of fiscal 2023; Return on average equity ("ROE") and return on average assets ("ROA") for the current quarter were 9.67% and 1.22%, respectively; Net interest margin ("NIM") for the current quarter compressed to 3.48% from 3.60% for the preceding quarter and from 3.99% for the comparable quarter one year ago; and The efficiency ratio for the current quarter was 60.22% compared to 56.50% for the preceding quarter and 55.31% for the comparable quarter one year ago.    Balance Sheet Highlights: Total assets increased 1% from the prior quarter and increased 7% year-over-year; Net loans receivable increased 2% from the prior quarter and increased 12% year-over-year; Total deposits increased 1% from the prior quarter and increased 6% year-over-year; Total shareholders' equity increased 1% from the prior quarter and increased 5% year-over-year; Non-performing assets to total assets ratio was 0.19% at March 31, 2024 compared to 0.18% at December 31, 2023 and 0.12% at March 31, 2023; Book and tangible book (non-GAAP) values per common share increased to $29.75 and $27.79, respectively, at March 31, 2024; and Liquidity (both on-balance sheet and off-balance sheet) remained strong at March 31, 2024 with only $20 million in borrowings and additional secured borrowing line capacity of $707 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 decreased 3% to $18.25 million from $18.80 million for the preceding quarter and decreased 8% from $19.79 million for the comparable quarter one year ago. The decrease in operating revenue compared to the preceding quarter was primarily due to an increase in funding costs, and to a lesser extent, a decrease in non-interest income. These decreases to operating revenue were partially offset by an increase in interest income from loans and overnight funds. Operating revenue decreased by 8%, to $37.05 million for the first six months of fiscal 2024 from $40.24 million for the first six months of fiscal 2023, primarily due to an increase in funding costs, which outpaced the increase in interest income. Net interest income decreased $369,000, or 2%, to $15.64 million for the current quarter from $16.00 million for the preceding quarter and decreased $1.52 million, or 9%, from $17.15 million for the comparable quarter one year ago. The decrease in net interest income compared to the preceding quarter was primarily due to an increase in the weighted average cost of interest-bearing liabilities to 2.50% from 2.22% for the preceding quarter. Partially offsetting the increase in funding costs, was an increase in the weighted average yield of interest-earning assets to 5.16% from 5.07% for the preceding quarter and a $30.15 million increase in average total interest-earning assets. Timberland's NIM for the current quarter compressed to 3.48% from 3.60% for the preceding quarter and from 3.99% for the comparable quarter one year ago.   The NIM for the current quarter 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.   The NIM for the preceding quarter was increased by approximately three basis points due to the collection of $142,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $10,000 of the fair value discount on acquired loans.   The NIM for the comparable quarter one year ago was increased by approximately three basis points due to the collection of $99,000 in pre-payment penalties, non-accrual interest, and late fees, and the accretion of $15,000 of the fair value discount on acquired loans. Net interest income for the first six months of fiscal 2024 decreased $3.26 million, or 9%, to $31.64 million from $34.89 million for the first six months of fiscal 2023, primarily due to funding cost increases, which outpaced the increase in interest income. Timberland's NIM compressed to 3.53% for the first six months of fiscal 2024 from 4.02% for the first six months of fiscal 2023. A $166,000 provision for credit losses on loans was recorded for the quarter ended March 31, 2024. The provision was primarily due to loan portfolio growth, which was partially offset by changes in the composition of the loan portfolio, as construction loan balances (which have a higher reserve factor) decreased. This compares to a $379,000 provision for credit losses on loans for the preceding quarter and a $475,000 provision for credit losses on loans for the comparable quarter one year ago. In addition, an $88,000 recapture of credit losses for unfunded commitments was recorded for the current quarter, primarily as a result of a decrease in the level of unfunded commitments for construction loans. Non-interest income decreased $183,000 or 7%, to $2.62 million for the current quarter from $2.80 million for the preceding quarter and decreased $21,000, or 1%, from $2.64 million for the comparable quarter one year ago. The decrease in non-interest income compared to the preceding quarter was primarily due to a $52,000 decrease in ATM and debit card interchange transaction fees, a $37,000 decrease in gain on sale of loans, a $35,000 decrease in service charges on deposits, and smaller changes in several other categories. Fiscal year-to-date non-interest income increased by 1% to $5.41 million from $5.34 million for the first six months of fiscal 2023. Total operating (non-interest) expenses for the current quarter increased $367,000, or 3%, to $10.99 million from $10.62 million for the preceding quarter and increased $47,000 (less than 1%) from $10.94 million for the comparable quarter one year ago.   The increase in operating expenses compared to the preceding quarter was primarily due to increases in salaries and employee benefits, premises and equipment, technology and communications, and professional fees and smaller changes in several other categories. The efficiency ratio for the current quarter was 60.22% compared to 56.50% for the preceding quarter and 55.31% for the comparable quarter one year ago. Fiscal year-to-date operating expenses increased 1% to $21.62 million from $21.48 million for the first six months of fiscal 2023. The efficiency ratio for the first six months of fiscal 2024 was 58.34% compared to 53.38% for the first six months of fiscal 2023. The provision for income taxes for the current quarter decreased $76,000, or 5%, to $1.47 million from $1.55 million for the preceding quarter, primarily due to lower taxable income.   Timberland's effective income tax rate was 20.5% for the quarter ended March 31, 2024 compared to 19.7% for the quarter ended December 31, 2023 and 20.4% for the quarter ended March 31, 2023. Timberland's effective income tax rate was 20.1% for the first six months of fiscal 2024 compared to 20.2% for the first six months of fiscal 2023. Balance Sheet Management Total assets increased $12.12 million, or 1%, during the quarter to $1.91 billion at March 31, 2024 from $1.90 billion at December 31, 2023 and increased $120.62 million, or 7%, from $1.79 billion one year ago. The increase during the current quarter was primarily due to a $22.83 million increase in net loans receivable and a $22.33 million increase in total cash and cash equivalents, which was partially offset by a $34.22 million decrease in investment securities and CDs held for investment. The quarterly increase in assets was primarily funded by an $11.49 million increase in deposits. 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 15.2% of total liabilities at March 31, 2024, compared to 12.7% at December 31, 2023, and 14.0% one year ago. Timberland had secured borrowing line capacity of $707 million available through the FHLB and the Federal Reserve at March 31, 2024. With a strong and diversified deposit base, only 18% of Timberland's deposits were uninsured or uncollateralized at March 31, 2024. (Note: This calculation excludes public deposits that are fully collateralized.) Loans Net loans receivable increased $22.83 million, or 2%, during the quarter to $1.36 billion at March 31, 2024 from $1.34 billion at December 31, 2023. This increase was primarily due to a $19.95 million increase in multi-family loans, a $13.31 million increase in one- to four-family loans and smaller increases in several other loan categories. Also impacting the quarterly comparison was a $27.18 million decrease in the undisbursed portion of construction loans in process. These increases to net loans receivable were partially offset by a $40.53 million decrease in construction and land development loans and smaller decreases in several other loan categories. The increases in multi-family loans and one-to-four family loans and the corresponding decrease in construction loans were, in large part, due to the construction portion of these loans being completed and moved into permanent financing categories. Loan Portfolio($ in thousands)     March 31, 2024   December 31, 2023   March 31, 2023     Amount   Percent   Amount   Percent   Amount   Percent Mortgage loans:                         One- to four-family (a)   $ 276,433     19 %   $ 263,122     18 %   $ 216,639     16 % Multi-family     167,275     12       147,321     10       103,870     8   Commercial     577,373     40       579,038     40       547,876     41   Construction - custom and owner/builder     122,988     8       134,878     9     124,071     9   Construction - speculative one-to four-family     16,407     1       17,609     1       11,343     1   Construction - commercial     32,318     2       36,702     3       31,458     3   Construction - multi-family     36,795     3       57,019     4       83,051     6   Construction - land development     16,051     1       18,878     1       17,018     1   Land     31,821     2       28,697     2       24,520     2   Total mortgage loans     1,277,461     88       1,283,264     88       1,159,846     87                             Consumer loans:                         Home equity and second mortgage     42,357     3       39,403     3       36,896     3   Other     2,925     --       2,926     --       2,283     --   Total consumer loans     45,282     3       42,329     3       39,179     3                             Commercial loans:                         Commercial business loans     135,505     9       136,942     9       129,306     10   SBA PPP loans     367     --       423     --       572     --   Total commercial loans     135,872     9       137,365     9       129,878     10   Total loans     1,458,615     100 %     1,462,958     100 %     1,328,903     100 % Less:                         Undisbursed portion of construction loans in process     (77,502 )         (104,683 )         (99,253 )     Deferred loan origination fees     (5,179 )         (5,337 )         (4,759 )     Allowance for credit losses     (16,818 )         (16,655 )         (14,698 )     Total loans receivable, net   $ 1,359,116         $ 1,336,283         $ 1,210,193       _______________________(a) Does not include one- to four-family loans held for sale totaling $1,311, $1,425, and $200 at March 31 2024, December 31, 2023, and March 31, 2023, respectively. The following table provides a breakdown of commercial real estate ("CRE") mortgage loans by collateral type as of March 31, 2024: CRE Loan Portfolio Breakdown by Collateral($ in thousands)   Collateral Type   Balance   Percent ofCREPortfolio   Percent ofTotal LoanPortfolio   AverageBalance PerLoan   Non-Accrual Industrial warehouse   $ 112,318     20 %   8 %   $ 1,123     $ 195   Medical/dental offices     81,335     14     6       1,291       --   Office buildings     71,518     12     5       777       --   Other retail buildings     51,422     9     3       547       --   Mini-storage     39,228     7     3       1,453       --   Hotel/motel     31,713     5     2       2,883       --   Restaurants     27,583     5     2       563       --   Gas stations/conv. stores     20,977     4     1       912       --   Nursing homes     18,630     3     1       2,329       --   Mobile home parks     10,869     2     1       494       --   Shopping centers     10,854     2     1       1,809       --   Churches     6,976     1     1       498       --   Additional CRE     93,950     16     6       706       954   Total CRE   $ 577,373     100 %   40 %   $ 899     $ 1,149   Timberland originated $39.37 million in loans during the quarter ended March 31, 2024, compared to $88.93 million for the preceding quarter and $77.15 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 $2.28 million were sold compared to $3.80 million for the preceding quarter and $2.39 million for the comparable quarter one year ago. Investment Securities        Timberland's investment securities and CDs held for investment decreased $34.22 million, or 11%, to $285.61 million at December 31, 2023, from $319.83 million at December 31, 2023. The decrease was primarily due to maturities of U.S. Treasury investment securities (classified as held to maturity) totaling $48.00 million 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 $11.49 million, or 1%, during the quarter to $1.64 billion at March 31, 2024, from $1.63 billion at December 31, 2023. The quarter's increase consisted of a $42.31 million in money market account balances and a $35.04 million increase in certificates of deposit balances. These increases were partially offset by a $52.84 million decrease in NOW checking account balances, an $8.16 million decrease in non-interest bearing deposit balances and a $4.86 million decrease in savings account balances. Deposit Breakdown($ in thousands)     March 31, 2024   December 31, 2023   March 31, 2023     Amount     Percent   Amount     Percent   Amount   Percent Non-interest-bearing demand   $424,906     26 %   $433,065     27 %   $479,283     31 % NOW checking   336,621     20     389,463     24     403,463     26   Savings   211,085     13     215,948     13     269,522     17   Money market   311,994     19     269,686     17     210,390     14   Certificates of deposit under $250   190,762     12     181,762     11     129,331     8   Certificates of deposit $250 and over   118,698     7     96,145     6     56,778     4   Certificates of deposit – brokered   44,488     3     41,000     2     --     --   Total deposits   $1,638,554     100 %   $1,627,069     100 %   $1,548,767     100 % Borrowings Total borrowings were $20.00 million at both March 31, 2024 and December 31, 2023. At March 31, 2024, the weighted average rate on the borrowings was 4.34%. Shareholders' Equity and Capital Ratios Total shareholders' equity increased $1.31 million, or 1%, to $238.70 million at March 31, 2024, from $237.37 million at December 31, 2023. The increase in shareholders' equity was primarily due to net income of $5.71 million for the quarter and an $82,000 reduction in the accumulated other comprehensive loss category for fair value adjustments on available for sale investment securities. These increases to shareholders' equity were partially offset by the payment of $1.94 million in dividends to shareholders and the repurchase of 99,787 shares of common stock for $2.67 million (an average price of $26.77 per share).   Timberland had 262,025 shares available to be repurchased in accordance with the terms of its existing stock repurchase plan at March 31, 2024. Timberland remains well capitalized with a total risk-based capital ratio of 19.33%, a Tier 1 leverage capital ratio of 12.01%, a tangible common equity to tangible assets ratio (non-GAAP) of 11.79%, and a shareholders' equity to total assets ratio of 12.51% at March 31, 2024. Timberland's held to maturity investment securities were $211.82 million at March 31, 2024, with a net unrealized loss of $13.53 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 12.02%, compared to 12.51%, as reported. Asset Quality Timberland's non-performing assets to total assets ratio was 0.19% at March 31, 2024 compared to 0.18% at December 31, 2023 and 0.12% at March 31, 2023 There were net charge-offs of $3,000 for the current quarter, compared to net charge-offs of $2,000 for the preceding quarter and net charge-offs of $6,000 for the comparable quarter one year ago. During the current quarter, provisions for credit losses on loans of $166,000 and on investment securities of $3,000 were made, which were partially offset by an $88,000 recapture of credit losses on unfunded commitments. The ACL for loans as a percentage of loans receivable was 1.22% at March 31, 2024, compared to 1.23% at December 31, 2023 and 1.20% one year ago. Total delinquent loans (past due 30 days or more) and non-accrual loans increased $598,000 or 17%, to $4.20 million at March 31, 2024, from $3.60 million at December 31, 2023. Non-accrual loans increased $239,000, or 7%, to $3.61 million at March 31, 2024, from $3.37 million at December 31, 2023.   The quarterly increase in non-accrual loans was primarily due to a $466,000 increase in commercial real estate loans on non-accrual status, which was partially offset by a $222,000 decrease in one- to four-family loans on non-accrual status. Non-Accrual Loans($ in thousands)       March 31, 2024   December 31, 2023   March 31, 2023     Amount   Quantity   Amount   Quantity   Amount   Quantity Mortgage loans:                         One- to four-family   $ 380     3   $ 602     4   $ 378     2 Commercial     1,149     3     683     2     694     2 Construction – custom and owner/builder     152     1     150     1     --     -- Land     --     --     --     --     362     1 Total mortgage loans     1,681     7     1,435     7     1,434     5                           Consumer loans:                         Home equity and second mortgage