LAKE SHORE BANCORP, INC. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (form 10-K)
Timberland Bancorp : Announces Third Fiscal Quarter Earnings – Form 8-K

Timberland Bancorp Announces Third Fiscal Quarter Earnings

Third Fiscal Quarter Net Income of $5.74 Million

Quarterly Return on Average Equity of 10.80%

Loan Portfolio (Excluding PPP Loans) Increased 5.7% During Quarter

Announces $0.22 Quarterly Cash Dividend

HOQUIAM, WA – July 26, 2022 – Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”), the holding company for Timberland Bank (the “Bank”), today reported net income of $5.74 million, or $0.69 per diluted common share, for the quarter ended June 30, 2022. This compares to net income of $5.33 million, or $0.63 per diluted common share, for the preceding quarter and $7.02 million, or $0.83 per diluted common share, for the comparable quarter one year ago.

For the first nine months of fiscal 2022, Timberland earned $16.55 million, or $1.97 per diluted common share, compared to $21.57 million or $2.55 per diluted common share for the first nine months of fiscal 2021.

Timberland’s Board of Directors declared a quarterly cash dividend to shareholders of $0.22 per share, payable on August 26, 2022, to shareholders of record on August 12, 2022.

“Timberland generated strong fiscal third quarter financial results,” stated Michael Sand, CEO. “Compared to the prior quarter, net income and earnings per share increased 8% and 10%, respectively, largely on the strength of continued solid loan growth and higher interest rates. This quarter we experienced continued strong loan growth, with net loans receivable, excluding Paycheck Protection Program (“PPP”) loans, increasing 5.7%, or 22.8% on an annualized basis. Loan growth was primarily due to increases in multi-family, commercial business, commercial real estate and residential mortgage loans originated within our western Washington market footprint. Increased interest income from the larger loan portfolio more than offset the quarter’s $584,000 decrease in income from the soon to be completely forgiven PPP loan portfolio.”

“Our net interest margin expanded 16 basis points compared to the prior quarter, benefitting from the recent interest rate increases enacted by the Federal Reserve,” added Dean Brydon, President and CFO. “This expansion was a result of deploying excess liquidity to fund loan growth, and from investing in short and moderate duration investments to supplement interest income. The Company continues to be well positioned to benefit from additional Federal Reserve actions to increase interest rates, and we anticipate additional opportunities to invest excess liquidity during the next several quarters.”

Third Fiscal Quarter 2022 Earnings and Balance Sheet Highlights (at or for the period ended June 30, 2022, compared to June 30, 2021, or March 31, 2022):

Earnings Highlights:

Net income was $5.74 million for the current quarter compared to $5.33 million for the preceding quarter and $7.02 million for the comparable quarter one year ago; Earnings per diluted common share (“EPS”) was $0.69 for the current quarter compared to $0.63 for the preceding quarter and $0.83 for the comparable quarter one year ago;

Net income was $16.55 million for the first nine months of fiscal 2022 compared to $21.57 million for the first nine months of fiscal 2021; EPS was $1.97 for the first nine months of fiscal 2022 compared to $2.55 for the first nine months of fiscal 2021;

Return on average equity (“ROE”) and return on average assets (“ROA”) for the current quarter were 10.80% and 1.22%, respectively;

Net interest margin (“NIM”) was 3.11% for the current quarter compared to 2.95% for the preceding quarter and 3.22% for the comparable quarter one year ago; and

The efficiency ratio was 57.80% for the current quarter compared to 58.42% for the preceding quarter and 49.43% for the comparable quarter one year ago.

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
Page 2

Balance Sheet Highlights:

Total assets increased 8% year-over-year and 1% from the prior quarter;

Total deposits increased 9% year-over-year and increased slightly (less than 1%) from the prior quarter;

Net loans receivable (excluding SBA PPP loans) increased 19.9% year-over-year and 5.7% from the prior quarter;

Net loans receivable (including SBA PPP loans) increased 5.2% from the prior quarter;

Non-performing assets to total assets ratio improved to 0.13% from 0.16% at March 31, 2022;

Total shareholders’ equity increased $2.05 million, or 1%, to $214.32 million, from $212.27 million at March 31, 2022; and

Book and tangible book (non-GAAP) values per common share increased to $25.98 and $24.02, respectively, at June 30, 2022.

Operating Results

Operating revenue (net interest income before the provision for loan losses plus non-interest income) increased 7% to $17.08 million for the third fiscal quarter from $15.98 million for the preceding quarter and decreased 2% from $17.34 million for the comparable quarter one year ago. The increase in operating revenue compared to the preceding quarter was primarily due to increased interest income from investment securities and interest bearing deposits in banks. Increased interest income from growth in the loan portfolio more than offset a $584,000 decrease in SBA PPP loan income. Operating revenue decreased 6% to $49.20 million for the first nine months of fiscal 2022 from $52.46 million for the comparable period one year ago, primarily due to a decrease in mortgage banking revenue.

Net interest income increased 8% to $13.98 million for the current quarter from $12.89 million for the preceding quarter and increased 6% from $13.16 million for the comparable quarter one year ago. Timberland’s NIM for the current quarter was 3.11% compared to 2.95% for the preceding quarter and 3.22% for the comparable quarter one year ago. The NIM for the current quarter was increased by approximately five basis points due to the accretion of $63,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $147,000 in pre-payment penalties, non-accrual interest, and late fees. The NIM for the preceding 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 comparable quarter one year ago was increased by approximately 13 basis points due to the accretion of $84,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $443,000 in pre-payment penalties, non-accrual interest and late fees. Net interest income increased 2% to $39.57 million for the first nine months of fiscal 2022 from $38.75 million for the first nine months of fiscal 2021. Timberland’s net interest margin for the first nine months of fiscal 2022 was 2.99% compared to 3.30% for the first nine 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 June 30, 2022, Timberland had SBA PPP deferred loan origination fees of $52,000 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

June 30, 2022

March 31, 2022

June 30, 2021

Interest income

$

9

$

31

$

293

Loan origination fee accretion

146

708

1,296

Total SBA PPP loan income

$

155

$

739

$

1,589

Nine Months Ended

June 30, 2022

June 30, 2021

Interest income

$

111

$

893

Loan origination fee accretion

1,782

3,583

Total SBA PPP loan income

$

1,893

$

4,476

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
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No provision for loan losses was made during the quarters ended June 30, 2022, March 31, 2022, and June 30, 2021.

Non-interest income increased 1% to $3.10 million for the current quarter from $3.08 million for the preceding quarter and decreased 27% from $4.27 million for the comparable quarter one year ago. The increase in non-interest income compared to the preceding quarter was primarily due to a $98,000 increase in ATM and debit card interchange transaction fees and smaller increases in several other categories. These increases were partially offset by a $158,000 decrease in gain on sales of loans. The quarterly year-over-year decrease in non-interest income was primarily due to a $1.35 million decrease in gain on sales of loans, which was partially offset by a $179,000 reduction in the valuation allowance on loan servicing rights. Fiscal year-to-date non-interest income decreased 30% to $9.63 million from $13.71 million for the first nine months of fiscal 2021, primarily due to a $4.03 million decrease in gain on sales of loans. The decrease in gain on sales of loans for the three and nine month periods ended June 30, 2022 was primarily due to decreases in the dollar amount of fixed-rate one- to four-family loans originated and sold (as refinance demand slowed) and decreases in the average pricing margin compared to the same periods last year.

Total operating expenses for the current quarter increased $541,000, or 6%, to $9.87 million from $9.33 million for the preceding quarter and increased $1.26 million, or 15%, from $8.61 million for the comparable quarter one year ago. The increase in operating expenses compared to the preceding quarter was primarily due to a $258,000 increase in professional fees expense and smaller increases in several other expense categories. These increases were partially offset by smaller decreases in several expense categories. The increase in professional fees expense was primarily due to higher legal and consulting fees. Fiscal year-to-date operating expenses increased 11% to $28.47 million from $25.57 million for the first nine months of fiscal 2021. The year-to-date increase in operating expenses was primarily due to a $1.66 million increase in salaries and employee benefits expense and a $498,000 increase in professional fees expense. The increase in salaries and employee benefits expense 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 57.80% compared to 58.42% for the preceding quarter and 49.43% for the comparable quarter one year ago. The efficiency ratio for the first nine months of fiscal 2022 was 57.87% compared to 48.75% for the first nine months of fiscal 2021.

The provision for income taxes for the current quarter increased $156,000 to $1.47 million from $1.32 million for the preceding quarter, primarily due to higher taxable income. Timberland’s effective income tax rate was 20.4% for the quarter ended June 30, 2022 compared to 19.8% for the quarter ended March 31, 2022 and 20.3% for the quarter ended quarter ended June 30, 2021. Timberland’s effective income tax rate was 20.1% for the first nine months of fiscal 2022 compared to 19.8% for the first nine months of fiscal 2021.

Balance Sheet Management

Total assets increased $10.33 million, or 1%, to $1.89 billion at June 30, 2022 from $1.88 billion at March 31, 2022. The quarter’s increase was primarily due to a $53.89 million increase in net loans receivable, a $28.55 million increase in investment securities and CDs held for investment, and smaller increases in several other categories. These increases were partially offset by a $70.15 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 $53.89 million, or 5%, to $1.09 billion at June 30, 2022 from $1.03 billion at March 31, 2022. This increase was primarily due to a $16.19 million increase in multi-family loans, a $14.18 million increase in commercial business loans (non-PPP), a $10.76 million increase in one- to four-family loans, an $8.69 million increase in commercial real estate loans, a $7.75 million increase in construction loans and smaller increases in several other loan categories. These increases to net loans receivable were partially offset by a $4.61 million decrease in SBA PPP loans and smaller decreases in several other loan categories.

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Loan Portfolio

($ in thousands)

June 30, 2022

March 31, 2022

June 30, 2021

Amount

Percent

Amount

Percent

Amount

Percent

Mortgage loans:

One- to four-family (a)

$

144,682

12

%

$

133,925

12

%

$

119,173

11

%

Multi-family

98,718

8

82,526

7

94,756

9

Commercial

532,167

44

523,479

45

458,889

41

Construction – custom and

owner/builder

117,724

10

114,394

10

105,484

9

Construction – speculative

one-to four-family

13,954

1

15,438

1

18,038

2

Construction – commercial

40,108

3

35,416

3

43,879

4

Construction – multi-family

54,804

5

64,141

6

45,624

4

Construction – land

development

21,240

2

10,687

1

4,434

Land

24,490

2

22,192

2

18,289

2

Total mortgage loans

1,047,887

87

1,002,198

87

908,566

82

Consumer loans:

Home equity and second

mortgage

32,821

3

32,980

3

31,891

3

Other

2,545

2,277

2,725

Total consumer loans

35,366

3

35,257

3

34,616

3

Commercial loans:

Commercial business loans

122,822

10

108,644

9

72,890

6

SBA PPP loans

1,320

5,934

1

95,633

9

Total commercial loans

124,142

10

114,578

10

168,523

15

Total loans

1,207,395

100

%

1,152,033

100

%

1,111,705

100

%

Less:

Undisbursed portion of

construction loans in

process

(102,044

)

(100,719

)

(90,332

)

Deferred loan origination

fees

(3,951

)

(3,801

)

(6,339

)

Allowance for loan losses

(13,433

)

(13,433

)

(13,469

)

Total loans receivable, net

$

1,087,967

$

1,034,080

$

1,001,565

_______________________

(a)

Does not include one- to four-family loans held for sale totaling $700, $2,772 and $3,359 at June 30, 2022, March 31, 2022, and June 30, 2021, respectively.

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
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The following table provides a breakdown of commercial real estate (“CRE”) mortgage loans by collateral type as of June 30, 2022:

CRE Loan Portfolio Breakdown by Collateral

($ in thousands)

Collateral Type

Amount

Percent

of CRE

Portfolio

Percent of

Total Loan

Portfolio

Industrial warehouse

$

105,060

19

%

9

%

Medical/dental offices

71,874

14

6

Office buildings

70,931

13

6

Other retail buildings

45,894

9

4

Restaurants

30,718

6

2

Hotel/motel

25,915

5

2

Mini-storage

24,846

5

2

Convenience stores

21,844

4

2

Nursing homes

18,504

3

1

Mobile home parks

14,209

3

1

Shopping centers

10,596

2

1

Churches

8,097

1

1

Additional CRE

83,679

16

7

Total CRE

$

532,167

100

%

44

%

Timberland originated $128.90 million in loans during the quarter ended June 30, 2022, compared to $130.41 million for the preceding quarter and $146.60 million for the comparable quarter one year ago. 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 $11.61 million were sold compared to $16.88 million for the preceding quarter and $41.06 million for the comparable quarter one year ago. 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 $28.55 million, or 11%, to $298.10 million at June 30, 2022, from $269.55 million at March 31, 2022. The increase was primarily due to the purchase of additional U.S Treasury securities and mortgage-backed investment securities.

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 29.4% of total liabilities at June 30, 2022, compared to 34.3% at March 31, 2022, and 39.2% one year ago.

Deposits

Total deposits increased $7.69 million during the current quarter to $1.664 billion at June 30, 2022, from $1.656 billion at March 31, 2022. The quarter’s increase consisted of a $16.34 million increase in NOW checking account balances and a $2.39 million increase in non-interest account balances. These increases were partially offset by an $8.77 million decrease in savings account balances, a $1.07 million decrease in money market account balances and a $1.20 million decrease in certificates of deposit account balances.

Timberland Fiscal Q3 2022 Earnings

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Page 6

Deposit Breakdown

($ in thousands)

June 30, 2022

March 31, 2022

June 30, 2021

Amount

Percent

Amount

Percent

Amount

Percent

Non-interest-bearing demand

$

527,876

32

%

$

525,488

32

%

$

495,938

33

%

NOW checking

474,217

29

457,874

28

429,950

28

Savings

279,592

17

288,361

18

255,103

17

Money market

251,451

15

251,631

15

189,443

12

Money market – reciprocal

5,533

6,426

12,253

1

Certificates of deposit under $250

102,752

6

106,208

6

115,782

7

Certificates of deposit $250 and over

22,693

1

20,438

1

24,183

2

Total deposits

$ 1,664,114 100 % $ 1,656,426 100 % $ 1,522,652 100 %

Shareholders’ Equity and Capital Ratios

Total shareholders’ equity increased $2.05 million, or 1%, to $214.32 million at June 30, 2022, from $212.27 million at March 31, 2022. The increase in shareholders’ equity was primarily due to net income of $5.74 million for the quarter, which was partially offset by the payment of $1.83 million in dividends to shareholders, the repurchase of 58,678 shares of common stock for $1.50 million (an average price of $25.60 per share), and a $458,000 increase in the Company’s accumulated other comprehensive loss. Timberland had 263,491 shares available to be repurchased in accordance with the terms of its existing stock repurchase plan at June 30, 2022.

Timberland remains well capitalized with a total risk-based capital ratio of 19.82%, a Tier 1 leverage capital ratio of 10.72%, and a tangible common equity to tangible assets ratio (non-GAAP) of 10.59% at June 30, 2022.

Asset Quality

Timberland’s non-performing assets to total assets ratio improved to 0.13% at June 30, 2022, from 0.16% at March 31, 2022 and 0.14% one year ago. There were no net charge-offs for the current quarter compared to net charge-offs of $35,000 for the preceding quarter and net recoveries of $35,000 for the comparable quarter one year ago. No provisions for loan losses were made during the quarters ended June 30, 2022, March 31, 2022, and June 30, 2021.

The allowance for loan losses (“ALL”) as a percentage of loans receivable was 1.22% at June 30, 2022, compared to 1.28% at March 31, 2022 and 1.33% one year ago.

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 $295,000 at June 30, 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 1.25% (non-GAAP) at June 30, 2022.

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

June 30,

March 31,

June 30,

2022

2022

2021

ALL to loans receivable

1.22

%

1.28

%

1.33

%

ALL to loans receivable (excluding SBA PPP loans) (non-GAAP)

1.22

%

1.29

%

1.46

%

ALL to loans receivable (excluding SBA PPP loans and South Sound

Acquisition loans) (non-GAAP)

1.25

%

1.33

%

1.53

%

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased $414,000, or 14%, to $2.53 million at June 30, 2022, from $2.95 million at March 31, 2022, and decreased $410,000, or 14%, from $2.94 million one year ago. Non-

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accrual loans decreased $360,000, or 14%, to $2.29 million at June 30, 2022, from $2.65 million at March 31, 2022 and increased $262,000, or 13%, from $2.03 million one year ago.

Non-Accrual Loans

($ in thousands)

June 30, 2022

March 31, 2022

June 30, 2021

Amount

Quantity

Amount

Quantity

Amount

Quantity

Mortgage loans:

One- to four-family

$

393

2

$

578

3

$

411

2

Commercial

671

2

671

3

373

1

Land

651

3

723

4

169

2

Total mortgage loans

1,715

7

1,972

10

953

5

Consumer loans

Home equity and second

mortgage

260

2

269

2

545

6

Other

4

1

5

1

18

2

Total consumer loans

264

3

274

3

563

8

Commercial business loans

312

6

405

6

513

7

Total loans

$

2,291

16

$

2,651

19

$

2,029

20

At June 30, 2022, the OREO and other repossessed asset portfolio consisted of two individual land parcels that have been written down to a book value of $0. OREO and other repossessed assets were $157,000 at March 31, 2022 and June 30, 2021. One OREO property was sold during the quarter ended June 30, 2022.

OREO and Other Repossessed Assets

($ in thousands)

June 30, 2022

March 31, 2022

June 30, 2021

Amount

Quantity

Amount

Quantity

Amount

Quantity

Land

$

2

$

157

3

$

157

3

Total

$

2

$

157

3

$

157

3

Acquisition of South Sound Bank

On October 1, 2018, the Company completed the acquisition of South Sound Bank, a Washington-state chartered bank, headquartered in Olympia, Washington (“South Sound Acquisition”). The Company acquired 100% of the outstanding common stock of South Sound Bank, and South Sound Bank was merged into Timberland Bank and the Company. Pursuant to the terms of the merger agreement, South Sound Bank shareholders received 0.746 of a share of the Company’s common stock and $5.68825 in cash per share of South Sound Bank common stock. The Company issued 904,826 shares of its common stock (valued at $28,267,000 based on the Company’s closing stock price on September 30, 2018 of $31.24 per share) and paid $6,903,000 in cash in the transaction for total consideration paid of $35,170,000.

About Timberland Bancorp, Inc.

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 branches (including its main office in Hoquiam).

Disclaimer

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plan,

Timberland Fiscal Q3 2022 Earnings

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objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future economic performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to: the effect of the novel coronavirus of 2019 (“COVID-19”) pandemic, including the Company’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets which may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our loan loss reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; uncertainty regarding the future of the London Interbank Offered Rate (“LIBOR”), and the potential transition away from LIBOR toward new interest rate benchmarks; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Federal Reserve and our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or our bank subsidiary which could require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules including as a result of Basel III; the impact of the Dodd Frank Wall Street Reform and Consumer Protection Act and implementing regulations; our ability to attract and retain deposits; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our consolidated balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common and stock; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board (“FASB”), including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations; pricing, products and services including the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), the Consolidated Appropriations Act, 2021 (“CAA”), and the American Rescue Plan Act of 2021; and other risks detailed in our reports filed with the Securities and Exchange Commission.

Any of the forward-looking statements that we make in this press release and in the other public statements we make are based upon management’s beliefs and assumptions at the time they are made. We do not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements included in this report to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur and we caution readers not to place undue reliance on any forward-looking statements. These risks could cause our actual results for fiscal 2022 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us, and could negatively affect the Company’s consolidated financial condition and results of operations as well as its stock price performance.

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TIMBERLAND BANCORP INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

($ in thousands, except per share amounts) (unaudited)

June 30,

March 31,

June 30,

2022

2022

2021

Interest and dividend income

Loans receivable

$

12,628

$

12,620

$

13,298

Investment securities

1,016

590

292

Dividends from mutual funds, FHLB stock and other investments

25

27

28

Interest bearing deposits in banks

958

283

247

Total interest and dividend income

14,627

13,520

13,865

Interest expense

Deposits

645

625

690

Borrowings

2

18

Total interest expense

645

627

708

Net interest income

13,982

12,893

13,157

Provision for loan losses

Net interest income after provision for loan losses

13,982

12,893

13,157

Non-interest income

Service charges on deposits

1,052

1,014

948

ATM and debit card interchange transaction fees

1,345

1,247

1,363

Gain on sales of loans, net

258

416

1,607

Bank owned life insurance (“BOLI”) net earnings

151

152

150

Valuation allowance on loan servicing rights, net

(179

)

Recoveries on investment securities, net

5

3

6

Other

291

251

371

Total non-interest income, net

3,102

3,083

4,266

Non-interest expense

Salaries and employee benefits

5,243

5,192

4,554

Premises and equipment

898

988

995

Advertising

187

161

162

OREO and other repossessed assets, net

(2

)

2

5

ATM and debit card processing

515

450

464

Postage and courier

140

164

141

State and local taxes

265

235

284

Professional fees

580

322

262

FDIC insurance expense

123

126

100

Loan administration and foreclosure

180

96

148

Data processing and telecommunications

698

669

627

Deposit operations

316

262

289

Amortization of core deposit intangible (“CDI”)

79

79

90

Other, net

652

587

492

Total non-interest expense, net

9,874

9,333

8,613

Income before income taxes

7,210

6,643

8,810

Provision for income taxes

1,472

1,316

1,786

Net income

$

5,738

$

5,327

$

7,024

Net income per common share:

Basic

$

0.69

$

0.64

$

0.84

Diluted

0.69

0.63

0.83

Weighted average common shares outstanding:

Basic

8,279,436

8,337,407

8,365,350

Diluted

8,349,859

8,421,875

8,465,393

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
Page 10

TIMBERLAND BANCORP INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Nine Months Ended

($ in thousands, except per share amounts) (unaudited)

June 30,

June 30,

2022

2021

Interest and dividend income

Loans receivable

$

37,870

$

39,406

Investment securities

2,012

877

Dividends from mutual funds, FHLB stock and other investments

80

83

Interest bearing deposits in banks

1,528

816

Total interest and dividend income

41,490

41,182

Interest expense

Deposits

1,902

2,358

Borrowings

17

76

Total interest expense

1,919

2,434

Net interest income

39,571

38,748

Provision for loan losses

Net interest income after provision for loan losses

39,571

38,748

Non-interest income

Service charges on deposits

2,979

2,943

ATM and debit card interchange transaction fees

3,868

3,755

Gain on sales of loans, net

1,337

5,367

BOLI net earnings

457

445

Valuation recovery on loan servicing rights, net

119

23

Recoveries on investment securities, net

16

14

Other

851

1,164

Total non-interest income, net

9,627

13,711

Non-interest expense

Salaries and employee benefits

15,606

13,944

Premises and equipment

2,814

2,949

Advertising

513

472

OREO and other repossessed assets, net

(18

)

(89

)

ATM and debit card processing

1,429

1,341

Postage and courier

440

428

State and local taxes

754

822

Professional fees

1,173

675

FDIC insurance expense

377

301

Loan administration and foreclosure

380

319

Data processing and telecommunications

1,980

1,868

Deposit operations

878

818

Amortization of CDI

237

271

Other, net

1,909

1,455

Total non-interest expense, net

28,472

25,574

Income before income taxes

20,726

26,885

Provision for income taxes

4,176

5,320

Net income

$

16,550

$

21,565

Net income per common share:

Basic

$

1.99

$

2.59

Diluted

1.97

2.55

Weighted average common shares outstanding:

Basic

8,324,371

8,336,590

Diluted

8,406,977

8,440,861

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
Page 11

TIMBERLAND BANCORP INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

($ in thousands, except per share amounts) (unaudited)

June 30,

March 31,

June 30,

2022

2022

2021

Assets

Cash and due from financial institutions

$

23,610

$

26,500

$

25,387

Interest-bearing deposits in banks

398,541

465,802

478,339

Total cash and cash equivalents

422,151

492,302

503,726

Certificates of deposit (“CDs”) held for investment, at cost

23,888

28,619

31,218

Investment securities:

Held to maturity, at amortized cost

228,196

189,405

52,314

Available for sale, at fair value

45,141

50,624

67,491

Investments in equity securities, at fair value

872

902

960

FHLB stock

2,194

2,194

2,103

Other investments, at cost

3,000

3,000

3,000

Loans held for sale

700

2,772

3,359

Loans receivable

1,101,400

1,047,513

1,015,034

Less: Allowance for loan losses

(13,433

)

(13,433

)

(13,469

)

Net loans receivable

1,087,967

1,034,080

1,001,565

Premises and equipment, net

22,154

21,878

22,519

OREO and other repossessed assets, net

157

157

BOLI

22,649

22,498

22,041

Accrued interest receivable

4,319

3,927

4,260

Goodwill

15,131

15,131

15,131

CDI

1,027

1,106

1,354

Loan servicing rights, net

3,220

3,390

3,548

Operating lease right-of-use assets

2,051

2,129

2,360

Other assets

3,135

3,356

3,354

Total assets

$

1,887,795

$

1,877,470

$

1,740,460

Liabilities and shareholders’ equity

Deposits: Non-interest-bearing demand

$

527,876

$

525,488

$

495,938

Deposits: Interest-bearing

1,136,238

1,130,938

1,026,714

Total deposits

1,664,114

1,656,426

1,522,652

Operating lease liabilities

2,135

2,210

2,432

FHLB borrowings

5,000

Other liabilities and accrued expenses

7,227

6,565

6,884

Total liabilities

1,673,476

1,665,201

1,536,968

Shareholders’ equity

Common stock, $.01 par value; 50,000,000 shares authorized;

8,249,448 shares issued and outstanding – June 30, 2022

8,305,826 shares issued and outstanding – March 31, 2022

8,353,969 shares issued and outstanding – June 30, 2021

39,585

40,988

42,624

Retained earnings

175,299

171,388

160,739

Accumulated other comprehensive income (loss)

(565

)

(107

)

129

Total shareholders’ equity

214,319

212,269

203,492

Total liabilities and shareholders’ equity

$

1,887,795

$

1,877,470

$

1,740,460

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
Page 12

KEY FINANCIAL RATIOS AND DATA

Three Months Ended

($ in thousands, except per share amounts) (unaudited)

June 30,

March 31,

June 30,

2022

2022

2021

PERFORMANCE RATIOS:

Return on average assets (a)

1.22

%

1.16

%

1.63

%

Return on average equity (a)

10.80

%

10.10

%

14.02

%

Net interest margin (a)

3.11

%

2.95

%

3.22

%

Efficiency ratio

57.80

%

58.42

%

49.43

%

Nine Months Ended

June 30,

June 30,

2022

2021

PERFORMANCE RATIOS:

Return on average assets (a)

1.19

%

1.74

%

Return on average equity (a)

10.48

%

14.76

%

Net interest margin (a)

2.99

%

3.30

%

Efficiency ratio

57.87

%

48.75

%

Three Months Ended

June 30,

March 31,

June 30,

ASSET QUALITY RATIOS AND DATA:

2022

2022

2021

Non-accrual loans

$

2,291

$

2,651

$

2,029

Loans past due 90 days and still accruing

Non-performing investment securities

114

127

179

OREO and other repossessed assets

157

157

Total non-performing assets (b)

$

2,405

$

2,935

$

2,365

Non-performing assets to total assets (b)

0.13

%

0.16

%

0.14

%

Net charge-offs (recoveries) during quarter

$

$

35

$

(35

)

ALL to non-accrual loans,

586

%

507

%

664

%

ALL to loans receivable (c)

1.22

%

1.28

%

1.33

%

ALL to loans receivable (excluding SBA PPP loans) (d) (non-GAAP)

1.22

%

1.29

%

1.46

%

ALL to loans receivable (excluding SBA PPP loans and South Sound

Acquisition loans) (d) (e) (non-GAAP)

1.25

%

1.33

%

1.53

%

Troubled debt restructured loans on accrual status (f)

$

2,484

$

2,496

$

2,380

CAPITAL RATIOS:

Tier 1 leverage capital

10.72

%

10.86

%

11.03

%

Tier 1 risk-based capital

18.57

%

19.50

%

21.34

%

Common equity Tier 1 risk-based capital

18.57

%

19.50

%

21.34

%

Total risk-based capital

19.82

%

20.75

%

22.60

%

Tangible common equity to tangible assets (non-GAAP)

10.59

%

10.53

%

10.85

%

BOOK VALUES:

Book value per common share

$

25.98

$

25.56

$

24.36

Tangible book value per common share (g)

24.02

23.60

22.39

________________________________________________

(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 $1,320, $5,934 and $95,633 at June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

(e) Does not include loans acquired in the South Sound Acquisition totaling $21,431, $28,549 and $40,622 at June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

(f) Does not include troubled debt restructured loans totaling $158, $172 and $187 reported as non-accrual loans at June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

(g) Tangible common equity divided by common shares outstanding (non-GAAP).

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
Page 13

AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY

($ in thousands)

(unaudited)

For the Three Months Ended

June 30, 2022

March 31, 2022

June 30, 2021

Amount

Rate

Amount

Rate

Amount

Rate

Assets

Loans receivable and loans held for sale

$

1,072,933

4.71

%

$

1,029,582

4.90

%

$

1,032,591

5.15

%

Investment securities and FHLB stock (1)

263,595

1.58

209,868

1.18

115,839

1.10

Interest-earning deposits in banks and CDs

460,657

0.83

510,211

0.22

487,508

0.20

Total interest-earning assets

1,797,185

3.26

1,749,661

3.09

1,635,938

3.39

Other assets

85,470

84,252

87,638

Total assets

$

1,882,655

$

1,833,913

$

1,723,576

Liabilities and Shareholders’ Equity

NOW checking accounts

$

462,085

0.14

%

$

441,259

0.13

%

$

416,234

0.13

%

Money market accounts

258,240

0.30

244,250

0.29

196,187

0.29

Savings accounts

284,659

0.08

277,888

0.08

253,147

0.08

Certificates of deposit accounts

125,132

0.75

128,588

0.80

141,301

1.02

Total interest-bearing deposits

1,130,116

0.23

1,091,985

0.23

1,006,869

0.27

Borrowings

677

1.18

5,769

1.25

Total interest-bearing liabilities

1,130,116

0.23

1,092,662

0.23

1,012,638

0.28

Non-interest-bearing demand deposits

529,770

521,284

499,383

Other liabilities

10,170

9,072

11,217

Shareholders’ equity

212,599

210,895

200,338

Total liabilities and shareholders’ equity

$

1,882,655

$

1,833,913

$

1,723,576

Interest rate spread

3.03

%

2.86

%

3.11

%

Net interest margin (2)

3.11

%

2.95

%

3.22

%

Average interest-earning assets to

average interest-bearing liabilities

159.03

%

160.13

%

161.55

%

_____________________________________

(1) Includes other investments

(2) Net interest margin = annualized net interest income /

average interest-earning assets

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
Page 14

AVERAGE BALANCES, YIELDS, AND RATES

($ in thousands)

(unaudited)

For the Nine Months Ended

June 30, 2022

June 30, 2021

Amount

Rate

Amount

Rate

Assets

Loans receivable and loans held for sale

$

1,033,173

4.89

%

$

1,035,733

5.07

%

Investment securities and FHLB stock (1)

211,671

1.32

103,821

1.23

Interest-earning deposits in banks and CDs

517,323

0.39

427,881

0.25

Total interest-earning assets

1,762,167

3.14

1,567,435

3.50

Other assets

84,426

85,636

Total assets

$

1,846,593

$

1,653,071

Liabilities and Shareholders’ Equity

NOW checking accounts

$

448,028

0.13

%

$

396,140

0.16

%

Money market accounts

241,734

0.29

181,115

0.30

Savings accounts

275,684

0.08

237,456

0.08

Certificates of deposit accounts

128,784

0.79

147,530

1.20

Total interest-bearing deposits

1,094,230

0.23

962,241

0.33

Borrowings

1,909

1.19

8,592

1.17

Total interest-bearing liabilities

1,096,139

0.23

970,833

0.34

Non-interest-bearing demand deposits

530,038

476,628

Other liabilities

9,938

10,757

Shareholders’ equity

210,478

194,853

Total liabilities and shareholders’ equity

$

1,846,593

$

1,653,071

Interest rate spread

2.91

%

3.16

%

Net interest margin (2)

2.99

%

3.30

%

Average interest-earning assets to

average interest-bearing liabilities

160.76

%

161.45

%

_____________________________________

(1) Includes other investments

(2) Net interest margin = annualized net interest income /

average interest-earning assets

Timberland Fiscal Q3 2022 Earnings

July 26, 2022
Page 15

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)

June 30, 2022

March 31, 2022

June 30, 2021

Shareholders’ equity

$

214,319

$

212,269

$

203,492

Less goodwill and CDI

(16,158

)

(16,237

)

(16,485

)

Tangible common equity

$

198,161

$

196,032

$

187,007

Total assets

$

1,887,795

$

1,877,470

$

1,740,460

Less goodwill and CDI

(16,158

)

(16,237

)

(16,485

)

Tangible assets

$

1,871,637

$

1,861,233

$

1,723,975

Disclaimer

Timberland Bancorp Inc. published this content on 28 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2022 18:47:04 UTC.

Publicnow 2022

All news about TIMBERLAND BANCORP, INC.

Sales 2021 69,0 M

Net income 2021 27,6 M

Net cash 2021 601 M

P/E ratio 2021 8,84x
Yield 2021 2,87%
Capitalization 212 M
212 M
EV / Sales 2020 -3,38x
EV / Sales 2021 -5,21x
Nbr of Employees 282
Free-Float 87,5%

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