Timberland Bancorp, Inc.

What they do

Timberland Bancorp operates through its wholly-owned subsidiary, Timberland Bank, which opened in 1915 and provides a full range of lending and deposit services through 23 branches across Grays Harbor, Pierce, Thurston, King, Kitsap, and Lewis counties, Washington. Lending activities are concentrated on real estate secured loans, including residential and commercial/multi-family construction, one-to-four family residential, multi-family, commercial real estate, and land loans, as well as commercial business and consumer loans. The bank also originates adjustable-rate residential mortgage loans, some of which do not qualify for sale in the secondary market, and offers a variety of savings products to retail and business customers.

Revenue drivers

• Net interest income — Primary revenue driver, derived from the spread between interest earned on loans and investments and interest paid on deposits and borrowings. Net interest margin was 3.85% for the June 2026 quarter.
• Commercial and residential real estate lending — Includes construction, multi-family, one-to-four family, and commercial real estate loans. Net loans were $1.46 billion at September 30, 2025, and grew 3% quarter-over-quarter and 4% year-over-year in the June 2026 quarter.
• Deposit services — Generates fee income through service charges on deposit accounts, ATM and debit card interchange fees, and escrow fees. Total deposits were $1.72 billion at September 30, 2025, and grew 1% from the prior quarter and 6% year-over-year in June 2026.
• Non-interest income items — Includes gains on sales of loans, BOLI cash surrender value increases and death benefits, servicing income, and other operating income. This supplements net interest income but is not the primary revenue source.

Recent performance

For the fiscal third quarter ended June 30, 2026, Timberland reported net income of $7.72 million, or $0.98 per diluted share, up from $7.10 million, or $0.90, in the year-ago quarter. For the first nine months of fiscal 2026, net income rose 11% to $23.07 million, or $2.92 per diluted share, from $20.72 million, or $2.60, in the prior-year period. Return on average assets was 1.51% and return on average equity was 11.42% for the quarter. Net interest margin expanded to 3.85% from 3.80% a year earlier, and the efficiency ratio improved to 53.40% from 54.48%. At June 30, 2026, total assets were $2.06 billion, with net loans up 3% from the prior quarter and 4% year-over-year.

Strategy

Management focuses on maintaining a disciplined funding mix and stable net interest margin, actively managing deposit pricing to mitigate interest rate headwinds. The bank aims for solid loan growth across its lending categories, with a continued emphasis on real estate secured lending. Management also seeks to grow deposits, with total deposits up 6% year-over-year in the June 2026 quarter. The company announced a 3% increase in its quarterly cash dividend to $0.30 per share, reflecting confidence in its long-term outlook and strong capital position.

Risks

• Concentrated geographic exposure — Substantially all loans are to businesses and individuals in Washington state, so downturns in the local economies of Grays Harbor, Pierce, Thurston, King, Kitsap, or Lewis counties could impair repayment capacity and slow growth.
• Interest rate risk — Changes in market interest rates and the yield curve, including FOMC actions, can materially affect net interest margin, funding costs, and asset values; the Federal Reserve reduced the target federal funds rate by 25 basis points after fiscal 2025 year-end.
• Credit risk from real estate concentration — The loan portfolio is heavily concentrated in real estate secured loans, so a decline in real estate values or an increase in delinquencies could lead to higher loan losses and an increased allowance for credit losses.
• Regulatory and operational risks — Regulatory examinations could result in enforcement actions that increase the ACL, require asset write-downs, or restrict capital, and the bank faces risks from technological changes, cybersecurity threats, and potential disruptions at third-party service providers.

Outlook

Management remains encouraged by the business model and believes it is well positioned heading into the end of the fiscal year, citing solid loan growth and stable credit quality with modest improvements in non-performing assets, delinquency, and substandard loans. The company plans to continue its disciplined approach to credit risk management and maintain a stable net interest margin. CEO Dean Brydon noted demand across lending categories has remained healthy, and the markets continue to offer solid growth opportunities.