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TIMBERLAND BANCORP INC (TSBK)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 EPS was $0.85, down 1% QoQ but up 21% YoY; net income was $6.76M, down 2% QoQ but up 18% YoY, driven by net interest margin expansion to 3.79% (+15 bps QoQ, +31 bps YoY) .
  • Operating revenue rose to $19.90M (+1% QoQ, +9% YoY) as funding costs declined and asset yields improved; efficiency ratio improved to 56.25% (vs 56.27% QoQ, 60.22% YoY) .
  • Board raised the quarterly cash dividend 4% to $0.26 per share (50th consecutive quarterly dividend), reinforcing capital strength and cash return discipline .
  • Credit metrics remained solid: non-performing assets/total assets improved to 0.13%, net charge-offs were < $1,000; however, “Substandard” loans rose to $23.51M from $2.12M due to an isolated borrower legal issue (both loans performing and well-collateralized), a watch item for investors .
  • Deposits increased $20.41M QoQ to $1.65B, with mix shifts toward CDs and NOW checking; liquidity remained strong with $675M secured borrowing capacity and only ~18% uninsured/uncollateralized deposits .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expansion: “During the second fiscal quarter our net interest margin continued to improve, expanding 15 basis points to 3.79%… driven by a reduction in funding costs” — CFO Marci Basich .
  • Capital returns and consistency: “Our Board of Directors announced a 4% increase to the quarterly cash dividend to $0.26 per share… This represents the 50th consecutive quarter Timberland will have paid a cash dividend” — President & COO Jonathan Fischer .
  • Profitability and tangible book value trending upward: “All profitability metrics improved compared to the year ago quarter, and tangible book value per share (non-GAAP) continued to trend upward” — CEO Dean Brydon .

What Went Wrong

  • Higher credit provisioning: Provision for credit losses on loans increased to $237K (vs $52K prior quarter), reflecting portfolio growth and mix shifts .
  • Substandard loan grades jumped: Loans graded “Substandard” increased to $23.51M (from $2.12M QoQ), tied to two loans for one borrower facing an external legal issue; management views it as isolated, with collateral strength cited .
  • Slight QoQ decline in earnings: Net income and EPS down 2% and 1% QoQ respectively, as the NIM tailwind was offset by higher provision and modestly higher expenses .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
EPS (Diluted)$0.79 $0.86 $0.85
Net Income ($USD Millions)$6.36 $6.86 $6.76
Operating Revenue ($USD Millions)$19.48 $19.67 $19.90
Net Interest Margin %3.58% 3.64% 3.79%
Efficiency Ratio %56.79% 56.27% 56.25%
ROA % (annualized)1.32% 1.41% 1.43%
ROE % (annualized)10.43% 11.03% 10.95%

Balance Sheet and KPIs (Quarter-End)

MetricQ4 2024Q2 2025
Total Assets ($USD Billions)$1.91 $1.93
Total Deposits ($USD Billions)$1.63 $1.65
Net Loans Receivable ($USD Billions)$1.41 $1.42
Borrowings ($USD Millions)$20.0 $20.0
Non-Performing Assets/Total Assets %0.16% 0.13%
Non-Accrual Loans ($USD Millions)$2.733 $2.327
ACL to Loans Receivable %1.21% 1.22%
Tangible Book Value per Share ($)$29.37 $29.99

Loan Portfolio Composition

CategoryDec 31, 2024 Amount ($000)Dec 31, 2024 %Mar 31, 2025 Amount ($000)Mar 31, 2025 %
One- to four-family306,443 20% 315,421 21%
Multi-family177,861 12% 178,590 12%
Commercial RE597,054 39% 602,248 40%
Construction (custom/owner-builder)124,104 8% 114,401 7%
Construction (spec 1–4 family)8,887 1% 9,791 1%
Construction (commercial)22,841 2% 22,352 1%
Construction (multi-family)48,940 3% 46,602 3%
Construction (land development)15,977 1% 15,032 1%
Land30,538 2% 32,301 2%
Consumer (home equity & second)48,851 3% 47,458 3%
Consumer (other)2,889 —2,375 —
Commercial business loans135,312 9% 131,243 9%
Total Loans1,519,901 100% 1,517,970 100%
Net Loans Receivable1,411,819 —1,420,074 —

Deposit Mix

CategoryDec 31, 2024 Amount ($000)Dec 31, 2024 %Mar 31, 2025 Amount ($000)Mar 31, 2025 %
Non-interest-bearing demand402,911 25% 407,811 25%
NOW checking323,412 20% 333,325 20%
Savings206,845 13% 207,857 13%
Money market311,413 19% 300,552 18%
CDs < $250K212,764 13% 227,137 14%
CDs ≥ $250K122,997 7% 124,009 7%
Brokered CDs50,074 3% 50,139 3%
Total Deposits1,630,416 100% 1,650,830 100%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly cash dividend per shareQ2 FY2025$0.25 (Q1 FY2025 dividend) $0.26 Raised 4%
Revenue/margins/OpEx/tax rate guidanceQ2 FY2025None providedNone providedMaintained “no formal guidance”

Earnings Call Themes & Trends

Note: No earnings call transcript was available; analysis reflects press releases and 8‑K disclosures [ListDocuments earnings-call-transcript: none].

TopicPrevious Mentions (Q4 FY2024 & Q1 FY2025)Current Period (Q2 FY2025)Trend
Net Interest Margin and Funding CostsNIM expanded to 3.58% in Q4; cost of interest-bearing liabilities rose to 2.70%; Q1 NIM expanded to 3.64% on reduced funding costs (−8 bps) NIM expanded to 3.79%; cost of interest-bearing liabilities declined to 2.47% (−15 bps QoQ) Improving NIM; easing funding costs
Deposit Mix and LiquidityQ4 deposits +$19M, liquidity ~14.7% of liabilities; Q1 deposits −$17M, liquidity 15.0% Deposits +$20.41M; liquidity 16.9% of liabilities; 18% uninsured/unsecured deposits Stronger liquidity; favorable deposit mix shift toward CDs/NOW
Asset QualityQ4 NPAs/Assets 0.20%; non-accrual loans $3.885M; Q1 NPAs/Assets 0.16%; non-accrual $2.733M NPAs/Assets 0.13%; non-accrual $2.327M; Substandard loans spiked to $23.51M on isolated borrower legal issue (performing, well-collateralized) Headline watch: substandard surge amid otherwise solid credit
Loan Growth and OriginationQ4: net loans +$24.5M, originations $48.8M; Q1: net loans −$9.7M, originations $72.1M Net loans +$8.26M; originations $56.76M; secondary sales $5.17M Moderate growth; active secondary market sales
Capital and TBVTBV/share rose to $28.87 (Q4); $29.37 (Q1) TBV/share increased to $29.99 Continuing upward trajectory

Management Commentary

  • CEO: “Our second fiscal quarter operating results were strong, highlighted by net interest margin expansion and modest balance sheet growth… All profitability metrics improved compared to the year ago quarter, and tangible book value per share (non-GAAP) continued to trend upward.”
  • President & COO: “As a result of Timberland’s solid earnings and strong capital position, our Board of Directors announced a 4% increase to the quarterly cash dividend to $0.26 per share… This represents the 50th consecutive quarter Timberland will have paid a cash dividend.”
  • CFO: “The improvement [in NIM] was primarily driven by a reduction in funding costs as the weighted average cost of interest-bearing liabilities decreased by 15 basis points during the quarter. Total deposits increased $20 million, or 1% during the quarter…”

Q&A Highlights

  • No earnings call transcript or Q&A session was filed for Q2 FY2025; investor communication occurred via press release and 8‑K with investor presentation exhibit .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY2025 was unavailable for EPS and revenue (limited small-cap coverage). We attempted to retrieve consensus, but the dataset did not provide mean values or estimate counts for Q2 FY2025; thus, comparisons vs consensus cannot be made this quarter [functions.GetEstimates Q2 2025 returned no consensus fields].

Key Takeaways for Investors

  • NIM tailwinds and funding cost relief are driving margin expansion; if deposit mix continues shifting toward lower-cost categories, NIM could remain resilient despite rate volatility .
  • Dividend increase and 50-quarter streak signal durable capital generation; TBV accretion continues, supporting downside protection and optionality for ongoing buybacks .
  • Credit quality remains strong on core metrics (lower NPAs, minimal charge-offs), but the spike in “Substandard” grades warrants monitoring; management asserts collateral coverage and an isolated borrower legal issue .
  • Deposit growth and liquidity capacity (FHLB/Fed lines of $675M) reduce contingency funding risk; uninsured deposits at ~18% are manageable for a community bank profile .
  • Operating leverage remains visible with efficiency ratio improvement; continued discipline on OpEx is key to sustaining ROA/ROE above peers .
  • Loan origination activity is healthy with secondary market sales aiding non-interest income; CRE concentrations look diversified by collateral type, with limited non-accruals in key categories .
  • Near-term trading implication: dividend raise and NIM expansion are positive catalysts; watch subsequent disclosures regarding substandard loans for any signs of migration to non-accrual or specific loss provisioning .