Companies

Timberland Reverses Margin Squeeze and Restarts Loan Growth

The Tip Desk · July 29, 2026 · 3 min read

Net interest margin recovered 4 bps to 3.85% and net loans rose 3% to $1.50 billion in the quarter ended June 30, 2026.

Timberland Bancorp (TSBK), the Washington community-bank holding company, reversed a sequential squeeze in its net interest margin and restarted loan growth in the quarter ended June 30, 2026, after the prior period’s modest compression and a slight dip in the loan book.

Net interest margin recovered 4 bps to 3.85% from 3.81%, after a 4 bps sequential decline in the March quarter. Year-over-year NIM was 3.80%. The company said the margin was lifted about 2 bps by $82,000 of pre-payment penalties, non-accrual interest and late fees, plus $8,000 of fair-value discount accretion on acquired loans.

Net interest income rose 3% to $18.81 million from $18.24 million, reversing the prior quarter’s modest decline. The company attributed the increase to a $14.62 million rise in average interest-earning assets, a 5 bps higher weighted-average yield on interest-bearing assets, and a 2 bps lower cost of interest-bearing liabilities.

Net loans receivable increased 3% to $1.50 billion from $1.45 billion, reversing the prior quarter’s slight decline that Chief Executive Officer Dean Brydon had tied to higher loan payoffs. Commercial real estate loans rose $35.26 million and construction loans $30.48 million, while one- to four-family loans fell $11.58 million. Originations more than doubled to $133.67 million from $71.12 million.

Total deposits increased 1% to $1.76 billion from $1.74 billion, after 2% growth in the prior quarter. Non-interest-bearing demand deposits were $410.97 million, or 23% of the mix. Only 17% of deposits were uninsured or uncollateralized.

Net income rose 8% to $7.72 million, or $0.98 a share, from $7.13 million, or $0.90 a share, reversing the prior quarter’s 13% sequential decline. Return on average equity was 11.42% and return on average assets 1.51%. Operating revenue increased 4% to $21.79 million from $21.05 million.

The provision for credit losses on loans rose to $600,000 from $523,000, which the company said was primarily due to loan growth and changes in portfolio composition. The allowance for credit losses on loans was 1.27% of loans receivable.

Credit quality improved sequentially. Non-accrual loans decreased 9% to $8.56 million from $9.41 million, and loans graded substandard fell 9% to $8.66 million from $9.54 million. The non-performing assets to total assets ratio improved to 0.43% from 0.47%. Net recoveries were $1,000.

The efficiency ratio improved to 53.40% from 55.37%, as operating expenses declined less than 1% to $11.64 million from $11.66 million on lower salary and technology costs. Non-interest income increased 6% to $2.99 million from $2.81 million, including a $91,000 rise in BOLI net earnings after the company purchased $15.00 million of additional BOLI policies, lifting the BOLI balance 69% to $37.39 million.

The board raised the quarterly cash dividend 3% to $0.30 a share from $0.29, the 55th consecutive quarterly dividend, payable August 24, 2026. The company repurchased 70,000 shares for $2.83 million. Total risk-based capital was 20.87%.

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