Timberland's Net Interest Margin Widens to 3.96%

The Tip Desk · November 2, 2026 · 4 min read

Fourth-quarter net interest income rose 5% to $19.66 million as the margin expanded 11 basis points, reversing the March-quarter compression.

Timberland Bancorp (TSBK), the holding company for Timberland Bank, reported net interest income of $19.66 million for the quarter ended September 30, 2026, up 5% from $18.81 million in the prior quarter. Net interest margin widened 11 basis points to 3.96% from 3.85%, after a 4 basis point expansion in the June quarter from 3.81% and reversing the 4 basis point compression recorded in the March quarter.

The company said the net interest income increase was driven by an $11.46 million rise in average interest-earning assets, a nine-basis-point increase in the weighted average yield on interest-bearing assets, and a one-basis-point decline in the weighted average cost of interest-bearing liabilities. Operating revenue (net interest income before the provision for credit losses plus non-interest income) rose 5% to $22.79 million from $21.79 million, primarily from higher interest income on loans receivable and, to a lesser extent, higher non-interest income, partially offset by lower interest income on interest-bearing deposits in banks.

Net income was $8.11 million, or $1.04 a share, up 5% and 6% from the preceding quarter’s $7.72 million, or $0.98 a share. Return on average equity was 11.72% and return on average assets 1.56%. Versus the year-ago quarter, net income was $8.45 million, or $1.07 a share; the company noted that period included a $1.04 million bank-owned life insurance benefit claim. For the full fiscal year ended September 30, 2026, net income was $31.17 million, or $3.96 a share, up 7% and 8% from $29.16 million, or $3.67 a share, a year earlier.

Net loans receivable grew 2% to $1.53 billion from $1.50 billion, after 3% growth in the prior quarter. The company said the increase was led by an $18.19 million rise in multi-family loans, a $6.33 million rise in one- to four-family loans, and a $3.12 million rise in land loans. Total deposits increased less than 1% to $1.77 billion. Non-interest-bearing demand deposits rose $11.59 million to $422.56 million, or 24% of deposits, while NOW checking fell $7.88 million and certificates of deposit fell $2.99 million. Total assets were $2.06 billion.

A $475,000 provision for credit losses on loans was recorded, down from $600,000 in the preceding quarter. Net charge-offs were $1.07 million versus net recoveries of $1,000 in the prior quarter. The company said the charge-off increase was primarily the result of charging off specific reserves already set up on several loans, including $436,000 on a participation loan. Non-performing assets to total assets declined to 0.42% from 0.43%. Non-accrual loans fell $163,000 to $8.39 million and substandard loans fell $271,000 to $8.39 million. The allowance for credit losses on loans was 1.21% of loans receivable.

Non-interest income increased 4% to $3.12 million from $2.99 million, primarily due to a $99,000 increase in BOLI net earnings. Operating expenses rose 6% to $12.29 million from $11.64 million, primarily from higher salary and employee benefits and ATM and debit card processing expense. The efficiency ratio was 53.94% versus 53.40%. The effective income tax rate was 19.5%.

The board raised the quarterly cash dividend 3% to $0.31 a share, the 56th consecutive quarterly dividend, after a 3% increase to $0.30 in the prior quarter. The company repurchased 40,395 shares for $1.85 million. Shareholders’ equity rose 1% to $276.31 million. Total risk-based capital was 20.86%, Tier 1 leverage 12.91%, and tangible common equity to tangible assets 12.74%. Book value per share was $35.51 and tangible book value $33.54. Liquidity remained strong, with $5 million in borrowings and $810 million of additional secured borrowing capacity through the FHLB and the Federal Reserve.