Second Fiscal Quarter Net Income of $5.33 Million
Quarterly Return on Average Equity of 10.10%
Loan Portfolio (Excluding PPP Loans) Increased 6% During Quarter
Announces $0.22 Quarterly Cash Dividend

HOQUIAM, Wash., April 26, 2022 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company"), the holding company for Timberland Bank (the "Bank"), today reported net income of $5.33 million, or $0.63 per diluted common share, for the quarter ended March 31, 2022. This compares to net income of $5.49 million, or $0.65 per diluted common share, for the preceding quarter and $7.25 million, or $0.86 per diluted common share, for the comparable quarter one year ago.

For the first six months of fiscal 2022, Timberland earned $10.81 million, or $1.28 per diluted common share, compared to $14.54 million or $1.73 per diluted common share for the first six months of fiscal 2021.

Timberland's Board of Directors declared a quarterly cash dividend to shareholders of $0.22 per share, payable on May 27, 2022, to shareholders of record on May 13, 2022.

"We are pleased to report strong growth during the past quarter," stated Michael Sand, CEO. "Net loans receivable, excluding Paycheck Protection Program loans ("PPP"), increased 5.7% (22.8% annualized) primarily due to increases in commercial real estate and commercial business loans originated within our western Washington market footprint. We continue to see opportunities for loan originations within our local markets and are pleased to observe reduced prepayment activity which has allowed loan originations to be more additive to net loans receivable."

"In addition to using excess liquidity to fund loan growth, we also deployed funds into short and moderate duration investments to supplement interest income," said Sand. "The Bank continues to be positioned to benefit from Federal Reserve actions to increase interest rates and we anticipate continued opportunities to invest excess liquidity during the next several quarters as the Fed begins reducing its balance sheet in conjunction with anticipated rate increases."

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

Earnings Highlights:

Net income was $5.33 million for the current quarter compared to $5.49 million for the preceding quarter and $7.25 million for the comparable quarter one year ago; EPS was $0.63 for the current quarter compared to $0.65 for the preceding quarter and $0.86 for the comparable quarter one year ago;
Net income was $10.81 million for the first six months of fiscal 2022 compared to $14.54 million for the first six months of fiscal 2021; EPS was $1.28 for the first six months of fiscal 2022 compared to $1.73 for the first six months of fiscal 2021;
Return on average equity ("ROE") and return on average assets ("ROA") for the current quarter were 10.10% and 1.16%, respectively;
Net interest margin ("NIM") was 2.95% for the current quarter compared to 2.92% for the preceding quarter and 3.21% for the comparable quarter one year ago; and
The efficiency ratio was 58.42% for the current quarter compared to 57.40% for the preceding quarter and 48.99% for the comparable quarter one year ago.

Balance Sheet Highlights:

Total assets increased 10% year-over-year and 3% from the prior quarter;
Total deposits increased 12% year-over-year and 3% from the prior quarter;
Net loans receivable (excluding SBA PPP loans) increased 15% year-over-year and 6% from the prior quarter;
Net loans receivable (including SBA PPP loans) increased 4% from the prior quarter;
Non-performing assets to total assets ratio improved to 0.16% from 0.17% at December 31, 2021; and
Book and tangible book (non-GAAP) values per common share increased to $25.56 and $23.60, respectively, at March 31, 2022.

Operating Results

Operating revenue (net interest income before the provision for loan losses plus non-interest income) decreased 1% to $15.98 million for the first fiscal quarter from $16.14 million for the preceding quarter and decreased 8% from $17.45 million for the comparable quarter one year ago. The decrease in operating revenue compared to the preceding quarter was primarily due to a $259,000 decrease in PPP loan income and a $247,000 decrease in gain on sales of loans. Operating revenue decreased 8% to $32.11 million for the first six months of fiscal 2022 from $35.04 million for the comparable period one year ago, primarily due to a $2.68 million decrease in gain on sales of loans and a $1.15 million decrease in PPP loan income.

Net interest income increased 2% to $12.89 million for the current quarter from $12.70 million for the preceding quarter and increased 3% from $12.57 million for the comparable quarter one year ago. Timberland's NIM for the current quarter was 2.95% compared to 2.92% for the preceding quarter and 3.21% for the comparable quarter one year ago. The NIM for the current 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 preceding quarter was increased by approximately four basis points due to the accretion of $57,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $114,000 in pre-payment penalties, non-accrual interest and late fees. The NIM for the comparable quarter one year ago was increased by approximately six basis points due to the accretion of $86,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $129,000 in pre-payment penalties, non-accrual interest and late fees. Net interest income was $25.59 million for both the first six months of fiscal 2022 and fiscal 2021. Timberland's net interest margin for the first six months of fiscal 2022 was 2.93% compared to 3.34% for the first six 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 March 31, 2022, Timberland had SBA PPP deferred loan origination fees of $199,000 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
	March 31, 2022		Dec. 31, 2021		March 31, 2021
Interest income	$	31	$	71	$	306
Loan origination fee accretion		708		927		1,143
Total SBA PPP loan income	$	739	$	998	$	1,449

No provision for loan losses was made during the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021.

Non-interest income decreased 10% to $3.08 million for the current quarter from $3.44 million for the preceding quarter and decreased 37% from $4.89 million for the comparable quarter one year ago. The decrease in non-interest income compared to the preceding quarter was primarily due to a $247,000 decrease in gain on sales of loans, a $119,000 decrease in the valuation recovery on loan servicing rights, and smaller decreases in several other categories. These decreases were partially offset by a $101,000 increase in service charges on deposits. The year-over-year decrease in non-interest income was primarily due to a $1.34 million decrease in gain on sales of loans and a $438,000 decrease in the valuation recovery on loan servicing rights. The decrease in gain on sales of loans was primarily due to a decrease in the dollar amount of fixed-rate one- to four-family loans originated and sold during the current quarter (as refinance demand slowed) and a decrease in the average pricing margin compared to the same period last year. Fiscal year-to-date non-interest income decreased 31% to $6.53 million from $9.45 million for the first six months of fiscal 2021, primarily due to a $2.68 million decrease in gain on sales of loans.

Total operating expenses for the current quarter increased $69,000, or 1%, to $9.33 million from $9.26 million for the preceding quarter and increased $782,000, or 9%, from $8.55 million for the comparable quarter one year ago. The increase in operating expenses compared to the preceding quarter was primarily due to a $73,000 increase in professional fee expense and smaller increases in several other expense categories. These increases were partially offset by smaller decreases in several expense categories. Fiscal year-to-date operating expenses increased 10% to $18.60 million from $16.96 million for the first six months of fiscal 2021. The year-to-date increase in operating expenses was primarily due to annual salary adjustments (effective October 1^st) and the hiring of additional lending personnel. The efficiency ratio for the current quarter was 58.42% compared to 57.40% for the preceding quarter and 48.99% for the comparable quarter one year ago. The efficiency ratio for the first six months of fiscal 2022 was 57.91% compared to 48.41% for the first six months of fiscal 2022.

The provision for income taxes for the current quarter decreased $73,000 to $1.32 million from $1.39 million for the preceding quarter, primarily due to lower taxable income. Timberland's effective income tax rate was 19.8% for the quarter ended March 31, 2022 compared to 20.2% for the quarter ended December 31, 2021 and 18.6% for the quarter ended quarter ended March 31, 2021. Timberland's effective income tax rate was 20.0% for the first six months of fiscal 2022 compared to 19.6% for the first six months of fiscal 2021.

Balance Sheet Management

Total assets increased $46.20 million, or 3%, to $1.88 billion at March 31, 2022 from $1.83 billion at December 31, 2021. The quarter's increase was primarily due to a $72.80 million increase in investment securities and CDs held for investment, a $40.07 million increase in net loans receivable, and smaller increases in several other categories. These increases were partially offset by a $66.02 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 $40.07 million, or 4%, to $1.03 billion at March 31, 2022 from $994.01 million at December 31, 2021. This increase was primarily due to a $26.12 million increase in commercial real estate loans, a $23.64 million increase in commercial business loans (non-PPP), a $5.29 million decrease in the undisbursed portion of construction loans in process, a $4.77 million increase in one- to four-family loans and smaller increases in other loan categories. These increases to net loans receivable were partially offset by a $15.46 million decrease in SBA PPP loans, a $5.45 million decrease in construction loans, and smaller decreases in several other loan categories.

Loan Portfolio

($ in thousands)

	March 31, 2022					December 31, 2021					March 31, 2021
	Amount			Percent		Amount			Percent		Amount			Percent
Mortgage loans:
One- to four-family (a)	$	133,925		12	%	$	129,151		12	%	$	117,184		10	%
Multi-family		82,526		7			84,180		7			92,435		8
Commercial		523,479		45			497,361		44			461,966		40
Construction - custom and
owner/builder		114,394		10			116,267		10			105,305		9
Construction - speculative one-to four-family		15,438		1			18,255		2			17,289		2
Construction - commercial		35,416		3			42,611		4			42,340		4
Construction - multi-family		64,141		6			54,710		5			44,266		4
Construction - land
development		10,687		1			13,680		1			2,238		--
Land		22,192		2			18,568		2			19,041		2
Total mortgage loans		1,002,198		87			974,783		87			902,064		79

Consumer loans:
Home equity and second
mortgage		32,980		3			34,375		3			32,026		3
Other		2,277		--			2,462		--			2,756		--
Total consumer loans		35,257		3			36,837		3			34,782		3

Commercial loans:
Commercial business loans		108,644		9			85,006		8			66,645		6
SBA PPP loans		5,934		1			21,397		2			138,175		12
Total commercial loans		114,578		10			106,403		10			204,820		18
Total loans		1,152,033		100	%		1,118,023		100	%		1,141,666		100	%
Less:
Undisbursed portion of
construction loans in
process		(100,719	)				(106,009	)				(90,550	)
Deferred loan origination
fees		(3,801	)				(4,539	)				(6,999	)
Allowance for loan losses		(13,433	)				(13,468	)				(13,434	)
Total loans receivable, net	$	1,034,080				$	994,007				$	1,030,683

_______________________

(a) Does not include one- to four-family loans held for sale totaling $2,772, $3,700 and $8,455 at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

The following table provides a breakdown of commercial real estate ("CRE") mortgage loans by collateral type as of March 31, 2022:

CRE Loan Portfolio Breakdown by Collateral

($ in thousands)

Collateral Type	Amount		Percent of CRE Portfolio		Percent of Total Loan Portfolio
Industrial warehouse	$	101,045	19	%	9	%
Office buildings		72,613	14		6
Medical/dental offices		65,500	12		5
Other retail buildings		47,518	9		4
Restaurants		29,532	6		3
Hotel/motel		26,152	5		2
Mini-storage		23,226	4		2
Convenience stores		22,645	4		2
Nursing homes		18,591	4		2
Shopping centers		10,655	2		1
Churches		8,173	2		1
Additional CRE		97,829	19		8
Total CRE	$	523,479	100	%	45	%

Timberland originated $130.41 million in loans during the quarter ended March 31, 2022, compared to $167.15 million for the comparable quarter one year ago and $178.84 million in loans for the preceding quarter. 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 $16.88 million were sold compared to $41.29 million for the comparable quarter one year ago and $22.56 million for the preceding quarter. 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 $72.80 million, or 37%, to $269.55 million at March 31, 2022, from $196.75 million at December 31, 2021. The increase was primarily due to the purchase of additional U.S Treasury securities, mortgage-backed investment securities, and CDs held in other financial institutions.

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 34.3% of total liabilities at March 31, 2022, compared to 39.5% at December 31, 2021, and 36.1% one year ago.

Deposits

Total deposits increased $49.80 million, or 3%, during the current quarter to $1.66 billion at March 31, 2022, from $1.61 billion at December 31, 2021. The quarter's increase consisted of a $35.60 million increase in money market account balances, an $18.94 million increase in savings account balances, and a $1.97 million increase in non-interest bearing account balances. These increases were partially offset by a $5.51 million decrease in certificates of deposit account balances and a $1.21 million decrease in NOW checking account balances.

Deposit Breakdown ($ in thousands)
	March 31, 2022							December 31, 2021					March 31, 2021
	Amount		Percent			Amount				Percent			Amount		Percent
Non-interest-bearing demand	$525,488		32		%	$523,518				33		%	$499,541		34		%
NOW checking		457,874	28				459,079			28				403,811	27
Savings		288,361	18				269,423			17				250,736	17
Money market		251,631	15				211,837			13				171,896	11
Money market – reciprocal		6,426	--				10,619			1				13,094	1
Certificates of deposit under $250		106,208	6				110,168			7				119,388	8
Certificates of deposit $250 and over		20,438	1				21,987			1				23,393	2
Total deposits	$1,656,426			100	%			$1,606,631	100		%			$1,481,859		100	%

Shareholders' Equity and Capital Ratios

Total shareholders' equity increased $1.89 million, or 1%, to $212.27 million at March 31, 2022, from $210.37 million at December 31, 2021. The increase in shareholders' equity was primarily due to net income of $5.33 million for the quarter, which was partially offset by the payment of $1.84 million in dividends to shareholders and the repurchase of 61,565 shares of common stock for $1.72 million (an average price of $27.88 per share). Timberland had 322,169 shares available to be repurchased on its existing stock repurchase plan at March 31, 2022.

Timberland remains well capitalized with a total risk-based capital ratio of 20.75% and a Tier 1 leverage capital ratio of 10.86% at March 31, 2022.

Asset Quality

Timberland's non-performing assets to total assets ratio was 0.16% at March 31, 2022, compared to 0.17% at December 31, 2021 and 0.16% one year ago. There were net charge-offs of $35,000 for the current quarter compared to net charge-offs of $1,000 for the preceding quarter and net recoveries of $2,000 for the comparable quarter one year ago. No provisions for loan losses were made during the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021.

Timberland has consistently worked with borrowers affected by the COVID-19 pandemic by offering loan deferral and forbearance plans during the pandemic. Deferrals were primarily approved for 90-day periods with interest continuing to accrue or with interest scheduled to be paid monthly. All borrowers that were granted COVID-19 deferrals have resumed making regular payments as of March 31, 2022.

The allowance for loan losses ("ALL") as a percentage of loans receivable was 1.28% at March 31, 2022, compared to 1.29% one year ago and 1.34% at December 31, 2021. If SBA PPP loans, which are 100% SBA guaranteed, are excluded, the ALL to loans receivable (excluding SBA PPP loans) at March 31, 2022 was 1.29% (non-GAAP).

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 $358,000 at March 31, 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 1.33% (non-GAAP) at March 31, 2022.

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

	March 31,		Dec. 31,		March 31,
	2022		2021		2021
ALL to loans receivable	1.28	%	1.34	%	1.29	%
ALL to loans receivable (excluding SBA PPP loans) (non-GAAP)	1.29	%	1.37	%	1.48	%
ALL to loans receivable (excluding SBA PPP loans and South Sound Acquisition loans) (non-GAAP)	1.33	%	1.41	%	1.56	%

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased $290,000, or 9%, to $2.95 million at March 31, 2022, from $3.24 million at December 31, 2021, and decreased $982,000, or 25%, from $3.93 million one year ago. Non-accrual loans decreased $202,000, or 7%, to $2.65 million at March 31, 2022, from $2.85 million at December 31, 2021 and increased $346,000, or 15%, from $2.31 million one year ago.

Non-Accrual Loans

($ in thousands)

	March 31, 2022			December 31, 2021			March 31, 2021
	Amount		Quantity	Amount		Quantity	Amount		Quantity
Mortgage loans:
One- to four-family	$578		3	$582		3	$415		2
Commercial		671	3		675	2		643	2
Land		723	4		676	3		173	2
Total mortgage loans		1,972	10		1,933	8		1,231	6

Consumer loans
Home equity and second
mortgage		269	2		456	4		539	6
Other		5	1		5	1		8	1
Total consumer loans		274	3		461	5		547	7

Commercial business loans		405	6		459	7		527	7
Total loans	$2,651		19	$2,853		20	$2,305		20

OREO and other repossessed assets were $157,000 at March 31, 2022, December 31, 2021 and March 31, 2021. At March 31, 2022, the OREO and other repossessed asset portfolio consisted of three individual land parcels. No OREO properties were sold during the quarter ended March 31, 2022.

OREO and Other Repossessed Assets

($ in thousands)

	March 31, 2022			December 31, 2021			March 31, 2021
	Amount		Quantity	Amount		Quantity	Amount		Quantity
Land	$	157	3	$	157	3	$	157	3
Total	$	157	3	$	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 24 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, 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.

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME		Three Months Ended
($ in thousands, except per share amounts) (unaudited)		March 31,		Dec. 31,			March 31,
		2022		2021			2021
	Interest and dividend income
	Loans receivable	$	12,620	$	12,622		$	12,790
	Investment securities		590		405			284
	Dividends from mutual funds, FHLB stock and other investments		27		27			27
	Interest bearing deposits in banks		283		288			259
	Total interest and dividend income		13,520		13,342			13,360

	Interest expense
	Deposits		625		631			764
	Borrowings		2		15			29
	Total interest expense		627		646			793
	Net interest income		12,893		12,696			12,567
	Provision for loan losses		--		--			--
	Net interest income after provision for loan losses		12,893		12,696			12,567

	Non-interest income
	Service charges on deposits		1,014		913			941
	ATM and debit card interchange transaction fees		1,247		1,277			1,237
	Gain on sales of loans, net		416		663			1,758
	Bank owned life insurance ("BOLI") net earnings		152		154			146
	Valuation recovery on loan servicing rights, net		--		119			438
	Recoveries on investment securities, net		3		8			3
	Other		251		308			363
	Total non-interest income, net		3,083		3,442			4,886

	Non-interest expense
	Salaries and employee benefits		5,192		5,171			4,778
	Premises and equipment		988		928			998
	Advertising		161		166			155
	OREO and other repossessed assets, net		2		(18	)		(68	)
	ATM and debit card processing		450		464			445
	Postage and courier		164		136			149
	State and local taxes		235		255			255
	Professional fees		322		271			181
	FDIC insurance expense		126		128			105
	Loan administration and foreclosure		96		104			90
	Data processing and telecommunications		669		613			634
	Deposit operations		262		299			245
	Amortization of core deposit intangible ("CDI")		79		79			91
	Other, net		587		668			493
	Total non-interest expense, net		9,333		9,264			8,551

	Income before income taxes		6,643		6,874			8,902
	Provision for income taxes		1,316		1,389			1,651
	Net income	$	5,327	$	5,485		$	7,251

	Net income per common share:
	Basic	$	0.64	$	0.66		$	0.87
	Diluted		0.63		0.65			0.86

	Weighted average common shares outstanding:
	Basic		8,337,407		8,356,066			8,331,121
	Diluted		8,421,875		8,448,900			8,444,798

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME		Six Months Ended
($ in thousands, except per share amounts) (unaudited)		March 31,			March 31,
		2022			2021
	Interest and dividend income
	Loans receivable	$	25,242		$	26,108
	Investment securities		996			585
	Dividends from mutual funds, FHLB stock and other investments		54			55
	Interest bearing deposits in banks		571			569
	Total interest and dividend income		26,863			27,317

	Interest expense
	Deposits		1,257			1,668
	Borrowings		17			58
	Total interest expense		1,274			1,726
	Net interest income		25,589			25,591
	Provision for loan losses		--			--
	Net interest income after provision for loan losses		25,589			25,591

	Non-interest income
	Service charges on deposits		1,927			1,996
	ATM and debit card interchange transaction fees		2,523			2,393
	Gain on sales of loans, net		1,079			3,760
	Bank owned life insurance ("BOLI") net earnings		305			295
	Valuation recovery on loan servicing rights, net		119			202
	Recoveries on investment securities, net		11			8
	Other		561			791
	Total non-interest income, net		6,525			9,445

	Non-interest expense
	Salaries and employee benefits		10,363			9,391
	Premises and equipment		1,916			1,955
	Advertising		327			311
	OREO and other repossessed assets, net		(16	)		(94	)
	ATM and debit card processing		914			876
	Postage and courier		300			287
	State and local taxes		489			538
	Professional fees		593			412
	FDIC insurance expense		254			201
	Loan administration and foreclosure		200			171
	Data processing and telecommunications		1,282			1,240
	Deposit operations		561			529
	Amortization of CDI		158			181
	Other, net		1,256			963
	Total non-interest expense, net		18,597			16,961

	Income before income taxes		13,517			18,075
	Provision for income taxes		2,705			3,534
	Net income	$	10,812		$	14,541

	Net income per common share:
	Basic	$	1.30		$	1.75
	Diluted		1.28			1.73

	Weighted average common shares outstanding:
	Basic		8,346,839			8,322,210
	Diluted		8,435,536			8,428,595

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts) (unaudited)		March 31,			Dec. 31,			March 31,
		2022			2021			2021
Assets
Cash and due from financial institutions		$	26,500		$	20,539		$	21,707
Interest-bearing deposits in banks			465,802			537,789			411,635
	Total cash and cash equivalents		492,302			558,328			433,342

Certificates of deposit ("CDs") held for investment, at cost			28,619			24,648			39,674
Investment securities:
	Held to maturity, at amortized cost		189,405			114,600			36,465
	Available for sale, at fair value		50,624			56,552			69,184
Investments in equity securities, at fair value			902			946			957
FHLB stock			2,194			2,103			2,303
Other investments, at cost			3,000			3,000			3,000
Loans held for sale			2,772			3,700			8,455

Loans receivable			1,047,513			1,007,475			1,044,117
Less: Allowance for loan losses			(13,433	)		(13,468	)		(13,434	)
	Net loans receivable		1,034,080			994,007			1,030,683

Premises and equipment, net			21,878			22,108			22,763
OREO and other repossessed assets, net			157			157			157
BOLI			22,498			22,347			21,891
Accrued interest receivable			3,927			3,938			4,471
Goodwill			15,131			15,131			15,131
CDI			1,106			1,185			1,444
Loan servicing rights, net			3,390			3,524			3,604
Operating lease right-of-use assets			2,129			2,206			2,436
Other assets			3,356			2,795			3,284
	Total assets	$	1,877,470		$	1,831,275		$	1,699,244

Liabilities and shareholders' equity
Deposits: Non-interest-bearing demand		$	525,488		$	523,518		$	499,541
Deposits: Interest-bearing			1,130,938			1,083,113			982,318
	Total deposits		1,656,426			1,606,631			1,481,859

Operating lease liabilities			2,210			2,285			2,499
FHLB borrowings			--			5,000			10,000
Other liabilities and accrued expenses			6,565			6,984			6,343
	Total liabilities		1,665,201			1,620,900			1,500,701

Shareholders' equity
Common stock, $.01 par value; 50,000,000 shares authorized; 8,305,826 shares issued and outstanding – March 31, 2022 8,348,821 shares issued and outstanding – December 31, 2021 8,361,457 shares issued and outstanding – March 31, 2021			40,988			42,436			42,949
Retained earnings			171,388			167,897			155,473
Accumulated other comprehensive income (loss)			(107	)		42			121
	Total shareholders' equity		212,269			210,375			198,543
	Total liabilities and shareholders' equity	$	1,877,470		$	1,831,275		$	1,699,244

KEY FINANCIAL RATIOS AND DATA	Three Months Ended
($ in thousands, except per share amounts) (unaudited)		March 31,			Dec. 31,			March 31,
		2022			2021			2021
PERFORMANCE RATIOS:
Return on average assets (a)			1.16	%		1.20	%		1.75	%
Return on average equity (a)			10.10	%		10.55	%		14.89	%
Net interest margin (a)			2.95	%		2.92	%		3.21	%
Efficiency ratio			58.42	%		57.40	%		48.99	%

	Six Months Ended
		March 31,						March 31,
		2022						2021
PERFORMANCE RATIOS:			1.18	%					1.80	%
Return on average assets (a)			10.33	%					15.14	%
Return on average equity (a)			2.93	%					3.34	%
Net interest margin (a)			57.91	%					48.41	%
Efficiency ratio
		March 31,			Dec. 31,			March 31,
		2022			2021			2021
ASSET QUALITY RATIOS AND DATA:
Non-accrual loans		$	2,651		$	2,853		$	2,305
Loans past due 90 days and still accruing			--			--			--
Non-performing investment securities			127			140			188
OREO and other repossessed assets			157			157			157
Total non-performing assets (b)		$	2,935		$	3,150		$	2,650

Non-performing assets to total assets (b)			0.16	%		0.17	%		0.16	%
Net charge-offs (recoveries) during quarter		$	35		$	1		$	(2	)
ALL to non-accrual loans,			507	%		472	%		583	%
ALL to loans receivable (c)			1.28	%		1.34	%		1.29	%
ALL to loans receivable (excluding SBA PPP loans) (d) (non-GAAP)			1.29	%		1.37	%		1.48	%
ALL to loans receivable (excluding SBA PPP loans and South Sound Acquisition loans) (d) (e) (non-GAAP)			1.33	%		1.41	%		1.56	%
Troubled debt restructured loans on accrual status (f)		$	2,496		$	2,361		$	2,864

CAPITAL RATIOS:
Tier 1 leverage capital			10.86	%		10.81	%		11.19	%
Tier 1 risk-based capital			19.50	%		20.24	%		19.47	%
Common equity Tier 1 risk-based capital			19.50	%		20.24	%		19.47	%
Total risk-based capital			20.75	%		21.49	%		20.72	%
Tangible common equity to tangible assets (non-GAAP)			10.53	%		10.69	%		10.81	%

BOOK VALUES:
Book value per common share		$	25.56		$	25.20		$	23.75
Tangible book value per common share (g)			23.60			23.24			21.76

________________________________________________

(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 $5,934, $21,397 and $138,175 at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

(e) Does not include loans acquired in the South Sound Acquisition totaling $28,459, $31,907 and $46,626 at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

(f) Does not include troubled debt restructured loans totaling $172, $177 and $192 reported as non-accrual loans at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

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

AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY

($ in thousands)

(unaudited)

	For the Three Months Ended
	March 31, 2022					December 31, 2021						March 31, 2021
	Amount			Rate			Amount			Rate			Amount			Rate

Assets
Loans receivable and loans held for sale	$	1,029,582		4.90	%		$	997,358		5.06	%		$	1,044,476		4.90	%
Investment securities and FHLB stock (1)		209,868		1.18				162,077		1.07				101,675		1.23
Interest-earning deposits in banks and CDs		510,211		0.22				580,337		0.20				422,286		0.24
Total interest-earning assets		1,749,661		3.09				1,739,772		3.07				1,568,437		3.41
Other assets		84,252						83,563						85,203
Total assets	$	1,833,913					$	1,823,335					$	1,653,640

Liabilities and Shareholders' Equity
NOW checking accounts	$	441,259		0.13	%		$	440,744		0.13	%		$	394,612		0.16	%
Money market accounts		244,250		0.29				222,945		0.29				178,768		0.30
Savings accounts		277,888		0.08				264,651		0.08				236,504		0.08
Certificates of deposit accounts		128,588		0.80				132,590		0.83				146,065		1.19
Total interest-bearing deposits		1,091,985		0.23				1,060,930		0.24				955,949		0.32
Borrowings		677		1.18				5,000		1.20				10,003		1.17
Total interest-bearing liabilities		1,092,662		0.23				1,065,930		0.24				965,952		0.33

Non-interest-bearing demand deposits		521,284						538,865						482,528
Other liabilities		9,072						10,567						10,365
Shareholders' equity		210,895						207,973						194,795
Total liabilities and shareholders' equity	$	1,833,913					$	1,823,335					$	1,653,640

Interest rate spread				2.86	%					2.83	%					3.08	%
Net interest margin (2)				2.95	%					2.92	%					3.21	%
Average interest-earning assets to
average interest-bearing liabilities		160.13	%					163.22	%					162.37	%

_____________________________________

(1) Includes other investments

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

average interest-earning assets

AVERAGE BALANCES, YIELDS, AND RATES

($ in thousands)

(unaudited)

	For the Six Months Ended
	March 31, 2022					March 31, 2021
	Amount			Rate			Amount			Rate

Assets
Loans receivable and loans held for sale	$	1,013,293		4.98	%		$	1,037,304		5.03	%
Investment securities and FHLB stock (1)		185,710		1.13				97,812		1.31
Interest-earning deposits in banks and CDs		545,651		0.21				398,067		0.29
Total interest-earning assets		1,744,654		3.08				1,533,183		3.56
Other assets		83,908						84,635
Total assets	$	1,828,562					$	1,617,818

Liabilities and Shareholders' Equity
NOW checking accounts	$	440,999		0.13	%		$	386,093		0.17	%
Money market accounts		233,480		0.29				173,579		0.31
Savings accounts		271,197		0.08				229,610		0.08
Certificates of deposit accounts		130,611		0.81				150,645		1.29
Total interest-bearing deposits		1,076,287		0.23				939,927		0.36
Borrowings		2,862		1.19				10,002		1.16
Total interest-bearing liabilities		1,079,149		0.24				949,929		0.36

Non-interest-bearing demand deposits		530,171						465,251
Other liabilities		9,824						10,528
Shareholders' equity		209,418						192,110
Total liabilities and shareholders' equity	$	1,828,562					$	1,617,818

Interest rate spread				2.84	%					3.20	%
Net interest margin (2)				2.93	%					3.34	%
Average interest-earning assets to
average interest-bearing liabilities		161.67	%					161.40	%

_____________________________________

(1) Includes other investments

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

average interest-earning assets

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)	March 31, 2022			December 31, 2021			March 31, 2021

Shareholders' equity	$	212,269		$	210,375		$	198,543
Less goodwill and CDI		(16,237	)		(16,316	)		(16,575	)
Tangible common equity	$	196,032		$	194,059		$	181,968

Total assets	$	1,877,470		$	1,831,275		$	1,699,244
Less goodwill and CDI		(16,237	)		(16,316	)		(16,575	)
Tangible assets	$	1,861,233		$	1,814,959		$	1,682,669

Contact:

Michael R. Sand, CEO

Dean J. Brydon, President & CFO

(360) 533-4747

www.timberlandbank.com