| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 43.50 | 12 |
| Intrinsic value (DCF) | 31.58 | -19 |
| Graham-Dodd Method | 29.48 | -24 |
| Graham Formula | 71.94 | 85 |
Timberland Bancorp, Inc. (NASDAQ: TSBK) is a community-focused financial services provider operating through its subsidiary, Timberland Bank, in Washington state. Founded in 1915 and headquartered in Hoquiam, the company offers a comprehensive suite of banking products, including deposit accounts (checking, savings, money market, and CDs) and a diversified loan portfolio spanning residential, commercial real estate, construction, and consumer lending. With 24 branches across six Washington counties, Timberland Bancorp serves local businesses and individuals with personalized banking solutions. The bank maintains a strong regional presence in the Pacific Northwest, emphasizing relationship-based banking and community development. As a small-cap regional bank with a market capitalization of approximately $239 million, Timberland Bancorp competes in the highly fragmented U.S. regional banking sector while maintaining conservative risk management practices, as evidenced by its low beta of 0.44. The company's financial performance reflects steady profitability, with $70.9 million in revenue and $24.3 million net income in its most recent fiscal year.
Timberland Bancorp presents a conservative investment opportunity within the regional banking sector, offering stable returns with below-market volatility (β=0.443). The company demonstrates consistent profitability (EPS $3.01) and maintains a shareholder-friendly policy with a $1.00 annual dividend (3.3% yield at current prices). Its focus on Washington state provides geographic concentration benefits but also creates regional economic dependency risks. The loan portfolio shows healthy diversification across residential (38%), commercial real estate (32%), and construction lending (18%), though investors should monitor potential exposure to Pacific Northwest real estate cycles. With no reported capital expenditures and strong operating cash flow ($23M), the bank maintains financial flexibility. However, the small market cap and regional focus may limit growth prospects compared to larger regional peers. Valuation appears reasonable at ~10x earnings, but investors should weigh the trade-off between stability and growth potential in this community banking model.
Timberland Bancorp's competitive position rests on its deep community banking roots in Washington state, where it has operated for over a century. The bank's primary advantage lies in localized decision-making and relationship banking, allowing it to compete against larger regional banks with more personalized service. Its 24-branch network provides convenient access in secondary markets that may be underserved by national banks. The company maintains cost advantages through its efficient size (803k shares outstanding) and conservative balance sheet (low debt at $21.6M). However, its small scale limits technological investments compared to larger competitors, potentially hindering digital banking capabilities. Timberland's loan portfolio concentration in Washington real estate (88% of loans) creates both specialization benefits and geographic risk exposure. The bank's 0.44 beta suggests it has successfully insulated itself from some banking sector volatility through conservative underwriting. In the competitive Pacific Northwest banking landscape, Timberland occupies a middle position—larger than community banks but smaller than regional players like Columbia Banking System. Its challenge will be maintaining margins in a rising rate environment while competing for deposits against higher-yielding alternatives. The lack of geographic diversification beyond Washington could become a liability in economic downturns, though this focus currently allows for deeper local market penetration.