Market Overview

Timberland Bancorp EPS Increases 16% Year-Over-Year to $0.36 for Third Fiscal Quarter of 2016

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  • Year-to-Date EPS Increases 38% to $1.05
  • Quarterly Dividend Increases 13%

HOQUIAM, Wash., July 26, 2016 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) ("Timberland" or "the Company") today reported net income of $2.55 million, or $0.36 per diluted common share, for its third fiscal quarter ended June 30, 2016.  This compares to net income of $2.16 million, or $0.31 per diluted common share, for the quarter ended June 30, 2015 and net income of $2.38 million, or $0.34 per diluted common share, for the quarter ended March 31, 2016.  

For the first nine months of fiscal 2016, Timberland's net income increased 40% to $7.46 million from the $5.34 million reported for the first nine months of fiscal 2015 and earnings per diluted common share increased 38% to $1.05 for the first nine months of fiscal 2016 from the $0.76 reported for the first nine months of fiscal 2015.

Timberland's Board of Directors also approved a 13% increase in the quarterly cash dividend to $0.09 per common share, payable on August 26, 2016 to shareholders of record on August 12, 2016.

"For the fifth consecutive quarter Timberland has recorded a return on equity ("ROE") exceeding 10% and a return on assets ("ROA") exceeding 1%," reported Michael R. Sand, President and CEO.  "Continued strong loan growth combined with above peer non-interest income and effective expense controls have resulted in an increase in the Company's ROE and ROA to 10.96% and 1.20%, respectively, for the quarter ended June 30, 2016.  Based on the Company's strong and consistent profitability, Timberland's Board declared a 13% increase in its dividend to $0.09 per share.  We continue to look forward to the December 2016 maturity of the first of three $15 million FHLB advances that will mature during our next fiscal year.  We plan to pay off the December advance which will reduce our monthly interest expense by, on average, $54,000 per month.  Paying off this advance will positively and materially contribute to the Company's already strong net interest margin.  In the aggregate the three advances maturing in our next fiscal year require interest payments of $1.85 million annually.  Their maturities in December of 2016, August of 2017 and September of 2017 will significantly reduce the Company's interest expense."     

Third Fiscal Quarter 2016 Highlights (at or for the period ended June 30, 2016, compared to June 30, 2015, or March 31, 2016):

  • EPS for the current quarter increased 16% to $0.36 from $0.31 for the comparable quarter one year ago;
  • EPS for the first nine months of fiscal 2016 increased 38% to $1.05 from $0.76 for the first nine months of fiscal 2015;
  • Net income for the first nine months of fiscal 2016 increased 40% to $7.46 million from $5.34 million for the first nine months of fiscal 2015;
  • Return on average equity increased to 10.96% for the current quarter;
  • Return on average assets increased to 1.20% for the current quarter;
  • Operating revenue increased 9% to $10.37 million from $9.51 million for the comparable quarter one year ago;
  • Net interest margin remained strong at 3.83% for the current quarter;
  • Non-interest income increased 9% from the prior quarter;
  • Net loans receivable increased 4% from the prior quarter and 9% year-over-year;
  • Non-performing assets decreased 54% year-over-year and decreased 12% from the prior quarter and are now at 1.01% of total assets;
  • OREO and other repossessed assets decreased 41% year-over-year and decreased 13% from the prior quarter; and
  • Book and tangible book values per common share increased to $13.61 and $12.80, respectively, at June 30, 2016.

Operating Results

Operating revenue (net interest income before provision for loan losses, plus non-interest income excluding gains or losses on the sale of investment securities and other than temporary impairment ["OTTI"] charges on investment securities) increased 9% to $10.37 million for the current quarter from $9.51 million for the comparable quarter one year ago and increased 2% from $10.21 million for the preceding quarter.  Operating revenue increased 14% to $30.81 million for the first nine months of fiscal 2016 from $27.07 million for the comparable period one year ago.

Net interest income increased 9% to $7.62 million from $6.98 million for the comparable quarter one year ago and decreased by less than 1% from the $7.67 million recorded for the preceding quarter.   The net interest margin for the current quarter was 3.83% compared to 3.92% for the preceding quarter and 3.88% for the comparable quarter one year ago.  The net interest margin was increased by approximately two basis points during the current quarter due to the collection of $34,000 of non-accrual interest.  The net interest margin was increased during the preceding quarter by approximately 12 basis points due to the collection of $189,000 in pre-payment penalties and $46,000 of non-accrual interest.  For the first nine months of fiscal 2016, net interest income increased 14% to $23.00 million from $20.25 million for the first nine months of fiscal 2015. Timberland's net interest margin for the first nine months of fiscal 2016 increased to 3.91% from 3.81% for the first nine months of fiscal 2015.

Non-interest income increased 9% to $2.75 million for the quarter ended June 30, 2016, from $2.51 million for the preceding quarter and $2.52 million for the quarter one year ago.  The increase in non-interest income for the current quarter compared to the preceding quarter was primarily due to increased debit card interchange transaction fees, increased service charges on deposits and an increase in the gain on sale of loans.  During the current quarter, service charges on deposits totaled $989,000, ATM and debit card interchange transaction fees increased to $778,000 and gain on sale of loans totaled $443,000.  Fiscal year-to-date non-interest income increased 13% to $7.78 million from $6.86 million for the first nine months of fiscal 2015.

Total operating (non-interest) expenses decreased 1% to $6.57 million for the third fiscal quarter, from $6.63 million for the preceding quarter and increased 6% from $6.22 million for the comparable quarter one year ago.  The decreased expenses for the current quarter compared to the preceding quarter were primarily due to a decrease in OREO and other repossessed asset expense and a decrease in salaries and employee benefits expense, which were partially offset by an increase in professional fee expense.  The efficiency ratio for the current quarter improved to 63.37% from 65.09% for the preceding quarter and from 65.43% for the comparable quarter one year ago.  Fiscal year-to-date operating expenses increased 3% to $19.68 million from $19.15 million for the first nine months of fiscal 2015.  The efficiency ratio for the first nine months of fiscal 2016 improved to 63.93% from 70.62% for the first nine months of fiscal 2015.

The provision for income taxes increased $75,000 to $1.25 million for the quarter ended June 30, 2016, from $1.18 million for the preceding quarter, primarily due to higher income before income taxes.  The effective tax rate was 32.9% for the current quarter compared to 33.1% for the quarter ended March 31, 2016. 

Balance Sheet Management

Total assets increased $6.18 million, or 1%, to $858.14 million at June 30, 2016, from $851.96 million at March 31, 2016.  The increase was primarily due to a $24.52 million increase in net loans receivable and a $3.30 million increase in loans held for sale. These increases were partially offset by a $20.86 million decrease in total cash and cash equivalents as excess liquidity was used to fund loan growth.

Liquidity, as measured by cash and cash equivalents, CDs held for investment and available for sale investments securities, was 18.7% of total liabilities at June 30, 2016, compared to 21.6% at March 31, 2016 and 17.7% one year ago. 

Net loans receivable increased $24.52 million, or 4%, to $647.37 million at June 30, 2016, from $622.85 million at March 31, 2016. The increase was primarily due to an $18.78 million increase in custom and owner/builder construction loans, a $9.01 million increase in multi-family loans, a $4.07 million increase in commercial real estate loans, a $1.88 million increase in speculative one-to-four family construction loans and a $1.34 million increase in home equity and second mortgage loans. These increases were partially offset by a $6.70 million increase in the undisbursed portion of construction loans in process, a $2.48 million decrease in multi-family construction loans and a $1.06 million decrease in commercial construction loans.

LOAN PORTFOLIO

($ in thousands)June 30, 2016 March 31, 2016 June 30, 2015
 Amount Percent Amount Percent Amount Percent
            
Mortgage loans:           
  One- to four-family (a)$  117,055   17% $  117,465   17% $ 107,349   16%
  Multi-family    51,672     7      42,666     6     50,587     8 
  Commercial   294,887     42     290,817     43     293,438     44 
  Construction - custom and           
            owner/builder    88,593     12      69,817     10      62,579     9 
  Construction - speculative                       
           one-to four-family    8,261     1     6,384     1     5,205     1 
  Construction - commercial    21,427     3     22,487     3     18,924     3 
  Construction - multi-family    18,090     3     20,570     3     22,970     4 
  Land    24,076     3      24,322     4     27,495     4 
            Total mortgage loans   624,061     88     594,528     87     588,547     89 
            
Consumer loans:           
  Home equity and second           
        mortgage    38,482     5     37,144     5     35,040     5 
  Other    4,490     1     4,380     1     4,711     1 
          Total consumer loans    42,972     6     41,524     6     39,751     6 
            
Commercial business loans    43,571     6     43,355     7     36,288     5 
Total loans   710,604   100%    679,407   100%    664,586   100%
Less:           
  Undisbursed portion of           
    construction loans in           
    process (51,163)    (44,465)    (57,674)  
  Deferred loan origination           
    fees (2,233)    (2,048)    (2,069)  
Allowance for loan losses (9,842)    (10,043)    (10,467)  
Total loans receivable, net$ 647,366    $  622,851    $594,376   


_______________________
(a)  Does not include one- to four family loans held for sale totaling $4,885, $1,584 and $3,835 at June 30, 2016, March 31, 2016 and June 30, 2015, respectively.

Timberland originated $88.81 million in loans during the quarter ended June 30, 2016, compared to $59.58 million for the preceding quarter and $101.27 million for the comparable quarter one year ago.  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.  During the quarter ended June 30, 2016, fixed-rate one- to four-family mortgage loans totaling $14.19 million were sold compared to $13.94 million for the preceding quarter and $16.53 million for the comparable quarter one year ago.

Timberland's investment securities decreased slightly during the quarter to $8.98 million at June 30, 2016, from $9.11 million at March 31, 2016, primarily due to scheduled amortization.

DEPOSIT BREAKDOWN
($ in thousands)
  June 30, 2016 March 31, 2016 June 30, 2015 
  Amount Percent Amount Percent Amount Percent 
Non-interest bearing $149,575   21% $148,980   21% $122,133   19% 
N.O.W. checking  189,475    26   188,108    27   168,773     26  
Savings  119,576    17   115,461    16   104,774     16  
Money market  100,914    14   100,903    14   94,529     14  
Money market – brokered  7,032     1   7,591     1   8,521     1  
Certificates of deposit under $100  79,283   11   81,350   11   87,590     13  
Certificates of deposit $100 and over  66,354    9   66,448    9   65,202     10  
Certificates of deposit – brokered  3,172    1   3,197    1   3,196     1  
  Total deposits $715,381   100% $712,038   100% $654,718   100% 


Total deposits increased $3.34 million to $715.38 million at June 30, 2016, from $712.04 million at March 31, 2016.  The increase was primarily due to a $4.12 million increase in savings account balances, a $1.37 million increase in N.O.W. checking account balances and a $595,000 increase in non-interest bearing checking account balances.  These increases were partially offset by a $2.19 million decrease in certificates of deposit account balances and a $548,000 decrease in money market account balances.  

Shareholders' Equity

Total shareholders' equity increased $2.19 million to $94.45 million at June 30, 2016, from $92.26 million at March 31, 2016.  The increase in shareholders' equity was primarily due to net income of $2.55 million for the quarter, which was partially offset by dividend payments of $555,000 to shareholders.  Book value per share increased $0.30 to $13.61 and tangible book value per share increased $0.31 to $12.80 at June 30, 2016.  Timberland did not repurchase shares of its common stock during the quarter and had 221,893 shares authorized to be purchased on its existing stock repurchase plan at June 30, 2016.

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 15.45%, a Tier 1 leverage capital ratio of 10.68% and a tangible capital to tangible assets ratio of 10.42% at June 30, 2016.

There was no provision for loan losses made for the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015.  Net charge-offs totaled $201,000 for the current quarter compared to a net recovery of $154,000 for the quarter ended March 31, 2016 and a net recovery of $85,000 for the quarter ended June 30, 2015.  The non-performing assets to total assets ratio improved to 1.01% at June 30, 2016 from 1.16% three months earlier and 2.36% one year ago.  The allowance for loan losses was 1.50% of loans receivable at June 30, 2016.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 63% to $4.01 million at June 30, 2016, from $10.83 million one year ago and increased 9% from $3.67 million at March 31, 2016.  Non-accrual loans decreased 13% to $2.96 million at June 30, 2016, from $3.39 million at March 31, 2016 and decreased 68% from $9.13 million at June 30, 2015.

NON-ACCRUAL LOANSJune 30, 2016 March 31, 2016 June 30, 2015
($ in thousands)Amount Quantity Amount Quantity Amount Quantity
            
Mortgage loans:           
  One- to four-family$  1,236  9 $  1,365  11 $  3,141  17
  Multi-family  --   -- --   --    760  1
  Commercial 808  2  1,129  3    462  2
  Construction  --   -- --   --    157  1
  Land   444  3  451  3    4,200  5
      Total mortgage loans   2,488  14  2,945  17  8,720  26
            
Consumer loans:           
  Home equity and second           
    mortgage 436  7  413  7    374  6
  Other 31  1  33  1    36  1
     Total consumer loans 467  8  446  8    410  7
Total loans$  2,955  22 $  3,391  25 $   9,130  33

           
OREO and other repossessed assets decreased 41% to $4.76 million at June 30, 2016, from $8.06 million at June 30, 2015 and decreased 13% from $5.46 million at March 31, 2016.  At June 30, 2016, the OREO and other repossessed asset portfolio consisted of 26 individual real estate properties and one mobile home.  During the quarter ended June 30, 2016, five OREO properties totaling $849,000 were sold for a net gain of $34,000.
               

OREO and OTHER
REPOSSESSED ASSETS
June 30, 2016 March 31, 2016 June 30, 2015
($ in thousands)Amount Quantity Amount Quantity Amount Quantity
            
One- to four-family$  1,382  7 $  1,645  7 $  2,434  8
Commercial 648  3  446  2    2,041  4
Land 2,665  16  3,300  18    3,521  21
Mobile home 67  1  67  1    67  1
Total$  4,762  27 $   5,458  28 $   8,063  34


About Timberland Bancorp, Inc.  


Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank ("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 22 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. Forward-looking statements are not statements of historical fact 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 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, including, but not limited to: 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 and 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; 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 Board of Governors of the Federal Reserve System 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 or 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, 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 the implementation of related rules and regulations; our ability to attract and retain deposits;  increases in premiums for deposit insurance; 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 workforce and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; 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, 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; 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 undertake no obligation to publicly update or revise any forward-looking statements included in this report 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.  We caution readers not to place undue reliance on any forward-looking statements.  We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  These risks could cause our actual results for fiscal 2016 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 operations and stock price performance.



TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended
($ in thousands, except per share amounts) June 30, March 31, June 30,
(unaudited)  2016   2016   2015 
 Interest and dividend income      
 Loans receivable $8,257  $8,306  $7,756 
 Investment securities  70   74   59 
 Dividends from mutual funds and Federal Home Loan Bank ("FHLB") stock  22   39   7 
 Interest bearing deposits in banks  247   231   125 
 Total interest and dividend income  8,596   8,650   7,947 
        
 Interest expense      
 Deposits  508   507   492 
 FHLB advances  472   472   471 
 Total interest expense  980   979   963 
 Net interest income  7,616   7,671   6,984 
        
 Provision for loan losses --   --   --  
 Net interest income after provision for loan losses  7,616   7,671   6,984 
        
 Non-interest income      
 OTTI on investment securities, net    (4)     (23)  (4)
 Service charges on deposits  989   937   899 
 ATM and debit card interchange transaction fees  778   710   691 
 Gain on sale of loans, net  443   393   514 
 Bank owned life insurance ("BOLI") net earnings  137   137   133 
 Servicing income (loss) on loans sold  60   55   (1)
 Other  346   304   291 
 Total non-interest income, net  2,749   2,513   2,523 
        
 Non-interest expense      
 Salaries and employee benefits  3,397   3,466   3,196 
 Premises and equipment  774   771   763 
 Gain on disposition of premises and equipment, net --   --    (299)
 Advertising  192   193   169 
 OREO and other repossessed assets, net  123   195   193 
 ATM and debit card processing  337   331   336 
 Postage and courier  98   110   104 
 State and local taxes  141   138   189 
 Professional fees  202   117   207 
 FDIC insurance  100   127   142 
 Other insurance  33   33   28 
 Loan administration and foreclosure  92   95   88 
 Data processing and telecommunications  470   474   449 
 Deposit operations  232   234   220 
 Other  377   345   435 
 Total non-interest expense  6,568   6,629   6,220 
        
 Income before income taxes $  3,797  $  3,555  $  3,287 
 Provision for income taxes  1,250   1,175   1,128 
 Net income $  2,547  $  2,380  $  2,159 
        
 Net income per common share:      
 Basic $0.37  $0.35  $0.31 
 Diluted  0.36   0.34   0.31 
        
 Weighted average common shares outstanding:      
 Basic  6,822,608   6,846,527   6,902,067 
 Diluted  7,111,199   7,080,005   7,071,221 



TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
 Nine Months Ended 
($ in thousands, except per share amounts) June 30, June 30, 
(unaudited)  2016   2015  
 Interest and dividend income     
 Loans receivable $24,992  $22,617  
 Investment securities  213   179  
 Dividends from mutual funds and FHLB stock  83   21  
 Interest bearing deposits in banks  649   343  
   Total interest and dividend income  25,937   23,160  
       
 Interest expense     
 Deposits  1,520   1,496  
 FHLB advances  1,420   1,411  
   Total interest expense   2,940   2,907  
   Net interest income  22,997   20,253  
  
 Provision for loan losses --   --   
   Net interest income after provision for loan losses  22,997   20,253  
       
 Non-interest income     
 OTTI on investment securities, net  (28)  (5) 
 Gain on sale of investment securities, net --    45  
 Service charges on deposits  2,898   2,635  
 ATM and debit card interchange transaction fees  2,187   1,964  
 Gain on sale of loans, net  1,230   1,098  
 BOLI net earnings  409   401  
 Servicing income (loss) on loans sold  180   (40) 
 Other  904   762  
   Total non-interest income, net  7,780   6,860  
       
 Non-interest expense     
 Salaries and employee benefits  10,333   9,877  
 Premises and equipment  2,305   2,239  
 Gain on disposition of premises and equipment, net --    (299) 
 Advertising  590   529  
 OREO and other repossessed asset, net  561   617  
 ATM and debit card processing  990   929  
 Postage and courier  309   322  
 State and local taxes  410   426  
 Professional fees  449   606  
 FDIC insurance  334   449  
 Other insurance  98   103  
 Loan administration and foreclosure  216   207  
 Data processing and telecommunications  1,394   1,299  
 Deposit operations  638   615  
 Other  1,048   1,228  
   Total non-interest expense  19,675   19,147  
       
 Income before income taxes $11,102  $7,966  
 Provision for income taxes  3,647   2,629  
   Net income $7,455  $5,337  
       
 Net income per common share:     
   Basic $1.09  $0.77  
   Diluted  1.05   0.76  
       
 Weighted average common shares outstanding:     
   Basic  6,846,373   6,897,381  
   Diluted  7,091,661   7,068,821  



TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 
($ in thousands, except per share amounts) (unaudited) June 30, March 31, June 30,
   2016   2016   2015 
Assets      
Cash and due from financial institutions $  16,394  $  17,121  $  13,800 
Interest-bearing deposits in banks  72,779   92,908   62,373 
 Total cash and cash equivalents  89,173   110,029   76,173 
        
Certificates of deposit ("CDs") held for investment, at cost  52,435   52,524   47,053 
Investment securities:      
 Held to maturity, at amortized cost  7,618   7,743   8,018 
 Available for sale, at fair value  1,363   1,365   1,401 
FHLB stock  2,804   2,804   2,699 
Loans held for sale  4,885   1,584   3,835 
       
Loans receivable  657,208   632,894   604,843 
Less: Allowance for loan losses  (9,842)  (10,043)  (10,467)
 Net loans receivable  647,366   622,851   594,376 
        
Premises and equipment, net  16,224   16,355   17,083 
OREO and other repossessed assets, net  4,762   5,458   8,063 
BOLI  18,580   18,443   18,034 
Accrued interest receivable  2,270   2,232   2,132 
Goodwill  5,650   5,650   5,650 
Mortgage servicing rights, net  1,516   1,488   1,469 
Other assets  3,493   3,436   3,801 
 Total assets $858,139  $851,962  $789,787 
        
Liabilities and shareholders' equity      
Deposits: Non-interest-bearing demand $  149,575  $  148,980  $  122,133 
Deposits: Interest-bearing  565,806   563,058   532,585 
 Total deposits  715,381   712,038   654,718 
        
FHLB advances  45,000   45,000   45,000 
Other liabilities and accrued expenses  3,306   2,662   2,779 
 Total liabilities  763,687   759,700   702,497 
       
Shareholders' equity      
Common stock, $.01 par value; 50,000,000 shares authorized;            
   7,053,636 shares issued and outstanding – June 30, 2015            
   6,933,068 shares issued and outstanding – March 31, 2016            
   6,939,068 shares issued and outstanding – June 30, 2016      9,818    9,698    10,948 
Unearned shares issued to Employee Stock Ownership Plan ("ESOP")  (728)  (793)  (992)
Retained earnings  85,635   83,643   77,673 
Accumulated other comprehensive loss  (273)  (286)  (339)
 Total shareholders' equity  94,452   92,262   87,290 
 Total liabilities and shareholders' equity $858,139  $851,962  $789,787 



KEY FINANCIAL RATIOS AND DATA  Three Months Ended
($ in thousands, except per share amounts) (unaudited) June 30, March 31, June 30,
   2016   2016   2015 
PERFORMANCE RATIOS:      
Return on average assets (a)  1.20%  1.13%  1.11%
Return on average equity (a)  10.96%  10.42%  10.03%
Net interest margin (a)  3.83%  3.92%  3.88%
Efficiency ratio  63.37%  65.09%  65.43%
       
  Nine Months Ended
   June 30,   June 30,
    2016     2015 
PERFORMANCE RATIOS          
Return on average assets  1.18%    0.93%
Return on average equity  10.88%    8.40%
Net interest margin  3.91%    3.81%
Efficiency ratio  63.93%    70.62%
       
  June 30, March 31, June 30,
   2016   2016   2015 
ASSET QUALITY RATIOS AND DATA:      
Non-accrual loans $2,955  $3,391  $9,130 
Loans past due 90 days and still accruing  135   135   488 
Non-performing investment securities  789   868   979 
OREO and other repossessed assets  4,762   5,458   8,063 
Total non-performing assets (b) $8,641  $9,852  $18,660 
       
       
Non-performing assets to total assets (b)  1.01%  1.16%  2.36%
Net charge-offs (recoveries) during quarter $  201  $(154) $  (85)
Allowance for loan losses to non-accrual loans  333%  296%  115%
Allowance for loan losses to loans receivable (c)  1.50%  1.59%  1.73%
Troubled debt restructured loans on accrual status (d) $7,677  $7,923  $12,392 
       
       
CAPITAL RATIOS:      
Tier 1 leverage capital  10.68%  10.56%  10.77%
Tier 1 risk-based capital  14.20%  14.21%  13.76%
Common equity Tier 1 risk-based capital  14.20%  14.21%  13.76%
Total risk-based capital  15.45%  15.46%  15.01%
Tangible capital to tangible assets (e)  10.42%  10.23%  10.41%
       
       
BOOK VALUES:      
Book value per common share $  13.61  $  13.31  $12.38 
Tangible book value per common share (e)  12.80   12.49   11.57 
       

__________________________________________________
(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 troubled debt restructured loans totaling $530, $531 and $1,356 reported as non-accrual loans at June 30, 2016, March 31, 2016 and June 30, 2015, respectively.
(e)  Calculation subtracts goodwill from the equity component and from assets.








AVERAGE BALANCES, YIELDS AND RATES - QUARTERLY  

($ in thousands)  
(unaudited)

   
 For the Three Months Ended 
 June 30, 2016 March 31, 2016 June 30, 2015 
 Average
Balance
 Average
Yield/Rate
 Average
Balance
 Average
Yield/Rate
 Average
Balance
 Average
Yield/Rate
 
Assets            
Loans and loans held for sale$  647,781   5.10% $  631,708   5.26% $  600,740   5.16% 
Investment securities and FHLB Stock   11,860   3.10%    11,844   3.82%    12,276   2.15% 
Interest-bearing deposits and CD's   136,724   0.73%    139,732   0.66%    107,295   0.47% 
  Total interest-bearing assets   796,365   4.32%    783,284   4.42%    720,311   4.41% 
Other assets   55,926       57,072       57,130    
  Total assets$  852,291    $  840,356    $  777,441    
             
Liabilities and Shareholders' Equity            
N.O.W. checking accounts$  187,836   0.24% $  184,414   0.24% $  167,003   0.27% 
Money market accounts   105,884   0.32%    105,670   0.30%    95,341   0.30% 
Savings accounts   116,818   0.05%    112,064   0.05%    104,306   0.05% 
Certificates of deposit accounts   149,713   0.79%    151,837   0.80%    158,990   0.74% 
  Total interest-bearing deposits   560,251   0.36%    553,985   0.37%    525,640   0.38% 
FHLB advances   45,000   4.22%    45,000   4.22%    45,000   4.20% 
  Total interest-bearing liabilities   605,251   0.65%    598,985   0.66%    570,640   0.68% 
             
Non-interest-bearing demand deposits   150,331       146,581       117,505    
Other liabilities   3,750       3,455       3,203    
Shareholders' equity   92,959       91,335       86,093    
  Total liabilities and shareholders' equity$  852,291    $  840,356    $  777,441    
             
  Net interest income and spread   3.67%    3.76%    3.73% 
  Net interest margin (1)   3.83%    3.92%    3.88% 
  Average interest-bearing assets to             
  average interest-bearing liabilities 131.58%    130.77%    126.23%   
             

 -----------------------------------------

(1)Net interest margin = annualized net interest income /average interest-bearing assets



AVERAGE BALANCES, YIELDS AND RATES – YEAR TO DATE
($ in thousands)
(unaudited)





 For the Nine Months Ended
 June 30, 2016  June 30, 2015
 Average
Balance
 Average
Yield/Rate
  Average
Balance
 Average
Yield/Rate
Assets        
Loans and loans held for sale$  634,981   5.25%  $  591,483   5.10%
Investment securities and FHLB Stock   11,887   3.31%     12,460   2.14%
Interest-bearing deposits and CD's   136,681   0.63%     103,937   0.44%
  Total interest-bearing assets   783,549   4.41%     707,880   4.36%
Other assets   57,079        58,424   
  Total assets$  840,628     $  766,304   
         
Liabilities and Shareholders' Equity        
N.O.W. checking accounts$  183,938   0.25%  $  163,917   0.27%
Money market accounts   105,307   0.31%     92,750   0.28%
Savings accounts   113,069   0.05%     100,636   0.05%
Certificates of deposit accounts   151,813   0.78%     161,486   0.77%
  Total interest-bearing deposits   554,127   0.37%     518,789   0.39%
FHLB advances   45,000   4.22%     45,000   4.19%
  Total interest-bearing liabilities   599,127   0.66%     563,789   0.69%
         
Non-interest-bearing demand deposits   146,466        114,883   
Other liabilities   3,661        2,961   
Shareholders' equity   91,374        84,671   
  Total liabilities and shareholders' equity$  840,628     $  766,304   
         
  Net interest income and spread   3.76%     3.67%
  Net interest margin (1)   3.91%     3.81%
  Average interest-bearing assets to         
  average interest-bearing liabilities 130.78%     125.56%  
         

------------------------------------
(1)Net interest margin = annualized net interest income /average interest-bearing assets


 

Michael R. Sand, President & CEO Dean J. Brydon, CFO (360) 533-4747 www.timberlandbank.com

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