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Timberland Bancorp EPS Increases 50% to $0.36 for First Fiscal Quarter of 2016

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HOQUIAM, Wash., Jan. 25, 2016 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) ("Timberland" or "the Company") today reported net income of $2.53 million, or $0.36 per diluted common share, for its first fiscal quarter ended December 31, 2015.  This compares to net income of $1.73 million, or $0.24 per diluted common share, for the quarter ended December 31, 2014.

Net income for the preceding quarter, ended September 30, 2015, was $2.96 million, or $0.42 per diluted common share.  Net income for the September quarter was increased by a $1.53 million negative loan loss provision (approximately $1.00 million after income taxes, or approximately $0.14 per diluted common share) that resulted from a significant improvement in asset quality and recoveries during that quarter.

Timberland's Board of Directors also announced a 14% increase in the quarterly cash dividend to common shareholders to $0.08 per common share, payable on February 26, 2016 to shareholders of record on February 12, 2016.  

"We continued our strong performance in the first quarter of fiscal 2016," said Michael R. Sand, President and CEO.  "Solid loan and deposit growth contributed to higher revenues, an increased net interest margin and growing profitability.  Our balance sheet is positioned to benefit from rising interest rates which we believe is appropriate given the Federal Reserve's decision last month to begin raising rates.  The timing of further rate increases is widely discussed but remains uncertain.  What is certain, however, are the final maturities of three Federal Home Loan Bank advances, scheduled to occur in December of 2016 and August and September of 2017.  The average rate of these advances is 4.10% and represented 49% of our funding costs in the quarter just ended.  When they mature, the elimination, or significant reduction, of this interest expense will have a positive impact on our already strong net interest margin."

First Fiscal Quarter 2016 Highlights (at or for the period ended December 31, 2015, compared to December 31, 2014, or September 30, 2015):

  • Earnings per diluted common share increased 50% to $0.36 from $0.24 for the comparable quarter one year ago;
  • Return on average equity was 11.26% for the current quarter;
  • Return on average assets was 1.22% for the current quarter;
  • Operating revenue increased 16% to $10.23 million from $8.78 million for the comparable quarter one year ago;
  • Net interest margin increased to 4.00% for the current quarter, which included the collection of $475,000 of non-accrual interest contributing approximately 25 basis points to the net interest margin;
  • Non-performing assets decreased 32% year-over-year and decreased 9% from the prior quarter;
  • Total delinquent and non-accrual loans decreased 57% year-over-year and decreased 24% from the prior quarter;
  • Total deposits increased 13% year-over-year and increased 3% from the prior quarter;
  • Net loans receivable increased 9% year-over-year and increased 3% from the prior quarter; and
  • Book and tangible book values per common share increased to $13.02 and $12.21, respectively, at December 31, 2015.

Operating Results

Operating revenue (net interest income before recapture of 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 5% to $10.23 million for the current quarter from $9.70 million for the preceding quarter and increased 16% from $8.78 million for the first fiscal quarter one year ago.

Net interest income increased 10% to $7.71 million for the first quarter of fiscal 2016, from $7.03 million for the preceding quarter and increased 15% from $6.70 million for the first fiscal quarter one year ago.  Net interest income improved in the current quarter primarily due to the increased level of average loans and average interest-earning assets and the collection of $475,000 of non-accrual interest.  The net interest margin for the current quarter improved to 4.00% from 3.76% for the preceding quarter and from 3.88% for the comparable quarter one year ago.  The $475,000 in non-accrual interest collected was related to the payoff of three non-accrual loans.  The net interest margin for the comparable quarter one year ago was increased by approximately seven basis points due to the collection of $125,000 in non-accrual interest during that quarter.

Non-interest income increased 19% to $2.52 million for the quarter ended December 31, 2015, from $2.12 million for the comparable quarter one year ago and decreased 5% from $2.66 million in the preceding quarter.  The decrease in non-interest income compared to the preceding quarter was primarily due to a $118,000 decrease in gain on sale of loans and smaller decreases in several other categories. The decrease in gain on sale of loans was primarily due to a decrease in the dollar volume of fixed-rate one- to four-family loans sold during the current quarter.

Total operating (non-interest) expenses decreased 3% to $6.48 million for the first fiscal quarter from $6.69 million for the preceding quarter and increased 3% from $6.27 million for the like quarter one year ago.  The decreased expenses for the current quarter compared to the preceding quarter were primarily due to decreases in the following expense line items: professional fees, loan administration and foreclosure, OREO and other repossessed assets, premises and equipment, advertising and FDIC insurance.  The decreases in professional fees and loan administration and foreclosure expenses were primarily due to the recovery of $80,000 in legal and foreclosure related expenses on three non-accrual loans that paid off during the quarter. These decreases were partially offset by an increase in salaries and employee benefit expense, which was primarily the result of annual salary adjustments and the hiring of addition lenders.  

The provision for income taxes decreased $343,000 to $1.22 million for the quarter ended December 31, 2015, from $1.56 million for the preceding quarter.  The tax provision was higher for the prior quarter primarily due to higher income related to the recognition of a negative loan loss provision of $1.53 million during that quarter.  The effective tax rate was 32.6% for the current quarter compared to 34.6% for the quarter ended September 30, 2015. 

Balance Sheet Management

Total assets increased $21.6 million, or 3%, to $837.4 million at December 31, 2015, from $815.8 million at September 30, 2015.  The increase was primarily due to an $18.5 million increase in net loans receivable, a $2.3 million increase in CDs held for investment and a $1.3 million increase in cash and cash equivalents.  The increase in total assets was funded primarily by an $18.9 million increase in total deposits.

Liquidity as measured by cash and cash equivalents, CDs held for investment and available for sale investments securities was 19.5% of total liabilities at December 31, 2015, compared to 19.6% at September 30, 2015, and 16.5% one year ago. 

Net loans receivable increased $18.5 million, or 3%, to $625.8 million at December 31, 2015, from $607.3 million at September 30, 2015.  The increase was primarily due to a $7.1 million increase in commercial business loans, a $5.9 million increase in construction and land development loans, a $4.3 million increase in commercial real estate loans, a $1.6 million increase in consumer loans and a $5.9 million decrease in the undisbursed portion of construction loans in process.  These increases to net loans receivable were partially offset by a $4.3 million decrease in multi-family loans, a $1.2 million decrease in one- to-four family loans, and an $882,000 decrease in land loans. 

LOAN PORTFOLIO

($ in thousands)December 31, 2015 September 30, 2015 December 31, 2014
 Amount Percent Amount Percent Amount Percent
            
Mortgage loans:           
  One- to four-family$  118,507   17% $  119,715   18% $ 103,021   17%
  Multi-family   47,980     7       52,322     8      45,423     7 
  Commercial   295,595     43     291,216     43     295,113     48 
  Construction and land                       
Development   116,843     17     110,920     16     69,235     11 
  Land   25,258     4     26,140     4     28,633     5 
Total mortgage loans   604,183     88     600,313     89     541,425     88 
                        
Consumer loans:                       
  Home equity and second                       
Mortgage   36,057     5     34,157     5     35,754     6 
  Other   4,387     1     4,669     1     4,453     1 
Total consumer loans   40,444     6     38,826     6     40,207     7 
                        
Commercial business loans   40,886     6     33,763     5     32,957     5 
Total loans   685,513   100%    672,902   100%    614,589   100%
Less:           
Undisbursed portion of           
construction loans in           
Process (47,596)    (53,457)    (28,832)  
Deferred loan origination           
Fees (2,183)    (2,193)    (1,840)  
Allowance for loan losses (9,889)    (9,924)    (10,322)  
Total loans receivable, net$  625,845    $  607,328    $573,595   

CONSTRUCTION AND LAND DEVELOPMENT LOAN COMPOSITION

 December 31, 2015 September 30, 2015 December 31, 2014 
($ in thousands)Amount  Percent
 of Loan
Portfolio
 Amount Percent
of Loan
Portfolio
 Amount   Percent
  of Loan
Portfolio
 
             
Custom and owner / builder$67,861   10% $62,954   9% $62,548   10% 
Speculative one- to four-            
family 6,199     1   6,668     1   2,287         --  
Commercial real estate 22,213     3   20,728      3   1,560         --  
Multi-family (including            
condominium) 20,570     3   20,570     3   2,840     1  
Land development --         --   --         --   --   --  
Total construction loans$116,843   17% $110,920   16% $69,235   11% 
             

Timberland originated $53.8 million in loans during the quarter ended December 31, 2015, compared to $66.0 million for the preceding quarter and $50.1 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 December 31, 2015, fixed-rate one- to four-family mortgage loans totaling $12.6 million were sold compared to $16.5 million for the preceding quarter and $8.2 million for the comparable quarter one year ago.

Timberland's investment securities decreased slightly during the quarter to $9.2 million at December 31, 2015, from $9.3 million at September 30, 2015, primarily due to scheduled amortization.

DEPOSIT BREAKDOWN ($ in thousands)
  December 31, 2015 September 30, 2015 December 31, 2014 
  Amount Percent Amount Percent Amount Percent 
Non-interest bearing $142,279   20% $141,388   21% $105,941   17% 
N.O.W. checking  186,003    27   180,628    27   161,762     26  
Savings  110,475    16   110,315    16   98,260     16  
Money market  99,061    14   84,026    12   88,727     14  
Money market – brokered  7,153     1   8,450     1   401       --  
Certificates of deposit under $100  83,618   12   84,824   12   94,222     15  
Certificates of deposit $100 and over  65,984    9   66,085   10   65,480     11  
Certificates of deposit – brokered  3,197    1   3,196    1   3,193     1  
  Total deposits $697,770   100% $678,912   100% $617,986   100% 

Total deposits increased $18.9 million, or 3%, to $697.8 million at December 31, 2015, from $678.9 million at September 30, 2015.  The increase was primarily due to a $13.7 million increase in money market account balances, a $5.3 million increase in N.O.W. checking account balances and an $891,000 increase in non-interest bearing account balances.  These increases were partially offset by a $1.3 million decrease in certificates of deposit account balances.  

Shareholders' Equity

Total shareholders' equity increased $1.86 million to $91.05 million at December 31, 2015, from $89.19 million at September 30, 2015.  The increase in shareholders' equity was primarily due to net income of $2.52 million for the quarter, which was partially offset by dividend payments of $839,000 to shareholders.  Book value per share increased to $13.02 and tangible book value per share increased to $12.21 at December 31, 2015.

Timberland did not repurchase any shares of its common stock during the quarter and had 287,893 shares remaining to be purchased on its existing stock repurchase plan at December 31, 2015.

Capital Ratios and Asset Quality

Timberland Bancorp remains well capitalized with a total risk-based capital ratio of 15.17%, a Tier 1 leverage capital ratio of 10.56% and a tangible capital to tangible assets ratio of 10.27% at December 31, 2015.

There was no provision for loan losses made for the quarter ended December 31, 2015, compared to a $1.53 million recapture of loan losses (which added approximately $0.14 to diluted earnings per share) for the quarter ended September 30, 2015.  Net charge-offs for the current quarter were $35,000 compared to a net recovery of $982,000 for the quarter ended September 30, 2015 and net charge-offs of $105,000 for the quarter ended December 31, 2014.  The non-performing assets to total assets ratio improved to 1.63% at December 31, 2015 from 1.84% three months earlier and 2.68% one year ago.  The allowance for loan losses was 1.56% of loans receivable at December 31, 2015.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 24% to $5.5 million at December 31, 2015, from $7.2 million at September 30, 2015 and decreased 57% from $12.8 million one year ago.  Non-accrual loans decreased 20% to $4.8 million at December 31, 2015, from $6.0 million at September 30, 2015 and decreased 55% from $10.8 million at December 31, 2014. 

NON-ACCRUAL LOANSDecember 31, 2015 September 30, 2015 December 31, 2014
($ in thousands)Amount Quantity Amount Quantity Amount Quantity
            
Mortgage loans:           
  One- to four-family$  2,694  17 $  2,368  16 $  4,296  20
  Multi-family --  --  760  1  --  --
  Commercial 1,184  3  1,016  2    1,439  1
  Construction --  --  --  --    156  1
  Land   546  4  1,558  5    4,357  6
Total mortgage loans   4,424  24  5,702  24  10,248  28
            
Consumer loans:           
  Home equity and second           
    mortgage 300  4  303  4    564  8
  Other 34  1  35  1  --  --
Total consumer loans 334  5  338  5    564  8
            
Commercial business loans 73  1  --  --  --  --
Total loans$  4,831  30 $  6,040  29 $   10,812  36

           
Other real estate owned ("OREO") and other repossessed assets decreased 7% to $7.7 million at December 31, 2015, from $8.2 million at December 31, 2014 and decreased 2% from $7.9 million at September 30, 2015.  At December 31, 2015, the OREO and other repossessed asset portfolio consisted of 31 individual real estate properties and one mobile home.  During the quarter ended December 31, 2015, three OREO properties totaling $170,000 were sold for a net loss of $3,000.
               

OREO and OTHER
REPOSSESSED ASSETS
December 31, 2015 September 30, 2015 December 31, 2014
($ in thousands)Amount Quantity Amount Quantity Amount Quantity
            
One- to four-family$  2,763  10 $  2,868  11 $  1,976  9
Multi-family --  --  --  --  142  1
Commercial 1,449  3  1,568  3    2,190  4
Land 3,388  18  3,351  20    3,912  23
Mobile home 67  1  67  1  --  --
Total$  7,667  32 $  7,854  35 $   8,220  37


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) Dec. 31, Sept. 30, Dec. 31,
(unaudited)  2015   2015   2014 
 Interest and dividend income      
 Loans receivable $8,429  $7,780  $7,509 
 Investment securities  69   70   65 
 Dividends from mutual funds and Federal Home Loan Bank ("FHLB") stock   22   10    7 
 Interest bearing deposits in banks  171   148   105 
   Total interest and dividend income  8,691   8,008   7,686 
        
 Interest expense      
 Deposits  504   508   509 
 FHLB advances  477   475   474 
   Total interest expense  981   983   983 
   Net interest income  7,710   7,025   6,703 
        
 Recapture of loan losses  --   (1,525)  -- 
   Net interest income after recapture of loan losses  7,710   8,550   6,703 
        
 Non-interest income      
 OTTI on investment securities, net  --     (8)  -- 
 Gain on sale of investment securities, net  --   --   45 
 Service charges on deposits  972   980   885 
 Gain on sale of loans, net  394   512   236 
 Bank owned life insurance ("BOLI") net earnings  135   137   136 
 ATM and debit card interchange transaction fees  700   699   630 
 Other  317   342   191 
   Total non-interest income, net  2,518   2,662   2,123 
        
 Non-interest expense      
 Salaries and employee benefits  3,471   3,324   3,396 
 Premises and equipment  760   817   725 
 Advertising  205   249   188 
 OREO and other repossessed assets, net  244   301   76 
 ATM and debit card processing  322   292   338 
 Postage and courier  100   107   104 
 State and local taxes  132   135   118 
 Professional fees  130   223   176 
 FDIC insurance  107   144   160 
 Other insurance  32   33   37 
 Loan administration and foreclosure  29   62   43 
 Data processing and telecommunications  450   468   379 
 Deposit operations  172   197   175 
 Other  325   341   359 
   Total non-interest expense  6,479   6,693   6,274 
        
 
   Three Months Ended
   Dec. 31, Sept. 30, Dec. 31,
    2015   2015   2014 
 Income before income taxes $3,749  $4,519  $2,552 
 Provision for income taxes  1,221   1,564   825 
   Net income $  2,528  $  2,955  $1,727 
        
 Net income per common share:      
   Basic $0.37  $0.43  $0.25 
   Diluted  0.36   0.42   0.24 
        
 Weighted average common shares outstanding:      
   Basic  6,869,726   6,896,941   6,891,952 
   Diluted  7,083,864   7,069,880   7,063,540 


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 
($ in thousands, except per share amounts) (unaudited) Dec. 31, Sept. 30, Dec. 31,
   2015   2015   2014 
Assets      
Cash and due from financial institutions $  12,481  $  14,014  $  12,583 
Interest-bearing deposits in banks  81,119   78,275   57,772 
 Total cash and cash equivalents  93,600   92,289   70,355 
        
Certificates of deposit ("CDs") held for investment, at cost  50,865   48,611   37,997 
Investment securities:      
 Held to maturity, at amortized cost  7,824   7,913   5,201 
 Available for sale, at fair value  1,362   1,392   1,494 
FHLB stock  2,699   2,699   5,191 
        
Loans receivable  634,430   614,201   582,722 
Loans held for sale  1,304   3,051   1,195 
Less: Allowance for loan losses  (9,889)  (9,924)  (10,322)
 Net loans receivable  625,845   607,328   573,595 
        
Premises and equipment, net  16,589   16,854   17,574 
OREO and other repossessed assets, net  7,667   7,854   8,220 
BOLI  18,306   18,170   17,769 
Accrued interest receivable  2,234   2,170   1,967 
Goodwill  5,650   5,650   5,650 
Mortgage servicing rights, net  1,475   1,478   1,549 
Other assets  3,263   3,407   3,355 
 Total assets $837,379  $815,815  $749,917 
        
Liabilities and shareholders' equity      
Deposits: Non-interest-bearing demand $  142,279  $  141,388  $  105,941 
Deposits: Interest-bearing  555,491   537,524   512,045 
 Total deposits  697,770   678,912   617,986 
        
FHLB advances  45,000   45,000   45,000 
Other liabilities and accrued expenses  3,558   2,716   2,664 
 Total liabilities  746,328   726,628   665,650 
       
Shareholders' equity      
Common stock, $.01 par value; 50,000,000 shares authorized;            
        7,052,336 shares issued and outstanding – December 31, 2014            
        6,988,848 shares issued and outstanding – September 30, 2015            
        6,994,148 shares issued and outstanding – December 31, 2015      10,402    10,293    10,846 
Unearned shares issued to Employee Stock Ownership Plan ("ESOP")  (859)  (926)  (1,124)
Retained earnings  81,823   80,133   74,909 
Accumulated other comprehensive loss  (315)  (313)  (364)
 Total shareholders' equity  91,051   89,187   84,267 
 Total liabilities and shareholders' equity $837,379  $815,815  $749,917 


KEY FINANCIAL RATIOS AND DATA  Three Months Ended
($ in thousands, except per share amounts) (unaudited) Dec. 31, Sept. 30, Dec. 31,
   2015   2015   2014 
       
PERFORMANCE RATIOS:      
Return on average assets (a)  1.22%  1.47%  0.92%
Return on average equity (a)  11.26%  13.47%  8.29%
Net interest margin (a)  4.00%  3.76%  3.88%
Efficiency ratio  63.35%  69.09%  71.09%
       
       
       
  Dec. 31, Sept. 30, Dec. 31,
   2015   2015   2014 
ASSET QUALITY RATIOS AND DATA:      
Non-accrual loans $4,831  $6,040  $10,812 
Loans past due 90 days and still accruing  285   151   -- 
Non-performing investment securities  891   932   1,057 
OREO and other repossessed assets  7,667   7,854   8,220 
Total non-performing assets (b) $13,674  $14,977  $20,089 
       
       
Non-performing assets to total assets (b)  1.63%  1.84%  2.68%
Net charge-offs (recoveries) during quarter $ 35  $  (982) $   105 
Allowance for loan losses to non-accrual loans  205%  164%  95%
Allowance for loan losses to loans receivable (c)  1.56%  1.61%  1.77%
Troubled debt restructured loans on accrual status (d) $7,971  $12,484  $12,337 
       
       
CAPITAL RATIOS:      
Tier 1 leverage capital  10.56%  10.64%  10.72%
Tier 1 risk-based capital  13.91%  13.91%  13.86%
Total risk-based capital  15.17%  15.16%  15.12%
Tangible capital to tangible assets (e)  10.27%  10.31%  10.56%
       
       
BOOK VALUES:      
Book value per common share $  13.02  $  12.76  $11.95 
Tangible book value per common share (e)  12.21   11.95   11.15 
       

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(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)  Includes loans held for sale and is before the allowance for loan losses.
(d)  Does not include troubled debt restructured loans totaling $1,229, $1,233 and $2,034 reported as non-accrual loans at December 31, 2015, September 30, 2015 and December 31, 2014, respectively.
(e)  Calculation subtracts goodwill and core deposit intangible from the equity component and from assets.                                                                                                                                                                                                                         

AVERAGE BALANCES, YIELDS AND RATES - QUARTERLY
($ in thousands)
(unaudited)
            
 For the three months ended
 December 31, 2015 September 30, 2015 December 31, 2014
 Average Average Average Average Average Average
 Balance  Yield/Rate Balance Yield/Rate Balance Yield/Rate
Assets           
Loans$  625,558   5.39% $  612,383   5.08% $  581,820   5.16%
Investment securities and FHLB stock   11,955   3.04%    12,062   2.63%    13,266   2.15%
Other interest-bearing assets   133,643   0.50%    123,129   0.48%    96,326   0.43%
  Total interest-bearing assets   771,156   4.51%    747,574   4.28%    691,412   4.45%
Other assets   58,204       57,808       59,922   
  Total assets$  829,360    $  805,382    $  751,334   
            
Liabilities and Shareholders' Equity           
N.O.W. checking accounts$  179,611   0.25% $  171,764   0.27% $  159,498   0.28%
Money market accounts   104,377   0.30%    101,204   0.31%    90,263   0.27%
Savings accounts   110,356   0.05%    107,250   0.05%    96,653   0.05%
Certificates of deposit accounts   153,866   0.76%    154,856   0.76%    163,016   0.79%
  Total interest-bearing deposits   548,210   0.36%    535,074   0.38%    509,430   0.40%
FHLB advances   45,000   4.21%    45,000   4.19%    45,000   4.18%
  Total interest-bearing liabilities   593,210   0.66%    580,074   0.67%    554,430   0.70%
            
Non-interest-bearing deposits   142,518       133,657       110,976   
Other liabilities   3,788       3,883       2,629   
Shareholders' equity   89,844       87,768       83,299   
  Total liabilities and shareholders' equity$  829,360    $  805,382    $  751,334   
            
  Interest rate spread   3.85%    3.61%    3.75%
  Net interest margin (1)   4.00%    3.76%    3.88%
  Average interest-bearing assets to            
  average interest-bearing liablilities 130.00%    128.88%    124.71%  

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

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