Market Overview

Timberland Bank Reports Growing Profitability for 2017's Third Fiscal Quarter:

Share:
  • Earnings Per Share Increased 61% to $0.58;
  • Prepays Legacy High Cost Federal Home Loan Bank Borrowings;
  • Announces $0.11 Regular Dividend and $0.08 Special Dividend

HOQUIAM, Wash., July 25, 2017 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company") today reported net income of $4.28 million, or $0.58 per diluted common share, for its third fiscal quarter ended June 30, 2017.  This compares to net income of $2.55 million, or $0.36 per diluted common share, for the quarter ended June 30, 2016, and net income of $3.13 million, or $0.42 per diluted common share, for the preceding quarter ended March 31, 2017.  

For the first nine months of fiscal 2017, Timberland earned $10.55 million, or $1.44 per diluted common share, a 42% increase in net income and a 37% increase in earnings per diluted common share ("EPS") from the $7.46 million, or $1.05 per diluted common share, reported for the first nine months of fiscal 2016.

Timberland's Board of Directors also declared a quarterly dividend of $0.11 per common share, payable on August 25, 2017 to shareholders of record on August 11, 2017.  The Company's Board of Directors also declared a special one-time dividend of $0.08 per share payable on August 25, 2017 to shareholders of record on August 11, 2017.

"This quarter we once again received the financial benefit of growing revenues more than expenses," stated Michael R. Sand, President and CEO.  "We also recouped interest that had previously been classified as non-accrual and booked a recovery on a previously charged off loan that was fully paid during the quarter.  Income recognized from these two sources was partially offset by prepayment penalties incurred for the early termination of two legacy Federal Home Loan Bank ("FHLB") borrowings.  The net result of these three items was a $953,000 increase in net income which positively affected the current quarter's EPS by approximately $0.13.  Even without the benefit of these extraordinary items the quarter's income and EPS significantly exceeded the results posted in the prior fiscal year's comparable quarter.  Prepaying the FHLB borrowings eliminated monthly interest expense by, on average, $100,000 per month which will benefit our fiscal fourth and subsequent quarters."     

Third Fiscal Quarter 2017 Earnings and Balance Sheet Highlights (at or for the period ended June 30, 2017, compared to March 31, 2017, or June 30, 2016):

   Earnings Highlights:

  • EPS increased 61% to $0.58 from $0.36 for the comparable quarter one year ago;
  • Net income increased 68% to $4.28 million from $2.55 million for the comparable quarter one year ago;
  • Return on average equity and return on average assets for the current quarter were 16.14% and 1.86%, respectively;
  • Operating revenue increased 20% from the comparable quarter one year ago;
  • Non-interest income increased 15% from the comparable quarter one year ago;
  • Efficiency ratio improved to 55.94% for the current quarter from 63.37% for the comparable quarter one year ago;
  • Net interest margin increased to 4.29% for the current quarter (approximately 22 basis points was due to the collection of non-accrual interest, which was partially offset by prepayment penalties paid for the early termination of two FHLB borrowings); and
  • Recorded a loan loss recapture of $1.00 million as a direct result of recording net recoveries of $1.02 million during the current quarter.

   Balance Sheet Highlights:

  • Increased net loans receivable 6% year-over-year and 2% from the prior quarter;
  • Increased total deposits 14% year-over-year and 1% from the prior quarter;
  • Prepaid $30.0 million of legacy FHLB borrowings during the current quarter;
  • Decreased troubled debt restructured loans 56% year-over-year and 47% from the prior quarter; and
  • Increased book and tangible book (non-GAAP) values per common share to $14.77 and $14.00, respectively, at June 30, 2017.

Operating Results

Operating revenue (net interest income before the recapture of loan losses, plus non-interest income excluding other than temporary impairment ("OTTI") charges on investment securities) increased 20% to $12.40 million for the current quarter from $10.37 million for the comparable quarter one year ago and increased 10% from $11.30 million for the preceding quarter. Operating revenue increased 14% to $35.24 million for the first nine months of fiscal 2017 from $30.81 million for the comparable period one year ago.

Net interest income for the current quarter increased 21% to $9.25 million from $7.62 million for the comparable quarter one year ago and increased 9% from $8.45 million for the preceding quarter.  The increased net interest income for the current quarter compared to the preceding quarter was primarily due to an increase in the amount of non-accrual interest collected, which was partially offset by FHLB borrowing prepayment penalties for the early termination of Timberland's remaining FHLB borrowings.  For the first nine months of fiscal 2017, net interest income increased 13% to $26.01 million from $23.00 million for the first nine months of fiscal 2016.

The net interest margin for the current quarter increased to 4.29% from 3.88% for the preceding quarter and 3.83% for the comparable quarter one year ago.  The net interest margin for the current quarter was increased by approximately 22 basis points due to the net effect of collecting $748,000 of non-accrual interest and paying $282,000 in FHLB borrowing prepayment penalties.  The net interest margin for the preceding quarter was increased by approximately nine basis points due to the collection of $204,000 of non-accrual interest.  The net interest margin for the comparable quarter one year ago was increased by approximately two basis points due to the collection of $34,000 of non-accrual interest.  Timberland's net interest margin for the first nine months of fiscal 2017 was 4.03% compared to 3.91% for the first nine months of fiscal 2016.

Non-interest income for the current quarter increased 15% to $3.16 million from $2.75 million for the comparable quarter one year ago and increased 11% from $2.85 million for the preceding quarter.  The increase in non-interest income for the current quarter compared to the preceding quarter was primarily due to a $155,000 increase in gain on sale of loans and smaller increases in several other categories.  The increase in gain on sale of loans was primarily due to an increase in the dollar volume of fixed-rate one- to four-family loans sold during the current quarter.  Fiscal year-to-date non-interest income increased 19% to $9.22 million from $7.78 million for the first nine months of fiscal 2016.

Total operating (non-interest) expenses for the current quarter increased 1% to $6.94 million from $6.86 million for the preceding quarter and increased 6% from $6.57 million for the comparable quarter one year ago.  The increased expenses for the current quarter compared to the preceding quarter were primarily due to a $61,000 increase in deposit operations expenses and smaller increases in several other categories.  The efficiency ratio for the current quarter improved to 55.94% from 63.37% for the comparable quarter one year ago and 60.67% for the preceding quarter.  Fiscal year-to-date operating expenses increased 5% to $20.61 million from $19.68 million for the first nine months of fiscal 2016.  The efficiency ratio for the first nine months of fiscal 2017 improved to 58.48% from 63.93% for the first nine months of fiscal 2016.

The provision for income taxes for the current quarter increased to $2.19 million from $1.57 million for the preceding quarter.  The effective tax rate was 33.8% for the current quarter compared to 33.4% for the quarter ended March 31, 2017.

Balance Sheet Management

Total assets decreased 2% to $931.01 million at June 30, 2017 from $946.68 million at March 31, 2017.  The decrease was primarily due to using liquid assets to prepay $30.00 million of high cost FHLB borrowings during the quarter.

Liquidity, as measured by cash and cash equivalents, CDs held for investment and available for sale investments securities, was 21.6% of total liabilities at June 30, 2017, compared to 24.0% at March 31, 2017, and 18.7% one year ago. 

Net loans receivable increased $11.08 million, or 2%, to $687.16 million at June 30, 2017, from $676.08 million at
March 31, 2017.  The increase was primarily due to a $10.27 million increase in custom and owner/builder one- to four-family construction loans, a $9.31 million increase in commercial construction loans, a $6.78 million increase in commercial mortgage loans, a $2.69 million increase in speculative one- to four-family construction loans, and smaller increases in several other categories.  These increases were partially offset by a $12.40 million increase in the amount of undisbursed construction loans in process, a $2.13 million decrease in multi-family mortgage loans, a $1.53 million decrease in land loans, and smaller decreases in several other categories. 

LOAN PORTFOLIO

($ in thousands)   June 30, 2017   March 31, 2017   June 30, 2016
    Amount    Percent    Amount    Percent    Amount    Percent 
                             
Mortgage loans:                          
  One- to four-family (a)   $   121,705     16 %     $   122,889     16 %   $  117,055     17 %
  Multi-family       61,051       8          63,181       8          51,672       7  
  Commercial       331,901       43         325,120       44         294,887       42  
  Construction - custom and                        
owner/builder       109,578       14         99,304       13          88,593       12  
  Construction - speculative
  one-to four-family
      8,002       1         5,311       1         8,261       1  
  Construction - commercial       20,067       3         10,762       2         21,427       3  
  Construction - multi-family       11,057       1         11,057       2         18,090       3  
  Land       24,333       3         25,866       3         24,076       3  
Total mortgage loans       687,694       89         663,490       89         624,061       88  
                         
Consumer loans:                        
  Home equity and second                        
mortgage       36,320       5         38,024       5         38,482       5  
  Other       3,789       --         3,527       --         4,490       1  
Total consumer loans       40,109       5         41,551       5         42,972       6  
                         
Commercial business loans (b)          43,407       6         42,603       6         43,571       6  
Total loans       771,210     100 %       747,644     100 %       710,604     100 %
Less:                        
Undisbursed portion of                        
construction loans in                        
process     (72,133 )         (59,724 )         (51,163 )    
Deferred loan origination                        
fees     (2,309 )         (2,251 )         (2,233 )    
Allowance for loan losses     (9,610 )         (9,590 )         (9,842 )    
Total loans receivable, net   $   687,158         $   676,079         $ 647,366      
 
                                           
                                           
(a)  Does not include one- to four-family loans held for sale totaling $3,523, $5,542 and $4,885 at June 30, 2017,
March 31, 2017, and June 30, 2016, respectively.
(b)  Does not include commercial business loans held for sale totaling $256 at March 31, 2017.
 

Timberland originated $92.93 million in loans during the quarter ended June 30, 2017, compared to $88.81 million for the comparable quarter one year ago and $79.50 million 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 (on a much smaller volume) sells the guaranteed portion of U.S. Small Business Administration ("SBA") loans.  During the third quarter of fiscal 2017, fixed-rate one- to four-family mortgage loans and SBA loans totaling $19.34 million were sold compared to $14.19 million for the comparable quarter one year ago and $13.00 million for the preceding quarter.                                             

Timberland's investment securities increased $2.91 million, or 34%, to $11.50 million at June 30, 2017, from $8.60 million at March 31, 2017, primarily due to the purchase of $3.00 million in investment securities.


DEPOSIT BREAKDOWN
($ in thousands)
      June 30, 2017   March 31, 2017   June 30, 2016
      Amount    Percent    Amount    Percent    Amount    Percent 
Non-interest bearing demand     $ 197,527   24 %   $ 186,239   23 %   $ 149,575   21 %
NOW checking       216,719   26         214,488   27         189,475   26  
Savings       136,750   17       138,518   17       119,576   17  
Money market       119,025   15       118,791   15       100,914   14  
Money market – brokered       8,506   1       8,665   1       7,032   1  
Certificates of deposit under $250       121,505   15       123,670   15       129,194   18  
Certificates of deposit $250 and over       15,590   2       15,269   2       16,443   2  
Certificates of deposit – brokered       3,196   --       3,212   --       3,172   1  
Total deposits     $ 818,818   100 %   $ 808,852   100 %   $ 715,381   100 %
 

Total deposits increased $9.97 million, or 1%, during the current quarter to $818.82 million at June 30, 2017, from $808.85 million at March 31, 2017.  The current quarter's increase was primarily due to an $11.29 million increase in non-interest bearing demand account balances and a $2.23 million increase in negotiable order of withdrawal ("NOW") checking account balances.  These increases were partially offset by a $1.86 million decrease in certificates of deposit account balances and a $1.77 million decrease in savings account balances. 

FHLB Borrowings

On April 26, 2017, FHLB borrowings totaling $30.00 million were prepaid.  Prepayment penalties of $282,000 were incurred for the early termination of these high-cost borrowings (weighted average rate of 3.98%).

Shareholders' Equity

Total shareholders' equity increased $3.79 million to $108.62 million at June 30, 2017, from $104.83 million at March 31, 2017.  The increase in shareholders' equity was primarily due to net income of $4.28 million for the quarter, which was partially offset by dividend payments of $809,000 to shareholders.  Timberland did not repurchase shares of its common stock during the quarter and, at June 30, 2017, had 221,893 shares authorized to be purchased in accordance with the terms of its existing stock repurchase plan.

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 17.30% and a Tier 1 leverage capital ratio of 11.42% at June 30, 2017.

Timberland recorded a $1.00 million loan loss reserve recapture (which added approximately $0.09 to diluted earnings per share) during the quarter ended June 30, 2017 due to the Bank's recovery on a previously charged-off commercial mortgage loan.  Timberland had a net recovery of $1.02 million for the current quarter compared to net charge-offs of $3,000 for the preceding quarter and net charge-offs of $201,000 for the comparable quarter one year ago.  The allowance for loan losses was 1.38% of loans receivable at June 30, 2017 compared to 1.40% at March 31, 2017.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 39% to $2.44 million at June 30, 2017, from $4.01 million one year ago, and decreased 8% from $2.66 million at March 31, 2017.  Non-accrual loans decreased 30% to $2.06 million at June 30, 2017, from $2.96 million one year ago, and increased 9% from $1.89 million at March 31, 2017.


NON-ACCRUAL LOANS         June 30, 2017   March 31, 2017   June 30, 2016
($ in thousands)         Amount   Quantity     Amount   Quantity     Amount   Quantity
                               
Mortgage loans:                              
One- to four-family         $  896   7   $  820   6   $  1,236   9
Commercial         403   1   313   1   808   2
Land         496   2   296   2   444   3
Total mortgage loans         1,795   10   1,429   9   2,488   14
                               
Consumer loans:                              
Home equity and second                              
mortgage         260   3   383   5   436   7
Other         --   --   28   1   31   1
Total consumer loans         260   3   411   6   467   8
                               
Commercial business loans         --   --   54   2   --   --
Total loans         $  2,055   13   $  1,894   17   $   2,955   22
 

OREO and other repossessed assets decreased 28% to $3.42 million at June 30, 2017, from $4.76 million at June 30, 2016, and increased 14% from $3.01 million at March 31, 2017.  At June 30, 2017, the OREO and other repossessed asset portfolio consisted of 17 individual real estate properties.  During the quarter ended June 30, 2017, one OREO property was sold for a net gain of $42,000.


OREO and OTHER REPOSSESSED ASSETS         June 30, 2017   March 31, 2017   June 30, 2016
($ in thousands)   Amount   Quantity   Amount   Quantity   Amount   Quantity
                         
One- to four-family   $    927   3   $    411   2   $    1,382   7
Commercial     587   2     637   3       648   3
Land     1,903   12     1,957   12       2,665   16
Mobile home     --   --     --   --       67   1
Total   $   3,417   17   $    3,005   17   $      4,762   27
 

The non-performing assets to total assets ratio was 0.65% at June 30, 2017, compared to 0.60% at March 30, 2017 and 1.01% one year ago.

Non-GAAP Financial Measures
In addition to results presented in accordance with 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.  In addition, tangible assets equal total assets less goodwill.

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)     June 30, 2017   March 31, 2017   June 30, 2016
                   
Shareholders' equity     $   108,616     $   104,829     $   94,452  
Less goodwill       (5,650 )     (5,650 )     (5,650 )
Tangible common equity     $   102,966     $   99,179     $   88,802  
                                                                             
Total assets     $   931,009     $   946,682     $   858,139  
Less goodwill       (5,650 )     (5,650 )     (5,650 )
Tangible assets     $   925,359     $   941,032     $   852,489  
 

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).  Timberland ranked 8th in the recent release of the S&P Global Market Intelligence ranking of the top performing 50 largest public thrifts as of December 31, 2016.  The ranking was based on six metrics which included: return on average assets, return on average common tangible equity, efficiency ratio, median three-year growth rate in tangible common equity per share, non-performing loans to total loans and net charge-offs to average loans.  

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 2017 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)  2017     2017       2016 
Interest and dividend income                
Loans receivable $ 9,652     $       8,840       $       8,257  
Investment securities   69       68         70  
Dividends from mutual funds and FHLB stock   23       12         22  
Interest bearing deposits in banks   421       379         247  
  Total interest and dividend income   10,165       9,299         8,596  
                 
Interest expense          
Deposits   549       545         508  
FHLB borrowings   369       302         472  
  Total interest expense   918       847         980  
  Net interest income   9,247       8,452         7,616  
           
Recapture of loan losses   (1,000 )     (250 )       --  
  Net interest income after recapture of loan losses   10,247       8,702         7,616  
                 
Non-interest income          
Service charges on deposits   1,153       1,090         989  
ATM and debit card interchange transaction fees   855       793         778  
Gain on sale of loans, net   561       406         443  
Bank owned life insurance ("BOLI") net earnings   133       136         137  
Servicing income on loans sold   106       99         60  
OTTI on investment securities, net     --         --         (4 )
Other   348       327         346  
  Total non-interest income, net   3,156       2,851         2,749  
                 
Non-interest expense          
Salaries and employee benefits   3,741       3,755         3,397  
Premises and equipment   767       776         774  
Advertising   170       167         192  
OREO and other repossessed assets, net   4       (12 )       123  
ATM and debit card processing   375       350         337  
Postage and courier   109       120         98  
State and local taxes   176       152         141  
Professional fees   230       199         202  
FDIC insurance   99       107         100  
Loan administration and foreclosure   20       (1 )       92  
Data processing and telecommunications   480       464         470  
Deposit operations   301       240         232  
Other   466       540         410  
  Total non-interest expense   6,938       6,857         6,568  
           
Income before income taxes   6,465       4,696         3,797  
Provision for income taxes   2,188       1,568         1,250  
  Net income $   4,277     $   3,128       $   2,547  
                 
Net income per common share:          
Basic $ 0.59     $ 0.44       $ 0.37  
Diluted   0.58       0.42         0.36  
           
Weighted average common shares outstanding:          
Basic   7,269,564       7,135,083         6,822,608  
Diluted   7,432,171       7,379,353         7,111,199  
 
 
 
TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
  Nine Months Ended 
($ in thousands, except per share amounts)   June 30,        June 30, 
(unaudited)    2017        2016
Interest and dividend income              
Loans receivable   27,280        $ 24,992  
Investment securities   207                213  
Dividends from mutual funds and FHLB stock   60                83  
Interest bearing deposits in banks   1,081                649  
  Total interest and dividend income   28,628                25,937  
         
Interest expense        
Deposits   1,637                1,520  
FHLB borrowings   979                1,420  
  Total interest expense   2,616                2,940  
  Net interest income   26,012                22,997  
Recapture of loan losses   (1,250)                --  
  Net interest income after recapture of loan losses   27,262                22,997  
         
Non-interest income        
Service charges on deposits   3,348                2,898  
ATM and debit card interchange transaction fees   2,448                2,187  
Gain on sale of loans, net   1,656                1,230  
BOLI net earnings   407                410  
Servicing income on loans sold   302                180  
OTTI on investment securities, net   --                (28 )
Other   1,063                903  
  Total non-interest income, net   9,224                7,780  
                         
Non-interest expense                        
Salaries and employee benefits   11,176                10,333  
Premises and equipment   2,298                2,305  
Advertising   499                590  
OREO and other repossessed assets, net   22                561  
ATM and debit card processing   1,036                990  
Postage and courier   324                309  
State and local taxes   484                410  
Professional fees   629                449  
FDIC insurance   319                334  
Loan administration and foreclosure   113                216  
Data processing and telecommunications   1,394                1,394  
Deposit operations   850                638  
Other   1,462                1,146  
  Total non-interest expense   20,606                19,675  
         
Income before income taxes   15,880        $       11,102  
Provision for income taxes   5,328                3,647  
  Net income   10,552        $       7,455  
                         
Net income per common share:                        
  Basic   1.49        $       1.09  
  Diluted   1.44                1.05  
         
Weighted average common shares outstanding:        
  Basic       7,088,134                6,846,373  
  Diluted   7,348,486                7,091,661  

 

TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 
($ in thousands, except per share amounts) (unaudited)   June 30,   March 31,   June 30,
    2017   2017   2016
Assets            
Cash and due from financial institutions   $ 17,476     $ 17,060     $ 16,394  
Interest-bearing deposits in banks     114,964       130,980       72,779  
Total cash and cash equivalents     132,440       148,040       89,173  
             
Certificates of deposit ("CDs") held for investment, at cost     41,187       52,934       52,435  
Investment securities:            
Held to maturity, at amortized cost     7,244       7,326       7,618  
Available for sale, at fair value     4,260       1,272       1,363  
FHLB stock     1,107       2,307       2,804  
Loans held for sale     3,523       5,798       4,885  
             
Loans receivable     696,768       685,669       657,208  
Less: Allowance for loan losses     (9,610 )     (9,590 )     (9,842 )
Net loans receivable     687,158       676,079       647,366  
             
Premises and equipment, net     18,465       18,013       16,224  
OREO and other repossessed assets, net     3,417       3,005       4,762  
BOLI     19,127       18,994       18,580  
Accrued interest receivable     2,437       2,443       2,270  
Goodwill     5,650       5,650       5,650  
Mortgage servicing rights, net     1,781       1,710       1,516  
Other assets     3,213       3,111       3,493  
Total assets   $ 931,009     $ 946,682     $ 858,139  
             
Liabilities and shareholders' equity            
Deposits: Non-interest-bearing demand   $ 197,527     $ 186,239     $ 149,575  
Deposits: Interest-bearing     621,291       622,613       565,806  
Total deposits     818,818       808,852       715,381  
             
FHLB borrowings     --       30,000       45,000  
Other liabilities and accrued expenses     3,575       3,001       3,306  
Total liabilities     822,393       841,853       763,687  
             
Shareholders' equity            
Common stock, $.01 par value; 50,000,000 shares authorized;
   7,354,577 shares issued and outstanding – June 30, 2017
   7,345,477 shares issued and outstanding – March 31, 2017
   6,939,068 shares issued and outstanding – June 30, 2016
    13,223      

12,986
     
9,818
 
Unearned shares issued to Employee Stock Ownership Plan ("ESOP")     (463 )     (529 )     (728 )
Retained earnings     96,018       92,550       85,635  
Accumulated other comprehensive loss     (162 )     (178 )     (273 )
Total shareholders' equity     108,616       104,829       94,452  
Total liabilities and shareholders' equity   $ 931,009     $ 946,682     $ 858,139  


KEY FINANCIAL RATIOS AND DATA          Three Months Ended
($ in thousands, except per share amounts) (unaudited)           June 30,   March 31,   June 30,
       2017     2017     2016 
PERFORMANCE RATIOS:              
Return on average assets (a)       1.86%       1.35%       1.20%  
Return on average equity (a)       16.14%       12.24%       10.96%  
Net interest margin (a)       4.29%       3.88%       3.83%  
Efficiency ratio       55.94%       60.67%       63.37%  
               
      Nine Months Ended
                              June 30,       June 30,
           2017         2016 
PERFORMANCE RATIOS:              
Return on average assets (a)
          1.53%           1.18%  
Return on average equity (a)            13.80%           10.88%  
Net interest margin (a)            4.03%           3.91%  
Efficiency ratio           58.48%           63.93%  
               
      June 30,   March 31,   June 30,
       2017     2017     2016 
ASSET QUALITY RATIOS AND DATA:              
Non-accrual loans     $2,055     $1,894     $2,955  
Loans past due 90 days and still accruing       --       135       135  
Non-performing investment securities       590       638       789  
OREO and other repossessed assets       3,417       3,005       4,762  
Total non-performing assets (b)     $6,062     $5,672     $8,641  
               
               
Non-performing assets to total assets (b)       0.65%       0.60%       1.01%  
Net charge-offs (recoveries) during quarter     $(1,020)     $  3     $  201  
Allowance for loan losses to non-accrual loans       468%       506%       333%  
Allowance for loan losses to loans receivable (c)       1.38%       1.40%       1.50%  
Troubled debt restructured loans on accrual status (d)     $3,360     $6,429     $7,677  
               
               
CAPITAL RATIOS:              
Tier 1 leverage capital       11.42%       10.89%       10.68%  
Tier 1 risk-based capital       16.05%       15.77%       14.20%  
Common equity Tier 1 risk-based capital       16.05%       15.77%       14.20%  
Total risk-based capital       17.30%       17.02%       15.45%  
Tangible common equity to tangible assets (non-GAAP)       11.13%       10.54%       10.42%  
               
               
BOOK VALUES:              
Book value per common share     $  14.77      $  14.27      $13.61  
Tangible book value per common share (e)       14.00       13.50       12.80  
               
               
(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 $252, $404 and $530 reported as non-accrual
loans at June 30, 2017, March 31, 2017 and June 30, 2016, respectively. 
(e)  Tangible common equity divided by common shares outstanding (non-GAAP).    


AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
($ in thousands)
(unaudited)
  For the Three Months Ended
  June 30, 2017   March 31, 2017   June 30, 2016
  Amount   Rate   Amount   Rate   Amount   Rate
                       
Assets                      
Loans and loans held for sale $ 693,931     5.56 %   $ 688,506     5.14 %   $ 647,781     5.10 %
Investment securities and FHLB stock   12,482     2.98       10,866     2.94       11,860     3.10  
Interest bearing deposits and CD's   156,507     1.08       171,203     0.90       136,724     0.73  
Total interest-bearing assets   862,920     4.71       870,575     4.27       796,365     4.32  
Other assets   57,841           59,561           55,926      
Total assets   920,761           930,136           852,291      
                       
Liabilities and Shareholders' Equity                      
NOW checking accounts $ 207,060     0.22 %   $ 208,736     0.22 %   $ 187,836     0.24 %
Money market accounts   125,787     0.35       127,935     0.34       105,884     0.32  
Savings accounts   137,108     0.06       134,073     0.06       116,818     0.05  
Certificates of deposit accounts   141,254     0.87       144,021     0.86       149,713     0.79  
Total interest-bearing deposits   611,209     0.36       614,765     0.35       560,251     0.36  
FHLB borrowings   8,571     17.57       30,000     4.08       45,000     4.22  
Total interest-bearing liabilities   619,780     0.59       644,765     0.52       605,251     0.65  
                       
Non-interest bearing demand deposits   190,631           178,977           150,331      
Other liabilities   4,379           4,208           3,750      
Shareholders' equity   105,971           102,186           92,959      
Total liabilities and shareholders' equity   920,761           930,136           852,291      
                       
Interest rate spread     4.12 %       3.75 %       3.67 %
Net interest margin (1)     4.29 %       3.88 %       3.83 %
Average interest-bearing assets to                      
average interest bearing liabilities   139.23 %         135.02 %         131.58 %    
 
                                 
(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, 2017       June 30, 2016
      Amount   Rate         Amount   Rate
                                     
Assets                        
Loans and loans held for sale     $ 688,936     5.29 %         $ 634,981     5.25 %
Investment securities and FHLB stock       11,447     3.11             11,887     3.31  
Interest bearing deposits and CD's       160,458     0.90             136,681     0.63  
Total interest-bearing assets       860,841     4.43             783,549     4.41  
Other assets       58,324                 57,079      
Total assets       919,165                 840,628      
                         
Liabilities and Shareholders' Equity                        
NOW checking accounts     $ 206,037     0.22 %         $ 183,938     0.25 %
Money market accounts       124,650     0.34             105,307     0.31  
Savings accounts       132,922     0.06             113,069     0.05  
Certificates of deposit accounts       144,249     0.85             151,813     0.78  
Total interest-bearing deposits       607,858     0.36             554,127     0.37  
FHLB borrowings       22,857     5.73             45,000     4.22  
Total interest-bearing liabilities       630,715     0.55             599,127     0.65  
                         
Non-interest bearing demand deposits       182,117                 146,466      
Other liabilities       4,368                 3,661      
Shareholders' equity       101,965                 91,374      
Total liabilities and shareholders' equity       919,165                 840,628      
                         
Interest rate spread         3.88 %             3.76 %
Net interest margin (1)         4.03 %             3.91 %
Average interest-bearing assets to                        
average interest bearing liabilities       136.49 %               130.78 %    
 
                                   
(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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