Market Overview

Timberland Bancorp Fiscal Year Net Income Increases 40% to $14.17 Million

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  • Fiscal Year Earnings Per Share Increases 34% to $1.92
  • Fiscal Year Return on Equity Increases to 13.65%
  • Fiscal Year Return on Assets Increases to 1.53%

HOQUIAM, Wash., Nov. 01, 2017 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company") today reported that net income increased 40% to $14.17 million for the fiscal year ended September 30, 2017 from $10.15 million for the fiscal year ended September 30, 2016. Earnings per diluted common share ("EPS") increased 34% to $1.92 for fiscal year 2017 from $1.43 for the prior fiscal year.

Timberland also reported net income of $3.62 million, or $0.48 per diluted common share, for its fourth fiscal quarter ended September 30, 2017.  This compares to net income of $2.70 million, or $0.38 per diluted common share, for the quarter ended September 30, 2016, and net income of $4.28 million, or $0.58 per diluted common share, for the preceding quarter ended June 30, 2017.  

Timberland's Board of Directors declared a quarterly cash dividend of $0.11 per common share, payable on November 30, 2017 to shareholders of record on November 16, 2017. 

"Fiscal year 2017 marked the 7th consecutive year the Company increased earnings per share, return on equity, return on assets and net income," stated Michael R. Sand, President and CEO.  "Each of these metrics increased significantly compared to the prior fiscal year as detailed fully in this earnings release.  The continued improvement in the Company's financial position is a result of exercising pricing discipline while growing revenues and carefully managing expenses.  Our positioning of the Company has been predicated on producing above peer results in conjunction with structuring the balance sheet to benefit from rising interest rates.  We anticipate maintaining this sensitivity to rising rates.  Timberland's shareholders have been rewarded this year by a significant increase in the Company's share price which increased the Company's market cap to a level comfortably sufficient for Timberland to be added to the Russell 2000 and 3000 indexes.  This has increased the visibility of the Company and significantly increased its average daily trading volume."

2017 Fiscal Year Earnings and Balance Sheet Highlights (at or for the period ended September 30, 2017, compared to September 30, 2016, or June 30, 2017):

   Earnings Highlights:

  • Fiscal year 2017 EPS increased 34% to $1.92 from $1.43 for fiscal year 2016;
  • Quarterly EPS increased 26% to $0.48 from $0.38 for comparable quarter one year ago;
  • Net income increased 40% to $14.17 million from $10.15 million for the prior fiscal year;
  • Return on average equity and return on average assets increased to 13.65% and 1.53%, respectively, for the 2017 fiscal year; from 11.00% and 1.19%, respectively, for the prior fiscal year;
  • Operating revenue increased 13% compared to fiscal year 2016;
  • Non-interest income increased 14% compared to fiscal year 2016;
  • Efficiency ratio improved to 57.92% for fiscal year 2017 from 63.89% for fiscal year 2016; and
  • Net interest margin for fiscal 2017 increased to 4.07% from 3.88% for fiscal 2016.

   Balance Sheet Highlights:

  • Increased total assets 7% year-over-year and 2% from the prior quarter;
  • Increased net loans receivable 4% year-over-year;
  • Increased total deposits 10% year-over-year and 2% from the prior quarter;
  • Decreased non-performing assets 27% year-over-year and 5% from the prior quarter; and
  • Increased book and tangible book (non-GAAP) values per common share to $15.08 and $14.31, respectively, at September 30, 2017 from $13.95 and $13.13, respectively, at September 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 13% for the 2017 fiscal year to $47.48 million from $41.86 million for Timberland's 2016 fiscal year. For the current quarter operating revenue increased 11% to $12.24 million from $11.06 million for the comparable quarter one year ago and decreased 1% from $12.40 for the preceding quarter.  During the preceding quarter operating revenue was increased by $466,000 – the net amount resulting from the collection of $748,000 of non-accrual interest and the payment of $282,000 in prepayment penalties incurred to prepay Timberland's remaining Federal Home Loan Bank ("FHLB") borrowings.

Net interest income for the 2017 fiscal year increased 14% to $35.14 million from $30.80 million for the 2016 fiscal year. Net interest income for the current quarter increased 17% to $9.13 million from $7.81 million for the comparable quarter one year ago and decreased 1% from $9.25 million for the preceding quarter.  The increased net interest income for the preceding quarter was primarily due to an increase in the amount of non-accrual interest collected, which was partially offset by prepayment penalties on FHLB borrowings as noted in the prior paragraph.   

Timberland's net interest margin for the fiscal year ended September 30, 2017, increased to 4.07% from 3.88% for the fiscal year ended September 30, 2016. The net interest margin for the current quarter increased to 4.18% from 3.77% for the comparable quarter one year ago and decreased from 4.29% for the preceding quarter.  The net interest margin for the prior quarter was increased by approximately 22 basis points due to the net effect ($466,000) of collecting $748,000 of non-accrual interest and paying $282,000 in FHLB borrowing prepayment penalties.  The net interest margin for the current quarter was increased by less than one basis point due to the collection of $8,000 of non-accrual interest.

Non-interest income for fiscal year 2017 increased 14% to $12.37 million from $10.89 million for the prior fiscal year. The increase was primarily due to increases in services charges on deposits, gain on sales of loans, servicing income on loans sold and smaller increases in several other categories.  Non-interest income for the current quarter increased 1% to $3.15 million from $3.11 million for the comparable quarter one year ago and decreased slightly from $3.16 million for the preceding quarter.

For fiscal year 2017, total (non-interest) operating expense increased 3% to $27.52 million from $26.64 million for the prior fiscal year. Total operating expenses for the current quarter decreased slightly to $6.91 million from $6.94 million for the preceding quarter and from $6.96 million for the comparable quarter one year ago.  The efficiency ratio for fiscal 2017 improved to 57.92% from 63.89% for fiscal year 2016.  The efficiency ratio for the current quarter improved to 56.31% from 63.77% for the comparable quarter one year ago.

The provision for income taxes for fiscal year 2017 increased $2.18 million to $7.08 million from $4.90 million for fiscal year 2016, primarily due to higher pre-tax income. The effective tax rate was 33.3% for fiscal year 2017 compared to 32.6% for fiscal year 2016. The provision for income taxes for the current quarter decreased to $1.75 million from $2.19 million for the preceding quarter, primarily due to lower pre-tax income.  The effective tax rate was 32.6% for the current quarter compared to 33.8% for the quarter ended June 30, 2017.  The lower effective tax rate for the current quarter was in part due to the adoption of Accounting Standards Update ("ASU") No. 2016-09, Improvements to Employee Share-Based Payment Accounting.

Balance Sheet Management

Total assets increased $60.64 million, or 7%, during the fiscal year to $952.02 million at September 30, 2017 from $891.39 million at September 30, 2016.  This increase was primarily due to a $39.25 million increase in cash and cash equivalents and a $27.22 million increase in net loans receivable.  These increases, and the repayment of $30.00 million in FHLB borrowings, were primarily funded by a $76.36 million increase in deposits and retained net income during the fiscal year.  Total assets increased $21.02 million, or 2%, during the current quarter to $952.02 million at September 30, 2017 from $931.01 million at June 30, 2017.  The increase was primarily due to a $15.75 million increase in cash and cash equivalents and a $3.21 million increase in net loans receivable and was funded by increased deposits.

Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment and available for sale investment securities, was 22.9% of total liabilities at September 30, 2017, compared to 21.3% at June 30, 2017, and 20.6% one year ago. 

Net loans receivable increased $27.22 million, or 4%, during the fiscal year to $690.36 million at September 30, 2017, from $663.15 million at September 30, 2016.  The increase was primarily due to a $24.59 million increase in custom and owner/builder one- to four-family construction loans, a $16.40 million increase in commercial real estate loans, a $10.27 million increase in commercial construction loans, an $8.74 million increase in multi-family construction loans and smaller increases in several other categories.  These increases were partially offset by a $33.78 million increase in the amount of undisbursed construction loans in process, a $3.70 million decrease in multi-family mortgage loans and smaller decreases in several other categories. 

Net loans receivable increased $3.21 million during the current quarter to $690.36 million at September 30, 2017, from $687.16 million at June 30, 2017.  The increase was primarily due to a $10.27 million increase in multi-family construction loans, an $8.06 million increase in custom and owner/builder one- to four-family construction loans and smaller increases in several other categories.  These increases were partially offset by a $10.28 million increase in the amount of undisbursed construction loans in process, a $3.80 million decrease in one- to four- family mortgage loans and smaller decreases in several other categories. 

LOAN PORTFOLIO

($ in thousands) September 30, 2017   June 30, 2017   September 30, 2016
  Amount   Percent   Amount   Percent   Amount   Percent
                       
Mortgage loans:                      
  One- to four-family (a) $   118,147     15 %   $   121,705     16 %   $  118,560     16 %
  Multi-family     58,607       7          61,051       8          62,303       9  
  Commercial     328,927       42         331,901       43         312,525       43  
  Construction - custom and                      
owner/builder     117,641       15         109,578         14          93,049       13  
  Construction - speculative
  one-to four-family
    9,918       1         8,002       1         8,106       1  
  Construction - commercial     19,630       3         20,067       3         9,365       1  
  Construction - multi-family     21,327       3         11,057       1         12,590       2  
  Land     23,910       3         24,333       3         21,627       3  
Total mortgage loans     698,107       89         687,694       89         638,125       88  
                       
Consumer loans:                      
  Home equity and second                      
mortgage     38,420       5         36,320       5         39,727       5  
  Other     3,823       --         3,789       --         4,139       1  
Total consumer loans     42,243       5         40,109       5         43,866       6  
                       
Commercial business loans (b)      44,444       6         43,407       6         41,837       6  
Total loans     784,794     100 %       771,210     100 %       723,828     100 %
Less:                      
Undisbursed portion of                      
construction loans in                      
  process   (82,411 )         (72,133 )         (48,627 )    
Deferred loan origination                      
fees   (2,466 )         (2,309 )         (2,229 )    
Allowance for loan losses   (9,553 )         (9,610 )         (9,826 )    
Total loans receivable, net $   690,364         $   687,158         $ 663,146      
   
                                         

(a) Does not include one- to four-family loans held for sale totaling $3,515, $3,523 and $3,604 at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.
(b) Does not include commercial business loans held for sale totaling $84 at September 30, 2017.

Timberland originated $85.10 million in loans during the quarter ended September 30, 2017, compared to $69.71 million for the comparable quarter one year ago and $92.93 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 fourth quarter of fiscal 2017, fixed-rate one- to four-family mortgage loans and SBA loans totaling $15.88 million were sold compared to $17.83 million for the comparable quarter one year ago and $19.50 million for the preceding quarter.
                                            
Timberland's investment securities and other investments decreased $124,000, or 1%, to $11.38 million at September 30, 2017, from $11.50 million at June 30, 2017, primarily due to scheduled amortization.

DEPOSIT BREAKDOWN ($ in thousands)
    September 30, 2017   June 30, 2017   September 30, 2016  
    Amount   Percent   Amount   Percent   Amount   Percent  
Non-interest-bearing demand   $ 205,952   25 %   $ 197,527   24 %   $ 172,283     23 %  
NOW checking     220,315    26       216,719    26       203,812     27    
Savings     140,987    17       136,750    17       123,474     16    
Money market     122,877    15       119,025    15       107,083     14    
Money market – brokered     8,125     1       8,506     1       6,908     1    
Certificates of deposit under $250     120,844    14       121,505    15       128,330     17    
Certificates of deposit $250 and over     15,601    2       15,590    2       16,439     2    
Certificates of deposit – brokered     3,197   --       3,196   --       3,205     --    
  Total deposits   $ 837,898   100 %   $ 818,818   100 %   $ 761,534   100 %  


Total deposits increased $76.36 million, or 10%, during the fiscal year to $837.90 million at September 30, 2017, from $761.53 million at September 30, 2016.  This increase was primarily due to a $33.67 million increase in non-interest-bearing demand account balances, a $17.51 million increase in savings account balances, a $17.01 million increase in money market account balances and a $16.50 million increase in negotiable order of withdrawal ("NOW") checking account balances.  These increases were partially offset by an $8.33 million decrease in certificates of deposit account balances. 

Total deposits increased $19.08 million, or 2%, during the current quarter to $837.90 million at September 30, 2017, from $818.82 million at June 30, 2017.  This increase was primarily due to an $8.45 million increase in non-interest-bearing demand account balances, a $4.24 million increase in savings account balances, a $3.60 million increase NOW checking account balances and a $3.47 million increase in money market account balances.  These increases were partially offset by a $649,000 decrease in certificates of deposit account balances. 

Shareholders' Equity

Total shareholders' equity increased $2.38 million to $111.00 million at September 30, 2017, from $108.62 million at June 30, 2017.  The increase in shareholders' equity was primarily due to net income of $3.61 million for the quarter, which was partially offset by dividend payments of $1.40 million to shareholders. 

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 17.56% and a Tier 1 leverage capital ratio of 11.52% at September 30, 2017.

No provision for loan losses was made for the quarters ended September 30, 2017 and 2016. 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, mainly due to the Bank's recovery on a previously charged-off commercial mortgage loan.  Timberland had net charge-offs of $57,000 for the current quarter compared to a net recovery of $1.02 million for the preceding quarter and net charge-offs of $15,000 for the comparable quarter one year ago.  The allowance for loan losses was 1.36% of loans receivable at September 30, 2017, compared to 1.38% at June 30, 2017.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 31% to $2.41 million at September 30, 2017, from $3.47 million one year ago, and decreased 1% from $2.44 million at June 30, 2017.  Non-accrual loans decreased 33% to $1.91 million at September 30, 2017, from $2.87 million one year ago, and decreased 7% from $2.06 million at June 30, 2017.

NON-ACCRUAL LOANS September 30, 2017   June 30, 2017     September 30, 2016 
($ in thousands) Amount   Quantity   Amount   Quantity     Amount   Quantity
                         
Mortgage loans:                        
  One- to four-family $   874   7   $   896   7     $   914   7
  Commercial   213   2     403   1         612   1
  Construction   --   --     --   --       367   1
  Land     566   4       496   2         548   5
Total mortgage loans     1,653   13       1,795   10       2,441   14
                         
Consumer loans:                        
  Home equity and second                        
mortgage   258   3     260   3         402   6
  Other   --   --     --   --         30   1
Total consumer loans   258   3     260   3         432   7
Total loans $   1,911   16   $    2,055   13     $    2,873   21

           
OREO and other repossessed assets decreased 20% to $3.30 million at September 30, 2017, from $4.12 million at September 30, 2016, and decreased 3% from $3.42 million at June 30, 2017.  At September 30, 2017, the OREO and other repossessed asset portfolio consisted of 15 individual real estate properties and one recreational vehicle.  During the quarter ended September 30, 2017, two OREO properties were sold.
               

OREO and OTHER REPOSSESSED ASSETS September 30, 2017   June 30, 2017   September 30, 2016
($ in thousands) Amount   Quantity   Amount   Quantity   Amount   Quantity
                       
One- to four-family $    875   2   $    927   3   $    1,071   5
Commercial   533   2     587   2       648   3
Land   1,865   11     1,903   12       2,331   14
Consumer   28   1     --   --       67   1
Total $   3,301   16   $    3,417   17   $      4,117   23

               

The non-performing assets to total assets ratio improved to 0.60% at September 30, 2017, compared to 0.65% at June 30, 2017 and 0.88% one year ago.

Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures.  Timberland believes that certain non-GAAP financial measures provide investors with information useful in understanding the Company's financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with GAAP results as reported.

Financial measures that exclude intangible assets are non-GAAP measures.  To provide investors with a broader understanding of capital adequacy, Timberland provides non-GAAP financial measures for tangible common equity, along with the GAAP measure.  Tangible common equity is calculated as shareholders' equity less goodwill.  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)   Sept. 30, 2017   June 30, 2017   Sept. 30, 2016
             
Shareholders' equity   $   111,000     $   108,616     $   96,834  
Less goodwill     (5,650 )     (5,650 )     (5,650 )
Tangible common equity   $   105,350     $    102,966     $   91,184  
             
Total assets   $   952,024     $   931,009     $   891,388  
Less goodwill     (5,650 )     (5,650 )     (5,650 )
Tangible assets   $    946,374     $   925,359     $   885,738  


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 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 2018 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)   Sept. 30,   June 30,   Sept. 30,
(unaudited)    2017    2017     2016 
  Interest and dividend income            
  Loans receivable and loans held for sale   $ 9,104   $ 9,652     $ 8,588  
  Investment securities     73     69       74  
  Dividends from mutual funds, other investments and FHLB stock     28     23       23  
  Interest bearing deposits in banks and CDs     505     421       253  
    Total interest and dividend income     9,710     10,165       8,938  
               
  Interest expense            
  Deposits     581     549       521  
  FHLB borrowings     --     369       611  
    Total interest expense     581     918       1,132  
    Net interest income     9,129     9,247       7,806  
               
  Recapture of loan losses     --     (1,000 )     --  
    Net interest income after recapture of loan losses     9,129     10,247       7,806  
               
  Non-interest income            
  Service charges on deposits     1,170     1,153       1,071  
  ATM and debit card interchange transaction fees     895     855       1,073  
  Gain on sales of loans, net     502     561       551  
  Bank owned life insurance ("BOLI") net earnings     139     133       141  
  Servicing income on loans sold     114     106       86  
  Recoveries (OTTI) on investment securities, net       33       --       (140 )
  Other     292     348       327  
    Total non-interest income, net     3,145     3,156       3,109  
               
  Non-interest expense            
  Salaries and employee benefits     3,732     3,741       3,589  
  Premises and equipment     789     767       831  
  Advertising     199     170       163  
  OREO and other repossessed assets, net     --     4       101  
  ATM and debit card processing     369     375       387  
  Postage and courier     111     109       104  
  State and local taxes     125     176       161  
  Professional fees     258     230       208  
  FDIC insurance     42     99       114  
  Loan administration and foreclosure     93     20       106  
  Data processing and telecommunications     476     480       502  
  Deposit operations     225     301       274  
  Other     492     466       421  
    Total non-interest expense     6,911     6,938       6,961  
               
  Income before income taxes     5,363     6,465       3,954  
  Provision for income taxes     1,748     2,188       1,255  
    Net income   $   3,615   $   4,277     $   2,699  
               
  Net income per common share:            
     Basic   $ 0.50   $ 0.59     $ 0.40  
    Diluted     0.48     0.58       0.38  
               
  Weighted average common shares outstanding:            
    Basic     7,280,773     7,269,564       6,831,419  
    Diluted
    7,473,724     7,432,171       7,146,115  
                         
                         
                         
                         
TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
  Year Ended  
($ in thousands, except per share amounts)   Sept. 30,   Sept. 30,  
(unaudited)    2017     2016   
  Interest and dividend income          
  Loans receivable and loans held for sale   $ 36,385     $ 33,580    
  Investment securities     279       287    
  Dividends from mutual funds, other investments and FHLB stock     88       106    
  Interest bearing deposits in banks and CDs     1,586       902    
    Total interest and dividend income     38,338       34,875    
             
  Interest expense          
  Deposits     2,218       2,041    
  FHLB borrowings     979       2,031    
    Total interest expense     3,197       4,072    
    Net interest income
    35,141       30,803    
                     
  Recapture of loan losses     (1,250 )     --    
    Net interest income after recapture of loan losses     36,391       30,803    
             
  Non-interest income          
  Service charges on deposits     4,518       3,969    
  ATM and debit card interchange transaction fees     3,343       3,261    
  Gain on sales of loans, net     2,157       1,781    
  BOLI net earnings     546       551    
  Servicing income on loans sold     417       266    
  Recoveries (OTTI) on investment securities, net     33       (168 )  
  Other     1,354       1,229    
    Total non-interest income, net     12,368       10,889    
             
  Non-interest expense          
  Salaries and employee benefits     14,908       13,921    
  Premises and equipment     3,087       3,137    
  Advertising     698       753    
  OREO and other repossessed assets, net     22       662    
  ATM and debit card processing     1,405       1,377    
  Postage and courier     435       413    
  State and local taxes     609       572    
  Professional fees     887       657    
  FDIC insurance     362       448    
  Loan administration and foreclosure     205       321    
  Data processing and telecommunications     1,870       1,896    
  Deposit operations     1,074       912    
  Other     1,954       1,568    
    Total non-interest expense     27,516       26,637    
             
  Income before income taxes   $ 21,243     $ 15,055    
  Provision for income taxes     7,076       4,901    
    Net income   $ 14,167     $ 10,154    
             
  Net income per common share:          
    Basic   $ 1.99     $ 1.48    
    Diluted     1.92       1.43    
             
  Weighted average common shares outstanding:          
    Basic     7,136,690       6,842,614    
    Diluted
    7,380,053
      7,105,349     


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 
($ in thousands, except per share amounts) (unaudited)   Sept. 30,   June 30,   Sept. 30,
     2017     2017     2016 
Assets            
Cash and due from financial institutions   $   17,447     $   17,476     $   16,686  
Interest-bearing deposits in banks     130,741       114,964       92,255  
  Total cash and cash equivalents     148,188       132,440       108,941  
               
Certificates of deposit ("CDs") held for investment, at cost     43,034       41,187       53,000
 
                         
Investment securities:            
  Held to maturity, at amortized cost     7,139       7,244       7,511  
  Available for sale, at fair value     1,241       1,260       1,342  
FHLB stock
Other investments, at cost
    1,107
3,000
      1,107
3,000
      2,204
--
 
Loans held for sale     3,599       3,523       3,604  
             
Loans receivable     699,917       696,768       672,972  
Less: Allowance for loan losses     (9,553 )     (9,610 )     (9,826 )
  Net loans receivable     690,364       687,158       663,146  
               
Premises and equipment, net     18,418       18,465       16,159  
OREO and other repossessed assets, net     3,301       3,417       4,117  
BOLI     19,266       19,127       18,721  
Accrued interest receivable     2,520       2,437       2,348  
Goodwill     5,650       5,650       5,650  
Mortgage servicing rights, net     1,825       1,781       1,573  
Other assets     3,372       3,213       3,072  
  Total assets   $ 952,024     $ 931,009     $ 891,388  
               
Liabilities and shareholders' equity            
Deposits: Non-interest-bearing demand   $   205,952     $   197,527     $   172,283  
Deposits: Interest-bearing     631,946       621,291       589,251  
  Total deposits     837,898       818,818       761,534  
               
FHLB borrowings     --       --       30,000  
Other liabilities and accrued expenses     3,126       3,575       3,020  
  Total liabilities     841,024       822,393       794,554  
             
Shareholders' equity            
Common stock, $.01 par value; 50,000,000 shares authorized;
   7,361,077 shares issued and outstanding – September 30, 2017
  7,354,577 shares issued and outstanding – June 30, 2017
   6,943,868 shares issued and outstanding – September 30, 2016   
    13,286      
13,223
     
9,961
 
Unearned shares issued to Employee Stock Ownership Plan ("ESOP")     (397 )     (463 )     (661 )
Retained earnings     98,235       96,018       87,709  
Accumulated other comprehensive loss     (124 )     (162 )     (175 )
  Total shareholders' equity     111,000       108,616       96,834  
  Total liabilities and shareholders' equity   $ 952,024     $ 931,009     $ 891,388  



KEY FINANCIAL RATIOS AND DATA  Three Months Ended
($ in thousands, except per share amounts) (unaudited)   Sept. 30,   June 30,   Sept. 30,
     2017     2017     2016 
PERFORMANCE RATIOS:            
Return on average assets (a)     1.55 %     1.86 %     1.22 %
Return on average equity (a)     13.23 %     16.14 %     11.34 %
Net interest margin (a)     4.18 %     4.29 %     3.77 %
Efficiency ratio     56.31 %     55.94 %     63.77 %
             
    Year Ended
      Sept. 30,       Sept. 30,
      2017
       2016 
PERFORMANCE RATIOS:            
Return on average assets
      1.53 %         1.19 %
Return on average equity  
      13.65 %         11.00 %
Net interest margin
      4.07 %         3.88 %
Efficiency ratio       57.92 %         63.89 %
             
    Sept. 30,   June 30,   Sept. 30,
     2017     2017     2016 
ASSET QUALITY RATIOS AND DATA:            
Non-accrual loans   $ 1,911     $ 2,055     $ 2,873  
Loans past due 90 days and still accruing     --       --       135  
Non-performing investment securities     533       590       734  
OREO and other repossessed assets     3,301       3,417       4,117  
Total non-performing assets (b)   $ 5,745     $ 6,062     $ 7,859  
             
             
Non-performing assets to total assets (b)     0.60 %     0.65 %     0.88 %
Net charge-offs (recoveries) during quarter   $  57     $   (1,020 )   $   15  
Allowance for loan losses to non-accrual loans     500 %     468 %     342 %
Allowance for loan losses to loans receivable (c)     1.36 %     1.38 %     1.46 %
Troubled debt restructured loans on accrual status (d)   $ 3,342     $ 3,360     $ 7,629  
             
             
CAPITAL RATIOS:            
Tier 1 leverage capital     11.52 %     11.42 %     10.54 %
Tier 1 risk-based capital     16.31 %     16.05 %     14.75 %
Common equity Tier 1 risk-based capital     16.31 %     16.05 %     14.75 %
Total risk-based capital     17.56 %     17.30 %     16.00 %
Tangible common equity to tangible assets (non-GAAP)     11.13 %     11.13 %     10.29 %
             
             
BOOK VALUES:            
Book value per common share   $   15.08      $   14.77      $ 13.95  
Tangible book value per common share (e)     14.31       14.00       13.13  
             
               

(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, $252 and $530 reported as non-accrual loans at September 30, 2017, June 30, 2017 and September 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
  September 30, 2017   June 30, 2017   September 30, 2016
  Amount   Rate   Amount   Rate   Amount     Rate
                       
Assets                      
Loans receivable and loans held for sale $   702,171     5.19 %   $   693,931     5.58 %   $   669,661     5.13 %
Investment securities and FHLB stock (1)     12,522      3.23         12,482      2.98         11,726      3.31  
Interest-bearing deposits in banks and CD's     159,297      1.26         156,507      1.08         146,609      0.68  
  Total interest-earning assets     873,990      4.44         862,920      4.71         827,996      4.32  
Other assets     60,365             57,841             56,653      
  Total assets   934,355           920,761           884,649      
                       
Liabilities and Shareholders' Equity                      
NOW checking accounts     211,046      0.21 %   $   207,060      0.22 %   $   193,225     0.24 %
Money market accounts     127,214      0.37         125,787      0.35         107,410      0.31  
Savings accounts   139,162      0.06       137,108      0.06       122,088      0.05  
Certificates of deposit accounts   139,975      0.93       141,254      0.87       148,866      0.81  
  Total interest-bearing deposits     617,397      0.37         611,209      0.36         571,589      0.36  
FHLB borrowings (2)     --       --         8,571     17.57         44,837      5.42  
Total interest-bearing liabilities   617,397      0.37       619,780      0.59       616,426      0.73  
                       
Non-interest-bearing demand deposits   202,948           190,631           168,744      
Other liabilities   4,693           4,379           4,296      
Shareholders' equity   109,317           105,971           95,183      
  Total liabilities and shareholders' equity $   934,355           920,761           884,649      
                       
  Interest rate spread     4.07 %       4.12 %       3.59 %
  Net interest margin (3)     4.18 %       4.29 %       3.77 %
  Average interest-earning assets to                      
  average interest-bearing liabilities   141.56 %         139.23 %         134.32 %    
                                   
                                   

(1) Includes other investments
(2) Rate calculation includes prepayment penalties incurred
(3) Net interest margin = annualized net interest income /
     average interest-bearing assets
               

AVERAGE BALANCES, YIELDS, AND RATES –ANNUAL
($ in thousands)
(unaudited)

  For the Year Ended  
  September 30, 2017       September 30, 2016  
  Amount   Rate       Amount     Rate
                 
Assets                
Loans receivable and loans held for sale $   692,278     5.26 %     $   643,698     5.22 %
Investment securities and FHLB stock (1)     11,717       3.13           11,846       3.31  
Interest-bearing deposits in banks and CD's     160,165       0.99           139,180       0.65  
  Total interest-earning assets     864,160       4.44           794,724       4.39  
Other assets     58,834               56,969      
  Total assets   922,994             851,693      
                 
Liabilities and Shareholders' Equity                
NOW checking accounts     207,300     0.22 %         186,272     0.24 %
Money market accounts     125,296       0.35           105,836       0.31  
Savings accounts   134,495       0.06         115,336       0.05  
Certificates of deposit accounts   143,171       0.87         151,072       0.79  
  Total interest-bearing deposits     610,262       0.36           558,516       0.37  
FHLB borrowings (2)     17,096       5.73           44,959       4.52  
Total interest-bearing liabilities   627,358       0.51         603,475       0.67  
                 
Non-interest-bearing demand deposits   187,368             152,085      
Other liabilities   4,450             3,809      
Shareholders' equity   103,818             92,324      
  Total liabilities and shareholders' equity $    922,994           $   851,693      
                 
  Interest rate spread     3.93 %         3.72 %
  Net interest margin     4.07 %         3.88 %
  Average interest-earning assets to                
  average interest-bearing liabilities   137.75 %           131.69 %    
                         
                         

(1) Includes other investments
(2) Rate calculation includes prepayment penalties incurred

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

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