Market Overview

Timberland Bancorp Earnings Per Share Increases 12% to $0.48 for First Fiscal Quarter of 2018

Share:
  • Increases Quarterly Cash Dividend by 18%
  • Increases Net Income 15%
  • Increases Operating Revenue 9%
  • Writes Down Net Deferred Tax Asset by $548,000 Reducing EPS by $0.07

HOQUIAM, Wash., Jan. 22, 2018 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company") today reported net income of $3.61 million, or $0.48 per diluted common share, for its first fiscal quarter ended December 31, 2017. This compares to net income of $3.15 million, or $0.43 per diluted common share, for the quarter ended December 31, 2016, and net income of $3.62 million, or $0.48 per diluted common share for the preceding quarter ended September 30, 2017.

Timberland's Board of Directors also announced an 18% increase in the quarterly cash dividend to shareholders to $0.13 per common share, payable on February 28, 2018 to shareholders of record on February 14, 2018. 

"The recently enacted tax reform legislation will materially reduce Timberland's 2018 fiscal year income tax expense.  Fiscal year companies, such as Timberland, were able to use a reduced tax rate for the recently completed December quarter," said Michael Sand, President and CEO.  "For the December quarter, a blended tax rate of 24.5% was applicable to the Company's current taxable income rather than the previously employed 35% rate.  This blended rate will also apply to the Company's taxable income for each of the next three quarters, after which the Company will cease using the blended rate and revert to the newly legislated 21% corporate tax rate.  During the quarter, the Company incurred a one-time tax expense of $548,000 to write down its net deferred tax asset and that expense was fully offset by a $551,000 tax benefit gained by using the blended rate.  We have continued to grow our franchise by increasing loans and deposits, expanding net interest margin and maintaining solid asset quality," stated Sand.  "Additionally, based on a number of factors including the Company's sustained strong financial performance, its Board of Directors voted to increase the quarterly cash dividend by 18% to $0.13 per share from the $0.11 per share dividend declared for each of the previous four quarters."

First Fiscal Quarter 2018 Earnings and Balance Sheet Highlights (at or for the period ended December 31, 2017, compared to December 31, 2016, or September 30, 2017):

   Earnings Highlights:

  • Net income increased 15% to $3.61 million from $3.15 million for the comparable quarter one year ago;
  • Earnings per diluted common share ("EPS") increased 12% to $0.48 from $0.43 for the comparable quarter one year ago;
  • Return on average equity and return on average assets for the current quarter remained strong at 12.90% and 1.50%, respectively;
  • Operating revenue increased 9% from the comparable quarter one year ago and 3% from the preceding quarter; and
  • Net interest margin improved to 4.19% from 3.91% for the comparable quarter one year ago and from 4.18% for the preceding quarter.

   Balance Sheet Highlights:

  • Increased total assets 8% year-over-year and 4% from the prior quarter;
  • Increased net loans receivable 5% year-over-year and 2% from the prior quarter;
  • Increased total deposits 11% year-over-year and 5% from the prior quarter;
  • Decreased non-performing assets 15% year-over-year and 4% from the prior quarter; and
  • Increased book and tangible book (non-GAAP) values per common share to $15.49 and $14.72, respectively, at December 31, 2017.

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 recoveries or other than temporary impairment ("OTTI") charges on investment securities) increased 9% for the current quarter to $12.55 million from $11.53 million for the comparable quarter one year ago and increased 3% from $12.24 million for the preceding quarter. 

Net interest income for the current quarter increased 13% to $9.43 million from $8.31 million for the comparable quarter one year ago and increased 3% from $9.13 million for the preceding quarter.  The increases were primarily due to increases in average total interest-earning assets and increases in the yield earned on average total interest-earning assets.

The net interest margin ("NIM") for the current quarter improved to 4.19% from 3.91% for the comparable quarter one year ago and from 4.18% for the preceding quarter.  The NIM for the current quarter was increased by approximately two basis points due to the collection of $45,000 of non-accrual interest.  The NIM for the comparable quarter one year ago was increased by approximately one basis point due to the collection of $21,000 of non-accrual interest and the NIM for the preceding quarter was increased by less than one basis point due to the collection of $8,000 of non-accrual interest.   

Non-interest income decreased slightly to $3.14 million for the current quarter from $3.15 million for the preceding quarter and decreased 2% from $3.22 million for the comparable quarter one year ago.  The decreased non-interest income for the current quarter compared to the preceding quarter was primarily due to a decrease in the ATM and debit card interchange transaction fees, which was partially offset by an increase in gain on sales of loans.

Total operating expenses for the current quarter increased 4% to $7.18 million from $6.91 million for the preceding quarter and increased 5% from $6.81 million for the comparable quarter one year ago.  The increased expenses for the current quarter compared to the preceding quarter were primarily due to increases in the salaries and employee benefits and OREO and other repossessed assets categories.  The increase in salaries and employee benefits was primarily due to typical annual salary adjustments and the hiring of additional lending personnel.  The increase in OREO and other repossessed assets expense was primarily due to market value write-downs on two real estate properties and one personal property during the quarter.  The efficiency ratio for the current quarter was 57.08% compared to 56.31% for the preceding quarter and 59.07% for the comparable quarter one year ago.

The provision for income taxes for the current quarter increased to $1.78 million from $1.75 million for the preceding quarter, and was impacted by the Tax Cuts and Jobs Act Legislation which was signed into law on December 22, 2017.  As a result of the new legislation (which decreases the federal corporate income tax rate to 21.0% from 35.0%), Timberland recorded a one-time income tax expense of $548,000 in conjunction with writing down its net deferred tax asset ("DTA").   Since Timberland is a September 30th fiscal year-end corporation, it will use a blended tax rate of 24.5% for the fiscal year ending September 30, 2018 and then use a 21.0% rate thereafter.  The impact of using the 24.5% blended tax rate for the current quarter versus a 35.0% tax rate reduced the provision for income tax expense by approximately $551,000 and offset the one-time $548,000 DTA write-down.

Balance Sheet Management

Total assets increased $41.87 million, or 4%, during the first fiscal quarter to $993.90 million at December 31, 2017 from $952.02 million at September 30, 2017.  The increase was primarily due to a $28.51 million increase in cash and cash equivalents and CDs held for investment and a $14.90 million increase in net loans receivable which were 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 25.1% of total liabilities at December 31, 2017, compared to 22.9% at September 30, 2017, and 23.1% one year ago. 

Net loans receivable increased $14.90 million, or 2%, to $705.27 million at December 31, 2017, from $690.36 million at September 30, 2017.  The increase was primarily due to a $5.72 million increase in custom and owner/builder one- to four-family construction loans, a $4.16 million increase in commercial real estate loans, a $3.27 million increase in multi-family construction loans, a $2.96 million decrease in the amount of undisbursed construction loans in process, a $2.76 million increase in multi-family mortgage loans, a $2.37 million increase in commercial construction loans and smaller increases in several other categories.  These increases were partially offset by a $2.79 million decrease in land loans, a $2.67 million decrease in speculative one- to four-family construction loans, a $1.17 million decrease in one- to four-family mortgage loans and smaller decreases in several other categories. 

 
LOAN PORTFOLIO
($ in thousands) December 31, 2017   September 30, 2017   December 31, 2016
  Amount   Percent   Amount   Percent   Amount   Percent
                       
Mortgage loans:                      
  One- to four-family (a) $   116,976     15 %   $   118,147     15 %   $  119,485     16 %
  Multi-family     61,366            8         58,607       7         52,062       7  
  Commercial     333,085       42         328,927       42         323,496       44  
  Construction - custom and                      
owner/builder     123,365       15         117,641         15          96,292       13  
  Construction - speculative
         one- to four-family
    7,253       1         9,918       1         6,133       1  
  Construction - commercial     22,000       3         19,630       3         8,627       1  
  Construction - multi-family     24,601       3         21,327       3         22,092       3  
  Land     21,122       2         23,910       3         22,359       3  
Total mortgage loans     709,768       89         698,107       89         650,546       88  
                       
Consumer loans:                      
  Home equity and second                      
mortgage     38,975       5         38,420       5         37,602       5  
  Other     4,050       --         3,823       --         4,523       1  
Total consumer loans     43,025       5         42,243       5         42,125       6  
                       
Commercial business loans (b)      43,993       6         44,444       6         42,657       6  
Total loans     796,786     100 %       784,794     100 %       735,328     100 %
Less:                      
Undisbursed portion of                      
construction loans in                      
         process   (79,449 )         (82,411 )         (54,161 )    
Deferred loan origination                      
fees   (2,504 )         (2,466 )         (2,184 )    
Allowance for loan losses   (9,565 )         (9,553 )         (9,843 )    
Total loans receivable, net $   705,268         $   690,364         $ 669,140      
 

_______________________

(a) Does not include one- to four-family loans held for sale totaling $3,236, $3,515 and $2,008 at December 31, 2017, September 30, 2017, and December 31, 2016, respectively. 
(b) Does not include commercial business loans held for sale totaling $171 and $84 at December 31, 2017 and September 30, 2017, respectively.

Timberland originated $82.51 million in loans during the quarter ended December 31, 2017, compared to $90.15 million for the comparable quarter one year ago and $85.10 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) periodically sells the guaranteed portion of U.S. Small Business Administration ("SBA") loans.  During the first quarter of fiscal 2018, fixed-rate one- to four-family mortgage loans and SBA loans totaling $15.91 million were sold compared to $24.20 million for the comparable quarter one year ago and $15.88 million for the preceding quarter.
                                            
Timberland's investment securities and other investments decreased $82,000, or 1%, to $11.30 million at December 31, 2017, from $11.38 million at September 30, 2017, primarily due to scheduled amortization.

 
DEPOSIT BREAKDOWN
($ in thousands)
    December 31, 2017   September 30, 2017   December 31, 2016  
    Amount   Percent   Amount   Percent   Amount   Percent  
Non-interest-bearing demand   $ 210,108   24 %   $ 205,952   25 %   $ 176,382     22 %  
NOW checking     218,422    25       220,315    26       207,415     26    
Savings     142,660    16       140,987    17       131,124     17    
Money market     156,665    18       122,877    15       122,026     15    
Money market – brokered     10,796     1       8,125     1       6,912     1    
Certificates of deposit under $250     118,017    14       120,844    14       127,035     17    
Certificates of deposit $250 and over     16,208    2       15,601    2       15,872     2    
Certificates of deposit – brokered     3,198   --       3,197   --       3,209     --    
  Total deposits   $ 876,074   100 %   $ 837,898   100 %   $ 789,975   100 %  
 

Total deposits increased $38.18 million, or 5%, during the current quarter to $876.07 million at December 31, 2017, from $837.90 million at September 30, 2017.  This increase was primarily due to a $36.46 million increase in money market account balances, a $4.16 million increase in non-interest-bearing demand account balances and a $1.67 million increase savings account balances.  These increases were partially offset by a $2.22 million decrease in certificates of deposit account balances and a $1.89 million decrease in NOW checking account balances.  The increase in money market account balances was primarily due to a commercial customer making a large deposit ($28.7 million).  The majority of this deposit is scheduled to be withdrawn during January, 2018.

Shareholders' Equity

Total shareholders' equity increased $3.11 million to $114.11 million at December 31, 2017, from $111.00 million at September 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 $810,000 to shareholders. 

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 17.74% and a Tier 1 leverage capital ratio of 11.45% at December 31, 2017.

No provision for loan losses was made for the quarters ended December 31, 2017, September 30, 2017 and December 31, 2016.  Timberland had a net recovery of $12,000 for the current quarter compared to net charge-offs of $57,000 for the preceding quarter and a net recovery of $17,000 for the comparable quarter one year ago.  The allowance for loan losses was 1.34% of loans receivable at December 31, 2017, compared to 1.36% at September 30, 2017 and 1.45% at December 31, 2016.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 23% to $3.12 million at December 31, 2017, from $4.06 million one year ago, and increased 29% from $2.41 million at September 30, 2017.  Non-accrual loans decreased 11% to $2.11 million at December 31, 2017 from $2.36 million one year ago, and increased 11% from $1.91 million at September 30, 2017.

 
NON-ACCRUAL LOANS December 31, 2017   September 30, 2017   December 31, 2016  
($ in thousands) Amount   Quantity   Amount   Quantity     Amount   Quantity
                         
Mortgage loans:                        
  One- to four-family $   947   8   $   874   7     $   846   7
  Commercial   402   3     213   2         --   --
  Construction   --   --     --   --       367   1
  Land     395   4        566   4         735   5
Total mortgage loans     1,744   15       1,653   13       1,948   13
                         
Consumer loans:                        
  Home equity and second                        
mortgage   188   4     258   3         387   5
  Other   --   --     --   --         29   1
Total consumer loans   188   4     258   3         416   6
  Commercial business   181   2     --   --       --   --
Total loans $   2,113   21   $    1,911   16     $    2,364   19
 

OREO and other repossessed assets decreased 13% to $2.89 million at December 31, 2017, from $3.30 million at September 30, 2017, and decreased 11% from $3.25 million at December 31, 2016.  At December 31, 2017, the OREO and other repossessed asset portfolio consisted of 14 individual real estate properties and one recreational vehicle.  During the quarter ended December 31, 2017, two OREO properties were sold for a net gain of $12,000.

 
OREO and OTHER REPOSSESSED ASSETS December 31, 2017   September 30, 2017   December 31, 2016
($ in thousands) Amount   Quantity   Amount   Quantity   Amount   Quantity
                       
One- to four-family $    516   1   $    875   2   $    456   3
Commercial   332   1     533   2       636   3
Land   2,026   12     1,865   11       2,095   13
Consumer   13   1     28   1       67   1
Total $   2,887   15   $    3,301   16   $      3,254   20
 

The non-performing assets to total assets ratio improved to 0.55% at December 31, 2017, from 0.60% at September 30, 2017 and 0.70% 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)   December 31, 2017   September 30, 2017   December 31, 2016
             
Shareholders' equity   $   114,112     $   111,000     $   99,634  
Less goodwill     (5,650 )     (5,650 )     (5,650 )
Tangible common equity   $   108,462     $    105,350     $   93,984  
             
Total assets   $   993,895     $   952,024     $   923,751  
Less goodwill     (5,650 )     (5,650 )     (5,650 )
Tangible assets   $   988,245     $   946,374     $   918,101  
 

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 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)   Dec. 31,   Sept. 30,   Dec. 31,
(unaudited)     2017       2017       2016  
  Interest and dividend income            
  Loans receivable and loans held for sale   $ 9,328     $ 9,104     $ 8,788  
  Investment securities     58       73       70  
  Dividends from mutual funds, FHLB stock and other investments     26       28       24  
  Interest bearing deposits in banks and CDs     623       505       281  
    Total interest and dividend income       10,035       9,710       9,163  
               
  Interest expense            
  Deposits     601       581       543  
  FHLB borrowings     --       --       307  
    Total interest expense     601       581       850  
    Net interest income     9,434       9,129       8,313  
               
  Provision for loan losses     --       --       --  
    Net interest income after provision for loan losses     9,434       9,129       8,313  
               
  Non-interest income            
  Service charges on deposits     1,179       1,170       1,105  
  ATM and debit card interchange transaction fees     845       895       800  
  Gain on sales of loans, net     521       502       689  
  Bank owned life insurance ("BOLI") net earnings     136       139       137  
  Servicing income on loans sold     116       114       97  
  Recoveries (OTTI) on investment securities, net       22         33       --  
  Other, net     318       292       388  
    Total non-interest income, net     3,137       3,145       3,216  
               
  Non-interest expense            
  Salaries and employee benefits     3,950       3,732       3,680  
  Premises and equipment     768       789       755  
  Advertising     209       199       162  
  OREO and other repossessed assets, net     113       --       30  
  ATM and debit card processing     331       369       311  
  Postage and courier     105       111       95  
  State and local taxes     161       125       155  
  Professional fees     218       258       201  
  FDIC insurance     65       42       113  
  Loan administration and foreclosure     79       93       94  
  Data processing and telecommunications     467       476       450  
  Deposit operations     278       225       309  
  Other, net     432       492       455  
    Total non-interest expense, net     7,176       6,911       6,810  
               
  Income before income taxes     5,395       5,363       4,719  
  Provision for income taxes     1,781       1,748       1,572  
    Net income   $ 3,614     $ 3,615     $ 3,147  
               
  Net income per common share:            
    Basic   $ 0.49     $ 0.50     $ 0.46  
    Diluted     0.48       0.48       0.43  
               
  Weighted average common shares outstanding:            
    Basic     7,312,531       7,280,773       6,862,749  
    Diluted
    7,508,169       7,473,724       7,235,515  
   
   
TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 
($ in thousands, except per share amounts) (unaudited)   Dec. 31,   Sept. 30,   Dec. 31,
      2017       2017       2016  
Assets            
Cash and due from financial institutions   $   16,952     $   17,447     $   16,598  
Interest-bearing deposits in banks     149,255       130,741       118,872  
  Total cash and cash equivalents     166,207       148,188       135,470  
               
Certificates of deposit ("CDs") held for investment, at cost     53,528       43,034       53,432   
             
Investment securities:            
  Held to maturity, at amortized cost     7,077       7,139       7,418  
  Available for sale, at fair value     1,221       1,241       1,288  
FHLB stock     1,107       1,107       2,204  
Other investments, at cost     3,000       3,000       --  
Loans held for sale     3,407       3,599       2,008  
             
Loans receivable     714,833       699,917       678,983  
Less: Allowance for loan losses     (9,565 )     (9,553 )     (9,843 )
  Net loans receivable     705,268       690,364       669,140  
               
Premises and equipment, net     18,307       18,418       17,816  
OREO and other repossessed assets, net     2,887       3,301       3,254  
BOLI     19,402       19,266       18,858  
Accrued interest receivable     2,743       2,520       2,443  
Goodwill     5,650       5,650       5,650  
Mortgage servicing rights, net     1,871       1,825       1,706  
Other assets     2,220       3,372       3,064  
  Total assets   $ 993,895     $ 952,024     $ 923,751  
               
Liabilities and shareholders' equity            
Deposits: Non-interest-bearing demand   $ 210,108     $ 205,952     $ 176,382  
Deposits: Interest-bearing     665,966       631,946       613,593  
  Total deposits     876,074       837,898       789,975  
               
FHLB borrowings     --       --       30,000  
Other liabilities and accrued expenses     3,709       3,126       4,142  
  Total liabilities     879,783       841,024       824,117  
             
Shareholders' equity            
Common stock, $.01 par value; 50,000,000 shares authorized;
   7,367,327 shares issued and outstanding – December 31, 2017
   7,361,077 shares issued and outstanding – September 30, 2017
   6,956,568 shares issued and outstanding – December 31, 2016   
     
13,540
       

 
13,286
       

 
10,188
 
Unearned shares issued to Employee Stock Ownership Plan ("ESOP")     (331 )     (397 )     (595 )
Retained earnings     101,039       98,235       90,230  
Accumulated other comprehensive loss     (136 )     (124 )     (189 )
  Total shareholders' equity     114,112       111,000       99,634  
  Total liabilities and shareholders' equity   $ 993,895     $ 952,024     $ 923,751  


   
KEY FINANCIAL RATIOS AND DATA  Three Months Ended
($ in thousands, except per share amounts) (unaudited)   Dec. 31,   Sept. 30,   Dec. 31,
      2017       2017       2016  
PERFORMANCE RATIOS:            
Return on average assets (a)     1.50 %     1.55 %     1.39 %
Return on average equity (a)     12.90 %     13.23 %     12.87 %
Net interest margin (a)     4.19 %     4.18 %     3.91 %
Efficiency ratio     57.08 %     56.31 %     59.07 %
             
             
    Dec. 31,   Sept. 30,   Dec. 31,
      2017       2017       2016  
ASSET QUALITY RATIOS AND DATA:            
Non-accrual loans   $ 2,113     $ 1,911     $ 2,364  
Loans past due 90 days and still accruing     --       --       135  
Non-performing investment securities     500       533       681  
OREO and other repossessed assets     2,887       3,301       3,254  
Total non-performing assets (b)   $ 5,500     $ 5,745     $ 6,434  
             
             
Non-performing assets to total assets (b)     0.55 %     0.60 %     0.70 %
Net charge-offs (recoveries) during quarter   $  (12 )   $   57     $   (17 )
Allowance for loan losses to non-accrual loans     453 %     500 %     416 %
Allowance for loan losses to loans receivable (c)     1.34 %     1.36 %     1.45 %
Troubled debt restructured loans on accrual status (d)   $ 3,282     $ 3,342     $ 7,579  
             
             
CAPITAL RATIOS:            
Tier 1 leverage capital     11.45 %     11.52 %     10.60 %
Tier 1 risk-based capital     16.49 %     16.31 %     15.13 %
Common equity Tier 1 risk-based capital     16.49 %     16.31 %     15.13 %
Total risk-based capital     17.74 %     17.56 %     16.39 %
Tangible common equity to tangible assets (non-GAAP)     10.98 %     11.13 %     10.24 %
             
             
BOOK VALUES:            
Book value per common share   $ 15.49     $ 15.08     $ 14.32  
Tangible book value per common share (e)     14.72       14.31       13.51  
             

_______________________________________________
(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 $199, $253 and $404 reported as non-accrual loans at December 31, 2017, September 30, 2017 and December 31, 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
  December 31, 2017   September 30, 2017   December 31, 2016
  Amount   Rate   Amount   Rate   Amount     Rate
                       
Assets                      
Loans receivable and loans held for sale $    709,079     5.26 %   $   702,171     5.19 %   $   684,911     5.13 %
Investment securities and FHLB stock (1)     12,451      2.70         12,522      3.23         10,989      3.42  
Interest-bearing deposits in banks and CD's     180,038      1.37         159,297      1.26         153,831      0.72  
  Total interest-earning assets     901,568      4.45         873,990      4.44         849,731      4.31  
Other assets     60,128             60,365             57,105      
  Total assets $   961,696         $   934,355         $   906,836      
                       
Liabilities and Shareholders' Equity                      
NOW checking accounts $      212,550      0.21 %   $   211,046      0.21 %   $   202,385     0.23 %
Money market accounts     136,466      0.38         127,214      0.37         120,311      0.32  
Savings accounts   141,266      0.06       139,162      0.06       127,656      0.06  
Certificates of deposit accounts   138,687      0.96       139,975      0.93       147,433      0.83  
  Total interest-bearing deposits     628,969      0.38         617,397      0.37         597,785      0.36  
FHLB borrowings     --       --         --       --         30,000      4.07  
Total interest-bearing liabilities   628,969      0.38       617,397      0.37       627,785      0.54  
                       
Non-interest-bearing demand deposits   216,907           202,948           176,768      
Other liabilities   3,732           4,693           4,495      
Shareholders' equity   112,088           109,317           97,788      
  Total liabilities and shareholders' equity $   961,696         $   934,355         $   906,836      
                       
  Interest rate spread     4.07 %       4.07 %       3.77 %
  Net interest margin (2)     4.19 %       4.18 %       3.91 %
  Average interest-earning assets to                      
  average interest-bearing liabilities   143.34 %         141.56 %         135.35 %    

          _____________________________________
(1) Includes other investments
(2) 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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