Market Overview

Timberland Bancorp Earnings Per Share Increases 36% to $0.57 for Second Fiscal Quarter of 2018

Share:
  • Earnings Per Share Increases 22% to $1.05 for the First Six Months of Fiscal 2018
  • Total Assets Reach $1 Billion
  • Announces $0.13 Regular Dividend and $0.10 Special Dividend

HOQUIAM, Wash., April 24, 2018 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company") today reported net income increased 36% to $4.27 million, or $0.57 per diluted common share, for its second fiscal quarter ended March 31, 2018, from $3.13 million, or $0.42 per diluted common share, for the quarter ended March 31, 2017, and increased 18% from $3.61 million, or $0.48 per diluted common share, for the preceding quarter ended December 31, 2017.

For the first six months of fiscal 2018, Timberland earned $7.88 million, or $1.05 per diluted common share, an increase in net income of 26% and an increase in earnings per diluted common share ("EPS") of 22% from $6.28 million, or $0.86 per diluted common share, reported for the first six months of fiscal 2017.

Timberland's Board of Directors also declared a quarterly cash dividend to shareholders of $0.13 per common share and a special one-time dividend of $0.10 per common share payable on May 25, 2018, to shareholders of record on May 11, 2018. 

"We have continued to emphasize our operations along Western Washington's economically important I-5 corridor and, correspondingly, have continued to significantly and consistently improve the Company's financial metrics year over year," said Michael Sand, President and CEO.  "We have expended considerable efforts developing and profitably growing our franchise within our primary markets and have specifically focused on increasing core deposits.  Particular attention has been devoted to growing transaction account balances, and we have successfully expanded this segment of our funding base.  Strong economic conditions persist in the northwest markets we serve, and we see ample opportunity for the continued profitable growth of our franchise."

"Additionally, based on a number of factors, including the Company's sustained strong financial performance, Timberland's Board of Directors voted to pay a one-time special dividend of $0.10 per share in addition to the regular $0.13 per share quarterly dividend.  This special dividend marks the third special dividend the Company has paid in the past three years."

Second Fiscal Quarter 2018 Earnings and Balance Sheet Highlights (at or for the period ended March 31, 2018, compared to December 31, 2017, or March 31, 2017):

   Earnings Highlights:

  • Net income increased 36% to $4.27 million from $3.13 million for the comparable quarter one year ago and increased 18% from $3.61 million for the preceding quarter;
  • EPS for the first six months of fiscal 2018 increased 22% to $1.05 from $0.86 for the first six months of fiscal 2017;
  • Return on average equity and return on average assets for the current quarter increased to 14.79% and 1.75%, respectively;
  • Operating revenue increased 13% from the comparable quarter one year ago;
  • Net interest margin improved to 4.19% from 3.88% for the comparable quarter one year ago; and
  • Efficiency ratio improved to 56.83% for the current quarter from 60.67% for the comparable quarter one year ago.

   Balance Sheet Highlights:

  • Total assets increased 6% year-over-year reaching $1 billion;
  • Increased net loans receivable 5% year-over-year;
  • Increased total deposits 9% year-over-year;
  • Decreased non-performing assets 18% year-over-year and 16% from the prior quarter; and
  • Increased book and tangible book (non-GAAP) values per common share to $15.95 and $15.18, respectively, at March 31, 2018.

Operating Results

Operating revenue (net interest income before the recapture of loan losses, plus non-interest income excluding gains or losses on the sale of investment securities and other than temporary impairment ("OTTI") charges (recoveries) on investment securities) increased 12% for the current quarter to $12.69 million from $11.30 million for the comparable quarter one year ago and increased 1% from $12.55 million for the preceding quarter.  Operating revenue increased 11% to $25.24 million for the first six months of fiscal 2018 from $22.83 million for the comparable period one year ago.

Net interest income for the current quarter increased 14% to $9.62 million from $8.45 million for the comparable quarter one year ago and increased 2% from $9.43 million for the preceding quarter.  The increase in net interest income compared to the preceding quarter was primarily due to an increase in average total interest-earning assets and an increase in the yield earned on average total interest-earning assets and was partially offset by an increase in the cost of interest-bearing deposits.  The increase in net interest income relative to the comparable quarter one year ago was also partially due to paying off FHLB borrowings and eliminating the associated interest expense.  For the first six months of fiscal 2018 net interest income increased 14% to $19.06 million from $16.76 million for the first six months of fiscal 2017.

The net interest margin ("NIM") for the current quarter improved to 4.19% from 3.88% for the comparable quarter one year ago and matched the 4.19% recorded for the preceding quarter.  The NIM for the current quarter was increased by approximately six basis points due to the collection of a $134,000 loan prepayment penalty and the collection of $2,000 of non-accrual interest.  The NIM for the comparable quarter one year ago was increased by approximately nine basis points due to the collection of $204,000 of non-accrual interest and the NIM for the preceding quarter was increased by approximately two basis points due to the collection of $45,000 of non-accrual interest. Timberland's net interest margin for the first six months of fiscal 2018 improved to 4.19% from 3.90% for the first six months of fiscal 2017. 

Non-interest income increased 8% to $3.08 million for the current quarter from $2.85 million for the comparable quarter one year ago and decreased 2% from $3.14 million for the preceding quarter.  The decreased non-interest income for the current quarter compared to the preceding quarter was primarily due to a decrease in service charges on deposits and a decrease in gain on sales of loans, which was partially offset by an increase in ATM and debit card interchange transaction fees.  Fiscal year-to-date non-interest income increased 2% to $6.22 million from $6.07 million for the first six months of fiscal 2017.

Total operating expenses for the current quarter increased 5% to $7.22 million from $6.86 million for the comparable quarter one year ago and increased 1% from $7.18 million for the preceding quarter.  The increased expenses for the current quarter compared to the preceding quarter were primarily due to an increase in salaries and employee benefits and smaller increases in several other categories.  These increases were partially offset by a $113,000 gain on the sale of excess land.  The efficiency ratio for the current quarter improved to 56.83% compared to 57.08% for the preceding quarter and 60.67% for the comparable quarter one year ago.  Fiscal year-to-date operating expenses increased 5% to $14.40 million from $13.67 million for the first six months of fiscal 2017.  The efficiency ratio improved for the first six months of fiscal 2018 to 56.96% from 59.86% for the first six months of fiscal 2017.

The provision for income taxes decreased $565,000 to $1.22 million from $1.78 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") during the quarter ended December 31, 2017.  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 a 21.0% rate thereafter.  Timberland's effective tax rate for the quarter ended March 31, 2018, was 22.2%.

Balance Sheet Management

Total assets increased $7.31 million, or 1%, to $1.00 billion at March 31, 2018, from $993.90 million at December 31, 2017. The increase was primarily due to a $3.87 million increase in net loans receivable and loans held for sale, and a $3.20 million increase in total cash and cash equivalents. These increases were primarily 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 25.3% of total liabilities at March 31, 2018, compared to 25.1% at December 31, 2017, and 24.0% one year ago. 

Net loans receivable increased $3.30 million, or 1%, to $708.57 million at March 31, 2018, from $705.27 million at December 31, 2017.  The increase was primarily due to an $8.76 million increase in commercial real estate loans, a $3.62 million increase in speculative one- to four-family loans, a $3.17 million increase in commercial construction loans, a $2.95 million increase in land development loans, a $1.34 million decrease in the undisbursed portion of construction loans in process and smaller increases in several other categories.  These increases were partially offset by a $6.21 million decrease in multi-family loans, a $4.14 million decrease in one- to four-family construction loans, a $4.11 million decrease in one- to four-family mortgage loans and smaller decreases in several other categories. 

LOAN PORTFOLIO

($ in thousands) March 31, 2018   December 31, 2017   March 31, 2017
  Amount   Percent   Amount   Percent   Amount   Percent
                       
Mortgage loans:                      
  One- to four-family (a) $   112,862     14 %   $   116,976     15 %   $  122,889     16 %
  Multi-family     55,157       7         61,366       8         63,181       8  
  Commercial     341,845       43         333,085       42         325,120       44  
  Construction - custom and                      
owner/builder     119,230       15         123,365     15          99,304       13  
  Construction - speculative
  one-to four-family
    10,876       1         7,253       1         5,311       1  
  Construction - commercial     25,166       3         22,000       3         10,762       2  
  Construction - multi-family     24,812       3         24,601       3         11,057       2  
  Construction – land                       
  development     2,950       --         --       --         --       --  
  Land     20,602       3         21,122       2         25,866       3  
Total mortgage loans     713,500       89         709,768       89         663,490       89  
                       
Consumer loans:                      
  Home equity and second                      
mortgage     38,124       5         38,975       5         38,024       5  
  Other     3,646       1         4,050       --         3,527       --  
Total consumer loans     41,770       6         43,025       5         41,551       5  
                       
Commercial business loans (b)     43,465       5         43,993       6         42,603       6  
Total loans     798,735     100 %       796,786     100 %       747,644     100 %
Less:                      
Undisbursed portion of                      
construction loans in                      
        process   (78,108 )         (79,449 )         (59,724 )    
Deferred loan origination                      
fees   (2,515 )         (2,504 )         (2,251 )    
Allowance for loan losses   (9,544 )         (9,565 )         (9,590 )    
Total loans receivable, net $   708,568         $   705,268         $ 676,079      

_______________________

  1. Does not include one- to four-family loans held for sale totaling $3,981, $3,236 and $5,542 at March 31, 2018, December 31, 2017, and March 31, 2017, respectively. 
  2. Does not include commercial business loans held for sale totaling $171 and $256 at December 31, 2017, and March 31, 2017, respectively. 

Timberland originated $78.99 million in loans during the quarter ended March 31, 2018, compared to $79.50 million for the comparable quarter one year ago and $82.51 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 second quarter of fiscal 2018 fixed-rate one- to four-family mortgage loans and SBA loans totaling $15.31 million were sold compared to $15.01 million for the comparable quarter one year ago and $15.91 million for the preceding quarter.
                                            
Timberland's investment securities and other investments increased $965,000, or 9%, to $12.26 million at March 31, 2018, from $11.30 million at December 31, 2017, primarily due to the purchase of a $1.11 million agency investment security.

DEPOSIT BREAKDOWN ($ in thousands)
    March 31, 2018   December 31, 2017   March 31, 2017  
    Amount   Percent   Amount   Percent   Amount   Percent  
Non-interest-bearing demand   $ 222,302   25 %   $ 210,108   24 %   $ 186,239     23 %  
NOW checking     227,075    26       218,422    25       214,488     27    
Savings     147,750    17       142,660    16       138,518     17    
Money market     130,844    15       156,665    18       118,791     15    
Money market – brokered     10,363     1       10,796     1       8,665     1    
Certificates of deposit under $250     121,157    14       118,017    14       123,671     15    
Certificates of deposit $250 and over     17,720    2       16,208    2       15,268     2    
Certificates of deposit – brokered     3,200   --       3,198   --       3,212     --    
  Total deposits   $ 880,411   100 %   $ 876,074   100 %   $ 808,852   100 %  

Total deposits increased $4.34 million, or 1%, to $880.41 million at March 31, 2018, from $876.07 million at December 31, 2017.  This increase was primarily due to a $13.19 million increase in non-interest-bearing demand account balances, an $8.65 million increase in NOW checking account balances, a $5.09 million increase in savings account balances and a $4.65 million increase in certificates of deposit account balances.  These increases were partially offset by a $25.82 million decrease in money market account balances.  The decrease in money market account balances was primarily due to a commercial customer withdrawing funds in January 2018 that were initially deposited in December 2017.

Shareholders' Equity

Total shareholders' equity increased $3.73 million to $117.84 million at March 31, 2018, from $114.11 million at December 31, 2017.  The increase in shareholders' equity was primarily due to net income of $4.27 million for the quarter, which was partially offset by dividend payments to shareholders of $959,000. 

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 18.01% and a Tier 1 leverage capital ratio of 11.66% at March 31, 2018.

No provision for loan losses was made for the quarters ended March 31, 2018, and December 31, 2017.  Timberland recorded a $250,000 loan loss reserve recapture during the comparable quarter one year ago.  Net charge-offs totaled $21,000 for the current quarter compared to a net recovery of $12,000 for the preceding quarter and net charge-offs of $3,000 for the comparable quarter one year ago.  The allowance for loan losses was 1.33% of loans receivable at March 31, 2018, compared to 1.34% at December 31, 2017, and 1.40% at March 31, 2017.

Total delinquent loans (past due 30 days or more) and non-accrual loans increased 5% to $3.29 million at March 31, 2018, from $3.12 million at December 31, 2017, and increased 23% from $2.66 million one year ago.  Non-accrual loans decreased 9% to $1.93 million at March 31, 2018, from $2.11 million at December 31, 2017, and increased 2% from $1.89 million one year ago.

NON-ACCRUAL LOANS March 31, 2018   December 31, 2017   March 31, 2017  
($ in thousands) Amount   Quantity   Amount   Quantity     Amount   Quantity
                         
Mortgage loans:                        
  One- to four-family $   801   6   $   947   8     $   820   6
  Commercial   370   3     402   3         314   1
  Land     395   4       395   4         296   2
Total mortgage loans     1,566   13       1,744   15       1,430   9
                         
Consumer loans:                        
  Home equity and second                        
mortgage   185   4     188   4         383   5
  Other   --   --     --   --         27   1
Total consumer loans   185   4     188   4         410   6
  Commercial business   181   2     181   2       54   2
Total loans $   1,932   19   $   2,113   21     $    1,894   17

           
OREO and other repossessed assets decreased 23% to $2.22 million at March 31, 2018, from $2.89 million at December 31, 2017, and decreased 26% from $3.01 million at March 31, 2017.  At March 31, 2018, the OREO and other repossessed asset portfolio consisted of 13 individual real estate properties.  During the quarter ended March 31, 2018, one OREO property and one recreational vehicle were sold for a net gain of $81,000.

OREO and OTHER REPOSSESSED ASSETS March 31, 2018   December 31, 2017   March 31, 2017
($ in thousands) Amount   Quantity   Amount   Quantity   Amount   Quantity
                       
One- to four-family $   --   --   $   516   1   $   411   2
Commercial   287   1     332   1       637   3
Land   1,934   12     2,026   12       1,957   12
Consumer   --   --     13   1       --   --
Total $   2,221   13   $   2,887   15   $     3,005   17

               

The non-performing assets to total assets ratio improved to 0.46% at March 31, 2018, from 0.55% at December 31, 2017, and 0.60% 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)   March 31, 2018   December 31, 2017   March 31, 2017
             
Shareholders' equity   $   117,843     $   114,112     $   104,829  
Less goodwill     (5,650 )     (5,650 )     (5,650 )
Tangible common equity   $   112,193     $   108,462     $   99,179  
             
Total assets   $   1,001,201     $   993,895     $   946,682  
Less goodwill     (5,650 )     (5,650 )     (5,650 )
Tangible assets   $   995,551     $   988,245     $   941,032  

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) March 31,   Dec. 31,   March 31,
(unaudited)   2018      2017     2017  
  Interest and dividend income          
  Loans receivable $ 9,484     $ 9,328   $ 8,840  
  Investment securities   39       58     68  
  Dividends from mutual funds and FHLB stock   26       26     12  
  Interest bearing deposits in banks   741       623     379  
    Total interest and dividend income   10,290         10,035     9,299  
             
  Interest expense          
  Deposits   666       601     545  
  FHLB borrowings   --       --     302  
    Total interest expense   666       601     847  
    Net interest income   9,624       9,434     8,452  
             
  Recapture of loan losses   --       --     (250 )
       Net interest income after recapture of loan losses   9,624       9,434     8,702  
             
  Non-interest income          
  Service charges on deposits   1,132       1,179     1,090  
  ATM and debit card interchange transaction fees   883       845     793  
  Gain on sale of loans, net   470       521     406  
  Bank owned life insurance ("BOLI") net earnings   137       136     136  
  Servicing income on loans sold   117       116     99  
  Recoveries on investment securities, net     13         22       --  
  Other   330       318     327  
    Total non-interest income   3,082       3,137     2,851  
             
  Non-interest expense          
  Salaries and employee benefits   4,001       3,950     3,755  
  Premises and equipment   799       768     776  
  Gain on disposition of premises and equipment, net   (113 )     --     --  
  Advertising   176       209     167  
  OREO and other repossessed assets, net   91       113     (12 )
  ATM and debit card processing   318       331     350  
  Postage and courier   131       105     120  
  State and local taxes   168       161     152  
  Professional fees   243       218     199  
  FDIC insurance   75       65     107  
  Loan administration and foreclosure   92       79     (1 )
  Data processing and telecommunications   495       467     464  
  Deposit operations   252       278     240  
  Other, net   493       432     540  
    Total non-interest expense, net   7,221       7,176     6,857  
             
  Income before income taxes   5,485       5,395     4,696  
  Provision for income taxes   1,216       1,781     1,568  
    Net income $   4,269     $ 3,614   $   3,128  
             
  Net income per common share:          
    Basic $ 0.58     $ 0.49   $ 0.44  
    Diluted   0.57       0.48     0.42  
             
  Weighted average common shares outstanding:          
    Basic   7,328,127       7,312,531     7,135,083  
    Diluted   7,512,058       7,508,169     7,379,353  
                       
                       
                       


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
($ in thousands, except per share amounts) March 31,   March 31,
(unaudited)   2018       2017  
  Interest and dividend income      
  Loans receivable $ 18,812     $ 17,628  
  Investment securities   96       138  
  Dividends from mutual funds and FHLB stock   52       37  
  Interest bearing deposits in banks   1,364       660  
    Total interest and dividend income   20,324       18,463  
         
  Interest expense      
  Deposits   1,266       1,088  
  FHLB borrowings   --       610  
    Total interest expense   1,266       1,698  
 

 
  Net interest income   19,058       16,765  
  Recapture of loan losses   --       (250 )
    Net interest income after recapture of loan losses   19,058       17,015  
         
  Non-interest income      
  Service charges on deposits   2,310       2,195  
  ATM and debit card interchange transaction fees   1,727       1,593  
  Gain on sale of loans, net   992       1,095  
  BOLI net earnings   273       274  
  Servicing income on loans sold   233       196  
  Recoveries on investment securities, net   36       --  
  Other   648       715  
    Total non-interest income   6,219       6,068  
         
  Non-interest expense      
  Salaries and employee benefits   7,950       7,435  
  Premises and equipment   1,567       1,531  
  Gain on disposition of premises and equipment, net   (113 )     --  
  Advertising   386       329  
  OREO and other repossessed assets, net   204       18  
  ATM and debit card processing   648       662  
  Postage and courier   237       214  
  State and local taxes   329       308  
  Professional fees   460       399  
  FDIC insurance   141       221  
  Loan administration and foreclosure   171       93  
  Data processing and telecommunications   962       914  
  Deposit operations   530       549  
  Other, net   925       995  
    Total non-interest expense, net   14,397       13,668  
         
  Income before income taxes $ 10,880     $ 9,415  
  Provision for income taxes   2,997       3,140  
    Net income $ 7,883     $ 6,275  
         
  Net income per common share:      
    Basic $ 1.08     $ 0.90  
    Diluted   1.05       0.86  
         
  Weighted average common shares outstanding:      
    Basic   7,320,243       6,997,420  
    Diluted   7,510,092       7,306,644  
                 
                 
                 


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 
($ in thousands, except per share amounts) (unaudited)   March 31,   Dec. 31,   March 31,
      2018       2017       2017  
Assets            
Cash and due from financial institutions   $ 15,508     $   16,952     $   17,060  
Interest-bearing deposits in banks     153,897       149,255       130,980  
  Total cash and cash equivalents     169,405       166,207       148,040  
               
Certificates of deposit ("CDs") held for investment, at cost     52,938       53,528       52,934  
Investment securities:            
  Held to maturity, at amortized cost     8,070       7,077       7,326  
  Available for sale, at fair value     1,193       1,221       1,272  
FHLB stock     1,107       1,107       2,307  
Other investments, at cost     3,000       3,000       --  
Loans held for sale     3,981       3,407       5,798  
             
Loans receivable     718,112       714,833       685,669  
Less: Allowance for loan losses     (9,544 )     (9,565 )     (9,590 )
  Net loans receivable     708,568       705,268       676,079  
               
Premises and equipment, net     18,053       18,307       18,013  
OREO and other repossessed assets, net     2,221       2,887       3,005  
BOLI     19,539       19,402       18,994  
Accrued interest receivable     2,655       2,743       2,443  
Goodwill     5,650       5,650       5,650  
Mortgage servicing rights, net     1,910       1,871       1,710  
Other assets     2,911       2,220       3,111  
  Total assets   $ 1,001,201     $ 993,895     $ 946,682  
               
Liabilities and shareholders' equity            
Deposits: Non-interest-bearing demand   $   222,302     $   210,108     $   186,239  
Deposits: Interest-bearing     658,109       665,966       622,613  
  Total deposits     880,411       876,074       808,852  
               
FHLB borrowings     --       --       30,000  
Other liabilities and accrued expenses     2,947       3,709       3,001  
  Total liabilities     883,358       879,783       841,853  
             
Shareholders' equity            
Common stock, $.01 par value; 50,000,000 shares authorized;
  7,390,227 shares issued and outstanding – March 31, 2018
  7,367,327 shares issued and outstanding – December 31,2017
  7,345,477 shares issued and outstanding – March 31, 2017   
     13,891        

13,540
       

 
12,986
 
Unearned shares issued to Employee Stock Ownership Plan ("ESOP")     (265 )     (331 )     (529 )
Retained earnings     104,349       101,039       92,550  
Accumulated other comprehensive loss     (132 )     (136 )     (178 )
  Total shareholders' equity     117,843       114,112       104,829  
  Total liabilities and shareholders' equity   $ 1,001,201     $ 993,895     $ 946,682  
                           
                           
                           


KEY FINANCIAL RATIOS AND DATA  Three Months Ended
($ in thousands, except per share amounts) (unaudited)   March 31,   Dec. 31,   March 31,
      2018       2017       2017  
PERFORMANCE RATIOS:            
Return on average assets (a)     1.75 %     1.50 %     1.35 %
Return on average equity (a)     14.79 %     12.90 %     12.24 %
Net interest margin (a)     4.19 %     4.19 %     3.88 %
Efficiency ratio     56.83 %     57.08 %     60.67 %
             
    Six Months Ended
      March 31,       March 31,
        2018           2017  
PERFORMANCE RATIOS:            
Return on average assets (a)
      1.63 %         1.37 %
Return on average equity (a)       13.86 %         12.55 %
Net interest margin (a)       4.19 %         3.90 %
Efficiency ratio       56.96 %         59.86 %
             
    March 31,   Dec. 31,   March 31,
      2018       2017       2017  
ASSET QUALITY RATIOS AND DATA:            
Non-accrual loans   $ 1,932     $ 2,113     $ 1,894  
Loans past due 90 days and still accruing     --       --       135  
Non-performing investment securities     470       500       638  
OREO and other repossessed assets     2,221       2,887       3,005  
Total non-performing assets (b)   $ 4,623     $ 5,500     $ 5,672  
             
             
Non-performing assets to total assets (b)     0.46 %     0.55 %     0.60 %
Net charge-offs (recoveries) during quarter   $ 21     $   (12 )   $   3  
Allowance for loan losses to non-accrual loans     494 %     453 %     506 %
Allowance for loan losses to loans receivable (c)     1.33 %     1.34 %     1.40 %
Troubled debt restructured loans on accrual status (d)   $ 2,970     $ 3,282     $ 6,428  
             
             
CAPITAL RATIOS:            
Tier 1 leverage capital     11.66 %     11.45 %     10.89 %
Tier 1 risk-based capital     16.76 %     16.49 %     15.77 %
Common equity Tier 1 risk-based capital     16.76 %     16.49 %     15.77 %
Total risk-based capital     18.01 %     17.74 %     17.02 %
Tangible common equity to tangible assets (non-GAAP)     11.27 %     10.98 %     10.54 %
             
             
BOOK VALUES:            
Book value per common share   $   15.95     $   15.49     $ 14.27  
Tangible book value per common share (e)     15.18       14.72       13.50  
             

________________________________________________

(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 $155, $199 and $404 reported as non-accrual loans at March 31, 2018, December 31, 2017 and March 31, 2017, 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
  March 31, 2018   December 31, 2017   March 31, 2017
  Amount   Rate   Amount   Rate   Amount     Rate
                       
Assets                      
Loans receivable and loans held for sale $   717,502     5.29 %   $    709,079     5.26 %   $   688,506     5.14 %
Investment securities and FHLB stock (1)     13,190      1.97         12,451      2.70         10,866      2.94  
Interest-bearing deposits in banks and CD's     187,181      1.61         180,038      1.37         171,203      0.90  
  Total interest-earning assets     917,873      4.48         901,568      4.45         870,575      4.27  
Other assets     58,590             60,128             59,561      
  Total assets $   976,463         $   961,696         $   930,136      
                       
Liabilities and Shareholders' Equity                      
NOW checking accounts $     217,734      0.21 %   $     212,550      0.21 %   $   208,736      0.22 %
Money market accounts     141,594      0.53         136,466      0.38         127,935      0.34  
Savings accounts   143,449      0.06       141,266      0.06       134,073      0.06  
Certificates of deposit accounts   139,620      1.01       138,687      0.96       144,021      0.86  
  Total interest-bearing deposits     642,397      0.42         628,969      0.38         614,765      0.35  
FHLB borrowings     --       --         --       --         30,000      4.08  
Total interest-bearing liabilities   642,397      0.42       628,969      0.38       644,765      0.52  
                       
Non-interest-bearing demand deposits   214,722           216,907           178,977      
Other liabilities   3,868           3,732           4,208      
Shareholders' equity   115,476           112,088           102,186      
  Total liabilities and shareholders' equity $   976,463         $   961,696         $   930,136      
                       
  Interest rate spread     4.06 %       4.07 %       3.75 %
  Net interest margin (2)     4.19 %       4.19 %       3.88 %
  Average interest-earning assets to                      
  average interest-bearing liabilities   142.88 %         143.34 %         135.02 %    

          _____________________________________
(1) Includes other investments
(2) Net interest margin = annualized net interest income /
     average interest-earning assets
               

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

  For the Six Months Ended 
         
  March 31, 2018     March 31, 2017 
  Amount   Rate     Amount   Rate
                 
Assets                
Loans receivable and loans held for sale $   713,245      5.28 %     $   686,689     5.13 %
Investment securities and FHLB Stock (1)     12,816       2.31           10,929       3.18  
Interest-bearing deposits in banks and CD's     183,572       1.49           162,433       0.81  
  Total interest-earning assets     909,633       4.47           860,051       4.29  
Other assets     59,366               58,317      
  Total assets $   968,999           $   918,368      
                 
Liabilities and Shareholders' Equity                
NOW checking accounts $   215,113     0.21 %     $   205,526     0.23 %
Money market accounts     139,002       0.46           124,081       0.33  
Savings accounts   142,346       0.06         130,829       0.06  
Certificate of deposit accounts   139,148       0.98         145,746       0.84  
  Total interest-bearing deposits     635,609       0.40           606,182       0.36  
FHLB borrowings     --       --           30,000       4.08  
Total interest-bearing liabilities   635,609       0.40         636,182       0.54  
                 
Non-interest-bearing demand deposits   215,826             177,860      
Other liabilities   3,800             4,363      
Shareholders' equity   113,764             99,963      
  Total liabilities and shareholders' equity $   968,999           $   918,368      
                 
  Interest rate spread     4.07 %         3.76 %
  Net interest margin (2)     4.19 %         3.90 %
  Average interest-earning assets to                
  average interest-bearing liabilities   143.11 %           135.19 %    

          _____________________________________
(1) Includes other investments
(2) Net interest margin = annualized net interest income /
     average interest-earning assets

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

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