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Timberland Bancorp EPS Increases 16% Year-Over-Year to $0.36 for Third Fiscal Quarter of 2016

  • Year-to-Date EPS Increases 38% to $1.05
  • Quarterly Dividend Increases 13%

HOQUIAM, Wash., July 26, 2016 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) (“Timberland” or “the Company”) today reported net income of $2.55 million, or $0.36 per diluted common share, for its third fiscal quarter ended June 30, 2016. This compares to net income of $2.16 million, or $0.31 per diluted common share, for the quarter ended June 30, 2015 and net income of $2.38 million, or $0.34 per diluted common share, for the quarter ended March 31, 2016.

For the first nine months of fiscal 2016, Timberland’s net income increased 40% to $7.46 million from the $5.34 million reported for the first nine months of fiscal 2015 and earnings per diluted common share increased 38% to $1.05 for the first nine months of fiscal 2016 from the $0.76 reported for the first nine months of fiscal 2015.

Timberland’s Board of Directors also approved a 13% increase in the quarterly cash dividend to $0.09 per common share, payable on August 26, 2016 to shareholders of record on August 12, 2016.

“For the fifth consecutive quarter Timberland has recorded a return on equity (“ROE”) exceeding 10% and a return on assets (“ROA”) exceeding 1%,” reported Michael R. Sand, President and CEO. “Continued strong loan growth combined with above peer non-interest income and effective expense controls have resulted in an increase in the Company’s ROE and ROA to 10.96% and 1.20%, respectively, for the quarter ended June 30, 2016. Based on the Company’s strong and consistent profitability, Timberland’s Board declared a 13% increase in its dividend to $0.09 per share. We continue to look forward to the December 2016 maturity of the first of three $15 million FHLB advances that will mature during our next fiscal year. We plan to pay off the December advance which will reduce our monthly interest expense by, on average, $54,000 per month. Paying off this advance will positively and materially contribute to the Company’s already strong net interest margin. In the aggregate the three advances maturing in our next fiscal year require interest payments of $1.85 million annually. Their maturities in December of 2016, August of 2017 and September of 2017 will significantly reduce the Company’s interest expense.”

Third Fiscal Quarter 2016 Highlights (at or for the period ended June 30, 2016, compared to June 30, 2015, or March 31, 2016):

  • EPS for the current quarter increased 16% to $0.36 from $0.31 for the comparable quarter one year ago;
  • EPS for the first nine months of fiscal 2016 increased 38% to $1.05 from $0.76 for the first nine months of fiscal 2015;
  • Net income for the first nine months of fiscal 2016 increased 40% to $7.46 million from $5.34 million for the first nine months of fiscal 2015;
  • Return on average equity increased to 10.96% for the current quarter;
  • Return on average assets increased to 1.20% for the current quarter;
  • Operating revenue increased 9% to $10.37 million from $9.51 million for the comparable quarter one year ago;
  • Net interest margin remained strong at 3.83% for the current quarter;
  • Non-interest income increased 9% from the prior quarter;
  • Net loans receivable increased 4% from the prior quarter and 9% year-over-year;
  • Non-performing assets decreased 54% year-over-year and decreased 12% from the prior quarter and are now at 1.01% of total assets;
  • OREO and other repossessed assets decreased 41% year-over-year and decreased 13% from the prior quarter; and
  • Book and tangible book values per common share increased to $13.61 and $12.80, respectively, at June 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 9% to $10.37 million for the current quarter from $9.51 million for the comparable quarter one year ago and increased 2% from $10.21 million for the preceding quarter. Operating revenue increased 14% to $30.81 million for the first nine months of fiscal 2016 from $27.07 million for the comparable period one year ago.

Net interest income increased 9% to $7.62 million from $6.98 million for the comparable quarter one year ago and decreased by less than 1% from the $7.67 million recorded for the preceding quarter. The net interest margin for the current quarter was 3.83% compared to 3.92% for the preceding quarter and 3.88% for the comparable quarter one year ago. The net interest margin was increased by approximately two basis points during the current quarter due to the collection of $34,000 of non-accrual interest. The net interest margin was increased during the preceding quarter by approximately 12 basis points due to the collection of $189,000 in pre-payment penalties and $46,000 of non-accrual interest. For the first nine months of fiscal 2016, net interest income increased 14% to $23.00 million from $20.25 million for the first nine months of fiscal 2015. Timberland’s net interest margin for the first nine months of fiscal 2016 increased to 3.91% from 3.81% for the first nine months of fiscal 2015.

Non-interest income increased 9% to $2.75 million for the quarter ended June 30, 2016, from $2.51 million for the preceding quarter and $2.52 million for the quarter one year ago. The increase in non-interest income for the current quarter compared to the preceding quarter was primarily due to increased debit card interchange transaction fees, increased service charges on deposits and an increase in the gain on sale of loans. During the current quarter, service charges on deposits totaled $989,000, ATM and debit card interchange transaction fees increased to $778,000 and gain on sale of loans totaled $443,000. Fiscal year-to-date non-interest income increased 13% to $7.78 million from $6.86 million for the first nine months of fiscal 2015.

Total operating (non-interest) expenses decreased 1% to $6.57 million for the third fiscal quarter, from $6.63 million for the preceding quarter and increased 6% from $6.22 million for the comparable quarter one year ago. The decreased expenses for the current quarter compared to the preceding quarter were primarily due to a decrease in OREO and other repossessed asset expense and a decrease in salaries and employee benefits expense, which were partially offset by an increase in professional fee expense. The efficiency ratio for the current quarter improved to 63.37% from 65.09% for the preceding quarter and from 65.43% for the comparable quarter one year ago. Fiscal year-to-date operating expenses increased 3% to $19.68 million from $19.15 million for the first nine months of fiscal 2015. The efficiency ratio for the first nine months of fiscal 2016 improved to 63.93% from 70.62% for the first nine months of fiscal 2015.

The provision for income taxes increased $75,000 to $1.25 million for the quarter ended June 30, 2016, from $1.18 million for the preceding quarter, primarily due to higher income before income taxes. The effective tax rate was 32.9% for the current quarter compared to 33.1% for the quarter ended March 31, 2016.

Balance Sheet Management

Total assets increased $6.18 million, or 1%, to $858.14 million at June 30, 2016, from $851.96 million at March 31, 2016. The increase was primarily due to a $24.52 million increase in net loans receivable and a $3.30 million increase in loans held for sale. These increases were partially offset by a $20.86 million decrease in total cash and cash equivalents as excess liquidity was used to fund loan growth.

Liquidity, as measured by cash and cash equivalents, CDs held for investment and available for sale investments securities, was 18.7% of total liabilities at June 30, 2016, compared to 21.6% at March 31, 2016 and 17.7% one year ago.

Net loans receivable increased $24.52 million, or 4%, to $647.37 million at June 30, 2016, from $622.85 million at March 31, 2016. The increase was primarily due to an $18.78 million increase in custom and owner/builder construction loans, a $9.01 million increase in multi-family loans, a $4.07 million increase in commercial real estate loans, a $1.88 million increase in speculative one-to-four family construction loans and a $1.34 million increase in home equity and second mortgage loans. These increases were partially offset by a $6.70 million increase in the undisbursed portion of construction loans in process, a $2.48 million decrease in multi-family construction loans and a $1.06 million decrease in commercial construction loans.

LOAN PORTFOLIO

($ in thousands)June 30, 2016 March 31, 2016 June 30, 2015
Amount Percent Amount Percent Amount Percent
Mortgage loans:
One- to four-family (a)$ 117,055 17% $ 117,465 17% $ 107,349 16%
Multi-family 51,672 7 42,666 6 50,587 8
Commercial 294,887 42 290,817 43 293,438 44
Construction - custom and
owner/builder 88,593 12 69,817 10 62,579 9
Construction - speculative
one-to four-family 8,261 1 6,384 1 5,205 1
Construction - commercial 21,427 3 22,487 3 18,924 3
Construction - multi-family 18,090 3 20,570 3 22,970 4
Land 24,076 3 24,322 4 27,495 4
Total mortgage loans 624,061 88 594,528 87 588,547 89
Consumer loans:
Home equity and second
mortgage 38,482 5 37,144 5 35,040 5
Other 4,490 1 4,380 1 4,711 1
Total consumer loans 42,972 6 41,524 6 39,751 6
Commercial business loans 43,571 6 43,355 7 36,288 5
Total loans 710,604 100% 679,407 100% 664,586 100%
Less:
Undisbursed portion of
construction loans in
process (51,163) (44,465) (57,674)
Deferred loan origination
fees (2,233) (2,048) (2,069)
Allowance for loan losses (9,842) (10,043) (10,467)
Total loans receivable, net$ 647,366 $ 622,851 $594,376


_______________________
(a) Does not include one- to four family loans held for sale totaling $4,885, $1,584 and $3,835 at June 30, 2016, March 31, 2016 and June 30, 2015, respectively.

Timberland originated $88.81 million in loans during the quarter ended June 30, 2016, compared to $59.58 million for the preceding quarter and $101.27 million for the comparable quarter one year ago. Timberland continues to sell fixed rate one- to four-family mortgage loans into the secondary market for asset-liability management purposes and to generate non-interest income. During the quarter ended June 30, 2016, fixed-rate one- to four-family mortgage loans totaling $14.19 million were sold compared to $13.94 million for the preceding quarter and $16.53 million for the comparable quarter one year ago.

Timberland’s investment securities decreased slightly during the quarter to $8.98 million at June 30, 2016, from $9.11 million at March 31, 2016, primarily due to scheduled amortization.

DEPOSIT BREAKDOWN
($ in thousands)
June 30, 2016 March 31, 2016 June 30, 2015
Amount Percent Amount Percent Amount Percent
Non-interest bearing $149,575 21% $148,980 21% $122,133 19%
N.O.W. checking 189,475 26 188,108 27 168,773 26
Savings 119,576 17 115,461 16 104,774 16
Money market 100,914 14 100,903 14 94,529 14
Money market – brokered 7,032 1 7,591 1 8,521 1
Certificates of deposit under $100 79,283 11 81,350 11 87,590 13
Certificates of deposit $100 and over 66,354 9 66,448 9 65,202 10
Certificates of deposit – brokered 3,172 1 3,197 1 3,196 1
Total deposits $715,381 100% $712,038 100% $654,718 100%


Total deposits increased $3.34 million to $715.38 million at June 30, 2016, from $712.04 million at March 31, 2016. The increase was primarily due to a $4.12 million increase in savings account balances, a $1.37 million increase in N.O.W. checking account balances and a $595,000 increase in non-interest bearing checking account balances. These increases were partially offset by a $2.19 million decrease in certificates of deposit account balances and a $548,000 decrease in money market account balances.

Shareholders’ Equity

Total shareholders’ equity increased $2.19 million to $94.45 million at June 30, 2016, from $92.26 million at March 31, 2016. The increase in shareholders’ equity was primarily due to net income of $2.55 million for the quarter, which was partially offset by dividend payments of $555,000 to shareholders. Book value per share increased $0.30 to $13.61 and tangible book value per share increased $0.31 to $12.80 at June 30, 2016. Timberland did not repurchase shares of its common stock during the quarter and had 221,893 shares authorized to be purchased on its existing stock repurchase plan at June 30, 2016.

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 15.45%, a Tier 1 leverage capital ratio of 10.68% and a tangible capital to tangible assets ratio of 10.42% at June 30, 2016.

There was no provision for loan losses made for the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015. Net charge-offs totaled $201,000 for the current quarter compared to a net recovery of $154,000 for the quarter ended March 31, 2016 and a net recovery of $85,000 for the quarter ended June 30, 2015. The non-performing assets to total assets ratio improved to 1.01% at June 30, 2016 from 1.16% three months earlier and 2.36% one year ago. The allowance for loan losses was 1.50% of loans receivable at June 30, 2016.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 63% to $4.01 million at June 30, 2016, from $10.83 million one year ago and increased 9% from $3.67 million at March 31, 2016. Non-accrual loans decreased 13% to $2.96 million at June 30, 2016, from $3.39 million at March 31, 2016 and decreased 68% from $9.13 million at June 30, 2015.

NON-ACCRUAL LOANSJune 30, 2016 March 31, 2016 June 30, 2015
($ in thousands)Amount Quantity Amount Quantity Amount Quantity
Mortgage loans:
One- to four-family$ 1,236 9 $ 1,365 11 $ 3,141 17
Multi-family -- -- -- -- 760 1
Commercial 808 2 1,129 3 462 2
Construction -- -- -- -- 157 1
Land 444 3 451 3 4,200 5
Total mortgage loans 2,488 14 2,945 17 8,720 26
Consumer loans:
Home equity and second
mortgage 436 7 413 7 374 6
Other 31 1 33 1 36 1
Total consumer loans 467 8 446 8 410 7
Total loans$ 2,955 22 $ 3,391 25 $ 9,130 33


OREO and other repossessed assets decreased 41% to $4.76 million at June 30, 2016, from $8.06 million at June 30, 2015 and decreased 13% from $5.46 million at March 31, 2016. At June 30, 2016, the OREO and other repossessed asset portfolio consisted of 26 individual real estate properties and one mobile home. During the quarter ended June 30, 2016, five OREO properties totaling $849,000 were sold for a net gain of $34,000.

OREO and OTHER
REPOSSESSED ASSETS
June 30, 2016 March 31, 2016 June 30, 2015
($ in thousands)Amount Quantity Amount Quantity Amount Quantity
One- to four-family$ 1,382 7 $ 1,645 7 $ 2,434 8
Commercial 648 3 446 2 2,041 4
Land 2,665 16 3,300 18 3,521 21
Mobile home 67 1 67 1 67 1
Total$ 4,762 27 $ 5,458 28 $ 8,063 34


About Timberland Bancorp, Inc.
Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank (“Bank”). The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 22 branches (including its main office in Hoquiam).

Disclaimer
Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated, including, but not limited to: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our loan loss reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Board of Governors of the Federal Reserve System and our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action or require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions, which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules including as a result of Basel III; the impact of the Dodd Frank Wall Street Reform and Consumer Protection Act and the implementation of related rules and regulations; our ability to attract and retain deposits; increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our consolidated balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common and stock; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations; pricing, products and services; and other risks detailed in our reports filed with the Securities and Exchange Commission.

Any of the forward-looking statements that we make in this press release and in the other public statements we make are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. We caution readers not to place undue reliance on any forward-looking statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2016 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us, and could negatively affect the Company’s operations and stock price performance.


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
($ in thousands, except per share amounts) June 30, March 31, June 30,
(unaudited) 2016 2016 2015
Interest and dividend income
Loans receivable $8,257 $8,306 $7,756
Investment securities 70 74 59
Dividends from mutual funds and Federal Home Loan Bank (“FHLB”) stock 22 39 7
Interest bearing deposits in banks 247 231 125
Total interest and dividend income 8,596 8,650 7,947
Interest expense
Deposits 508 507 492
FHLB advances 472 472 471
Total interest expense 980 979 963
Net interest income 7,616 7,671 6,984
Provision for loan losses -- -- --
Net interest income after provision for loan losses 7,616 7,671 6,984
Non-interest income
OTTI on investment securities, net (4) (23) (4)
Service charges on deposits 989 937 899
ATM and debit card interchange transaction fees 778 710 691
Gain on sale of loans, net 443 393 514
Bank owned life insurance (“BOLI”) net earnings 137 137 133
Servicing income (loss) on loans sold 60 55 (1)
Other 346 304 291
Total non-interest income, net 2,749 2,513 2,523
Non-interest expense
Salaries and employee benefits 3,397 3,466 3,196
Premises and equipment 774 771 763
Gain on disposition of premises and equipment, net -- -- (299)
Advertising 192 193 169
OREO and other repossessed assets, net 123 195 193
ATM and debit card processing 337 331 336
Postage and courier 98 110 104
State and local taxes 141 138 189
Professional fees 202 117 207
FDIC insurance 100 127 142
Other insurance 33 33 28
Loan administration and foreclosure 92 95 88
Data processing and telecommunications 470 474 449
Deposit operations 232 234 220
Other 377 345 435
Total non-interest expense 6,568 6,629 6,220
Income before income taxes $ 3,797 $ 3,555 $ 3,287
Provision for income taxes 1,250 1,175 1,128
Net income $ 2,547 $ 2,380 $ 2,159
Net income per common share:
Basic $0.37 $0.35 $0.31
Diluted 0.36 0.34 0.31
Weighted average common shares outstanding:
Basic 6,822,608 6,846,527 6,902,067
Diluted 7,111,199 7,080,005 7,071,221


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended
($ in thousands, except per share amounts) June 30, June 30,
(unaudited) 2016 2015
Interest and dividend income
Loans receivable $24,992 $22,617
Investment securities 213 179
Dividends from mutual funds and FHLB stock 83 21
Interest bearing deposits in banks 649 343
Total interest and dividend income 25,937 23,160
Interest expense
Deposits 1,520 1,496
FHLB advances 1,420 1,411
Total interest expense 2,940 2,907
Net interest income 22,997 20,253
Provision for loan losses -- --
Net interest income after provision for loan losses 22,997 20,253
Non-interest income
OTTI on investment securities, net (28) (5)
Gain on sale of investment securities, net -- 45
Service charges on deposits 2,898 2,635
ATM and debit card interchange transaction fees 2,187 1,964
Gain on sale of loans, net 1,230 1,098
BOLI net earnings 409 401
Servicing income (loss) on loans sold 180 (40)
Other 904 762
Total non-interest income, net 7,780 6,860
Non-interest expense
Salaries and employee benefits 10,333 9,877
Premises and equipment 2,305 2,239
Gain on disposition of premises and equipment, net -- (299)
Advertising 590 529
OREO and other repossessed asset, net 561 617
ATM and debit card processing 990 929
Postage and courier 309 322
State and local taxes 410 426
Professional fees 449 606
FDIC insurance 334 449
Other insurance 98 103
Loan administration and foreclosure 216 207
Data processing and telecommunications 1,394 1,299
Deposit operations 638 615
Other 1,048 1,228
Total non-interest expense 19,675 19,147
Income before income taxes $11,102 $7,966
Provision for income taxes 3,647 2,629
Net income $7,455 $5,337
Net income per common share:
Basic $1.09 $0.77
Diluted 1.05 0.76
Weighted average common shares outstanding:
Basic 6,846,373 6,897,381
Diluted 7,091,661 7,068,821


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts) (unaudited) June 30, March 31, June 30,
2016 2016 2015
Assets
Cash and due from financial institutions $ 16,394 $ 17,121 $ 13,800
Interest-bearing deposits in banks 72,779 92,908 62,373
Total cash and cash equivalents 89,173 110,029 76,173
Certificates of deposit (“CDs”) held for investment, at cost 52,435 52,524 47,053
Investment securities:
Held to maturity, at amortized cost 7,618 7,743 8,018
Available for sale, at fair value 1,363 1,365 1,401
FHLB stock 2,804 2,804 2,699
Loans held for sale 4,885 1,584 3,835
Loans receivable 657,208 632,894 604,843
Less: Allowance for loan losses (9,842) (10,043) (10,467)
Net loans receivable 647,366 622,851 594,376
Premises and equipment, net 16,224 16,355 17,083
OREO and other repossessed assets, net 4,762 5,458 8,063
BOLI 18,580 18,443 18,034
Accrued interest receivable 2,270 2,232 2,132
Goodwill 5,650 5,650 5,650
Mortgage servicing rights, net 1,516 1,488 1,469
Other assets 3,493 3,436 3,801
Total assets $858,139 $851,962 $789,787
Liabilities and shareholders’ equity
Deposits: Non-interest-bearing demand $ 149,575 $ 148,980 $ 122,133
Deposits: Interest-bearing 565,806 563,058 532,585
Total deposits 715,381 712,038 654,718
FHLB advances 45,000 45,000 45,000
Other liabilities and accrued expenses 3,306 2,662 2,779
Total liabilities 763,687 759,700 702,497
Shareholders’ equity
Common stock, $.01 par value; 50,000,000 shares authorized;
7,053,636 shares issued and outstanding – June 30, 2015
6,933,068 shares issued and outstanding – March 31, 2016
6,939,068 shares issued and outstanding – June 30, 2016 9,818 9,698 10,948
Unearned shares issued to Employee Stock Ownership Plan (“ESOP”) (728) (793) (992)
Retained earnings 85,635 83,643 77,673
Accumulated other comprehensive loss (273) (286) (339)
Total shareholders’ equity 94,452 92,262 87,290
Total liabilities and shareholders’ equity $858,139 $851,962 $789,787


KEY FINANCIAL RATIOS AND DATA Three Months Ended
($ in thousands, except per share amounts) (unaudited) June 30, March 31, June 30,
2016 2016 2015
PERFORMANCE RATIOS:
Return on average assets (a) 1.20% 1.13% 1.11%
Return on average equity (a) 10.96% 10.42% 10.03%
Net interest margin (a) 3.83% 3.92% 3.88%
Efficiency ratio 63.37% 65.09% 65.43%
Nine Months Ended
June 30, June 30,
2016 2015
PERFORMANCE RATIOS
Return on average assets 1.18% 0.93%
Return on average equity 10.88% 8.40%
Net interest margin 3.91% 3.81%
Efficiency ratio 63.93% 70.62%
June 30, March 31, June 30,
2016 2016 2015
ASSET QUALITY RATIOS AND DATA:
Non-accrual loans $2,955 $3,391 $9,130
Loans past due 90 days and still accruing 135 135 488
Non-performing investment securities 789 868 979
OREO and other repossessed assets 4,762 5,458 8,063
Total non-performing assets (b) $8,641 $9,852 $18,660
Non-performing assets to total assets (b) 1.01% 1.16% 2.36%
Net charge-offs (recoveries) during quarter $ 201 $(154) $ (85)
Allowance for loan losses to non-accrual loans 333% 296% 115%
Allowance for loan losses to loans receivable (c) 1.50% 1.59% 1.73%
Troubled debt restructured loans on accrual status (d) $7,677 $7,923 $12,392
CAPITAL RATIOS:
Tier 1 leverage capital 10.68% 10.56% 10.77%
Tier 1 risk-based capital 14.20% 14.21% 13.76%
Common equity Tier 1 risk-based capital 14.20% 14.21% 13.76%
Total risk-based capital 15.45% 15.46% 15.01%
Tangible capital to tangible assets (e) 10.42% 10.23% 10.41%
BOOK VALUES:
Book value per common share $ 13.61 $ 13.31 $12.38
Tangible book value per common share (e) 12.80 12.49 11.57

__________________________________________________
(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 $530, $531 and $1,356 reported as non-accrual loans at June 30, 2016, March 31, 2016 and June 30, 2015, respectively.
(e) Calculation subtracts goodwill from the equity component and from assets.


AVERAGE BALANCES, YIELDS AND RATES - QUARTERLY
($ in thousands)
(unaudited)

For the Three Months Ended
June 30, 2016 March 31, 2016 June 30, 2015
Average
Balance
Average
Yield/Rate
Average
Balance
Average
Yield/Rate
Average
Balance
Average
Yield/Rate
Assets
Loans and loans held for sale$ 647,781 5.10% $ 631,708 5.26% $ 600,740 5.16%
Investment securities and FHLB Stock 11,860 3.10% 11,844 3.82% 12,276 2.15%
Interest-bearing deposits and CD's 136,724 0.73% 139,732 0.66% 107,295 0.47%
Total interest-bearing assets 796,365 4.32% 783,284 4.42% 720,311 4.41%
Other assets 55,926 57,072 57,130
Total assets$ 852,291 $ 840,356 $ 777,441
Liabilities and Shareholders' Equity
N.O.W. checking accounts$ 187,836 0.24% $ 184,414 0.24% $ 167,003 0.27%
Money market accounts 105,884 0.32% 105,670 0.30% 95,341 0.30%
Savings accounts 116,818 0.05% 112,064 0.05% 104,306 0.05%
Certificates of deposit accounts 149,713 0.79% 151,837 0.80% 158,990 0.74%
Total interest-bearing deposits 560,251 0.36% 553,985 0.37% 525,640 0.38%
FHLB advances 45,000 4.22% 45,000 4.22% 45,000 4.20%
Total interest-bearing liabilities 605,251 0.65% 598,985 0.66% 570,640 0.68%
Non-interest-bearing demand deposits 150,331 146,581 117,505
Other liabilities 3,750 3,455 3,203
Shareholders' equity 92,959 91,335 86,093
Total liabilities and shareholders' equity$ 852,291 $ 840,356 $ 777,441
Net interest income and spread 3.67% 3.76% 3.73%
Net interest margin (1) 3.83% 3.92% 3.88%
Average interest-bearing assets to
average interest-bearing liabilities 131.58% 130.77% 126.23%

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


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

For the Nine Months Ended
June 30, 2016 June 30, 2015
Average
Balance
Average
Yield/Rate
Average
Balance
Average
Yield/Rate
Assets
Loans and loans held for sale$ 634,981 5.25% $ 591,483 5.10%
Investment securities and FHLB Stock 11,887 3.31% 12,460 2.14%
Interest-bearing deposits and CD's 136,681 0.63% 103,937 0.44%
Total interest-bearing assets 783,549 4.41% 707,880 4.36%
Other assets 57,079 58,424
Total assets$ 840,628 $ 766,304
Liabilities and Shareholders' Equity
N.O.W. checking accounts$ 183,938 0.25% $ 163,917 0.27%
Money market accounts 105,307 0.31% 92,750 0.28%
Savings accounts 113,069 0.05% 100,636 0.05%
Certificates of deposit accounts 151,813 0.78% 161,486 0.77%
Total interest-bearing deposits 554,127 0.37% 518,789 0.39%
FHLB advances 45,000 4.22% 45,000 4.19%
Total interest-bearing liabilities 599,127 0.66% 563,789 0.69%
Non-interest-bearing demand deposits 146,466 114,883
Other liabilities 3,661 2,961
Shareholders' equity 91,374 84,671
Total liabilities and shareholders' equity$ 840,628 $ 766,304
Net interest income and spread 3.76% 3.67%
Net interest margin (1) 3.91% 3.81%
Average interest-bearing assets to
average interest-bearing liabilities 130.78% 125.56%

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


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

Source:Timberland Bancorp, Inc