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

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

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

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

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

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

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

Earnings Highlights:

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

Balance Sheet Highlights:

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

Operating Results

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

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

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

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

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

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

Balance Sheet Management

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

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

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

LOAN PORTFOLIO

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

Timberland originated $92.93 million in loans during the quarter ended June 30, 2017, compared to $88.81 million for the comparable quarter one year ago and $79.50 million for the preceding quarter. Timberland continues to sell fixed rate one- to four-family mortgage loans into the secondary market for asset-liability management purposes and to generate non-interest income. Timberland also (on a much smaller volume) sells the guaranteed portion of U.S. Small Business Administration (“SBA”) loans. During the third quarter of fiscal 2017, fixed-rate one- to four-family mortgage loans and SBA loans totaling $19.34 million were sold compared to $14.19 million for the comparable quarter one year ago and $13.00 million for the preceding quarter.

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


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

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

FHLB Borrowings

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

Shareholders’ Equity

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

Capital Ratios and Asset Quality

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

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

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


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

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


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

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

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

Financial measures that exclude intangible assets are non-GAAP measures. To provide investors with a broader understanding of capital adequacy, Timberland provides non-GAAP financial measures for tangible common equity, along with the GAAP measure. Tangible common equity is calculated as shareholders’ equity less goodwill. In addition, tangible assets equal total assets less goodwill.

The following table provides a reconciliation of ending shareholders’ equity (GAAP) to ending tangible shareholders’ equity (non-GAAP), and ending total assets (GAAP) to ending tangible assets (non-GAAP).


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

About Timberland Bancorp, Inc.
Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank (“Bank”). The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 22 branches (including its main office in Hoquiam). Timberland ranked 8th in the recent release of the S&P Global Market Intelligence ranking of the top performing 50 largest public thrifts as of December 31, 2016. The ranking was based on six metrics which included: return on average assets, return on average common tangible equity, efficiency ratio, median three-year growth rate in tangible common equity per share, non-performing loans to total loans and net charge-offs to average loans.

Disclaimer

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

Any of the forward-looking statements that we make in this press release and in the other public statements we make are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. We caution readers not to place undue reliance on any forward-looking statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2017 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us, and could negatively affect the Company’s operations and stock price performance.

TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
($ in thousands, except per share amounts)June 30, March 31, June 30,
(unaudited) 2017 2017 2016
Interest and dividend income
Loans receivable$9,652 $ 8,840 $ 8,257
Investment securities 69 68 70
Dividends from mutual funds and FHLB stock 23 12 22
Interest bearing deposits in banks 421 379 247
Total interest and dividend income 10,165 9,299 8,596
Interest expense
Deposits 549 545 508
FHLB borrowings 369 302 472
Total interest expense 918 847 980
Net interest income 9,247 8,452 7,616
Recapture of loan losses (1,000) (250) --
Net interest income after recapture of loan losses 10,247 8,702 7,616
Non-interest income
Service charges on deposits 1,153 1,090 989
ATM and debit card interchange transaction fees 855 793 778
Gain on sale of loans, net 561 406 443
Bank owned life insurance (“BOLI”) net earnings 133 136 137
Servicing income on loans sold 106 99 60
OTTI on investment securities, net -- -- (4)
Other 348 327 346
Total non-interest income, net 3,156 2,851 2,749
Non-interest expense
Salaries and employee benefits 3,741 3,755 3,397
Premises and equipment 767 776 774
Advertising 170 167 192
OREO and other repossessed assets, net 4 (12) 123
ATM and debit card processing 375 350 337
Postage and courier 109 120 98
State and local taxes 176 152 141
Professional fees 230 199 202
FDIC insurance 99 107 100
Loan administration and foreclosure 20 (1) 92
Data processing and telecommunications 480 464 470
Deposit operations 301 240 232
Other 466 540 410
Total non-interest expense 6,938 6,857 6,568
Income before income taxes 6,465 4,696 3,797
Provision for income taxes 2,188 1,568 1,250
Net income$ 4,277 $ 3,128 $ 2,547
Net income per common share:
Basic$0.59 $0.44 $0.37
Diluted 0.58 0.42 0.36
Weighted average common shares outstanding:
Basic 7,269,564 7,135,083 6,822,608
Diluted 7,432,171 7,379,353 7,111,199
TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended
($ in thousands, except per share amounts) June 30, June 30,
(unaudited) 2017 2016
Interest and dividend income
Loans receivable 27,280 $24,992
Investment securities 207 213
Dividends from mutual funds and FHLB stock 60 83
Interest bearing deposits in banks 1,081 649
Total interest and dividend income 28,628 25,937
Interest expense
Deposits 1,637 1,520
FHLB borrowings 979 1,420
Total interest expense 2,616 2,940
Net interest income 26,012 22,997
Recapture of loan losses (1,250) --
Net interest income after recapture of loan losses 27,262 22,997
Non-interest income
Service charges on deposits 3,348 2,898
ATM and debit card interchange transaction fees 2,448 2,187
Gain on sale of loans, net 1,656 1,230
BOLI net earnings 407 410
Servicing income on loans sold 302 180
OTTI on investment securities, net -- (28)
Other 1,063 903
Total non-interest income, net 9,224 7,780
Non-interest expense
Salaries and employee benefits 11,176 10,333
Premises and equipment 2,298 2,305
Advertising 499 590
OREO and other repossessed assets, net 22 561
ATM and debit card processing 1,036 990
Postage and courier 324 309
State and local taxes 484 410
Professional fees 629 449
FDIC insurance 319 334
Loan administration and foreclosure 113 216
Data processing and telecommunications 1,394 1,394
Deposit operations 850 638
Other 1,462 1,146
Total non-interest expense 20,606 19,675
Income before income taxes 15,880 $ 11,102
Provision for income taxes 5,328 3,647
Net income 10,552 $ 7,455
Net income per common share:
Basic 1.49 $ 1.09
Diluted 1.44 1.05
Weighted average common shares outstanding:
Basic 7,088,134 6,846,373
Diluted 7,348,486 7,091,661


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

12,986

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


KEY FINANCIAL RATIOS AND DATA Three Months Ended
($ in thousands, except per share amounts) (unaudited) June 30, March 31, June 30,
2017 2017 2016
PERFORMANCE RATIOS:
Return on average assets (a) 1.86% 1.35% 1.20%
Return on average equity (a) 16.14% 12.24% 10.96%
Net interest margin (a) 4.29% 3.88% 3.83%
Efficiency ratio 55.94% 60.67% 63.37%
Nine Months Ended
June 30, June 30,
2017 2016
PERFORMANCE RATIOS:
Return on average assets (a)
1.53% 1.18%
Return on average equity (a) 13.80% 10.88%
Net interest margin (a) 4.03% 3.91%
Efficiency ratio 58.48% 63.93%
June 30, March 31, June 30,
2017 2017 2016
ASSET QUALITY RATIOS AND DATA:
Non-accrual loans $2,055 $1,894 $2,955
Loans past due 90 days and still accruing -- 135 135
Non-performing investment securities 590 638 789
OREO and other repossessed assets 3,417 3,005 4,762
Total non-performing assets (b) $6,062 $5,672 $8,641
Non-performing assets to total assets (b) 0.65% 0.60% 1.01%
Net charge-offs (recoveries) during quarter $(1,020) $ 3 $ 201
Allowance for loan losses to non-accrual loans 468% 506% 333%
Allowance for loan losses to loans receivable (c) 1.38% 1.40% 1.50%
Troubled debt restructured loans on accrual status (d) $3,360 $6,429 $7,677
CAPITAL RATIOS:
Tier 1 leverage capital 11.42% 10.89% 10.68%
Tier 1 risk-based capital 16.05% 15.77% 14.20%
Common equity Tier 1 risk-based capital 16.05% 15.77% 14.20%
Total risk-based capital 17.30% 17.02% 15.45%
Tangible common equity to tangible assets (non-GAAP) 11.13% 10.54% 10.42%
BOOK VALUES:
Book value per common share $ 14.77 $ 14.27 $13.61
Tangible book value per common share (e) 14.00 13.50 12.80
(a) Annualized
(b) Non-performing assets include non-accrual loans, loans past due 90 days and still accruing, non-performing
investment securities and OREO and other repossessed assets. Troubled debt restructured loans on accrual
status are not included.
(c) Does not include loans held for sale and is before the allowance for loan losses.
(d) Does not include troubled debt restructured loans totaling $252, $404 and $530 reported as non-accrual
loans at June 30, 2017, March 31, 2017 and June 30, 2016, respectively.
(e) Tangible common equity divided by common shares outstanding (non-GAAP).


AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
($ in thousands)
(unaudited)
For the Three Months Ended
June 30, 2017 March 31, 2017 June 30, 2016
Amount Rate Amount Rate Amount Rate
Assets
Loans and loans held for sale$693,931 5.56% $688,506 5.14% $647,781 5.10%
Investment securities and FHLB stock 12,482 2.98 10,866 2.94 11,860 3.10
Interest bearing deposits and CD’s 156,507 1.08 171,203 0.90 136,724 0.73
Total interest-bearing assets 862,920 4.71 870,575 4.27 796,365 4.32
Other assets 57,841 59,561 55,926
Total assets 920,761 930,136 852,291
Liabilities and Shareholders’ Equity
NOW checking accounts$207,060 0.22% $208,736 0.22% $187,836 0.24%
Money market accounts 125,787 0.35 127,935 0.34 105,884 0.32
Savings accounts 137,108 0.06 134,073 0.06 116,818 0.05
Certificates of deposit accounts 141,254 0.87 144,021 0.86 149,713 0.79
Total interest-bearing deposits 611,209 0.36 614,765 0.35 560,251 0.36
FHLB borrowings 8,571 17.57 30,000 4.08 45,000 4.22
Total interest-bearing liabilities 619,780 0.59 644,765 0.52 605,251 0.65
Non-interest bearing demand deposits 190,631 178,977 150,331
Other liabilities 4,379 4,208 3,750
Shareholders’ equity 105,971 102,186 92,959
Total liabilities and shareholders’ equity 920,761 930,136 852,291
Interest rate spread 4.12% 3.75% 3.67%
Net interest margin (1) 4.29% 3.88% 3.83%
Average interest-bearing assets to
average interest bearing liabilities 139.23% 135.02% 131.58%
(1) Net interest margin = annualized net interest income /
average interest-bearing assets


AVERAGE BALANCES, YIELDS, AND RATES –YEAR-TO-DATE
($ in thousands)
(unaudited)
For the Nine Months Ended
June 30, 2017 June 30, 2016
Amount Rate Amount Rate
Assets
Loans and loans held for sale $688,936 5.29% $634,981 5.25%
Investment securities and FHLB stock 11,447 3.11 11,887 3.31
Interest bearing deposits and CD’s 160,458 0.90 136,681 0.63
Total interest-bearing assets 860,841 4.43 783,549 4.41
Other assets 58,324 57,079
Total assets 919,165 840,628
Liabilities and Shareholders’ Equity
NOW checking accounts $206,037 0.22% $183,938 0.25%
Money market accounts 124,650 0.34 105,307 0.31
Savings accounts 132,922 0.06 113,069 0.05
Certificates of deposit accounts 144,249 0.85 151,813 0.78
Total interest-bearing deposits 607,858 0.36 554,127 0.37
FHLB borrowings 22,857 5.73 45,000 4.22
Total interest-bearing liabilities 630,715 0.55 599,127 0.65
Non-interest bearing demand deposits 182,117 146,466
Other liabilities 4,368 3,661
Shareholders’ equity 101,965 91,374
Total liabilities and shareholders’ equity 919,165 840,628
Interest rate spread 3.88% 3.76%
Net interest margin (1) 4.03% 3.91%
Average interest-bearing assets to
average interest bearing liabilities 136.49% 130.78%
(1) Net interest margin = annualized net interest income /
average interest-bearing assets


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

Source:Timberland Bancorp, Inc