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

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

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

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

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

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

Earnings Highlights:

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

Balance Sheet Highlights:

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

Operating Results

Operating revenue (net interest income before provision for loan losses, plus non-interest income excluding gains or losses on the sale of investment securities and recoveries or other than temporary impairment (“OTTI”) charges on investment securities) increased 9% for the current quarter to $12.55 million from $11.53 million for the comparable quarter one year ago and increased 3% from $12.24 million for the preceding quarter.

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

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

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

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

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

Balance Sheet Management

Total assets increased $41.87 million, or 4%, during the first fiscal quarter to $993.90 million at December 31, 2017 from $952.02 million at September 30, 2017. The increase was primarily due to a $28.51 million increase in cash and cash equivalents and CDs held for investment and a $14.90 million increase in net loans receivable which were funded by increased deposits.

Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment and available for sale investment securities, was 25.1% of total liabilities at December 31, 2017, compared to 22.9% at September 30, 2017, and 23.1% one year ago.

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

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

_______________________

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

Timberland originated $82.51 million in loans during the quarter ended December 31, 2017, compared to $90.15 million for the comparable quarter one year ago and $85.10 million for the preceding quarter. Timberland continues to sell fixed rate one- to four-family mortgage loans into the secondary market for asset-liability management purposes and to generate non-interest income. Timberland also (on a much smaller volume) periodically sells the guaranteed portion of U.S. Small Business Administration (“SBA”) loans. During the first quarter of fiscal 2018, fixed-rate one- to four-family mortgage loans and SBA loans totaling $15.91 million were sold compared to $24.20 million for the comparable quarter one year ago and $15.88 million for the preceding quarter.

Timberland’s investment securities and other investments decreased $82,000, or 1%, to $11.30 million at December 31, 2017, from $11.38 million at September 30, 2017, primarily due to scheduled amortization.

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

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

Shareholders’ Equity

Total shareholders’ equity increased $3.11 million to $114.11 million at December 31, 2017, from $111.00 million at September 30, 2017. The increase in shareholders’ equity was primarily due to net income of $3.61 million for the quarter, which was partially offset by dividend payments of $810,000 to shareholders.

Capital Ratios and Asset Quality

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

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

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

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

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

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

The non-performing assets to total assets ratio improved to 0.55% at December 31, 2017, from 0.60% at September 30, 2017 and 0.70% one year ago.

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

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

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

($ in thousands) December 31, 2017 September 30, 2017 December 31, 2016
Shareholders’ equity $ 114,112 $ 111,000 $ 99,634
Less goodwill (5,650) (5,650) (5,650)
Tangible common equity $ 108,462 $ 105,350 $ 93,984
Total assets $ 993,895 $ 952,024 $ 923,751
Less goodwill (5,650) (5,650) (5,650)
Tangible assets $ 988,245 $ 946,374 $ 918,101

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

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

Any of the forward-looking statements that we make in this press release and in the other public statements we make are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. We caution readers not to place undue reliance on any forward-looking statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2018 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us, and could negatively affect the Company’s operations and stock price performance.

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

13,540



13,286



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


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

_______________________________________________
(a) Annualized
(b) Non-performing assets include non-accrual loans, loans past due 90 days and still accruing, non-performing investment securities and OREO and other repossessed assets. Troubled debt restructured loans on accrual status are not included.
(c) Does not include loans held for sale and is before the allowance for loan losses.
(d) Does not include troubled debt restructured loans totaling $199, $253 and $404 reported as non-accrual loans at December 31, 2017, September 30, 2017 and December 31, 2016, respectively.
(e) Tangible common equity divided by common shares outstanding (non-GAAP).

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

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

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

Source:Timberland Bancorp, Inc.