Home Icon

Loading, Please Wait...

CST: 30/10/2020 16:53:26   

Timberland Bancorp Fiscal Year Net Income Increases 44% to $24.02 million

364 Days ago

  • Fiscal Year Earnings Per Share Increases 28% to $2.84
  • Fiscal Year Return on Average Equity Increases to 14.91%
  • Fiscal Year Return on Average Assets Increases to 1.96%
  • Announces $0.15 Regular Quarterly Dividend and $0.10 Special Dividend

HOQUIAM, Wash., Oct. 31, 2019 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”) today reported net income increased 44% to $24.02 million for the fiscal year ended September 30, 2019 from $16.72 million for the fiscal year ended September 30, 2018.  Earnings per diluted common share (“EPS”) increased 28% to $2.84 for the fiscal year 2019 from $2.22 for the prior fiscal year.

Timberland also reported quarterly net income of $6.33 million, or $0.75 per diluted common share, for the quarter ended September 30, 2019.  This compares to net income of $5.96 million, or $0.70 per diluted common share, for the preceding quarter and net income of $4.42 million, or $0.59 per diluted common share, for the quarter ended September 30, 2018.

“We are pleased to report record net income for the year ended September 30, 2019 and, for the ninth consecutive fiscal year, increases in revenue, earnings per share, return on average equity and return on average assets,” stated Michael Sand, President and CEO.  “The Northwest economy continues to provide an enviable economic environment within which to operate and we continue to develop lending and deposit relationships throughout our six county Western Washington footprint.  The completion of the South Sound Bank acquisition on the first day of our recently completed fiscal year contributed to Timberland’s year-over-year earnings growth and provided additional opportunities to increase customer relationships along Washington’s economically important I-5 corridor.  Despite incurring $492,000 ($389,000 after tax) in conversion related IT expenses during the September quarter, the quarter’s efficiency ratio improved to 52.39% from 56.94% for the comparable quarter one year ago.”

“Also, during our recently completed fiscal year we were honored to be recognized for the second consecutive year by Raymond James as being in the top 10% of community banks in the country, as measured by various financial metrics, and, by Sandler O’Neill, as one of the 30 best performing small cap banks in the country.”  

“In addition to declaring a regular dividend of $0.15 per share, Timberland’s Board of Directors also declared a one-time special dividend of $0.10 per share payable on November 29, 2019 to shareholders of record on November 15, 2019.  Timberland’s continued solid financial performance has allowed us to pay a special cash dividend for the second time this calendar year while continuing to maintain a very strong capital position to support future growth,” added Sand.  “The payment of these two declared dividends combined with the dividends paid for the prior three quarters represents a payment to shareholders of $0.80 per share for the four quarter period.”

During the quarter, Timberland repurchased 17,609 shares of its common stock for $428,000 at an average price of $24.33 per share.  At September 30, 2019, Timberland had 201,453 shares available to be repurchased in accordance with the terms of its existing stock repurchase plan.

2019 Fiscal Year Earnings and Balance Sheet Highlights (at or for the period ended September 30, 2019, compared to September 30, 2018, or June 30, 2019):

Earnings Highlights:

  • Net income increased 44% to $24.02 million for the 2019 fiscal year from $16.72 million for the 2018 fiscal year;
  • Fiscal year 2019 EPS increased 28% to $2.84 from $2.22 for fiscal year 2018;
  • EPS for the current quarter increased 27% to $0.75 from $0.59 for the comparable quarter one year ago and increased 7% from $0.70 for the preceding quarter;
  • Return on average equity increased to 15.07% for the current quarter and 14.91% for the 2019 fiscal year;
  • Return on average assets increased to 2.04% for the current quarter and 1.96% for the 2019 fiscal year;
  • Net interest margin improved to 4.54% for the current quarter and 4.50% for the 2019 fiscal year; and
  • Efficiency ratio improved to 54.32% for the 2019 fiscal year from 56.55% for the 2018 fiscal year.

Balance Sheet Highlights:

  • Total assets increased 22% year-over-year;
  • Total deposits increased 20% year-over-year;
  • Net loans receivable increased 22% year-over-year; and
  • Book and tangible book (non-GAAP) values per common share increased to $20.54 and $18.48, respectively, at September 30, 2019.

Operating Results

Operating revenue (net interest income before the provision for loan losses, plus non-interest income excluding recoveries on investment securities, gains on sale of investment securities and Bank Owned Life Insurance (“BOLI”) payouts) increased 25% for the 2019 fiscal year to $64.37 million from $51.53 million for the 2018 fiscal year.  For the current quarter operating revenue increased 24% to $16.72 million from $13.44 million for the comparable quarter one year ago and increased 2% from $16.37 million for the preceding quarter.

Net interest income for the 2019 fiscal year increased 31% to $51.16 million from $39.06 million for the 2018 fiscal year.  The year-over-year increase in net interest income was primarily due to a 23% increase in average interest-earning assets, primarily as a result of the acquisition of South Sound Bank (“South Sound Acquisition”).  Net interest income for the current quarter increased 28% to $13.15 million from $10.27 million for the comparable quarter one year ago and increased 2% from $12.94 million for the preceding quarter.

Timberland’s net interest margin (“NIM”) for the fiscal year ended September 30, 2019, increased to 4.50% from 4.23% for the fiscal year ended September 30, 2018.  The net interest margin for the current quarter increased to 4.54% from 4.35% for the comparable quarter one year ago and from 4.49% for the preceding quarter.  The NIM for the current quarter was increased by approximately eight basis points due to the accretion of $188,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $45,000 of non-accrual interest.  The NIM for the comparable quarter one year ago was increased by approximately five basis points due to the collection of $107,000 of non-accrual interest and late fees.  The NIM for the preceding quarter was increased by approximately six basis points due to the accretion of $69,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $88,000 of non-accrual interest.

Non-interest income for fiscal year 2019 increased 14% to $14.34 million from $12.54 million for the prior fiscal year.  The increase was primarily due to a $1.09 million increase in BOLI net earnings, a $466,000 increase in ATM and debit card interchange transaction fees, and a $323,000 increase in service charges on deposits.  The increased BOLI income was primarily the result of a $1.03 million BOLI death benefit claim.  The increases in ATM and debit card interchange fees and service charges on deposits were primarily a result of income from deposit accounts acquired in the South Sound Acquisition.  Non-interest income increased 2% to $3.60 million for the current quarter from $3.54 million for the preceding quarter primarily due to an increase in service charges on deposits and smaller increases in several other categories, which were partially offset by small decreases in several categories.

For fiscal year 2019, total (non-interest) operating expenses increased 22% to $35.58 million from $29.18 million for the prior fiscal year primarily as a result increased staffing, operating and conversion expenses associated with the South Sound Acquisition and expenses associated with Timberland’s core operating system conversion.  During the year ended September 30, 2019, Timberland’s core operating system conversion expenses (including the termination fees associated with South Sound Bank’s core system provider) totaled $1.38 million.  The efficiency ratio for fiscal year 2019 improved to 54.32% from 56.55% for fiscal year 2018 as increases in revenue outpaced increases in expenses.

Total operating expenses for the current quarter decreased 2% to $8.77 million from $8.97 million for the preceding quarter and increased 15% from $7.66 million for the comparable quarter one year ago.  The decrease in expenses for the current quarter compared to the preceding quarter was primarily due to decreases in OREO related expenses, FDIC insurance expense and smaller decreases in several other expense categories. The decrease in OREO related expenses was primarily due to the sale of two OREO properties (which resulted in net gains on sale during the quarter of $56,000) and lower overall operating expenses on the remaining OREOs.  FDIC insurance expense was reduced due to the Bank’s receipt of an FDIC insurance assessment credit during the quarter.  During the current quarter, the Bank incurred core operating system conversion related expenses of $492,000 compared to $435,000 for the preceding quarter.  The efficiency ratio improved to 52.39% for the current quarter compared to 54.43% for the preceding quarter and 56.94% for the comparable quarter one year ago.

The provision for income taxes for fiscal year 2019 increased $200,000 to $5.90 million from $5.70 million for fiscal year 2018 as higher income before income taxes was partially offset by a lower effective tax rate.  Timberland’s effective tax rate for fiscal year 2019 was 19.7% compared to 25.4% for fiscal year 2018.  The decrease in the effective tax rate for the fiscal year just ended was primarily due to provisions of the Tax Cuts and Jobs Acts legislation, (signed into law on December 22, 2017) which decreased the federal corporate income tax rate to 21.0% from 35.0%.  As a result of this legislation, Timberland used a blended federal income tax rate of 24.5% for its 2018 fiscal year and 21.0% during its 2019 fiscal year.  A higher percentage of tax-exempt income, primarily due to a BOLI death benefit payout, also contributed to the lower effective tax rate for fiscal year 2019.  

The provision for income taxes for the current quarter increased $88,000 to $1.64 million from $1.55 million for the preceding quarter primarily due to higher income before income taxes.  Timberland’s effective tax rate was 20.6% for the quarter ended September 30, 2019 compared to 20.7% for the quarter ended June 30, 2019 and 23.7% for the quarter ended one year ago. 

Balance Sheet Management

Total assets increased $228.84 million, or 22%, during the fiscal year to $1.25 billion at September 30, 2019, from $1.02 billion at September 30, 2018.  The increase in total assets was primarily due to the South Sound Acquisition, which resulted in a $183.10 million increase in total assets (including goodwill and net of cash consideration paid) at the acquisition date (October 1, 2018) and, to a lesser extent, organic growth.  Total assets remained relatively stable (a $178,000 decrease) for the current quarter compared to the preceding quarter as increases in net loans receivable and investment securities were offset by a decrease in cash and cash equivalents.

Net loans receivable increased $161.27 million, or 22%, during the fiscal year to $886.66 million at September 30, 2019, from $725.39 million at September 30, 2018.  The increase was primarily due to loans acquired in the South Sound Acquisition ($121.54 million at the merger date) and, to a lesser extent, organic loan growth.

Net loans receivable increased $12.68 million, or 1%, during the current quarter to $886.66 million at September 30, 2019, from $873.98 million at June 30, 2019.  The increase was primarily due to a $5.66 million increase in multi-family loans, a $4.12 million increase in land loans, a $3.61 million increase in 1-4 family mortgage loans, a $592,000 net increase in construction loans, a $950,000 decrease in the undisbursed construction loans in progress and smaller increases in several other categories.  These increases to net loans receivable were partially offset by a $2.15 million decrease in consumer loans and smaller decreases in several other categories.   

LOAN PORTFOLIO

($ in thousands) September 30, 2019   June 30, 2019   September 30, 2018
  Amount   Percent   Amount   Percent   Amount   Percent
                       
Mortgage loans:                      
  One- to four-family (a) $   132,661       13 %   $   129,050       13 %   $  115,941     14 %
  Multi-family     76,036       8         70,374       7         61,928       8  
  Commercial     419,117       42         418,778       43         345,113       42  
  Construction - custom and                      
owner/builder     128,848       13         130,516     13         119,555       15  
  Construction - speculative
  one-to four-family
    16,445       2         18,165       2         15,433       2  
  Construction - commercial     39,566       4         41,805       4         39,590       5  
  Construction - multi-family     36,263       4         29,400       3         10,740       1  
  Construction - land                       
  development     2,404       --         3,047       1         3,040       --  
  Land     30,770       3         26,653       3         25,546       3  
Total mortgage loans     882,110       89         867,788        89         736,886       90  
                       
Consumer loans:                      
  Home equity and second                      
mortgage     40,190       4         42,204       4         37,341       5  
  Other     4,312       --         4,450       1         3,515       --  
Total consumer loans     44,502       4         46,654       5         40,856       5  
                       
Commercial business loans     64,764       7         65,185       6         43,053       5  
Total loans     991,376     100 %       979,627     100 %       820,795     100 %
Less:                      
Undisbursed portion of                      
construction loans in                      
  process   (92,226 )         (93,176 )         (83,237 )    
Deferred loan origination                      
fees   (2,798 )         (2,838 )         (2,637 )    
Allowance for loan losses   (9,690 )         (9,631 )         (9,530 )    
Total loans receivable, net $   886,662         $   873,982         $ 725,391      

_______________________
(a) Does not include one- to four-family loans held for sale totaling $6,071, $3,338 and $1,785 at September 30, 2019, June 30, 2019 and September 30, 2018, respectively. 

Timberland originated $96.41 million in loans during the quarter ended September 30, 2019, compared to $83.30 million for the preceding quarter and $99.27 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.  Timberland also periodically sells the guaranteed portion of U.S. Small Business Administration (“SBA”) loans.  During the fourth quarter of fiscal 2019 fixed-rate one- to four-family mortgage loans and SBA loans totaling $19.77 million were sold compared to $19.91 million for the preceding quarter and $17.42 million for the comparable quarter one year ago.
                                            
Investment securities and CDs held for investment increased $11.16 million, or 9%, to $132.96 million at September 30, 2019, from $121.81 million at June 30, 2019.  The increase was primarily due to the purchase of additional mortgage-backed investment securities during the quarter.

Timberland’s liquidity continues to remain strong.  Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment and available for sale investment securities, was 22.8% of total liabilities at September 30, 2019, compared to 23.6% at June 30, 2019, and 23.9% one year ago. 

DEPOSIT BREAKDOWN ($ in thousands)
         September 30, 2019      June 30, 2019   September 30, 2018 
    Amount   Percent   Amount   Percent   Amount   Percent
Non-interest-bearing demand   $ 296,472     28 %   $ 287,552     27 %   $ 233,258     26 %
NOW checking     297,055   28       302,390   28       225,290   25  
Savings     164,506   15       163,560   15       151,404   17  
Money market     136,151   13       146,132   14       127,791   15  
Money market – reciprocal     8,388   1       8,708   1       9,955   1  
Certificates of deposit under $250     133,241   12       134,693   13       120,443   14  
Certificates of deposit $250 and over     29,211   3       26,301   2       18,164   2  
Certificates of deposit – brokered     3,203   --       3,199   --       3,201   --  
  Total deposits   $ 1,068,227   100 %   $ 1,072,535   100 %   $ 889,506   100 %

Total deposits increased $178.72 million, or 20%, during the fiscal year to $1.068 billion at September 30, 2019, from $889.51 million at September 30, 2018.  This increase was primarily due to deposits acquired in the South Sound Acquisition ($151.54 million at the acquisition date) and, to a lesser extent, organic deposit growth. 

Total deposits decreased $4.31 million during the current quarter to $1.068 billion at September 30, 2019 from $1.073 billion at June 30, 2019.  The quarterly decrease consisted of a $10.30 million decrease in money market account balances and a $5.34 million decrease in NOW checking account balances.  These decreases were partially offset by an $8.92 million increase in non-interest bearing demand account balances, a $1.46 million increase in certificates of deposit account balances and a $946,000 increase in savings account balances.

Shareholders’ Equity

Total shareholders’ equity increased $4.80 million to $171.07 million at September 30, 2019, from $166.27 million at June 30, 2019.  The increase in shareholders’ equity was primarily due to net income of $6.33 million for the quarter, which was partially offset by dividend payments to shareholders of $1.25 million and common stock repurchases of $428,000. 

During the quarter, Timberland repurchased 17,609 shares of its common stock for $428,000 (an average price of $24.33 per share).  Timberland had 201,453 shares available to be repurchased on its existing stock repurchase plan at September 30, 2019.

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 19.57% and a Tier 1 leverage capital ratio of 12.65% at September 30, 2019.

Asset quality remains strong with a non-performing assets to total assets ratio of 0.40% at September 30, 2019, compared to 0.36% one year ago and 0.43% at June 30, 2019.

No provision for loan losses was made for the quarters ended September 30, 2019, June 30, 2019, and September 30, 2018.  There were net recoveries of $59,000 for the current quarter compared to net charge-offs of $110,000 for the preceding quarter and net charge-offs of $2,000 for the comparable quarter one year ago.  The allowance for loan losses to loans receivable was 1.08% at September 30, 2019 compared to 1.09% at June 30, 2019 and 1.30% at September 30, 2018.  The decrease in the allowance for loan losses as a percentage of loans receivable over the past year was primarily a result of an increase in loans from the South Sound Acquisition.  Included in the recorded value of loans acquired in mergers are net discounts which may reduce the need for an allowance for loan losses on such loans because they are carried at an amount below their outstanding principal balance.  The recorded value of loans acquired in the South Sound Acquisition was $123.62 million and the related fair value discount was $2.08 million, or 1.68% of the loans acquired.  The remaining fair value discount on loans acquired in the South Sound Acquisition was $1.39 million at September 30, 2019.  The allowance for loan losses to loans receivable (excluding the remaining balance of the loans acquired in the South Sound Acquisition) was 1.20% (non-GAAP) at September 30, 2019.

Total delinquent loans (past due 30 days or more) and non-accrual loans increased $404,000, or 11%, to $3.93 million at September 30, 2019, from $3.52 million at June 30, 2019, and increased $1.37 million, or 54%, from $2.56 million one year ago.  Non-accrual loans decreased $317,000, or 9%, to $3.03 million at September 30, 2019, from $3.35 million at June 30, 2019, and increased $1.72 million, or 130%, from $1.32 million one year ago. A portion of the year-over year increase in delinquent loans and non-accrual loans was attributable to loans acquired in the South Sound Acquisition.

NON-ACCRUAL LOANS

($ in thousands) September 30, 2019   June 30, 2019   September 30, 2018
  Amount   Quantity   Amount   Quantity   Amount   Quantity
Mortgage loans:                      
  One- to four-family $     699   3   $     723   4   $   545   5
  Commercial     779   2       836   2       --    --
  Land     204   2       422   4       243   2
Total mortgage loans     1,682   7       1,981   10        788   7
                       
Consumer loans:                      
  Home equity and second                      
mortgage     603   6        606   6       359   5
  Consumer (Other)      23   2       14   1       --   --
Total consumer loans     626   8       620   7       359   5
                       
Commercial business loans      725   10       749   10       170   2
Total loans $     3,033   25   $     3,350   27   $   1,317    14

OREO and other repossessed assets decreased 2% to $1.68 million at September 30, 2019, from $1.72 million at June 30, 2019, and decreased 12% from $1.91 million at September 30, 2018.  At September 30, 2019, the OREO and other repossessed asset portfolio consisted of 11 individual land parcels and one commercial real estate property.  During the quarter ended September 30, 2019, two OREO properties were sold for a net gain of $56,000.

OREO and OTHER REPOSSESSED ASSETS

($ in thousands) September 30, 2019   June 30, 2019      September 30, 2018
  Amount   Quantity   Amount   Quantity   Amount   Quantity
Commercial $     25   1   $     186   2   $    448   2
Land     1,658   11       1,533   11       1,465   10
Total $     1,683   12   $     1,719   13   $    1,913   12

               
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 and CDI.  In addition, tangible assets equal total assets less goodwill and CDI.

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)   September 30, 2019   June 30, 2019   September 30, 2018
             
Shareholders’ equity   $   171,067     $   166,269     $   124,657  
Less goodwill and CDI     (17,162 )     (17,275 )     (5,650 )
Tangible common equity   $   153,905     $   148,994     $   119,007  
             
Total assets   $   1,247,132     $   1,247,310     $   1,018,290  
Less goodwill and CDI     (17,162 )     (17,275 )     (5,650 )
Tangible assets   $   1,229,970     $   1,230,035     $   1,012,640  

Acquisition of South Sound Bank

On October 1, 2018, the Company completed the acquisition of South Sound Bank, a Washington-state chartered bank, headquartered in Olympia, Washington.  The Company acquired 100% of the outstanding common stock of South Sound Bank, and South Sound Bank was merged into Timberland Bank and the Company.  Pursuant to the terms of the merger agreement, South Sound Bank shareholders received 0.746 of a share of the Company’s common stock and $5.68825 in cash per share of South Sound Bank common stock.  The Company issued 904,826 shares of its common stock (valued at $28,267,000 based on the Company’s closing stock price on September 30, 2018 of $31.24 per share) and paid $6,903,000 in cash in the transaction for total consideration paid of $35,170,000. 

The South Sound Acquisition was accounted for as a business combination.  Accordingly, Timberland’s cost to acquire South Sound Bank was allocated to the assets acquired (including identifiable intangible assets) and liabilities assumed of South Sound Bank at their respective estimated fair values as of the acquisition date.  The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill.

The following table summarizes the fair value of consideration transferred, the estimated fair value of the assets acquired and liabilities assumed at October 1, 2018, and the resulting goodwill from the transaction ($ in thousands):

Total merger consideration $   35,170
   
Assets  
Cash and cash equivalents $   21,187
Certificates of deposits (“CDs”) held for investment   2,973
FHLB stock   205
Investment securities   24,724
Loans receivable   121,544
Premises and equipment   3,337
Other real estate owned (“OREO”)   25
Bank owned life insurance (“BOLI”)   2,629
Accrued interest receivable   554
Mortgage servicing rights   281
Other assets   576
Core deposit intangible (“CDI”)   2,483
  Total assets $   180,518
   
Liabilities  
Deposits $   151,538
Other liabilities and accrued expenses   3,291
  Total liabilities $   154,829
   
Fair value of net assets acquired $   25,689
   
Goodwill $   9,481
   

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 24 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. These statements relate to our financial condition, results of operations, plan, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions 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 or implied by our forward-looking statements, including, but not limited to: the expected cost savings, synergies and other financial benefits from our acquisition of South Sound Bank might not be realized within the expected time frames or at all; the integration of the combined company, including personnel changes/retention, might not proceed as planned; and the combined company might not perform as well as expected; 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 which 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 on us, any of 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; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; 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 do not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements included in this report to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements 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.  In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur and we caution readers not to place undue reliance on any forward-looking statements.  These risks could cause our actual results for fiscal 2020 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 consolidated financial condition and results of operations as well as its stock price performance.

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


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
  Three Months Ended
($ in thousands, except per share amounts)   Sept. 30,   June 30,   Sept. 30,
(unaudited)     2019       2019       2018
  Interest and dividend income            
  Loans receivable   $ 12,670     $ 12,459     $ 9,956
  Investment securities     350       339       70
  Dividends from mutual funds, FHLB stock and other investments     40       43       37
  Interest bearing deposits in banks     1,323       1,344       989
    Total interest and dividend income     14,383       14,185       11,052
               
  Interest expense            
  Deposits     1,233       1,248       782
    Total interest expense     1,233       1,248       782
    Net interest income     13,150       12,937       10,270
               
  Provision for loan losses     --       --       --
    Net interest income after provision for loan losses     13,150       12,937       10,270
               
  Non-interest income            
  Service charges on deposits     1,324       1,175       1,134
  ATM and debit card interchange transaction fees     1,140       1,090       922
  Gain on sale of loans, net     559       520       467
  Bank owned life insurance (“BOLI”) net earnings     139       188       140
  Servicing income on loans sold     87       110       127
  Gain on sale of investment securities, net     --       47       --
  Recoveries on investment securities, net       25         14         13
  Other     323       394       378
    Total non-interest income     3,597       3,538       3,181
               
  Non-interest expense            
  Salaries and employee benefits     4,572       4,501       3,877
  Premises and equipment     885       998       871
  (Gain) loss on disposition of premises and equipment, net     (1 )     --       11
  Advertising     153       177       191
  OREO and other repossessed assets, net     (26 )     145       29
  ATM and debit card processing     408       364       314
  Postage and courier     135       131       115
  State and local taxes     232       237       190
  Professional fees     332       267       561
  FDIC insurance (credit)     (55 )     72       52
  Loan administration and foreclosure     137       73       89
  Data processing and telecommunications     1,040       987       511
  Deposit operations     309       391       376
  Amortization of CDI     113       120       --
  Other, net     539       504       472
    Total non-interest expense, net     8,773       8,967       7,659
               
  Income before income taxes     7,974       7,508       5,792
  Provision for income taxes     1,640       1,552       1,370
    Net income   $   6,334     $   5,956     $   4,422
               
  Net income per common share:            
     Basic   $ 0.76     $ 0.71     $ 0.60
    Diluted     0.75       0.70       0.59
               
  Weighted average common shares outstanding:            
  Basic     8,333,812       8,338,637       7,352,013
  Diluted     8,468,266       8,482,360       7,549,778


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
  Year Ended  
($ in thousands, except per share amounts)   Sept. 30,   Sept. 30,  
(unaudited)     2019     2018    
  Interest and dividend income          
  Loans receivable   $ 49,127   $ 38,298    
  Investment securities     1,264     217    
  Dividends from mutual funds, FHLB stock and other investments     162     120    
  Interest bearing deposits in banks     5,172     3,198    
    Total interest and dividend income     55,725     41,833    
             
  Interest expense          
  Deposits     4,565     2,778    
    Total interest expense     4,565     2,778    
    Net interest income     51,160     39,055    
             
  Provision for loan losses     --     --    
    Net interest income after provision for loan losses     51,160     39,055    
             
  Non-interest income          
  Service charges on deposits     4,904     4,581    
  ATM and debit card interchange transaction fees     4,036     3,570    
  Gain on sale of loans, net     1,754     1,893    
  BOLI net earnings     1,641     547    
  Servicing income on loans sold     462     480    
  Gain on sale of investment securities, net     47     --    
  Recoveries on investment securities, net     59     68    
  Other     1,438     1,405    
    Total non-interest income     14,341     12,544    
             
  Non-interest expense          
  Salaries and employee benefits     18,545     15,740    
  Premises and equipment     3,831     3,231    
  Loss (gain) on disposition of premises and equipment, net     7     (102 )  
  Advertising     696     782    
  OREO and other repossessed assets, net     221     140    
  ATM and debit card processing     1,583     1,296    
  Postage and courier     514     456    
  State and local taxes     873     687    
  Professional fees     1,019     1,390    
  FDIC insurance     187     294    
  Loan administration and foreclosure     382     336    
  Data processing and telecommunications     3,707     1,938    
  Deposit operations     1,358     1,192    
  Amortization of CDI     452     --    
  Other, net     2,205     1,797    
    Total non-interest expense, net     35,580     29,177    
             
  Income before income taxes     29,921     22,422    
  Provision for income taxes     5,901     5,701    
    Net income   $ 24,020   $ 16,721    
             
  Net income per common share:          
    Basic   $ 2.89   $ 2.28    
    Diluted     2.84     2.22    
  Weighted average common shares outstanding:          
    Basic     8,318,928     7,334,577    
    Diluted     8,468,226     7,526,344    


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 
($ in thousands, except per share amounts) (unaudited)   Sept. 30,   June 30,   Sept. 30,
      2019       2019       2018  
Assets            
Cash and due from financial institutions   $ 25,179     $   24,169     $   20,238  
Interest-bearing deposits in banks     117,836       146,666       128,626  
  Total cash and cash equivalents     143,015       170,835       148,864  
               
Certificates of deposit (“CDs”) held for investment, at cost     78,346       81,184       63,290  
Investment securities:            
  Held to maturity, at amortized cost     31,102       37,645       12,810  
  Available for sale, at fair value     23,490       2,979       1,154  
FHLB stock     1,437       1,437       1,190  
Other investments, at cost     3,000       3,000       3,000  
Loans held for sale     6,071       3,338       1,785  
             
Loans receivable     896,352       883,613       734,921  
Less: Allowance for loan losses     (9,690 )     (9,631 )     (9,530 )
  Net loans receivable     886,662       873,982       725,391  
               
Premises and equipment, net     22,830       23,090       18,953  
OREO and other repossessed assets, net     1,683       1,719       1,913  
BOLI     21,005       20,866       19,813  
Accrued interest receivable     3,598       3,759       2,877  
Goodwill     15,131       15,131       5,650  
CDI     2,031       2,144       --  
Mortgage servicing rights, net     2,408       2,372       2,028  
Escrow deposit for business combination     --       --       6,900  
Other assets     5,323       3,829       2,672  
  Total assets   $ 1,247,132     $ 1,247,310     $ 1,018,290  
               
Liabilities and shareholders’ equity            
Deposits: Non-interest-bearing demand   $   296,472     $   287,552     $   233,258  
Deposits: Interest-bearing     771,755       784,983       656,248  
  Total deposits     1,068,227       1,072,535       889,506  
               
Other liabilities and accrued expenses     7,838       8,506       4,127  
  Total liabilities     1,076,065       1,081,041       893,633  
             
Shareholders’ equity            
Common stock, $.01 par value; 50,000,000 shares authorized;
  8,329,419 shares issued and outstanding – September 30, 2019
  8,340,928 shares issued and outstanding – June 30, 2019
   7,401,177 shares issued and outstanding – September 30, 2018   
     
 

43,030
       


43,398
       


14,394
 
Unearned shares issued to Employee Stock Ownership Plan (“ESOP”)     --       --       (133 )
Retained earnings     127,987       122,904       110,525  
Accumulated other comprehensive gain (loss)     50       (33 )     (129 )
  Total shareholders’ equity     171,067       166,269       124,657  
  Total liabilities and shareholders’ equity   $ 1,247,132     $ 1,247,310     $ 1,018,290  


KEY FINANCIAL RATIOS AND DATA  Three Months Ended
($ in thousands, except per share amounts) (unaudited)   Sept. 30,   June 30,   Sept. 30,
      2019       2019       2018  
PERFORMANCE RATIOS:            
Return on average assets (a)     2.04 %     1.93 %     1.76 %
Return on average equity (a)     15.07 %     14.56 %     14.47 %
Net interest margin (a)     4.54 %     4.49 %     4.35 %
Efficiency ratio     52.39 %     54.43 %     56.94 %
             
    Year Ended
      Sept. 30,       Sept. 30,
        2019           2018  
PERFORMANCE RATIOS:            
Return on average assets (a)
      1.96 %         1.70 %
Return on average equity (a)       14.91 %         14.27 %
Net interest margin (a)       4.50 %         4.23 %
Efficiency ratio       54.32 %         56.55 %
             
    Sept. 30,   June 30,   Sept. 30,
      2019       2019       2018  
ASSET QUALITY RATIOS AND DATA:            
Non-accrual loans   $ 3,033     $ 3,350     $ 1,317  
Loans past due 90 days and still accruing     --       --       --  
Non-performing investment securities     294       303       406  
OREO and other repossessed assets     1,683       1,719       1,913  
Total non-performing assets (b)   $ 5,010     $ 5,372     $ 3,636  
             
             
Non-performing assets to total assets (b)     0.40 %     0.43 %     0.36 %
Net charge-offs (recoveries) during quarter   $   (59 )   $   110     $ 2  
Allowance for loan losses to non-accrual loans     319 %     287 %     724 %
Allowance for loan losses to loans receivable (c)     1.08 %     1.09 %     1.30 %
Troubled debt restructured loans on accrual status (d)   $ 2,903     $ 2,916     $ 2,955  
             
CAPITAL RATIOS:            
Tier 1 leverage capital     12.65 %     12.32 %     11.98 %
Tier 1 risk-based capital     18.40 %     17.74 %     17.13 %
Common equity Tier 1 risk-based capital     18.40 %     17.74 %     17.13 %
Total risk-based capital     19.57 %     18.91 %     18.39 %
Tangible common equity to tangible assets (non-GAAP)     12.51 %     12.11 %     11.75 %
             
BOOK VALUES:            
Book value per common share   $   20.54      $   19.93      $ 16.84  
Tangible book value per common share (e)     18.48       17.86       16.08  
             

________________________________________________

(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) Loans receivable does not include loans held for sale and is before the allowance for loan losses.
(d) Does not include troubled debt restructured loans totaling $366, $292 and $323 reported as non-accrual loans at September 30, 2019, June 30, 2019 and September 30, 2018, 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
  September 30, 2019   June 30, 2019   September 30, 2018
  Amount   Rate   Amount   Rate   Amount     Rate
                       
Assets                      
Loans receivable and loans held for sale $   891,109      5.69 %   $   886,460      5.62 %   $   731,480     5.44 %
Investment securities and FHLB stock (1)     47,660      3.27         47,677      3.21         16,504      2.62  
Interest-bearing deposits in banks and CDs     219,567      2.39         219,070      2.45         195,940      2.00  
  Total interest-earning assets     1,158,336      4.97         1,153,207      4.92         943,924      4.68  
Other assets   83,308            82,113              63,746      
  Total assets $   1,241,644         $   1,235,320         $   1,007,670      
                       
Liabilities and Shareholders’ Equity                      
NOW checking accounts $     295,612      0.30 %   $     300,330     0.30 %   $     216,498      0.21 %
Money market accounts     147,885      0.70         154,238     0.82         136,026      0.59  
Savings accounts   162,654      0.06       163,122     0.07       150,060      0.06  
Certificates of deposit accounts   164,530      1.75       162,237     1.68       141,264      1.24  
  Total interest-bearing deposits   770,681      0.63       779,927     0.64         643,848      0.48  
                         
  Total interest-bearing liabilities   770,681      0.63       779,927     0.64       643,848      0.48  
                       
Non-interest-bearing demand deposits   296,741           288,308           235,498      
Other liabilities   6,050           3,405           6,093      
Shareholders’ equity   168,172           163,680           122,231      
  Total liabilities and shareholders’ equity $   1,241,644          $   1,235,320          $   1,007,670      
                       
  Interest rate spread     4.34 %       4.28 %       4.20 %
  Net interest margin (2)     4.54 %       4.49 %       4.35 %
  Average interest-earning assets to                      
  average interest-bearing liabilities   150.30 %         147.86 %         146.61 %    

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

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

  For the Year Ended 
  September 30, 2019     September 30, 2018 
  Amount   Rate     Amount   Rate
                 
Assets                
Loans receivable and loans held for sale $   878,984       5.59 %     $    721,472      5.31 %
Investment securities and FHLB Stock (1)     43,394       3.28           13,885       2.43  
Interest-bearing deposits in banks and CD’s     214,481       2.41           188,080       1.70  
  Total interest-earning assets     1,136,859       4.90           923,437       4.53  
Other assets     86,494               60,728      
  Total assets $   1,223,353           $   984,165      
                 
Liabilities and Shareholders’ Equity                
NOW checking accounts $   291,348       0.29 %     $   215,249     0.21 %
Money market accounts     154,375       0.72           139,138       0.52  
Savings accounts   162,266       0.07         145,670       0.06  
Certificates of deposit accounts   159,397       1.57         140,464       1.08  
  Total interest-bearing deposits     767,386       0.59            640,521       0.43  
                 
Total interest-bearing liabilities   767,386       0.59         640,521       0.43  
                 
Non-interest-bearing demand deposits   290,653             221,953      
Other liabilities   4,229             4,549      
Shareholders’ equity   161,085             117,142      
  Total liabilities and shareholders’ equity $   1,223,353           $   984,165      
                 
  Interest rate spread     4.31 %         4.10 %
  Net interest margin (2)     4.50 %         4.23 %
  Average interest-earning assets to                
  average interest-bearing liabilities   148.15 %           144.17 %    

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

We Are Diffrent
Is your business listed correctly on America’s largest city directory network of 1,000 portals?