UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to _____.
Commission file number 0-23333
TIMBERLAND BANCORP, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1863696
(State of Incorporation) (IRS Employer Identification No.)
624 Simpson Avenue, Hoquiam, Washington
(Address of principal executive office)
98550
(Zip Code)
(360) 533-4747
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90
days. Yes [X] No [ ]
Check whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act):
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AT APRIL 25, 2003
----- ------------------------------------
Common stock, $.01 par value 3,775,777
1
INDEX
Page
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Shareholders'
Equity 5
Condensed Consolidated Statements of Cash Flows 6-7
Condensed Consolidated Statements of Comprehensive
Income 8
Notes to Condensed Consolidated Financial
Statements (unaudited) 9-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-21
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 22
Item 4. Controls and Procedures 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
CERTIFICATIONS 25-27
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2003 and September 30, 2002
Dollars in Thousands
(unaudited)
March 31, September 30,
2003 2002
--------------------------
Assets
Cash and due from financial institutions $ 11,039 $ 10,580
Interest bearing deposits in banks 30,075 25,493
Securities held to maturity (fair value $469) 470 - -
Securities available for sale 52,207 41,582
Federal Home Loan Bank stock 5,313 5,139
Loans receivable 310,109 322,997
Loans held for sale 2,466 3,161
Less: Allowance for loan losses (3,868) (3,630)
--------------------------
Total Loans 308,707 322,528
--------------------------
Accrued interest receivable 1,533 1,604
Premises and equipment 13,019 11,664
Real estate owned 900 680
Bank owned life insurance ("BOLI") 10,305 10,036
Other assets 2,257 1,748
--------------------------
Total Assets $ 435,825 $ 431,054
--------------------------
Liabilities and Shareholders' Equity
Liabilities
Deposits $ 296,579 $ 292,316
Federal Home Loan Bank advances 61,684 61,759
Other liabilities and accrued expenses 1,759 2,583
--------------------------
Total Liabilities 360,022 356,658
--------------------------
Shareholders' Equity
Common Stock, $.01 par value; 50,000,000
shares authorized; March 31, 2003 - 4,253,217
issued, 3,768,777 outstanding
September 30, 2002 - 4,340,976 issued,
3,856,536 outstanding (unallocated ESOP
shares and unvested MRDP shares are not
considered outstanding) 42 43
Additional paid in capital 34,148 35,857
Unearned shares - Employee Stock Ownership Plan (5,155) (5,419)
Unearned shares - Management Recognition &
Development Plan (1,504) (1,826)
Retained earnings 47,824 45,210
Accumulated other comprehensive income 448 531
--------------------------
Total Shareholders' Equity 75,803 74,396
--------------------------
Total Liabilities and Shareholders' Equity $ 435,825 $ 431,054
--------------------------
See notes to unaudited condensed consolidated financial statements
3
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended March 31, 2003 and 2002
Dollars in Thousands, Except Per Share Amounts
(unaudited)
Three Months Ended March 31, Six Months Ended March 31,
2003 2002 2003 2002
-------------------- ---------------------
Interest and Dividend
Income
Loans receivable $ 6,379 $ 6,898 $ 12,962 $ 14,246
Investments and mortgage-
backed securities 244 404 487 815
Dividends from
investments 287 173 546 333
Interest bearing deposits
in banks 83 41 205 63
-------------------- ---------------------
Total interest and
dividend income 6,993 7,516 14,200 15,457
Interest Expense
Deposits 1,412 1,872 3,023 3,974
Federal Home Loan Bank
advances 831 821 1,681 1,681
-------------------- ---------------------
Total interest expense 2,243 2,693 4,704 5,655
-------------------- ---------------------
Net interest income 4,750 4,823 9,496 9,802
Provision for Loan Losses 107 200 280 592
-------------------- ---------------------
Net interest income
after provision for
loan losses 4,643 4,623 9,216 9,210
Non-Interest Income
Service charges on
deposits 461 380 992 783
Gain on sale of loans, net 394 220 823 500
Loss on sale of securities - - (19) - - (16)
BOLI net earnings 134 - - 269 - -
Escrow fees 61 72 135 145
Servicing income on
loans sold 83 114 195 251
ATM transaction fees 189 137 375 270
Other 177 142 356 275
-------------------- ---------------------
Total non-interest
income 1,499 1,046 3,145 2,208
Non-interest Expense
Salaries and employee
benefits 2,031 1,724 4,041 3,432
Premises and equipment 370 368 733 687
Advertising 176 191 380 432
Loss from real estate
operations & write-downs 42 27 73 60
ATM expenses 152 164 301 271
Other 763 672 1,496 1,370
-------------------- ---------------------
Total non-interest
expense 3,534 3,146 7,024 6,252
Income before federal
income taxes 2,608 2,523 5,337 5,166
Federal Income Taxes 818 894 1,678 1,830
-------------------- ---------------------
Net Income $ 1,790 $ 1,629 $ 3,659 $ 3,336
Earnings Per Common Share:
Basic $ 0.47 $ 0.42 $ 0.95 $ 0.85
Diluted $ 0.45 $ 0.41 $ 0.91 $ 0.83
Weighted average shares
outstanding:
Basic 3,820,273 3,881,782 3,838,604 3,934,081
Diluted 4,009,862 4,014,645 4,010,795 4,038,635
See notes to unaudited condensed consolidated financial statements
4
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the year ended September 30, 2002 and the six months ended March 31, 2003
Dollars in Thousands Except Common Stock Shares
(unaudited)
Unearned
Shares Unearned Accumulated
Issued to Shares Other
Employee Issued to Compre-
Common Common Additional Stock Management hensive
Stock Shares Stock Paid-In Ownership Recognition Retained Income
Outstanding Amount Capital Trust Plan Earnings (Loss) Total
----------- ------ ------- ----- ---------- -------- ------ ------
<c> <c> <c> <c> <c> <c> <c> <c> <c>
Balance, Sept. 30, 2001 4,010,303 $46 $39,574 ($5,948) ($2,471) $40,332 $ 276 $71,809
Net Income - - - - - - - - - - 6,891 - - 6,891
Repurchase of
Common Stock (274,272) (3) (4,411) - - - - - - - - (4,414)
Exercise of Stock Options 44,253 - - 588 - - - - - - - - 588
Cash Dividends
($.45 per share) - - - - - - - - - - (2,013) - - (2,013)
Earned ESOP Shares 35,267 - - 27 529 - - - - - - 556
Earned MRDP Shares 40,985 - - 79 - - 645 - - - - 724
Change in fair value of
securities available
for sale, net of tax - - - - - - - - - - - - 255 255
--------------------------------------------------------------------------------
Balance, Sept. 30, 2002 3,856,536 43 35,857 (5,419) (1,826) 45,210 531 74,396
--------------------------------------------------------------------------------
Net Income - - - - - - - - - - 3,659 - - 3,659
Repurchase of
Common Stock (116,259) (1) (2,203) - - - - - - - - (2,204)
Exercise of Stock Options 28,500 - - 344 - - - - - - - - 344
Cash Dividends
($.24 per share) - - - - - - - - - - (1,045) - - (1,045)
Earned ESOP Shares - - - - 120 264 - - - - - - 384
Earned MRDP Shares - - - - 30 - - 322 - - - - 352
Change in fair value of
securities available for
sale, net of tax - - - - - - - - - - - - (83) (83)
--------------------------------------------------------------------------------
Balance, Mar. 31, 2003 3,768,777 $42 $34,148 ($5,155) ($1,504) $47,824 $448 $75,803
--------------------------------------------------------------------------------
See notes to unaudited condensed consolidated financial statements
5
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended March 31, 2003 and 2002
Dollars in Thousands
(unaudited)
Six Months Ended March 31,
Cash Flow from Operating Activities 2003 2002
--------------------
Net income $ 3,659 $ 3,336
--------------------
Noncash revenues, expenses, gains and losses
included in income:
Depreciation 299 313
Federal Home Loan Bank stock dividends (174) (158)
Earned ESOP Shares 384 265
Earned MRDP Shares 352 359
Loss on sale of securities available for sale - - 16
Loss (Gain) on sale of real estate owned, net 10 (13)
BOLI cash surrender value increase (269) - -
Gain on sale of loans (823) (500)
Provision for loan and real estate owned losses 307 643
Loans originated for sale (61,608) (38,921)
Proceeds from sale of loans 63,126 40,444
Net decrease in other assets (395) (123)
Decrease in other liabilities and accrued
expenses, net (823) (1,336)
--------------------
Net Cash Provided by Operating Activities 4,045 4,325
Cash Flow from Investing Activities
Net increase in interest-bearing deposits in banks (4,582) (23,422)
Purchase of securities (15,500) - -
Proceeds from maturities of securities available
for sale 4,278 2,527
Proceeds from sale of securities available for sale - - 8,299
Decrease (increase) in loans receivable, net 12,846 (616)
Additions to premises and equipment (1,654) (850)
Additions to real estate owned (525) (637)
Proceeds from sale of real estate owned 268 622
--------------------
Net Cash Used in Investing Activities (4,869) (14,077)
Cash Flow from Financing Activities
Increase in deposits, net 4,263 20,462
Decrease in Federal Home Loan Bank advances, net (75) (7,146)
Proceeds from exercise of stock options 344 201
Repurchase of common stock (2,204) (2,413)
Payment of dividends (1,045) (993)
--------------------
Net Cash Provided by Financing Activities 1,283 10,111
Net Change in Cash 459 359
Cash and Due from Financial Institutions
Beginning of period 10,580 10,017
--------------------
End of period $11,039 $10,376
--------------------
See notes to unaudited condensed consolidated financial statements (continued)
6
Six Months Ended March 31,
2003 2002
--------------------
Supplemental Disclosure of Cash Flow Information
Income taxes paid $ 1,675 $ 1,670
Interest paid 4,716 5,827
Supplemental Disclosure of Noncash Investing
Activities
Market value adjustment of securities
held for sale, net of tax (83) (290)
Investment securities acquired in loan
securitization - - 12,226
Loans transferred to real estate owned 480 291
See notes to unaudited condensed consolidated financial statements
7
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three and six months ended March 31, 2003 and 2002
Dollars in Thousands
(unaudited)
Three Months Ended March 31, Six Months Ended March 31,
2003 2002 2003 2002
------------------ -------------------
Comprehensive Income:
Net Income $1,790 $1,629 $3,659 $3,336
Change in fair value
of securities
available for sale,
net of tax (79) 23 (83) (290)
------------------ -------------------
Total Comprehensive
Income $1,711 $1,652 $3,576 $3,046
See notes to unaudited condensed consolidated financial statements
8
Timberland Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation: The accompanying unaudited consolidated financial
statements for Timberland Bancorp, Inc. ("Company") were prepared in
accordance with accounting principles generally accepted in the United States
of America for interim financial information and with instructions for Form
10-Q and therefore, do not include all disclosures necessary for a complete
presentation of financial condition, results of operations, and cash flows in
conformity with accounting principles generally accepted in the United States
of America. However, all adjustments, which are, in the opinion of
management, necessary for a fair presentation of the interim financial
statements have been included. All such adjustments are of a normal recurring
nature. The results of operations for the six months ended March 31, 2003 are
not necessarily indicative of the results that may be expected for the entire
fiscal year.
(b) Principles of Consolidation: The interim consolidated financial
statements include the accounts of Timberland Bancorp, Inc. and its
wholly-owned subsidiary, Timberland Bank ("Bank"), and the Bank's wholly-
owned subsidiary, Timberland Service Corp. All significant intercompany
balances have been eliminated in consolidation.
(c) The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
9
(2) EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income applicable to
common stock by the weighted average number of common shares outstanding
during the period, without considering any dilutive items. Diluted earnings
per share is computed by dividing net income applicable to common stock by the
weighted average number of common shares and common stock equivalents for
items that are dilutive, net of shares assumed to be repurchased using the
treasury stock method at the average share price for the Company's common
stock during the period. Common stock equivalents arise from assumed
conversion of outstanding stock options and awarded but not released
Management Recognition and Development Plan ("MRDP") shares. In accordance
with Statement of Position ("SOP") 93-6, Employers' Accounting for Employee
Stock Ownership Plans (ESOP), issued by the American Institute of Certified
Public Accountants, shares owned by the Bank's Employee Stock Ownership Plan
that have not been allocated are not considered to be outstanding for the
purpose of computing earnings per share. At March 31, 2003 and 2002, there
were 361,483 and 396,750 ESOP shares, respectively, that had not been
allocated.
Three Months Ended March 31, Six Month Ended March 31,
2003 2002 2003 2002
--------------------------- ------------------------
Basic EPS computation
Numerator - Net
Income $1,790,000 $1,629,000 $3,659,000 $3,336,000
Denominator -
Weighted average
common shares
outstanding 3,820,273 3,881,782 3,838,604 3,934,081
Basic EPS $ 0.47 $ 0.42 $ 0.95 $ 0.85
Diluted EPS
computation
Numerator - Net
Income $1,790,000 $1,629,000 $3,659,000 $3,336,000
Denominator -
Weighted average
common shares
outstanding 3,820,273 3,881,782 3,838,604 3,934,081
Effect of dilutive
stock options 159,133 106,390 148,102 91,103
Effect of dilutive MRDP 30,456 18,997 24,089 10,737
---------- ---------- ---------- ----------
Weighted average common
shares and common
stock equivalents 4,009,862 4,007,169 4,010,795 4,035,921
Diluted EPS $ 0.45 $ 0.41 $ 0.91 $ 0.83
(3) STOCK BASED COMPENSATION
At March 31, 2003 the Company has an employee and director stock option plan.
The Company accounts for options granted under that plan under the recognition
and measurement principles of APB No. 25, Accounting for Stock Issued to
Employees and related interpretations. Accordingly, no stock-based
compensation cost is reflected in net income as all the exercise price for all
options granted under the plan were equal to the market value of the Company's
stock on the date of grant. The following table illustrates the effect on net
income and earnings per share for the three and the six months ended March 31,
2003 and 2002 if the Company had applied the fair value recognition provisions
of SFAS No. 123, Accounting for Stock-Based Compensation for the effects of
all options granted:
10
Three Months Ended March 31, Six Months Ended March 31,
2003 2002 2003 2002
--------------------------- ------------------------
Net income as reported $1,790,000 $1,629,000 $3,659,000 $3,336,000
Less total stock-based
compensation expense
determined under fair
value method for all
qualifying awards (52,000) (63,000) (100,000) (125,000)
Pro forma net income 1,738,000 1,566,000 3,559,000 3,211,000
Earnings per share:
Basic:
As reported $ 0.47 $ 0.42 $ 0.95 $ 0.85
Pro forma 0.45 0.40 0.93 0.82
Diluted:
As reported $ 0.45 $ 0.41 $ 0.91 $ 0.83
Pro forma 0.44 0.40 0.89 0.80
(4) DIVIDEND
On April 11, 2003, the Company announced a quarterly cash dividend of $0.12
per common share. The dividend is to be paid May 16, 2003, to shareholders of
record as of the close of business May 2, 2003.
11
Item 2. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operation
- --------------------
The following analysis discusses the material changes in the financial
condition and results of operations of the Company at and for the three and
six months ended March 31, 2003. This report contains certain "forward-
looking statements." The Company desires to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995 and
is including this statement for the express purpose of availing itself of the
protection of such safe harbor with forward looking statements. These forward
looking statements may describe future plans or strategies and include the
Company's expectations of future financial results. The words "believe,"
"expect," "anticipate," "estimate," "project," and similar expressions
identify forward-looking statements. The Company's ability to predict results
or the effect of future plans or strategies is inherently uncertain. Factors
which could affect actual results include competition in the financial
services market for both deposits and loans, interest rate trends, the
economic climate in the Company's market areas and the country as a whole,
loan delinquency rates, and changes in federal and state regulation. These
factors should be considered in evaluating the forward-looking statements, and
undue reliance should not be placed on such statements.
Comparison of Financial Condition at March 31, 2003 and September 30, 2002
Total Assets: Total assets increased to $435.8 million at March 31, 2003 from
$431.1 million at September 30, 2002. This change is reflected primarily in a
$15.7 million increase in investments and interest bearing deposits in banks,
which is partially offset by a $13.8 million decrease in total loans.
Cash and Due from Financial Institutions: Cash and due from financial
institutions increased to $11.0 million at March 31, 2003 from $10.6 million
at September 30, 2002.
Interest Bearing Deposits in Banks: Interest bearing deposits in banks
increased $4.6 million to $30.1 million at March 31, 2003 from $25.5 million
at September 30, 2002. This increase is primarily due to investing proceeds
from loan sales, loan prepayments, and increased customer deposits.
Securities and FHLB Stock: Securities and FHLB stock increased 24.1% to $58.0
million at March 31, 2003 from $46.7 million at September 30, 2002. This
increase is primarily due to investing proceeds from loan sales, loan
prepayments, and increased customer deposits.
Loans Receivable, and Loans Held-for-sale, net of allowance for loan losses:
Net loans receivable, including loans held-for-sale, decreased $13.8 million
to $308.7 million at March 31, 2003 from $322.5 at September 30, 2002,
primarily reflected in a $14.4 million decrease in the Bank's one-to-four
family mortgage loan portfolio. The portfolio decrease was primarily due to
loan prepayments, as a result of the historically low home mortgage rates, and
the sale of a majority of the one-to-four family mortgages generated during
the period. During the six months ended March 31, 2003, the Bank originated
loans of $109.3 million and sold $62.3 million in fixed rate one-to-four
family mortgage loans. Management elected to sell a majority of the fixed
rate residential loans originated instead of adding them to the Bank's
portfolio due to the low rate environment. In addition to the reduction in
the one-to-four family mortgage portfolio, the Bank's commercial real estate
portfolio decreased by $2.3 million primarily due to the prepayment of several
large participation loans.
Real Estate Owned ("REO"): Real estate owned increased to $900,000 for March
31, 2003 from $680,000 at September 30, 2002. The increase was due to the
addition of four 1-4 family residences, two parcels of land and one commercial
piece of property.
12
Premises and Equipment: Premises and equipment increased by $1.4 million to
$13.0 million at March 31, 2003 from $11.7 million at September 30, 2002.
This increase is primarily due to costs associated with the construction of
the Silverdale branch (which opened January 13, 2003), remodeling of a
commercial building in Hoquiam, which has become the current location of the
Bank's loan servicing and escrow departments, and the remodeling of a building
in downtown Olympia that will become the Bank's 15th full-service office. The
downtown Olympia branch is scheduled to open in August 2003 and will serve as
the headquarters for the Bank's Commercial Lending and Business Banking
Divisions.
Deposits: Deposits increased to $296.6 million at March 31, 2003 from $292.3
million at September 30, 2002, primarily due to a $9.6 million increase in the
Bank's savings accounts, a $5.4 million increase in N.O.W. checking accounts
and a $3.8 million increase in non-interest bearing accounts. These increases
are partially offset by a $9.9 million decrease in certificate of deposit
accounts and a $4.7 million decrease in money market accounts.
Federal Home Loan Bank ("FHLB") Advances: FHLB advances decreased to $61.7
million at March 31, 2003 from $61.8 million at September 30, 2002.
Shareholders' Equity: Total shareholders' equity increased by $1.4 million to
$75.8 million at March 31, 2003 from $74.4 million at September 30, 2002. The
components of shareholders' equity were primarily affected by net income of
$3.7 million, the repurchase of 116,259 shares of the Company's stock for $2.2
million and the payment of $1.0 million in dividends to shareholders. Also
affecting shareholders' equity was a $344,000 increase to additional paid in
capital from the exercise of stock options, and decreases of $322,000 and
$264,000 in the equity components related to unearned shares issued to the
Management Recognition and Development Plan and Employee Stock Ownership
Plans, respectively.
On February 11, 2003, the Company announced the completion of its tenth stock
repurchase program. The Company repurchased 193,659 shares at an average
price of $17.76 per share. The Company repurchased 76,259 of these shares
during the quarter ended March 31, 2003.
On February 14, 2003 the Company announced a plan to repurchase 380,028 shares
of the Company's stock. This marked the Company's eleventh stock repurchase
plan. As of March 31, 2003, the Company had purchased 40,000 of these shares
and cumulatively had repurchased 2,638,563 (39.9%) of the 6,612,500 shares
that were issued when the Company went public in January 1998.
Non-performing Assets: Total non-performing assets decreased to $4.3 million
for March 31, 2003 from $4.4 million at September 30, 2002. The Company's
non-performing asset ratio to total asset ratio ("NPA") decreased to 0.99% at
March 31, 2003 from 1.03% at September 30, 2002. Nonaccrual loans decreased
to $3.4 million at March 31, 2003 from $3.7 million at September 30, 2002,
primarily reflected in decreases of $154,000 and $151,000 in the one-to-four
family mortgage loan and commercial loan categories, respectively. This
decrease in non-accrual loans was partially offset by a $220,000 increase in
the real estate owned category.
13
Non Performing Assets
- ---------------------
The following table sets forth information with respect to the Company's
nonperforming assets at the dates indicated.
March 31, September 30,
2003 2002
----------------------------
(Dollars in thousands)
Loans accounted for on a nonaccrual basis:
Mortgage loans:
One-to-four family $ 984 $ 1,138
Commercial 537 688
Construction and land development 1,624 1,571
Land 205 251
Consumer loans 50 49
Commercial Business Loans - - 44
-------- --------
Total 3,400 3,741
Accruing loans which are contractually
past due 90 days or more: -- --
Total of nonaccrual and
90 days past due loans 3,400 3,741
Real estate owned and other
repossessed assets 900 680
-------- --------
Total nonperforming assets 4,300 4,421
Restructured loans - - - -
Nonaccrual and 90 days or more past
due loans as a percentage of loans
receivable, (including loans held for sale)(1) 1.09% 1.15%
Nonaccrual and 90 days or more past
due loans as a percentage of total assets 0.78% 0.87%
Nonperforming assets as a percentage
of total assets 0.99% 1.03%
Loans receivable, (including loans
held for sale) (1) $312,575 $326,158
======== ========
Total assets $435,825 $431,054
======== ========
- ------------
(1) Loans receivable is before the allowance for loan losses
14
Loans Receivable
- ----------------
The following table sets forth the composition of the Company's loan portfolio
by type of loan.
At March 31, At September 30,
2003 2002
Amount Percent Amount Percent
--------------------- -------------------
(Dollars In thousands)
Mortgage Loans:
One-to-four family (1)(2) $ 98,711 29.08% $113,144 31.28%
Multi family 23,626 6.96 24,135 6.67
Commercial 95,380 28.10 97,644 27.00
Construction and
land development 74,740 22.01 80,144 22.16
Land 15,470 4.56 15,453 4.27
-------- ------ -------- ------
Total mortgage loans 307,927 90.71 330,520 91.38
Consumer Loans:
Home equity and second
mortgage 15,120 4.45 13,718 3.79
Other 8,039 2.37 8,097 2.24
-------- ------ -------- ------
23,159 6.82 21,815 6.03
Commercial business loans 8,387 2.47 9,365 2.59
-------- ------ -------- ------
Total loans 339,473 100.00% 361,700 100.00%
====== ======
Less:
Undisbursed portion of
loans in process (24,035) (32,324)
Unearned income (2,863) (3,218)
Allowance for loan losses (3,868) (3,630)
Market value adjustment
of loans held-for-sale - - - -
-------- --------
Total loans receivable, net $308,707 $322,528
======== ========
- -------------
(1) Includes loans held-for-sale.
(2) Includes real estate contracts totaling $1.1 million at March 31, 2003
Activity in the Allowance for Loan Losses
- -----------------------------------------
Activity in the allowance for loan losses in the six months ended March 31,
2003 and 2002 is as follows:
2003 2002
---------------------
Balance beginning of period $3,630 $3,050
Provision for loan losses 280 592
Loans charged off (103) (200)
Recoveries on loans previously charged off 61 8
Net charge offs (42) (192)
Balance at end of period $3,868 $3,450
15
Deposit Breakdown
- -----------------
The following table sets forth the balances of deposits in the various types
of accounts offered by the Bank at the dates indicated.
March 31, 2003 September 30, 2002
-------------- ------------------
(in thousands) (in thousands)
Non-interest bearing $ 27,393 $ 23,585
N.O.W. checking 47,659 42,222
Savings 49,900 40,328
Money market accounts 43,218 47,888
Certificates of deposit under $100,000 105,603 102,052
Certificates of deposit $100,000 and over 22,806 36,241
-------- --------
Total Deposits $296,579 $292,316
======== ========
Comparison of Operating Results for the Three and Six Months Ended March 31,
2003 and 2002
Net Income: Net income for the quarter ended March 31, 2003 was $1.79
million, or $0.45 per diluted share ($0.47 per basic share) compared to $1.63
million, or $0.41 per diluted share ($0.42 per basic share) for the quarter
ended March 31, 2002. The primary factor affecting the improved performance
in the current quarter was increased non-interest income.
Net income for the six months ended March 31, 2003 was $3.66 million, or $0.91
per diluted share ($0.95 per basic share) compared to $3.34 million, or $0.83
per diluted share ($0.85 per basic share) for the six months ended March 31,
2002.
The Company also announced in its April 24, 2003 earnings release that
expenses associated with planned technology improvements will reduce earnings
over the next two quarters by a combined total of $0.09 per share. Additional
details concerning the technology improvements are discussed below.
Net Interest Income: Net interest income decreased $73,000 to $4.75 million
for the quarter ended March 31, 2003 from $4.82 million for the quarter ended
March 31, 2002. Total interest income decreased $523,000 to $6.99 million
for the quarter ended March 31, 2003 from $7.52 million for the quarter ended
March 31, 2002, primarily due to a reduction in average yields on earning
assets. The yield on earning assets was 6.99% for the quarter ended March 31,
2003 compared to 8.12% for the quarter ended March 31, 2002. In addition to
overall lower market rates, the yield was also impacted by a shift in the
makeup of total earning assets. In 2002, loans, the Company's highest
yielding class of assets, comprised 86.3% of average earning assets. In 2003,
loans comprised 78.8% of average earning assets. This change was largely
influenced by the decision to sell many of the loans originated in the current
quarter. That had the effect of increasing the gain on loans sold, at the
expense of interest income. The impact of lower average yields was, however,
partially offset by increased levels of average earning assets. Total
interest expense decreased $450,000 to $2.24 million for the quarter ended
March 31, 2003 from $2.69 million for the quarter ended March 31, 2002. The
average cost of funds for
16
each of the Bank's deposit account types for the current quarter was lower
than a year ago. The overall cost of funds decreased to 2.73% for the quarter
ended March 31, 2003 from 3.67% for the quarter ended March 31, 2002. As a
result of these changes, the net interest margin decreased to 4.75% for the
quarter ended March 31, 2003 from 5.21% for the quarter ended March 31, 2002.
Net interest income decreased $306,000 to $9.50 million for the six months
ended March 31, 2003 from $9.80 million for the six months ended March 31,
2002. Total interest income decreased $1.26 million to $14.20 million for
the six months ended March 31, 2003 from $15.46 million for the six months
ended March 31, 2002, primarily due to a reduction in average yields on
earning assets. The yield on earning assets was 7.05% for the six months
ended March 31, 2003 compared to 8.37% for the six months ended March 31,
2002. The impact of lower average yields was, however, partially offset by
increased levels of average earning assets. Total interest expense decreased
$951,000 to $4.70 million for the six months ended March 31, 2003 from $5.66
million for the six months ended March 31, 2002. The average cost of funds for
each of the Bank's deposit account types for the current period was lower than
a year ago. The overall cost of funds decreased to 2.84% for the six months
ended March 31, 2003 from 3.87% for the six months ended March 31, 2002. As a
result of these changes, the net interest margin decreased to 4.71% for the
six months ended March 31, 2003 from 5.31% for the six months ended March 31,
2002.
Provision for Loan Losses: The provision for loan losses decreased to
$107,000 for the three months ended March 31, 2003 from $200,000 for the three
months ended March 31, 2002. The provision for loan losses decreased to
$280,000 for the six months ended March 31, 2003 from $592,000 for the six
months ended March 31, 2002. The Bank has established a systematic
methodology for the determination of provisions for loan losses. On a
quarterly basis the Bank performs an analysis taking into consideration
historic loss experience for various loan segments, changes in economic
conditions, delinquency rates, and other factors to determine the level of
allowance for loan losses needed.
Based on the systematic methodology, management deemed the allowance for loan
losses of $3.9 million at March 31, 2003 (1.25% of loans receivable and 113.8%
of non-performing loans) adequate to provide for estimated losses based on an
evaluation of known and inherent risks in the loan portfolio at that date.
The allowance for loan losses was $3.450 million (1.12% of loans receivable
and 84.9% of non-performing loans) at March 31, 2002. The increase in the
level of the allowance for loan losses primarily resulted from a slight change
in the mix of the loan portfolio. Net charge-offs for the current quarter
were $16,000 compared to $102,000 in the same quarter of 2002. For the six
months ended March 31, 2003 and 2002, net charge-offs were $42,000 and
$192,000, respectively.
Noninterest Income: Total non-interest income increased $453,000 to $1.50
million for the quarter ended March 31, 2003 from $1.05 million for the
quarter ended March 31, 2002, primarily due to a $174,000 increase in gain on
sale of loans, the recognition of $134,000 in BOLI income, and an $81,000
increase in service charges on deposits. The increased loan sale gains are
primarily a result of the Bank selling $27.5 million in fixed-rate one-to-four
family loans during the current quarter. During the same period in 2002, the
Bank sold $23.9 million in fixed-rate one-to-four family loans.
The increased deposit-related service charge income is primarily a result of
the Bank's checking account acquisition program. Since the program began in
December 2000, the Bank has increased the number of its consumer checking
accounts by 96% and increased its consumer checking account balances by $28.5
million.
For the six months ended March 31, 2003 non-interest income increased $937,000
to $3.15 million from $2.21 million for the six months ended March 31, 2002.
This increase is primarily due to a $323,000 increase in gain on sale of
loans, the recognition of $269,000 in BOLI income, a $209,000 increase in
service charges on deposits, and a $105,000 increase in ATM transaction fees.
17
Noninterest Expense: Total non-interest expense increased by $388,000 to
$3.53 million for the three months ended March 31, 2003 from $3.15 million for
the three months ended March 31, 2002. This increase is primarily due to a
$307,000 increase in salaries and employee benefits. The increase in salaries
and employee benefits is primarily a result of adding employees to staff the
Silverdale branch, increasing staffing levels in several other departments,
and salary increases in October of 2002.
For the six months ended March 31, 2003 non-interest expense increased by
$772,000 to $7.02 million from $6.25 million for the six months ended March
31, 2002. This increase is primarily due to a $609,000 increase in salaries
and employee benefits for the reasons stated above.
Provision for Income Taxes: The provision for income taxes decreased to
$818,000 for the quarter ended March 31, 2003 from $894,000 for the quarter
ended March 31, 2002. The provision for income taxes decreased to $1.7
million for the six months ended March 31, 2003 from $1.8 million for the six
months ended March 31, 2002. These decreases are primarily due to increased
tax-exempt income from the Bank owned life insurance program that was
implemented in September 2002. The Company's effective tax rate was 31.4% for
the three and six months ended March 31, 2003 compared to 35.4% for the three
and six months ended March 31, 2002.
Future Technology Improvement Expense
- -------------------------------------
Timberland also announced its plans for upcoming technology improvements. The
Bank will be converting to the Kirchman Bankway core processing system from
its current in-house supported system in July of this year. In addition to
the core processing system, Timberland will also be changing its Internet
banking provider, its ATM service provider and its loan platform system. The
Bank believes that these changes will enhance customer service, streamline the
loan processing system, and allow it to offer more products to commercial and
retail customers. It is estimated that expenses related to the technology
upgrades and conversion will reduce earnings over the next two quarters by a
total of $0.09 per share.
Liquidity and Capital Resources
- -------------------------------
The Company's primary sources of funds are customer deposits, proceeds from
principal and interest payments on loans and mortgage backed securities, and
proceeds from the sale of loans, maturing securities and FHLB advances. While
maturities and the scheduled amortization of loans are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by
general interest rates, economic conditions and competition.
The analysis of liquidity should also include a review of the changes that
appear in the consolidated statement of cash flows for the six months ended
March 31, 2003. The statement of cash flows includes operating, investing and
financing categories. Operating activities include net income, which is
adjusted for non-cash items, and increases or decreases in cash due to certain
changes in assets and liabilities. Investing activities consist primarily of
proceeds from maturities and sales of securities, purchases of securities, and
the net change in loans. Financing activities present the cash flows
associated with the Company's deposit accounts and other borrowings.
The Company's consolidated total of cash and due from financial institutions
increased $459,000 to $11.0 million at March 31, 2003 from $10.6 million at
September 30, 2002. The Company's level of interest bearing deposits in banks
increased by $4.6 million to $30.1 million at March 31, 2003 from $25.5
million at September 30, 2002. The net increase in cash and interest bearing
deposits in banks is primarily a result of funds received from loan
prepayments and loan sales, which led to a net decrease of $13.8 million in
total loans.
18
The Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. The Bank generally maintains sufficient cash and
short-term investments to meet short-term liquidity needs. At March 31, 2003,
the Bank's regulatory liquidity ratio (net cash, and short-term and marketable
assets, as a percentage of net deposits and short-term liabilities) was 31.4%.
The Bank also maintained an uncommitted credit facility with the FHLB-Seattle
that provided for immediately available advances up to an aggregate amount of
$134.0 million, under which $61.7 million was outstanding at March 31, 2003.
Liquidity management is both a short and long-term responsibility of the
Bank's management. The Bank adjusts its investments in liquid assets based
upon management's assessment of (i) expected loan demand, (ii) projected loan
sales, (iii) expected deposit flows, and (iv) yields available on
interest-bearing deposits. Excess liquidity is invested generally in
interest-bearing overnight deposits and other short-term investments. If the
Bank requires funds beyond its ability to generate them internally, it has
additional borrowing capacity with the FHLB and collateral for repurchase
agreements.
The Bank's primary investing activity is the origination of one-to-four family
mortgage loans, commercial mortgage loans, and construction and land
development loans. At March 31, 2003, the Bank had loan commitments totaling
$24.2 million and undisbursed loans in process totaling $24.0 million. The
Bank anticipates that it will have sufficient funds available to meet current
loan commitments. Certificates of deposit that are scheduled to mature in
less than one year from March 31, 2003 totaled $99.6 million. Historically,
the Bank has been able to retain a significant amount of its deposits as they
mature.
Federally-insured state-chartered banks are required to maintained minimum
levels of regulatory capital. Under current FDIC regulations, insured
state-chartered banks generally must maintain (i) a ratio of Tier 1 leverage
capital to total assets of at least 3.0% (4.0% to 5.0% for all but the most
highly rated banks), (ii) a ratio of Tier 1 capital to risk weighted assets of
at least 4.0% and (iii) a ratio of total capital to risk weighted assets of at
least 8.0%. At March 31, 2003, the Bank was in compliance with all applicable
capital requirements. For additional details see "Regulatory Capital".
19
Regulatory Capital
- ------------------
The following table compares the Bank's regulatory capital at March 31, 2003
to its minimum regulatory capital requirements at that date (dollars in
thousands):
Percent of
Amount Adjusted Total Assets (1)
------- ------------------------
Tier 1 (leverage) capital $65,663 15.5%
Tier 1 (leverage) capital requirement 16,994 4.0
------- ----
Excess $48,669 11.5%
======= ====
Tier 1 risk adjusted capital $65,663 21.0%
Tier 1 risk adjusted capital requirement 12,487 4.0
------- ----
Excess $53,176 17.0%
======= ====
Total risk based capital $69,531 22.3%
Total risk based capital requirement 24,974 8.0
------- ----
Excess $44,557 14.3%
======= ====
- --------------
(1) For the Tier 1 (leverage) capital, percent of total average assets of
$424.8 million. For the Tier 1 risk-based capital and total risk-based
capital calculations, percent of total risk-weighted assets of $312.2 million.
20
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
KEY FINANCIAL RATIOS
(Dollars in thousands, except per share data)
Three Months Ended March 31, Six Months Ended March 31,
2003 2002 2003 2002
--------------------------- -------------------------
PERFORMANCE RATIOS:
Return on average
assets (1) 1.67% 1.69% 1.69% 1.73%
Return on average
equity (1) 9.41% 9.08% 9.69% 9.27%
Net interest margin (1) 4.75% 5.21% 4.71% 5.31%
Efficiency ratio 56.56% 53.60% 55.57% 52.06%
March 31, September 30,
2003 2002
-------- ------------
ASSET QUALITY RATIOS:
Non-performing loans $ 3,400 $ 3,741
REO & other repossessed assets 900 680
Total non-performing assets 4,300 4,421
Non-performing assets to total assets 0.99% 1.03%
Allowance for loan losses to
non-performing loans 113.76% 97.03%
Book Value Per Share (2) $ 17.82 $ 17.14
Book Value Per Share (3) $ 19.39 $ 18.69
- ---------------
(1) Annualized
(2) Calculation includes ESOP shares not committed to be released
(3) Calculation excludes ESOP shares not committed to be released
Three Months Ended March 31, Six Months Ended March 31,
2003 2002 2003 2002
--------------------------- -------------------------
AVERAGE BALANCE SHEET:
Average Total Loans $315,469 $319,621 $320,335 $321,337
Average Total Interest
Earning Assets 400,137 370,156 402,827 369,188
Average Total Assets 429,792 385,964 432,336 385,484
Average Total Interest
Bearing Deposits 266,514 229,566 269,276 227,786
Average FHLB Advances 61,698 63,589 61,716 64,805
Average Shareholders'
Equity 76,062 71,755 75,531 72,002
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
There were no material changes in information concerning market risk from the
information provided in the Company's Form 10-K for the fiscal year ended
September 30, 2002.
Item 4. Controls and Procedures
- --------------------------------
(a) Evaluation of Disclosure Controls and Procedures: An evaluation of
the Company's disclosure controls and procedures (as defined in
Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the
"Act")) was carried out under the supervision and with the
participation of the Company's Chief Executive Officer, Chief
Financial Officer and several other members the Company's senior
management within the 90-day period preceding the filing date of this
quarterly report. The Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls
and procedures as currently in effect are effective in ensuring that
the information required to be disclosed by the Company in the
reports it files or submits under the Act is (i) accumulated and
communicated to the Company's management (including the Chief
Executive Officer and Chief Financial Officer) in a timely manner,
and (ii) recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.
(b) Changes in Internal Controls: In the quarter ended March 31, 2003,
the Company did not make any significant changes in, nor take any
corrective actions regarding, its internal controls or other factors
that could significantly affect these controls. The Company, did,
however, continue to implement suggestions from its internal auditor
on ways to strengthen existing controls.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ---------------------------
Neither the Company nor the Bank is a party to any material legal proceedings
at this time. Further, neither the Company nor the Bank is aware of the
threat of any such proceedings. From time to time, the Bank is involved in
various claims and legal actions arising in the ordinary course of business.
Item 2. Changes in Securities and Use of Proceeds
- ---------------------------------------------------
Change in Securities -- None to be reported.
Use of proceeds -- None to be reported.
Item 3. Defaults Upon Senior Securities
- ------------------------------------------
None to be reported.
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
None to be reported.
Item 5. Other Information
- ---------------------------
None to be reported.
22
Item 6. Exhibits and Reports on Form 8-K
- ---------------------------------------------
(a) Exhibits
3.1 Articles of Incorporation of the Registrant *
3.2 Bylaws of the Registrant *
3.3 Amendment to Bylaws****
10.1 Employee Severance Compensation Plan **
10.2 Timberland Savings Bank, S.S.B. Employee Stock Ownership
Plan **
10.3 Timberland Bancorp, Inc. 1999 Stock Option Plan ***
10.4 Timberland Bancorp, Inc. Management Recognition and Development
Plan ***
99.1 Certification Pursuant to Section 906 of the Sarbanes Oxley Act
----------------
* Incorporated by reference to the Registrant's Registration
Statement of Form S-1 (333-35817).
** Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1997.
*** Incorporated by reference to the Registrant's Annual Meeting
Proxy Statement dated December 15, 1998.
**** Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended September 30, 2002.
(b) Reports on Form 8-K. Timberland Bancorp, Inc. filed a Form 8-K on January
24, 2003 to report that Clarence E. Hamre has announced his retirement as
Timberland Bancorp, Inc.'s and Timberland Bank's President. Mr. Hamre will
retire as Chief Executive Officer of Timberland Bancorp, Inc. and Timberland
Bank effective September 30, 2003, but will continue to serve as Chairman of
the Board of Directors of each entity and will serve Timberland Bancorp and
Timberland Bank in an advisory capacity. Timberland Bancorp, Inc. and
Timberland Bank also reported that Executive Vice President, Michael R. Sand
has been promoted to President.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Timberland Bancorp, Inc.
Date: May 7, 2003 By:/s/ Clarence E. Hamre
-----------------------------------
Clarence E. Hamre
Chief Executive Officer
(Principal Executive Officer)
Date: May 7, 2003 By:/s/ Dean J. Brydon
-----------------------------------
Dean J. Brydon
Chief Financial Officer
(Principal Financial Officer)
24
Form of Certification Required
By Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934
I, Clarence E. Hamre, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Timberland Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statements of material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regards to significant
deficiencies and material weaknesses.
Date: May 7, 2003
/s/ Clarence E. Hamre
------------------------------
Clarence E. Hamre
Chief Executive Officer
25
Form of Certification Required
By Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934
I, Dean J. Brydon, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Timberland Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statements of material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regards to significant
deficiencies and material weaknesses.
Date: May 7, 2003
/s/ Dean J. Brydon
------------------------------
Dean J. Brydon
Chief Financial Officer
26
EXHIBIT 99.1
Certification Pursuant to Section 906 of the Sarbanes Oxley Act
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
OF TIMBERLAND BANCORP, INC.
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned hereby certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on
Form 10-Q, that:
* the report fully complies with the requirements of Sections 13(a)
and 15(d) of the Securities Exchange Act of 1934, as amended, and
* the information contained in the report fairly presents, in all
material respects, the company's financial condition and results of
operations.
/s/ Clarence E. Hamre /s/ Dean J. Brydon
- -------------------------------- ---------------------------------
Chief Executive Officer Chief Financial Officer
Date: May 7, 2003
A signed original of this written statement required by Section 906 has been
provided to Timberland Bancorp, Inc. and will be retained by Timberland
Bancorp, Inc. and furnished to the staff of the Securities and Exchange
Commission or its staff upon request.
27