Exhibit 99.1
Contact:
Michael R. Sand
President & CEO
Dean J. Brydon, CFO
(360) 533-4747
www.timberlandbank.com
Timberland Bancorp Announces Fiscal First Quarter Results
Core Operating Profits Rise 6%;
Capital Ratios Remain Exceptionally Strong
HOQUIAM, WA - January 26, 2010 - Timberland Bancorp, Inc. (NASDAQ:TSBK)
("Timberland" or "the Company") today reported fiscal first quarter net income
of $224,000, or $0.03 per diluted common share. Income available to common
shareholders after adjusting for the preferred stock dividend and the
preferred stock discount accretion was a loss of $(35,000), or $(0.01) per
diluted common share. This compares to a net loss available to common
shareholders of $(524,000), or $(0.08) per diluted common share for the
quarter ended September 30, 2009 and net income available to common
shareholders of $343,000, or $0.05 per diluted common share, for the quarter
ended December 31, 2008.
Fiscal First Quarter 2010 Highlights:
-- Capital levels remain exceptionally strong: Total Risk Based Capital
of 15.88%; Tier 1 Leverage Capital Ratio of 11.95%; Tangible Capital to
Tangible Assets Ratio of 11.40%
-- Net interest margin increased to 3.94% from 3.93% for the quarter
immediately prior
-- Efficiency ratio improved to 65.77% from 70.14% in the prior quarter
and 75.13% for the like quarter one year prior
-- Deposits increased 13% year over year and 7% from the prior quarter
-- N.O.W. checking account balances increased to 25% of deposits
compared to 19% of deposits one year prior
-- Total assets increased by 7% year over year
-- Construction and land development loans decreased 31% year over year
and 15% during the quarter
-- Loan loss reserves increased to 2.66% of total loans
-- Core operating profits (pre-tax, pre-provision and pre-OTTI charges)
increased 6% to $3.2 million compared to the like quarter one year prior
"The Company's quarterly operating profit emanated from the continuance of
strong core revenues that offset higher than normal credit costs," noted
Michael R. Sand, President and CEO. "We continue to reduce our exposure to the
speculative residential construction sector with speculative one-to-four
family loans at December 31, 2009 representing only 2.14% of the total loan
portfolio. Multi-family and land development construction loans represented
only 3.26% and 3.09% respectively of the total loan portfolio on the same
date. We continue to deploy the necessary personnel to work through and
resolve the classified and non-performing assets in our portfolio."
"Our commitment to increasing the Bank's transaction account base has resulted
in a $44 million dollar increase in N.O.W. account balances year over year and
an associated $74,000 increase in ATM transaction fees compared to the like
quarter in the prior fiscal year," Sand also stated.
Capital Ratios and Asset Quality
Timberland Bancorp remains very well capitalized with a total risk-based
capital ratio of 15.88%, a Tier 1 leverage capital ratio of 11.95% and a
tangible capital to tangible assets ratio of 11.40% at December 31, 2009.
The non-performing assets ("NPAs") to total assets ratio was 6.40% at December
31, 2009 compared to 5.41% at September 30, 2009. During the quarter ended
December 31, 2009 net charge-offs were $1.84 million compared to $1.47 million
during the quarter ended September 30, 2009. Timberland recorded a $2.60
million provision to its allowance for loan losses during the current quarter.
The allowance for loan losses totaled $14.9 million at December 31, 2009, or
2.66% of total loans compared to $14.2 million, or 2.52% of loans receivable
at September 30, 2009 and $8.2 million, or 1.44% of loans receivable one year
ago.
Timberland Q1 Earnings
January 25, 2010
Page 2
Non-performing loans ("NPLs") increased to $34.6 million at December 31, 2009
from $29.3 million at September 30, 2009 and were comprised of 64 loans and 45
credit relationships. The change in NPLs for the quarter are the result of
changes in the following categories:
-- Land Loans - six additional loans with the category balance
increased by $3.69 million
-- Land Development Loans - one less loan with the category balance
decreased by $1.04 million
-- Commercial Real Estate Loans - one less loan although the category
balance increased by $1.51 million
-- Condominium Construction Loans - one additional loan with the
category balance increased by $1.35 million
-- One-to-Four-Family Speculative Construction Loans - no change in the
number of loans although a decrease in the category balance of $440,000
-- One-to-Four Family Home Loans - no change in the number of loans
although the category balance increased by $570,000
-- One-to-Four Family Owner /Builder Construction Loans - one less loan
with the category balance decreased by $157,000
-- Consumer Loans - one additional loan with the category balance
increased by $58,000
-- Second Mortgage Loans - two fewer loans with the category balance
decreasing by $105,000
Net charge-offs totaled $1.84 million for the quarter ended December 31, 2009
and included the following:
-- $502,000 on a condominium construction loan upon receipt of an
updated appraisal of the collateral
-- $350,000 on seven land loans - one loan accounted for $197,000 of
the balance charged off
-- $324,000 on three land development loans - one loan accounted for
$183,000 of the balance charged off
-- $305,000 on two commercial real estate loans - one loan accounted
for $299,000 of the balance charged off and the loan was subsequently
transferred to OREO for orderly disposition
-- $200,000 on four speculative construction loans - one loan accounted
for $105,000 of the balance charged off
-- $109,000 on four home equity loans
-- $35,000 on a single family construction loan
-- $10,000 on two single family home loans
-- $6,000 on a consumer secured loan
Seven Other Real Estate Owned ("OREO") properties totaling $1.57 million were
sold during the quarter ended December 31, 2009. A net gain of $88,000 was
recorded on the sale of these OREO properties as a consequence of selling a
number of them above their recorded book values. Timberland continues to
manage the disposition of OREO properties in an orderly manner. OREO totaled
$8.12 million at December 31, 2009 compared to $8.19 million at September 30,
2009. The balance was comprised of 23 individual properties and two other
repossessed assets representing 19 relationships. The largest OREO property
has a balance of $2.31 million and consists of a 78 lot plat located in
Richland, Washington. The Richland/Kennewick/Pasco market is currently one of
Washington State's better performing economic areas and lot sales are expected
to commence in February.
Balance Sheet Management
Total assets increased by 2% to $716.6 million at December 31, 2009 from
$701.7 million at September 30, 2009. The $14.9 million increase in total
assets was primarily the result of a $13.7 million increase in cash
equivalents and certificates of deposits ("CD's") held for investment. The
Company continues to build and maintain a high level of liquidity, both on
balance sheet and through off-balance sheet sources. Liquidity as measured by
cash equivalents, CDs held for investment and available for sale investments
securities increased to 15.2% of liabilities at December 31, 2009 from 13.5%
at September 30, 2009 and 8.5% one year ago. The Bank also prepaid its
estimated three-year FDIC insurance assessment during the quarter increasing
other assets (prepaid insurance) by $4.2 million at December 31, 2009.
Net loans receivable remained stable during the quarter and totaled $547.2
million at December 31, 2009. "The mix of loans in our portfolio continues to
improve," said Dean Brydon, Chief Financial Officer. "Overall, we have reduced
our total exposure to construction and land development loans by 31% from one
year ago." The one-to-four family speculative construction
Timberland Q1 Earnings
January 25, 2010
Page 3
portfolio decreased by 26% during the current quarter and the land development
portfolio decreased by 6%. "Our exposure to construction and land development
loans decreased by $54 million year over year," Brydon added.
LOAN PORTFOLIO
($ in thousands) Dec. 31, 2009 Sept. 30, 2009 Dec. 31, 2008
Amount Percent Amount Percent Amount Percent
--------- ---- --------- ---- --------- ----
Mortgage Loans:
One-to-four family $ 112,678 19% $ 110,556 19% $ 114,169 19%
Multi-family 27,833 5 25,638 4 26,449 4
Commercial 197,614 34 188,205 32 151,630 25
Construction and land
development 118,552 20 139,728 23 172,828 29
Land 65,159 11 65,642 11 63,241 10
--------- ---- --------- ---- --------- ----
Total mortgage loans 521,836 89 529,769 89 528,317 87
Consumer Loans:
Home equity and second
mortgage 40,212 7 41,746 7 49,895 8
Other 9,449 2 9,827 2 9,838 2
--------- ---- --------- ---- --------- ----
Total consumer loans 49,661 9 51,573 9 59,733 10
Commercial business loans 13,023 2 13,775 2 18,700 3
--------- ---- --------- ---- --------- ----
Total loans $ 584,520 100% $ 595,117 100% $ 606,750 100%
Less:
Undisbursed portion
of construction
loans in process (20,096) (31,298) (38,350)
Unearned income (2,337) (2,439) (2,678)
Allowance for loan
losses (14,931) (14,172) (8,166)
--------- --------- ---------
Total loans receivable,
net $ 547,156 $ 547,208 $ 557,556
========= ========= =========
CONSTRUCTION LOAN COMPOSITION
($ in thousands) Dec. 31, 2009 Sept. 30, 2009 Dec. 31, 2008
Percent Percent Percent
of Loan of Loan of Loan
Port- Port- Port-
Amount folio Amount folio Amount folio
--------- ---- --------- ---- --------- ----
Custom and owner/builder $ 32,014 6% $ 35,414 6% $ 43,832 7%
Speculative 12,523 2 16,959 3 27,117 5
Commercial real estate 36,890 6 49,397 8 43,043 7
Multi-family (including
condominium) 19,084 3 18,800 3 32,117 5
Land development 18,041 3 19,158 3 26,719 5
--------- --------- ---------
Total construction
loans $ 118,552 $ 139,728 $ 172,828
Total loan originations were $54.1 million for the quarter ended December 31,
2009 compared to $59.5 million for the preceding quarter and $43.9 million for
the like quarter one year ago. Timberland continues to sell fixed rate
one-to-four family mortgage loans into the secondary market for
asset-liability management purposes and to generate non-interest income.
During the quarter ended December 31, 2009, $18.9 million one-to-four family
fixed-rate mortgage loans were sold on the secondary market compared to $21.7
million for the preceding quarter and $10.5 million for the quarter ended one
year ago.
Timberland's investment securities decreased by $1.3 million during the
quarter to $19.2 million at December 31, 2009 from $20.6 million at September
30, 2009, primarily as a result of impairment related write-downs, prepayments
and regular amortization. During the quarter ended December 31, 2009,
other-than-temporary-impairment ("OTTI") write-downs of $1.2 million were
recorded on the private label mortgage-backed securities that were acquired in
the in-kind redemption from the AMF family of mutual funds in June 2008. The
impairment write-downs were comprised of $336,000 in credit-related
write-downs that were charged to earnings and $892,000 in non-credit related
write-downs that were recorded through the other
Timberland Q1 Earnings
January 25, 2010
Page 4
comprehensive loss equity component. At December 31, 2009 the Bank's remaining
private label mortgage-backed securities portfolio totaled $6.2 million.
DEPOSIT BREAKDOWN
($ in thousands)
Dec. 31, 2009 Sept. 30, 2009 Dec. 31, 2008
Amount Percent Amount Percent Amount Percent
--------- ---- --------- ---- --------- ----
Non-interest bearing $ 50,525 9% $ 50,295 10% $ 51,775 11%
N.O.W. checking 133,510 25 117,357 23 89,151 19
Savings 61,697 11 58,609 12 55,082 12
Money market 63,965 12 62,478 12 61,210 13
Certificates of deposit
under $100 136,838 25 135,242 27 129,867 27
Certificates of deposit
$100 and over 90,478 17 77,926 15 64,281 13
Certificates of deposit -
brokered 4,000 1 3,754 1 25,975 5
--------- ---- --------- ---- --------- ----
Total deposits $ 541,013 100% $ 505,661 100% $ 477,341 100%
========= ==== ========= ==== ========= ====
Total deposits increased by 7% to $541.0 million at December 31, 2009, from
$505.7 million at September 30, 2009 primarily as a result of a $16.2 million
increase in N.O.W. checking account balances, a $14.4 million increase in CD
account balances and a $3.1 million increase in savings account balances.
Timberland held no true brokered funds in its deposit base at December 31,
2009. The $4.0 million noted on the balance sheet as brokered deposits
consisted of reciprocal deposits exchanged through the Certificate of Deposits
Account Registry Service ("CDARS") program.
Total shareholders' equity increased $146,000 to $87.35 million at December
31, 2009, from $87.20 million at September 30, 2009. Timberland's tangible
capital to tangible assets ratio was 11.40% at December 31, 2009. Book value
per common share was $10.18 and tangible book value per common share was $9.28
at December 31, 2009.
Operating Results
Fiscal first quarter operating revenue (net interest income before provision
for loan losses, plus non-interest income excluding OTTI charges), increased
by 2% to $8.7 million compared to $8.5 million in the like quarter one year
ago. The increase was primarily the result of increased non-interest income,
which was partially offset by a minor decrease in net interest income. The
increased non-interest income was primarily due to a $168,000 increase in gain
on sale of loans and a $74,000 increase in ATM transaction fees.
Net interest income before the provision for loan losses decreased by 1% to
$6.4 million for the quarter ended December 31, 2009, from $6.5 million for
the like quarter one year ago with interest and dividend income decreasing by
7% and interest expense decreasing by 17%. The decrease in net interest income
was primarily due to an increased level of loans on non-accrual status and an
increased level of cash equivalents and other liquid assets with lower yields.
In spite of the challenging interest rate environment, Timberland's net
interest margin remained strong at 3.94% for the current quarter; an increase
of one basis point from 3.93% for the quarter ended September 30, 2009 and a
decrease of 25 basis points from 4.19% for the quarter one year ago. The
reversal of interest income on loans placed on non-accrual status reduced the
net interest margin by approximately 22 basis points for the quarter ended
December 31, 2009.
Timberland recorded a $2.6 million provision to its allowance for loan losses
for the quarter ended December 31, 2009, compared to $3.2 million in the
preceding quarter and $1.3 million in the like quarter one year prior. Net
charge-offs for the quarter ended December 31, 2009 totaled $1.8 million
compared to $1.5 million for the quarter ended September 30, 2009 and $1.2
million for the quarter ended December 31, 2008.
Timberland's total operating (non-interest) expenses decreased by 1% to $5.50
million for the first fiscal quarter from $5.54 million from the like quarter
one year ago and increased by 2% from $5.39 million for the immediately prior
quarter. A change
Timberland Q1 Earnings
January 25, 2010
Page 5
in the Bank's vacation accrual policy reduced salaries and employee benefit
expenses by approximately $164,000 during the current quarter.
About Timberland Bancorp, Inc.
Timberland Bancorp operates 22 branches in the state of Washington in Hoquiam,
Aberdeen, Ocean Shores, Montesano, Elma, Olympia, Lacey, Tumwater, Yelm,
Puyallup, Edgewood, Tacoma, Spanaway (Bethel Station), Gig Harbor, Poulsbo,
Silverdale, Auburn, Chehalis, Winlock, and Toledo.
Timberland Q1 Earnings
January 25, 2010
Page 6
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT Three Months Ended
($ in thousands, except per share amounts) Dec. 31, Sept. 30, Dec. 31,
(unaudited) 2009 2009 2008
------- ------- -------
Interest and dividend income
Loans receivable $ 9,065 $ 9,020 $ 9,570
Investments and mortgage-backed securities 216 297 412
Dividends from mutual funds 9 9 10
Federal funds sold -- 1 24
Interest bearing deposits in banks 51 37 9
------- ------- -------
Total interest and dividend income 9,341 9,364 10,025
Interest expense
Deposits 2,077 2,150 2,496
FHLB advances and other borrowings 873 990 1,065
------- ------- -------
Total interest expense 2,950 3,140 3,561
------- ------- -------
Net interest income 6,391 6,224 6,464
Provision for loan losses 2,600 3,243 1,315
------- ------- -------
Net interest income after provision for
loan losses 3,791 2,981 5,149
Non-interest income
Total OTTI on securities (1,228) (3,212) (1,170)
Less: portion recorded as other
comprehensive loss 892 1,878 --
------- ------- -------
Net OTTI loss recognized (336) (1,334) (1,170)
Service charges on deposits 1,130 1,088 1,150
Gain on sale of loans, net 449 357 281
Bank owned life insurance ("BOLI") net
earnings 134 464 121
Servicing income on loans sold 29 27 33
Valuation recovery (allowance) on MSRs -- 169 --
ATM transaction fees 362 342 288
Other 201 345 203
------- ------- -------
Total non-interest income 1,969 1,458 906
Non-interest expense
Salaries and employee benefits 2,981 2,983 3,073
Premises and equipment 701 496 663
Advertising 172 224 191
OREO and other repossessed items expense 50 91 62
ATM expenses 155 164 125
FDIC insurance 200 192 86
Postage and courier 128 101 119
Amortization of core deposit intangible 48 54 54
State and local taxes 141 154 143
Professional fees 172 198 135
Other 750 731 886
------- ------- -------
Total non-interest expense 5,498 5,388 5,537
Income (loss) before federal and state
income taxes 262 (949) 518
Provision (benefit) for federal and
state income taxes 38 (681) 157
------- ------- -------
Net income $ 224 $ (268) $ 361
======= ======= =======
Timberland Q1 Earnings
January 25, 2010
Page 7
Preferred stock dividends $ 208 $ 206 $ 18
Preferred stock discount accretion 51 50 --
------- ------- -------
Net income (loss) avail. to common
shareholders $ (35) $ (524) $ 343
======= ======= =======
Earnings (loss) per common share:
Basic $ (0.01) $ (0.08) $ 0.05
Diluted $ (0.01) $ (0.08) $ 0.05
Weighted average common shares outstanding:
Basic 6,709,985 6,655,479 6,570,776
Diluted 6,709,985 6,655,479 6,578,080
Timberland Q1 Earnings
January 25, 2010
Page 8
TIMBERLAND BANCORP, INC.
CONSOLIDATED BALANCE SHEET
($ in thousands, except per share amounts) (unaudited)
Dec. 31, Sept. 30, Dec. 31,
2009 2009 2008
--------- --------- ---------
Assets
Cash equivalents:
Cash and due from financial
institutions $ 11,676 $ 10,205 $ 12,049
Interest-bearing deposits in
other banks 57,250 56,257 12,138
Federal funds sold -- -- 9,725
--------- --------- ---------
68,926 66,462 33,912
Certificate of deposits ("CDs") held
for investment 14,442 3,251 --
Investments and mortgage-backed
securities:
Held to maturity 6,626 7,087 12,891
Available for sale 12,594 13,471 15,491
FHLB stock 5,705 5,705 5,705
--------- --------- ---------
24,925 26,263 34,087
Loans receivable 559,153 560,750 563,312
Loans held for sale 2,934 630 2,410
Less: Allowance for loan losses (14,931) (14,172) (8,166)
--------- --------- ---------
Net loans receivable 547,156 547,208 557,556
Accrued interest receivable 2,997 2,805 3,087
Premises and equipment 17,951 18,046 17,369
OREO and other repossessed items 8,119 8,185 1,266
BOLI 13,042 12,918 13,023
Goodwill 5,650 5,650 5,650
Core deposit intangible 707 755 918
Mortgage servicing rights 2,691 2,618 1,336
Other assets 9,999 7,515 3,388
--------- --------- ---------
Total Assets $ 716,605 $ 701,676 $ 671,592
========= ========= =========
Liabilities and Shareholders' Equity
Non-interest-bearing deposits $ 50,525 $ 50,295 $ 51,775
Interest-bearing deposits 490,488 455,366 425,566
--------- --------- ---------
Total deposits 541,013 505,661 477,341
FHLB advances 75,000 95,000 99,609
Federal Reserve Bank advances 10,000 10,000 --
Other borrowings: repurchase
agreements 622 777 714
Other liabilities and accrued
expenses 2,625 3,039 2,985
--------- --------- ---------
Total Liabilities 629,260 614,477 580,649
--------- --------- ---------
Shareholders' Equity
Preferred stock - $.01 par value;
1,000,000 shares authorized; 15,605 15,554 15,408
Dec. 31, 2009 - 16,641 shares,
Series A, issued and outstanding
Sept. 30, 2009 - 16,641 shares,
Series A, issued and outstanding
Series A shares: $1,000 liquidation
value
Common stock - $.01 par value;
50,000,000 shares authorized; 10,343 10,315 10,152
Dec. 31, 2009 - 7,045,036 shares
issued and outstanding
Sept. 30, 2009 - 7,045,036 shares
issued and outstanding
Dec. 31, 2008 - 7,028,015 shares
issued and outstanding
Unearned shares- Employee Stock
Ownership Plan (2,446) (2,512) (2,710)
Retained earnings 65,607 65,854 69,000
Accumulated other comprehensive loss (1,764) (2,012) (907)
--------- --------- ---------
Total Shareholders' Equity 87,345 87,199 90,943
--------- --------- ---------
Total Liabilities and Shareholders'
Equity $ 716,605 $ 701,676 $ 671,592
========= ========= =========
Timberland Q1 Earnings
January 25, 2010
Page 9
KEY FINANCIAL RATIOS AND DATA
($ in thousands, except per share amounts) (unaudited)
Three Months Ended
------------------------------------
Dec. 31, Sept. 30, Dec. 31,
2009 2009 2008
--------- --------- ---------
PERFORMANCE RATIOS:
Return (loss) on average assets (a) 0.13% (0.16)% 0.22%
Return (loss) on average equity (a) 1.02% (1.20)% 1.88%
Net interest margin (a) 3.94% 3.93% 4.19%
Efficiency ratio 65.77% 70.14% 75.13%
Dec. 31, Sept. 30, Dec. 31,
2009 2009 2008
--------- --------- ---------
ASSET QUALITY RATIOS:
Non-performing loans $ 34,563 $ 29,287 $ 13,520
Non-performing investment securities 3,189 477 --
OREO and other repossessed assets 8,119 8,185 1,266
--------- --------- ---------
Total non-performing assets $ 45,871 $ 37,949 $ 14,786
Non-performing assets to total
assets (b) 6.40% 5.41% 2.20%
Allowance for loan losses to non-
performing loans 43% 48% 60%
Troubled debt restructured loans (c) $ 9,799 $ 9,492 $ --
Past due 90 days and still accruing $ 6,299 $ 796 $ --
CAPITAL RATIOS:
Tier 1 leverage capital 11.95% 12.24% 13.07%
Tier 1 risk based capital 14.62% 14.67% 15.47%
Total risk based capital 15.88% 15.94% 16.73%
Tangible capital to tangible
assets (f) 11.40% 11.62% 12.69%
BOOK VALUES:
Book value per common share (d) $ 10.18 $ 10.17 $ 10.58
Book value per common share (e) $ 10.68 $ 10.68 $ 11.16
Tangible book value per common
share (d) (f) $ 9.28 $ 9.26 $ 9.65
Tangible book value per common
share (e) (f) $ 9.73 $ 9.72 $ 10.17
- -------------------
(a) Annualized
(b) Non-performing assets include non-accrual loans, non-accrual
investment securities, and other real estate owned and other
repossessed assets
(c) At December 31, 2009 and September 30, 2009 all troubled debt
restructured loans were on non-accrual status and included in
total non-performing assets.
(d) Calculation includes ESOP shares not committed to be released
(e) Calculation excludes ESOP shares not committed to be released
(f) Calculation subtracts goodwill and core deposit intangible from
the equity component
AVERAGE BALANCE SHEET:
Three Months Ended
------------------------------------
Dec. 31, Sept. 30, Dec. 31,
2009 2009 2008
--------- --------- ---------
Average total loans $ 561,378 $ 563,159 $ 564,782
Average total interest-earning
assets (a) 648,716 633,803 617,284
Average total assets 701,614 685,534 663,339
Average total interest-bearing
deposits 474,898 444,241 430,259
Average FHLB advances and other
borrowings 85,537 95,668 100,436
Average shareholders' equity 87,756 89,164 76,702
- -------------------
(a) Includes loans on non-accrual status
Timberland Q1 Earnings
January 25, 2010
Page 10
Disclaimer
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. Forward-looking statements are subject to a number of
risks and uncertainties that might cause actual results to differ materially
from stated objectives. These risk factors include but are not limited to the
effect of interest rate changes, competition in the financial services market
for both deposits and loans as well as regional and general economic
conditions. 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 and undue reliance should not be placed on
such statements.