Exhibit 99.1
Timberland Bancorp, Inc.
Contact: Michael R. Sand,
President & CEO
Dean J. Brydon, CFO
(360) 533-4747
www.timberlandbank.com
----------------------
Timberland Bancorp Announces Fiscal Fourth Quarter and Year End Results
Reflecting Strong Capital and Excellent Deposit Growth
HOQUIAM, WA - November 9, 2010 -- Timberland Bancorp, Inc. (NASDAQ: TSBK)
("Timberland" or "the Company") today reported a net loss of $(141,000) for
its fiscal fourth quarter ended September 30, 2010. The current quarter's
results include a non-cash valuation allowance of $890,000 ($587,000 after
tax) established for the Bank's mortgage servicing rights ("MSRs") asset.
This non-cash expense reduced the Company's earnings for the current quarter
by $0.09 per diluted common share. Net loss to common shareholders after
adjusting for the accrual of the preferred stock dividend and the preferred
stock discount accretion was $(403,000), or $(0.06) per diluted common share.
This compares to net income available to common shareholders of $543,000, or
$0.08 per diluted common share for the quarter ended June 30, 2010 and a net
loss to common shareholders of $(524,000), or $(0.08) per diluted common
share, for the quarter ended September 30, 2009.
The non-cash valuation allowance established during the quarter is primarily
the result of lower mortgage interest rates at quarter end relative to those
of the prior quarter. Lower interest rates reduced the market value of the
Bank's mortgage servicing rights by reducing the expected duration of the cash
flows associated with the asset. Conversely, rising rates typically diminish
refinance activity, extend the expected duration of the cash flows and
increase the market value of the asset. Timberland recorded full recoveries of
the valuation allowances on its mortgage servicing rights in the amount of
$169,000 and $22,000 for the quarters ended September 30, 2009 and June 30,
2010, respectively.
For fiscal 2010, the Company reported a net loss of $(2.29 million). The
fiscal year loss was primarily the result of provisioning $5.3 million to loan
loss reserves during the quarter ended March 31, 2010. Net loss to common
shareholders after adjusting for the preferred stock dividend and the
preferred stock discount accretion was $(3.33 million), or $(0.50) per diluted
common share. This compares to a net loss to common shareholders of $(1.01
million), or $(0.15) per diluted common share for the fiscal year ended
September 30, 2009.
Fiscal Fourth Quarter 2010 Highlights:
- Capital levels remain very strong: Total Risk Based Capital of 16.26%;
Tier 1 Leverage Capital Ratio of 10.96%; Tangible Capital to Tangible
Assets Ratio of 10.75%, all solidly above well capitalized levels
- Total loan delinquencies including non-performing loans ("NPLs")
decreased to $35.0 million at September 30, 2010, the lowest level in
over a year
- Construction and land development loans decreased 50% year over year
and now account for 12% of total loans
- Speculative one- to four-family construction loans and multi-family
construction loans account for only 2% of the total loan portfolio
- Land development loans account for only 1% of the total loan portfolio
- Net interest margin for the current quarter remained strong at 3.77%
- On balance sheet liquidity increased to 21% of total liabilities
- Deposits increased 14% year over year with no brokered funds
"We have continued to reduce our exposure to speculative construction, land
development and multi-family / condominium construction loans during the past
year," stated Michael Sand, Timberland's President and CEO. "These three loan
types represented 9.23% of our total loan portfolio at September 30, 2009, but
represented only 2.65% of the portfolio at September 30, 2010. The Bank's
exposure to construction loans has been reduced 50% to $69.3 million from
$139.7 million one year earlier." Owner-builder / custom construction loans
represented 45% of the Bank's $69.3 million construction loan portfolio at
September 30, 2010. "Owner-builder / custom construction loans do not possess
the speculative component associated with construction loan types that have
been the source of significant losses in our industry during the past two
years," Sand also
Timberland Q4 Earnings
November 9, 2010
Page 2
stated. "Loans 30 or more days delinquent plus non-accrual loans declined 19%
from the total at September 30, 2009 and declined 32% from the total at
December 31, 2009."
"Near record low interest rates have increased refinance and purchase activity
in our markets which has resulted in increased income from mortgage banking
activities," Sand added. "We have continued to sell loans into the secondary
market rather than placing them in the portfolio given the low interest rate
environment. This choice, along with strong deposit inflows, has resulted in
an increased liquidity position and has slightly affected our net interest
margin."
Capital Ratios and Asset Quality
Timberland Bancorp remains very well capitalized with a total risk-based
capital ratio of 16.26%, a Tier 1 leverage capital ratio of 10.96% and a
tangible capital to tangible assets ratio of 10.75% at September 30, 2010.
Total delinquent and non-accrual loans decreased to $35.0 million at September
30, 2010 from $51.3 million at December 31, 2009 and from $35.1 million at
June 30, 2010. The non-performing assets ("NPAs") to total assets ratio
increased slightly to 5.36% at September 30, 2010 from 5.12% at June 30, 2010.
Timberland recorded a $2.0 million provision to its allowance for loan losses
during the current quarter. Net charge-offs for the quarter ended September
30, 2010 totaled $1.6 million compared to $6.5 million for the quarter ended
June 30, 2010 and $1.5 million for the quarter ended September 30, 2009. The
allowance for loan losses of $11.3 million represented 2.09% of loans
receivable and loans held for sale at September 30, 2010.
NPLs increased to $24.9 million at September 30, 2010 from $21.0 million at
June 30, 2010 and were comprised of 76 loans and 52 credit relationships.
NPLs were comprised of the following at September 30, 2010:
- 12 commercial real estate loans totaling $7.25 million (of which the
largest had a balance of $2.71 million)
- 24 land loans totaling $5.46 million (of which the largest had a
balance of $826,000)
- Eight land development loans totaling $3.79 million (of which the
largest had a balance of $1.42 million)
- 17 single family home loans totaling $3.69 million (of which the
largest had a balance of $722,000)
- Four single family speculative home loans totaling $2.05 million (of
which the largest had a balance of $759,000)
- Two condominium construction loans totaling $1.77 million (of which the
largest had a balance of $1.45 million)
- Five home equity loans totaling $780,000 (of which the largest had a
balance of $358,000)
- Two commercial business loans totaling $46,000
- Two consumer loans totaling $26,000
Net charge-offs totaled $1.64 million during the quarter ended September 30,
2010 and were primarily comprised of the
following:
- $745,000 on three land development loans
- $466,000 on five commercial real estate loans
- $274,000 on nine land loans
- $101,000 on four single family speculative construction loans
- $38,000 on one single family home loan
Other real estate owned ("OREO") and other repossessed items decreased 11.1%
to $11.52 million at September 30, 2010 from $12.96 million at June 30, 2010.
At September 30, 2010 the OREO portfolio consisted of 27 individual properties
and three other repossessed assets. The properties consisted of two
condominium projects totaling $3.9 million, three land development projects
totaling $3.3 million, eight single family homes totaling $1.7 million, 11
land parcels totaling $1.4 million and three commercial real estate properties
totaling $1.1 million. During the quarter ended September 30, 2010 four OREO
properties and two other repossessed assets totaling $1.5 million were sold.
In addition, the sales of six residential building lots were closed in the
Clark County, Washington OREO subdivision during the quarter ended September
30, 2010 with four pending sales in the plat at quarter end. The Bank has a
12.5% participation interest in the plat. Also closed during the quarter were
six residential building lots in the Bank's Richland, Washington OREO
subdivision. Four additional sales were pending in the subdivision at quarter
end. The Tri-cities area of Eastern Washington in which the Richland plat
resides continues to represent one of the stronger economic areas in
Washington State.
Timberland Q4 Earnings
November 9, 2010
Page 3
Balance Sheet Management
Total assets increased 1% to $742.7 million at September 30, 2010 from $732.4
million at June 30, 2010. The increase in total assets was primarily the
result of a $19.4 million increase in cash equivalents and certificates of
deposits ("CDs") held for investment, which was partially offset by a decrease
in net loans receivable and other real estate owned. "We continue to build
and maintain a high level of liquidity, both on balance sheet and through
off-balance sheet sources," said Dean Brydon, Chief Financial Officer.
Liquidity as measured by cash and cash equivalents, CDs held for investment
and available for sale investments increased to 21.4% of total liabilities at
September 30, 2010 from 18.9% at June 30, 2010 and 13.5% one year ago. On
October 1, 2010, just after quarter end, management elected to use a portion
of the Bank's excess liquidity to prepay certain Federal Home Loan Bank of
Seattle advances. Four advances of $5.0 million each were prepaid. The
advances had scheduled maturity dates in October and December of 2010 and in
January of 2011. The average interest rate of these four advances was 4.08%.
Net loans receivable decreased 1% to $527.6 million at September 30, 2010 from
$533.1 million at June 30, 2010. "The mix of loans in our portfolio continues
to improve," said Brydon. "Overall, we have reduced our total exposure to
construction and land development loans by 50% from one year ago." The
Company continues to originate owner / builder single family home construction
loans (which do not possess a speculative nature) and certain commercial real
estate construction loans, but has dramatically reduced its exposure to
speculative construction loans.
LOAN PORTFOLIO
($ in thousands) Sept. 30, 2010 June 30, 2010 Sept. 30, 2009
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Mortgage loans:
One-to-four family $121,014 22% $116,805 21% $110,556 19%
Multi-family 32,267 6 33,127 6 25,638 4
Commercial 208,002 37 215,336 38 188,205 32
Construction and land
development 69,271 12 66,248 12 139,728 23
Land 62,999 11 63,684 11 65,642 11
-------- --- -------- --- -------- ---
Total mortgage loans 493,553 88 495,200 88 529,769 89
Consumer loans:
Home equity and second
mortgage 38,418 7 39,215 7 41,746 7
Other 9,086 2 9,514 2 9,827 2
-------- --- -------- --- -------- ---
Total consumer loans 47,504 9 48,729 9 51,573 9
Commercial business loans 17,979 3 18,114 3 13,775 2
-------- --- -------- --- -------- ---
Total loans 559,036 100% 562,043 100% 595,117 100%
=== === ===
Less:
Undisbursed portion of
construction loans in
process (17,952) (15,780) (31,298)
Deferred loan
origination fees (2,229) (2,232) (2,439)
Allowance for loan
losses (11,264) (10,900) (14,172)
-------- -------- --------
Total loans receivable,
net $527,591 $533,131 $547,208
======== ======== ========
CONSTRUCTION AND LAND DEVELOPMENT LOAN COMPOSITION
($ in thousands) Sept. 30, 2010 June 30, 2010 Sept. 30, 2009
Percent Percent Percent
of Loan of Loan of Loan
Amount Portfolio Amount Portfolio Amount Portfolio
------ --------- ------ --------- ------ ---------
Custom and owner /
builder $30,945 5% $29,080 5% $35,414 6%
Speculative one- to
four-family 4,777 1 5,071 1 16,959 3
Commercial real
estate 23,528 4 20,363 4 49,397 8
Multi-family
(including
condominium) 3,587 1 4,014 1 18,800 3
Timberland Q4 Earnings
November 9, 2010
Page 4
Land development 6,434 1 7,720 1 19,158 3
------- -- ------- -- -------- --
Total construction
and land
development loans $69,271 12% $66,248 12% $139,728 23%
======= == ======= == ======== ==
Total loan originations were $49.3 million for the quarter ended September 30,
2010 compared to $36.5 million for the preceding quarter and $59.5 million for
the comparable quarter one year ago. Historically low interest rates continue
to motivate borrowers to refinance existing mortgage loan obligations.
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 September 30, 2010, $24.0
million one-to-four family fixed-rate mortgage loans were sold on the
secondary market compared to $12.1 million for the preceding quarter and $21.7
million for the quarter ended one year ago.
The Bank's land loan portfolio decreased to $63.0 million at September 30,
2010 from $65.6 million at the end of the prior fiscal year. The portfolio
consists of 499 loans on a variety of land types including individual building
lots, acreage, raw land and commercially zoned properties. The average loan
size for the entire land portfolio was approximately $126,000 at September 30,
2010.
Timberland's mortgage-backed securities and other investments decreased by
$1.0 million during the quarter to $16.2 million at September 30, 2010 from
$17.2 million at June 30, 2010, primarily as a result of prepayments, regular
amortization and impairment related write-downs. During the quarter ended
September 30, 2010, other-than-temporary-impairment ("OTTI") credit related
write-downs and realized losses of $151,000 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. At September 30, 2010 the Bank's
remaining private label mortgage-backed securities portfolio had been reduced
to $5.0 million from an original acquired balance of $15.3 million.
DEPOSIT BREAKDOWN
($ in thousands) Sept. 30, 2010 June 30, 2010 Sept. 30, 2009
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Non-interest bearing $ 58,755 10% $ 52,018 9% $ 50,295 10%
N.O.W. checking 153,304 26 154,753 27 117,357 23
Savings 67,448 12 66,134 12 58,609 12
Money market 55,723 10 54,506 10 62,478 12
Certificates of deposit
under $100 150,633 26 148,864 26 135,242 27
Certificates of deposit
$100 and over 93,006 16 91,710 16 77,926 15
Certificates of deposit -
brokered - - -- - - - - 3,754 1
-------- --- -------- --- -------- ---
Total deposits $578,869 100% $567,985 100% $505,661 100%
======== === ======== === ======== ===
Total deposits increased by 2% to $578.9 million at September 30, 2010, from
$568.0 million at June 30, 2010 primarily as a result of a $6.7 million
increase in non-interest bearing account balances, a $3.1 million increase in
CD account balances, a $1.3 million increase in savings account balances and a
$1.2 million increase in money market account balances. These increases were
partially offset by a $1.4 million decrease in N.O.W. checking account
balances.
Total shareholders' equity decreased $271,000 to $85.41 million at September
30, 2010, from $85.68 million at June 30, 2010. The decrease in equity was
primarily a result of accrued dividends on preferred stock and the nominal net
loss for the quarter. Timberland continues to remain very well capitalized
with a total risk based capital ratio of 16.26% and a Tier 1 leverage capital
of 10.96%. Book value per common share was $9.89 and tangible book value per
common share was $9.00 at September 30, 2010.
Operating Results
Fiscal fourth quarter operating revenue (net interest income before provision
for loan losses, plus non-interest income excluding OTTI charges and valuation
allowances on MSRs), increased 4% to $8.8 million from $8.5 million for the
immediately prior quarter and was consistent with the $8.8 million amount in
the comparable quarter one year ago. The increase in operating
Timberland Q4 Earnings
November 9, 2010
Page 5
revenue from the immediately prior quarter was primarily the result of an
increase in gains on sale of loans due to an increase in the dollar amount of
fixed rate single family home loans sold into the secondary market. For
fiscal 2010, operating revenue decreased 4% to $34.4 million compared to $35.8
million for fiscal 2009 primarily due to a decrease in gains on sale of loans.
Also affecting the comparison to fiscal 2009 was a $377,000 gain on a bank
owned life insurance ("BOLI") death claim benefit recorded in the quarter
ended September 30, 2009 and a $134,000 non-recurring BOLI gain recorded
during the quarter ended March 31, 2009 from transferring a number of the
Bank's BOLI policies to a new insurance carrier.
Pre-provision net interest income increased to $6.41 million for the quarter
ended September 30, 2010, from $6.39 million for the immediately prior quarter
and from $6.22 for the comparable quarter one year ago. The increase in net
interest income was primarily due to a decrease in funding costs and an
increased level of average interest earnings assets for the current quarter.
In spite of the challenging interest rate environment and elevated liquidity
levels, Timberland's net interest margin remained strong at 3.77% for the
current quarter compared to 3.85% for the quarter ended June 30, 2010 and
3.93% for the comparable quarter one year ago. The net interest margin was
reduced by approximately ten basis points for the quarter ended September 30,
2010 by the reversal of interest income on loans placed on non-accrual during
the quarter. For fiscal 2010, pre-provision net interest income increased 1%
to $25.64 million compared to $25.30 million for fiscal 2009. Timberland's
net interest margin for the twelve months ended September 30, 2010 was 3.87%
compared to 4.01% for the twelve months ended September 30, 2009.
Timberland recorded a $2.0 million provision to its allowance for loan losses
for the quarter ended September 30, 2010, compared to $750,000 in the
preceding quarter and $3.2 million in the comparable quarter one year prior.
Net charge-offs for the quarter ended September 30, 2010 totaled $1.6 million
compared to $6.5 million for the quarter ended June 30, 2010 and $1.5 million
for the quarter ended September 30, 2009. For fiscal 2010, the provision for
loan losses totaled $10.6 million compared to $10.7 million for fiscal 2009.
Net charge-offs were $13.5 million for fiscal 2010 compared to $4.4 million
for fiscal 2009.
Primarily as a result of recording a non-cash $890,000 valuation allowance for
the Company's MSR asset, non-interest income decreased 30% to $1.36 million
for the fourth fiscal quarter from $1.94 million for the immediately prior
quarter and decreased 7% from $1.46 million for the comparable quarter one
year ago. The decrease in the fair value of the MSR asset was primarily a
result of a decrease in mortgage interest rates during the quarter ended
September 30, 2010. For fiscal 2010, non-interest income decreased 18% to
$5.70 million from $6.95 million for fiscal 2009. The decrease was primarily
a result of a decrease in the gain on sale of loans due to a lower level of
mortgage banking activity, the valuation allowance on the MSR asset and
non-recurring BOLI income that was included in fiscal 2009.
Total operating (non-interest) expenses decreased 6% to $6.03 million for the
fourth fiscal quarter from $6.42 million for the immediately prior quarter and
increased 12% from $5.39 million for the comparable quarter one year ago. The
decrease in expenses compared to the immediately prior quarter was primarily
due to decreased OREO expenses and decreased professional fees. The increase
in expenses compared to the comparable quarter one year ago was primarily due
to increased insurance expenses (FDIC and D&O), and to a lesser extent,
increased salaries and employee benefits expenses and increased ATM expenses.
Also affecting the comparison was a non-recurring gain from the sale of bank
owned property which reduced premises and equipment expense by $235,000 for
the quarter ended September 30, 2009.
For fiscal 2010, total operating expenses increased 8% to $24.64 million from
$22.74 million for fiscal 2009. Increased insurance expenses (FDIC and D&O),
increased OREO expenses, increased salaries and employee benefits expenses and
increased premises and equipment expenses accounted for the majority of the
increased expense.
About Timberland Bancorp, Inc.
Timberland Bancorp, Inc., a Washington corporation, is the holding company for
Timberland Bank ("Bank"). The Bank opened for business in 1915 and serves
consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap
and Lewis counties, Washington with a full range of lending and deposit
services through its 22 branches (including its main office in Hoquiam).
Timberland Q4 Earnings
November 9, 2010
Page 6
Disclaimer
Certain matters discussed in this press release may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are not statements of historical fact and
often include the words "believes," "expects," "anticipates," "estimates,"
"forecasts," "intends," "plans," "targets," "potentially," "probably,"
"projects," "outlook" or similar expressions or future or conditional verbs
such as "may," "will," "should," "would" and "could." Forward-looking
statements include statements with respect to our beliefs, plans, objectives,
goals, expectations, assumptions and statements about future performance.
These forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that could cause our actual results to differ
materially from the results anticipated, including, but not limited to: the
credit risks of lending activities, including changes in the level and trend
of loan delinquencies and write-offs and changes in our allowance for loan
losses and provision for loan losses that may be impacted by deterioration in
the housing and commercial real estate markets and may lead to increased
losses and non-performing assets in our loan portfolio, and may result in our
allowance for loan losses not being adequate to cover actual losses, and
require us to materially increase our 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 Federal
Reserve 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, 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, which could adversely affect our liquidity and earnings; our
compliance with regulatory enforcement actions, including regulatory memoranda
of understandings ("MOUs") to which we are subject; 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; our ability to attract and retain deposits; further 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 balance sheet; staffing fluctuations in response to product demand or
the implementation of corporate strategies that affect our workforce and
potential associated charges; computer systems on which we depend could fail
or experience a security breach; our ability to retain key members of our
senior management team; costs and effects of litigation, including settlements
and judgments; our ability to successfully integrate any assets, liabilities,
customers, systems, and management personnel we may in the future acquire into
our operations and our ability to realize related revenue synergies and cost
savings within expected time frames and any goodwill charges related thereto;
our ability to manage loan delinquency rates; increased competitive pressures
among financial services companies; changes in consumer spending, borrowing
and savings habits; legislative or regulatory changes that adversely affect
our business including changes in regulatory policies and principles, the
interpretation of regulatory capital or other rules and any changes in the
rules applicable to institutions participating in the TARP Capital Purchase
Program; the availability of resources to address changes in laws, rules, or
regulations or to respond to regulatory actions; adverse changes in the
securities markets; inability of key third-party providers to perform their
obligations to us; changes in accounting policies and practices, as may be
adopted by the financial institution regulatory agencies or the Financial
Accounting Standards Board, including additional guidance and interpretation
on accounting issues and details of the implementation of new accounting
methods; the economic impact of war or any terrorist activities; other
economic, competitive, governmental, regulatory, and technological factors
affecting our operations; pricing, products and services; and other risks
detailed in our reports filed with the Securities and Exchange Commission.
Any of the forward-looking statements that we make in this press release and
in the other public statements we make are based upon management's beliefs and
assumptions at the time they are made. We undertake no obligation to publicly
update or revise any forward-looking statements included in this report or to
update the reasons why actual results could differ from those contained in
such statements, whether as a result of new information, future events or
otherwise. We caution readers not to place undue reliance on any
forward-looking statements. We do not undertake and specifically disclaim any
obligation to revise any forward-looking statements to reflect the occurrence
of anticipated or unanticipated events or circumstances after the date of such
statements. These risks could cause our actual results for fiscal 2011 and
beyond to differ materially from those expressed in any forward-looking
statements by, or on behalf of us, and could negatively affect the Company's
operations and stock price performance.
Timberland Q4 Earnings
November 9, 2010
Page 7
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended
($ in thousands, except per share amounts) Sept. 30, June 30, Sept. 30,
(unaudited) 2010 2010 2009
------ ------ ------
Interest and dividend income
Loans receivable $8,683 $8,764 $9,020
Mortgage-backed securities and other
investments 215 239 297
Dividends from mutual funds 8 9 9
Interest bearing deposits in banks 90 90 38
------ ------ ------
Total interest and dividend income 8,996 9,102 9,364
Interest expense
Deposits 1,821 1,950 2,150
FHLB advances and other borrowings 768 761 990
------ ------ ------
Total interest expense 2,589 2,711 3,140
------ ------ ------
Net interest income 6,407 6,391 6,224
Provision for loan losses 2,005 750 3,243
------ ------ ------
Net interest income after provision for
loan losses 4,402 5,641 2,981
Non-interest income
OTTI loss on mortgage-backed
securities, net (148) (152) (1,300)
Realized loss on mortgage-backed securities (3) -- (34)
Service charges on deposits 1,022 1,066 1,088
Gain on sale of loans, net 560 238 357
Bank owned life insurance ("BOLI") net
earnings 122 120 464
Servicing income on loans sold 48 32 27
Valuation recovery (allowance)
on mortgage servicing rights ("MSRs") (890) 22 169
ATM transaction fees 432 439 342
Other 213 176 345
------ ------ ------
Total non-interest income 1,356 1,941 1,458
Non-interest expense
Salaries and employee benefits 3,047 3,117 2,983
Premises and equipment 648 717 496
Advertising 203 235 224
OREO and other repossessed items expense,
net 114 373 91
ATM expenses 208 164 164
FDIC insurance 336 317 192
Postage and courier 139 130 101
Amortization of core deposit intangible 48 48 54
State and local taxes 173 159 154
Professional fees 102 193 198
Other 1,011 969 731
------ ------ ------
Total non-interest expense 6,029 6,422 5,388
------ ------ ------
Income (loss) before income taxes (271) 1,160 (949)
Provision (benefit) for income taxes (130) 356 (681)
------ ------ ------
Net income (loss) $ (141) $ 804 $ (268)
====== ====== ======
Preferred stock dividends accrued $ 208 $ 208 $ 206
Preferred stock discount accretion 54 53 50
------ ------ ------
Net income (loss) to common shareholders $ (403) $ 543 $ (524)
====== ====== ======
Timberland Q4 Earnings
November 9, 2010
Page 8
Earnings (loss) per common share:
Basic $(0.06) $ 0.08 $(0.08)
Diluted $(0.06) $ 0.08 $(0.08)
Weighted average common shares outstanding:
Basic 6,715,734 6,715,410 6,655,479
Diluted 6,715,734 6,715,410 6,655,479
Timberland Q4 Earnings
November 9, 2010
Page 9
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended
($ in thousands, except per share) Sept. 30, Sept. 30,
(unaudited) 2010 2009
------- -------
Interest and dividend income
Loans receivable $35,344 $37,249
Mortgage-backed securities and other investments 910 1,379
Dividends from mutual funds 35 38
Interest bearing deposits in banks 307 135
------- -------
Total interest and dividend income 36,596 38,801
Interest expense
Deposits 7,807 9,472
FHLB advances and other borrowings 3,154 4,032
------- -------
Total interest expense 10,961 13,504
------- -------
Net interest income 25,635 25,297
Provision for loan losses 10,550 10,734
------- -------
Net interest income after provision for loan
losses 15,085 14,563
Non-interest income
OTTI loss on mortgage-backed securities, net (2,176) (3,531)
Realized loss on mortgage-backed securities (20) (91)
Service charges on deposits 4,240 4,312
Gain on sale of loans, net 1,547 2,828
BOLI net earnings 491 965
Servicing income on loans sold 135 103
Valuation allowance on MSRs (890) --
ATM transaction fees 1,619 1,261
Other 750 1,102
------- -------
Total non-interest income 5,696 6,949
Non-interest expense
Salaries and employee benefits 12,066 11,801
Premises and equipment 2,768 2,574
Advertising 829 895
OREO and other repossessed items expense, net 882 643
ATM expenses 698 613
FDIC insurance 1,659 778
Postage and courier 539 549
Amortization of core deposit intangible 191 217
State and local taxes 626 604
Professional fees 664 745
Other 3,719 3,320
------- -------
Total non-interest expense 24,641 22,739
------- -------
Loss before income taxes (3,860) (1,227)
Benefit for income taxes (1,569) (985)
------- -------
Net loss $(2,291) $ (242)
======= =======
Preferred stock dividends accrued $ 832 $ 643
Preferred stock discount accretion 210 129
------- -------
Net loss to common shareholders $(3,333) $(1,014)
======= =======
Timberland Q4 Earnings
November 9, 2010
Page 10
Loss per common share:
Basic $ (0.50) $ (0.15)
Diluted $ (0.50) $ (0.15)
Weighted average common shares outstanding:
Basic 6,713,766 6,621,399
Diluted 6,713,766 6,621,399
Timberland Q4 Earnings
November 9, 2010
Page 11
TIMBERLAND BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
(unaudited) Sept. 30, June 30, Sept. 30,
Assets 2010 2010 2009
-------- -------- --------
Cash and cash equivalents:
Cash and due from financial institutions $ 9,466 $ 11,748 $ 10,205
Interest-bearing deposits in other banks 102,320 83,507 56,257
-------- -------- --------
111,786 95,255 66,462
Certificate of deposits ("CDs") held for
investment, at cost 18,047 15,188 3,251
Mortgage-backed securities and other
investments:
Held to maturity, at amortized cost 5,066 5,604 7,087
Available for sale, at fair value 11,119 11,578 13,471
FHLB stock 5,705 5,705 5,705
Loans receivable 535,885 542,577 560,750
Loans held for sale 2,970 1,454 630
Less: Allowance for loan losses (11,264) (10,900) (14,172)
-------- -------- --------
Net loans receivable 527,591 533,131 547,208
Premises and equipment 17,383 17,529 18,046
OREO and other repossessed items 11,519 12,957 8,185
BOLI 13,400 13,278 12,918
Accrued interest receivable 2,630 2,709 2,805
Goodwill 5,650 5,650 5,650
Core deposit intangible 564 612 755
Mortgage servicing rights, net 1,929 2,683 2,618
Prepaid FDIC insurance assessment 3,268 3,569 --
Other assets 7,030 6,970 7,515
-------- -------- --------
Total assets $742,687 $732,418 $701,676
======== ======== ========
Liabilities and shareholders' equity
Deposits: Demand, non-interest-bearing $ 58,755 $ 52,018 $ 50,295
Deposits: Interest-bearing 520,114 515,967 455,366
-------- -------- --------
Total deposits 578,869 567,985 505,661
FHLB advances 75,000 75,000 95,000
Federal Reserve Bank of San Francisco
borrowings -- -- 10,000
Repurchase agreements 622 713 777
Other liabilities and accrued expenses 2,788 3,041 3,039
-------- -------- --------
Total liabilities 657,279 646,739 614,477
-------- -------- --------
Shareholders' equity
Preferred stock - $.01 par value; 1,000,000
shares authorized;
16,641 shares, Series A, issued and
outstanding
Series A shares: $1,000 per share
liquidation value 15,764 15,710 15,554
Common stock - $.01 par value; 50,000,000
shares authorized;
7,045,036 shares issued and outstanding 10,377 10,373 10,315
Unearned shares- Employee Stock Ownership
Plan (2,247) (2,313) (2,512)
Retained earnings 62,238 62,641 65,854
Accumulated other comprehensive loss (724) (732) (2,012)
-------- -------- --------
Total shareholders' equity 85,408 85,679 87,199
-------- -------- --------
Total liabilities and shareholders' equity $742,687 $732,418 $701,676
======== ======== ========
Timberland Q4 Earnings
November 9, 2010
Page 12
KEY FINANCIAL RATIOS AND DATA
($ in thousands, except per share amounts) (unaudited)
Three Months Ended
---------------------------------
Sept. 30, June 30, Sept. 30,
2010 2010 2009
-------- ------- --------
PERFORMANCE RATIOS:
Return (loss) on average assets (a) (0.08)% 0.45% (0.16)%
Return (loss) on average equity (a) (0.66)% 3.78% (1.20)%
Net interest margin (a) 3.77% 3.85% 3.93%
Efficiency ratio 77.66% 77.08% 70.14%
Core efficiency ratio (b) 66.66% 70.92% 59.49%
Year Ended
---------------------------------
Sept. 30, Sept. 30,
2010 2009
-------- --------
Loss on average assets (0.32)% (0.04)%
Loss on average equity (2.65)% (0.28)%
Net interest margin 3.87% 4.01%
Efficiency ratio 78.65% 70.52%
Core efficiency ratio 67.03% 61.15%
Sept. 30, June 30, Sept. 30,
2010 2010 2009
-------- ------- --------
ASSET QUALITY RATIOS:
Non-performing loans $ 24,864 $ 21,031 $ 29,287
Non-performing investment securities 3,390 3,482 477
OREO and other repossessed assets 11,519 12,957 8,185
-------- -------- --------
Total non-performing assets $ 39,773 $ 37,470 $ 37,949
======== ======== ========
Non-performing assets to total assets (c) 5.36% 5.12% 5.41%
Allowance for loan losses to
non-performing loans 45% 52% 48%
Allowance for loan losses to net loans
receivable 2.09% 2.00% 2.52%
Troubled debt restructured loans (d) $ 16,400 $ 14,359 $ 9,492
Past due 90 days and still accruing $ 1,325 $ 1,198 $ 796
CAPITAL RATIOS:
Tier 1 leverage capital 10.96% 11.25% 12.24%
Tier 1 risk based capital 15.00% 14.70% 14.67%
Total risk based capital 16.26% 15.96% 15.94%
Tangible capital to tangible assets 10.75% 10.94% 11.62%
BOOK VALUES:
Book value per common share $ 9.89 $ 9.93 $ 10.17
Tangible book value per common share (e) $ 9.00 $ 9.04 $ 9.26
- -------------
(a) Annualized
(b) Calculation excludes OTTI losses, OREO expenses, realized losses on
investment securities, valuation allowance /recovery on MSRs and
amortization of CDI. For the year ending September 30, 2010 the
non-recurring FDIC insurance expense accrual adjustment ($512) has also
been excluded.
(c) Non-performing assets include non-accrual loans, non-accrual investment
securities, and other real estate owned and other repossessed assets
(d) At September 30, 2010, $7,405 of the $16,400 in troubled debt
restructured loans were on non-accrual status and included on total
non-performing loans. At June 30, 2010, $5,464 of the $14,359 in
troubled debt restructured loans were on non-accrual status and included
in total non-performing loans. At September 30, 2009, all troubled debt
restructured loans were on non-accrual status and included in total
non-performing loans.
(e) Calculation subtracts goodwill and core deposit intangible from the
equity component.
Timberland Q4 Earnings
November 9, 2010
Page 13
AVERAGE BALANCE SHEETS: Three Months Ended
---------------------------------
Sept. 30, June 30, Sept. 30,
2010 2010 2009
-------- ------- --------
Average total loans $544,561 $552,055 $563,159
Average total interest-earning assets (a) 678,925 663,511 633,803
Average total assets 737,854 721,001 685,534
Average total interest-bearing deposits 518,683 508,185 444,241
Average FHLB advances and other borrowings 75,584 75,859 95,668
Average shareholders' equity 86,086 85,101 89,164
Year Ended
---------------------------------
Sept. 30, Sept. 30,
2010 2009
-------- --------
Average total loans $550,050 $564,741
Average total interest-earning assets (a) 661,697 631,154
Average total assets 718,179 679,005
Average total interest-bearing deposits 499,473 440,143
Average FHLB advances and other borrowings 78,402 97,393
Average shareholders' equity 86,570 86,383
- --------------------------------------------
(a) Includes loans on non-accrual status