SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 22, 2003
Timberland Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Washington 0-23333 91-1863696
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State or other jurisdiction Commission (I.R.S. Employer
Of incorporation File Number Identification No.)
624 Simpson Avenue, Hoquiam, Washington 98550
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code) (360) 533-4747
Not Applicable
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(Former name or former address, if changed since last report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
99.1 Press Release of Timberland Bancorp, Inc. dated July 22, 2003
Item 9. Regulation FD Disclosure
--------------------------------
On July 22, 2003, Timberland Bancorp, Inc. issued its earnings release
for the quarter ended June 30, 2003. A copy of the earnings release is
attached hereto as Exhibit 99.1, which is incorporated herein by reference.
The information being furnished under this "Item 9. Regulation FD
Disclosure" is intended to be furnished under "Item 12. Disclosure of Results
of Operations and Financial Condition."
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, hereunto duly authorized.
TIMBERLAND BANCORP,INC.
DATE: July 23, 2003 By: /s/ Dean J. Brydon
-------------------------
Dean J. Brydon
Chief Financial Officer
Exhibit 99.1
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PRESS RELEASE: FOR IMMEDIATE PUBLICATION
----------------------------------------
For further information contact: Clarence Hamre, CEO
Michael Sand, President
Dean Brydon, CFO
At (360) 533-4747
=============================================================================
Timberland Bancorp, Inc. Announces Third Quarter Earnings
Technology investment expense reduces income by $0.04 per share
HOQUIAM, Wash. July 22, 2003 Timberland Bancorp, Inc. (Nasdaq: TSBK),
("Company") the holding company for Timberland Bank, ("Bank"), today reported
net income of $1.54 million, or $0.38 per diluted share, for the quarter ended
June 30, 2003. This compares to $0.45 per diluted share that the Company
earned for the quarter ended June 30, 2002. The lower earnings for the current
quarter are primarily due to increased non-interest expenses resulting from
technology improvement expenses and increased employee costs. The increased
non-interest expenses were, however, partially offset by increased
non-interest income.
President Michael Sand noted that, "The planned technology improvements
announced previously are in process and on schedule. The conversion to the
Kirchman Bankway core processing system from our current in-house supported
system will occur in August of this year. In addition to the core processing
system, Timberland is also changing its Internet banking provider, its ATM
service provider and its loan platform system. We believe that these changes
will enhance customer service, streamline our loan processing system, and
allow us to offer more products to our commercial and retail customers." The
Company incurred expenses of $252,000 ($166,000 net of income tax) related to
the technology upgrades and conversion process during the current quarter.
This expense reduced earnings by approximately $0.04 per share for the June
30, 2003 quarter. It is estimated that additional expenses related to the
technology initiatives and conversion process will also reduce earnings for
the September 30, 2003 quarter by approximately $0.05 per share.
Loan volumes and mortgage banking activity remained strong during the current
quarter as the Bank originated loans totaling $75.1 million and sold $25.7
million in fixed rate loans. During this low interest rate cycle the Bank has
continued to sell a majority of its fixed rate mortgage loans secured by
residential properties. The Bank also saw an increase in construction loan
demand during the current quarter as the construction loan portfolio increased
23% to $91.9 million at June 30, 2003 from $74.7 million at March 31, 2003.
The Company also reported asset quality improvements as the non-performing
asset ("NPA") ratio was reduced to 0.77% at June 30, 2003 from 0.99% at March
31, 2003. This represents the lowest NPA level that the Company has reported
since going public in 1998. As a result of the improved asset quality, the
Company was able to reduce its provision for loan losses to $66,000 for the
current quarter from $200,000 for the quarter ended June 30, 2002.
Increased non-interest income helped offset a portion of the increased
non-interest expenses. Non-interest income increased 39% to $1.65 million for
the current quarter from $1.19 million for the quarter ended June 30, 2002,
primarily due to strong mortgage banking activity, increased gains on security
sales, and income from the Bank Owned Life Insurance ("BOLI") program.
The Company experienced margin compression in the declining rate environment
as net interest income decreased 3.7% to $4.60 million for the current quarter
from $4.8 million for the quarter ended June 30, 2002. The decrease was
primarily due to the Company's interest earning assets repricing downward at a
greater rate than the Company's funding sources and a shift in the makeup of
total earning assets. The Company's net interest margin reflected this
compression as it decreased to 4.51% for the current quarter from 4.93% for
the quarter ended June 30, 2002. The Company remains asset sensitive and is
positioned to benefit from increasing interest rates.
Branch Expansion Update
The Bank's 15th full-service office will be located in downtown Olympia
(Thurston County) and is scheduled to open in mid to late August 2003. This
office will be Timberland's fourth Thurston County location and will serve as
the headquarters for the Bank's Commercial Lending and Business Banking
Divisions. This downtown Olympia site is centrally located and will provide a
good strategic location as the Company continues to expand its commercial
banking initiatives. Commercial real estate, commercial business, and
commercial construction loans now comprise 33% of the Bank's loan portfolio.
The Bank also announced plans in May to expand to Gig Harbor (Pierce County).
Plans are to open a branch in the Gig Harbor area within the next 6 months.
Richard Pifer of Gig Harbor has been named Vice President and branch manager.
He is a 12-year resident of Gig Harbor and has over 23 years of banking
experience, most recently with Key Bank. "We've been interested in entering
the Gig Harbor market for some time. With Richard Pifer, we have an
individual with the experience and abilities necessary to compete effectively
in that market." stated CEO Clarence Hamre.
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.
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
For the three and nine months ended June 30, 2003 and 2002
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended June 30, Nine Months Ended June 30,
2003 2002 2003 2002
-------------------- --------------------
Interest and Dividend
Income
Loans receivable $ 6,203 $ 6,771 $19,165 $21,017
Investments and mortgage-
backed securities 209 317 697 1,132
Dividends from investments 259 258 805 592
Interest bearing deposits
in banks 103 60 308 123
-------------------- --------------------
Total interest and
dividend income 6,774 7,406 20,975 22,864
Interest Expense
Deposits 1,338 1,793 4,361 5,768
Federal Home Loan
Bank advances 840 842 2,521 2,523
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Total interest expense 2,178 2,635 6,882 8,291
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Net interest income 4,596 4,771 14,093 14,573
Provision for Loan Losses 66 200 347 792
-------------------- --------------------
Net interest income
after provision for
for loan losses 4,530 4,571 13,746 13,781
Non-Interest Income
Service charges on deposits 531 516 1,522 1,299
Gain on sale of loans, net 364 251 1,187 751
Gain (loss) on sale of
securities 135 1 135 (15)
BOLI net earnings 131 - - 400 - -
Escrow fees 70 57 205 202
Servicing income on
loans sold 50 57 245 307
ATM transaction fees 213 168 588 439
Other 154 139 511 414
-------------------- --------------------
Total non-interest
income 1,648 1,189 4,793 3,397
Non-interest Expense
Salaries and employee
benefits 2,068 1,729 6,110 5,161
Premises and equipment 580 355 1,313 1,043
Advertising 170 169 550 601
Loss from real estate
operations and write-downs 68 45 141 104
ATM expenses 169 130 470 355
Other 888 710 2,384 2,126
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Total non-interest
expense 3,943 3,138 10,968 9,390
Income before federal
income taxes 2,235 2,622 7,571 7,788
Federal Income Taxes 694 825 2,372 2,655
-------------------- --------------------
Net Income $ 1,541 $ 1,797 $ 5,199 $ 5,133
Earnings Per Common Share:
Basic $ 0.41 $ 0.46 $ 1.36 $ 1.31
Diluted $ 0.38 $ 0.45 $ 1.30 $ 1.27
Weighted average shares
outstanding:
Basic 3,783,219 3,875,211 3,820,142 3,928,653
Diluted 4,012,736 4,037,034 4,008,623 4,052,061
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
SUMMARY BALANCE SHEETS
June 30, 2003 and September 30, 2002
(Dollars in thousands)
(unaudited)
June 30, September 30,
2003 2002
-------------------------
ASSETS
Cash and due from financial institutions $ 11,009 $ 10,580
Interest bearing deposits in banks 39,617 25,493
Investments and mortgage-backed securities
held to maturity 383 - -
Investments and mortgage-backed securities
available for sale 48,373 41,582
Federal Home Loan Bank stock 5,383 5,139
Loans receivable 313,346 322,997
Loans held for sale 1,389 3,161
Less: Allowance for loan losses (3,938) (3,630)
-------------------------
Total loans 310,797 322,528
Accrued interest receivable 1,455 1,604
Premises and equipment 13,049 11,664
Real estate owned 1,247 680
Bank owned life insurance ("BOLI") 10,437 10,036
Other assets 2,403 1,748
-------------------------
TOTAL ASSETS $444,153 $431,054
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $302,934 $292,316
Federal Home Loan Bank advances 61,644 61,759
Other liabilities and accrued expenses 2,249 2,583
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TOTAL LIABILITIES 366,827 356,658
-------------------------
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 50,000,000
shares authorized; June 30, 2003 - 4,273,917
shares issued, 3,789,477 shares outstanding
September 30, 2002 - 4,340,976 shares issued,
3,856,536 shares outstanding (Unallocated
ESOP shares and unvested MRDP shares are
not considered outstanding) 43 43
Additional paid in capital 34,491 35,857
Unearned shares - Employee Stock Ownership
Plan (5,023) (5,419)
Unearned shares Management Recognition &
Development Plan (1,343) (1,826)
Retained earnings 48,859 45,210
Accumulated other comprehensive income 299 531
-------------------------
TOTAL SHAREHOLDERS' EQUITY 77,326 74,396
-------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $444,153 $431,054
=========================
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
KEY FINANCIAL RATIOS AND DATA
(Dollars in thousands, except per share data)
Three Months Ended June 30, Nine Months Ended June 30,
2003 2002 2003 2002
--------------------------- --------------------------
PERFORMANCE RATIOS:
Return on average
assets (1) 1.41% 1.78% 1.60% 1.75%
Return on average
equity (1) 7.91% 9.78% 9.08% 9.44%
Net interest margin (1) 4.51% 4.93% 4.65% 5.18%
Efficiency ratio 63.15% 52.65% 58.07% 52.25%
June 30, September 30,
2003 2002
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ASSET QUALITY RATIOS:
Non-performing loans $ 2,186 $ 3,741
REO & other repossessed assets 1,247 680
Total non-performing assets 3,433 4,421
Non-performing assets to total assets 0.77% 1.03%
Allowance for loan losses to
non-performing loans 180.15% 97.03%
Book Value Per Share (2) $ 18.09 $ 17.14
Book Value Per Share (3) $ 19.63 $ 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 June 30, Nine Months Ended June 30,
2003 2002 2003 2002
--------------------------- --------------------------
AVERAGE BALANCE SHEET:
Average Total Loans $314,764 $323,438 $318,478 $322,037
Average Total Interest
Earning Assets 407,287 387,003 404,313 375,126
Average Total Assets 437,819 404,018 434,164 391,662
Average Total Interest
Bearing Deposits 270,562 246,258 269,704 233,944
Average FHLB Advances 61,695 61,839 61,736 63,816
Average Shareholders'
Equity 77,949 73,526 76,337 72,510
Comparison of Financial Condition at June 30, 2003 and September 30, 2002
Total Assets: Total assets increased to $444.2 million at June 30, 2003 from
$431.1 million at September 30, 2002. This change is reflected primarily in a
$21.3 million increase in investments and interest bearing deposits in banks,
which is partially offset by a $11.7 million decrease in total loans.
Investments and Interest Bearing Deposits in Banks: Investments and interest
bearing deposits in banks increased by $21.3 million to $88.4 million at June
30, 2003 from $67.1 million at September 30, 2002. This increase is primarily
due to investing proceeds from loan sales, loan prepayments, and increased
customer deposits.
Loans: Net loans receivable, including loans held-for-sale, decreased to
$310.8 million at June 30, 2003 from $322.5 at September 30, 2002, primarily
reflected in a $16.6 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 nine months ended June 30, 2003, the Bank originated loans
of $184.4 million and sold $88.0 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.
Deposits: Deposits increased by $10.6 million to $302.9 million at June 30,
2003 from $292.3 million at September 30, 2002, primarily due to a $9.0
million increase in the Bank's passbook savings accounts, a $7.7 million
increase in N.O.W. checking accounts and a $4.2 million increase in
non-interest bearing accounts. These increases are partially offset by a $6.2
million decrease in money market accounts and a $4.1 million decrease in
certificate of deposit accounts.
Shareholders' Equity: Total shareholders' equity increased by $2.9 million to
$77.3 million at June 30, 2003 from $74.4 million at September 30, 2002. The
components of shareholders' equity were primarily affected by net income of
$5.2 million, the repurchase of 122,259 shares of the Company's stock for $2.3
million and the payment of $1.5 million in dividends to shareholders. Also
affecting shareholders' equity was a $664,000 increase to additional paid in
capital from the exercise of stock options, and decreases of $483,000 and
$396,000 in the equity components related to unearned shares issued to the
Management Recognition and Development Plan and Employee Stock Ownership
Plans, respectively.
On February 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 June 30, 2003, the Company had purchased 46,000 of these shares
and cumulatively had repurchased 2,644,563 (40.0%) of the 6,612,500 shares
that were issued when the Company went public in January 1998.
Comparison of Operating Results for the Three and Nine Months Ended June 30,
2003 and 2002
Net Income: Net income for the quarter ended June 30, 2003 was $1.54 million,
or $0.38 per diluted share ($0.41 per basic share) compared to $1.80 million,
or $0.45 per diluted share ($0.46 per basic share) for the quarter ended June
30, 2002. The lower earnings for the current quarter were primarily a result
of increased non-interest expenses related to technology improvements and
higher employee costs resulting from a larger employee base. The increase in
non-interest expenses was, however, partially offset by increased non-interest
income from loan sales, security sales, and BOLI income.
Net income for the nine months ended June 30, 2003 was $5.20 million, or $1.30
per diluted share ($1.36 per basic share) compared to $5.13 million, or $1.27
per diluted share ($1.31 per basic share) for the nine months ended June 30,
2002.
Net Interest Income: Net interest income decreased $175,000 to $4.60 million
for the quarter ended June 30, 2003 from $4.77 million for the quarter ended
June 30, 2002. Total interest income decreased $632,000 to $6.77 million for
the quarter ended June 30, 2003 from $7.41 million for the quarter ended June
30, 2002, primarily due to a reduction in average yields on earning assets.
The yield on earning assets was 6.65% for the quarter ended June 30, 2003
compared to 7.65% for the quarter ended June 30, 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 83.6% of average earning assets. In 2003, loans were 77.3%
of average earning assets. This change was largely influenced by the decision
to sell many of the loans originated in the current periods. 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
$457,000 to $2.18 million for the quarter ended June 30, 2003 from $2.64
million for the quarter ended June 30, 2002. The average cost of funds for
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 2.62% for the quarter
ended June 30, 2003 from 3.42% for the quarter ended June 30, 2002. As a
result of these changes, the net interest margin decreased to 4.51% for the
quarter ended June 30, 2003 from 4.93% for the quarter ended June 30, 2002.
Net interest income decreased $480,000 to $14.09 million for the nine months
ended June 30, 2003 from $14.57 million for the nine months ended June 30,
2002. Total interest income decreased $1.89 million to $20.98 million for
the nine months ended June 30, 2003 from $22.86 million for the nine months
ended June 30, 2002, primarily due to a reduction in average yields on earning
assets. The yield on earning assets was 6.92% for the nine months ended June
30, 2003 compared to 8.13% for the nine months ended June 30, 2002. The
impact of lower average yields was, however, partially offset by increased
levels of average earning assets. Total interest expense decreased $1.41
million to $6.88 million for the nine months ended June 30, 2003 from $8.29
million for the nine months ended June 30, 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 2.77% for the nine months
ended June 30, 2003 from 3.71% for the nine months ended June 30, 2002. As a
result of these changes, the net interest margin decreased to 4.65% for the
nine months ended June 30, 2003 from 5.18% for the nine months ended June 30,
2002.
Provision for Loan Losses: The Company's non-performing asset ("NPA") ratio
decreased to 0.77% at June 30, 2003 from 1.31% at June 30, 2002. The
provision for loan losses decreased to $66,000 for the three months ended June
30, 2003 from $200,000 for the three months ended June 30, 2002. Management
deemed the allowance for loan losses of $3.94 million at June 30, 2003 (1.26%
of loans receivable and 180.2% of non-performing loans) adequate to provide
for probable losses based on an evaluation of known and inherent risks in the
loan portfolio at that date. The allowance for loan losses was $3.46 million
(1.08% of loans receivable and 77.0% of non-performing loans) at June 30,
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. The Company
had a net recovery of $3,000 for the current quarter compared to a net
charge-off of $186,000 in the same quarter of 2002. For the nine months ended
June 30, 2003 and 2002, net charge-offs were $40,000 and $378,000,
respectively.
Non-interest Income: Total non-interest income increased $459,000 to $1.65
million for the quarter ended June 30, 2003 from $1.19 million for the quarter
ended June 30, 2002, primarily due to a $134,000 increase in gain on sale of
securities, the recognition of $131,000 in BOLI income, and a $113,000
increase in gain on sale of loans. The gain on sale of securities was the
result of the sale of a $1.9 million mortgaged backed security. The increased
loan sale gains are primarily a result of the Bank selling $25.7 million in
fixed-rate one-to-four family loans during the current quarter. During the
same period in 2002, the Bank sold $15.5 million in fixed-rate one-to-four
family loans.
For the nine months ended June 30, 2003 non-interest income increased $1.39
million to $4.79 million from $3.40 million for the nine months ended June 30,
2002. This increase is primarily due to a $436,000 increase in gain on sale
of loans, the recognition of $400,000 in BOLI income, a $223,000 increase in
service charges on deposits, a $150,000 increase in security sale gains, and a
$149,000 increase in ATM transaction fees.
Non-interest Expense: Total non-interest expense increased by $805,000 to
$3.94 million for the three months ended June 30, 2003 from $3.14 million for
the three months ended June 30, 2002. This increase is primarily due to a
$339,000 increase in salaries and employee benefits and $252,000 in expenses
related to the core processing system conversion and related technology
improvements. 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.
The technology conversion related expenses are reflected in the income
statement under premises and equipment ($135,000) and other non-interest
expenses ($117,000).
For the nine months ended June 30, 2003 non-interest expense increased by
$1.58 million to $10.97 million from $9.39 million for the nine months ended
June 30, 2002. This increase is primarily due to a $949,000 increase in
salaries and employee benefits, technology conversion related expenses of
$271,000 and a $115,000 increase in ATM expenses.
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
LOANS RECEIVABLE BREAKDOWN
(Dollars in thousands)
The following table sets forth the composition of the Company's loan portfolio
by type of loan.
At June 30, At September 30,
2003 2002
Amount Percent Amount Percent
------------------- ------------------
Mortgage Loans:
One-to-four family (1) $ 96,584 27.21% $113,144 31.28%
Multi family 19,624 5.53 24,135 6.67
Commercial 98,406 27.72 97,644 27.00
Construction and land
development 91,920 25.90 80,144 22.16
Land 14,743 4.15 15,453 4.27
-------- ------ -------- ------
Total mortgage loans 321,277 90.51 330,520 91.38
Consumer Loans:
Home equity and second mortgage 16,577 4.67 13,718 3.79
Other 9,024 2.54 8,097 2.24
-------- ------ -------- ------
25,601 7.21 21,815 6.03
Commercial business loans 8,074 2.28 9,365 2.59
-------- ------ -------- ------
Total loans 354,952 100.00% 361,700 100.00%
Less:
Undisbursed portion of loans
in process (37,133) (32,324)
Unearned income (3,084) (3,218)
Allowance for loan losses (3,938) (3,630)
Total loans receivable, net $310,797 $322,528
======== ========
------------------
(1) Includes loans held-for-sale.
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
DEPOSIT BREAKDOWN
(Dollars in thousands)
The following table sets forth the balances of deposits in the various types
of savings accounts offered by the Bank at the dates indicated.
June 30, 2003 September 30, 2002
------------- ------------------
Non-interest bearing $ 27,749 $ 23,585
N.O.W checking 49,937 42,222
Passbook savings 49,283 40,328
Money market accounts 41,722 47,888
Certificates of deposit under $100,000 108,707 102,052
Certificates of deposit $100,000 and over 25,536 36,241
-------- --------
Total deposits $302,934 $292,316
======== ========
Timberland Bancorp, Inc. stock trades on the NASDAQ national market under the
symbol "TSBK." The Bank owns and operates branches in the state of Washington
in Hoquiam, Aberdeen, Ocean Shores, Montesano, Lacey, Puyallup, Edgewood,
Auburn, Yelm, Poulsbo, Spanaway (Bethel Station), Tumwater, Tacoma, and
Silverdale.
CONTACT:
Timberland Bancorp, Inc.
Clarence Hamre, CEO, Michael Sand, President or Dean Brydon, CFO 360/533-4747