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): January 23, 2007
Timberland Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Washington 0-23333 91-1863696
----------------------- --------- ------------
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
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
--------------------------------------------------------
On January 23, 2007, Timberland Bancorp, Inc. issued its earnings release
for the quarter ended December 31, 2006. A copy of the earnings release is
attached hereto as Exhibit 99.1, which is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
--------------------------------------------
(c) Exhibits
99.1 Press Release of Timberland Bancorp, Inc. dated January 23, 2007
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: January 23, 2007 By:/s/Dean J. Brydon
------------------
Dean J. Brydon
Chief Financial Officer
Exhibit 99.1
Contact: Michael R. Sand,
President & CEO
TIMBERLAND BANCORP, INC. Dean J. Brydon, CFO
(360) 533-4747
www.timberlandbank.com
Timberland Bancorp Reports Strong First Fiscal Quarter Earnings of $0.54
Per Share Led by Solid Loan Growth and Brisk Origination Activity
HOQUIAM, Wash. - January 23, 2007 - Timberland Bancorp, Inc. (NASDAQ: TSBK),
the holding company for Timberland Bank, today reported that strong loan growth
and excellent asset quality contributed to solid fiscal first quarter 2007
results. First quarter profits were near the record levels of its fiscal first
quarter of 2006 with net income totaling $1.95 million, or $0.54 per diluted
share, for the quarter ended December 31, 2006, compared to $2.01 million, or
$0.55 per diluted share, for the quarter ended December 31, 2005.
Quarterly Highlights (1Q07 compared to 1Q06) -
* The loan portfolio increased 15% to $452 million from $392 million.
* Total deposits increased 6% to $434 million, with non-interest
bearing deposits increasing 10%.
* Loan originations increased 23%, with continuing strength in construction
and land development lending.
* Asset quality remains strong - NPA ratio of 0.04%.
"The investment we are making in expanding our team of business bankers is
generating solid returns," said Michael Sand, President and CEO. "The addition
of five exceptional business bankers in fast-growing Pierce and King Counties
has produced a significant increase in loan originations and net loans
outstanding during the past two quarters. We are particularly pleased with the
increase in construction and commercial real estate originations that resulted
from the successful efforts of each of our lending officers."
"The increase in net loans outstanding exceeded the increase in deposits during
the quarter. As a result short term advances were obtained from the Federal
Home Loan Bank of Seattle. These advances at an average rate of approximately
5.45% contributed to a slight margin compression during the quarter. Late in
the quarter the Bank was able to take advantage of two special advance programs
offered by the FHLB to significantly reduce its interest expense by obtaining
$30 million in advances at an average rate of 4.11%. Going forward we will be
focusing on the acquisition of core deposits to support our success in
increasing net loans outstanding," Sand continued.
Led by aerospace, software and service industries Western Washington's economy
continues to generate above average growth. Solid improvements in personal
income and continued population growth are providing support for our lending
initiatives. "Our lending and deposit gathering emphasis in Western Washington
is directly linked to the strong regional economy," said Sand. The following
highlights some of the economic data detailed in the recently published 2006 -
2007 Pierce County Economic Index ("PCEI") Report:
* For 2005 and 2006, the PCEI should increase by a cumulative 10.4% one of
the best 2-year periods on record and is expected to remain solid
through 2007.
* Per capita income from 2004 through 2007 is expected to increase at an
average annual rate of 8%. By the end of 2007 per capita income is
expected to increase to $39,800 - a 25% gain in three years.
* The single family housing index is expected to increase by 4% over
2005, setting another record for total activity. For 2007, the housing
index is expected to decline by 1.2% compared to 2006. The multiple-
family market is expected to be tight and condominium conversions
should moderate in 2007.
* The office market segment should show some real gains and the market
for industrial space should remain strong through 2007. The Port of
Tacoma is forecasting a 51% increase in container business over the next
five years.
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Timberland Q1 Earnings
January 23, 2007
Page 2
Operating Results
Revenue (net interest income before provision for loan losses plus non-interest
income) for the quarter ended December 31, 2006 increased 2% to $7.8 million
from $7.6 million for the quarter ended December 31, 2005. Net interest income
before the provision for loan losses increased 4% to $6.3 million with interest
income increasing 16% and interest expense increasing 44%. Loan growth
contributed to the increase in net interest income, and partially offset rising
funding costs.
Following the industry trend, the net interest margin compressed to 4.74% for
the quarter ended December 31, 2006. In the first fiscal quarter one year ago,
Timberland's net interest margin of 4.87% was increased by 11 basis points as a
result of the collection of $131,000 ($86,000 net of tax) of non-accrual
interest and prepayment penalties. This added $0.02 per diluted share to last
year's first fiscal quarter earnings. Net interest margin also decreased from
the immediate prior quarter's net interest margin of 4.91% (or 4.80% net of
$138,000 in non-accrual interest). The margin compression was primarily due
to increased funding costs, which outpaced the increased yield on interest
earning assets. The funding cost increases were primarily a result of increased
reliance on FHLB advances to fund loan growth and increased market rates being
paid for deposit accounts. "The flat yield curve is a challenge for the banking
industry, which is seeing the lowest net interest margin level in seventeen
years," said Dean Brydon, CFO.
Non-interest income decreased 5% to $1.48 million for the current quarter from
$1.56 million for the quarter ended December 31, 2005 primarily due a reduction
in fee income from the sale of non-deposit investments.
Total operating (non-interest) expenses increased 6% to $4.9 million for the
current quarter from $4.6 million for the quarter ended December 31, 2005.
"Increased employee and advertising expenses in addition to the expenses
associated with growing our business banking team were the primary reasons for
the increase. We are also investing in new technologies that will improve
customer service and reduce costs. These new programs will be introduced in
2007 and should start contributing to our productivity in the second half of the
year," said Sand. The efficiency ratio for the first quarter of fiscal 2007
increased to 63.13% from 60.03% in the immediate prior quarter and 61.16% a year
ago.
Return on equity (ROE) was 9.94% for the quarter ended December 31, 2006,
compared to 10.70% for the quarter ended December 31, 2005. Return on average
assets (ROA) was 1.35% for the quarter ended December 31, 2006 compared to 1.46%
for the same period a year ago.
Balance Sheet Management
Total assets increased 12% on an annualized basis during the quarter and 8%
year-over-year. Assets increased to $594 million compared to $577 million at
the end of fiscal 2006 and $548 million a year ago due to strong loan portfolio
growth. Total loans increased by $27 million in the first fiscal quarter and
grew $60 million during the past year. Total loans increased by 6% to $452
million at December 31, 2006 from $425 million at September 30, 2006, and were
up 15% from the $392 million reported one year ago. Loan originations
increased 23% to $81 million for the quarter ended December 31, 2006 from $66
million for the same period one year ago. The Bank also continued to sell fixed
rate one-to-four family mortgage loans into the secondary market for
asset-liability management purposes. Fixed rate one-to-four family mortgage
loan sales totaled $7.2 million for the quarter ended December 31, 2006 compared
to $7.5 million for the same period a year ago.
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Timberland Q1 Earnings
January 23, 2007
Page 3
LOAN PORTFOLIO
($ in thousands)
Dec. 31, 2006 Sept. 30, 2006 Dec. 31, 2005
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Mortgage Loans:
One-to-four family(1) $100,204 19.1% $ 98,709 20.1% $ 97,544 21.5%
Multi-family 18,391 3.5% 17,689 3.6% 20,909 4.6%
Commercial 139,700 26.6% 137,609 28.1% 128,216 28.2%
Construction and land
development 170,788 32.5% 146,855 29.9% 128,210 28.2%
Land 34,986 6.6% 29,598 6.0% 26,921 5.9%
------- ----- ------- ----- ------- -----
Total mortgage loans 464,069 88.3% 430,460 87.7% 401,800 88.4%
Consumer Loans:
Home equity and second
mortgage 38,434 7.3% 37,435 7.6% 33,669 7.4%
Other 11,051 2.1% 11,127 2.3% 9,199 2.0%
------- ----- ------- ----- ------- -----
49,485 9.4% 48,562 9.9% 42,868 9.4%
Commercial business loans 12,136 2.3% 11,803 2.4% 9,855 2.2%
------- ----- ------- ----- ------- -----
Total loans $525,690 100.0% $490,825 100.0% $454,523 100.0%
Less:
Undisbursed portion of
construction loans in
process (66,810) (59,260) (56,049)
Unearned income (2,889) (2,798) (2,813)
Allowance for loan
losses (4,121) (4,122) (4,117)
Total loans receivable, ------- ------- -------
net $451,870 $424,645 $391,544
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(1) Includes loans held-for-sale
Total deposits increased $3 million to $434 million at December 31, 2006,
compared to $431 million at September 30, 2006, and grew 6% or $24 million from
one year ago. Core deposits comprised 87% of Timberland's total deposits at
December 31, 2006. "Increasing core deposits is a key component of our
long-term strategy and our bankers are doing a great job of building our
presence and sustaining client relationships in our home markets," Sand
commented.
DEPOSIT BREAKDOWN
($ in thousands)
Dec. 31, 2006 Sept. 30, 2006 Dec.31, 2005
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Non-interest bearing $ 55,121 13% $ 57,905 13% $ 50,070 12%
N.O.W. checking 88,428 21% 89,509 21% 91,741 23%
Savings 61,324 14% 60,235 14% 62,895 15%
Money market accounts 44,660 10% 42,378 10% 46,309 11%
Certificates of deposit
under $100,000 126,819 29% 128,183 30% 121,737 30%
------- ----- ------- ----- ------- -----
Total Core Deposits 376,352 87% 378,210 88% 372,752 91%
Certificates of deposit
$100,000 and over 57,897 13% 52,851 12% 37,924 9%
------- ----- ------- ----- ------- -----
Total Deposits $434,249 100% $431,061 100% $410,676 100%
Total shareholders' equity was $77.3 million at December 31, 2006, compared to
$79.4 million at September 30, 2006, as the Company continued to manage its
capital through stock buybacks and dividends. During the quarter Timberland
repurchased 112,505 shares for $4.2 million as it completed its current share
repurchase program and announced another 5% share repurchase
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Timberland Q1 Earnings
January 23, 2007
Page 4
program. The 112,505 shares were repurchased at an average price of $37.12 per
share. Cumulatively, Timberland has repurchased 3.6 million shares or 54.3% of
the 6.6 million shares that were issued in its initial public offering in
January 1998. The average price of the 3.6 million repurchased shares was
$16.64 per share. The Company also paid an $0.18 per share dividend during the
quarter, which represents the 35th consecutive quarter a cash dividend has been
paid.
Asset Quality
Asset quality remained solid as the non-performing assets to total asset ratio
was 0.04% at December 31, 2006 with only $1,000 in net charge-offs during the
quarter. The allowance for loan losses totaled $4.1 million at December 31,
2006, or 0.91% of loans receivable and 1,724% of non-performing loans. The
allowance for loan losses was $4.1 million, or 0.97% of loans receivable and
5,152% of non-performing loans at September 30, 2006, and at December 31, 2005
the allowance for loan losses was $4.1 million, or 1.05% of loans receivable and
152% of non-performing loans. The Company's non-performing loans totaled only
$239,000 at December 31, 2006, and consisted of three single family mortgage
loans and two consumer loans.
About Timberland Bancorp, Inc.
Timberland Bancorp, Inc. stock trades on the NASDAQ global market under the
symbol "TSBK." The Bank operates 21 branches in the state of Washington in
Hoquiam, Aberdeen, Ocean Shores, Montesano, Elma, Olympia, Lacey, Tumwater,
Yelm, Puyallup, Edgewood, Tacoma, Spanaway (Bethel Station), Gig Harbor,
Poulsbo, Silverdale, Auburn, Winlock, and Toledo.
(more)
Timberland Q1 Earnings
January 23, 2007
Page 5
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT Three Months Ended
($ in thousands, except per share) Dec. 31, Sept. 30, Dec. 31,
(unaudited) 2006 2006 2005
Interest and dividend income ------- ------- -------
Loans receivable $ 8,786 $ 8,252 $ 7,485
Investments and mortgage-backed securities 454 510 536
Dividends 420 401 323
Federal funds sold 65 97 77
Interest bearing deposits in banks 39 23 24
------- ------- -------
Total interest and dividend income 9,764 9,283 8,445
Interest expense
Deposits 2,589 2,351 1,688
Federal Home Loan Bank ("FHLB") advances 882 659 720
Other borrowings 17 13 10
------- ------- -------
Total interest expense 3,488 3,023 2,418
------- ------- -------
Net interest income 6,276 6,260 6,027
Provision for loan losses - - -
Net interest income after provision ------- ------- -------
for loan losses 6,276 6,260 6,027
Non-interest income
Service charges on deposits 706 755 720
Gain on sale of loans, net 107 122 116
BOLI net earnings 114 116 111
Escrow fees 31 33 32
Servicing income on loans sold 132 160 108
ATM transaction fees 263 284 235
Other 128 183 233
------- ------- -------
Total non-interest income 1,481 1,653 1,555
Non-interest expense
Salaries and employee benefits 2,785 2,650 2,630
Premises and equipment 624 598 609
Advertising 177 187 136
Loss (gain) from real estate operations (17) (85) (53)
ATM expenses 119 129 98
Postage and courier 105 116 115
Amortization of core deposit intangible 71 82 82
State and local taxes 139 138 160
Professional fees 177 243 187
Other 717 692 673
------- ------- -------
Total non-interest expense 4,897 4,750 4,637
Income before federal income taxes 2,860 3,163 2,945
Federal income taxes 906 1,019 939
------- ------- -------
Net income $ 1,954 $ 2,144 $ 2,006
Earnings per common share: ====== ====== ======
Basic $ 0.56 $ 0.61 $ 0.57
Diluted $ 0.54 $ 0.59 $ 0.55
Weighted average shares outstanding:
Basic 3,503,883 3,517,377 3,504,526
Diluted 3,623,108 3,645,477 3,625,620
Timberland Q1 Earnings
January 23, 2007
Page 6
TIMBERLAND BANCORP, INC.
CONSOLIDATED BALANCE SHEET
($ in thousands) (unaudited) Dec. 31, Sept 30, Dec. 31,
Assets 2006 2006 2005
Cash and due from financial institutions ------- ------- -------
Non-interest bearing $ 17,764 $ 14,870 $ 17,557
Interest-bearing deposits in banks 2,847 2,619 1,104
Federal funds sold 4,655 5,400 3,875
------- ------- -------
25,266 22,889 22,536
Investments and mortgage-backed securities:
Held-to-maturity 73 75 90
Available-for-sale 69,772 81,408 87,814
FHLB Stock 5,705 5,705 5,705
------- ------- -------
75,550 87,188 93,609
Loans receivable 454,736 426,318 394,414
Loans held-for-sale 1,255 2,449 1,247
Less: Allowance for loan losses (4,121) (4,122) (4,117)
------- ------- -------
Net loans receivable 451,870 424,645 391,544
Accrued interest receivable 2,884 2,806 2,319
Premises and equipment 16,756 16,730 16,050
Other real estate owned and other repossessed items 2 15 144
Bank owned life insurance 12,065 11,951 11,612
Goodwill 5,650 5,650 5,650
Core deposit intangible 1,434 1,506 1,752
Mortgage servicing rights 964 932 929
Other assets 1,737 2,775 1,602
------- ------- -------
Total Assets $594,178 $577,087 $547,747
======= ======= =======
Liabilities and Shareholders' Equity
Non-interest-bearing deposits 55,121 57,905 50,070
Interest-bearing deposits 379,128 373,156 360,606
------- ------- -------
Total deposits 434,249 431,061 410,676
FHLB advances 78,446 62,761 56,805
Other borrowings: repurchase agreements 1,322 947 1,305
Other liabilities and accrued expenses 2,881 2,953 3,006
------- ------- -------
Total Liabilities 516,898 497,722 471,792
------- ------- -------
Shareholders' Equity
Common stock- $.01 par value; 50,000,000 shares authorized;
December 31, 2006 3,670,861 shares issued and outstanding
September 30, 2006 3,757,676 shares issued and outstanding
December 31, 2005 3,757,037 shares issued and
outstanding 37 38 38
Additional paid-in-capital 17,380 20,888 22,013
Unearned shares- Employee Stock Ownership Plan (3,239) (3,305) (3,701)
Unearned shares- Management Recognition and
Development Plan (233) (188) -
Retained earnings 64,209 62,933 58,672
Accumulated other comprehensive loss (874) (1,001) (1,067)
------- ------- -------
Total Shareholders' Equity 77,280 79,365 75,955
------- ------- -------
Total Liabilities and Shareholders' Equity $594,178 $577,087 $547,747
======= ======= =======
Timberland Q1 Earnings
January 23, 2007
Page 7
KEY FINANCIAL RATIOS AND DATA Three Months Ended
($ in thousands, except per share)(unaudited) Dec. 31, Sept. 30, Dec. 31,
2006 2006 2005
PERFORMANCE RATIOS: ------- ------- -------
Return on average assets (a) 1.35% 1.53% 1.46%
Return on average equity (a) 9.94% 10.89% 10.70%
Net interest margin (a) 4.74% 4.91% 4.87%
Efficiency ratio 63.13% 60.03% 61.16%
Dec. 31, Sept. 30, Dec. 31,
2006 2006 2005
------- ------- -------
ASSET QUALITY RATIOS:
Non-performing loans $ 239 $ 80 $ 2,707
OREO & other repossessed assets 2 15 144
------ ------ ------
Total non-performing assets $ 241 $ 95 $ 2,851
Non-performing assets to total assets 0.04% 0.02% 0.52%
Allowance for loan losses to non-performing loans 1,724% 5,152% 152%
Book value per share (b) $21.05 $21.12 $ 20.22
Book value per share (c) $22.37 $22.44 $ 21.64
Tangible book value per share (b) (d) $19.12 $19.22 $ 18.25
Tangible book value per share (c) (d) $20.32 $20.41 $ 19.53
(a) Annualized
(b) Calculation includes ESOP shares not committed to be released
(c) Calculation excludes ESOP shares not committed to be released
(d) Calculation subtracts goodwill and core deposit intangible from the equity
component
Three Months Ended
Dec. 31,Sept. 30,Dec. 31,
AVERAGE BALANCE SHEET: 2006 2006 2005
------ ------ ------
Average total loans $439,294 $411,012 $390,776
Average total interest earning assets 529,572 510,180 495,290
Average total assets 580,114 560,941 549,361
Average total interest bearing deposits 376,365 372,371 361,620
Average FHLB advances & other borrowings 65,970 48,518 56,939
Average shareholders' equity 78,646 78,724 74,996
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.