Timberland Bancorp Reports EPS of $0.16 for Second Fiscal Quarter of 2014

Declares $0.04 Per Share Cash Dividend

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| Source: Timberland Bancorp, Inc

HOQUIAM, Wash., April 22, 2014 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (Nasdaq:TSBK) ("Timberland" or "the Company") today reported net income to common shareholders of $1.16 million, or $0.16 per diluted common share for the quarter ended March 31, 2014. This compares to net income to common shareholders of $1.41 million, or $0.20 per diluted common share, for the quarter ended December 31, 2013, and net income to common shareholders of $1.20 million, or $0.17 per diluted common share, for the quarter ended March 31, 2013. In the first six months of fiscal 2014, Timberland earned $2.56 million, or $0.37 per diluted common share, compared to $2.64 million, or $0.39 per diluted common share, in the first six months of fiscal 2013.

Timberland's Board of Directors also declared a quarterly cash dividend to common shareholders of $0.04 per common share payable on May 28, 2014 to shareholders of record on May 14, 2014.

"During the quarter ended March 31, 2014, we devoted considerable resources to improve the technology footing of the Company," said Michael R. Sand, President and CEO. "During the quarter we transitioned to a new internet banking provider, outsourced our core data processing function, outsourced our item processing function, completed the replacement of all PCs operating on the Windows XP operating system, implemented a new account opening platform, installed new customer relationship management software, installed new imaging software and planned for the transition of our debit card relationship to MasterCard from VISA. We also trained staff to effectively use the new systems and engaged the Ritz-Carlton Leadership Center to provide enhanced customer training to Timberland employees. While these investments in enhanced technology and training increased our operating expenses for the recent quarter, we anticipate that, long term, we will realize significant operational efficiencies and cost savings.

"Refinance activity has diminished significantly both nationally and in the Pacific Northwest. As a result, gain on sale income has diminished to more normal levels. During the quarter, we continued our emphasis on the generation of shorter duration assets including custom and owner/builder construction loans and C&I credits, which we anticipate will continue to grow in subsequent quarters," stated Sand.

Fiscal Second Quarter 2014 Highlights (at or for the period ended March 31, 2014):

  • Earnings per diluted common share for the current quarter were $0.16;
  • Declared a quarterly cash dividend of $0.04 per common share;
  • Net interest margin for the current quarter increased to 3.85% from 3.78% for the preceding quarter;
  • Total delinquent and non-accrual loans decreased 17% during the quarter and 39% year-over-year;
  • Non-performing assets decreased 6% during the quarter and 29% year-over-year;
  • Charge-offs improved with a net recovery of $4,000 for the current quarter compared to net charge-offs of $391,000 for the preceding quarter and $1.6 million for the comparable quarter one year ago; and
  • Book value per common share increased to $11.36, and tangible book value per common share increased to $10.55 at quarter end.

Capital Ratios and Asset Quality

Timberland Bancorp remains well capitalized with a total risk-based capital ratio of 14.65% and a Tier 1 leverage capital ratio of 10.40% at March 31, 2014.

Reflecting continued improvement in asset quality, no provision for loan losses was required for the quarter ended March 31, 2014, compared to $1.18 million in the comparable quarter one year ago. The Bank had a net recovery of $4,000 during the current quarter, compared to net charge-offs of $391,000 for the preceding quarter and $1.63 million for the comparable quarter one year ago.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 17% to $14.7 million at March 31, 2014, from $17.8 million at December 31, 2013, and decreased 39% from $24.2 million one year ago. The non-performing assets to total assets ratio improved to 3.69% at March 31, 2014, from 3.97% three months earlier and 5.14% one year ago.

Non-accrual loans decreased by 11% to $12.6 million at March 31, 2014, from $14.1 million at December 31, 2013, and decreased 38% from $20.5 million at March 31, 2013. The non-accrual loans at March 31, 2014, were comprised of 51 loans and 41 credit relationships. By dollar amount per category: 44% are secured by residential properties; 42% are secured by land; 13% are secured by commercial properties; and 1% are secured by commercial business assets.

Other real estate owned ("OREO") and other repossessed assets increased to $13.2 million at March 31, 2014, from $12.5 million at December 31, 2013, and decreased from $15.0 million at March 31, 2013. At March 31, 2014, the OREO portfolio consisted of 55 individual properties. The properties consisted of 29 land parcels totaling $5.4 million, 19 single family homes totaling $4.1 million, six commercial real estate properties totaling $3.5 million, and one multi-family property of $170,000. During the quarter ended March 31, 2014, six OREO properties totaling $1.2 million were sold for a net gain of $48,000.

Balance Sheet Management

Total assets increased by $4.5 million to $732.4 million at March 31, 2014, from $727.9 million at December 31, 2013. The increase in total assets was primarily due to a $4.0 million increase in total cash and cash equivalents.

Liquidity measured by cash and cash equivalents, CDs held for investment and available for sale investments as a percentage of total liabilities was 16.0% at March 31, 2014, compared to 15.8% at December 31, 2013, and 17.9% one year ago.

Net loans receivable decreased $1.2 million to $554.7 million at March 31, 2014, from $555.9 million at December 31, 2013. The decrease was primarily due to a $1.9 million decrease in land loan balances, a $1.8 million decrease in construction and land development loan balances, a $1.0 million decrease in multi-family loan balances and a $430,000 decrease in consumer loan balances. These decreases to net loans receivable were partially offset by a $2.7 million increase in commercial business loan balances and an $890,000 decrease in the undisbursed portion of construction loans in process.

LOAN PORTFOLIO            
             
  March 31, 2014 December 31, 2013 March 31, 2013
($ in thousands) Amount Percent Amount Percent Amount Percent
             
Mortgage Loans:            
One-to four-family $100,985 17% $100,870 17% $108,304 19%
Multi-family 47,206 8 48,212 8 47,330 8
Commercial 299,791 51 299,644 51 283,307 50
Construction and land development 51,852 9 53,693 9 39,658 7
Land 29,593 5 31,464 5 35,323 6
Total mortgage loans 529,427 90 533,883 90 513,922 90
             
Consumer Loans:            
Home equity and second mortgage 32,120 5 32,201 6 32,080 6
Other 5,613 1 5,962 1 5,570 1
Total consumer loans 37,733 6 38,163 7 37,650 7
             
Commercial business loans 20,460 4 17,733 3 20,388 3
Total loans 587,620 100% 589,779 100% 571,960 100%
Less:            
Undisbursed portion of construction loans in process (20,472)   (21,362)   (12,161)  
Deferred loan origination fees (1,707)   (1,768)   (1,699)  
Allowance for loan losses (10,749)   (10,745)   (11,313)  
Total loans receivable, net $554,692   $555,904   $546,787  
             
CONSTRUCTION LOAN COMPOSITION            
             
  March 31, 2014 December 31, 2013 March 31, 2013
($ in thousands)   Percent   Percent   Percent
    of Loan   of Loan   of Loan
  Amount Portfolio Amount Portfolio Amount Portfolio
             
Custom and owner / builder $47,365 8% $46,789 8% $32,515 6%
Speculative one- to four-family 2,054 1 2,104 -- 1,718 --
Commercial real estate 1,993 -- 4,467 1 4,521 1
Multi-family (including condominium) 440 -- 143 -- 345 --
Land development -- -- 190 -- 559 --
Total construction loans $51,852 9% $53,693 9% $39,658 7%

Timberland originated $31.9 million in loans during the quarter ended March 31, 2014, compared to $52.9 million for the preceding quarter and $58.1 million for the comparable 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 March 31, 2014, $5.2 million fixed-rate one-to four-family mortgage loans were sold compared to $10.3 million for the preceding quarter and $29.0 million for the comparable quarter ended one year ago.

Timberland's mortgage-backed securities ("MBS") and other investments increased by $2.0 million during the quarter to $8.5 million at March 31, 2014, from $6.5 million at December 31, 2013, primarily due to the purchase of additional U.S. government agency securities. Private label MBS totaling $747,000 were sold during the quarter resulting in a net increase to non-interest income of $57,000 [$89,000 recovery to previously recorded other than temporary impairment ("OTTI") and a $32,000 loss on the sale of MBS].

DEPOSIT BREAKDOWN            
($ in thousands)            
  March 31, 2014 December 31, 2013 March 31, 2013
  Amount Percent Amount Percent Amount Percent
Non-interest bearing $95,607 16% $98,585 17% $80,938 14%
N.O.W. checking 160,049 26 155,472 26 152,068 25
Savings 92,537 15 91,468 15 91,790 15
Money market 94,543 16 90,181 15 89,489 15
Certificates of deposit under $100 101,413 17 104,400 17 118,752 20
Certificates of deposit $100 and over 59,034 10 60,186 10 68,548 11
Certificates of deposit – brokered 1,191  -- 1,191  -- --  --
Total deposits $604,374 100% $601,483 100% $601,585 100%

Total deposits increased $2.9 million to $604.4 million at March 31, 2014, from $601.5 million at December 31, 2013, primarily as a result of a $4.6 million increase in N.O.W. checking account balances, a $4.4 million increase in money market account balances and a $1.1 million increase in savings account balances. These increases were partially offset by a $4.1 million decrease in certificates of deposit account balances and a $3.0 million decrease in non-interest bearing account balances.

Total shareholders' equity increased $936,000 to $80.0 million at March 31, 2014, from $79.1 million at December 31, 2013. The increase in shareholders' equity was primarily due to net income of $1.16 million for the quarter, which was partially offset by dividend payments of $282,000 to common shareholders.  Book value per common share increased to $11.36 and tangible book value per common share increased to $10.55 at March 31, 2014.

Operating Results

Fiscal second quarter operating revenue [net interest income before provision for loan losses, plus non-interest income excluding OTTI charges / recoveries, gains or losses on sale of investments, valuation allowances or recoveries on mortgage servicing rights ("MSRs")], decreased 3% to $8.39 million from $8.66 million for the preceding quarter and decreased 7% from the $9.02 million for the comparable quarter one year ago. The decrease in revenue was primarily a result of a decrease in gain on sale of loans as refinance activity on one-to four family home loans slowed. Operating revenue decreased 5% to $17.05 million for the first six months of fiscal 2014 from $17.88 million for the comparable period one year ago.

Net interest income decreased slightly to $6.44 million for the quarter ended March 31, 2014, from $6.46 million for the preceding quarter and was level with the comparable quarter one year ago. The net interest margin for the current quarter increased to 3.85% from 3.78% for the preceding quarter and 3.83% for the comparable quarter one year ago. For the first six months of fiscal 2014, net interest income increased 1% to $12.90 million from $12.83 million for the first six months of fiscal 2013. Timberland's net interest margin for the first six months of fiscal 2014 increased to 3.81% from 3.80% for the first six months of 2013.

Non-interest income decreased 8% to $2.01 million for the quarter ended March 31, 2014, from $2.20 million in the preceding quarter and 28% from $2.78 million for the comparable quarter one year ago. The decrease in non-interest income compared to the preceding quarter was primarily due to a $130,000 decrease in gain on sale of loans and a $109,000 decrease in service charges on deposits. The decrease in gains on sale of loans was primarily due to a decrease in the dollar volume of fixed-rate one-to four-family loans sold during the current quarter as refinance activity decreased. The decrease in service charges on deposits was primarily due to a decrease in overdraft related fees.  Fiscal year-to-date non-interest income decreased 23% to $4.21 million from $5.49 million for the first six months of fiscal 2013. The decrease was primarily due to a decrease in gain on sale of loans and a decrease in the valuation recovery on MSRs.

Total operating (non-interest) expenses increased 8% to $6.75 million for the second fiscal quarter from $6.24 million for the preceding quarter and 9% from $6.18 million for the comparable quarter one year ago. The increased expense for the current quarter compared to the preceding quarter were primarily the result of a $238,000 increase in OREO and other repossessed assets expense and a $132,000 increase in ATM and debit card processing expense. The increase in OREO related expense was primarily due to fair value write-downs on several properties. The increase in ATM and debit card processing expense was primarily due to conversion related expenses from the Company's technology investment to upgrade its electronic funds transfer ("EFT") platform. Fiscal year-to-date operating expenses increased 3% to $13.00 million from $12.56 million for the first six months of fiscal 2013.

The provision for income taxes decreased $265,000 to $537,000 for the quarter ended March 31, 2014, from $802,000 for the preceding quarter, primarily due to lower income before income taxes. 

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).   

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 loan loss 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 Board of Governors of the Federal Reserve System 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, institute a formal or informal enforcement action or 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 or impose additional requirements or restrictions, which could adversely affect our liquidity and earnings; 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 including as a result of Basel III; the impact of the Dodd Frank Wall Street Reform and Consumer Protection Act and the implementation of related rules and regulations; our ability to attract and retain deposits;  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 consolidated 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; 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 2014 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 BANCORP INC. AND SUBSIDIARY      
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended
($ in thousands, except per share amounts) March 31, Dec. 31, March 31,
(unaudited) 2014 2013 2013
Interest and dividend income      
Loans receivable $7,255 $7,318 $7,395
MBS and other investments 64 61 70
Dividends from mutual funds and Federal Home Loan Bank ("FHLB") stock 6 8 5
Interest bearing deposits in banks 87 94 82
Total interest and dividend income 7,412 7,481 7,552
       
Interest expense      
Deposits 514 551 650
FHLB advances 461 471 461
Total interest expense 975 1,022 1,111
Net interest income 6,437 6,459 6,441
       
Provision for loan losses -- -- 1,175
Net interest income after provision for loan losses 6,437 6,459 5,266
       
Non-interest income      
(OTTI) recovery on MBS and other investments, net 89 (2) (25)
Loss on sale of MBS and other investments, net (32) -- --
Service charges on deposits 883 992 827
Gain on sale of loans, net 172 302 833
Bank owned life insurance ("BOLI") net earnings 143 115 144
Valuation recovery on MSRs -- -- 221
ATM and debit card interchange transaction fees 573 585 521
Other 185 203 257
Total non-interest income, net 2,013 2,195 2,778
       
Non-interest expense      
Salaries and employee benefits 3,434 3,380 3,086
Premises and equipment 647 693 725
Advertising 172 178 172
OREO and other repossessed assets expense, net 397 159 506
ATM and debit card processing 358 226 196
Postage and courier 110 96 109
Amortization of core deposit intangible ("CDI") 29 29 32
State and local taxes 121 117 157
Professional fees 211 183 192
FDIC insurance 160 162 128
Other insurance 40 39 43
Loan administration and foreclosure 138 109 49
Data processing and telecommunications 329 330 305
Deposit operations 225 198 161
Other 383 342 323
Total non-interest expense 6,754 6,241 6,184
       
Income before income taxes $1,696 $2,413 $1,860
Provision for income taxes 537 802 582
Net income 1,159 1,611 1,278
       
Preferred stock dividends -- (136) (207)
Preferred stock discount accretion -- (70) (126)
Discount on redemption of preferred stock -- -- 255
Net income to common shareholders $1,159 $1,405 $1,200
       
Net income per common share:      
Basic $0.17 $0.20 $0.18
Diluted 0.16 0.20 0.17
       
Weighted average common shares outstanding:      
Basic 6,856,633 6,853,683 6,815,782
Diluted 7,033,979 6,978,385 6,889,504
     
TIMBERLAND BANCORP INC. AND SUBSIDIARY    
CONSOLIDATED STATEMENTS OF INCOME Six Months Ended
($ in thousands, except per share amounts) March 31, March 31,
(unaudited) 2014 2013
Interest and dividend income    
Loans receivable $14,573 $14,809
MBS and other investments 124 147
Dividends from mutual funds and FHLB stock 15 17
Interest bearing deposits in banks 181 168
Total interest and dividend income 14,893 15,141
     
Interest expense    
Deposits 1,064 1,378
FHLB advances and other borrowings 933 933
Total interest expense 1,997 2,311
Net interest income 12,896 12,830
     
Provision for loan losses -- 1,375
Net interest income after provision for loan losses 12,896 11,455
     
Non-interest income    
(OTTI) recovery on MBS and other investments, net 87 (35)
Loss on sale of MBS and other investments, net (32) --
Service charges on deposits 1,874 1,774
Gain on sale of loans, net 474 1,475
BOLI net earnings 258 287
Valuation recovery on MSRs -- 475
ATM and debit card interchange transaction fees 1,158 1,036
Other 389 481
Total non-interest income, net 4,208 5,493
     
Non-interest expense    
Salaries and employee benefits 6,813 6,200
Premises and equipment 1,340 1,415
Advertising 349 349
OREO and other repossessed assets expense, net 555 794
ATM and debit card processing 585 417
Postage and courier 207 209
Amortization of CDI 58 65
State and local taxes 238 296
Professional fees 394 434
FDIC insurance 321 369
Other insurance 79 95
Loan administration and foreclosure 248 187
Data processing and telecommunications 659 592
Deposit operations 423 338
Other 726 801
Total non-interest expense 12,995 12,561
     
Income before income taxes $4,109 $4,387
Provision for income taxes 1,339 1,401
Net income 2,770 2,986
     
Preferred stock dividends (136) (408)
Preferred stock discount accretion (70) (189)
Discount on redemption of preferred stock -- 255
Net income to common shareholders $2,564 $2,644
     
Net income per common share:    
Basic $0.37 $0.39
Diluted 0.37 0.39
     
Weighted average common shares outstanding:    
Basic 6,855,142 6,815,782
Diluted 7,005,877 6,854,879
       
TIMBERLAND BANCORP INC. AND SUBSIDIARY      
CONSOLIDATED BALANCE SHEETS      
($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31,
  2014 2013 2013
Assets      
Cash and due from financial institutions $11,437 $11,508 $11,250
Interest-bearing deposits in banks 58,804 54,730 74,550
Total cash and cash equivalents 70,241 66,238 85,800
       
Certificates of deposit ("CDs") held for investment, at cost 31,385 32,428 26,057
MBS and other investments:      
Held to maturity, at amortized cost 5,511 2,617 3,060
Available for sale, at fair value 2,991 3,930 4,463
FHLB stock 5,351 5,401 5,553
       
Loans receivable 564,109 565,655 554,313
Loans held for sale 1,332 994 3,787
Less: Allowance for loan losses (10,749) (10,745) (11,313)
Net loans receivable 554,692 555,904 546,787
       
Premises and equipment, net 17,785 17,914 18,126
OREO and other repossessed assets, net 13,208 12,483 15,031
BOLI 17,361 17,217 16,812
Accrued interest receivable 2,003 2,092 2,081
Goodwill 5,650 5,650 5,650
Core deposit intangible 61 90 184
Mortgage servicing rights, net 1,958 2,144 2,412
Prepaid FDIC insurance assessment -- -- 758
Other assets 4,220 3,825 5,347
Total assets $732,417 $727,933 $738,121
       
Liabilities and shareholders' equity      
Deposits: Non-interest-bearing demand $95,607 $98,585 $80,938
Deposits: Interest-bearing 508,767 502,898 520,647
Total deposits 604,374 601,483 601,585
       
FHLB advances 45,000 45,000 45,000
Repurchase agreements -- -- 549
Other liabilities and accrued expenses 3,019 2,362 2,456
Total liabilities 652,393 648,845 649,590
Shareholders' equity      
Preferred stock, Series A, $.01 par value; 1,000,000 shares authorized; redeemable at $1,000 per share;       
12,065 shares issued and outstanding – March 31,2013  -- -- 11,842
Common stock, $.01 par value; 50,000,000 shares authorized;      
7,045,036 shares issued and outstanding – March 31, 2013      
7,047,636 shares issued and outstanding – December 31, 2013      
7,045,936 shares issued and outstanding – March 31, 2014  10,663 10,614 10,524
Unearned shares- Employee Stock Ownership Plan (1,322) (1,388) (1,587)
Retained earnings 71,088 70,211 68,198
Accumulated other comprehensive loss (405) (349) (446)
Total shareholders' equity 80,024 79,088 88,531
Total liabilities and shareholders' equity $732,417 $727,933 $738,121
   
KEY FINANCIAL RATIOS AND DATA  Three Months Ended
($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31,
  2014 2013 2013
PERFORMANCE RATIOS:      
Return on average assets (a) 0.63% 0.87% 0.69%
Return on average equity (a) 5.83% 7.28% 5.56%
Net interest margin (a) 3.85% 3.78% 3.83%
Efficiency ratio 79.93% 72.12% 67.08%
       
  Six Months Ended
  March 31,   March 31,
  2014   2013
PERFORMANCE RATIOS:      
Return on average assets (a) 0.75%   0.81%
Return on average equity (a)  6.59%    6.54%
Net interest margin (a) 3.81%   3.80%
Efficiency ratio 75.98%   68.55%
       
       
  As of or for Three Months Ended
  March 31, Dec. 31, March 31,
  2014 2013 2013
ASSET QUALITY RATIOS AND DATA:      
Non-accrual loans $12,649 $14,141 $20,450
Loans past due 90 days and still accruing -- 153 158
Non-performing investment securities 1,204 2,092 2,264
OREO and other repossessed assets 13,208 12,483 15,031
Total non-performing assets (b) $27,061 $28,869 $37,903
       
       
Non-performing assets to total assets (b) 3.69% 3.97% 5.14%
Net charge-offs (recoveries) during quarter  $ (4) $391 $1,631
       
Allowance for loan losses to non-accrual loans 85% 76% 55%
Allowance for loan losses to loans receivable (c) 1.90% 1.90% 2.03%
Troubled debt restructured loans on accrual status (d) $17,284 $18,260 $13,012
       
CAPITAL RATIOS:      
Tier 1 leverage capital 10.40% 10.10% 11.43%
Tier 1 risk based capital 13.38% 13.13% 14.95%
Total risk based capital 14.65% 14.39% 16.21%
Tangible capital to tangible assets (e) 10.23% 10.16% 11.29%
       
       
BOOK VALUES:      
Book value per common share $11.36 $11.22 $10.89
Tangible book value per common share (e) 10.55 10.41 10.06
       
(a) Annualized
(b) Non-performing assets include non-accrual loans, loans past due 90 days and still accruing, non-performing investment securities and OREO and other repossessed assets. Troubled debt restructured loans on accrual status are not included. 
(c) Includes loans held for sale and is before the allowance for loan losses.
(d) Does not include troubled debt restructured loans totaling $2,812, $3,176 and $10,832 reported as non-accrual loans at March 31, 2014, December 31, 2013 and March 31, 2013, respectively. 
(e) Calculation subtracts goodwill and core deposit intangible from the equity component and from assets.
   
AVERAGE CONSOLIDATED BALANCE SHEETS: Three Months Ended
($ in thousands) (unaudited) March 31, Dec. 31, March 31,
  2014 2013 2013
       
Average total loans $568,448 $562,697 $557,426
Average total interest-bearing assets (a) 668,628 684,055 673,109
Average total assets 732,513 743,549 738,818
Average total interest-bearing deposits 505,756 513,997 518,834
Average FHLB advances and other borrowings 45,000 45,000 45,599
Average shareholders' equity 79,497 88,528 92,055
       
  Six Months Ended
  March 31,   March 31,
  2014   2013
       
Average total loans $565,541   $555,405
Average total interest-bearing assets (a) 676,422   674,612
Average total assets 738,091   739,332
Average total interest-bearing deposits 509,922   519,073
Average FHLB advances and other borrowings 45,000   45,625
Average shareholders' equity 84,125   91,381
       
(a) Includes loans and MBS on non-accrual status
Michael R. Sand,
President & CEO
Dean J. Brydon, CFO
(360) 533-4747
www.timberlandbank.com