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, 2006
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
---------------------------------------- ---------
(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, 2006, Timberland Bancorp, Inc. issued its earnings release
for the quarter ended December 31, 2005. 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, 2006
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, 2006 By: /s/Dean J. Brydon
--------------------------
Dean J. Brydon
Chief Financial Officer
Exhibit 99.1
==============================================================================
PRESS RELEASE: FOR IMMEDIATE PUBLICATION
----------------------------------------
For further information contact: Michael R. Sand, President & CEO
Dean J. Brydon, CFO
At (360) 533-4747
==============================================================================
Timberland Bancorp, Inc. Announces Record Earnings
* Net Income Increases by 34%
* Diluted Earnings Per Share Increases by 38%
* Return on Equity Increases by 31%
HOQUIAM, Wash. - January 23, 2006 - Timberland Bancorp, Inc. (Nasdaq: TSBK),
("Company") the holding company for Timberland Bank, ("Bank"), today reported
record net income of $2.01 million, or $0.55 per diluted share, for the
quarter ended December 31, 2005. This compares to net income of $1.49
million, or $0.40 per diluted share that the Company earned for the quarter
ended December 31, 2004. The increased earnings per share was primarily a
result of increased net interest income and decreased non-interest expenses.
"We are pleased with the operating results achieved during our first
fiscal quarter," stated Timberland's President and CEO, Michael Sand. "While
the current interest rate environment introduces challenges to margin
management, the Company's expanded interest margin contributed to increased
profitability for the quarter. The Company recorded increases in net income
and return on equity of 34% and 31% respectively, while diluted earnings per
share increased by 38% as compared to the like quarter in the prior fiscal
year. Loan originations increased by 7% to nearly $66 million for the quarter
ended December 31, 2005 from $61 million for the quarter ended December 31,
2004. Assets decreased slightly as the determination was made to liquidate
lower yielding assets to reduce higher cost advances from the Federal Home
Loan Bank of Seattle," Sand also stated.
The Company also announced that it has declared a quarterly cash dividend of
$0.16 per share of common stock for shareholders of record as of the close of
business on February 9, 2006, payable on February 23, 2006. This will be the
32nd consecutive quarter that Timberland has paid a cash dividend.
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
1
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
For the three months ended December 31, 2005 and 2004
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
December 31,
2005 2004
--------------------------
Interest and Dividend Income
Loans receivable $ 7,485 $ 6,507
Investments and mortgage-backed securities 536 389
Dividends 323 266
Federal funds sold 77 112
Interest bearing deposits in banks 24 28
--------------------------
Total interest and dividend income 8,445 7,302
Interest Expense
Deposits 1,688 1,179
Federal Home Loan Bank advances 720 750
Other borrowings - repurchase agreements 10 5
--------------------------
Total interest expense 2,418 1,934
--------------------------
Net interest income 6,027 5,368
Provision for Loan Losses -- --
--------------------------
Net interest income after provision
for loan losses 6,027 5,368
Non-Interest Income
Service charges on deposits 720 698
Gain on sale of loans, net 116 348
BOLI net earnings 111 99
Escrow fees 32 35
Servicing income on loans sold 108 40
ATM transaction fees 235 196
Other 233 123
--------------------------
Total non-interest income 1,555 1,539
Non-interest Expense
Salaries and employee benefits 2,630 2,650
Premises and equipment 609 511
Advertising 136 166
Loss (gain) from real estate operations (53) (27)
ATM expenses 98 112
Postage and courier 115 158
Amortization of core deposit intangible 82 85
State and local taxes 160 94
Professional fees 208 185
Other 652 826
--------------------------
Total non-interest expense 4,637 4,760
Income before federal income taxes 2,945 2,147
Federal Income Taxes 939 653
--------------------------
Net Income $ 2,006 $ 1,494
Earnings Per Common Share:
Basic $0.57 $0.42
Diluted $0.55 $0.40
Weighted average shares outstanding:
Basic 3,504,526 3,550,007
Diluted 3,625,620 3,717,162
2
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
SUMMARY BALANCE SHEETS
December 31, 2005 and September 30, 2005
(Dollars in thousands)
(unaudited)
December 31, September 30,
2005 2005
-------------------------
ASSETS
Cash and due from financial institutions:
Non-interest bearing $ 17,557 $ 20,015
Interest bearing deposits in banks 1,104 3,068
Federal funds sold 3,875 5,635
-------------------------
22,536 28,718
Investments and mortgage-backed securities:
Held to maturity 90 104
Available for sale 87,814 89,595
Federal Home Loan Bank stock 5,705 5,705
-------------------------
93,609 95,404
Loans receivable 393,772 389,853
Loans held for sale 1,889 2,355
Less: Allowance for loan losses (4,117) (4,099)
-------------------------
Total loans 391,544 388,109
Accrued interest receivable 2,319 2,294
Premises and equipment 16,050 15,862
Real estate owned and other repossessed items 144 509
Bank owned life insurance ("BOLI") 11,612 11,502
Goodwill 5,650 5,650
Core deposit intangible 1,752 1,834
Mortgage servicing rights 929 928
Other assets 1,602 1,955
-------------------------
TOTAL ASSETS $ 547,747 $ 552,765
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $ 410,676 $ 411,665
Federal Home Loan Bank advances 56,805 62,353
Other borrowings: repurchase agreements 1,305 781
Other liabilities and accrued expenses 3,006 3,324
-------------------------
TOTAL LIABILITIES 471,792 478,123
-------------------------
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 50,000,000
shares authorized; December 31, 2005 -
3,757,037 shares issued and outstanding
September 30, 2005 - 3,759,937 shares
issued and outstanding 38 38
Additional paid in capital 22,013 22,040
Unearned shares - Employee Stock Ownership Plan (3,701) (3,833)
Retained earnings 58,672 57,268
Accumulated other comprehensive loss (1,067) (871)
-------------------------
TOTAL SHAREHOLDERS' EQUITY 75,955 74,642
-------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 547,747 $ 552,765
=========================
3
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
KEY FINANCIAL RATIOS AND DATA
(Dollars in thousands, except per share data)
For the Three Months Ended
December 31, September 30, December 31,
2005 2005 2004
-----------------------------------------
PERFORMANCE RATIOS:
Return on average assets (1) 1.46% 1.33% 1.15%
Return on average equity (1) 10.70% 10.03% 8.17%
Net interest margin (1) 4.87% 4.56% 4.58%
Efficiency ratio 61.16% 62.96% 68.92%
December 31, September 30, December 31,
2005 2005 2004
-----------------------------------------
ASSET QUALITY RATIOS:
Non-performing loans $ 2,707 $ 2,926 $ 3,003
REO & other repossessed assets 144 509 346
Total non-performing assets 2,851 3,435 3,349
Non-performing assets to total assets 0.52% 0.62% 0.63%
Allowance for loan losses to
non-performing loans 152.09% 140.09% 133.00%
Book Value Per Share(2) $ 20.22 $ 19.85 $ 19.03
Book Value Per Share(3) 21.64 21.30 20.52
Tangible Book Value Per Share(2)(4) 18.25 17.86 17.04
Tangible Book Value Per Share(3)(4) 19.53 19.16 18.37
-------------------
(1) Annualized
(2) Calculation includes ESOP shares not committed to be released
(3) Calculation excludes ESOP shares not committed to be released
(4) Calculation subtracts goodwill and core deposit intangible from equity
component
For the Three Months Ended
December 31, September 30, December 31,
2005 2005 2004
-----------------------------------------
AVERAGE BALANCE SHEET:
Average Total Loans $ 390,776 $ 392,596 $ 358,336
Average Total Interest
Earning Assets 495,290 502,453 469,317
Average Total Assets 549,361 544,750 521,680
Average Total Interest Bearing
Deposits 361,620 363,150 347,782
Average FHLB Advances and Other
Borrowings 56,939 63,745 55,414
Average Shareholders' Equity 74,996 73,310 73,135
4
Comparison of Financial Condition at December 31, 2005 and September 30, 2005
Total Assets: Total assets decreased $5.02 million to $547.75 million at
December 31, 2005 from $552.77 million at September 30, 2005 primarily due to
a $6.18 million decrease in cash and due from financial institutions and a
$1.80 million decrease in investments and mortgage backed securities.
Approximately $5.55 million in net cash was used to repay higher cost advances
from the Federal Home Loan Bank of Seattle. These decreases were partially
offset by a $3.44 million increase in net loans receivable.
Investments: Investment securities decreased by $1.80 million to $93.61
million at December 31, 2005 from $95.40 million at September 30, 2005, due to
regular amortization and prepayments on mortgage-backed securities.
Loans: Net loans receivable increased by $3.44 million to $391.54 million at
December 31, 2005 from $388.11 million at September 30, 2005. The increase in
the portfolio was primarily a result of a $3.37 million increase in commercial
real estate loans, a $2.46 million increase in construction loans (net of
undisbursed portion), a $1.94 million increase in land loans, a $1.24 million
increase in consumer loans, and a $739,000 increase in multi-family loans.
Partially offsetting these increases were decreases of $4.22 million in
one-to-four family mortgage loans, and $2.16 million in commercial business
loans.
Loan demand remained strong during the current quarter as loan originations
totaled $65.78 million compared to $61.44 million for the same period a year
earlier. Loan portfolio growth during the quarter was, however, impacted by
the repayment of $5.80 million in loans secured by a particularly successful
ocean front condominium project and the sale of fixed rate one-to-four family
mortgages. The Bank sold fixed rate one-to-four family mortgage loans
totaling $7.53 million during the quarter ended December 31, 2005 compared to
$3.32 million for the same period one year earlier. A portion of the loans
originated during the quarter were construction loans. Undisbursed
construction loan balances increased by $13.28 million to $56.05 million at
December 31, 2005.
Deposits: Deposits decreased by $989,000 to $410.68 million at December 31,
2005 from $411.67 million at September 30, 2005. The deposit decrease is
comprised of a $2.99 million decrease in money market accounts, a $1.74
million decrease in N.O.W. checking accounts, a $1.72 million decrease in
non-interest bearing accounts, and a $1.38 million decrease in savings
accounts. These decreases were offset by a $6.83 million increase in
certificates of deposit accounts.
Shareholders' Equity: Total shareholders' equity increased by $1.31 million to
$75.96 million at December 31, 2005 from $74.64 million at September 30, 2005,
primarily due to net income of $2.00 million and a $161,000 increase to
additional paid in capital from the exercise of stock options and vesting
associated with the Bank's benefit plans. Also increasing shareholders'
equity was a decrease from September 30, 2005 of $132,000 in the equity
component related to unearned shares issued to the Employee Stock Ownership
Plan. Partially offsetting these increases to shareholders' equity were the
payment of $602,000 in dividends to shareholders, the repurchase of 8,200
shares of the Company's stock for $193,000, and a $196,000 increase in
accumulated other comprehensive loss.
On April 7, 2005, the Company announced a plan to repurchase up to 5% of the
Company's outstanding shares, or 187,955 shares. This represents the
Company's 13th stock repurchase plan. As of December 31, 2005, the Company
had repurchased 36,050 of these shares at an average price of $23.26.
Cumulatively the Company has repurchased 3,375,321 (51.0%) of the 6,612,500
shares that were issued when the Company went public in January 1998. The
3,375,321 shares have been repurchased at an average price of $15.41 per
share.
Comparison of Operating Results for the Three Months Ended December 31, 2005
and 2004
Net Income: Net income for the quarter ended December 31, 2005 increased to
$2.00 million, or $0.55 per diluted share ($0.57 per basic share) from $1.49
million, or $0.40 per diluted share ($0.42 per basic share) for the quarter
ended December 31, 2004. The $0.15 increase in diluted earnings per share for
the quarter ended December 31, 2005 was primarily a result of a $659,000
($435,000 net of income tax - $0.12 per diluted share) increase in net
interest income after provision for loan losses, a $123,000 ($81,000 net of
income tax - $0.02 per diluted share) decrease in non-interest
5
expense, and a lower number of weighted average shares outstanding, which
increased diluted earnings per share by approximately $0.01.
Net Interest Income: Net interest income increased $659,000 to $6.03 million
for the quarter ended December 31, 2005 from $5.37 million for the quarter
ended December 31, 2004, primarily due to a larger interest earning asset base
and an increase in the average yield on interest earning assets. Total
interest income increased $1.14 million to $8.45 million for the quarter ended
December 31, 2005 from $7.30 million for the quarter ended December 31, 2004
as average total interest earning assets increased by $25.97 million. The
yield on interest earning assets increased to 6.82% for the quarter ended
December 31, 2005 from 6.22% for the quarter ended December 31, 2004. The
collection of delinquent interest on two non-accrual loans that paid off
during the quarter contributed to a net decrease in non-accrual interest of
$49,000. The repayment of these two non-accrual loans also contributed to a
net increase of $82,000 in late fee income which is recorded as interest
income.
Partially offsetting the increased interest income was an increase in interest
expense as average interest bearing deposits and borrowings increased and the
interest rates paid for deposits increased. Total interest expense increased
by $484,000 to $2.42 million for the quarter ended December 31, 2005 from
$1.93 million for the quarter ended December 31, 2004 as average interest
bearing liabilities increased $15.36 million. Also contributing to increased
interest expense was an increase in the average rate paid for these funding
sources to 2.29% for the quarter ended December 31, 2005 from 1.90% for the
quarter ended December 31, 2004. As a result of these changes, the net
interest margin increased to 4.87% for the quarter ended December 31, 2005
from 4.58% for the quarter ended December 31, 2004.
Provision for Loan Losses: There was no provision for loan losses made in the
current quarter. The allowance for loan losses, however, did increase during
the current quarter due to a net recovery of $18,000. Based on its
comprehensive analysis, management deemed the allowance for loan losses of
$4.12 million at December 31, 2005 (1.05% of loans receivable and 152.09% 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 $3.99 million (1.10% of loans receivable and
133.00% of non-performing loans) at December 31, 2004. For the quarters ended
December 31, 2005 and 2004, the Company had net recoveries of $18,000 and
$3,000, respectively.
The Company's non-performing assets to total assets ratio decreased to 0.52%
at December 31, 2005 from 0.62% at September 30, 2005 and 0.63% at December
31, 2004. The non-performing loan total of $2.71 million at December 31, 2005
consisted of a $1.37 million commercial construction loan, $1.07 million in
one-to-four family mortgage loans, $263,000 in commercial real estate loans,
and $10,000 in consumer loans.
Non-interest Income: Total non-interest income increased $16,000 to $1.56
million for the quarter ended December 31, 2005 from $1.54 million for the
quarter ended December 31, 2004. Total non-interest income increased as
income from service charges on deposits, ATM transaction fees, bank owned life
insurance and the sale of non-deposit investment products all increased from a
year ago. Partially offsetting these increases was a decrease in income from
loan sales, (gain on sale of loans and servicing income on loans sold) which
decreased by $164,000 to $224,000 for the current quarter from $388,000 for
the same period a year earlier. Income from loan sales was larger in the
period a year ago due the sale of the Bank's credit card portfolio, which
resulted in a gain of $245,000 ($162,000 net of income tax).
Non-interest Expense: Total non-interest expense decreased by $123,000 to
$4.64 million for the quarter ended December 31, 2005 from $4.76 million for
the quarter ended December 31, 2004. Non-interest expenses were higher a year
ago primarily due to expenses of $183,000 related to the branch acquisition in
October 2004 and vesting expenses of $167,000 related to one of the Company's
benefit plans. Partially offsetting these expense decreases during the
current quarter were increases in expenses related to premises and equipment
and state and local taxes. As a result of the decreased expenses and
increased revenue, the Company's efficiency ratio decreased to 61.16% for the
quarter ended December 31, 2005 from 68.92% for the quarter ended December 31,
2004.
The Company also began expensing stock options under SFAS 123(R), which became
effective for the Company on October 1, 2005. Total stock option expenses of
$5,000 were recorded for the quarter ended December 31, 2005.
6
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
LOANS RECEIVABLE BREAKDOWN
(Dollars in thousands)
At December 31, At September 30,
2005 2005
Amount Percent Amount Percent
------------------- ------------------
Mortgage Loans:
One-to-four family (1) $ 97,544 21.46% $101,763 23.24%
Multi family 20,909 4.60 20,170 4.61
Commercial 128,216 28.21 124,849 28.51
Construction and
land development 128,210 28.21 112,470 25.68
Land 26,921 5.92 24,981 5.71
-------- ------ -------- ------
Total mortgage loans 401,800 88.40 384,233 87.75
Consumer Loans:
Home equity and second
mortgage 33,669 7.41 32,298 7.38
Other 9,199 2.02 9,330 2.13
-------- ------ -------- ------
42,868 9.43 41,628 9.51
Commercial business loans 9,855 2.17 12,013 2.74
-------- ------ -------- ------
Total loans 454,523 100.00% 437,874 100.00%
Less:
Undisbursed portion of
construction loans
in process (56,049) (42,771)
Unearned income (2,813) (2,895)
Allowance for loan losses (4,117) (4,099)
-------- --------
Total loans receivable, net $391,544 $388,109
======== ========
----------------
(1) Includes loans held-for-sale.
7
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
DEPOSIT BREAKDOWN
(Dollars in thousands)
December 31, 2005 September 30, 2005
----------------- ------------------
Non-interest bearing $ 50,070 $ 51,792
N.O.W checking 91,741 93,477
Savings 62,895 64,274
Money market accounts 46,309 49,295
Certificates of deposit under $100,000 121,737 117,618
Certificates of deposit $100,000 and over 37,924 35,209
-------- --------
Total deposits $410,676 $411,665
======== ========
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, Elma, Olympia, Lacey, Tumwater,
Yelm, Puyallup, Edgewood, Tacoma, Spanaway (Bethel Station), Gig Harbor,
Poulsbo, Silverdale, Auburn, Winlock, and Toledo.
CONTACT:
Timberland Bancorp, Inc.
Michael Sand, President & CEO or Dean Brydon, CFO 360/533-4747
8