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): November 7, 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 November 7, 2006, Timberland Bancorp, Inc. issued its earnings release
for the quarter ended September 30, 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 November 7, 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: November 7, 2006 By: /s/Dean J. Brydon
--------------------------
Dean J. Brydon
Chief Financial Officer
Exhibit 99.1
Contact: Michael R. Sand,
President & CEO
Dean J. Brydon, CFO
(360) 533-4747
www.timberlandbank.com
Timberland Bancorp, Inc. Announces Record Earnings for FY06
Diluted Earnings Per Share Increases 23%
and Net Interest Margin Increases by 31 Basis Points
HOQUIAM, Wash. - November 7, 2006 - Timberland Bancorp, Inc. (NASDAQ: TSBK),
("Company") the holding company for Timberland Bank, ("Bank") today reported
record profits, strong loan growth and excellent asset quality for its fiscal
year ended September 30, 2006. Fiscal year 2006, net income increased 23% to
$8.16 million, or $2.24 per diluted share, compared to $6.62 million, or $1.82
per diluted share in fiscal year 2005. Fiscal fourth quarter 2006 net income
increased 17% to $2.14 million, or $0.59 per diluted share, from $1.84
million, or $0.51 per diluted share, in the fourth quarter of fiscal 2005.
Fiscal 2006 Financial Highlights
* Annual diluted earnings per share (EPS) increased 23%.
* Quarterly diluted EPS increased 16%.
* Net interest margin increased 31 basis points to 4.91% during the
year.
* Non performing asset to total assets ratio improved to 0.02% at year
end.
* Total loans increased 9% to $425 million.
* Efficiency ratio improved to 61.19% for the year.
Two - Year Financial Highlights (Fiscal 2004 to 2006)
* Diluted EPS increased to $2.24 from $1.46 generating a 24% compounded
annual growth rate (CAGR).
* Net income increased to $8.2 million from $5.6 million for a 21%
CAGR.
* Return on equity increased to 10.89% from 7.52% for a 20% CAGR.
* Net loans increased to $425 million from $345 million for an 11%
CAGR.
* Total deposits increased to $431 million from $320 million for a 16%
CAGR.
* Total assets increased to $577 million from $460 million for a 12%
CAGR.
* Visit www.timberlandbank.com (investor relations tab) to view graphs
of recent growth trends.
"The Western Washington economy remains strong, with on-going expansion in the
aerospace, software and construction industries continuing to provide a solid
underpinning for regional economic growth," said Michael Sand, President and
CEO. According to Marple's Pacific Northwest Letter, "The economy of the
Pacific Northwest in fact is booming growing at the fastest rates since
before the brief and shallow U.S. recession in 2001." Recently the Port of
Grays Harbor and Imperium Renewables, backed by Microsoft's co-founder Paul
Allen, announced plans for the country's largest biodiesel fuel plant which
will be built in the greater Hoquiam-Aberdeen area. Construction began last
month with a scheduled completion date in mid 2007. Approximately 300 jobs
will be created to facilitate the construction of the plant which will provide
permanent employment for approximately 50 people.
"The initiatives we launched in late 2003 to upgrade our technology platforms,
improve our credit administration processes, and strengthen our deposit
gathering capabilities have been successful and are reflected in the Company's
financial results over the past two years," Sand continued. "This year we
began building on those core platform initiatives by adding two highly capable
and market-proven business bankers to lead our loan production initiatives and
strengthen our presence in the commercial real estate and business banking
markets. Their contacts, relationships and management oversight led to record
loan originations of $86.5 million for the quarter. We are pleased with the
financial trends we are seeing develop in the Company. A visit to our website
www.timberlandbank.com (investor relations tab) will allow the viewing of
charts that graphically display the progress made during the past two years,"
Sand also stated.
Operating Results
Fiscal 2006 revenue (net interest income before provision for loan losses plus
non-interest income) increased 9% to $30.9 million from $28.4 million in
fiscal 2005. Net interest income before the provision for loan losses
increased 10% to $24.6 million with interest income increasing 15% and
interest expense increasing 26%. Loan growth and a shift in assets to
higher-yielding credits contributed to the growth in net interest income, and
offset rising funding costs. In addition, the collection of $327,000 in
prepayment penalties and $162,000 in non-accrual interest increased interest
income and added approximately 10
Timberland FY06 Profits Rise 23%
November 7, 2006
Page 2
basis points to the net interest margin. The yield on interest earning assets
increased to 7.06% in fiscal 2006 from 6.37% a year ago, while the average
rate paid on interest bearing liabilities increased to 2.57% in fiscal 2006
from 2.09% in fiscal 2005.
Net interest margin for the year increased 31 basis points to 4.91% from 4.60
% a year ago. Non-interest income increased 3% for the year to $6.24 million
from $6.07 million in fiscal 2005, with increased service charges on deposits
and ATM fees offsetting a lower gain on sale of loans. Income from loan sales
was larger a year ago in part due to the December 2004 sale of the Bank's
credit card portfolio, which resulted in a gain of $245,000.
In the fourth quarter of fiscal 2006, revenue increased 7% to $7.91 million
from $7.37 million for the fourth quarter of fiscal 2005 with interest income
up 14% and interest expense increasing 24%. Fourth quarter net interest
income increased 9% to $6.26 million from $5.72 million a year ago. The
collection and recognition of $138,000 in non-accrual interest contributed to
higher interest income and increased the quarterly net interest margin by
approximately 5 basis points. Net interest margin in the fourth quarter was
4.91% compared to 4.56% in the fourth quarter a year ago. There was no
provision for loan losses made during the year ended September 30, 2006 as
credit quality remained strong. Non-interest income was consistent at $1.65
million in the fourth quarter of 2006 and 2005.
Total operating (non-interest) expenses increased 2% in fiscal 2006 to $18.90
million from $18.54 million in fiscal 2005. "Our continued emphasis on cost
control and efficiencies allowed us to stabilize expenses while we increased
revenues," said Sand. Fourth quarter operating expenses increased only 2%
compared to a year ago and decreased 1% on a sequential quarterly basis.
Non-interest expense in the fourth quarter was $4.75 million compared to $4.79
in the third quarter of fiscal 2006 and $4.64 million in the fourth quarter of
2005.
Return on equity (ROE) was 10.59% for fiscal 2006 and 10.89% for the final
quarter, compared to 9.08% and 10.03%, respectively, a year ago. Return on
average assets was 1.47% in fiscal 2006 and 1.53% in the fourth quarter of the
year, compared to 1.23% in fiscal 2005 and 1.33% in the fourth quarter of
2005.
Balance Sheet Management
Total assets increased 4% during fiscal 2006 to $577.1 million compared to
$552.8 million at the end of fiscal 2005. Strong loan originations
facilitated the conversion of assets from lower yielding investments and cash
into higher yielding loans. At September 30, 2006, total loans increased by
9% to $424.6 million from $388.1 million at the end of the preceding year.
Loan growth was primarily due to an 11% increase in loan originations during
the year with $256.3 million in total originations in fiscal 2006. Fourth
quarter loan originations were exceptionally strong, increasing 40% to $86.5
million from $61.6 million in the fourth quarter a year ago. "We continue to
sell fixed rate one-to-four family mortgage loans into the secondary market
for asset liability management purposes," said Dean Brydon, Chief Financial
Officer. Fixed rate one-to-four family mortgage loan sales totaled $26.5
million for fiscal 2006 and $8.9 million for the final quarter, compared to
$25.4 million and $9.1 million, respectively, a year ago.
"Strong demand for commercial real estate and construction and land
development loans offset lower levels of retail mortgage loans in our
portfolio," Brydon noted. In fiscal 2006 commercial real estate loans
increased 10%, construction and land development loans increased 31%, land
loans increased 18%, and consumer loans increased 17%, offsetting moderate
declines in residential mortgage loans.
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Timberland FY06 Profits Rise 23%
November 7, 2006
Page 3
LOAN PORTFOLIO
($ in thousands)
September 30, 2006 September 30, 2005
Amount Percent Amount Percent
------------------------------------------------
Mortgage Loans:
One-to-four family (1) $ 98,709 20.1% $101,763 23.2%
Multi family 17,689 3.6% 20,170 4.6%
Commercial 137,609 28.1% 124,849 28.5%
Construction and land
development 146,855 29.9% 112,470 25.7%
Land 29,598 6.0% 24,981 5.7%
-------- ---- -------- ------
Total mortgage loans 430,460 87.7% 384,233 87.7%
Consumer Loans:
Home equity and second
mortgage 37,435 7.6% 32,298 7.4%
Other 11,127 2.3% 9,330 2.1%
-------- ---- -------- ------
48,562 9.9% 41,628 9.5%
Commercial business loans 11,803 2.4% 12,013 2.8%
-------- ---- -------- ------
Total loans $490,825 100.0% $437,874 100.0%
Less:
Undisbursed portion of
construction loans
in process (59,260) (42,771)
Unearned income (2,798) (2,895)
Allowance for loan losses (4,122) (4,099)
-------- --------
Total loans receivable, net $424,645 $388,109
======== ========
---------------
(1) Includes loans held for sale
Total deposits increased 5% during fiscal 2006 with strong growth in
non-interest bearing deposits and certificates of deposit accounts. Deposits
increased $19 million to $431 million at September 30, 2006 from $412 million
at September 30, 2005.
DEPOSIT BREAKDOWN
($ in thousands)
September 30, 2006 September 30, 2005
Amount Percent Amount Percent
------------------------------------------------
Non-interest bearing $ 57,905 13% $ 51,792 13%
N.O.W. checking 89,509 21% 93,477 23%
Savings 60,235 14% 64,274 16%
Money market accounts 42,378 10% 49,295 12%
Certificates of deposit
under $100,000 128,183 30% 117,618 28%
Certificates of deposit
$100,000 and over 52,851 12% 35,209 8%
-------- --- -------- ----
Total deposits $431,061 100% $411,665 100%
Total shareholders' equity increased to $79.4 million (tangible book value per
share of $19.22) at September 30, 2006 from $74.6 million (tangible book value
per share of $17.86) at September 30, 2005. In addition to solid growth in
shareholder equity, Timberland shareholders earned $0.66 per share in cash
dividends, an 8% increase from the $0.61 per share dividends paid in fiscal
2005. The Company recently announced an increase in the quarterly dividend to
$0.18 per share from the prior quarterly dividend of $0.16 per share. The
dividend payable on November 27, 2006 represents the 35th consecutive quarter
that Timberland has paid a cash dividend. In addition, the Company continued
its share repurchase program in which it bought back 108,600 shares at an
average price of $34.08 for a total of $3.7 million during fiscal 2006.
Cumulatively, Timberland has
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Timberland FY06 Profits Rise 23%
November 7, 2006
Page 4
repurchased 3.5 million shares or 52.6% of the 6.6 million shares that were
issued in its initial public offering in January 1998. The average price of
the 3.5 million repurchased shares was $15.97 per share.
Asset Quality
Asset quality improved significantly during fiscal 2006 with the resolution of
several non-performing loans. At year end, non-performing loans declined to
$80,000 from $2.9 million at year-end 2005, and total non-performing assets
decreased to $95,000 from $3.4 million a year ago. Although there was no
provision for loan losses in fiscal 2006, the allowance for loan losses,
increased during this period due to a net recovery of $23,000. The allowance
for loan losses totaled $4.1 million at September 30, 2006, or 0.97% of loans
receivable and 5,152% of non-performing loans. The allowance for loan losses
was $4.0 million, or 1.05% of loans receivable and 140% of non-performing
loans at September 30, 2005. Timberland had a net recovery of $1,000 for the
three months ended September 30, 2006 compared to a net charge-off of $29,000
for the three months ended September 30, 2005. The Company had a net recovery
of $23,000 for the year ended September 30, 2006 compared to a net charge-off
of $33,000 for the year ended September 30, 2005.
The Company's non-performing assets to total assets ratio decreased to 0.02%
at September 30, 2006 from 0.37% at June 30, 2006 and 0.62% at September 30,
2005. The non-performing loan total of $80,000 at September 30, 2006
consisted of two single family mortgage loans.
About Timberland Bancorp, Inc.
Timberland Bancorp, Inc. stock trades on the NASDAQ global market under the
symbol "TSBK." The Bank operates 21 branches in the state of Washington in
Hoquiam, Aberdeen, Ocean Shores, Montesano, Elma, Olympia, Lacey, Tumwater,
Yelm, Puyallup, Edgewood, Tacoma, Spanaway (Bethel Station), Gig Harbor,
Poulsbo, Silverdale, Auburn, Winlock, and Toledo.
(more)
Timberland FY06 Profits Rise 23%
November 7, 2006
Page 5
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT Three Months Ended
($ in thousands, except per share) Sept. 30, June 30, Sept. 30,
(unaudited) 2006 2006 2005
----------- ----------- -----------
Interest and dividend income
Loans receivable $ 8,252 $ 8,036 $ 7,243
Investments and mortgage-backed
securities 510 529 503
Dividends 401 370 305
Federal funds sold 97 121 86
Interest bearing deposits in banks 23 18 29
---------- ---------- ----------
Total interest and dividend income 9,283 9,074 8,166
Interest expense
Deposits 2,351 2,058 1,603
Federal Home Loan Bank ("FHLB")
advances 659 718 831
Other borrowings 13 10 9
---------- ---------- ----------
Total interest expense 3,023 2,786 2,443
---------- ---------- ----------
Net interest income 6,260 6,288 5,723
Provision for loan losses - - 25
---------- ---------- ----------
Net interest income after provision
for loan losses 6,260 6,288 5,698
Non-interest income
Service charges on deposits 755 769 760
Gain on sale of loans, net 122 60 115
BOLI net earnings 116 112 110
Escrow fees 33 32 44
Servicing income on loans sold 160 80 180
ATM transaction fees 284 266 239
Other 183 209 199
---------- ---------- ----------
Total non-interest income 1,653 1,528 1,647
Non-interest expense
Salaries and employee benefits 2,650 2,727 2,470
Premises and equipment 598 589 554
Advertising 187 185 232
Loss (gain) from real estate operations (85) (1) 15
ATM expenses 129 105 115
Postage and courier 116 123 148
Amortization of core deposit intangible 82 82 94
State and local taxes 138 138 114
Professional fees 265 222 160
Other 670 621 738
---------- ---------- ----------
Total non-interest expense 4,750 4,791 4,640
Income before federal income taxes 3,163 3,025 2,705
Federal income taxes 1,019 964 867
---------- ---------- ----------
Net income $ 2,144 $ 2,061 $ 1,838
========== ========== ==========
Earnings per common share:
Basic $ 0.61 $ 0.58 $ 0.53
Diluted $ 0.59 $ 0.56 $ 0.51
Weighted average shares outstanding:
Basic 3,517,377 3,531,610 3,442,198
Diluted 3,645,477 3,652,198 3,575,560
Timberland FY06 Profits Rise 23%
November 7, 2006
Page 6
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT Year Ended
($ in thousands, except per share) September 30,
(unaudited) 2006 2005
---------- -----------
Interest and dividend income
Loans receivable $ 31,397 $ 27,514
Investments and mortgage-backed securities 2,152 1,962
Dividends 1,436 1,093
Federal funds sold 389 282
Interest bearing deposits in banks 78 85
---------- ----------
Total interest and dividend income 35,452 30,936
Interest expense
Deposits 7,905 5,422
Federal Home Loan Bank ("FHLB") advances 2,860 3,156
Other borrowings 49 31
---------- ----------
Total interest expense 10,814 8,609
---------- ----------
Net interest income 24,638 22,327
Provision for loan losses - 141
---------- ----------
Net interest income after provision
for loan losses 24,638 22,186
Non-interest income
Service charges on deposits 2,981 2,822
Gain on sale of loans, net 386 728
BOLI net earnings 449 430
Escrow fees 120 141
Servicing income on loans sold 425 379
ATM transaction fees 1,026 871
Other 857 702
---------- ----------
Total non-interest income 6,244 6,073
Non-interest expense
Salaries and employee benefits 10,744 10,196
Premises and equipment 2,425 2,229
Advertising 688 797
Loss (gain) from real estate operations (178) 4
ATM expenses 428 465
Postage and courier 486 529
Amortization of core deposit intangible 328 367
State and local taxes 564 436
Professional fees 876 656
Other 2,535 2,857
---------- ----------
Total non-interest expense 18,896 18,536
Income before federal income taxes 11,986 9,723
Federal income taxes 3,829 3,105
---------- ----------
Net income $ 8,157 $ 6,618
========== ==========
Earnings per common share:
Basic $ 2.32 $ 1.90
Diluted $ 2.24 $ 1.82
Weighted average shares outstanding:
Basic 3,516,331 3,475,400
Diluted 3,640,948 3,627,989
Timberland FY06 Profits Rise 23%
November 7, 2006
Page 7
TIMBERLAND BANCORP, INC.
CONSOLIDATED BALANCE SHEET
($ in thousands) (unaudited) Sept. 30 June 30 Sept. 30
Assets 2006 2006 2005
---------- --------- ---------
Cash and due from financial institutions
Non-interest bearing $ 14,870 $ 13,720 $ 20,015
Interest-bearing deposits in banks 2,619 2,565 3,068
Federal funds sold 5,400 10,450 5,635
--------- --------- ---------
22,889 26,735 28,718
Investments and mortgage-backed securities:
Held to maturity 75 86 104
Available for sale 81,408 84,822 89,595
FHLB stock 5,705 5,705 5,705
--------- --------- ---------
87,188 90,613 95,404
Loans receivable 426,318 401,014 389,853
Loans held for sale 2,449 1,024 2,355
Less: Allowance for loan losses (4,122) (4,120) (4,099)
--------- --------- ---------
Net loans receivable 424,645 397,918 388,109
Accrued interest receivable 2,806 2,416 2,294
Premises and equipment 16,730 16,416 15,862
Other Real estate owned ("OREO") and
other repossessed items 15 112 509
Bank owned life insurance ("BOLI") 11,951 11,835 11,502
Goodwill 5,650 5,650 5,650
Core deposit intangible 1,506 1,588 1,834
Mortgage servicing rights 932 888 928
Other assets 2,775 2,373 1,955
--------- --------- ---------
Total Assets $ 577,087 $ 556,544 $ 552,765
========= ========== =========
Liabilities and Shareholders' Equity
Non-interest-bearing deposits $ 57,905 54,372 $ 51,791
Interest-bearing deposits 373,156 365,012 359,874
--------- --------- ---------
Total deposits 431,061 419,384 411,665
FHLB advances 62,761 53,776 62,353
Other borrowings: repurchase agreements 947 1,152 781
Other liabilities and accrued expenses 2,953 3,409 3,324
--------- --------- ---------
Total Liabilities 497,722 477,721 478,123
--------- --------- ---------
Shareholders' Equity
Common stock - $.01 par value; 50,000,000
shares authorized; September 30, 2006 -
3,757,676 shares issued and outstanding
June 30, 2006 - 3,785,576 shares issued
and outstanding September 30, 2005 -
3,759,937 shares issued and outstanding 38 38 38
Additional paid in capital 20,888 22,111 22,040
Unearned shares - Employee Stock Ownership
Plan (3,305) (3,437) (3,833)
Unearned shares - Management Recognition
and Development Plan (188) - -
Retained earnings 62,933 61,471 57,268
Accumulated other comprehensive loss (1,001) (1,360) (871)
--------- --------- ---------
Total Shareholders' Equity 79,365 78,823 74,642
--------- --------- ---------
Total Liabilities and Shareholders' Equity $ 577,087 $ 556,544 $ 552,765
========= ========== =========
Timberland FY06 Profits Rise 23%
November 7, 2006
Page 8
KEY FINANCIAL RATIOS AND DATA Three Months Ended Year Ended
($ in thousands, except per share) September 30, September 30,
(unaudited) 2006 2005 2006 2005
-------- -------- ------ --------
PERFORMANCE RATIOS:
Return on average assets (a) 1.53% 1.33% 1.47% 1.23%
Return on average equity (a) 10.89% 10.03% 10.59% 9.08%
Net interest margin (a) 4.91% 4.56% 4.91% 4.60%
Efficiency ratio 60.03% 62.96% 61.19% 65.27%
September 30,
2006 2005
-------- ---------
ASSET QUALITY RATIOS:
Non-performing loans $ 80 $ 2,926
REO & other repossessed assets 15 509
-------- --------
Total non-performing assets $ 95 $ 3,435
Non-performing assets to total assets 0.02% 0.62%
Restructured loans $ 1,355 $ -
Allowance for loan losses to non-
performing loans 5,152.5% 140.09%
Book value per share (b) $ 21.12 $ 19.85
Book value per share (c) $ 22.44 $ 21.30
Tangible book value per share (b) (d) $ 19.22 $ 17.86
Tangible book value per share (c) (d) $ 20.41 $ 19.16
(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
AVERAGE BALANCE SHEET: Three Months Ended Year Ended
September 30, September 30,
2006 2005 2006 2005
--------- --------- -------- ---------
Average total loans $ 411,012 $ 392,596 $399,811 $ 378,113
Average total interest
earning assets 510,180 502,453 502,194 485,616
Average total assets 560,941 554,750 554,231 538,402
Average total interest
bearing deposits 372,371 363,150 365,544 356,089
Average FHLB advances &
other borrowings 48,518 63,745 55,773 60,537
Average shareholders' equity 78,724 73,310 77,044 72,860
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.