SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 24, 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 July 24, 2007, Timberland Bancorp, Inc. issued its earnings release for
the quarter ended June 30, 2007. 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 July 24, 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: July 25, 2007 By:/s/Dean J. Brydon
-------------------
Dean J. Brydon
Chief Financial Officer
Exhibit 99.1
TIMBERLAND BANCORP, INC. Contact: Michael R. Sand,
President & CEO
Dean J. Brydon, CFO
(360) 533-4747
www.timberlandbank.com
----------------------
Timberland Bancorp, Inc. Announces Record Earnings Per Share
* Diluted Earnings Per Share Increases 11% to $0.31
* Loan Portfolio Increases 25%
HOQUIAM, Wash. - July 24, 2007 - Timberland Bancorp, Inc. (NASDAQ: TSBK),
("Company") the holding company for Timberland Bank, ("Bank") today reported
record third quarter earnings per share led by strong loan growth, ongoing share
repurchases and excellent asset quality. Timberland increased its diluted
earnings per share 11% to $0.31 compared to $0.28 per share in the third
quarter of fiscal 2006. Net income for the quarter ended June 30, 2007,
increased 4% year over year and 12% from the quarter immediately prior. Fiscal
third quarter net income totaled $2.14 million compared to $2.06 million for the
fiscal quarter a year ago and $1.92 million for the quarter immediately prior.
All per share data has been adjusted to reflect the 2 for 1 stock split in the
form of a 100% dividend paid on June 5, 2007.
FISCAL THIRD QUARTER (JUNE 30, 2007) HIGHLIGHTS -
* Diluted earnings per share increased 11% compared to 3Q06 and increased
15% compared to 2Q07
* Return on equity increased to 11.2%.
* Loan portfolio increased 25% in the last 12 months to $497 million.
* Quarterly cash dividend increased 11% to $0.10 per share.
* Asset quality remained strong, with non-performing assets at 0.17% of
total assets and a net charge-off of only $2,000 during the quarter.
"We continue to benefit from the strong Northwest economy," stated Michael Sand,
President and CEO. "We have continued to increase net interest income, control
expenses and manage our capital. The results have been an increase in our
earnings per share and in our return on equity. The economic strength in our
area continues to provide ample opportunities for the profitable growth of our
Company."
OPERATING RESULTS
Fiscal third quarter revenue (net interest income before provision for loan
losses plus non-interest income) increased 4% to $8.2 million from $7.8 million
in the like quarter one year ago. Net interest income before the provision for
loan losses for the quarter ended June 30, 2007 increased 6% to $6.7 million
compared to the like quarter one year ago with interest income increasing 19%
and interest expense increasing 49%. For the first nine months of fiscal 2007,
revenues increased 4% to $23.8 million from $23.0 million in the first nine
months of fiscal 2006. Net interest income before provision for loan losses
increased 6% to $19.4 million, with interest income increasing 17% and interest
expenses increasing 45%. Loan growth contributed to the increase in net
interest income and offset increased funding costs.
"Our loan portfolio continues to perform well. The provision for loan losses
made during the past two quarters is primarily due to the strong growth in the
loan portfolio and changes in the portfolio's composition," said Sand.
Timberland recorded a $260,000 provision for loan losses in the third quarter,
bringing the year-to-date provision to $416,000, compared to no provision in the
first three quarters of the prior fiscal year.
"As we have seen throughout the banking industry, the flat yield curve and
intense competition for deposits has impacted margins," said Dean Brydon, Chief
Financial Officer. "We have funded some of our loan growth this year with
moderate deposit growth and are using other sources of borrowings to fund the
strong loan demand in our market." Timberland's net interest margin was 4.67%
for the third quarter compared to 4.75% for the quarter ended March 31, 2007 and
5.00% for the third quarter one year ago. Year to date, the net interest margin
was 4.72% compared to 4.90% in the first nine months of fiscal 2006.
Non-interest income decreased 2% to $1.50 million for the third quarter from
$1.53 million for the third fiscal quarter of 2006. Non-interest income for the
first nine months of fiscal 2007 decreased 4% to $4.41 million from $4.59
million for the same period of 2006. These decreases were primarily due to a
reduction in service charges on deposits.
Timberland Q3 Earnings
July 24, 2007
Page 2
Total operating (non-interest) expenses decreased $30,000 to $4.76 million for
the current quarter from $4.79 million for the third quarter of fiscal 2006.
The decrease in expenses for the current quarter was primarily due to a $59,000
gain ($38,000 net of tax) on the sale of a land parcel that was recorded in the
premises and equipment expense category. Operating expenses in the first nine
months of fiscal 2007 increased 3% to $14.60 million from $14.15 million for the
same period one year ago, primarily due to increased salary and benefit related
expenses and higher advertising and ATM expenses. The efficiency ratio for the
third quarter improved to 58.35% from 62.42% in the quarter immediately prior
and from 61.30% for the same quarter one year ago. Year-to-date the efficiency
ratio improved to 61.26% from 61.59% for the first nine months of fiscal 2006.
"Strong topline growth and overall cost controls throughout the organization are
producing solid improvements in productivity and efficiency this year," said
Brydon.
"Our return on equity continues to improve as we return excess capital to
shareholders through regular dividends and share repurchase programs," Sand
noted. Return on equity ("ROE") was 11.24% for the third quarter of fiscal
2007, compared to the prior quarter's 9.91% and 10.57% for the third quarter of
fiscal 2006. Timberland's return on assets ("ROA") was 1.38% compared to the
prior quarter's 1.28% and 1.45% for the same period one year ago. For the first
nine months of fiscal 2007, ROE was 10.36% compared to 10.48% of fiscal 2006,
and ROA was 1.34% compared to 1.45% one year ago.
BALANCE SHEET MANAGEMENT
Total assets increased to $624 million at June 30, 2007 compared to $618 million
at March 31, 2007 and $557 million one year ago primarily due to strong loan
portfolio growth. Net loans receivable increased 14% on an annualized basis to
$497 million at June 30, 2007 from $480 million at March 31, 2007, and increased
25% from $398 million one year ago. During the past 12 months the portfolio
has increased by $99 million with a majority of the increase in higher yielding
loans: Construction and land development loans (net of undisbursed portion)
increased $32 million; land loans increased $24 million; multi-family loans
increased $13 million; consumer loans increased $10 million; one-to four family
loans increased $8 million; commercial business loans increased $6 million; and
commercial real estate loans increased $6 million. Timberland's construction
portfolio is well diversified geographically and by type.
"We have no direct exposure to the subprime market," stated Sand. "The local
housing markets in our trade areas remain healthy and it appears that regional
population, personal income and employment growth will continue to provide
support for the sales of new and existing homes.
LOAN PORTFOLIO
($ in thousands)
June 30, 2007 March 31, 2007 June 30, 2006
Amount Percent Amount Percent Amount Percent
Mortgage Loans: ------ ------- ------ ------- ------ -------
One-to-four family(1) $103,883 18% $104,697 19% $ 95,828 21%
Multi family 31,719 6 17,156 3 18,582 4
Commercial 128,118 22 137,474 25 121,966 27
Construction and land
development 181,157 32 179,350 32 133,977 29
Land 53,794 9 48,331 9 29,259 7
------- -- ------- -- ------- --
Total mortgage loans 498,671 87 487,008 88 399,612 88
Consumer Loans:
Home equity and second
mortgage 44,347 8 41,357 7 35,935 8
Other 11,735 2 11,543 2 10,239 2
------- -- ------- -- ------- --
56,082 10 52,900 9 46,174 10
Commercial business loans 16,625 3 15,289 3 10,158 2
------- -- ------- -- ------- --
Total loans $571,378 100% $555,197 100% $455,944 100%
Less:
Undisbursed portion of
construction loans in
process (66,598) (68,034) (51,333)
Unearned income (2,921) (3,003) (2,573)
Allowance for loan losses (4,529) (4,272) (4,120)
------- ------- -------
Total loans receivable, net $497,330 $479,888 $397,918
======= ======= =======
____________________
(1) Includes loans held for sale
Timberland Q3 Earnings
July 24, 2007
Page 3
CONSTRUCTION LOAN COMPOSITION
($ in thousands)
June 30, 2007 March 31, 2007 June 30, 2006
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Custom and owner/builder $ 48,894 27% $ 46,723 26% $ 44,552 33%
Speculative 43,655 24 36,753 20 37,306 28
Commercial real estate 50,729 28 57,191 32 32,990 25
Multi-family 19,801 11 17,756 10 7,388 5
Land development 18,078 10 20,927 12 11,741 9
------- --- ------- --- ------- ---
Total construction loans $181,157 100% $179,350 100% $133,977 100%
Loan originations increased 10% to $66.4 million for the third quarter of fiscal
2007 from $60.1 million for the same quarter one year ago. In the first nine
months of fiscal 2007, loan originations increased 37% to $233.4 million from
$169.8 million in the first nine months of fiscal 2006. Timberland 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 $7.8 million for the third
quarter of fiscal 2007 compared to $4.5 million for the same period one year
ago.
"We continue to expand our deposit gathering capabilities, both with our branch
expansion over the past few years and with new products," Sand noted. "A new
checking account program that offers an attractive yield is scheduled for
introduction later this summer. We believe this innovative product will not
only help us attract new accounts, but encourage our current customers to build
their deposit balances with us. We believe the long-term benefits of expanding
the deposit customer base will outweigh the initial expenses." Total deposits
decreased $10.6 million to $433.5 million at June 30, 2007 from $444.1 million
at March 31, 2007 as balances in checking accounts, savings accounts and
certificate of deposit accounts of $100,000 and over decreased.
DEPOSIT BREAKDOWN
($ in thousands)
June 30, 2007 March 31, 2007 June 30, 2006
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Non-interest bearing $ 50,580 12% $ 53,321 12% $ 54,372 13%
N.O.W. checking 80,290 18 83,945 19 91,694 22
Savings 59,558 14 62,169 14 60,878 14
Money market accounts 46,446 11 45,950 10 37,962 9
Certificates of deposit
under $100 131,803 30 129,986 29 125,085 30
Certificates of deposit
$100 and over 64,837 15 68,751 16 49,393 12
------- --- ------- --- ------- ---
Total deposits $433,514 100% $444,122 100% $419,384 100%
======= === ======= === ======= ===
Total shareholders' equity decreased $3.8 million to $74.0 million at June 30,
2007 from $77.8 million at March 31, 2007, as Timberland continued to manage its
capital through asset growth, stock repurchases and dividends. During the
quarter Timberland repurchased 310,532 shares (adjusted for stock split) for
$5.6 million (an average price of $18.02 per share). There are 216,950 shares
remaining to be repurchased in the current stock repurchase plan. Cumulatively,
Timberland has repurchased 7.6 million shares or 57% of the 13.2 million shares
that were issued in its initial public offering in January 1998 at an average
price of $8.82 per share. A cash dividend of $0.09 per share was paid during
the quarter, which represented the 37th consecutive quarter a cash dividend was
paid to shareholders. On July 12, 2007 the Company announced an 11% increase in
the quarterly cash dividend to $0.10 per share. The dividend will be paid on
August 23, 2007 to shareholders of record on August 9, 2007.
Timberland Q3 Earnings
July 24, 2007
Page 4
ASSET QUALITY
Asset quality remained strong as the non-performing assets to total assets ratio
was 0.17% at June 30, 2007, with a net charge-off of only $2,000 during the
quarter. The allowance for loan losses totaled $4.5 million at June 30, 2007,
or 0.90% of loans receivable and 461% of non-performing loans. The allowance
for loan losses was $4.3 million, or 0.89% of loans receivable at March 31,
2007. The Company's non-performing loans totaled $982,000 at June 30, 2007, and
consisted of a $347,000 commercial real estate loan, four single family mortgage
loans totaling $351,000, a $250,000 single-family construction loan and a
$34,000 land loan.
ABOUT TIMBERLAND BANCORP, INC.
Timberland Bancorp, Inc. stock trades on the NASDAQ global market under the
symbol "TSBK." The Bank operates 21 branches in the state of Washington in
Hoquiam, Aberdeen, Ocean Shores, Montesano, Elma, Olympia, Lacey, Tumwater,
Yelm, Puyallup, Edgewood, Tacoma, Spanaway (Bethel Station), Gig Harbor,
Poulsbo, Silverdale, Auburn, Winlock, and Toledo.
Timberland Q3 Earnings
July 24, 2007
Page 5
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT Three Months Ended
($ in thousands, except per share) June 30, March 31, June 30,
(unaudited) 2007 2007 2006
------- ------- -------
Interest and dividend income
Loans receivable $ 9,981 $ 9,283 $ 8,036
Investments and mortgage-backed securities 350 381 529
Dividends 426 413 370
Federal funds sold 49 77 121
Interest bearing deposits in banks 8 14 18
------- ------- -------
Total interest and dividend income 10,814 10,168 9,074
Interest expense
Deposits 2,866 2,657 2,058
Federal Home Loan Bank ("FHLB") advances 1,278 1,013 718
Other borrowings 12 10 10
------- ------- -------
Total interest expense 4,156 3,680 2,786
------- ------- -------
Net interest income 6,658 6,488 6,288
Provision for loan losses 260 156 --
Net interest income after provision ------- ------- -------
for loan losses 6,398 6,332 6,288
Non-interest income
Service charges on deposits 692 663 769
Gain on sale of loans, net 79 64 60
BOLI net earnings 116 114 112
Escrow fees 22 24 32
Servicing income on loans sold 127 115 80
ATM transaction fees 295 272 266
Other 170 172 209
------- ------- -------
Total non-interest income 1,501 1,424 1,528
Non-interest expense
Salaries and employee benefits 2,752 2,766 2,727
Premises and equipment 557 647 583
Advertising 190 201 185
Loss from other real estate operations 1 2 5
ATM expenses 128 107 105
Postage and courier 113 130 123
Amortization of core deposit intangible 71 71 82
State and local taxes 148 133 138
Professional fees 175 172 222
Other 626 710 621
------- ------- -------
Total non-interest expense 4,761 4,939 4,791
Income before federal income taxes 3,138 2,817 3,025
Federal income taxes 1,000 901 964
------- ------- -------
Net income $ 2,138 $ 1,916 $ 2,061
======= ======= =======
Earnings per common share:
Basic $ 0.32 $ 0.28 $ 0.29
Diluted $ 0.31 $ 0.27 $ 0.28
Weighted average shares outstanding:
Basic 6,713,777 6,866,664 7,141,700
Diluted 6,910,165 7,083,420 7,382,876
Timberland Q3 Earnings
July 24, 2007
Page 6
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT Nine Months Ended
($ in thousands, except per share) June 30, June 30,
(unaudited) 2007 2006
Interest and dividend income ------- -------
Loans receivable $ 28,050 $ 23,144
Investments and mortgage-backed securities 1,185 1,642
Dividends 1,259 1,036
Federal funds sold 192 292
Interest bearing deposits in banks 61 54
------- -------
Total interest and dividend income 30,747 26,168
Interest expense
Deposits 8,113 5,554
Federal Home Loan Bank ("FHLB") advances 3,173 2,201
Other borrowings 39 36
------- -------
Total interest expense 11,325 7,791
------- -------
Net interest income 19,422 18,377
Provision for loan losses 416 --
Net interest income after provision ------- -------
for loan losses 19,006 18,377
Non-interest income
Service charges on deposits 2,061 2,226
Gain on sale of loans, net 250 264
BOLI net earnings 343 333
Escrow fees 77 87
Servicing income on loans sold 373 266
ATM transaction fees 830 742
Other 471 674
------- -------
Total non-interest income 4,405 4,592
Non-interest expense
Salaries and employee benefits 8,303 8,095
Premises and equipment 1,827 1,814
Advertising 569 501
Loss (gain) from other real estate operations (14) (79)
ATM expenses 354 299
Postage and courier 347 370
Amortization of core deposit intangible 214 246
State and local taxes 420 427
Professional fees 524 611
Other 2,052 1,863
------- -------
Total non-interest expense 14,596 14,147
Income before federal income taxes 8,815 8,822
Federal income taxes 2,806 2,809
------- -------
Net income $ 6,009 $ 6,013
======= =======
Earnings per common share:
Basic $ 0.88 $ 0.85
Diluted $ 0.85 $ 0.82
Weighted average shares outstanding:
Basic 6,863,253 7,058,116
Diluted 7,080,530 7,305,004
Timberland Q3 Earnings
July 24, 2007
Page 7
TIMBERLAND BANCORP, INC.
CONSOLIDATED BALANCE SHEET
($ in thousands)(unaudited) June 30, March 31, June 30,
Assets 2007 2007 2006
Cash and due from financial institutions ------- -------- -------
Non-interest bearing $ 11,798 $ 14,604 $ 13,720
Interest-bearing deposits in banks 1,188 659 2,565
Federal funds sold 205 6,655 10,450
------- -------- -------
13,191 21,918 26,735
Investments and mortgage-backed securities:
Held to maturity 72 72 86
Available for sale 64,911 67,221 84,822
FHLB Stock 5,705 5,705 5,705
------- -------- -------
70,688 72,998 90,613
Loans receivable 500,694 482,226 401,014
Loans held for sale 1,165 1,934 1,024
Less: Allowance for loan losses (4,529) (4,272) (4,120)
------- -------- -------
Net loans receivable 497,330 479,888 397,918
Accrued interest receivable 3,177 3,177 2,416
Premises and equipment 16,557 16,736 16,416
Other Real estate owned ("OREO") and
other repossessed items 68 71 112
Bank owned life insurance ("BOLI") 12,294 12,178 11,835
Goodwill 5,650 5,650 5,650
Core deposit intangible 1,292 1,363 1,588
Mortgage servicing rights 1,018 986 888
Other assets 2,881 2,836 2,373
------- -------- -------
Total Assets $624,146 $617,801 $556,544
======= ======= =======
Liabilities and Shareholders' Equity
Non-interest-bearing deposits $ 50,580 $ 53,321 $ 54,372
Interest-bearing deposits 382,934 390,801 365,012
------- -------- -------
Total deposits 433,514 444,122 419,384
FHLB advances 112,463 92,230 53,776
Other borrowings: repurchase agreements 775 588 1,152
Other liabilities and accrued expenses 3,402 3,048 3,409
------- -------- -------
Total Liabilities 550,154 539,988 477,721
------- -------- -------
Shareholders' Equity
Common stock-$.01 par value; 50,000,000
shares authorized;
June 30, 2007 - 7,025,360 shares issued
and outstanding
March 31, 2007 - 3,649,190 shares issued
and outstanding on a pre-split basis
June 30, 2006 - 3,785,576 shares issued and
outstanding on a pre-split basis 70 36 38
Additional paid in capital 11,425 16,439 22,111
Unearned shares- Employee Stock Ownership Plan (3,106) (3,172) (3,437)
Unearned shares- Management Recognition and
Development Plan (415) (220) --
Retained earnings 66,915 65,465 61,471
Accumulated other comprehensive loss (897) (735) (1,360)
------- -------- -------
Total Shareholders' Equity 73,992 77,813 78,823
------- -------- -------
Total Liabilities and Shareholders' Equity $624,146 $617,801 $556,544
======= ======= =======
Timberland Q3 Earnings
July 24, 2007
Page 8
KEY FINANCIAL RATIOS AND DATA Three Months Ended
($ in thousands, except per share)(unaudited) June 30, March 31, June 30,
2007 2007 2006
PERFORMANCE RATIOS: ------- -------- -------
Return on average assets (a) 1.38% 1.28% 1.49%
Return on average equity (a) 11.24% 9.91% 10.57%
Net interest margin (a) 4.67% 4.75% 5.00%
Efficiency ratio 58.35% 62.42% 61.30%
Nine Months Ended
June 30, June 30,
2007 2006
------- -------
Return on average assets (a) 1.34% 1.45%
Return on average equity (a) 10.36% 10.48%
Net interest margin (a) 4.72% 4.90%
Efficiency ratio 61.26% 61.59%
June 30, March 31, June 30,
2007 2007 2006
ASSET QUALITY RATIOS: ------- -------- -------
Non-performing loans $ 982 $ 322 $ 1,935
OREO & other repossessed assets 68 71 112
----- ----- -----
Total non-performing assets $ 1,050 $ 393 $ 2,047
Non-performing assets to total assets 0.17% 0.06% 0.37%
Allowance for loan losses to non-performing
loans 461% 1,327% 213%
Book value per share (b) $ 10.53 $ 10.66 $ 10.41
Book value per share (c) $ 11.19 $ 11.32 $ 11.08
Tangible book value per share (b) (d) $ 9.54 $ 9.70 $ 9.46
Tangible book value per share (c) (d) $ 10.14 $ 10.30 $ 10.07
(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
June 30, March 31, June 30,
2007 2007 2006
------- -------- -------
Average total loans $ 494,137 $ 465,460 $ 399,849
Average total interest earning assets 570,597 546,870 502,804
Average total assets 619,120 597,015 554,716
Average total interest bearing deposits 388,610 380,916 366,228
Average FHLB advances & other borrowings 98,467 81,578 55,597
Average shareholders' equity 76,087 77,340 77,969
Nine Months Ended
June 30, June 30,
2007 2006
------- -------
Average total loans $ 466,200 $ 396,141
Average total interest earning assets 548,942 499,624
Average total assets 598,688 552,100
Average total interest bearing deposits 381,946 363,246
Average FHLB advances & other borrowings 82,139 58,218
Average shareholders' equity 77,364 76,478
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.