Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to _____.
Commission file number 0-23333
TIMBERLAND BANCORP, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1863696
(State of Incorporation) (IRS Employer Identification No.)
624 Simpson Avenue, Hoquiam, Washington
(Address of principal executive office)
98550
(Zip Code)
(360) 533-4747
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Check whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act):
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AT JANUARY 31, 2005
----- --------------------------------------
common stock, $.01 par value 3,802,218
INDEX
Page
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Shareholders' Equity 5
Condensed Consolidated Statements of Cash Flows 6-7
Condensed Consolidated Statements of Comprehensive Income 8
Notes to Condensed Consolidated Financial Statements 9-13
Item 2. Management's Discussion and Analysis of Financial Condition 13-24
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 25
Item 4. Controls and Procedures 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity Securities 25-26
Item 3. Defaults Upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits 26
SIGNATURES 27
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2004 and September 30, 2004
Dollars in Thousands
(unaudited)
December 31, September 30,
2004 2004
-----------------------------
Assets
Cash and due from financial institutions $ 14,717 $ 15,268
Interest bearing deposits in banks 6,451 3,385
Federal funds sold 17,835 1,180
Investments and mortgage backed securities
held to maturity 160 174
Investments and mortgage backed securities
available for sale 89,170 59,889
Federal Home Loan Bank stock 5,682 5,682
Loans receivable 362,657 347,975
Loans held for sale 1,938 610
Less: Allowance for loan losses (3,994) (3,991)
-----------------------------
Total Loans 360,601 344,594
-----------------------------
Accrued interest receivable 1,934 1,828
Premises and equipment 15,941 13,913
Real estate owned and other repossessed
items 346 421
Bank owned life insurance ("BOLI") 11,127 11,028
Goodwill 5,646 --
Core deposit intangible 2,116 --
Other assets 2,561 3,057
-----------------------------
Total Assets $ 534,287 $ 460,419
-----------------------------
Liabilities and Shareholders' Equity
Liabilities
Deposits $ 403,270 $ 319,570
Federal Home Loan Bank ("FHLB") advances 52,492 65,421
Other borrowings: repurchase agreements 2,008 --
Other liabilities and accrued expenses 2,350 2,611
-----------------------------
Total Liabilities 460,120 387,602
-----------------------------
Shareholders' Equity
Common Stock, $.01 par value; 50,000,000
shares authorized; December 31, 2004 -
3,896,528 shares issued and outstanding
September 30, 2004 - 3,882,070 shares
issued and outstanding 39 39
Additional paid in capital 25,164 24,867
Unearned shares - Employee Stock Ownership Plan (4,230) (4,362)
Unearned shares - Management Recognition &
Development Plan (376) (537)
Retained earnings 53,881 52,967
Accumulated other comprehensive loss (311) (157)
-----------------------------
Total Shareholders' Equity 74,167 72,817
-----------------------------
Total Liabilities and Shareholders'
Equity $ 534,287 $ 460,419
-----------------------------
See notes to unaudited condensed consolidated financial statements
3
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months ended December 31, 2004 and 2003
Dollars in Thousands, Except Per Share Amounts
(unaudited)
Three Months Ended December 31,
2004 2003
-------------------------------
Interest and Dividend Income
Loans receivable $ 6,608 $ 6,283
Securities available for sale and
held to maturity 389 244
Dividends from investments 266 269
Interest-bearing deposits in banks 140 45
-------------------------------
Total interest and dividend income 7,403 6,841
-------------------------------
Interest Expense
Deposits 1,179 1,129
FHLB advances and other borrowings 755 850
-------------------------------
Total interest expense 1,934 1,979
-------------------------------
Net interest income 5,469 4,862
Provision for loan losses -- 50
-------------------------------
Net interest income after provision
for loan losses 5,469 4,812
-------------------------------
Non-Interest Income
Service charges on deposits 698 449
Gain on sale of loans, net 348 170
BOLI net earnings 99 115
Escrow fees 35 45
Servicing income (expense) on loans sold (61) (18)
ATM transaction fees 196 149
Other 123 102
-------------------------------
Total non-interest income 1,438 1,012
-------------------------------
Non-Interest Expense
Salaries and employee benefits 2,650 2,172
Premises and equipment 511 462
Advertising 166 151
Real estate owned expense (income) (27) 16
ATM expenses 112 101
Postage and courier 158 92
Amortization of core deposit intangible 85 --
Other 1,105 832
-------------------------------
Total non-interest expense 4,760 3,826
-------------------------------
Income before income taxes 2,147 1,998
Provision for income taxes 653 611
Net Income $ 1,494 $ 1,387
Earnings per common share:
Basic $ 0.42 $ 0.36
Diluted $ 0.40 $ 0.34
Weighted average shares outstanding:
Basic 3,555,007 3,846,580
Diluted 3,717,162 4,070,336
Dividends per share: $ 0.15 $ 0.14
See notes to unaudited condensed consolidated financial statements
4
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the year ended September 30, 2004 and the three months ended December 31, 2004
Dollars in Thousands Except Common Stock Shares
(unaudited)
Unearned
Shares Unearned Accumulated
Issued to Shares Other
Employee Issued to Compre-
Common Common Additional Stock Management hensive
Stock Shares Stock Paid-In Ownership Recognition Retained Income
Outstanding Amount Capital Trust Plan Earnings (Loss) Total
----------- ------- -------- --------- ------------- --------- ---------- ---------
Balance, Sept.
30, 2003 4,251,680 $43 $33,775 ($4,891) ($1,182) $49,699 $ 167 $77,611
Net income - - - - - - - - - - 5,588 - - 5,588
Repurchase of
common stock (482,016) (5) (11,074) - - - - - - - - (11,079)
Exercise of stock
options 112,406 1 1,747 - - - - - - - - 1,748
Cash dividends
($.57 per share) - - - - - - - - - - (2,320) - - (2,320)
Earned ESOP shares - - 283 529 - - - - - - 812
Earned MRDP shares - - 136 - - 645 - - - - 781
Change in fair value
of securities
available for sale,
net of tax - - - - - - - - - - - - (324) (324)
------------------------------------------------------------------------------------------
Balance, Sept.
30, 2004 3,882,070 39 24,867 (4,362) (537) 52,967 (157) 72,817
------------------------------------------------------------------------------------------
Net income - - - - - - - - - - 1,494 - - 1,494
Exercise of stock
options 14,458 - - 214 - - - - - - - - 214
Cash dividends
($.15 per share) - - - - - - - - - - (580) - - (580)
Earned ESOP shares - - - - 80 132 - - - - - - 212
Earned MRDP shares - - - - 3 - - 161 - - - - 164
Change in fair value
of securities
available for sale,
net of tax - - - - - - - - - - - - (154) (154)
------------------------------------------------------------------------------------------
Balance, December
31, 2004 3,896,528 $39 $25,164 ($4,230) ($376) $53,881 ($311) $74,167
------------------------------------------------------------------------------------------
See notes to unaudited condensed consolidated financial statements
5
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 2004 and 2003
Dollars in Thousands
(unaudited)
Three Months Ended December 31,
Cash Flow from Operating Activities 2004 2003
------------------------------
Net income $1,494 $1,387
Noncash revenues, expenses, gains and
losses included in income:
Depreciation 224 197
Amortization of core deposit intangible 85 --
Federal Home Loan Bank stock dividends - - (68)
Earned ESOP Shares 212 212
Earned MRDP Shares 164 172
Loss (gain) on sale of real estate owned, net (40) 3
Gain on sale of premises and equipment (6) --
BOLI cash surrender value increase (99) (115)
Gain on sale of loans (348) (170)
Provision for loan and real estate owned losses 23 52
Loans originated for sale (4,652) (9,954)
Proceeds from sale of loans 3,673 10,419
Decrease in other assets, net 540 134
Decrease in other liabilities and accrued
expenses, net (260) (471)
------------------------------
Net Cash Provided by Operating Activities 1,010 1,798
Cash Flow from Investing Activities
Decrease (increase) in interest-bearing
deposits in banks, net (3,066) 10,388
Increase in federal funds sold (16,655) --
Purchase of securities available for sale (32,984) (7,000)
Proceeds from maturities of securities
available for sale 3,465 3,233
Proceeds from maturities of securities
held to maturity 14 30
Increase in loans receivable, net (15,006) (11,577)
Additions to premises and equipment (2,252) (591)
Premium paid for Venture branches (7,848) --
Proceeds from the disposition of premises
and equipment 6 --
Proceeds from sale of real estate owned 352 63
------------------------------
Net Cash Used in Investing Activities (73,974) (5,454)
Cash Flow from Financing Activities
Increase in deposits, net 83,700 9,328
Decrease in Federal Home Loan Bank
advances, net (12,929) (1,541)
Increase in repurchase agreements 2,008 --
Proceeds from exercise of stock options 214 108
Payment of dividends (580) (603)
------------------------------
Net Cash Provided by Financing Activities 72,413 7,292
Net Change in Cash (551) 3,636
Cash and Due from Financial Institutions
Beginning of period 15,268 8,587
------------------------------
End of period $ 14,717 $ 12,223
------------------------------
See notes to unaudited condensed consolidated financial statements
(continued)
6
Three Months Ended December 31,
2004 2003
------------------------------
Supplemental Disclosure of Cash Flow Information
Income taxes paid $ 175 $ - -
Interest paid 1,882 1,980
Supplemental Disclosure of Non-cash
Investing Activities
Market value adjustment of securities
held for sale, net of tax (154) (47)
Loans transferred to real estate owned 233 72
Supplemental Disclosure of Branch Acquisition
Premium paid on deposits (7,646) --
Fair value of assets acquired, principally
property and equipment (2,064) --
Deposits assumed 86,293 --
Other liabilities assumed 47 -
Net cash provided by branch acquisition 76,630 --
See notes to unaudited condensed consolidated financial statements
7
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended December 31, 2004 and 2003
Dollars in Thousands
(unaudited)
Three Months Ended December 31,
2004 2003
-----------------------
Comprehensive Income:
Net Income $ 1,494 $1,387
Change in fair value of securities
available for sale, net of tax (154) (47)
-----------------------
Total Comprehensive Income $ 1,340 $1,340
-----------------------
See notes to unaudited condensed consolidated financial statements
8
Timberland Bancorp, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation: The accompanying unaudited condensed consolidated
financial statements for Timberland Bancorp, Inc. ("Company") were prepared in
accordance with accounting principles generally accepted in the United States
of America for interim financial information and with instructions for Form
10-Q and therefore, do not include all disclosures necessary for a complete
presentation of financial condition, results of operations, and cash flows in
conformity with accounting principles generally accepted in the United States
of America. However, all adjustments, which are, in the opinion of
management, necessary for a fair presentation of the interim condensed
consolidated financial statements have been included. All such adjustments
are of a normal recurring nature. The unaudited condensed consolidated
financial statements should be read in conjunction with the audited financial
statements included in the Timberland Bancorp, Inc. 2004 Annual Report on Form
10-K. The results of operations for the three months ended December 31, 2004
are not necessarily indicative of the results that may be expected for the
entire fiscal year.
(b) Principles of Consolidation: The interim condensed consolidated
financial statements include the accounts of Timberland Bancorp, Inc. and its
wholly-owned subsidiary, Timberland Bank ("Bank"), and the Bank's wholly-owned
subsidiary, Timberland Service Corp. All significant intercompany balances
have been eliminated in consolidation.
(c) The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
9
(2) EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income applicable to
common stock by the weighted average number of common shares outstanding
during the period, without considering any dilutive items. Diluted earnings
per share is computed by dividing net income applicable to common stock by the
weighted average number of common shares and common stock equivalents for
items that are dilutive, net of shares assumed to be repurchased using the
treasury stock method at the average share price for the Company's common
stock during the period. Common stock equivalents arise from assumed
conversion of outstanding stock options and awarded but not released
Management Recognition and Development Plan ("MRDP") shares. In accordance
with Statement of Position ("SOP") 93-6, Employers' Accounting for Employee
Stock Ownership Plans (ESOP), issued by the American Institute of Certified
Public Accountants, shares owned by the Bank's Employee Stock Ownership Plan
that have not been allocated are not considered to be outstanding for the
purpose of computing earnings per share. At December 31, 2004 and 2003, there
were 290,949 and 326,216 ESOP shares, respectively, that had not been
allocated.
Three Months Ended December 31,
2004 2003
------------------------------
Basic EPS computation
Numerator - net income $ 1,494,000 $ 1,387,000
Denominator - weighted average
common shares outstanding 3,555,007 3,846,580
Basic EPS $ 0.42 $ 0.36
Diluted EPS computation
Numerator - net income $ 1,494,000 $ 1,387,000
Denominator - weighted average
common shares outstanding 3,555,007 3,846,580
Effect of dilutive stock options 146,000 198,346
Effect of dilutive MRDP shares 16,155 25,410
Weighted average common shares ----------- -----------
outstanding - assuming dilution 3,717,162 4,070,336
Diluted EPS $ 0.40 $ 0.34
10
(3) STOCK BASED COMPENSATION
At December 31, 2004 the Company has an employee and director stock option
plan. The Company accounts for options granted under that plan under the
recognition and measurement principles of APB No. 25, Accounting for Stock
Issued to Employees and related interpretations. Accordingly, no stock-based
compensation cost is reflected in net income as the exercise price for all
options granted under the plan was equal to the market value of the Company's
stock on the date of grant. The following table illustrates the effect on net
income and earnings per share for the three months ended December 31, 2004 and
2003 if the Company had applied the fair value recognition provisions of SFAS
No. 123, Accounting for Stock-Based Compensation for the effects of all
options granted:
Three Months Ended December 31,
2004 2003
---------------------------
Net income as reported $ 1,494,000 $ 1,387,000
Less total stock-based
compensation expense
determined under fair
value method for all
qualifying awards, net of tax (31,000) (37,000)
Pro forma net income 1,463,000 1,350,000
Earnings per share:
Basic:
As reported $ 0.42 $ 0.36
Pro forma 0.41 0.35
Diluted:
As reported $ 0.40 $ 0.34
Pro forma 0.39 0.33
(4) ACQUISITION
On October 9, 2004, Timberland Bank, the subsidiary of the Company completed
the acquisition of seven branch offices and related deposits from Venture
Bank, the subsidiary of the Venture Financial Group. The Bank acquired $86.3
million in deposits. In addition the Bank acquired the real estate, branch
infrastructure and employees of the seven branches. The Bank paid $1.8
million for the branch buildings and fixed assets. The Bank paid a premium
for the deposits and recorded intangible assets (the excess of the purchase
price over the net fair value of the assets and liabilities acquired) in the
amount of $7.8 million. As part of the accounting for the acquisition, the
intangible assets were recorded as goodwill and core deposit intangible in the
amounts of $5.6 million and $2.2 million, respectively.
The Company will follow the provisions of SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 provides that goodwill is no longer amortized
and the value of an identifiable intangible asset is amortized
11
over its useful life, unless the asset is determined to have an indefinite
life. The Company will review the recorded value of the goodwill on an annual
basis for impairment. The annual test for impairment will be a two- step
process. The first step will be to compare the current value of the acquired
branch offices and related deposits with the fair value on the purchase date.
If the current value exceeds the purchase value, goodwill will not be
considered to be impaired and the test is completed. If the purchase date
fair value is determined to be greater than the current value, the implied
value of the goodwill will be compared to the recorded value of the goodwill.
Any noted impairment losses will be taken at that time.
The core deposit intangible recorded as part of the acquisition has an
estimated life of ten years and will be amortized using an accelerated method
over the ten year period.
(5) DIVIDEND / SUBSEQUENT EVENT
On January 26, 2005, the Company announced a quarterly cash dividend of $0.15
per common share. The dividend is to be paid February 22, 2005, to
shareholders of record as of the close of business February 8, 2005.
(6) RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement No, 123
(Revised), "Share-Based Payment" (FAS 123(R)). This Statement establishes
standards for accounting for transactions in which an entity exchanges its
equity instruments for goods or services. It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments, or that may be
settled by the issuance of those equity instruments. Statement No. 123(R)
covers a wide range of share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share appreciation
rights, and employee share purchase plans. FAS123(R) replaces existing
requirements under FASB Statement No. 123, Accounting for Stock-Based
Compensation, and eliminates the ability to account for share-based
compensation transactions using APB Opinion No. 25, Accounting for Stock
Issued to Employees. For the Company, the Statement is effective for the
interim reporting period beginning July 1, 2005. Adoption of the Standard
will impact the consolidated financial statements by requiring compensation
expense to be recorded for the unvested portion of stock options, which have
been granted.
On September 30, 2004, the Financial Accounting Standards Board ("FASB")
issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) Issue No.
03-1-1 delaying the effective date of paragraphs 10-20 of EITF 03-1, "The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments", which provides guidance for determining the meaning of
"other-than-temporarily impaired" and its application to certain debt and
equity securities within the scope of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", and investments accounted for
under the cost method. The guidance requires that investments which have
declined in value due to credit concerns or solely due to changes in interest
rates must be recorded as other-than-temporarily impaired unless the Company
can assert and demonstrate its intention to hold the security for a period of
time sufficient to allow for a recovery of fair value up to or beyond the cost
of the investment which might mean maturity. The delay of the effective date
of EITF 03-1 will be superceded concurrent with the final issuance of proposed
FSP Issue 03-1-a. Proposed FSP Issue 03-1-a is intended to provide
implementation guidance with respect to all securities analyzed for impairment
under paragraphs 10-20 of EITF 03-1. Management continues to closely monitor
and evaluate how the provisions of EITF 03-1 and proposed FSP Issue 03-1-a
will affect the Company.
In December 2003, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position No. 03-3 ("SOP 03-3"), Accounting for Certain
Loans or Debt Securities Acquired in a Transfer. SOP 03-3 addresses the
accounting for differences between contractual cash flows and the cash flows
expected to be collected from purchased loans or debt securities if those
differences are attributable, in part, to credit quality. SOP 03-3 requires
purchased loans and debt securities to be recorded initially at fair value
based on the present
12
value of the cash flows expected to be collected with no carryover of any
valuation allowance previously recognized by the seller. Interest income
should be recognized based on the effective yield from the cash flows expected
to be collected. To the extent that the purchased loans or debt securities
experience subsequent deterioration in credit quality, a valuation allowance
would be established for any additional cash flows that are not expected to be
received. However, if more cash flows subsequently are expected to be
received than originally estimated, the effective yield would be adjusted on a
prospective basis. SOP 03-3 will be effective for loans and debt securities
acquired after December 31, 2004. Management does not expect the adoption of
this statement to have a material impact on the Company's consolidated
financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operation
- --------------------
The following analysis discusses the material changes in the financial
condition and results of operations of the Company at and for the three months
ended December 31, 2004. 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. 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. Factors
which could affect actual results include competition in the financial
services market for both deposits and loans, interest rate trends, the
economic climate in the Company's market areas and the country as a whole,
loan delinquency rates, and changes in federal and state regulation. These
factors should be considered in evaluating the forward-looking statements, and
undue reliance should not be placed on such statements.
Comparison of Financial Condition at December 31, 2004 and September 30, 2004
Total Assets: Total assets increased $73.9 million to $534.3 million at
December 31, 2004 from $460.4 million at September 30, 2004 primarily due to a
$49.0 million increase in investment securities and overnight funds, a $16.0
million increase in net loans receivable, a $7.8 million increase in goodwill
and core deposit intangible, and a $2.0 million increase in premises and
equipment. This growth was funded by the net cash received in connection with
the acquisition of seven branch offices and related deposits from Venture Bank
in October 2004.
Cash and Due from Financial Institutions: Cash and due from financial
institutions decreased to $14.7 million at December 31, 2004 from $15.3
million at September 30, 2004.
Interest Bearing Deposits in Banks and Federal Funds Sold: Interest bearing
deposits in banks and federal funds sold increased $19.7 million to $24.3
million at December 31, 2004 from $4.6 million at September 30,
2004. The increase was primarily a result of investing a portion of the net
cash received in connection with the acquisition of seven branch offices and
related deposits from Venture Bank into overnight funds.
Securities: Investments and mortgage-backed securities increased $29.2
million to $89.3 million at December 31, 2004 from $60.1 million at September
30, 2004. The increase was primarily a result of investing a portion of the
net cash received in connection with the acquisition of seven branch offices
and related deposits into U.S agency securities and mortgage-backed
securities. At December 31, 2004, the Company's securities' portfolio was
comprised of mutual funds of $32.5 million, mortgage-backed securities of
$28.9 million, and U.S. agency
13
securities of $27.9 million. The mutual funds invest primarily in
mortgage-backed products and U.S. agency securities.
Loans: Net loans receivable, including loans held-for-sale, increased by $16.0
million to $360.6 million at December 31, 2004 from $344.6 million at
September 30, 2004. The increase in the portfolio was primarily a result of
an $11.8 million increase in commercial real estate loans, a $3.0 million
increase in one-to-four family mortgage loans, a $1.4 million increase in
construction loans (net of undisbursed portion), a $592,000 increase in
consumer loans, and a $352,000 increase in land loans. These increases were
partially offset by a $517,000 decrease in commercial business loans and a
$513,000 decrease in multi-family loans.
Loan originations totaled $61.4 million for the three months ended December
31, 2004 compared to $54.3 million for the same period a year earlier. The
Bank sold loans totaling $4.8 million ($3.3 million in fixed rate one-to-four
family mortgage loans and $1.5 million in credit card loans) during the three
months ended December 31, 2004, compared to $10.2 million in fixed rate
one-to-four family mortgage loans sold during the three months ended December
31, 2003.
For additional information, see "Loan Portfolio Composition" section and
"Construction and Land Development Loan Portfolio Composition" section
included herein.
Real Estate Owned and Other Repossessed Items: Real estate owned ("REO") and
other repossessed items decreased to $346,000 at December 31, 2004 from
$421,000 at September 30, 2004 as several properties were sold. At December
31, 2004, the REO and other repossessed item amounts were comprised of land
parcels totaling $335,000 and vehicles and other personal property totaling
$11,000. For additional information, see "Non-performing assets" section
included herein.
Premises and Equipment: Premises and equipment increased by $2.0 million to
$15.9 million at December 31, 2004 from $13.9 million at September 30, 2004.
This increase is primarily due to the acquisition of seven branch offices from
Venture Bank in October 2004. The acquired offices are located in Toledo,
Winlock, Elma, Montesano, Hoquiam, Aberdeen and Panorama City (Lacey),
Washington. Timberland acquired the real estate for all of these offices with
the exception of the facility in Panorama City, which is leased. Subsequent
to the acquisition, two of the acquired offices (Montesano and Hoquiam) were
consolidated with existing Timberland branch offices.
Goodwill and Core Deposit Intangible: Goodwill and core deposit intangible
increased to $7.8 million at December 31, 2004 as the Bank paid a premium for
$86.3 million in deposits acquired from Venture Bank in October 2004.
Deposits: Deposits increased by $83.7 million to $403.3 million at December
31, 2004 from $319.6 million at September 30, 2004, primarily due to the
acquisition of $86.3 million in deposits from Venture Bank in October 2004.
The $83.6 million deposit increase is comprised of a $34.7 million increase in
certificate of deposit accounts, a $21.5 million increase in N.O.W. checking
accounts, a $14.0 million increase savings accounts, a $9.9 million increase
in money market accounts, and a $3.6 million increase in non-interest bearing
accounts. For additional information, see "Deposit Breakdown" section
included herein.
Federal Home Loan Bank ("FHLB") Advances: FHLB advances decreased to $52.5
million at December 31, 2004 from $65.4 million at September 30, 2004 as the
Bank repaid several maturing advances with proceeds received in connection
with the acquisition of seven branch offices and related deposits from Venture
Bank. For additional information, see "FHLB Advance Maturity Schedule"
included herein.
14
Shareholders' Equity: Total shareholders' equity increased by $1.4 million to
$74.2 million at December 31, 2004 from $72.8 million at September 30, 2004,
primarily due to net income of $1.5 million and a $297,000 increase to
additional paid in capital from the exercise of stock options and the vesting
of shares associated with the Bank's benefit plans. Also increasing
shareholders' equity were decreases of $161,000 and $132,000 in the equity
components related to unearned shares issued to the Management Recognition and
Development Plan and the Employee Stock Ownership Plan, respectively.
Partially offsetting these increases to shareholders' equity was the payment
of $580,000 in dividends to shareholders and a $154,000 increase in
accumulated other comprehensive loss
On February 27, 2004, the Company announced a plan to repurchase 360,670
shares of the Company's stock. This marked the Company's 12th stock
repurchase plan. As of December 31, 2004, the Company has repurchased 214,086
of these shares at an average price of $22.83 per share. Cumulatively the
Company has repurchased 3,192,687 shares at an average price of $14.96 per
share. This represents 48.3% of the 6,612,500 shares that were issued when
the Company went public in January 1998. For additional information, see Item
2 of Part II of this Form 10-Q.
Non-performing Assets: The Company's non-performing asset ratio to total
asset ratio ("NPA") increased to 0.63% at December 31, 2004 from 0.40% at
September 30, 2004, as total non-performing assets increased to $3.35 million
from $1.86 million. The ratio increased primarily due to a $1.56 million
increase in non- performing loans.
The non-performing loan total of $3.00 million at December 31, 2004 consisted
of $2.20 million in commercial real estate loans, $349,000 in commercial
business loans, $333,000 in one-to-four family loans, $115,000 in land loans,
and $6,000 in consumer loans. Despite historically having a higher percentage
of non-performing loans than the Company's relevant peer group, the Company's
actual charge-offs have remained low. The Company had a net recovery during
the quarter ended December 31, 2004 and during the last five fiscal years its
net charge-offs to outstanding loans ratio has averaged less than .10% per
year.
15
Non Performing Assets
- ---------------------
The following table sets forth information with respect to the Company's
nonperforming assets at the dates indicated.
December 31, September 30,
2004 2004
----------------------------
(Dollars in thousands)
Loans accounted for on a
nonaccrual basis:
Mortgage loans:
One-to-four family $ 333 $ 430
Commercial 2,200 640
Land 115 322
Consumer loans 6 23
Commercial business loans 349 27
Total 3,003 1,442
Accruing loans which are contractually
past due 90 days or more: -- --
---------- ----------
Total -- --
Total of nonaccrual and
90 days past due loans 3,003 1,442
Real estate owned and other
repossessed items 346 421
---------- ----------
Total nonperforming assets $ 3,349 $ 1,863
========== ==========
Restructured loans -- --
Nonaccrual and 90 days or more past
due loans as a percentage of loans
receivable (1) 0.82% 0.41%
Nonaccrual and 90 days or more past
due loans as a percentage of total assets 0.56% 0.31%
Nonperforming assets as a percentage
of total assets 0.63% 0.40%
Loans receivable (1) $ 364,595 $ 348,585
========== ==========
Total assets $534,287 $ 460,419
========== ==========
- -----------------
(1) Includes loans held-for-sale and is before the allowance for loan losses
16
Loan Portfolio Composition
- --------------------------
The following table sets forth the composition of the Company's loan portfolio
by type of loan as of the dates indicated.
At December 31, At September 30,
2004 2004
Amount Percent Amount Percent
------------------ ------------------
(Dollars in thousands)
Mortgage Loans:
One-to-four
family (1) $102,862 24.71% $99,835 25.25%
Multi family 16,647 4.00 17,160 4.34
Commercial 120,046 28.84 108,276 27.39
Construction and
land development 112,448 27.02 106,241 26.88
Land 20,247 4.86 19,895 5.03
-------- -------- -------- --------
Total mortgage
loans 372,250 89.43 351,407 88.89
Consumer Loans:
Home equity and
second mortgage 25,024 6.01 23,549 5.96
Other 8,387 2.02 9,270 2.34
-------- -------- -------- --------
33,411 8.03 32,819 8.30
Commercial business
loans 10,581 2.54 11,098 2.81
-------- -------- -------- --------
Total loans 416,242 100.00% 395,324 100.00%
======== ========
Less:
Undisbursed portion
of loans in process (48,385) (43,563)
Unearned income (3,262) (3,176)
Allowance for loan
losses (3,994) (3,991)
-------- --------
Total loans, net $360,601 $344,594
======== ========
- ------------------
(1) Includes loans held-for-sale.
Construction and Land Development Loan Portfolio Composition
- ------------------------------------------------------------
The following table sets forth the composition of the Company's construction
and land development loan portfolio as of the dates indicated.
At December 31, At September 30,
2004 2004
Amount Percent Amount Percent
------------------ ------------------
(Dollars in thousands)
Custom and owner/
builder const. $40,670 36.17% $43,801 41.23%
Speculative
construction 26,518 23.58 22,228 20.92
Commercial real estate 24,494 21.78 25,633 24.13
Multi-family 11,035 9.81 3,352 3.15
Land development 9,731 8.66 11,227 10.57
-------- -------- -------- --------
Total construction
loans $112,448 100.00% $106,241 100.00%
======== ======== ======== ========
17
Activity in the Allowance for Loan Losses
- -----------------------------------------
Activity in the allowance for loan losses for the three months ended December
31, 2004 and 2003 is as follows:
2004 2003
--------------------------
(Dollars in thousands)
Balance beginning of period $3,991 $3,891
Provision for loan losses - - 50
Loans charged off (3) (25)
Recoveries on loans previously
charged off 6 10
Net recoveries (charge offs) 3 (15)
------ ------
Balance at end of period $3,994 $3,926
====== ======
18
Deposit Breakdown
- -----------------
The following table sets forth the balances of deposits in the various types
of accounts offered by the Bank at the dates indicated.
December 31, 2004 September 30, 2004
----------------- ------------------
(in thousands) (in thousands)
Non-interest bearing $ 40,721 $ 37,150
N.O.W. checking 98,749 77,242
Savings 62,190 48,200
Money market accounts 51,547 41,652
Certificates of deposit
under $100,000 113,903 93,750
Certificates of deposit
$100,000 and over 36,160 21,576
--------- ---------
Total Deposits $ 403,270 $ 319,570
========= =========
FHLB Advance Maturity Schedule
- ------------------------------
The Bank's Federal Home Loan Bank borrowings mature at various dates through
January 2011 and bear interest at rates ranging from 4.77% to 6.55%.
Principal reduction amounts due for future years ending September 30 are as
follows (dollars in thousands):
2005 2,139
2006 10,591
2007 64
2008 15,070
2009 4,628
Thereafter 20,000
-------
Total $52,492
=======
A portion of these advances have a putable feature and may be called by the
FHLB earlier than the above schedule indicates.
19
Comparison of Operating Results for the Three Months Ended December 31, 2004
and 2003
Net Income: Net income for the quarter ended December 31, 2004 was $1.49
million, or $0.40 per diluted share ($0.42 per basic share) compared to $1.39
million, or $0.34 per diluted share ($0.36 per basic share) for the quarter
ended December 31, 2003. The $.06 increase in earnings per share for the
quarter ended December 31, 2004 was primarily a result of a $657,000 ($434,000
net of income tax - $0.12 per diluted share) increase in net interest income
after provision for loan losses, a $426,000 ($281,000 net of income tax -
$0.08 per diluted share) increase in non-interest income, and a lower number
of weighted average shares outstanding which increased diluted earnings per
share by approximately $0.03. These items were partially offset by a $934,000
($616,000 net of income tax - $0.17 per diluted share) increase in
non-interest expense.
Net Interest Income: Net interest income increased $607,000 to $5.47 million
for the quarter ended December 31, 2004 from $4.86 million for the quarter
ended December 31, 2003, primarily due to increased interest income from a
larger interest earning asset base.
Total interest income increased $562,000 to $7.40 million for the quarter
ended December 31, 2004 from $6.84 million for the quarter ended December 31,
2003 as average total interest earning assets increased by $51.1 million. The
increased interest earning asset balances were a result of investing the funds
received in connection with the acquisition of deposits from Venture Bank.
Partially offsetting the increased interest earning balances, was a reduction
in the yield on assets. The yield on earning assets was 6.31% for the quarter
ended December 31, 2004 compared to 6.54% for the quarter ended December 31,
2003.
Also contributing to the increased net interest income was a decrease in
interest expense. Total interest expense decreased by $45,000 to $1.93 million
for the quarter ended December 31, 2004 from $1.98 million for the quarter
ended December 31, 2003 as the Company's total cost of funds decreased to
1.92% from 2.30%. The lower funding costs were due in part to a change in the
composition of interest-bearing liabilities, as average certificate of deposit
accounts and FHLB advances decreased while N.O.W. checking accounts, a lower
cost source of funds, increased.
As a result of these changes, the net interest margin increased to 4.66% for
the quarter ended December 31, 2004 from 4.65% for the quarter ended December
31, 2003.
Provision for Loan Losses: The provision for loan losses for the quarter
ended December 31, 2004 decreased $50,000 from the quarter ended December 31,
2003 as there was no provision made during the current quarter Even though
the loan portfolio grew during the current quarter, the sale of the Bank's
credit card portfolio, which carried the highest risk factors of any loan
type, offset the need to increase the overall allowance for loan losses
according to the Bank's comprehensive analysis. On a quarterly basis the Bank
performs an analysis taking into consideration historic loss experience for
various loan segments, collateral securing individual loans on non-accrual
status, changes in economic conditions, delinquency rates, and other factors
to determine the level of allowance for loan losses needed.
Based on its comprehensive analysis, management deemed the allowance for loan
losses of $3.99 million at December 31, 2004 (1.10% of loans receivable and
133.00% 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 $3.93 million (1.17% of loans
receivable and 68.2% of non-performing loans) at December 31, 2003. The
Company had a net recovery of $3,000 for the current quarter compared to a net
charge-off of $15,000 in the same quarter of 2003. For additional
information, see the "Activity in the Allowance for Loan Losses" section
included herein.
20
Non-interest Income: Total non-interest income increased $426,000 to $1.44
million for the quarter ended December 31, 2004 from $1.01 million for the
quarter ended December 31, 2003, primarily due to a $249,000 increase in
service charges on deposits, a $135,000 increase in income from loan sales
(gain on sale of loans and servicing income on loans sold), and a $47,000
increase in ATM transaction fees. The increased service charges
on deposits and the increased ATM transaction fees are primarily a result of
the increased transaction account base acquired through the Venture Bank
branch acquisition. The increased income from loan sales is primarily due to
the sale of the Bank's $1.5 million credit card portfolio, which resulted in a
gain of $245,000. Income from the sale of fixed rate one-to-four family loans
decreased to $42,000 for the quarter ended December 31, 2004 from $152,000 for
the quarter ended December 31, 2003 as fewer loans were sold. The Bank sold
$3.3 million in fixed rate one-to-four family mortgages during the quarter
ended December 31, 2004 compared to $10.2 million for the same period a year
ago.
Non-interest Expense: Total non-interest expense increased by $934,000 to
$4.76 million for the quarter ended December 31, 2004 from $3.83 million for
the quarter ended December 31, 2003, as the Bank acquired seven branch offices
and the associated employees from Venture Bank in October 2004. The increase
is primarily a result of a $478,000 increase in salaries and benefits,
$183,000 in expenses associated with the branch acquisition, an $85,000 core
deposit intangible amortization expense, a $66,000 increase in postage and
courier expense, a $59,000 increase in legal and professional fees, and a
$49,000 increase in premises and equipment expenses. The increased employee
expenses are primarily due to the larger employee base resulting from the
branch acquisition, annual salary adjustments, and increased medical insurance
costs.
The Company's efficiency ratio increased to 68.92% for the quarter ended
December 31, 2004 from 65.13% for the quarter ended December 31, 2003 and from
66.79% for the quarter ended September 30, 2004. Directly impacting the
current quarter's higher ratio was the acquisition of seven branches as
discussed above.
Provision for Income Taxes: The provision for income taxes increased to
$653,000 for the quarter ended December 31, 2004 from $611,000 for the quarter
ended December 31, 2003, primarily due to increased net income before taxes.
The Company's effective tax rate was 30.4% for the quarter ended December 31,
2004 and 30.6% for the quarter ended December 31, 2003.
Liquidity and Capital Resources
- -------------------------------
The Company's primary sources of funds are customer deposits, proceeds from
principal and interest payments on loans and mortgage backed securities, and
proceeds from the sale of loans, maturing securities and FHLB advances. While
maturities and the scheduled amortization of loans are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by
general interest rates, economic conditions and competition.
An analysis of liquidity should also include a review of the changes that
appear in the condensed consolidated statement of cash flows for the three
months ended December 31, 2004. The statement of cash flows includes
operating, investing and financing categories. Operating activities include
net income, which is adjusted for non-cash items, and increases or decreases
in cash due to certain changes in assets and liabilities. Investing
activities consist primarily of proceeds from maturities and sales of
securities, purchases of securities, and the net change in loans. Financing
activities present the cash flows associated with the Company's deposit
accounts, other borrowings and stock related transactions.
The Company's total of cash and due from financial institutions, interest
bearing deposits in banks, and federal funds sold increased by $19.2 million
to $39.0 million at December 31, 2004 from $19.8 million at September 30,
2004. The Company's liquid assets increased primarily due to the net cash
proceeds received in connection with the acquisition of seven branch offices
and related deposits from Venture Bank in October 2004.
21
The Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds for loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. The Bank generally maintains sufficient cash and
short-term investments to meet short-term liquidity needs. At December 31,
2004, the Bank's regulatory liquidity ratio (net cash, and short- term and
marketable assets, as a percentage of net deposits and short-term liabilities)
was 19.8%. The Bank also maintained an uncommitted credit facility with the
FHLB-Seattle that provided for immediately available advances up to an
aggregate amount of $136.1 million, under which $52.5 million was outstanding
at December 31, 2004.
Liquidity management is both a short and long-term responsibility of the
Bank's management. The Bank adjusts its investments in liquid assets based
upon management's assessment of (i) expected loan demand, (ii) projected loan
sales, (iii) expected deposit flows, and (iv) yields available on
interest-bearing deposits. Excess liquidity is invested generally in
interest-bearing overnight deposits, federal funds sold, and other short-term
investments. If the Bank requires funds beyond its ability to generate them
internally, it has additional borrowing capacity with the FHLB and collateral
for repurchase agreements.
The Bank's primary investing activity is the origination of one-to-four family
mortgage loans, commercial mortgage loans, and construction and land
development loans. At December 31, 2004, the Bank had loan commitments
totaling $24.6 million and undisbursed loans in process totaling $48.4
million. The Bank anticipates that it will have sufficient funds available to
meet current loan commitments. Certificates of deposit that are scheduled to
mature in less than one year from December 31, 2004 totaled $109.3 million.
Historically, the Bank has been able to retain a significant amount of its
certificates of deposit as they mature.
Federally-insured state-chartered banks are required to maintain minimum
levels of regulatory capital. Under current FDIC regulations, insured
state-chartered banks generally must maintain (i) a ratio of Tier 1 leverage
capital to total assets of at least 3.0% (4.0% to 5.0% for all but the most
highly rated banks), (ii) a ratio of Tier 1 capital to risk weighted assets of
at least 4.0% and (iii) a ratio of total capital to risk weighted assets of at
least 8.0%. At December 31, 2004, the Bank was in compliance with all
applicable capital requirements. For additional details see "Regulatory
Capital".
Regulatory Capital
- ------------------
The following table compares the Bank's regulatory capital at December 31,
2004 to its minimum regulatory capital requirements at that date (dollars in
thousands):
Percent of
Amount Adjusted Total Assets (1)
------ ------------------------
Tier 1 (leverage) capital $57,366 11.2%
Tier 1 (leverage) capital
requirement 20,441 4.0
------- ----
Excess $36,925 7.2%
======= ====
Tier 1 risk adjusted capital $57,366 15.5%
Tier 1 risk adjusted capital
requirement 14,762 4.0
------- ----
Excess $42,604 11.5%
======= ====
Total risk based capital $61,317 16.6%
22
Total risk based capital
requirement 29,523 8.0
------- ----
Excess $31,794 8.6%
======= ====
- -----------------------
(1) For the Tier 1 (leverage) capital, percent of total average assets of
$511.0 million. For the Tier 1 risk- based capital and total risk-based
capital calculations, percent of total risk-weighted assets of $369.0 million.
23
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
KEY FINANCIAL RATIOS
(Dollars in thousands, except per share data)
For the Three Months Ended
December 31, September 30, December 31,
2004 2004 2003
---------------------------------------------
PERFORMANCE RATIOS:
Return on average assets (1) 1.15% 1.19% 1.22%
Return on average equity (1) 8.17% 7.40% 7.11%
Net interest margin (1) 4.66% 4.92% 4.65%
Efficiency ratio 68.92% 66.79% 65.13%
December 31, September 30, December 31,
2004 2004 2003
---------------------------------------------
ASSET QUALITY RATIOS:
Non-performing loans $ 3,003 $ 1,442 $ 5,754
REO & other repossessed items 346 421 1,264
Total non-performing assets 3,349 1,863 7,018
Non-performing assets to
total assets 0.63% 0.40% 1.53%
Allowance for loan losses to
non-performing loans 133.00% 276.77% 68.23%
Book Value Per Share (2) $ 19.03 $ 18.76 $ 18.51
Book Value Per Share (3) 20.52 20.28 20.05
Tangible Book Value Per
Share (2) (4) 17.04 18.76 18.51
Tangible Book Value Per
Share (3) (4) 18.37 20.28 20.05
______________________
(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,
2004 2004 2003
---------------------------------------------
AVERAGE BALANCE SHEET:
Average Total Loans $ 358,336 $ 342,150 $336,601
Average Total Interest
Earning Assets 469,317 409,504 418,266
Average Total Assets 521,680 447,160 453,27
Average Total Interest
Bearing Deposits 347,782 281,701 283,660
Average FHLB Advances 55,414 57,770 60,036
Average Shareholders' Equity 73,135 72,070 77,987
24
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
There were no material changes in information concerning market risk from the
information provided in the Company's Form 10-K for the fiscal year ended
September 30, 2004.
Item 4. Controls and Procedures
- --------------------------------
(a) Evaluation of Disclosure Controls and Procedures: An evaluation of
------------------------------------------------
the Company's disclosure controls and procedures (as defined in
Section 13a-15(e) and 15d-15(e)) of the Securities Exchange Act of
1934 (the "Act")) was carried out under the supervision and with the
participation of the Company's Chief Executive Officer, Chief
Financial Officer and several other members of the Company's senior
management as of the end of the period covered by this report. The
Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures as
currently in effect are effective in ensuring that the information
required to be disclosed by the Company in the reports it files or
submits under the Act is (i) accumulated and communicated to the
Company's management (including the Chief Executive Officer and Chief
Financial Officer) in a timely manner, and (ii) recorded, processed,
summarized and reported within the time periods specified in the SEC's
rules and forms.
(b) Changes in Internal Controls: In the quarter ended December 31, 2004,
----------------------------
the Company did not make any significant changes in, nor take any
material corrective actions regarding, its internal controls or other
factors that could significantly affect these controls. A number of
internal control procedures were, however, modified during the quarter
to improve internal controls. The Company also continued to implement
suggestions from its internal auditor and independent auditor on ways
to strengthen existing controls.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Neither the Company nor the Bank is a party to any material legal proceedings
at this time. Further, neither the Company nor the Bank is aware of the
threat of any such proceedings. From time to time, the Bank is involved in
various claims and legal actions arising in the ordinary course of business.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
- ----------------------------------------------------------------------
Equity Securities
- -----------------
The following table sets forth the shares repurchased by the Company during
the quarter:
Total No. Maximum No.
of Shares Of Shares
Purchased that May
Average as Part Yet Be
Total No. Price Of Publicly Purchased
of Shares Paid Announced Under
Period Purchased Per Share Plan the Plan
10/01/2004-
10/31/2004 - $ - - - 146,584 (1)
11/01/2004 -
11/30/2004 - - - - - - 146,584 (1)
12/01/2004-
12/31/2004 - - - - - - 146,584 (1)
Total - - - - - -
25
(1) On February 27, 2004 Timberland Bancorp, Inc. announced a share
repurchase plan authorizing the repurchase of up to 10% of its outstanding
shares, or 360,670 shares. As of December 31, 2004, a total of 214,086 of
these shares were repurchased at an average price of $22.83 per share. All
shares were repurchased through open market broker transactions and no shares
were directly repurchased from directors or officers of the Company.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None to be reported.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None to be reported.
Item 5. Other Information
- --------------------------
None to be reported.
Item 6. Exhibits
- -----------------
(a) Exhibits
3.1 Articles of Incorporation of the Registrant (1)
3.2 Bylaws of the Registrant (1)
3.3 Amendment to Bylaws (2)
10.1 Employee Severance Compensation Plan (3)
10.2 Employee Stock Ownership Plan (3)
10.3 1999 Stock Option Plan (4)
10.4 Management Recognition and Development Plan (4)
10.5 2003 Stock Option Plan (5)
31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes Oxley Act
31.2 Certification of Chief Financial Officer Pursuant to Section
906 of the Sarbanes Oxley Act
32 Certifications of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes Oxley Act
-----------------
(1) Incorporated by reference to the Registrant's Registration
Statement of Form S-1 (333- 35817).
(2) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended September 30, 2002.
(3) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1997.
(4) Incorporated by reference to the Registrant's 1999 Annual
Meeting Proxy Statement dated December 15, 1998.
(5) Incorporated by reference to the Registrant's 2004 Annual
Meeting Proxy Statement dated December 24, 2003.
26
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 thereunto duly authorized.
Timberland Bancorp, Inc.
Date: February 10, 2005 By: /s/Michael R. Sand
---------------------------------
Michael R. Sand
Chief Executive Officer
(Principal Executive Officer)
Date: February 10, 2005 By: /s/Dean J. Brydon
---------------------------------
Dean J. Brydon
Chief Financial Officer
(Principal Financial Officer)
27
Exhibit 31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes Oxley Act
I, Michael R. Sand, certify that:
1. I have reviewed this Form 10-Q of Timberland Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: February 10, 2005
/s/Michael R. Sand
----------------------------
Michael R. Sand
Chief Executive Officer
28
Exhibit 31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes Oxley Act
I, Dean J. Brydon, certify that:
1. I have reviewed this Form 10-Q of Timberland Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: February 10, 2005
/s/Dean J. Brydon
--------------------------
Dean J. Brydon
Chief Financial Officer
29
EXHIBIT 32
Certification Pursuant to Section 906 of the Sarbanes Oxley Act
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
OF TIMBERLAND BANCORP, INC.
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned hereby certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on
Form 10-Q, that:
* the report fully complies with the requirements of Sections 13(a) and
15(d) of the Securities Exchange Act of 1934, as amended, and
* the information contained in the report fairly presents, in all
material respects, the company's financial condition and results of
operations.
/s/Michael R. Sand /s/Dean J. Brydon
-------------------------- -------------------------
Michael R. Sand Dean J. Brydon
Chief Executive Officer Chief Financial Officer
Date: February 10, 2005
30