Exhibit 99.1

 

Contact:	Michael R. Sand,
	President & CEO Dean J. Brydon, CFO (360) 533-4747 www.timberlandbank.com

         

Timberland Bancorp Fiscal Year Net Income Increases 40% to $14.17 Million

 

·	Fiscal Year Earnings Per Share Increases 34% to $1.92
·	Fiscal Year Return on Equity Increases to 13.65%
·	Fiscal Year Return on Assets Increases to 1.53%

 

 

HOQUIAM, WA – November 1, 2017 - Timberland Bancorp, Inc. (NASDAQ: TSBK) ("Timberland" or "the Company") today reported that net income increased 40% to $14.17 million for the fiscal year ended September 30, 2017 from $10.15 million for the fiscal year ended September 30, 2016. Earnings per diluted common share ("EPS") increased 34% to $1.92 for fiscal year 2017 from $1.43 for the prior fiscal year.

Timberland also reported net income of $3.62 million, or $0.48 per diluted common share, for its fourth fiscal quarter ended September 30, 2017.  This compares to net income of $2.70 million, or $0.38 per diluted common share, for the quarter ended September 30, 2016, and net income of $4.28 million, or $0.58 per diluted common share, for the preceding quarter ended June 30, 2017.

Timberland's Board of Directors declared a quarterly cash dividend of $0.11 per common share, payable on November 30, 2017 to shareholders of record on November 16, 2017.

"Fiscal year 2017 marked the 7^th consecutive year the Company increased earnings per share, return on equity, return on assets and net income," stated Michael R. Sand, President and CEO.  "Each of these metrics increased significantly compared to the prior fiscal year as detailed fully in this earnings release.  The continued improvement in the Company's financial position is a result of exercising pricing discipline while growing revenues and carefully managing expenses.  Our positioning of the Company has been predicated on producing above peer results in conjunction with structuring the balance sheet to benefit from rising interest rates.  We anticipate maintaining this sensitivity to rising rates.  Timberland's shareholders have been rewarded this year by a significant increase in the Company's share price which increased the Company's market cap to a level comfortably sufficient for Timberland to be added to the Russell 2000 and 3000 indexes.  This has increased the visibility of the Company and significantly increased its average daily trading volume."

2017 Fiscal Year Earnings and Balance Sheet Highlights (at or for the period ended September 30, 2017, compared to September 30, 2016, or June 30, 2017):

   Earnings Highlights:

·	Fiscal year 2017 EPS increased 34% to $1.92 from $1.43 for fiscal year 2016;

·	Quarterly EPS increased 26% to $0.48 from $0.38 for comparable quarter one year ago;

·	Net income increased 40% to $14.17 million from $10.15 million for the prior fiscal year;

·	Return on average equity and return on average assets increased to 13.65% and 1.53%, respectively, for the 2017 fiscal year; from 11.00% and 1.19%, respectively, for the prior fiscal year;

·	Operating revenue increased 13% compared to fiscal year 2016;

·	Non-interest income increased 14% compared to fiscal year 2016;

·	Efficiency ratio improved to 57.92% for fiscal year 2017 from 63.89% for fiscal year 2016; and

·	Net interest margin for fiscal 2017 increased to 4.07% from 3.88% for fiscal 2016.

   Balance Sheet Highlights:

·	Increased total assets 7% year-over-year and 2% from the prior quarter;

·	Increased net loans receivable 4% year-over-year;

·	Increased total deposits 10% year-over-year and 2% from the prior quarter;

 

Timberland Fiscal Q4 2017 Earnings

November 1, 2017

Page 2

 

·	Decreased non-performing assets 27% year-over-year and 5% from the prior quarter; and

·	Increased book and tangible book (non-GAAP) values per common share to $15.08 and $14.31, respectively, at September 30, 2017 from $13.95 and $13.13, respectively, at September 30, 2016.

Operating Results

Operating revenue (net interest income before provision for loan losses, plus non-interest income excluding gains or losses on the sale of investment securities and other than temporary impairment ("OTTI") charges on investment securities) increased 13% for the 2017 fiscal year to $47.48 million from $41.86 million for Timberland's 2016 fiscal year. For the current quarter operating revenue increased 11% to $12.24 million from $11.06 million for the comparable quarter one year ago and decreased 1% from $12.40 for the preceding quarter.  During the preceding quarter operating revenue was increased by $466,000 – the net amount resulting from the collection of $748,000 of non-accrual interest and the payment of $282,000 in prepayment penalties incurred to prepay Timberland's remaining Federal Home Loan Bank ("FHLB") borrowings.

Net interest income for the 2017 fiscal year increased 14% to $35.14 million from $30.80 million for the 2016 fiscal year. Net interest income for the current quarter increased 17% to $9.13 million from $7.81 million for the comparable quarter one year ago and decreased 1% from $9.25 million for the preceding quarter.  The increased net interest income for the preceding quarter was primarily due to an increase in the amount of non-accrual interest collected, which was partially offset by prepayment penalties on FHLB borrowings as noted in the prior paragraph.

Timberland's net interest margin for the fiscal year ended September 30, 2017, increased to 4.07% from 3.88% for the fiscal year ended September 30, 2016. The net interest margin for the current quarter increased to 4.18% from 3.77% for the comparable quarter one year ago and decreased from 4.29% for the preceding quarter.  The net interest margin for the prior quarter was increased by approximately 22 basis points due to the net effect ($466,000) of collecting $748,000 of non-accrual interest and paying $282,000 in FHLB borrowing prepayment penalties.  The net interest margin for the current quarter was increased by less than one basis point due to the collection of $8,000 of non-accrual interest.

Non-interest income for fiscal year 2017 increased 14% to $12.37 million from $10.89 million for the prior fiscal year. The increase was primarily due to increases in services charges on deposits, gain on sales of loans, servicing income on loans sold and smaller increases in several other categories.  Non-interest income for the current quarter increased 1% to $3.15 million from $3.11 million for the comparable quarter one year ago and decreased slightly from $3.16 million for the preceding quarter.

For fiscal year 2017, total (non-interest) operating expense increased 3% to $27.52 million from $26.64 million for the prior fiscal year. Total operating expenses for the current quarter decreased slightly to $6.91 million from $6.94 million for the preceding quarter and from $6.96 million for the comparable quarter one year ago.  The efficiency ratio for fiscal 2017 improved to 57.92% from 63.89% for fiscal year 2016.  The efficiency ratio for the current quarter improved to 56.31% from 63.77% for the comparable quarter one year ago.

The provision for income taxes for fiscal year 2017 increased $2.18 million to $7.08 million from $4.90 million for fiscal year 2016, primarily due to higher pre-tax income. The effective tax rate was 33.3% for fiscal year 2017 compared to 32.6% for fiscal year 2016. The provision for income taxes for the current quarter decreased to $1.75 million from $2.19 million for the preceding quarter, primarily due to lower pre-tax income.  The effective tax rate was 32.6% for the current quarter compared to 33.8% for the quarter ended June 30, 2017.  The lower effective tax rate for the current quarter was in part due to the adoption of Accounting Standards Update ("ASU") No. 2016-09, Improvements to Employee Share-Based Payment Accounting.

Balance Sheet Management

Total assets increased $60.64 million, or 7%, during the fiscal year to $952.02 million at September 30, 2017 from $891.39 million at September 30, 2016.  This increase was primarily due to a $39.25 million increase in cash and cash equivalents and a $27.22 million increase in net loans receivable.  These increases, and the repayment of $30.00 million in FHLB borrowings, were primarily funded by a $76.36 million increase in deposits and retained net income during the fiscal year.  Total assets increased $21.02 million, or 2%, during the current quarter to $952.02 million at September 30, 2017 from $931.01 million at June 30, 2017.  The increase was primarily due to a $15.75 million increase in cash and cash equivalents and a $3.21 million increase in net loans receivable and was funded by increased deposits.

Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment and available for sale investment securities, was 22.9% of total liabilities at September 30, 2017, compared to 21.3% at June 30, 2017, and 20.6% one year ago.

Net loans receivable increased $27.22 million, or 4%, during the fiscal year to $690.36 million at September 30, 2017, from $663.15 million at September 30, 2016.  The increase was primarily due to a $24.59 million increase in custom and owner/builder one- to four-family construction loans, a $16.40 million increase in commercial real estate loans, a $10.27 million increase in commercial construction loans, an $8.74 million increase in multi-family construction loans and smaller increases in several other categories.  These increases were partially offset by a $33.78 million increase in the amount of undisbursed construction loans in process, a $3.70 million decrease in multi-family mortgage loans and smaller decreases in several other categories.

Net loans receivable increased $3.21 million during the current quarter to $690.36 million at September 30, 2017, from $687.16 million at June 30, 2017.  The increase was primarily due to a $10.27 million increase in multi-family construction loans, an $8.06 million increase in custom and owner/builder one- to four-family construction loans and smaller increases in several other categories.  These increases were partially offset by a $10.28 million increase in the amount of undisbursed construction loans in process, a $3.80 million decrease in one- to four- family mortgage loans and smaller decreases in several other categories.

LOAN PORTFOLIO

_______________________

(a)	Does not include one- to four-family loans held for sale totaling $3,515, $3,523 and $3,604 at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.

(b)	Does not include commercial business loans held for sale totaling $84 at September 30, 2017.

Timberland originated $85.10 million in loans during the quarter ended September 30, 2017, compared to $69.71 million for the comparable quarter one year ago and $92.93 million for the preceding quarter.  Timberland continues to sell fixed rate one- to four-family mortgage loans into the secondary market for asset-liability management purposes and to generate non-interest income.  Timberland also (on a much smaller volume) sells the guaranteed portion of U.S. Small Business Administration ("SBA") loans.  During the fourth quarter of fiscal 2017, fixed-rate one- to four-family mortgage loans and SBA loans totaling $15.88 million were sold compared to $17.83 million for the comparable quarter one year ago and $19.50 million for the preceding quarter.

Timberland's investment securities and other investments decreased $124,000, or 1%, to $11.38 million at September 30, 2017, from $11.50 million at June 30, 2017, primarily due to scheduled amortization.

Total deposits increased $76.36 million, or 10%, during the fiscal year to $837.90 million at September 30, 2017, from $761.53 million at September 30, 2016.  This increase was primarily due to a $33.67 million increase in non-interest-bearing demand account balances, a $17.51 million increase in savings account balances, a $17.01 million increase in money market account balances and a $16.50 million increase in negotiable order of withdrawal ("NOW") checking account balances.  These increases were partially offset by an $8.33 million decrease in certificates of deposit account balances.

Total deposits increased $19.08 million, or 2%, during the current quarter to $837.90 million at September 30, 2017, from $818.82 million at June 30, 2017.  This increase was primarily due to an $8.45 million increase in non-interest-bearing demand account balances, a $4.24 million increase in savings account balances, a $3.60 million increase NOW checking account balances and a $3.47 million increase in money market account balances.  These increases were partially offset by a $649,000 decrease in certificates of deposit account balances.

Shareholders' Equity

Total shareholders' equity increased $2.38 million to $111.00 million at September 30, 2017, from $108.62 million at June 30, 2017.  The increase in shareholders' equity was primarily due to net income of $3.61 million for the quarter, which was partially offset by dividend payments of $1.40 million to shareholders.

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 17.56% and a Tier 1 leverage capital ratio of 11.52% at September 30, 2017.

No provision for loan losses was made for the quarters ended September 30, 2017 and 2016. Timberland recorded a $1.00 million loan loss reserve recapture (which added approximately $0.09 to diluted earnings per share) during the quarter ended June 30, 2017, mainly due to the Bank's recovery on a previously charged-off commercial mortgage loan.  Timberland had net charge-offs of $57,000 for the current quarter compared to a net recovery of $1.02 million for the preceding quarter and net charge-offs of $15,000 for the comparable quarter one year ago.  The allowance for loan losses was 1.36% of loans receivable at September 30, 2017, compared to 1.38% at June 30, 2017.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 31% to $2.41 million at September 30, 2017, from $3.47 million one year ago, and decreased 1% from $2.44 million at June 30, 2017.  Non-accrual loans decreased 33% to $1.91 million at September 30, 2017, from $2.87 million one year ago, and decreased 7% from $2.06 million at June 30, 2017.

OREO and other repossessed assets decreased 20% to $3.30 million at September 30, 2017, from $4.12 million at September 30, 2016, and decreased 3% from $3.42 million at June 30, 2017.  At September 30, 2017, the OREO and other repossessed asset portfolio consisted of 15 individual real estate properties and one recreational vehicle.  During the quarter ended September 30, 2017, two OREO properties were sold.

The non-performing assets to total assets ratio improved to 0.60% at September 30, 2017, compared to 0.65% at June 30, 2017 and 0.88% one year ago.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures.  Timberland believes that certain non-GAAP financial measures provide

 

investors with information useful in understanding the Company's financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with GAAP results as reported.

Financial measures that exclude intangible assets are non-GAAP measures.  To provide investors with a broader understanding of capital adequacy, Timberland provides non-GAAP financial measures for tangible common equity, along with the GAAP measure.  Tangible common equity is calculated as shareholders' equity less goodwill.  In addition, tangible assets equal total assets less goodwill.

The following table provides a reconciliation of ending shareholders' equity (GAAP) to ending tangible shareholders' equity (non-GAAP), and ending total assets (GAAP) to ending tangible assets (non-GAAP).

About Timberland Bancorp, Inc.

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank ("Bank").  The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 22 branches (including its main office in Hoquiam).  Timberland ranked 8^th in the release of the S&P Global Market Intelligence ranking of the top performing 50 largest public thrifts as of December 31, 2016.  The ranking was based on six metrics which included: return on average assets, return on average common tangible equity, efficiency ratio, median three-year growth rate in tangible common equity per share, non-performing loans to total loans and net charge-offs to average loans.

Disclaimer

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could."  Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future performance.  These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated, including, but not limited to: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our loan loss reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Board of Governors of the Federal Reserve System and our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action or require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions, which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules including as a result of Basel III; the impact of the Dodd Frank Wall Street Reform and Consumer Protection Act and the implementation of related rules and regulations; our ability to attract and retain deposits;  increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our consolidated balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates;  increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common and stock; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist activities; other economic, competitive, governmental,

 

regulatory, and technological factors affecting our operations; pricing, products and services; and other risks detailed in our reports filed with the Securities and Exchange Commission.

Any of the forward-looking statements that we make in this press release and in the other public statements we make are based upon management's beliefs and assumptions at the time they are made.  We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise.  We caution readers not to place undue reliance on any forward-looking statements.  We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  These risks could cause our actual results for fiscal 2018 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us, and could negatively affect the Company's operations and stock price performance.

 

 

 

 

 

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME		Three Months Ended
($ in thousands, except per share amounts)		Sept. 30,				June 30,				Sept. 30,
(unaudited)		2017				2017				2016
Interest and dividend income
Loans receivable and loans held for sale		$	9,104			$	9,652			$	8,588
Investment securities			73				69				74
Dividends from mutual funds, other investments and FHLB stock			28				23				23
Interest bearing deposits in banks and CDs			505				421				253
Total interest and dividend income			9,710				10,165				8,938
Interest expense
Deposits			581				549				521
FHLB borrowings			--				369				611
Total interest expense			581				918				1,132
Net interest income			9,129				9,247				7,806
Recapture of loan losses			--				(1,000	)			--
Net interest income after recapture of loan losses			9,129				10,247				7,806
Non-interest income
Service charges on deposits			1,170				1,153				1,071
ATM and debit card interchange transaction fees			895				855				1,073
Gain on sales of loans, net			502				561				551
Bank owned life insurance ("BOLI") net earnings			139				133				141
Servicing income on loans sold			114				106				86
Recoveries (OTTI) on investment securities, net			33				--				(140	)
Other			292				348				327
Total non-interest income, net			3,145				3,156				3,109
Non-interest expense
Salaries and employee benefits			3,732				3,741				3,589
Premises and equipment			789				767				831
Advertising			199				170				163
OREO and other repossessed assets, net			--				4				101
ATM and debit card processing			369				375				387
Postage and courier			111				109				104
State and local taxes			125				176				161
Professional fees			258				230				208
FDIC insurance			42				99				114
Loan administration and foreclosure			93				20				106
Data processing and telecommunications			476				480				502
Deposit operations			225				301				274
Other			492				466				421
Total non-interest expense			6,911				6,938				6,961
Income before income taxes			5,363				6,465				3,954
Provision for income taxes			1,748				2,188				1,255
Net income		$	3,615			$	4,277			$	2,699
Net income per common share:
Basic		$	0.50			$	0.59			$	0.40
Diluted			0.48				0.58				0.38
Weighted average common shares outstanding:
Basic			7,280,773				7,269,564				6,831,419
Diluted			7,473,724				7,432,171				7,146,115

 

 

 

Timberland Fiscal Q4 2017 Earnings

November 1, 2017

Page 11

__________________________________________________

(a)  Annualized

(b)  Non-performing assets include non-accrual loans, loans past due 90 days and still accruing, non-performing investment securities and OREO and other repossessed assets.  Troubled debt restructured loans on accrual status are not included.

(c)  Does not include loans held for sale and is before the allowance for loan losses.

(d)  Does not include troubled debt restructured loans totaling $252, $252 and $530 reported as non-accrual loans at September 30, 2017, June 30, 2017 and September 30, 2016, respectively.

(e)  Tangible common equity divided by common shares outstanding (non-GAAP).

AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY

($ in thousands)

(unaudited)

 

          _____________________________________

(1) Includes other investments

(2) Rate calculation includes prepayment penalties incurred

(3) Net interest margin = annualized net interest income /

     average interest-bearing assets

AVERAGE BALANCES, YIELDS, AND RATES –ANNUAL

($ in thousands)

(unaudited)

 

_____________________________________

(1)	Includes other investments

(2)	Rate calculation includes prepayment penalties incurred