8-K 1 k8110707.txt TIMBERLAND BANCORP, INC. FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 6, 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 --------------------------------------- ------- (Address of principal executive offices) (Zip Code) Registrant's telephone number (including area code) (360) 533-4747 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions. [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition -------------------------------------------------------- On November 6, 2007, Timberland Bancorp, Inc. issued its earnings release for the quarter ended September 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 September 30, 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: November 6, 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. EARNINGS PER SHARE INCREASE 10% TO RECORD $0.32 HOQUIAM, WA----November 6, 2007 -- Timberland Bancorp, Inc. (NASDAQ:TSBK), ("Timberland") the holding company for Timberland Bank, ("Bank") today reported record fourth quarter earnings per share led by strong loan growth, solid asset quality, improving efficiency and ongoing share repurchases. Timberland increased its diluted earnings per share 10% to $0.32 compared to $0.29 per share in the fourth quarter one year ago. Timberland also reported record diluted earnings per share for the fiscal year ended September 30, 2007 of $1.17 compared to $1.12 for the fiscal year ended September 30, 2006. All per share data has been adjusted to reflect the 2-for-1 stock split in the form of a 100% stock dividend paid on June 5, 2007. Fiscal Fourth Quarter (September 30, 2007) Highlights - * Diluted earnings per share increased 10% compared to 4Q06 * Return on equity increased to 11.66%. * Loan portfolio increased 21% to $515 million during the past 12 months. * Asset quality remained strong, with non-performing assets at 0.23% of total assets and a net charge-off of only $2,000 during the quarter. "We continue to benefit from a strong Northwest economy," stated Michael Sand, Timberland's President and CEO. "Although markets in the Puget Sound area are experiencing higher inventory levels and longer sales cycles, housing prices have risen during the first nine months of this year compared to the same period last year. While we retain an optimistic view of our region's economic prospects, recent sales statistics indicate that the sales of new homes slowed in King and Pierce Counties on a year-to-date basis. Residential sales transactions decreased by 12% and 31% in King and Pierce Counties respectively through September of this year as compared to the prior year. We continue to closely monitor our builders and their inventory levels in this economic environment. Our loan portfolio is well diversified by geography and by loan type. We are pleased with the improvement in our earnings per share and in our return on equity this past quarter," Sand also stated. Operating Results Fiscal fourth quarter revenue (net interest income before provision for loan losses plus non-interest income) increased 5% to $8.3 million from $7.9 million in the like quarter one year ago. Net interest income before the provision for loan losses for the fourth quarter of fiscal 2007 increased 8% to $6.7 million compared to the like quarter one year ago with interest income increasing 21% and interest expense increasing 47%. For the fiscal year ended September 30, 2007, revenues increased 4% to $32.1 million from $30.9 million the year before. Net interest income before provision for loan losses increased 6% to $26.2 million, with interest income increasing 18% and interest expenses increasing 46%. Loan growth contributed to the increase in net interest income and offset increased funding costs. "As we have seen throughout the banking industry, the relatively 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 core deposit growth, supplemented by wholesale funding sources." Timberland's net interest margin was 4.60% for the fourth quarter compared to 4.67% for the third quarter of fiscal 2007 and 4.91% for the fourth quarter one year ago. For the year ended September 30, 2007 the net interest margin was 4.69% compared to 4.91% for the year ended September 30, 2006. The loan portfolio continued to perform well during the quarter with net charge-offs totaling only $2,000. The fourth quarter provision for loan losses totaled $270,000 compared to no provision made during the fourth quarter of fiscal 2006. For the full fiscal year, the provision for loan losses totaled $686,000 compared to no provision for fiscal 2006. Non-interest income decreased 6% to $1.56 million for the fourth quarter from $1.65 million for the fourth fiscal quarter of 2006. Non-interest income for fiscal 2007 decreased 5% to $5.96 million from $6.24 million for fiscal 2006. Non-interest income decreased primarily due to lower income from loan sales and a reduction in service charges on deposits accounts. On a linked quarter basis, non-interest income increased 4%. The increase in non-interest income was primarily due to an increase in service charges on deposit accounts and an increase in the gain on sale of loans. Timberland Q4 Earnings November 6, 2007 Page 2 "In fiscal 2007, total revenue growth outpaced the growth of operating overhead, which improved our efficiency ratio," Sand noted. The efficiency ratio for the fourth quarter was 58.47% compared to 60.03% for the same quarter one year ago. The efficiency ratio for fiscal 2007 improved to 60.54% from 61.19% for fiscal 2006. Primarily because of increased advertising expenses and increased premises and equipment expenses, Timberland's total operating (non-interest) expenses increased 2% to $4.85 million for the current quarter from $4.75 million for the fourth quarter one year ago. Operating expenses for fiscal 2007 increased 3% to $19.45 million from $18.90 million for fiscal 2006, primarily due to increased compensation expenses and higher advertising and ATM expenses. "Our return on equity continued to improve as profitability increased and we returned excess capital to shareholders through regular dividends and share repurchase programs," Sand noted. Timberland's return on equity ("ROE") was 11.66% for the fourth quarter of fiscal 2007, compared to the prior quarter's 11.24% and 10.89% for the fourth quarter of fiscal 2006. Timberland's return on assets ("ROA") was 1.36% for the fourth quarter of fiscal 2007, compared to the prior quarter's 1.38% and 1.53% for the same period one year ago. For the fiscal year ended September 30, 2007, ROE was 10.67% compared to 10.59% for fiscal 2006, and ROA was 1.34% compared to 1.47% one year ago. Balance Sheet Management Total assets increased to $645 million at September 30, 2007, compared to $624 million at June 30, 2007 and $577 million one year ago primarily due to strong loan portfolio growth. Net loans receivable increased 14% on an annualized basis during the quarter to $515 million at September 30, 2007, and increased 21% from $425 million one year ago. During the past 12 months the portfolio has increased by $91 million as construction and land development loans (net of the undisbursed portion) increased $33 million, land loans increased $31million, multi-family loans increased $17 million, consumer loans increased $10 million, and commercial business loans increased $6 million. LOAN PORTFOLIO ($ in thousands) Sept. 30, 2007 June 30, 2007 Sept. 30, 2006 Amount Percent Amount Percent Amount Percent -------- ---- -------- ---- -------- ---- Mortgage Loans: One-to-four family (1) $102,434 17% $103,883 18% $ 98,709 20% Multi family 35,157 6 31,719 6 17,689 4 Commercial 127,866 22 128,118 22 137,609 28 Construction and land development 186,261 32 181,157 32 146,855 30 Land 60,706 10 53,794 9 29,598 6 -------- ---- -------- ---- -------- ---- Total mortgage loans 512,424 87 498,671 87 430,460 88 Consumer Loans: Home equity and second mortgage 47,269 8 44,347 8 37,435 8 Other 10,922 2 11,735 2 11,127 2 -------- ---- -------- ---- -------- ---- 58,191 10 56,082 10 48,562 10 Commercial business loans 18,164 3 16,625 3 11,803 2 -------- ---- -------- ---- -------- ---- Total loans $588,779 100% $571,378 100% $490,825 100% Less: Undisbursed portion of construction loans in process (65,673) (66,598) (59,260) Unearned income (2,968) (2,921) (2,798) Allowance for loan losses (4,797) (4,529) (4,122) -------- -------- -------- Total loans receivable, net $515,341 $497,330 $424,645 ======== ======== ======== __________ (1) Includes loans held for sale Timberland Q4 Earnings November 6, 2007 Page 3 CONSTRUCTION LOAN COMPOSITION ($ in thousands) Sept. 30, 2007 June 30, 2007 Sept. 30, 2006 Amount Percent Amount Percent Amount Percent -------- ---- -------- ---- -------- ---- Custom and owner / builder $ 52,375 28% $ 48,894 27% $ 46,346 32% Speculative 43,012 23 43,655 24 34,363 23 Commercial real estate 50,518 27 50,729 28 42,398 29 Multi-family 18,064 10 19,801 11 7,662 5 Land development 22,292 12 18,078 10 16,086 11 -------- ---- -------- ---- -------- ---- Total construction loans $186,261 100% $181,157 100% $146,855 100% Loan originations of $66.3 million for the quarter were nearly identical to the $66.4 million in loan originations for the quarter ended June 30, 2007. Loan originations decreased 23% to $66.3 million for the quarter ended September 30, 2007 compared to $86.5 million for the same quarter one year ago. In fiscal 2007 loan originations increased 17% to $299.7 million from $256.3 million for fiscal 2006. The Bank 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 $8.3 million for the fourth quarter of fiscal 2007 compared to $8.8 million for the same period one year ago. In fiscal 2007 loan sales increased by 13% to $29.9 million from $26.4 million for fiscal 2006. Total deposits increased $33.2 million to $466.7 million at September 30, 2007 from $433.5 million at June 30, 2007 primarily due to the addition of $24.1 million in brokered deposits which were used to help fund loan portfolio growth. Balances in money market accounts and certificates of deposit accounts showed strong increases during the quarter and year-over-year. DEPOSIT BREAKDOWN ($ in thousands) Sept. 30, 2007 June 30, 2007 Sept. 30, 2006 Amount Percent Amount Percent Amount Percent -------- ---- -------- ---- -------- ---- Non-interest bearing $ 54,962 12% $ 50,580 12% $ 57,905 13% N.O.W. checking 80,372 17 80,290 18 89,509 21 Savings 56,412 12 59,558 14 60,235 14 Money market accounts 48,068 10 46,446 11 42,378 10 Certificates of deposit under $100 135,528 29 131,803 30 128,183 30 Certificates of deposit $100 and over 67,316 15 64,837 15 52,851 12 Certificates of deposit - brokered 24,077 5 -- -- -- -- -------- ---- -------- ---- -------- ---- Total deposits $466,735 100% $433,514 100% $431,061 100% ======== ==== ======== ==== ======== ==== Total shareholders' equity increased $555,000 to $74.5 million at September 30, 2007 from $74.0 million at June 30, 2007. Timberland continued to manage its capital ratio through asset growth, stock repurchases and dividends. During the quarter Timberland repurchased 72,000 shares for $1.2 million (an average price of $16.56 per share). There are 144,950 shares remaining to be repurchased in the current stock repurchase plan. Cumulatively, Timberland has repurchased 7.6 million shares at an average price of $8.89 per share. The share repurchases equal approximately 58% of the 13.2 million shares that were issued in Timberland's initial public offering in January 1998. A cash dividend of $0.10 per share was paid during the quarter, which represented the 38th consecutive quarter a cash dividend was paid to shareholders. On October 30, 2007 the Company announced a quarterly cash dividend of $0.10 per share, payable on November 27, 2007 to shareholders of record on November 13, 2007. Asset Quality Asset quality remained strong as the non-performing assets to total assets ratio was 0.23% at September 30, 2007, with a net charge-off of only $2,000 during the quarter. The allowance for loan losses totaled $4.8 million at September 30, 2007, or 0.92% of loans receivable and 322% of non-performing loans. The allowance for loan losses was $4.5 million, or 0.90% of loans receivable at June 30, 2007. The Bank's non-performing loans totaled $1.49 million at September 30, 2007 and were Timberland Q4 Earnings November 6, 2007 Page 4 comprised of a $159,000 single family loan, a $28,000 land loan and $1.30 million in loans to a construction company. The $1.30 million in loans to the construction entity were secured by two single family homes and a land parcel in Pierce County. About Timberland Bancorp, Inc. Timberland Bancorp, Inc. stock trades on the NASDAQ global market under the symbol "TSBK." The Bank operates 21 branches in the state of Washington in Hoquiam, Aberdeen, Ocean Shores, Montesano, Elma, Olympia, Lacey, Tumwater, Yelm, Puyallup, Edgewood, Tacoma, Spanaway (Bethel Station), Gig Harbor, Poulsbo, Silverdale, Auburn, Winlock, and Toledo. Timberland Q4 Earnings November 6, 2007 Page 5 TIMBERLAND BANCORP INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT Three Months Ended ($ in thousands, except per share) Sept. 30, June 30, Sept. 30, (unaudited) 2007 2007 2006 ---------- ---------- ---------- Interest and dividend income Loans receivable $ 10,335 $ 9,981 $ 8,252 Investments and mortgage-backed securities 344 350 510 Dividends 433 426 401 Federal funds sold 69 49 97 Interest bearing deposits in banks 16 8 23 ---------- ---------- ---------- Total interest and dividend income 11,197 10,814 9,283 Interest expense Deposits 3,180 2,866 2,351 Federal Home Loan Bank ("FHLB") advances 1,262 1,278 659 Other borrowings 11 12 13 ---------- ---------- ---------- Total interest expense 4,453 4,156 3,023 ---------- ---------- ---------- Net interest income 6,744 6,658 6,260 Provision for loan losses 270 260 -- ---------- ---------- ---------- Net interest income after provision for loan losses 6,474 6,398 6,260 Non-interest income Service charges on deposits 715 692 755 Gain on sale of loans, net 106 79 122 BOLI net earnings 120 116 116 Escrow fees 14 22 33 Servicing income on loans sold 133 127 160 ATM transaction fees 307 295 284 Other 162 170 183 ---------- ---------- ---------- Total non-interest income 1,557 1,501 1,653 Non-interest expense Salaries and employee benefits 2,624 2,752 2,650 Premises and equipment 625 557 590 Advertising 274 190 187 Loss (gain) from other real estate operations 1 1 (77) ATM expenses 143 128 129 Postage and courier 131 113 116 Amortization of core deposit intangible 71 71 82 State and local taxes 152 148 138 Professional fees 125 175 265 Other 708 626 670 ---------- ---------- ---------- Total non-interest expense 4,854 4,761 4,750 Income before federal income taxes 3,177 3,138 3,163 Federal income taxes 1,022 1,000 1,019 ---------- ---------- ---------- Net income $ 2,155 $ 2,138 $ 2,144 ========== ========== ========== Earnings per common share: Basic $ 0.33 $ 0.32 $ 0.30 Diluted $ 0.32 $ 0.31 $ 0.29 Weighted average shares outstanding: Basic 6,516,381 6,713,777 7,034,754 Diluted 6,690,048 6,910,165 7,290,954 Timberland Q4 Earnings November 6, 2007 Page 6 TIMBERLAND BANCORP INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT Year Ended ($ in thousands, except per share) September 30, September 30, (unaudited) 2007 2006 ------------ ------------ Interest and dividend income Loans receivable $ 38,386 $ 31,397 Investments and mortgage-backed securities 1,529 2,152 Dividends 1,692 1,436 Federal funds sold 260 389 Interest bearing deposits in banks 77 78 ------------ ------------ Total interest and dividend income 41,944 35,452 Interest expense Deposits 11,292 7,905 Federal Home Loan Bank ("FHLB") advances 4,436 2,860 Other borrowings 50 49 ------------ ------------ Total interest expense 15,778 10,814 ------------ ------------ Net interest income 26,166 24,638 Provision for loan losses 686 -- ------------ ------------ Net interest income after provision for loan losses 25,480 24,638 Non-interest income Service charges on deposits 2,776 2,981 Gain on sale of loans, net 356 386 BOLI net earnings 464 449 Escrow fees 92 120 Servicing income on loans sold 505 425 ATM transaction fees 1,138 1,026 Other 631 857 ------------ ------------ Total non-interest income 5,962 6,244 Non-interest expense Salaries and employee benefits 10,928 10,744 Premises and equipment 2,452 2,403 Advertising 843 688 Loss (gain) from other real estate operations (13) (156) ATM expenses 497 428 Postage and courier 478 486 Amortization of core deposit intangible 285 328 State and local taxes 571 564 Professional fees 650 876 Other 2,760 2,535 ------------ ------------ Total non-interest expense 19,451 18,896 Income before federal income taxes 11,991 11,986 Federal income taxes 3,828 3,829 ------------ ------------ Net income $ 8,163 $ 8,157 ============ ============ Earnings per common share: Basic $ 1.20 $ 1.16 Diluted $ 1.17 $ 1.12 Weighted average shares outstanding: Basic 6,775,822 7,032,662 Diluted 6,982,107 7,281,896 Timberland Q4 Earnings November 6, 2007 Page 7 TIMBERLAND BANCORP, INC. CONSOLIDATED BALANCE SHEET ($ in thousands) (unaudited) Sept. 30, June 30, Sept. 30, Assets 2007 2007 2006 -------- -------- -------- Cash and due from financial institutions Non-interest bearing $ 10,813 $ 11,798 $ 14,870 Interest-bearing deposits in banks 2,082 1,188 2,519 Federal funds sold 3,775 205 5,400 -------- -------- -------- 16,670 13,191 22,789 Certificate of deposit held for investment -- -- 100 Investments and mortgage-backed securities: Held to maturity 71 72 75 Available for sale 63,898 64,911 81,408 FHLB Stock 5,705 5,705 5,705 -------- -------- -------- 69,674 70,688 87,288 Loans receivable 519,381 500,694 426,318 Loans held for sale 757 1,165 2,449 Less: Allowance for loan losses (4,797) (4,529) (4,122) -------- -------- -------- Net loans receivable 515,341 497,330 424,645 Accrued interest receivable 3,424 3,177 2,806 Premises and equipment 16,575 16,557 16,730 Other Real estate owned ("OREO") and other repossessed items -- 68 15 Bank owned life insurance ("BOLI") 12,415 12,294 11,951 Goodwill 5,650 5,650 5,650 Core deposit intangible 1,221 1,292 1,506 Mortgage servicing rights 1,051 1,018 932 Other assets 2,827 2,881 2,775 -------- -------- -------- Total Assets $644,848 $624,146 $577,087 ======== ======== ======== Liabilities and Shareholders' Equity Non-interest-bearing deposits $ 54,962 $ 50,580 $ 57,905 Interest-bearing deposits 411,773 382,934 373,156 -------- -------- -------- Total deposits 466,735 433,514 431,061 FHLB advances 99,697 112,463 62,761 Other borrowings: repurchase agreements 595 775 947 Other liabilities and accrued expenses 3,274 3,402 2,953 -------- -------- -------- Total Liabilities 570,301 550,154 497,722 -------- -------- -------- Shareholders' Equity Common stock- $.01 par value; 50,000,000 shares authorized; September 30, 2007 - 6,953,360 shares issued and outstanding June 30, 2007 - 7,025,360 shares issued and outstanding September 30, 2006 - 3,757,676 shares issued and outstanding on a pre-split basis 70 70 38 Additional paid in capital 10,315 11,425 20,888 Unearned shares- Employee Stock Ownership Plan (3,040) (3,106) (3,305) Unearned shares- Management Recognition and Development Plan (392) (415) (188) Retained earnings 68,378 66,915 62,933 Accumulated other comprehensive loss (784) (897) (1,001) -------- -------- -------- Total Shareholders' Equity 74,547 73,992 79,365 -------- -------- -------- Total Liabilities and Shareholders' Equity $644,848 $624,146 $577,087 ======== ======== ======== Timberland Q4 Earnings November 6, 2007 Page 8 KEY FINANCIAL RATIOS AND DATA ($ in thousands, except per share) Three Months Ended (unaudited) Sept. 30, June 30, Sept. 30, 2007 2007 2006 --------- --------- --------- PERFORMANCE RATIOS: Return on average assets (a) 1.36% 1.38% 1.53% Return on average equity (a) 11.66% 11.24% 10.89% Net interest margin (a) 4.60% 4.67% 4.91% Efficiency ratio 58.47% 58.35% 60.03% Year Ended Sept. 30, Sept. 30, 2007 2006 --------- --------- Return on average assets 1.34% 1.47% Return on average equity 10.67% 10.59% Net interest margin 4.69% 4.91% Efficiency ratio 60.54% 61.19% Sept. 30, June 30, Sept. 30, 2007 2007 2006 --------- --------- --------- ASSET QUALITY RATIOS: Non-performing loans $ 1,490 $ 982 $ 80 OREO and other repossessed assets -- 68 15 --------- --------- --------- Total non-performing assets $ 1,490 $ 1,050 $ 95 Non-performing assets to total assets 0.23% 0.17% 0.02% Allowance for loan losses to non-performing loans 322% 461% 5,153% Book value per share (b) $ 10.72 $ 10.53 $ 10.56 Book value per share (c) $ 11.39 $ 11.19 $ 11.22 Tangible book value per share (b) (d) $ 9.73 $ 9.54 $ 9.61 Tangible book value per share (c) (d) $ 10.34 $ 10.14 $ 10.21 (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 Sept. 30, June 30, Sept. 30, 2007 2007 2006 --------- --------- --------- Average total loans $ 509,166 $ 494,137 $ 411,012 Average total interest earning assets 586,056 570,597 510,180 Average total assets 634,762 619,120 560,941 Average total interest bearing deposits 405,078 388,610 372,371 Average FHLB advances and other borrowings 96,442 98,467 48,518 Average shareholders' equity 73,916 76,087 78,724 Year Ended Sept. 30, Sept. 30, 2007 2006 --------- --------- Average total loans $ 477,029 $ 399,811 Average total interest earning assets 558,298 502,194 Average total assets 607,781 554,231 Average total interest bearing deposits 387,505 365,544 Average FHLB advances and other borrowings 85,599 55,773 Average shareholders' equity 76,497 77,044 Timberland Q4 Earnings November 6, 2007 Page 9 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.