8-K 1 k8072208.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): July 22, 2008 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 July 22, 2008, Timberland Bancorp, Inc. issued its earnings release for the quarter ended June 30, 2008. 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 -------------------------------------------- (d) Exhibits 99.1 Press Release of Timberland Bancorp, Inc. dated July 22, 2008 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. TIMBERLAND BANCORP,INC. DATE: July 23, 2008 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 Announces Fiscal Third Quarter 2008 Results HOQUIAM, WA--Jul 22, 2008 -- Timberland Bancorp, Inc. (TSBK News) ("Timberland"), the holding company for Timberland Bank ("Bank"), today reported core operating earnings of $2.05 million, or $0.31 per diluted share for the fiscal third quarter ended June 30, 2008, exclusive of the previously announced non-recurring impairment charge of $2.82 million ($2.59 million after tax) resulting from the withdrawal of its investment in the AMF family of mutual funds. The non-recurring impairment charge of $0.39 per diluted share resulted in a net loss of $0.08 per diluted shares for the fiscal third quarter. In the fiscal second quarter ended March 31, 2008, Timberland earned $1.59 million, or $0.24 per diluted share and in the quarter ended June 30, 2007, it earned $2.14 million, or $0.31 per diluted share. Timberland's non- performing assets to total assets ratio was 1.55% at June 30, 2008. All per share data has been adjusted to reflect the two-for-one stock split in the form of a 100% stock dividend paid on June 5, 2007. Fiscal Third Quarter 2008 Highlights: (quarter ended June 30, 2008 compared to the quarter ended June 30, 2007) * Core earnings per diluted share were $0.31. * Capital levels remain strong with an 11.3% equity-to-assets ratio and a 10.3% tangible-equity-to-assets ratio. * Non-interest income (exclusive of the non-recurring impairment charge) increased 29%. * Quarterly cash dividend of $0.11 per share announced on July 8, 2008. This represents the 42nd consecutive quarter that Timberland will have paid a cash dividend. * The loan portfolio increased 12% to $557 million from $497 million. * Total assets increased 6% to $664 million from $624 million. * Timberland consistently earns top honors for strong performance and financial stability. * In April 2008, SNL Financial, a leading bank research firm, released their 2007 performance ratings of the nation's 100 largest thrifts. Timberland Bancorp, Inc. ranked seventh overall in the nation. * Timberland Bank also earned a five-star "Superior" rating from Bauer Financial. "Operationally our third quarter performance reflects the underlying strength of our franchise," said Michael R. Sand, President and Chief Executive Officer. Operating Results Fiscal third quarter revenue (net interest income before provision for loan losses plus non-interest income), excluding the non-recurring impairment charge, increased 3% to $8.4 million compared with $8.2 million in the like quarter one year ago. Solid growth in fee income more than offset marginally lower net interest income. Net interest income before the provision for loan losses decreased 2% to $6.5 million from $6.7 million compared to the like quarter one year ago with interest and dividend income decreasing 4% and interest expense decreasing 7%. Fiscal year to date core operating revenue increased 5% to $25.1 million from $23.8 million in the first nine months one year ago with net interest income up 3% and non-interest income increasing 13%. During this challenging interest rate environment, Timberland's net interest margin remained solid at 4.23%, a reduction of 21 basis points from the 4.44% reported for the quarter ended March 31, 2008. The 25 basis point interest rate cut by the Federal Reserve at the end of April 2008 combined with a full quarter's impact from the 200 basis points in cuts during the quarter ended March 31, 2008 compressed margins during the current quarter. The reversal of interest on loans placed on non-accrual status during the quarter accounted for eight basis points of the 21 basis point decrease in the net interest margin. The Company's net interest margin was 4.67% for the same quarter one year ago. Year to date, Timberland's net interest margin was 4.42% compared to 4.72% one year ago. In the third fiscal quarter Timberland made a provision of $500,000 to its allowance for loan losses. This represented a decrease of $200,000 from the provision made in the quarter immediately prior and an increase of $240,000 as compared to the like quarter in the prior fiscal year. Net charge-offs for the quarter ended June 30, 2008 totaled $121,000. Timberland's Safety Timberland Q3 Earnings July 22, 2008 Page 2 and Soundness Regulatory examination was conducted and concluded in mid May. Timberland's annual independent third party loan review was also conducted and concluded in May. During the quarter Timberland recognized a non-recurring impairment charge of $2.82 million on its investment in the AMF family of mutual funds. Due to a continuing decline in the net asset value ("NAV") of the funds primarily as a result of uncertainty in spreads in the bond market for mortgage-related securities and downgrades to a small percentage of the underlying securities, Timberland determined that the funds should be classified as "other than temporarily impaired." "Subsequently, we elected to redeem our $29.1 million mutual fund investment and received both cash and the underlying securities from the redemption," said Sand. Only $317,000 were cash charges and the remaining $2.5 million were non-cash charges to income. It is currently anticipated that a portion of the non-cash charge will be partially offset in each subsequent quarter as principal payments are made to the underlying securities. The redemption of the mutual funds resulted in a capital loss which can only be deducted for tax purposes to the extent that capital gains are realized within a three year carry back period and a five year carry forward period. Timberland has estimated that it will have $679,000 in capital gains during the allowable tax period to offset the capital loss. The after tax impact of the non-recurring impairment charge is $2.59 million, or $0.39 per diluted share. Non-interest income (excluding the non-recurring impairment charge) increased 29% to $1.93 million for the third quarter from $1.50 million for the third quarter of fiscal 2007, primarily due to increased service charges on deposits and increased income from loan sales (gain on sale of loans and servicing income on loans sold). "Our operating income continues to build as we introduce new products and services to our customers. The success of the automated overdraft decisioning system implemented during the quarter increased fee income," said Sand. The increased income from loan sales was primarily a result of an increase in the dollar value of residential mortgage loans sold in the secondary market during the quarter. The sale of fixed rate one-to-four family mortgage loans totaled $16.0 million for the third quarter of fiscal 2008 compared to $7.8 million for the same period one year prior. Timberland's total operating (non-interest) expenses increased by $158,000 to $4.92 million for the third quarter from $4.76 million for the third quarter of fiscal 2007 primarily due to a $60,000 increase in salaries and employee benefits expense, a $49,000 increase in deposit related expenses, a $38,000 increase in advertising expenses and smaller increases in several other categories. The increased salary and benefit expense was primarily the result of annual salary adjustments (effective October 1, 2007). The increased deposit related expenses were primarily a result of expenses associated with several new deposit related programs. The increased advertising expenses were primarily attributable to marketing costs designed to gather new deposits. Partially offsetting these increased expenses was a $38,000 decrease in premises and equipment expense as compared to the like quarter one year ago. The decrease in premises and equipment expense was primarily due to the sale of a building that previously served as a branch facility. The gain on the sale of the building resulted in a $123,000 decrease to premises and equipment expenses during the quarter. Timberland's efficiency ratio (exclusive of the non-recurring impairment charge) was 58.36% for the quarter ended June 30, 2008 compared to 58.35% for the quarter ended June 30, 2007. Asset Quality The non-performing assets ("NPAs") to total assets ratio was 1.55% at June 30, 2008, with $121,000 in net charge-offs during the quarter. The allowance for loan losses totaled $7.1 million at June 30, 2008, or 1.26% of loans receivable and 75% of non-performing loans. The allowance for loan losses was $6.7 million, or 1.21% of loans receivable and $4.5 million, or 0.90% of loans receivable at March 31, 2008 and June 30, 2007, respectively. Non-performing loans increased by $3.0 million during the quarter to $9.4 million at June 30, 2008, and were comprised of 31 loans including 16 single family speculative loans totaling $5.6 million (of which the largest has a balance of $522,000), a $1.8 million participation interest in a land development loan located in Clark County, eight land loans totaling $933,000, one commercial real estate loan for $717,000, three home equity consumer loans totaling $233,000, one single family home loan for $101,000 and one commercial business loan for $14,000. These non-performing loans represent 13 credit relationships. The increase in non-performing loans as compared to the quarter immediately prior was attributable to seven credit relationships which are discussed below. 1. The largest of these seven relationships is with a long-time builder of Timberland's that has five single family speculative loans, four land loans each zoned for the construction of one single family dwelling and one home equity loan outstanding for an aggregate total of $2.57 million. The collateral for all these loans except the home equity loan is located in rural Thurston County. Timberland Q3 Earnings July 22, 2008 Page 3 2. Another builder has two loans totaling $605,000 that are secured by single family speculative homes in Pierce County. 3. A commercial real estate loan of $717,000 is secured by a medical office building in Kitsap County. The assessed value of the collateral is $1.02 million and the property is currently listed for sale at $1.24 million. 4. A loan of $101,000 is well secured by a house with an assessed value of $166,000. The collateral is located in Kitsap County. 5. A loan of $78,000 is partially secured by a building lot. The borrower is an owner builder that is involved in personal litigation which has prevented him from building on the lot. The collateral is located in Grays Harbor County. 6. A loan of $31,000 is secured by a residential building lot in Grays Harbor County with an assessed value of $50,000. 7. A $14,000 loan is secured by a lift truck. Loans with an aggregate balance of $173,000 that were non-performing at the end of the prior quarter were brought current during the quarter ended June 30, 2008 and one loan was transferred to other real estate owned ("OREO"). OREO increased to $879,000 at June 30, 2008 and consisted of one single-family residence in Pierce County. Balance Sheet Management Total assets increased 6% on an annualized basis during the quarter to $663.8 million at June 30, 2008, and increased 6% from $624.1 million one year ago primarily due to loan portfolio growth. LOAN PORTFOLIO ($ in thousands) June 30, 2008 March 31, 2008 June 30, 2007 Amount Percent Amount Percent Amount Percent -------- -------- -------- -------- -------- -------- Mortgage Loans: One-to-four family (1) $105,791 17% $108,117 18% $103,883 18% Multi-family 37,465 6 37,932 6 31,719 6 Commercial 140,785 23 136,112 22 128,118 22 Construction and land development 202,029 32 197,384 32 181,157 32 Land 56,489 9 55,158 9 53,794 9 -------- -------- -------- -------- -------- -------- Total mortgage loans 542,559 87 534,703 87 498,671 87 Consumer Loans: Home equity and second mortgage 46,771 7 47,003 8 44,347 8 Other 11,292 2 10,888 2 11,735 2 -------- -------- -------- -------- -------- -------- 58,063 9 57,891 10 56,082 10 Commercial business loans 23,307 4 20,177 3 16,625 3 -------- -------- -------- -------- -------- -------- Total loans $623,929 100% $612,771 100% $571,378 100% Less: Undisbursed portion of construction loans in process (57,335) (55,447) (66,598) Unearned income (2,865) (2,782) (2,921) Allowance for loan losses (7,076) (6,697) (4,529) -------- -------- -------- Total loans receivable, net $556,653 $547,845 $497,330 ======== ======== ======== _____________________ (1) Includes loans held for sale CONSTRUCTION LOAN COMPOSITION ($ in thousands) June 30, 2008 March 31, 2008 June 30, 2007 Amount Percent Amount Percent Amount Percent -------- -------- -------- -------- -------- -------- Custom and owner / builder $ 48,384 24% $ 46,311 23% $ 48,894 27% Speculative 36,979 18 42,582 22 43,655 24 Commercial real estate 66,846 33 56,964 29 50,729 28 Multi-family 19,044 10 21,941 11 19,801 11 Land development 30,776 15 29,586 15 18,078 10 -------- -------- -------- -------- -------- -------- Total construction loans $202,029 100% $197,384 100% $181,157 100% Net loans receivable increased 12% year-over-year to $556.7 million at June 30, 2008, from $497.3 million one year ago. During the quarter the loan portfolio increased by $8.8 million as commercial real estate loans increased by $4.7 million, commercial business loans increased by $3.1 million, construction and land development loans (net of the undisbursed portion) increased by $2.8 million and land loans increased by $1.3 million. These increases were partially offset by a $2.3 million Timberland Q3 Earnings July 22, 2008 Page 4 decrease in one-to four-family mortgage loans and a $467,000 decrease in multi-family mortgage loans. The Bank's speculative construction portfolio decreased by 13% from the prior quarter. Loan originations increased 36% to $80.1 million for the quarter ended June 30, 2008 from $59.0 million for the quarter ended March 31, 2008 and from $66.4 million for the quarter ended June 30, 2007. The Bank participated out $14.5 million of its loan production during the quarter and continues to sell fixed rate one-to four-family mortgage loans into the secondary market for asset-liability management purposes. During the quarter ended June 30, 2008, fixed rate one-to four-family mortgage loan sales totaled $16.0 million. Timberland's investment securities decreased by $9.4 million during the quarter to $33.5 million at June 30, 2008 from $42.9 million at March 31, 2008 primarily due to the redemption of mutual funds held with the AMF family of mutual funds. During the quarter Timberland redeemed $29.1 million in mutual funds and received $22.2 million in underlying securities and $6.9 million in cash. The investment securities balance also decreased during the quarter as a result of regular amortization and prepayments on mortgage-backed securities. DEPOSIT BREAKDOWN ($ in thousands) June 30, 2008 March 31, 2008 June 30, 2007 Amount Percent Amount Percent Amount Percent -------- ------- -------- ------- -------- ------- Non-interest bearing $ 50,701 11% $ 50,068 11% $ 50,580 12% N.O.W. checking 90,476 19 88,350 19 80,290 18 Savings 58,604 12 57,212 12 59,558 14 Money market 48,082 10 47,244 10 46,446 11 Certificates of deposit under $100 128,791 27 137,529 29 131,803 30 Certificates of deposit $100 and over 77,343 16 74,376 16 64,837 15 Certificates of deposit - brokered 25,937 5 15,058 3 -- -- -------- --- -------- --- -------- --- Total deposits $479,934 100% $469,837 100% $433,514 100% ======== === ======== === ======== === Total deposits increased $10.1 million to $479.9 million at June 30, 2008 from $469.8 million at March 31, 2008 primarily due to a $10.9 million increase in brokered deposit accounts, a $2.1 million increase in N.O.W. checking accounts, a $1.4 million increase in savings accounts, an $838,000 increase in money market accounts and a $633,000 increase in non-interest bearing accounts. These increases were partially offset by a $5.8 million decrease in certificates of deposit accounts. Brokered deposits remain a very limited portion of the Bank's funding sources. Total shareholders' equity decreased $67,000 to $74.78 million at June 30, 2008 from $74.84 million at March 31, 2008. The reduction in shareholders' equity was primarily due to cash dividends of $758,000 paid to shareholders and a net loss of $546,000 resulting from the non-recurring impairment charge noted above. These reductions to shareholders' equity were partially offset by a $991,000 decrease to the accumulated other comprehensive loss category. A significant portion ($976,000) of the non-recurring impairment charge on the mutual funds reflected in the current quarter's income statement had previously been accounted for as a reduction to shareholders' equity. This reduction was reflected in the accumulated other comprehensive loss line item in the balance sheet. Timberland did not repurchase any shares during the quarter. Timberland remains well capitalized with tier 1 risk based capital of 12.1%, equity to assets of 11.3% and tangible equity to assets of 10.3%. About Timberland Bancorp, Inc. Timberland Bancorp operates 21 branches in the state of Washington in Hoquiam, Aberdeen, Ocean Shores, Montesano, Elma, Olympia, Lacey, Tumwater, Yelm, Puyallup, Edgewood, Tacoma, Spanaway (Bethel Station), Gig Harbor, Poulsbo, Silverdale, Auburn, Winlock, and Toledo. Timberland Q3 Earnings July 22, 2008 Page 5 TIMBERLAND BANCORP INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT ($ in thousands, except per share) (unaudited) Three Months Ended --------------------------------------------- Non-GAAP* GAAP GAAP GAAP June 30, June 30, March 31, June 30, 2008 2008 2008 2007 --------- --------- --------- --------- Interest and dividend income Loans receivable $ 9,825 $ 9,825 $ 10,358 $ 9,981 Investments and mortgage- backed securities 235 235 142 350 Dividends from mutual funds and Federal Home Loan Bank ("FHLB") stock 272 272 395 426 Federal funds sold 28 28 27 49 Interest bearing deposits in banks 8 8 4 8 --------- --------- --------- --------- Total interest and dividend income 10,368 10,368 10,926 10,814 Interest expense Deposits 2,703 2,703 3,117 2,866 FHLB advances 1,161 1,161 1,132 1,278 Other borrowings 4 4 6 12 --------- --------- --------- --------- Total interest expense 3,868 3,868 4,255 4,156 --------- --------- --------- --------- Net interest income 6,500 6,500 6,671 6,658 Provision for loan losses 500 500 700 260 --------- --------- --------- --------- Net interest income after provision for loan losses 6,000 6,000 5,971 6,398 Non-interest income Service charges on deposits 948 948 648 692 Gain on sale of loans, net 127 127 144 79 Loss on redemption of mutual funds -- (2,822) -- -- Bank owned life insurance ("BOLI") net earnings 121 121 119 116 Servicing income on loans sold 234 234 179 127 ATM transaction fees 329 329 302 295 Other 170 170 162 192 --------- --------- --------- --------- Total non-interest income (loss) 1,929 (893) 1,554 1,501 Non-interest expense Salaries and employee benefits 2,812 2,812 2,986 2,752 Premises and equipment 519 519 650 557 Advertising 228 228 268 190 Loss (gain) from other real estate operations -- -- -- 1 ATM expenses 136 136 142 128 Postage and courier 129 129 130 113 Amortization of core deposit intangible 62 62 62 71 State and local taxes 149 149 147 148 Professional fees 175 175 145 175 Other 709 709 676 626 --------- --------- --------- --------- Total non-interest expense 4,919 4,919 5,206 4,761 Income before federal income taxes 3,010 188 2,319 3,138 Federal income taxes 965 734 734 1,000 --------- --------- --------- --------- Net income (loss) $ 2,045 $ (546) $ 1,585 $ 2,138 ========= ========= ========= ========= Earnings (loss) per common share: Basic $ 0.32 $ (0.08) $ 0.25 $ 0.32 Diluted $ 0.31 $ (0.08) $ 0.24 $ 0.31 Weighted average shares outstanding: Basic 6,446,303 6,446,303 6,441,367 6,713,777 Diluted 6,524,818 6,524,818 6,560,806 6,910,165 * Non-GAAP column excludes non-recurring loss on redemption of mutual funds. Timberland Q3 Earnings July 22, 2008 Page 6 TIMBERLAND BANCORP INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT Nine Months Ended ------------------------------- ($ in thousands, except per share) Non-GAAP* GAAP GAAP (unaudited) June 30, June 30, June 30, 2008 2008 2007 --------- --------- --------- Interest and dividend income Loans receivable $ 30,947 $ 30,947 $ 28,050 Investments and mortgage-backed securities 625 625 1,185 Dividends from mutual funds and FHLB stock 1,090 1,090 1,259 Federal funds sold 87 87 192 Interest bearing deposits in banks 22 22 61 --------- --------- --------- Total interest and dividend income 32,771 32,771 30,747 Interest expense Deposits 9,153 9,153 8,113 FHLB advances 3,510 3,510 3,173 Other borrowings 18 18 39 --------- --------- --------- Total interest expense 12,681 12,681 11,325 --------- --------- --------- Net interest income 20,090 20,090 19,422 Provision for loan losses 2,400 2,400 416 --------- --------- --------- Net interest income after provision for loan losses 17,690 17,690 19,006 Non-interest income Service charges on deposits 2,292 2,292 2,061 Gain on sale of loans, net 364 364 250 Loss on redemption of mutual funds - - (2,822) - - BOLI net earnings 360 360 343 Servicing income on loans sold 531 531 373 ATM transaction fees 930 930 830 Other 504 504 548 --------- --------- --------- Total non-interest income 4,981 2,159 4,405 Non-interest expense Salaries and employee benefits 8,718 8,718 8,303 Premises and equipment 1,634 1,634 1,827 Advertising 678 678 569 Loss (gain) from real estate operations - - - - (14) ATM expenses 426 426 354 Postage and courier 376 376 347 Amortization of core deposit intangible 186 186 214 State and local taxes 447 447 420 Professional fees 467 467 524 Other 2,044 2,044 2,052 --------- --------- --------- Total non-interest expense 14,976 14,976 14,596 Income before federal income taxes 7,695 4,873 8,815 Federal income taxes 2,449 2,218 2,806 --------- --------- --------- Net income $ 5,246 $ 2,655 $ 6,009 ========= ========= ========= Earnings per common share: Basic $ 0.81 $ 0.41 $ 0.88 Diluted $ 0.80 $ 0.40 $ 0.85 Weighted average shares outstanding: Basic 6,467,874 6,467,874 6,863,253 Diluted 6,587,120 6,587,120 7,080,530 * Non-GAAP column excludes non-recurring loss on redemption of mutual funds. Timberland Q3 Earnings July 22, 2008 Page 7 TIMBERLAND BANCORP, INC. CONSOLIDATED BALANCE SHEET ($ in thousands) (unaudited) June 30, March 31, June 30, 2008 2008 2007 --------- --------- --------- Assets Cash and due from financial institutions: Non-interest bearing $ 14,776 $ 12,165 $ 11,798 Interest-bearing deposits in banks 3,196 883 1,188 Federal funds sold 5,565 1,220 205 --------- --------- --------- 23,537 14,268 13,191 Investments and mortgage-backed securities: Held to maturity 14,684 60 72 Available for sale 18,828 42,868 64,911 FHLB stock 5,705 5,705 5,705 --------- --------- --------- 39,217 48,633 70,688 Loans receivable 562,664 549,593 500,694 Loans held for sale 1,065 4,949 1,165 Less: Allowance for loan losses (7,076) (6,697) (4,529) --------- --------- --------- Net loans receivable 556,653 547,845 497,330 Accrued interest receivable 2,932 3,055 3,177 Premises and equipment 16,286 16,470 16,557 Other real estate owned ("OREO") and other repossessed items 879 -- 68 BOLI 12,775 12,654 12,294 Goodwill 5,650 5,650 5,650 Core deposit intangible 1,034 1,096 1,292 Mortgage servicing rights 1,277 1,145 1,018 Other assets 3,514 3,697 2,881 --------- --------- --------- Total Assets $ 663,754 $ 654,513 $ 624,146 ========= ========= ========= Liabilities and Shareholders' Equity Non-interest-bearing deposits $ 50,697 $ 50,068 $ 50,580 Interest-bearing deposits 429,237 419,769 382,934 --------- --------- --------- Total deposits 479,934 469,837 433,514 FHLB advances 104,645 105,663 112,463 Other borrowings: repurchase agreements 1,007 815 775 Other liabilities and accrued expenses 3,393 3,356 3,402 --------- --------- --------- Total Liabilities 588,979 579,671 550,154 --------- --------- --------- Shareholders' Equity Common stock- $.01 par value; 50,000,000 shares authorized; June 30, 2008 - 6,901,453 shares issued and outstanding March 31, 2008 - 6,876,653 shares issued and outstanding June 30, 2007 - 7,025,360 shares issued and outstanding 69 69 70 Additional paid in capital 8,706 8,527 11,425 Unearned shares- Employee Stock Ownership Plan (2,842) (2,908) (3,521) Retained earnings 68,822 70,125 66,915 Accumulated other comprehensive income (loss) 20 (971) (897) --------- --------- --------- Total Shareholders' Equity 74,775 74,842 73,992 --------- --------- --------- Total Liabilities and Shareholders' Equity $ 663,754 $ 654,513 $ 624,146 ========= ========= ========= Timberland Q3 Earnings July 22, 2008 Page 8 KEY FINANCIAL RATIOS AND DATA ($ in thousands, except per share amounts) (unaudited) Three Months Ended ------------------------------------------- Core Results GAAP GAAP GAAP June 30, June 30, March 31, June 30, 2008 (a) 2008 2008 2007 ---------- --------- --------- -------- PERFORMANCE RATIOS: Return (loss) on average assets (b) 1.24% (0.33%) 0.98% 1.38% Return (loss) on average equity (b) 10.91% (2.91%) 8.48% 11.24% Net interest margin (b) 4.23% 4.23% 4.44% 4.67% Efficiency ratio 58.36% 87.73% 63.29% 58.35% Nine Months Ended ------------------------------------------ Core Results GAAP GAAP June 30, June 30, June 30, 2008 (a) 2008 2007 ---------- --------- -------- Return on average assets (b) 1.07% 0.54% 1.34% Return on average equity (b) 9.34% 4.73% 10.36% Net interest margin (b) 4.42% 4.42% 4.72% Efficiency ratio 59.73% 67.31% 61.26% June 30, March 31, June 30, 2008 2008 2007 -------- -------- ------- ASSET QUALITY RATIOS: Non-performing loans $ 9,391 $ 6,388 $ 982 OREO and other repossessed assets 879 -- 68 -------- -------- ------- Total non-performing assets $ 10,270 $ 6,388 $ 1,050 Non-performing assets to total assets 1.55% 0.98% 0.17% Allowance for loan losses to non-performing loans 75% 105% 461% Restructured loans $ -- $ 2,491 $ -- CAPITAL RATIOS: Tier 1 leverage capital 10.41% 10.53% 10.92% Tier 1 risk based capital 12.10% 12.08% 13.08% Total risk based capital 13.35% 13.28% 13.96% Equity to assets 11.27% 11.43% 11.85% Tangible equity to assets (e) 10.26% 10.40% 10.74% Book value per share (c) $ 10.83 $ 10.88 $ 10.53 Book value per share (d) $ 11.46 $ 11.53 $ 11.19 Tangible book value per share (c) (e) $ 9.87 $ 9.90 $ 9.54 Tangible book value per share (d) (e) $ 10.44 $ 10.49 $ 10.14 (a) Calculation excludes non-recurring loss on redemption of mutual funds that occurred during 6/30/2008 quarter (b) Annualized (c) Calculation includes ESOP shares not committed to be released (d) Calculation excludes ESOP shares not committed to be released (e) Calculation subtracts goodwill and core deposit intangible from the equity component Timberland Q3 Earnings July 22, 2008 Page 9 AVERAGE BALANCE SHEET: Three Months Ended June 30, March 31, June 30, 2008 2008 2007 --------- --------- --------- Average total loans $ 560,515 $ 546,349 $ 494,137 Average total interest earning assets 614,383 600,872 570,597 Average total assets 659,998 647,851 619,120 Average total interest bearing deposits 415,495 411,465 388,610 Average FHLB advances and other borrowings 110,903 107,572 98,467 Average shareholders' equity 74,956 74,741 76,087 Nine Months Ended June 30, June 30, 2008 2007 --------- --------- Average total loans $ 548,346 $ 466,200 Average total interest earning assets 605,949 548,942 Average total assets 652,804 598,688 Average total interest bearing deposits 412,904 381,946 Average FHLB advances and other borrowings 109,794 82,139 Average shareholders' equity 74,901 77,364 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.