EX-99 2 exh991.txt EXHIBIT 99.1 Exhibit 99.1 Timberland Bancorp, Inc. Contact: Michael R. Sand, President & CEO Dean J. Brydon, CFO (360) 533-4747 www.timberlandbank.com Timberland Bancorp Earns $0.08 per Share in Fiscal Third Quarter Non-Performing Assets Decrease; Capital Ratios Remain Very Strong HOQUIAM, WA - July 29, 2010 -- Timberland Bancorp, Inc. (NASDAQ: TSBK) ("Timberland" or "the Company") today reported net income of $804,000 for its fiscal third quarter ended June 30, 2010. Net income available to common shareholders after adjusting for the preferred stock dividend and the preferred stock discount accretion was $543,000, or $0.08 per diluted common share. This compares to a net loss to common shareholders of $(3.44 million), or $(0.51) per diluted common share for the quarter ended March 31, 2010 and net income available to common shareholders of $769,000, or $0.12 per diluted common share, for the quarter ended June 30, 2009. Fiscal Third Quarter 2010 Highlights: * Capital levels remain very strong: Total Risk Based Capital of 15.96%; Tier 1 Leverage Capital Ratio of 11.15%; Tangible Capital to Tangible Assets Ratio of 10.94%, all solidly above well capitalized levels * Non-performing loans ("NPLs") decreased 20% and represented 3.74% of total loans at June 30, 2010 * Non-performing assets ("NPAs") decreased by $5.6 million during the quarter * NPAs decreased to 5.12% of assets at June 30, 2010 from 5.95% three months earlier * Construction and land development loans decreased 53% year over year and 34% during the quarter, and now account for 12% of total loans * Net interest margin for the current quarter remained strong at 3.85% * Deposits increased 17% year over year with no brokered funds * N.O.W. checking account balances increased to 27% of deposits compared to 21% of deposits one year prior "Our fiscal third quarter performance demonstrates the progress we have made during the past few quarters toward improving the risk profile of the Bank. Asset quality, asset mix, deposit mix and our already strong Risk Based Capital ratios improved during the quarter," stated Michael Sand, the Company's President and CEO. "We have relentlessly reduced our exposure to speculative single family construction loans which at June 30, 2010, comprised less than 1% of the total loan portfolio. Total construction credits at June 30, 2010, exclusive of our owner builder segment, represented less than 7% of our loan portfolio," Sand also stated. "Loan demand remained soft during the quarter which is reflected by a 1% reduction in net loans receivable at quarter end relative to the end of the prior quarter. We were also pleased to have completed our annual regulatory examination," added Sand. Capital Ratios and Asset Quality Timberland Bancorp remains very well capitalized with a total risk-based capital ratio of 15.96%, a Tier 1 leverage capital ratio of 11.15% and a tangible capital to tangible assets ratio of 10.94% at June 30, 2010. The NPAs to total assets ratio decreased to 5.12% at June 30, 2010 from 5.95% at March 31, 2010. "We charged off a total of $6.5 million in loans in the third fiscal quarter. This total included $5.1 million of previously identified impairments that were provisioned for in prior quarters. Due to improving credit metrics and appropriate provisioning in prior periods for potential charge-offs, a $750,000 provision for the quarter was appropriate based on our detailed allowance for loan loss analysis," Sand stated. The allowance for loan losses of $10.9 million represented 2.00% of loans receivable and loans held for sale at June 30, 2010. Net charge-offs for the quarter ended June 30, 2010 totaled $6.5 million compared to $3.4 million for the quarter ended March 31, 2010 and $609,000 for the quarter ended June 30, 2009. NPLs decreased 20% to $21.0 million at June 30, 2010 from $26.4 million at March 31, 2010 and were comprised of 66 loans and 44 credit relationships. NPLs were comprised of the following at June 30, 2010: Timberland Q3 Earnings July 29, 2010 Page 2 * Seven commercial real estate loans totaling $4.96 million (of which the largest had a balance of $2.84 million) * 22 land loans totaling $4.85 million (of which the largest had a balance of $835,000) * 12 single family home loans totaling $3.46 million (of which the largest had a balance of $722,000) * Seven land development loans totaling $3.21 million (of which the largest had a balance of $1.49 million) * Seven single family speculative home loans totaling $2.08 million (of which the largest had a balance of $767,000) * Two condominium construction loans totaling $1.93 million (of which the largest had a balance of $1.60 million) * One single family construction loan with a balance of $274,000 * Four home equity loans totaling $114,000 * Two commercial business loans totaling $98,000 * Two consumer loans totaling $62,000 Net charge-offs totaled $6.54 million during the quarter ended June 30, 2010 and were comprised of the following: * $3.99 million on six land development loans (of which $3.57 million had already been specifically reserved for in previous quarters) * $1.74 million on 14 land loans (of which $1.37 million had already been specifically reserved for in previous quarters) * $189,000 on two commercial real estate properties * $176,000 on two multi-family construction loans * $144,000 on home equity and consumer loans * $133,000 on three single family construction loans * $116,000 on three single family loans * $47,000 on two single family speculative construction loans Other real estate owned ("OREO") and other repossessed items decreased to $12.96 million at June 30, 2010 from $13.48 million at March 31, 2010. At June 30, 2010 the OREO portfolio consisted of 28 individual properties and two other repossessed assets. The properties consisted of two condominium projects totaling $3.9 million, three land development projects totaling $3.6 million, ten single family homes totaling $2.9 million, ten land parcels totaling $1.3 million and three commercial real estate properties totaling $1.3 million. During the quarter ended June 30, 2010 seven OREO properties and three other repossessed assets totaling $1.1 million were sold for a net book gain of $73,000. In addition to these sales, 23 residential building lots were closed in the Clark County, Washington OREO subdivision during the quarter ended June 30, 2010 with three pending sales at quarter end. The Bank has a 12.5% participation interest in the plat. Also at quarter end, there were eight pending sales in the Bank's Richland, Washington OREO plat with four sales closing during the quarter. Balance Sheet Management Total assets increased 1% to $732.4 million at June 30, 2010 from $724.8 million at March 31, 2010. The increase in total assets was primarily the result of a $16.9 million increase in cash equivalents and certificates of deposits ("CDs") held for investment, which was partially offset by a decrease in net loans receivable. "We continue to build and maintain a high level of liquidity, both on balance sheet and through off-balance sheet sources," said Dean Brydon, Chief Financial Officer. Liquidity as measured by cash equivalents, CDs held for investment and available for sale investments increased to 18.9% of total liabilities at June 30, 2010 from 16.5% at March 31, 2010 and 9.9% one year ago. Net loans receivable decreased 1% to $533.1 million at June 30, 2010 from $538.7 million at March 31, 2010. "The mix of loans in our portfolio continues to improve," said Brydon. "Overall, we have reduced our total exposure to construction and land development loans by 34% during the last quarter and by 53% from one year ago." During the current quarter the one-to- four family speculative construction portfolio decreased by 50%, the land development portfolio decreased by 49% and the multi-family construction portfolio decreased by 35%. Timberland Q3 Earnings July 29, 2010 Page 3 LOAN PORTFOLIO ($ in thousands) June 30, 2010 March 31, 2010 June 30, 2009 Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- Mortgage Loans: One-to-four family $116,805 21% $113,295 20% $110,338 19% Multi-family 33,127 6 33,236 6 25,702 4 Commercial 215,336 38 198,171 34 178,941 30 Construction and land development 66,248 12 100,938 18 142,006 24 Land 63,684 11 63,856 11 65,736 11 -------- --- -------- --- -------- --- Total mortgage loans 495,200 88 509,496 89 522,723 88 Consumer Loans: Home equity and second mortgage 39,215 7 39,303 7 41,950 7 Other 9,514 2 9,477 1 10,107 2 -------- --- -------- --- -------- --- Total consumer loans 48,729 9 48,780 8 52,057 9 Commercial business loans 18,114 3 18,173 3 15,199 3 -------- --- -------- --- -------- --- Total loans 562,043 100% 576,449 100% 589,979 100% === === === Less: Undisbursed portion of construction loans in process (15,780) (18,824) (29,447) Unearned income (2,232) (2,286) (2,326) Allowance for loan losses (10,900) (16,687) (12,440) -------- -------- -------- Total loans receivable, net $533,131 $538,652 $545,766 ======== ======== ======== CONSTRUCTION LOAN COMPOSITION ($ in thousands) June 30, 2010 March 31, 2010 June 30, 2009 Percent Percent Percent of Loan of Loan of Loan Amount Portfolio Amount Portfolio Amount Portfolio ------ --------- ------ --------- ------ --------- Custom and owner / builder $29,080 5% $ 29,101 5% $ 34,373 6% Speculative 5,071 1 10,070 2 19,332 3 Commercial real estate 20,363 4 40,369 7 42,056 7 Multi-family (including condominium) 4,014 1 6,135 1 25,631 4 Land development 7,720 1 15,263 3 20,614 4 ------- -- -------- -- -------- -- Total construction and land development loans $66,248 12% $100,938 18% $142,006 24% ======= == ======== == ======== == Total loan originations were $36.5 million for the quarter ended June 30, 2010 compared to $42.6 million for the preceding quarter and $94.8 million for the comparable quarter one year ago. 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. During the quarter ended June 30, 2010, $11.4 million one-to-four family fixed-rate mortgage loans were sold on the secondary market compared to $13.5 million for the preceding quarter and $69.6 million for the quarter ended one year ago. Timberland's mortgage-backed securities and other investments decreased by $1.0 million during the quarter to $17.2 million at June 30, 2010 from $18.2 million at March 31, 2010, primarily as a result of prepayments, regular amortization and impairment related write-downs. During the quarter ended June 30, 2010, other-than-temporary-impairment ("OTTI") credit related write-downs and realized losses of $152,000 were recorded on the private label mortgage-backed securities that were acquired in the in-kind redemption from the AMF family of mutual funds in June 2008. At June 30, 2010 the Bank's remaining private label mortgage-backed securities portfolio had been reduced to $5.4 million from an original acquired balance of $15.3 million. Timberland Q3 Earnings July 29, 2010 Page 4 DEPOSIT BREAKDOWN ($ in thousands) June 30, 2010 March 31, 2010 June 30, 2009 Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- Non-interest bearing $ 52,018 9% $ 49,870 9% $ 50,153 10% N.O.W. checking 154,753 27 141,119 26 102,186 21 Savings 66,134 12 64,800 12 56,303 11 Money market 54,506 10 57,716 10 61,992 13 Certificates of deposit under $100 148,864 26 144,957 26 140,924 29 Certificates of deposit $100 and over 91,710 16 89,262 16 75,861 16 Certificates of deposit - brokered - - -- 4,000 1 - - - - -------- -------- --- -------- --- Total deposits $567,985 100% $551,724 100% $487,419 100% ======== === ======== === ======== === Total deposits increased by 3% to $568.0 million at June 30, 2010, from $551.7 million at March 31, 2010 primarily as a result of a $13.6 million increase in N.O.W. checking account balances, a $2.1 million increase in non-interest bearing account balances, a $6.4 million increase in CD account balances and a $1.3 million increase in savings account balances. These increases were partially offset by a $3.2 million decrease in money market account balances. Total shareholders' equity increased $810,000 to $85.68 million at June 30, 2010, from $84.87 million at March 31, 2010. The increase in equity was primarily a result of net income for the quarter and a reduction in the accumulated other comprehensive loss equity component. Timberland continues to remain very well capitalized with a total risk based capital ratio of 15.96% and a Tier 1 leverage capital of 11.15%. Book value per common share was $9.93 and tangible book value per common share was $9.04 at June 30, 2010. Operating Results Fiscal third quarter operating revenue (net interest income before provision for loan losses, plus non-interest income excluding OTTI charges), increased 1% to $8.5 million from $8.4 million for the immediately prior quarter and decreased 6% compared to $9.0 million in the comparable quarter one year ago. The decrease in operating revenue from the comparable quarter one year ago was primarily the result of a decrease in gains on sale of loans as mortgage banking activity slowed. For the first nine months of fiscal 2010, operating revenue decreased 5% to $25.6 million compared to $26.9 million for the first nine months of fiscal 2009 primarily due to a decrease in gains on sale of loans. Also affecting the comparison to the first nine months of fiscal 2009 was a $134,000 non-recurring gain on the Bank's investment in bank owned life insurance ("BOLI") recorded during the quarter ended March 31, 2009. Net interest income before the provision for loan losses increased to $6.39 million for the quarter ended June 30, 2010, from $6.20 million for the comparable quarter one year ago with interest and dividend income decreasing by 5% and interest expense decreasing by 21%. The increase in net interest income was primarily due to a decrease in funding costs and an increased level of average interest earnings assets for the current quarter. In spite of the challenging interest rate environment and elevated liquidity levels, Timberland's net interest margin remained strong at 3.85% for the current quarter compared to 3.93% for the quarter ended March 31, 2010 and 3.86% for the quarter one year ago. The net interest margin was reduced by approximately eight basis points for the quarter ended June 30, 2010 by the reversal of interest income on loans placed on non-accrual during the quarter. For the first nine months of fiscal 2010, net interest income before the provision for loan losses increased 1% to $19.2 million compared to $19.1 million for the first nine months of fiscal 2009. Timberland's net interest margin for the first nine months of fiscal 2010 was 3.91% compared to 4.03% for the first nine months of fiscal 2009. Timberland recorded a $750,000 provision to its allowance for loan losses for the quarter ended June 30, 2010, compared to $5.2 million in the preceding quarter and $1.0 million in the comparable quarter one year prior. Net charge-offs during the current quarter exceeded the quarterly provision expense primarily due to the charge-off of $5.1 million in impairments previously identified and factored into prior quarters' provisions. Net charge-offs for the quarter ended June 30, 2010 totaled $6.5 million compared to $3.4 million for the quarter ended March 31, 2010 and $609,000 for the quarter ended June 30, 2009. For the first nine months of fiscal 2010, the provision for loan losses totaled $8.5 million compared to $7.5 million in the first nine months of fiscal 2009. Year to date, net charge-offs were $11.8 million compared to $3.0 million in the first nine months of fiscal 2009. Timberland Q3 Earnings July 29, 2010 Page 5 Total operating (non-interest) expenses increased 1% to $6.42 million for the third fiscal quarter from $6.37 million from the comparable quarter one year ago and decreased 4% from $6.69 million for the immediately prior quarter. Year to date, total operating expenses increased 7% to $18.61 million from $17.35 million for the first nine months of fiscal 2009. Increased insurance expenses (FDIC and D&O), increased OREO expenses and increased salaries and employee benefits expenses accounted for the majority of the increased expense. 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). 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 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 Federal Reserve 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, 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, which could adversely affect our liquidity and earnings; our compliance with regulatory enforcement actions, including regulatory memoranda of understandings ("MOUs") to which we are subject; 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; our ability to attract and retain deposits; further 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 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; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, the interpretation of regulatory capital or other rules and any changes in the rules applicable to institutions participating in the TARP Capital Purchase Program; the availability ofdresources to address changes in laws, rules, or regulations or to respond to regulatory actions; 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 Timberland Q3 Earnings July 29, 2010 Page 6 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 2010 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 Q3 Earnings July 29, 2010 Page 7 TIMBERLAND BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended ($ in thousands, except per share amounts) June 30, March 31, June 30, (unaudited) 2010 2010 2009 ------- ------- ------- Interest and dividend income Loans receivable $ 8,764 $ 8,832 $ 9,240 Mortgage-backed securities and other investments 239 239 322 Dividends from mutual funds 9 9 9 Federal funds sold -- -- 8 Interest bearing deposits in banks 90 77 32 ------- ------- ------- Total interest and dividend income 9,102 9,157 9,611 Interest expense Deposits 1,951 1,958 2,440 FHLB advances and other borrowings 760 753 979 ------- ------- ------- Total interest expense 2,711 2,711 3,419 ------- ------- ------- Net interest income 6,391 6,446 6,192 Provision for loan losses 750 5,195 1,000 ------- ------- ------- Net interest income after provision for loan losses 5,641 1,251 5,192 Non-interest income OTTI loss, net (152) (1,556) (125) Realized loss on investment securities - - (1) - - Service charges on deposits 1,066 1,022 1,066 Gain on sale of loans, net 238 300 1,170 Bank owned life insurance ("BOLI") net earnings 120 115 123 Servicing income on loans sold 32 25 20 Valuation recovery (allowance) on mortgage servicing rights ("MSRs") 22 (22) (169) ATM transaction fees 439 386 326 Other 176 161 263 ------- ------- ------- Total non-interest income 1,941 430 2,674 Non-interest expense Salaries and employee benefits 3,117 2,921 2,919 Premises and equipment 717 702 719 Advertising 235 220 252 OREO and other repossessed items expense, net 373 344 391 ATM expenses 164 171 162 FDIC insurance 317 806 400 Postage and courier 130 142 203 Amortization of core deposit intangible 48 48 54 State and local taxes 159 153 152 Professional fees 193 196 199 Other 969 989 922 ------- ------- ------- Total non-interest expense 6,422 6,692 6,373 ------- ------- ------- Income (loss) before income taxes 1,160 (5,011) 1,493 Provision (benefit) for income taxes 356 (1,833) 435 ------- ------- ------- Net income (loss) $ 804 $(3,178) $ 1,058 ======= ======= ======= Preferred stock dividends accrued $ 208 $ 208 $ 210 Preferred stock discount accretion 53 52 79 ------- ------- ------- Timberland Q3 Earnings July 29, 2010 Page 8 Net income (loss) to common shareholders $ 543 $(3,438) $ 769 ======= ======= ======= Earnings (loss) per common share: Basic $ 0.08 $ (0.51) $ 0.12 Diluted $ 0.08 $ (0.51) $ 0.12 Weighted average common shares outstanding: Basic 6,715,410 6,713,958 6,645,229 Diluted 6,715,410 6,713,958 6,645,229 Timberland Q3 Earnings July 29, 2010 Page 9 TIMBERLAND BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Nine Months Ended ($ in thousands, except per share) June 30, June 30, (unaudited) 2010 2009 ------- ------- Interest and dividend income Loans receivable $26,661 $28,229 Mortgage-backed securities and other investments 695 1,081 Dividends from mutual funds 27 29 Federal funds sold -- 36 Interest bearing deposits in banks 218 62 ------- ------- Total interest and dividend income 27,601 29,437 Interest expense Deposits 5,986 7,321 FHLB advances and other borrowings 2,387 3,043 ------- ------- Total interest expense 8,373 10,364 ------- ------- Net interest income 19,228 19,073 Provision for loan losses 8,545 7,491 ------- ------- Net interest income after provision for loan losses 10,683 11,582 Non-interest income OTTI loss, net (2,028) (2,288) Realized loss on investment securities (17) - - Service charges on deposits 3,218 3,224 Gain on sale of loans, net 987 2,471 BOLI net earnings 369 501 Servicing income on loans sold 86 76 Valuation allowance on MSRs -- (169) ATM transaction fees 1,187 920 Other 538 756 ------- ------- Total non-interest income 4,340 5,491 Non-interest expense Salaries and employee benefits 9,019 8,818 Premises and equipment 2,120 2,079 Advertising 626 672 OREO and other repossessed items expense, net 767 552 ATM expenses 490 448 FDIC insurance 1,323 586 Postage and courier 400 448 Amortization of core deposit intangible 143 163 State and local taxes 453 449 Professional fees 561 547 Other 2,710 2,589 ------- ------- Total non-interest expense 18,612 17,351 ------- ------- Loss before income taxes (3,589) (278) Benefit for income taxes (1,439) (305) ------- ------- Net income (loss) $ (2,150) $ 27 ======== ======= Preferred stock dividends accrued $ 624 $ 437 Preferred stock discount accretion 156 79 ------- ------- Net loss to common shareholders $ (2,930) $ (489) ======== ======= Timberland Q3 Earnings July 29, 2010 Page 10 Loss per common share: Basic $ (0.44) $ (0.07) Diluted $ (0.44) $ (0.07) Weighted average common shares outstanding: Basic 6,713,103 6,609,915 Diluted 6,713,103 6,609,915 Timberland Q3 Earnings July 29, 2010 Page 11 TIMBERLAND BANCORP, INC. CONSOLIDATED BALANCE SHEET ($ in thousands, except per share amounts) (unaudited) June 30, March 31, June 30, 2010 2010 2009 Assets -------- -------- -------- Cash equivalents: Cash and due from financial institutions $ 11,748 $ 9,883 $ 12,118 Interest-bearing deposits in other banks 83,507 65,574 31,853 -------- -------- -------- 95,255 75,457 43,971 Certificate of deposits ("CDs") held for investment, at cost 15,188 18,108 -- Mortgage-backed securities and other investments: Held to maturity, at amortized cost 5,604 5,982 10,196 Available for sale, at fair value 11,578 12,225 13,898 FHLB stock 5,705 5,705 5,705 -------- -------- -------- 22,887 23,912 29,799 Loans receivable 542,577 554,880 555,961 Loans held for sale 1,454 459 2,245 Less: Allowance for loan losses (10,900) (16,687) (12,440) -------- -------- -------- Net loans receivable 533,131 538,652 545,766 Premises and equipment 17,529 17,751 18,174 OREO and other repossessed items 12,957 13,477 7,698 BOLI 13,278 13,158 13,403 Accrued interest receivable 2,709 2,996 2,918 Goodwill 5,650 5,650 5,650 Core deposit intangible 612 659 809 Mortgage servicing rights, net 2,683 2,678 2,366 Prepaid FDIC insurance assessment 3,569 3,863 -- Other assets 6,970 8,415 4,938 -------- -------- -------- Total Assets $732,418 $724,776 $675,492 ======== ======== ======== Liabilities and Shareholders' Equity Non-interest-bearing deposits $ 52,018 $ 49,870 $ 50,153 Interest-bearing deposits 515,967 501,854 437,266 -------- -------- -------- Total deposits 567,985 551,724 487,419 FHLB advances 75,000 75,000 95,000 Federal Reserve Bank of San Francisco advances -- 10,000 -- Repurchase agreements 713 445 666 Other liabilities and accrued expenses 3,041 2,738 3,652 -------- -------- -------- Total Liabilities 646,739 639,907 586,737 -------- -------- -------- Shareholders' Equity Preferred stock - $.01 par value; 1,000,000 shares authorized; 15,710 15,657 15,487 16,641 shares, Series A, issued and outstanding Series A shares: $1,000 per share liquidation value Common stock - $.01 par value; 50,000,000 shares authorized; 10,373 10,357 10,328 7,045,036 shares issued and outstanding Unearned shares- Employee Stock Ownership Plan (2,313) (2,379) (2,578) Retained earnings 62,641 62,098 66,802 Accumulated other comprehensive loss (732) (864) (1,284) -------- -------- -------- Total Shareholders' Equity 85,679 84,869 88,755 -------- -------- -------- Total Liabilities and Shareholders' Equity $732,418 $724,776 $675,492 ======== ======== ======== Timberland Q3 Earnings July 29, 2010 Page 12 KEY FINANCIAL RATIOS AND DATA ($ in thousands, except per share amounts) (unaudited) Three Months Ended --------------------------------- June 30, March 31, June 30, 2010 2010 2009 ------- -------- ------- PERFORMANCE RATIOS: Return (loss) on average assets (a) 0.45% (1.78)% 0.61% Return (loss) on average equity (a) 3.78% (14.56)% 4.79% Net interest margin (a) 3.85% 3.93% 3.86% Efficiency ratio 77.08% 97.32% 71.88% Core efficiency ratio (b) 70.92% 68.46% 64.72% Nine Months Ended --------------------------------- June 30, June 30, 2010 2009 ------- ------- Return (loss) on average assets (a) (0.40)% 0.01% Return (loss) on average equity (a) (3.31)% 0.04% Net interest margin (a) 3.91% 4.03% Efficiency ratio 78.97% 70.64% Core efficiency ratio (b) 67.11% 61.57% June 30, March 31, June 30, 2010 2010 2009 ------- -------- ------- ASSET QUALITY RATIOS: Non-performing loans $21,031 $26,351 $25,113 Non-performing investment securities 3,482 3,262 175 OREO and other repossessed assets 12,957 13,477 7,698 ------- ------- ------- Total non-performing assets $37,470 $43,090 $32,986 ======= ======= ======= Non-performing assets to total assets (c) 5.12% 5.95% 4.88% Allowance for loan losses to non- performing loans 52% 63% 50% Allowance for loan losses to net loans receivable 2.00% 3.00% - - Troubled debt restructured loans (d) $14,359 $18,623 $ - - Past due 90 days and still accruing $ 1,198 $ 5,216 $ 830 CAPITAL RATIOS: Tier 1 leverage capital 11.15% 11.27% 12.30% Tier 1 risk based capital 14.70% 14.04% 14.93% Total risk based capital 15.96% 15.31% 16.19% Tangible capital to tangible assets 10.94% 10.93% 12.30% BOOK VALUES: Book value per common share $ 9.93 $ 9.82 $10.39 Tangible book value per common share (e) $ 9.04 $ 8.93 $ 9.33 ------------ (a) Annualized (b) Calculation excludes OTTI losses, OREO expenses, realized losses on investment securities, valuation allowance /recovery on MSRs and amortization of CDI. For the nine-month period ending June 30, 2010 the non-recurring FDIC insurance expense accrual adjustment ($512) has also been excluded. (c) Non-performing assets include non-accrual loans, non-accrual investment securities, and other real estate owned and other repossessed assets (d) At June 30, 2010, $5,464 of the $14,359 in troubled debt restructured loans were on non-accrual status and included in non-performing loans. At March 31, 2010, $10,265 of the $18,623 in troubled debt restructured loans were on non-accrual status and included in total non-performing loans. (e) Calculation subtracts goodwill and core deposit intangible from the equity component. Timberland Q3 Earnings July 29, 2010 Page 13 AVERAGE BALANCE SHEET: Three Months Ended --------------------------------- June 30, March 31, June 30, 2010 2010 2009 ------- -------- ------- Average total loans $552,055 $562,335 $562,105 Average total interest-earning assets (a) 663,511 655,357 641,468 Average total assets 721,001 712,205 688,411 Average total interest-bearing deposits 508,185 496,148 450,974 Average FHLB advances and other borrowings 75,859 76,561 95,612 Average shareholders' equity 85,101 87,333 88,433 Nine Months Ended --------------------------------- June 30, June 30, 2010 2009 ------- ------- Average total loans $558,586 $565,274 Average total interest-earning assets (a) 655,847 630,421 Average total assets 711,551 676,809 Average total interest-bearing deposits 492,999 438,762 Average FHLB advances and other borrowings 79,352 97,954 Average shareholders' equity 86,732 85,445 -------------- (a) Includes loans on non-accrual status