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 25, 2006
Timberland Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Washington 0-23333 91-1863696
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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 25, 2006, Timberland Bancorp, Inc. issued its earnings release
for the quarter ended June 30, 2006. 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 June 25, 2006
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 25, 2006 By: /s/Dean J. Brydon
---------------------------
Dean J. Brydon
Chief Financial Officer
Exhibit 99.1
Timberland Bancorp, Inc. Announces Record Earnings
==============================================================================
PRESS RELEASE: FOR IMMEDIATE PUBLICATION
----------------------------------------
For further information contact: Michael R. Sand, President& CEO
Dean J. Brydon, CFO
At (360) 533-4747
==============================================================================
Timberland Bancorp, Inc. Announces Record Earnings
* Net Income Increases by 12%
* Diluted Earnings Per Share Increases by 10%
* Quarterly Dividend Increases by 13%
HOQUIAM, Wash. -July 25, 2006--Timberland Bancorp, Inc. Timberland Bancorp,
Inc. (NASDAQ:TSBK - News), ("Company") the holding company for Timberland
Bank, ("Bank"), today reported record net income of $2.06 million, or $0.56
per diluted share, for the quarter ended June 30, 2006. This compares to net
income of $1.84 million, or $0.51 per diluted share that the Company earned
for the quarter ended June 30, 2005. The increased earnings per share was
primarily a result of increased net interest income.
"We are pleased to announce increases of 12% and 10% respectively in the
Company's net income and diluted earnings per share when compared to the same
period in the prior fiscal year," stated Michael Sand, Timberland's President
and CEO. "We were also pleased to announce the 13% increase in the quarterly
dividend to $0.18 per share as well as the addition of Robert Drugge and John
Norawong to Timberland's management team. Robert and John's experience working
with significant loan relationships and their management capabilities will
assist in the future growth of the Company," Sand also stated.
Robert Drugge was hired to oversee the Bank's expanding business banking
presence in Pierce, Kitsap and southern King Counties. He brings nearly 20
years of in-market experience most recently managing relationships with
companies having sales between $10 million and $2 billion. Bob's lending and
management expertise have been shaped by his career affiliation with Seafirst
and its successor, the Bank of America.
John Norawong will manage the Bank's mortgage lending operations. Mr. Norawong
comes to Timberland after serving seven years with KeyBank where he was most
recently Senior Vice President and Department Manager. During his tenure with
KeyBank Mr. Norawong managed all aspects of Corporate Banking activities in
Tacoma, Washington. Concurrent with his responsibilities in Tacoma he
established and managed a new commercial banking team for KeyBank in San
Francisco, California, to serve the California market. "These two individuals
will complement and strengthen our existing management team and we are pleased
to have them associated with Timberland Bank," Sand further stated.
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
1
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.
2
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
For the three and nine months ended June 30, 2006 and 2005
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended June 30, Nine Months Ended June 30,
2006 2005 2006 2005
-------------------------- -------------------------
Interest and dividend
income
Loans receivable $8,036 $7,170 $23,144 $20,271
Investments and
mortgage-
backed
securities 529 550 1,642 1,459
Dividends 370 270 1,036 788
Federal funds sold 121 34 292 196
Interest bearing
deposits in banks 18 13 54 56
-------------------------- -------------------------
Total interest and
dividend income 9,074 8,037 26,168 22,770
Interest expense
Deposits 2,058 1,382 5,554 3,819
Federal Home
Loan Bank("FHLB")
advances 718 839 2,201 2,325
Other borrowings 10 7 36 22
-------------------------- -------------------------
Total interest
expense 2,786 2,228 7,791 6,166
-------------------------- -------------------------
Net interest
income 6,288 5,809 18,377 16,604
Provision for
loan losses -- 96 -- 116
-------------------------- -------------------------
Net interest 6,288 5,713 18,377 16,488
income after
provision
for loan losses
Non-interest income
Service charges
on deposits 769 723 2,226 2,062
Gain on sale of
loans, net 60 181 264 613
BOLI net earnings 112 111 333 320
Escrow fees 32 38 87 97
Servicing income on
loans sold 80 110 266 199
ATM transaction fees 266 223 742 632
Other 209 162 674 503
-------------------------- -------------------------
Total non-interest
income 1,528 1,548 4,592 4,426
Non-interest expense
Salaries and employee
benefits 2,727 2,528 8,095 7,726
Premises and equipment 589 597 1,828 1,675
Advertising 185 187 501 565
Loss (gain)from real
estate operations (1) 19 (93) (11)
ATM expenses 105 134 299 350
Postage and courier 123 80 370 381
Amortization of
core deposit
intangible 82 94 246 273
State and local
taxes 138 116 427 322
Professional fees 222 133 611 496
Other 621 577 1,863 2,119
-------------------------- -------------------------
Total non-interest
expense 4,791 4,465 14,147 13,896
Income before
federal income
taxes 3,025 2,796 8,822 7,018
Federal income
taxes 964 961 2,809 2,238
-------------------------- -------------------------
Net income $2,061 $1,835 $6,013 $4,780
========================== =========================
Earnings per common
share:
Basic $0.58 $0.54 $1.70 $1.37
Diluted $0.56 $0.51 $1.65 $1.31
Weighted average
shares outstanding:
Basic 3,570,850 3,415,644 3,529,058 3,486,589
Diluted 3,691,438 3,574,410 3,652,502 3,645,658
3
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2006 and September 30, 2005
(Dollars in thousands)
June 30, September 30,
ASSETS 2006 2005
--------------------------
Cash and due from financial institutions (Unaudited)
Non-interest bearing $13,720 $ 20,015
Interest-bearing deposits in banks 2,565 3,068
Federal funds sold 10,450 5,635
--------------------------
26,735 28,718
Investments and mortgage-backed securities:
Held to maturity 86 104
Available for sale 84,822 89,595
FHLB stock 5,705 5,705
--------------------------
90,613 95,404
Loans receivable 401,014 389,853
Loans held for sale 1,024 2,355
Less: Allowance for loan losses (4,120) (4,099)
--------------------------
Net loans receivable 397,918 388,109
Accrued interest receivable 2,416 2,294
Premises and equipment 16,416 15,862
Real estate owned ("REO") and other
repossessed items 112 509
Bank owned life insurance ("BOLI") 11,835 11,502
Goodwill 5,650 5,650
Core deposit intangible 1,588 1,834
Mortgage servicing rights 888 928
Other assets 2,373 1,955
--------------------------
TOTAL ASSETS $556,544 $552,765
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest-bearing deposits $54,372 $51,791
Interest-bearing deposits 365,012 359,874
--------------------------
Total deposits 419,384 411,665
FHLB advances 53,776 62,353
Other borrowings: repurchase agreements 1,152 781
Other liabilities and accrued expenses 3,409 3,324
--------------------------
TOTAL LIABILITIES 477,721 478,123
--------------------------
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 50,000,000
shares authorized;
June 30, 2006 - 3,785,576 shares issued
and outstanding
September 30, 2005 - 3,759,937 shares
issued and outstanding 38 38
Additional paid in capital 22,111 22,040
Unearned shares - Employee Stock Ownership
Plan ("ESOP") (3,437) (3,833)
Retained earnings 61,471 57,268
Accumulated other comprehensive loss (1,360) (871)
--------------------------
TOTAL SHAREHOLDERS' EQUITY 78,823 74,642
--------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $556,544 $552,765
==========================
4
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
KEY FINANCIAL RATIOS AND DATA
(Dollars in thousands, except per share data)
Three Months Ended June 30, Nine Months Ended June 30,
2006 2005 2006 2005
--------------------------- --------------------------
PERFORMANCE RATIOS:
Return on average
assets(1) 1.49% 1.35% 1.45% 1.20%
Return on average
equity(1) 10.57% 10.19% 10.48% 8.77%
Net interest
margin (1) 5.00% 4.74% 4.90% 4.62%
Efficiency ratio 61.30% 60.69% 61.59% 66.08%
June 30, September 30,
2006 2005
-----------------------
ASSET QUALITY RATIOS:
Non-performing loans $1,935 $2,926
REO & other repossessed assets 112 509
--------- ------------
Total non-performing assets $2,047 $3,435
Non-performing assets to total assets 0.37% 0.62%
Allowance for loan losses to non-performing
loans 212.92% 140.09%
Book value per share (2) $20.82 $19.85
Book value per share (3) $22.16 $21.30
Tangible book value per share (2) (4) $18.91 $17.86
Tangible book value per share (3) (4) $20.13 $19.16
--------------
(1) Annualized
(2) Calculation includes ESOP shares not committed to be released
(3) Calculation excludes ESOP shares not committed to be released
(4) Calculation subtracts goodwill and core deposit intangible from
the equity component
Three Months Ended June 30, Nine Months Ended June 30,
2006 2005 2006 2005
-------------------------- --------------------------
AVERAGE BALANCE SHEET:
Average total loans $399,849 $385,592 $396,141 $372,183
Average total interest
earning assets 502,804 490,359 499,624 479,551
Average total assets 554,716 544,149 552,100 532,025
Average total interest
bearing deposits 366,228 355,367 363,246 353,622
Average FHLB advances
& other borrowings 55,597 68,345 58,218 59,455
Average shareholders'
equity 77,969 72,027 76,478 72,708
5
Comparison of Financial Condition at June 30, 2006 and September 30, 2005
Total Assets: Total assets increased $3.77 million to $556.54 million at June
30, 2006, from $552.77 million at September 30, 2005, primarily due to a $9.81
million increase in net loans receivable. This increase was partially offset
by a $4.79 million decrease in investment securities and a $1.98 million
decrease in cash and due from financial institutions.
Investments: Investment securities decreased by $4.79 million to $90.61
million at June 30, 2006, from $95.40 million at September 30, 2005, due to
regular amortization and prepayments on mortgage-backed securities.
Loans: Net loans receivable increased by $9.81 million to $397.92 million at
June 30, 2006, from $388.11 million at September 30, 2005. The increase in the
portfolio was primarily a result of a $12.95 million increase in construction
loans (net of undisbursed portion), a $4.55 million increase in consumer
loans, and a $4.28 million increase in land loans. Partially offsetting these
increases were decreases of $5.94 million in one-to-four family mortgage
loans, $2.88 million in commercial real estate loans, $1.86 million commercial
business loans, and $1.59 million in multi-family loans.
Loan demand remained strong as loan originations totaled $60.06 million and
$169.82 million for the three and nine months ended June 30, 2006, compared to
$58.25 million and $168.63 million for the three and nine months ended June
30, 2005. The Bank also continued to sell longer-term fixed rate loans for
asset liability management purposes. The Bank sold fixed rate one-to-four
family mortgage loans totaling $4.54 million and $17.60 million for the three
and nine months ended June 30, 2006, compared to $8.30 million and $16.26
million for the three and nine months ended June 30, 2005.
Deposits: Deposits increased by $7.71 million to $419.38 million at June 30,
2006, from $411.67 million at September 30, 2005. The deposit increase was
primarily due to a $21.65 million increase in certificate of deposit accounts
and a $2.58 million increase in non-interest bearing accounts. These increases
were partially offset by decreases of $11.33 million in money market accounts,
$3.40 million in savings accounts, and $1.78 million in N.O.W. checking
accounts.
Shareholders' Equity: Total shareholders' equity increased by $4.18 million to
$78.82 million at June 30, 2006, from $74.64 million at September 30, 2005,
primarily due to net income of $6.01 million and a $1.82 million increase in
additional paid in capital from the exercise of stock options and vesting
associated with the Company's benefit plans. Also increasing shareholders'
equity was a decrease of $396,000 in the equity component related to unearned
shares issued to the Employee Stock Ownership Plan. Partially offsetting these
increases to shareholders' equity were the payment of $1.81 million in
dividends to shareholders, the repurchase of 58,200 shares of the Company's
stock for $1.75 million, and a $489,000 increase in accumulated other
comprehensive loss.
On April 7, 2005, the Company announced a plan to repurchase up to 5% of the
Company's outstanding shares, or 187,955 shares. This represents the Company's
13th stock repurchase plan. As of June 30, 2006, the Company had repurchased
86,050 of these shares at an average price of $27.79. During the quarter ended
June 30, 2006, the Company purchased 50,000 shares at an average price of
$31.06. Cumulatively the Company has repurchased 3,425,321 (51.8%) of the
6,612,500 shares that were issued when the Company went public in January
1998. The 3,425,321 shares have been repurchased at an average price of $15.64
per share.
Comparison of Operating Results for the Three and Nine Months Ended June 30,
2006 and 2005
Net Income: Net income for the quarter ended June 30, 2006, increased to $2.06
million, or $0.56 per diluted share ($0.58 per basic share) from $1.84
million, or $0.51 per diluted share ($0.54 per basic share) for the quarter
ended June 30, 2005. The $0.05 increase in diluted earnings per share for the
quarter ended June 30, 2006, was primarily a result of a $575,000 ($380,000
net of income tax -- $0.11 per diluted share) increase in net interest income
after provision for loan losses. This increase was partially offset by a
$326,000 ($215,000 net of income tax -- $0.06 per diluted share) increase in
non-interest expense.
6
Net income for the nine months ended June 30, 2006, increased $1.23 million to
$6.01 million, or $1.65 per diluted share ($1.70 per basic share) from $4.78
million, or $1.31 per diluted share ($1.37 per basic share) for the nine
months ended June 30, 2005. The $0.34 increase in diluted earnings per share
for the nine months ended June 30, 2006, was primarily the result of a $1.89
million ($1.25 million net of income tax -- $0.35 per diluted share) increase
in net interest income after provision for loan losses and a $166,000
($110,000 net of income tax -- $0.03 per diluted share) increase in
non-interest income. These items were partially offset by a $251,000 ($166,000
net of income tax -- $0.04 per diluted share) increase in non-interest
expense.
Net Interest Income: Net interest income increased $479,000 to $6.29 million
for the quarter ended June 30, 2006, from $5.81 million for the quarter ended
June 30, 2005, primarily due to a larger interest earning asset base and the
collection of $216,000 in prepayment penalties on two participation loans that
paid off during the current quarter. The prepayment penalties were recorded as
interest income and contributed 17 basis points to the quarterly net interest
margin. Total interest income increased $1.03 million to $9.07 million for the
quarter ended June 30, 2006, from $8.04 million for the quarter ended June 30,
2005, as average total interest earning assets increased by $12.45 million.
The yield on interest earning assets increased to 7.22% for the quarter ended
June 30, 2006, from 6.56% for the quarter ended June 30, 2005. Total interest
expense increased by $558,000 to $2.79 million for the quarter ended June 30,
2006, from $2.23 million for the quarter ended June 30, 2005, as the average
rate paid on interest bearing liabilities increased to 2.65% for the quarter
ended June 30, 2006, from 2.10% for the quarter ended June 30, 2005. Partially
offsetting the increased rate on interest-bearing liabilities was a $1.89
million decrease in the average balance of interest-bearing liabilities during
the current quarter. The net interest margin increased to 5.00% for the
quarter ended June 30, 2006 from 4.74% for the quarter ended June 30, 2005.
Net interest income increased $1.78 million to $18.38 million for the nine
months ended June 30, 2006, from $16.60 million for the nine months ended June
30, 2005, primarily due to a larger interest earning asset base and an
increase in the Company's interest rate spread. Total interest income
increased $3.40 million to $26.17 million for the nine months ended June 30,
2006, from $22.77 million for the nine months ended June 30, 2005, as average
total interest earning assets increased by $20.07 million. The yield on
interest earning assets was 6.98% for the nine months ended June 30, 2006,
compared to 6.33% for the nine months ended June 30, 2005. Total interest
expense increased by $1.63 million to $7.79 million for the nine months ended
June 30, 2006, from $6.17 million for the nine months ended June 30, 2005, as
average interest bearing liabilities increased by $8.39 million. The average
rate paid on interest bearing liabilities increased to 2.47% for the nine
months ended June 30, 2006, from 2.00% for the nine months ended June 30,
2005. The net interest margin increased to 4.90% for the nine months ended
June 30, 2006, from 4.62% for the nine months ended June 30, 2005.
Provision for Loan Losses: There was no provision for loan losses made during
the nine months ended June 30, 2006, as credit quality remained strong. The
allowance for loan losses, however, did increase during this period due to a
net recovery of $21,000. Based on its comprehensive analysis, management
deemed the allowance for loan losses of $4.12 million at June 30, 2006, (1.03%
of loans receivable and 212.92% of non-performing loans) adequate to provide
for probable losses based on an evaluation of known and inherent risks in the
loan portfolio at that date. The allowance for loan losses was $4.01 million
(1.05% of loans receivable and 137.87% of non-performing loans) at June 30,
2005. The Company had net recovery of $1,000 for the three months ended June
30, 2006, and did not have any charge-offs for the three months ended June 30,
2005. The Company had a net recovery of $21,000 for the nine months ended June
30, 2006, compared to a net charge-off of $4,000 for the nine months ended
June 30, 2005.
The Company's non-performing assets to total assets ratio decreased to 0.37%
at June 30, 2006, from 0.39% at March 31, 2006, and 0.61% at June 30, 2005.
The non-performing loan total of $1.94 million at June 30, 2006, consisted of
a $1.36 million commercial construction loan, $542,000 in one-to-four family
mortgage loans, $29,000 in consumer loans, and an $8,000 land loan.
Non-interest Income: Total non-interest income decreased $20,000 to $1.53
million for the quarter ended June 30, 2006, from $1.55 million for the
quarter ended June 30, 2005, primarily due to $121,000 decrease in gains on
sale of loans and a $30,000 decrease in servicing income on loans sold. These
decreases were partially offset by a $48,000 increase in fees
7
from the sale of non-deposit investment products, a $46,000 increase in
service charges on deposits, and a $43,000 increase in ATM transaction fees.
Total non-interest income increased by $166,000 to $4.59 million for the nine
months ended June 30, 2006, from $4.43 million for the nine months ended June
30, 2005, primarily due to a $227,000 increase in fees from the sale of
non-deposit investment products, a $164,000 increase in service charges on
deposits, and a $110,000 increase in ATM transaction fees. These increases
were partially offset by a $349,000 decrease in gains from loan sales. Income
from loan sales was larger in the period a year ago in part due to the sale of
the Bank's credit card portfolio in December 2004, which resulted in a gain of
$245,000.
Non-interest Expense: Total non-interest expense increased by $326,000 to
$4.79 million for the quarter ended June 30, 2006, from $4.47 million for the
quarter ended June 30, 2005. The increase was primarily a result of increases
in salary expense, professional fees, and postage and courier expense.
Total non-interest expense increased by $251,000 to $14.15 million for the
nine months ended June 30, 2006, from $13.90 million for the nine months ended
June 30, 2005. Non-interest expense was higher in the current year primarily
due to increases in salary and benefit expense, premises and equipment
expense, professional fees, and state and local taxes. The Company also began
expensing stock options under SFAS 123 , which became effective for the
Company on October 1, 2005. Total stock option expenses of $37,000 were
recorded for the nine months ended June 30, 2006.
8
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
LOANS RECEIVABLE BREAKDOWN
(Dollars in thousands)
The following table sets forth the composition of the Company's loan
portfolio by type of loan.
June 30, 2006 September 30, 2005
Amount Percent Amount Percent
------------------- ---------------------
Mortgage Loans:
One-to-four family (1) $ 95,828 21.02% $ 101,763 23.24%
Multi family 18,582 4.08 20,170 4.61
Commercial 121,966 26.75 124,849 28.51
Construction and land
development 133,977 29.38 112,470 25.68
Land 29,259 6.42 24,981 5.71
--------- -------- --------- ----------
Total mortgage loans 399,612 87.65 384,233 87.75
Consumer Loans:
Home equity and second
mortgage 35,935 7.88 32,298 7.38
Other 10,239 2.24 9,330 2.13
--------- -------- --------- ----------
46,174 10.12 41,628 9.51
Commercial business loans 10,158 2.23 12,013 2.74
--------- -------- --------- ----------
Total loans 455,944 100.00% 437,874 100.00%
Less:
Undisbursed portion of
construction loans in
process (51,333) (42,771)
Unearned income (2,573) (2,895)
Allowance for loan losses (4,120) (4,099)
--------- ---------
Total loans receivable, net $ 397,918 $ 388,109
========= =========
------------
(1) Includes loans held-for-sale.
9
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
DEPOSIT BREAKDOWN
(Dollars in thousands)
June 30, 2006 September 30, 2005
--------------- ------------------
Non-interest bearing $54,372 $51,792
N.O.W. checking 91,694 93,477
Savings 60,878 64,274
Money market accounts 37,962 49,295
Certificates of deposit under
$100,000 125,085 117,618
Certificates of deposit $100,000
and over 49,393 35,209
-------------- -----------------
Total deposits $419,384 $411,665
============== =================
Timberland Bancorp, Inc. stock trades on the NASDAQ global market under the
symbol "TSBK." The Bank owns and operates 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.
Contact:
Timberland Bancorp, Inc.
Michael Sand or Dean Brydon, 360-533-4747
10