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): April 24, 2003
Timberland Bancorp, Inc.
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code) (360) 533-4747
Not Applicable
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(Former name or former address, if changed since last report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
99.1 Press Release of Timberland Bancorp, Inc. dated April 24, 2003.
Item 9. Regulation FD Disclosure
---------------------------------
On April 24, 2003, Timberland Bancorp, Inc. issued its earnings release
for the quarter ended March 31, 2003. A copy of the earnings release is
attached hereto as Exhibit 99.1, which is incorporated herein by reference.
The information being furnished under this "Item 9. Regulation FD
Disclosure" is intended to be furnished under "Item 12. Disclosure of Results
of Operations and Financial Condition."
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.
/s/Dean J. Brydon
DATE: April 25, 2003 By: ---------------------------------
Dean J. Brydon
Chief Financial Officer
Exhibit 99.1
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PRESS RELEASE: FOR IMMEDIATE PUBLICATION
----------------------------------------
For further information contact: Clarence Hamre, CEO
Michael Sand, President
Dean Brydon, CFO
At (360) 533-4747
==============================================================================
Timberland Bancorp, Inc. Second Quarter Earnings Increase 10%
Announces planned technology investment during the next two
quarters at an anticipated cost of approximately $0.09 per share
HOQUIAM, Wash. April 24, 2003 Timberland Bancorp, Inc. (Nasdaq: TSBK),
("Company") the holding company for Timberland Bank, ("Bank"), today reported
net income of $1.79 million, or $0.45 per diluted share, for the quarter ended
March 31, 2003. This represents a 10% increase in earnings per share from the
$0.41 per diluted share the Company earned for the quarter ended March 31,
2002. The improved earnings for the current quarter are primarily a result of
increased non-interest income.
The growth of non-interest income has been an important component of the
Company's increased profitability. Non-interest income increased 43% to $1.50
million for the current quarter from $1.05 million for the quarter ended March
31, 2002, primarily due to strong mortgage banking activity, increased
deposit-related fee income and income from the Bank Owned Life Insurance
("BOLI") program.
The Bank has continued to sell fixed rate loans secured by residential
properties during this low interest rate cycle. During the quarter ended
March 31, 2003, $27.5 million in fixed rate mortgage loans were sold resulting
in a gain of $394,000 ($260,000 after income tax). This compares to a gain of
$220,000 ($145,000 after income tax) for the quarter ended March 31, 2002.
Non-interest income also increased due to the continued success of the Bank's
checking account acquisition program, which has been responsible for growth in
deposit-related fee income. Service charges on deposits increased by 21% to
$461,000 for the current quarter compared to the same period a year ago.
Since the program began in December 2000, the Bank has increased the number of
its consumer checking accounts by 96% and increased its consumer checking
account balances by $28.5 million. Timberland plans to continue the emphasis
on increasing its checking account base and believes that the marketing
program will further the Bank's initiatives of increasing the level of
lower-costing deposits and growing non-interest income.
Income from the BOLI program that was implemented in September 2002 increased
non-interest income by $134,000 during the quarter.
Net interest income decreased 1.5% from the quarter ended March 31, 2002 to
$4.75 million for the current quarter. The decrease was primarily due to the
Company's interest earning assets repricing downward at a greater rate than
the Company's funding sources and a shift in the makeup of total earning
assets. The Company's net interest margin reflected this compression as it
decreased to 4.75% for the current quarter from 5.21% for the quarter ended
March 31, 2002. The Company remains asset sensitive and is positioned to
benefit from increasing interest rates.
1
The Bank's 15th full-service office will be located in downtown Olympia
(Thurston County) and is scheduled to open in August 2003. This office will
be Timberland's fourth Thurston County location and will serve as the
headquarters for the Bank's Commercial Lending and Business Banking Divisions.
This downtown Olympia site is centrally located and will provide a good
strategic location as the Company continues to expand its commercial banking
initiatives. Commercial real estate, commercial business, and commercial
construction loans now comprise 33% of the Bank's loan portfolio.
Technology Improvements
President, Michael Sand also announced the Bank's plans for upcoming
technology improvements. "We will be converting to the Kirchman Bankway core
processing system from our current in-house supported system in July of this
year. In addition to the core processing system, Timberland will also be
changing its internet banking provider, its ATM service provider and its loan
platform system. We believe that these changes will enhance customer service,
streamline our loan processing system, and allow us to offer more products to
our commercial and retail customers." It is estimated that expenses related
to the technology upgrades and conversion will reduce earnings over the next
two quarters by a total of $0.09 per share.
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.
2
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
For the three and six months ended March 31, 2003 and 2002
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2003 2002 2003 2002
---------------- -----------------
Interest and Dividend Income
Loans receivable $6,379 $6,898 $12,962 $14,246
Investments and mortgage-backed
securities 244 404 487 815
Dividends from investments 287 173 546 333
Interest bearing deposits in banks 83 41 205 63
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Total interest and dividend income 6,993 7,516 14,200 15,457
Interest Expense
Deposits 1,412 1,872 3,023 3,974
Federal Home Loan Bank advances 831 821 1,681 1,681
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Total interest expense 2,243 2,693 4,704 5,655
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Net interest income 4,750 4,823 9,496 9,802
Provision for Loan Losses 107 200 280 592
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Net interest income after provision
for loan losses 4,643 4,623 9,216 9,210
Non-Interest Income
Service charges on deposits 461 380 992 783
Gain on sale of loans, net 394 220 823 500
Loss on sale of securities - - (19) - - (16)
BOLI net earnings 134 - - 269 - -
Escrow fees 61 72 135 145
Servicing income on loans sold 83 114 195 251
ATM transaction fees 189 137 375 270
Other 177 142 356 275
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Total non-interest income 1,499 1,046 3,145 2,208
Non-interest Expense
Salaries and employee benefits 2,031 1,724 4,041 3,432
Premises and equipment 370 368 733 687
Advertising 176 191 380 432
Loss from real estate operations and
write-downs 42 27 73 60
ATM expenses 152 164 301 271
Other 763 672 1,496 1,370
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Total non-interest expense 3,534 3,146 7,024 6,252
Income before federal income taxes 2,608 2,523 5,337 5,166
Federal Income Taxes 818 894 1,678 1,830
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Net Income $1,790 $ 1,629 $ 3,659 $ 3,336
Earnings Per Common Share:
Basic $0.47 $0.42 $0.95 $0.85
Diluted $0.45 $0.41 $0.91 $0.83
Weighted average shares outstanding:
Basic 3,820,273 3,881,782 3,838,604 3,934,081
Diluted 4,009,862 4,014,645 4,010,795 4,038,635
3
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
SUMMARY BALANCE SHEETS
March 31, 2003 and September 30, 2002
(Dollars in thousands)
(unaudited)
March 31, September 30,
2003 2002
-------------------------
ASSETS
Cash and due from financial institutions $ 11,039 $ 10,580
Interest bearing deposits in banks 30,075 25,493
Investments and mortgage-backed securities
held to maturity 470 - -
Investments and mortgage-backed securities
available for sale 52,207 41,582
Federal Home Loan Bank stock 5,313 5,139
Loans receivable 310,109 322,997
Loans held for sale 2,466 3,161
Less: Allowance for loan losses (3,868) (3,630)
-------------------------
Total loans 308,707 322,528
Accrued interest receivable 1,533 1,604
Premises and equipment 13,019 11,664
Real estate owned 900 680
Bank owned life insurance ("BOLI") 10,305 10,036
Other assets 2,257 1,748
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TOTAL ASSETS $ 435,825 $ 431,054
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $ 296,579 $ 292,316
Federal Home Loan Bank advances 61,684 61,759
Other liabilities and accrued expenses 1,759 2,583
-------------------------
TOTAL LIABILITIES 360,022 356,658
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 50,000,000
shares authorized;
March 31, 2003 - 4,253,217 shares issued,
3,768,777 shares outstanding
September 30, 2002 - 4,340,976 shares issued,
3,856,536 shares outstanding
(Unallocated ESOP shares and unvested MRDP
shares are not considered outstanding) 42 43
Additional paid in capital 34,148 35,857
Unearned shares - Employee Stock Ownership Plan (5,155) (5,419)
Unearned shares - Management Recognition &
Development Plan (1,504) (1,826)
Retained earnings 47,824 45,210
Accumulated other comprehensive income 448 531
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TOTAL SHAREHOLDERS' EQUITY 75,803 74,396
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 435,825 $ 431,054
=========================
4
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
KEY FINANCIAL RATIOS AND DATA
(Dollars in thousands, except per share data)
Three Months Six Months
Ended March 31, Ended March 31,
2003 2002 2003 2002
------------------ -----------------
PERFORMANCE RATIOS:
Return on average assets (1) 1.67% 1.69% 1.69% 1.73%
Return on average equity (1) 9.41% 9.08% 9.69% 9.27%
Net interest margin (1) 4.75% 5.21% 4.71% 5.31%
Efficiency ratio 56.56% 53.60% 55.57% 52.06%
March 31, September 30,
2003 2002
-----------------------
ASSET QUALITY RATIOS:
Non-performing loans $ 3,400 $ 3,741
REO & other repossessed assets 900 680
Total non-performing assets 4,300 4,421
Non-performing assets to total
assets 0.99% 1.03%
Allowance for loan losses to
non-performing loans 113.76% 97.03%
Book Value Per Share (2) $ 17.82 $ 17.14
Book Value Per Share (3) $ 19.39 $ 18.69
----------------------
(1) Annualized
(2) Calculation includes ESOP shares not committed to be released
(3) Calculation excludes ESOP shares not committed to be released
Three Months Six Months
Ended March 31, Ended March 31,
2003 2002 2003 2002
------------------ -----------------
AVERAGE BALANCE SHEET:
Average Total Loans $315,469 $319,621 $320,335 $321,337
Average Total Interest Earning
Assets 400,137 370,156 402,827 369,188
Average Total Assets 429,792 385,964 432,336 385,484
Average Total Interest Bearing
Deposits 266,514 229,566 269,276 227,786
Average FHLB Advances 61,698 63,589 61,716 64,805
Average Shareholders' Equity 76,062 71,755 75,531 72,002
5
Comparison of Financial Condition at March 31, 2003 and September 30, 2002
Total Assets: Total assets increased to $435.8 million at March 31, 2003 from
$431.1 million at September 30, 2002. This change is reflected primarily in a
$15.7 million increase in investments and interest bearing deposits in banks,
which is partially offset by a $13.8 million decrease in total loans.
Investments and Interest Bearing Deposits in Banks: Investments and interest
bearing deposits in banks increased by $15.7 million to $82.8 million at March
31, 2003 from $67.1 million at September 30, 2002. This increase is primarily
due to investing proceeds from loan sales, loan prepayments, and increased
customer deposits.
Loans: Net loans receivable, including loans held-for-sale, decreased to
$308.7 million at March 31, 2003 from $322.5 at September 30, 2002, primarily
reflected in a $14.4 million decrease in the Bank's one-to-four family
mortgage loan portfolio. The portfolio decrease was primarily due to loan
prepayments, as a result of the historically low home mortgage rates, and the
sale of a majority of the one-to-four family mortgages generated during the
period. During the six months ended March 31, 2003, the Bank originated
loans of $109.3 million and sold $62.3 million in fixed rate one-to-four
family mortgage loans. Management elected to sell a majority of the fixed
rate residential loans originated instead of adding them to the Bank's
portfolio due to the low rate environment.
Deposits: Deposits increased to $296.6 million at March 31, 2003 from $292.3
million at September 30, 2002, primarily due to a $9.6 million increase in the
Bank's passbook savings accounts, a $5.4 million increase in N.O.W. checking
accounts and a $3.8 million increase in non-interest bearing accounts. These
increases are partially offset by a $9.9 million decrease in certificate of
deposit accounts and a $4.7 million decrease in money market accounts.
Shareholders' Equity: Total shareholders' equity increased by $1.4 million to
$75.8 million at March 31, 2003 from $74.4 million at September 30, 2002. The
components of shareholders' equity were primarily affected by net income of
$3.7 million, the repurchase of 116,259 shares of the Company's stock for $2.2
million and the payment of $1.0 million in dividends to shareholders. Also
affecting shareholders' equity was a $344,000 increase to additional paid in
capital from the exercise of stock options, and decreases of $322,000 and
$264,000 in the equity components related to unearned shares issued to the
Management Recognition and Development Plan and Employee Stock Ownership
Plans, respectively.
On February 11, 2003, the Company announced the completion of its tenth stock
repurchase program. The Company repurchased 193,659 shares at an average
price of $17.76 per share. The Company repurchased 76,259 of these shares
during the quarter ended March 31, 2003.
On February 14, 2003 the Company announced a plan to repurchase 380,028 shares
of the Company's stock. This marked the Company's eleventh stock repurchase
plan. As of March 31, 2003, the Company had purchased 40,000 of these shares
and cumulatively had repurchased 2,638,563 (39.9%) of the 6,612,500 shares
that were issued when the Company went public in January 1998.
6
Comparison of Operating Results for the Three and Six Months Ended March 31,
2003 and 2002
Net Income: Net income for the quarter ended March 31, 2003 was $1.79 million,
or $0.45 per diluted share ($0.47 per basic share) compared to $1.63 million,
or $0.41 per diluted share ($0.42 per basic share) for the quarter ended March
31, 2002. The primary factor affecting the improved performance in the
current quarter was increased non-interest income.
Net income for the six months ended March 31, 2003 was $3.66 million, or $0.91
per diluted share ($0.95 per basic share) compared to $3.34 million, or $0.83
per diluted share ($0.85 per basic share) for the six months ended March 31,
2002.
Net Interest Income: Net interest income decreased $73,000 to $4.75 million
for the quarter ended March 31, 2003 from $4.82 million for the quarter ended
March 31, 2002. Total interest income decreased $523,000 to $6.99 million
for the quarter ended March 31, 2003 from $7.52 million for the quarter ended
March 31, 2002, primarily due to a reduction in average yields on earning
assets. The yield on earning assets was 6.99% for the quarter ended March 31,
2003 compared to 8.12% for the quarter ended March 31, 2002. In addition to
overall lower market rates, the yield was also impacted by a shift in the
makeup of total earning assets. In 2002, loans, the Company's highest
yielding class of assets, comprised 86.3% of average earning assets. In 2003,
loans were 78.8% of average earning assets. This change was largely
influenced by the decision to sell many of the loans originated in the current
quarter. That had the effect of increasing the gain on loans sold, at the
expense of interest income. The impact of lower average yields was, however,
partially offset by increased levels of average earning assets. Total
interest expense decreased $450,000 to $2.24 million for the quarter ended
March 31, 2003 from $2.69 million for the quarter ended March 31, 2002. The
average cost of funds for each of the Bank's deposit account types for the
current quarter was lower than a year ago. The overall cost of funds
decreased to 2.73% for the quarter ended March 31, 2003 from 3.67% for the
quarter ended March 31, 2002. As a result of these changes, the net interest
margin decreased to 4.75% for the quarter ended March 31, 2003 from 5.21% for
the quarter ended March 31, 2002.
Net interest income decreased $306,000 to $9.50 million for the six months
ended March 31, 2003 from $9.80 million for the six months ended March 31,
2002. Total interest income decreased $1.26 million to $14.20 million for
the six months ended March 31, 2003 from $15.46 million for the six months
ended March 31, 2002, primarily due to a reduction in average yields on
earning assets. The yield on earning assets was 7.05% for the six months
ended March 31, 2003 compared to 8.37% for the six months ended March 31,
2002. The impact of lower average yields was, however, partially offset by
increased levels of average earning assets. Total interest expense decreased
$951,000 to $4.70 million for the six months ended March 31, 2003 from $5.66
million for the six months ended March 31, 2002. The average cost of funds for
each of the Bank's deposit account types for the current period was lower than
a year ago. The overall cost of funds decreased to 2.84% for the six months
ended March 31, 2003 from 3.87% for the six months ended March 31, 2002. As a
result of these changes, the net interest margin decreased to 4.71% for the
six months ended March 31, 2003 from 5.31% for the six months ended March 31,
2002.
Provision for Loan Losses: The Company's non-performing asset ("NPA") ratio
decreased to 0.99% at March 31,2003 from 1.27% at March 31, 2002. The
provision for loan losses decreased to $107,000 for the three months ended
March 31, 2003 from $200,000 for the three months ended March 31, 2002.
Management deemed the allowance for loan losses of $3.868 million at March 31,
2003 (1.25% of loans receivable and 113.8% 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
$3.450 million (1.12% of loans receivable and 84.9% of non-performing loans)
at March 31, 2002. The increase in the level of the allowance for loan losses
primarily resulted from a slight change in the mix of the loan portfolio. Net
charge-offs for the current quarter were $16,000 compared to $102,000 in the
same quarter of 2002. For the six months ended March 31, 2003 and 2002, net
charge-offs were $43,000 and $192,000, respectively.
Non-interest Income: Total non-interest income increased $453,000 to $1.50
million for the quarter ended March 31, 2003 from $1.05 million for the
quarter ended March 31, 2002, primarily due to a $174,000 increase in gain on
sale of
7
loans, the recognition of $134,000 in BOLI income, and an $81,000 increase in
service charges on deposits. The increased loan sale gains are primarily a
result of the Bank selling $27.5 million in fixed-rate one-to-four family
loans during the current quarter. During the same period in 2002, the Bank
sold $23.9 million in fixed-rate one-to-four family loans. The increased
deposit-related service charge income is primarily a result of the Bank's
checking account acquisition program.
For the six months ended March 31, 2003 non-interest income increased $937,000
to $3.15 million from $2.21 million for the six months ended March 31, 2002.
This increase is primarily due to a $323,000 increase in gain on sale of
loans, the recognition of $269,000 in BOLI income, a $209,000 increase in
service charges on deposits, and a $105,000 increase in ATM transaction fees.
Non-interest Expense: Total non-interest expense increased by $388,000 to
$3.53 million for the three months ended March 31, 2003 from $3.15 million for
the three months ended March 31, 2002. This increase is primarily due to a
$307,000 increase in salaries and employee benefits. The increase in salaries
and employee benefits is primarily a result of adding employees to staff the
Silverdale branch, increasing staffing levels in several other departments,
and salary increases in October of 2002.
For the six months ended March 31, 2003 non-interest expense increased by
$772,000 to $7.02 million from $6.25 million for the six months ended March
31, 2002. This increase is primarily due to a $609,000 increase in salaries
and employee benefits for the reasons stated above.
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.
At March 31, At September 30,
2003 2002
Amount Percent Amount Percent
------------------ ------------------
Mortgage Loans:
One-to-four family (1)(2) $ 98,711 29.08% $113,144 31.28%
Multi family 23,626 6.96 24,135 6.67
Commercial 95,380 28.10 97,644 27.00
Construction and
land development 74,740 22.01 80,144 22.16
Land 15,470 4.56 15,453 4.27
-------- ------ -------- ------
Total mortgage loans 307,927 90.71 330,520 91.38
Consumer Loans:
Home equity and second mortgage 15,120 4.45 13,718 3.79
Other 8,039 2.37 8,097 2.24
-------- ------ -------- ------
23,159 6.82 21,815 6.03
Commercial business loans 8,387 2.47 9,365 2.59
-------- ------ -------- ------
Total loans 339,473 100.00% 361,700 100.00%
Less:
Undisbursed portion of loans
in process (24,035) (32,324)
Unearned income (2,863) (3,218)
Allowance for loan losses (3,868) (3,630)
Market value adjustment of loans
held-for-sale - - - -
-------- --------
Total loans receivable, net $308,707 $322,528
======== ========
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(1) Includes loans held-for-sale.
(2) Includes real estate contracts totaling $1.1 million at March 31, 2003.
9
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
DEPOSIT BREAKDOWN
(Dollars in thousands)
The following table sets forth the balances of deposits in the various types
of savings accounts offered by the Bank at the dates indicated.
March 31, 2003 September 30, 2002
-------------- ------------------
Non-interest bearing $ 27,393 $ 23,585
N.O.W checking 47,659 42,222
Passbook savings 49,900 40,328
Money market accounts 43,218 47,888
Certificates of deposit under $100,000 105,603 102,052
Certificates of deposit $100,000 and over 22,806 36,241
-------- --------
Total deposits $296,579 $292,316
======== ========
Timberland Bancorp, Inc. stock trades on the NASDAQ national market under the
symbol "TSBK." The Bank owns and operates branches in the state of Washington
in Hoquiam, Aberdeen, Ocean Shores, Montesano, Lacey, Puyallup, Edgewood,
Auburn, Yelm, Poulsbo, Spanaway (Bethel Station), Tumwater, Tacoma, and
Silverdale.
CONTACT:
Timberland Bancorp, Inc.
Clarence Hamre, CEO, Michael Sand, President or Dean Brydon, CFO 360/533-4747
10