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 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
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(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
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On April 25, 2006, Timberland Bancorp, Inc. issued its earnings release
for the quarter ended March 31, 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 April 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: April 25, 2006 By: /s/Dean J. Brydon
---------------------------
Dean J. Brydon
Chief Financial Officer
Exhibit 99.1
==============================================================================
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 Increased Second Quarter Earnings
* Net Income Increases by 34%
* Diluted Earnings Per Share Increases by 33%
* Return on Equity Increases by 28%
* Net Interest Margin Increases by 7%
HOQUIAM, Wash. April 25, 2006 Timberland Bancorp, Inc. (NASDAQ: TSBK),
("Company") the holding company for Timberland Bank, ("Bank"), today reported
net income of $1.95 million, or $0.53 per diluted share, for the quarter ended
March 31, 2006. This compares to net income of $1.45 million, or $0.40 per
diluted share that the Company earned for the quarter ended March 31, 2005.
The increased earnings per share was primarily a result of increased net
interest income and increased non-interest income.
"The solid results for the second fiscal quarter are largely the result of the
Company's focus on balancing the repricing characteristics of its assets and
liabilities. This has allowed the maintenance of a healthy net interest
margin in spite of the current flat yield curve environment. As compared to
the same period in the prior fiscal year, net income, diluted earnings per
share and return on equity have increased by 34%, 33% and 28% respectively,"
stated Michael Sand, Timberland's President and CEO. "Our focus during the
remainder of the year will be the profitable growth of the Company,"
Sand also stated.
The Company recently announced the addition of Robert Drugge as a Senior Vice
President in the Bank's Business Banking Division. Bob 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 of 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. "We are looking forward to the contributions that Bob will make in
furthering the goals of Timberland Bancorp, Inc.," 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 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.
1
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
For the three and six months ended March 31, 2006 and 2005
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2006 2005 2006 2005
----------------- ------------------
Interest and dividend income
Loans receivable $7,624 $6,594 $15,108 $13,101
Investments and mortgage-backed
securities 576 520 1,113 910
Dividends 342 251 665 517
Federal funds sold 95 50 172 162
Interest bearing deposits in banks 12 15 36 43
------------------ -----------------
Total interest and dividend
income 8,649 7,430 17,094 14,733
Interest expense
Deposits 1,809 1,257 3,497 2,437
Federal Home Loan Bank ("FHLB")
advances 762 737 1,482 1,486
Other borrowings 16 10 26 15
------------------ -----------------
Total interest expense 2,587 2,004 5,005 3,938
------------------ -----------------
Net interest income 6,062 5,426 12,089 10,795
Provision for loan losses -- 20 -- 20
------------------ -----------------
Net interest income after
provision for loan losses 6,062 5,406 12,089 10,775
Non-interest income
Service charges on deposits 737 642 1,457 1,339
Gain on sale of loans, net 88 84 204 432
BOLI net earnings 110 110 220 209
Escrow fees 24 24 55 59
Servicing income on loans sold 78 49 186 88
ATM transaction fees 240 213 476 410
Other 232 218 466 341
------------------ -----------------
Total non-interest income 1,509 1,340 3,064 2,878
Non-interest expense
Salaries and employee benefits 2,737 2,548 5,367 5,198
Premises and equipment 631 566 1,239 1,077
Advertising 179 212 315 377
Loss (gain) from real estate
operations (39) (3) (91) (30)
ATM expenses 97 103 194 216
Postage and courier 132 143 247 301
Amortization of core deposit
intangible 82 94 164 179
State and local taxes 128 111 288 206
Professional fees 181 177 389 362
Other 591 720 1,243 1,545
------------------ -----------------
Total non-interest expense 4,719 4,671 9,355 9,431
Income before federal income taxes 2,852 2,075 5,798 4,222
Federal income taxes 906 624 1,846 1,277
------------------ -----------------
Net income $ 1,946 $ 1,451 $ 3,952 $ 2,945
================== =================
Earnings per common share:
Basic $0.55 $0.42 $1.13 $0.84
Diluted $0.53 $0.40 $1.09 $0.80
Weighted average shares outstanding:
Basic 3,511,880 3,488,385 3,508,163 3,522,062
Diluted 3,640,612 3,644,604 3,633,034 3,681,282
2
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2006 and September 30, 2005
(Dollars in thousands)
(unaudited)
March 31, September 30,
2006 2005
---------------------------
ASSETS
Cash and due from financial institutions
Non-interest bearing $18,650 $20,015
Interest-bearing deposits in banks 1,872 3,068
Federal funds sold 10,770 5,635
---------------------------
31,292 28,718
Investments and mortgage-backed securities:
Held to maturity 89 104
Available for sale 86,657 89,595
FHLB stock 5,705 5,705
---------------------------
92,451 95,404
Loans receivable 397,216 389,853
Loans held for sale 140 2,355
Less: Allowance for loan losses (4,119) (4,099)
---------------------------
Net loans receivable 393,237 388,109
Accrued interest receivable 2,558 2,294
Premises and equipment 15,933 15,862
Real estate owned ("REO")and other
repossessed items 110 509
Bank owned life insurance ("BOLI") 11,723 11,502
Goodwill 5,650 5,650
Core deposit intangible 1,670 1,834
Mortgage servicing rights 913 928
Other assets 1,846 1,955
---------------------------
TOTAL ASSETS $557,383 $552,765
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $414,035 $411,665
FHLB advances 61,792 62,353
Other borrowings: repurchase agreements 838 781
Other liabilities and accrued expenses 3,005 3,324
---------------------------
TOTAL LIABILITIES 479,670 478,123
---------------------------
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 50,000,000
shares authorized; March 31, 2006 -
3,774,337 shares issued and outstanding
September 30, 2005 - 3,759,937 shares
issued and outstanding 38 38
Additional paid in capital 22,391 22,040
Unearned shares - Employee Stock Ownership
Plan (3,569) (3,833)
Retained earnings 60,016 57,268
Accumulated other comprehensive loss (1,163) (871)
---------------------------
TOTAL SHAREHOLDERS' EQUITY 77,713 74,642
---------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $557,383 $552,765
===========================
3
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,
2006 2005 2006 2005
---------------- ----------------
PERFORMANCE RATIOS:
Return on average assets (1) 1.41% 1.10% 1.44% 1.12%
Return on average equity (1) 10.18% 7.95% 10.44% 8.06%
Net interest margin (1) 4.84% 4.54% 4.85% 4.56%
Efficiency ratio 62.33% 69.04% 61.74% 68.98%
March 31, September 30,
2006 2005
----------------------------------
ASSET QUALITY RATIOS:
Non-performing loans $ 2,040 $ 2,926
REO & other repossessed assets 110 509
Total non-performing assets 2,150 3,435
Non-performing assets to total assets 0.39% 0.62%
Allowance for loan losses to
non-performing loans 201.91% 140.09%
Book value per share (2) $ 20.59 $ 19.85
Book value per share (3) $ 21.98 $ 21.30
Tangible book value per share (2) (4) $ 18.65 $ 17.86
Tangible book value per share (3) (4) $ 19.91 $ 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 Six Months
Ended March 31, Ended March 31,
2006 2005 2006 2005
---------------------- --------------------
AVERAGE BALANCE SHEET:
Average total loans $ 397,880 $ 371,509 $ 394,290 $ 365,021
Average total interest
earning assets 500,835 477,946 498,030 473,730
Average total assets 553,210 527,453 550,792 525,958
Average total interest
bearing deposits 361,893 357,825 361,755 352,740
Average FHLB advances &
other borrowings 62,176 54,597 59,528 55,010
Average shareholders' equity 76,470 72,962 75,729 73,049
4
Comparison of Financial Condition at March 31, 2006 and September 30, 2005
Total Assets: Total assets increased $4.61 million to $557.38 million at March
31, 2006 from $552.77 million at September 30, 2005 primarily due to a $5.13
million increase in net loans receivable and $2.57 million increase in cash
and due from financial institutions. These increases were partially offset
by a $2.95 million decrease in investment securities.
Investments: Investment securities decreased by $2.95 million to $92.45
million at March 31, 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 $5.13 million to $393.24 million at
March 31, 2006 from $388.11 million at September 30, 2005. The increase in
the portfolio was primarily a result of a $6.38 million increase in
construction loans (net of undisbursed portion), a $3.33 million increase in
land loans, a $2.75 million increase in consumer loans, and a $1.89 million
increase in multi-family loans. Partially offsetting these increases were
decreases of $5.46 million in one-to-four family mortgage loans, $2.58 million
in commercial business loans, and $1.37 million in commercial real estate
loans.
Loan demand remains relatively strong in the Bank's market areas, although an
unusually wet winter impacted the loan portfolio by delaying construction loan
disbursements on existing construction loans and kept some of the Bank's
builders from beginning new projects. Undisbursed construction loan balances
increased by $10.10 million to $52.87 million at March 31, 2006. Loan
originations totaled $43.98 million and $109.76 million for the three and six
months ended March 31, 2006 compared to $48.94 million and $110.38 million for
the three and six months ended March 31, 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 $5.52
million and $13.05 million for the three and six months ended March 31, 2006
compared to $4.63 million and $7.96 million for the three and six months ended
March 31, 2005.
Deposits: Deposits increased by $2.37 million to $414.04 million at March 31,
2006 from $411.67 million at September 30, 2005. The deposit increase was
primarily due to a $12.2 million increase in certificate of deposit accounts.
This increase was partially offset by decreases of $7.33 million in money
market accounts, $1.38 million in savings accounts, and $1.12 million in
non-interest bearing accounts.
Shareholders' Equity: Total shareholders' equity increased by $3.07 million to
$77.71 million at March 31, 2006 from $74.64 million at September 30, 2005,
primarily due to net income of $3.95 million and a $544,000 increase to
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 $264,000 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 $1.20 million in
dividends to shareholders, the repurchase of 8,200 shares of the Company's
stock for $193,000, and a $292,000 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 March 31, 2006, the Company had
repurchased 36,050 of these shares at an average price of $23.26.
Cumulatively the Company has repurchased 3,375,321 (51.0%) of the 6,612,500
shares that were issued when the Company went public in January 1998. The
3,375,321 shares have been repurchased at an average price of $15.41 per
share.
Comparison of Operating Results for the Three and Six Months Ended March 31,
2006 and 2005
Net Income: Net income for the quarter ended March 31, 2006 increased to $1.95
million, or $0.53 per diluted share ($0.55 per basic share) from $1.45
million, or $0.40 per diluted share ($0.42 per basic share) for the quarter
ended March 31, 2005. The $0.13 increase in diluted earnings per share for
the quarter ended March 31, 2006 was primarily a result of a $656,000
($433,000 net of income tax - $0.11 per diluted share) increase in net
interest income after provision for loan losses and a $169,000 ($112,000 net
of income tax - $0.03 per diluted share) increase in non-interest income.
These
5
items were partially offset by a $48,000 ($32,000 net of income tax - $0.01
per diluted share) increase in non-interest expense.
Net income for the six months ended March 31, 2006 increased to $3.95 million,
or $1.09 per diluted share ($1.13 per basic share) from $2.95 million, or
$0.80 per diluted share ($0.84 per basic share) for the six months ended March
31, 2005. The $0.29 increase in diluted earnings per share for the six months
ended March 31, 2006 was primarily the result of a $1.31 million ($867,000 net
of income tax - $0.24 per diluted share) increase in net interest income after
provision for loan losses, a $186,000 ($123,000 net of income tax - $0.03 per
diluted share) increase in non-interest income, a $76,000 ($50,000 net of
income tax - $0.01 per diluted share) decrease in non-interest expense, and a
lower number of weighted average shares outstanding, which increased diluted
earnings per share by approximately $0.01.
Net Interest Income: Net interest income increased $636,000 to $6.06 million
for the quarter ended March 31, 2006 from $5.43 million for the quarter ended
March 31, 2005, primarily due to a larger interest earning asset base and an
increase in the Company's net interest margin. Total interest income
increased $1.22 million to $8.65 million for the quarter ended March 31, 2006
from $7.43 million for the quarter ended March 31, 2005 as average total
interest earning assets increased by $22.89 million. The yield on interest
earning assets increased to 6.91% for the quarter ended March 31, 2006 from
6.22% for the quarter ended March 31, 2005. Total interest expense increased
by $583,000 to $2.59 million for the quarter ended March 31, 2006 from $2.00
million for the quarter ended March 31, 2005 as average interest bearing
liabilities increased $11.65 million. The average rate paid on interest
bearing liabilities increased to 2.47% for the quarter ended March 31, 2006
from 1.94% for the quarter ended March 31, 2005. The net interest margin
increased to 4.84% for the quarter ended March 31, 2006 from 4.56% for the
quarter ended March 31, 2005.
Net interest income increased $1.29 million to $12.09 million for the six
months ended March 31, 2006 from $10.80 million for the six months ended March
31, 2005, primarily due to a larger interest earning asset base and an
increase in the Company's net interest margin. Total interest income
increased $2.36 million to $17.09 million for the six months ended March 31,
2006 from $14.73 million for the six months ended March 31, 2005 as average
total interest earning assets increased by $24.30 million. The yield on
interest earning assets was 6.87% for the six months ended March 31, 2006
compared to 6.22% for the six months ended March 31, 2005. Total interest
expense increased by $1.07 million to $5.01 million for the six months ended
March 31, 2006 from $3.94 million for the six months ended March 31, 2005 as
average interest bearing liabilities increased $13.53 million. The average
rate paid on interest bearing liabilities increased to 2.38% for the six
months ended March 31, 2006 from 1.94% for the six months ended March 31,
2005. The net interest margin increased to 4.85% for the six months ended
March 31, 2006 from 4.54% for the six months ended March 31, 2005.
Provision for Loan Losses: There was no provision for loan losses made during
the six months ended March 31, 2006 as credit quality remained strong. The
allowance for loan losses, however, did increase during this period due to a
net recovery of $20,000. Based on its comprehensive analysis, management
deemed the allowance for loan losses of $4.12 million at March 31, 2006 (1.04%
of loans receivable and 201.91% 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 130.99% of non-performing loans) at March 31,
2005. The Company had net recoveries of $2,000 and $20,000 for the three and
six months ended March 31, 2006 compared to net charge-offs of $7,000 and
$4,000 for the three and six months ended March 31, 2005.
The Company's non-performing assets to total assets ratio decreased to 0.39%
at March 31, 2006 from 0.52% at December 31, 2005 and 0.64% at March 31, 2005.
The non-performing loan total of $2.04 million at March 31, 2006 consisted of
a $1.36 million commercial construction loan, $506,000 in one-to-four family
mortgage loans, and a $179,000 commercial real estate loan.
Non-interest Income: Total non-interest income increased $169,000 to $1.51
million for the quarter ended March 31, 2006 from $1.34 million for the
quarter ended March 31, 2005, primarily due to $95,000 increase in service
charges on deposits, a $29,000 increase in servicing income on loans sold, and
a $27,000 increase in ATM transaction fees. The Bank also continued to
generate non-interest income from the sale of fixed-rate loans. During the
quarter ended March
6
31, 2006, the Bank sold $5.52 million in fixed rate one-to-four family
mortgages for a gain of $88,000 compared to sales of $4.63 million for a gain
of $84,000 for the quarter ended March 31, 2005.
Total non-interest income increased by $186,000 to $3.06 million for the six
months ended March 31, 2006 from $2.88 million for the six months ended March
31, 2005, primarily due to a $179,000 increase in fees from the sale of non-
deposit investment products, a $118,000 increase in service charges on
deposits, and a $98,000 increase in servicing income on loans sold. These
increases were partially offset by a $228,000 decrease in gains from loan
sales. Income from loan sales was larger in the period a year ago 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 $48,000 to $4.72
million for the quarter ended March 31, 2006 from $4.67 million for the
quarter ended March 31, 2005. The increase was primarily a result of
increases in salary expense, premises and equipment expense, and state and
local tax expense. These increases were partially offset by decreases in
advertising expense, real estate owned operation expense, and postage and
courier expense
Total non-interest expense decreased by $76,000 to $9.36 million for the six
months ended March 31, 2006 from $9.43 million for the six months ended March
31, 2005. Non-interest expenses were higher a year ago primarily due to
expenses of $183,000 related to the branch acquisition in October 2004 and
vesting expenses of $335,000 related to one of the Company's benefit plans.
Partially offsetting these expense decreases during the current year, were
increases in expenses related to salaries, premises and equipment, and state
and local taxes. The Company also began expensing stock options under SFAS
123(R), which became effective for the Company on October 1, 2005. Total
stock option expenses of $11,000 were recorded for the six months ended March
31, 2006. As a result of the decreased expenses and increased revenue, the
Company's efficiency ratio improved to 61.74% for the six months ended March
31, 2006 from 68.98% for the six months ended March 31, 2005.
7
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.
March 31, 2006 September 30, 2005
Amount Percent Amount Percent
-------------------- -----------------------
Mortgage Loans:
One-to-four family (1) $96,300 21.26% $101,763 23.24%
Multi family 22,058 4.87 20,170 4.61
Commercial 123,480 27.27 124,849 28.51
Construction and
land development 128,951 28.47 112,470 25.68
Land 28,314 6.25 24,981 5.71
-------- ------ -------- ------
Total mortgage loans 399,103 88.12 384,233 87.75
Consumer Loans:
Home equity and second
mortgage 34,704 7.66 32,298 7.38
Other 9,669 2.14 9,330 2.13
-------- ------ -------- ------
44,373 9.80 41,628 9.51
Commercial business loans 9,436 2.08 12,013 2.74
-------- ------ -------- ------
Total loans 452,912 100.00% 437,874 100.00%
Less:
Undisbursed portion of
construction loans in
process (52,869) (42,771)
Unearned income (2,687) (2,895)
Allowance for loan
losses (4,119) (4,099)
-------- --------
Total loans receivable,
net $393,237 $388,109
======== ========
-----------------
(1) Includes loans held-for-sale.
8
TIMBERLAND BANCORP, INC. AND SUBSIDIARIES
DEPOSIT BREAKDOWN
(Dollars in thousands)
March 31, 2006 September 30, 2005
-------------- ------------------
Non-interest bearing $50,677 $51,792
N.O.W checking 93,470 93,477
Savings 62,890 64,274
Money market accounts 41,961 49,295
Certificates of deposit under
$100,000 120,668 117,618
Certificates of deposit $100,000
and over 44,369 35,209
-------- --------
Total deposits $414,035 $411,665
======== ========
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, 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, President & CEO or Dean Brydon, CFO 360/533-4747
9