Operating Revenue Increases, Non-Interest Income Increases and Net Loans Outstanding Increases
Announces $0.07 Regular Dividend and $0.05 Special Dividend

HOQUIAM, Wash., Nov. 2, 2015 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company") today reported that solid loan growth and improved asset quality contributed to record fourth quarter profits. The Company recorded net income of $2.96 million and $8.29 million, respectively, for the quarter and fiscal year ended September 30, 2015.

Net income per diluted common share increased 83% to $0.42 for the quarter ended September 30, 2015 from $0.23 for the comparable quarter one year ago and increased 35% from $0.31 for the quarter immediately prior. Earnings per diluted common share for the fiscal year just ended increased 46% to $1.17 from $0.80 for the fiscal year ended September 30, 2014.

Timberland's Board of Directors declared a $0.07 per common share quarterly cash dividend payable on November 30, 2015 to shareholders of record on November 16, 2015. The Company's Board of Directors also declared a special one-time dividend of $0.05 per share payable on November 30, 2015 to shareholders of record on November 16, 2015.

"The Company recorded solid core earnings during the September quarter which were increased by approximately $0.14 per share from a loan loss reserve recapture," stated Michael R. Sand, President and CEO. "A significant reduction in non-performing assets this quarter, combined with a net recovery of $982,000 and the release of a $1.29 million impairment within the loan loss reserve, moved the reserve into an overfunded position. As a result, the Company recorded a loan loss reserve recapture of $1.53 million (approximately $1.0 million after tax) for the quarter. The Company continues to increase operating revenues and net loans outstanding and has increased net income to shareholders annually for five consecutive years. The Company's assets increased to $816 million which represents the first time its fiscal year-end assets have exceeded $800 million. We are pleased with the year over year improvement in the Company's already solid financial metrics."

Fiscal Year 2015 Highlights (at or for the period ended September 30, 2015, compared to September 30, 2014, or June 30, 2015):

• Earnings per diluted common share for fiscal year 2015 increased 46% to $1.17 from $0.80 for fiscal year 2014;
• Earnings per diluted common share increased 83% to $0.42 from $0.23 for the comparable quarter one year ago and increased 35% from $0.31 per diluted common share for the quarter ended June 30, 2015;
• Return on average equity was 13.47% for the current quarter and 9.70% for fiscal year 2015;
• Return on average assets was 1.47% for the current quarter and 1.07% for fiscal year 2015;
• Non-performing assets decreased 32% year-over-year and 20% from the prior quarter;
• Total delinquent loans decreased 47% year-over-year and 33% from the prior quarter;
• Recorded a net loan loss recovery of $982,000 for the current quarter and $1.02 million for fiscal year 2015;
• Non-interest income increased 12% year-over-year;
• Total deposits increased 10% year-over-year and 4% from the prior quarter;
• Net loans increased 7% year-over-year and 2% from the prior quarter;
• Tangible book value per common share increased to $11.95 at September 30, 2015 from $10.94 at September 30, 2014.

Capital Ratios and Asset Quality

Timberland Bancorp remains well capitalized with a total risk-based capital ratio of 15.16%, a Tier 1 leverage capital ratio of 10.64% and a tangible capital to tangible assets ratio of 10.31% at September 30, 2015.

Timberland recorded a $1.53 million loan loss reserve recapture (which added approximately $0.14 to diluted earnings per share) during the quarter ended September 30, 2015 as asset quality continued to improve. During the fourth fiscal quarter the Bank had a $982,000 net recovery on loans previously charged off. The Bank also had a $1.29 million decrease in the portion of the allowance for loan losses allocated to specific impairments due to the resolution of two significant non-accrual loans. The non-performing assets to total assets ratio improved to 1.84% at September 30, 2015 from 2.36% three months earlier and 2.94% one year ago. The allowance for loan losses was 1.61% of loans receivable at September 30, 2015.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 33% to $7.2 million at September 30, 2015, from $10.8 million at June 30, 2015 and decreased 47% from $13.7 million one year ago. Non-accrual loans decreased 34% to $6.0 million at September 30, 2015 from $9.1 million at June 30, 2015 and decreased 45% from $10.9 million at September 30, 2014.

Other real estate owned ("OREO") and other repossessed assets decreased 14% to $7.9 million at September 30, 2015, from $9.1 million at September 30, 2014 and decreased 3% from $8.1 million at June 30, 2015.  At September 30, 2015, the OREO portfolio consisted of 34 individual properties and one other repossessed asset. During the quarter ended September 30, 2015, three OREO properties totaling $606,000 were sold for a net gain of $1,000.

Balance Sheet Management

Total assets increased by $26.0 million, or 3%, to $815.8 million at September 30, 2015, from $789.8 million at June 30, 2015. The increase was primarily due to a $16.1 million increase in cash and cash equivalents and a $9.1 million increase in net loans receivable. The increase in total assets was funded primarily by a $24.2 million increase in total deposits.

Liquidity as measured by cash and cash equivalents, CDs held for investment and available for sale investments securities was 19.6% of total liabilities at September 30, 2015, compared to 17.7% at June 30, 2015, and 16.8% one year ago. 

Net loans receivable increased $9.1 million, or 2%, to $607.3 million at September 30, 2015, from $598.2 million at June 30, 2015. The increase was primarily due to an $8.5 million increase in one-to four-family loans, a $1.7 million increase in multi-family loans, a $1.2 million increase in construction and land development loans and a $4.2 million decrease in the undisbursed portion of construction loans in process. These increases to net loans receivable were partially offset by a $2.5 million decrease in commercial business loans, a $2.2 million decrease in commercial mortgage loans, a $1.4 million decrease in land loans and a $925,000 decrease in consumer loans. 

Timberland originated $65.97 million in loans during the quarter ended September 30, 2015, compared to $101.3 million for the preceding quarter and $60.4 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 September 30, 2015, fixed-rate one- to four-family mortgage loans totaling $16.4 million were sold compared to $16.5 million for the preceding quarter and $10.0 million for the comparable quarter one year ago.

Timberland's investment securities decreased slightly during the quarter to $9.3 million at September 30, 2015, from $9.4 million at June 30, 2015, primarily due to scheduled amortization.

Total deposits increased $24.2 million, or 4%, to $678.9 million at September 30, 2015, from $654.7 million at June 30, 2015. The increase was primarily due to a $19.3 million increase in non-interest bearing account balances, an $11.9 million increase in N.O.W. checking account balances and a $5.5 million increase in savings account balances.  These increases were partially offset by a $10.6 million decrease in money market account balances and a $1.9 million decrease in certificates of deposit account balances.  

Shareholders' Equity

Total shareholders' equity increased $1.90 million to $89.19 million at September 30, 2015, from $87.29 million at June 30, 2015. The increase in shareholders' equity was primarily due to net income of $2.96 million for the quarter, which was partially offset by share repurchases of $709,000 and dividend payments of $494,000 to shareholders. Book value per share increased to $12.76 and tangible book value per share increased to $11.95 at September 30, 2015.

During the quarter, Timberland repurchased 64,788 shares of its common stock for $709,000 (an average price of $10.94 per share). Timberland had 287,893 shares remaining to be purchased on its existing stock repurchase plan at September 30, 2015.

Operating Results

Operating revenue (net interest income before provision for loan losses, plus non-interest income excluding other than temporary impairment ("OTTI") charges and gains or losses on sale of investments) increased 2% to $9.70 million for the current quarter from $9.51 million for the preceding quarter and 10% from $8.81 million for the comparable quarter one year ago.  For fiscal year 2015, operating revenue increased 7% to $36.77 million from $34.42 million for fiscal year 2014.

Net interest income increased 1% to $7.03 million for the quarter ended September 30, 2015, from $6.98 million for the preceding quarter and increased 7% from $6.59 million for the comparable quarter one year ago.  Net interest income was higher during the quarter ended September 30, 2015, primarily due to an increased level of average loans and average interest-earning assets.  The net interest margin for the current quarter decreased to 3.76% from 3.88% for the preceding quarter and from 3.86% for the comparable quarter one year ago. The net interest margin for the preceding quarter was higher, in part, due to the collection of $159,000 of non-accrual interest, which increased the net interest margin for the quarter ended June 30, 2015 by approximately nine basis points.  For fiscal year 2015, net interest income increased 5% to $27.28 million from $25.92 million for fiscal year 2014.  Timberland's net interest margin for year ended September 30, 2015 decreased to 3.80% from 3.84% for the year ended September 30, 2014.

Non-interest income increased 6% to $2.66 million for the quarter ended September 30, 2015, from $2.52 million in the preceding quarter, and increased 21% from $2.21 million for the comparable quarter one year ago. The increase in non-interest income compared to the preceding quarter was primarily due to an $81,000 increase in service charges on deposits and smaller increases in several other categories. For fiscal year 2015 non-interest income increased 12% to $9.52 million from $8.53 million for fiscal year 2014, primarily due to a $597,000 increase in gain on sale of loans and a $228,000 increase in ATM and debit card interchange transaction fees.

Total operating (non-interest) expenses increased 8% to $6.69 million for the fourth fiscal quarter from $6.22 million for the preceding quarter and increased 5% from $6.37 million for the comparable quarter one year ago. The increased expenses for the current quarter compared to the preceding quarter were primarily due to a $128,000 increase in salaries and employee benefits expense and a $108,000 increase in OREO and other repossessed asset expense.   Also impacting the comparison was a non-recurring gain on the sale of excess land during the preceding quarter which reduced total non-interest expenses by $299,000. For fiscal year 2015, total operating expenses were virtually unchanged at $25.84 million compared to $25.80 million for fiscal year 2014. 

The provision for income taxes increased $436,000 to $1.56 million for the quarter ended September 30, 2015, from $1.13 million for the preceding quarter, primarily due to increased income before income taxes.  The effective tax rate was 34.6% for the current quarter compared to 34.3% for the quarter ended June 30, 2015.  For fiscal year 2015, the provision for income taxes increased $1.39 million to $4.19 million from $2.80 million for fiscal year 2014, primarily due to higher income before taxes. The effective tax rate was 33.6% for fiscal year 2015 compared to 32.4% for fiscal year 2014.

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 loan loss 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 Board of Governors of the Federal Reserve System 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, institute a formal or informal enforcement action or 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 or impose additional requirements or restrictions, which could adversely affect our liquidity and earnings; 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 including as a result of Basel III; the impact of the Dodd Frank Wall Street Reform and Consumer Protection Act and the implementation of related rules and regulations; our ability to attract and retain deposits;  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 consolidated 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; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common and stock; 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 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 fiscal 2016 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.

CONTACT: Michael R. Sand,
         President & CEO
         Dean J. Brydon, CFO
         (360) 533-4747
         www.timberlandbank.com

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