TIMBERLAND BANCORP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - TIMBERLAND BANCORP, INC. FORM 8-K - TIMBERLAND BANCORP INC	k811812.htm

Exhibit 99.1

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

Timberland Bancorp Net Income Increases 321% to $4.6 Million for Fiscal 2012

Earns $0.13 Per Diluted Common Share in Fourth Fiscal Quarter

HOQUIAM, WA – November 8, 2012- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”) today reported earnings of $4.59 million for fiscal 2012 compared to earnings of $1.09 million for fiscal 2011. Net income available to common shareholders for fiscal 2012, after the preferred stock dividends and the preferred stock discount accretion, was $3.52 million, or $0.52 per diluted common share, compared to $32,000, or $0.00 per diluted common share for fiscal 2011.

Timberland reported net income of $1.15 million for its fiscal fourth quarter ended September 30, 2012. The quarter’s net income to common shareholders, after adjusting for the preferred stock dividend and the preferred stock discount accretion, was $883,000, or $0.13 per diluted common share, compared to net income of $1.08 million, or $0.16 per diluted common share for the quarter ended June 30, 2012 and a net loss of $(339,000), or $(0.05) per diluted common share for the quarter ended September 30, 2011.

“Profitability increased significantly year over year as historically low interest rates and the improving economy contributed to an increase in the gain on sale of loans and a reduction in provision expense,” said Michael R. Sand, President and CEO. “We will continue to focus on reducing non-performing assets and on maintaining the Bank’s net interest margin during the new fiscal year.”

Fiscal 2012 Highlights (at or for the period ended September 30, 2012, compared to September 30, 2011, or June 30, 2012):

·	Fiscal 2012 net income increased to $4.59 million compared to $1.09 million for fiscal 2011;

·	Fiscal 2012 earnings per diluted common share increased to $0.52 compared to $0.00 for fiscal 2011;

·	Net income for the current quarter was $1.15 million compared to $1.35 million for the preceding quarter and a loss of $(73,000) for the comparable quarter one year ago;

·	Earnings per diluted common share for current quarter was $0.13 compared to $0.16 for the preceding quarter and a loss of $(0.05) for the comparable quarter one year ago;

·	Net interest margin was 3.83% for the current quarter and 3.81% for fiscal 2012;

·	Total delinquent and non-accrual loans decreased 12% during the quarter and 30% year-over-year;

·	Net charge-offs for the current quarter decreased 56% from the preceding quarter and decreased 58% from the comparable quarter one year ago;

·	Capital levels remain very strong: Total Risk Based Capital of 16.77%; Tier 1 Leverage Capital Ratio of 11.66%; Tangible Capital to Tangible Assets Ratio of 11.55%; and

·	Book value per common share increased to $10.52, and tangible book value per common share increased to $9.68 at year end.

Capital Ratios and Asset Quality

Timberland Bancorp remains very well capitalized with a total risk-based capital ratio of 16.77%, a Tier 1 leverage capital ratio of 11.66% and a tangible capital to tangible assets ratio of 11.55% at September 30, 2012. On August 21, 2012 Timberland received approval and paid $1.2 million in dividends on the preferred shares issued to the U.S. Treasury in December 2008. This payment brought Timberland current on all dividend payments owed. The dividend payment did not reduce Timberland’s reported capital ratios since appropriate accruals for the dividends were recorded in prior quarters. On November 1, 2012 the U.S. Treasury successfully auctioned the preferred shares it had purchased from Timberland in December 2008. The clearing price in the auction was $862.50 per preferred share. Upon the closing of the sale which is projected to occur prior to November 13, 2012, Timberland will no longer be a participant in the Treasury’s TARP program since the preferred shares

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will be owned by private investors. The sale of the preferred shares will have no effect on Timberland’s capital ratios as the terms of the preferred shares did not change in connection with the sale.

Timberland provisioned $900,000 to its loan loss allowance during the quarter ended September 30, 2012 compared to $900,000 in the preceding quarter and $1.76 million in the comparable quarter one year ago. In fiscal 2012, the loan loss provision totaled $3.50 million, down 48% from $6.76 million in fiscal 2011. Net charge-offs for the fourth fiscal quarter, decreased to $679,000 compared to $1.56 million for the preceding quarter and $1.60 million for the comparable quarter one year ago. Net charge-offs for fiscal 2012 decreased 40% to $3.62 million from $6.08 million for fiscal 2011.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 12% to $30.4 million at September 30, 2012 from $34.7 million at June 30, 2012 and decreased 30% from $43.7 million one year ago. The non-performing assets to total assets ratio was 5.19% at September 30, 2012 compared to 5.14% three months earlier and 5.01% one year ago.

Non-accrual loans decreased to $21.3 million at September 30, 2012 from $24.0 million at June 30, 2012 and $21.6 million at September 30, 2011. The non-accrual loans at September 30, 2012 were comprised of 58 loans and 47 credit relationships. By dollar amount per category: 43% of non-accrual loans are secured by land and land development properties; 28% are secured by commercial properties; 24% are secured by residential properties; and 5% are secured by residential construction projects.

Other real estate owned (“OREO”) and other repossessed assets increased to $13.3 million at September 30, 2012 from $10.0 million at June 30, 2012 and $10.8 million at September 30, 2011. At September 30, 2012 the OREO portfolio consisted of 56 individual properties. The properties consisted of eight commercial real estate properties totaling $6.5 million, 35 land parcels totaling $4.2 million, 12 single family homes totaling $1.7 million and a condominium project of $842,000. During the quarter ended September 30, 2012 ten OREO properties totaling $863,000 were sold for a net loss of $83,000.

Balance Sheet Management

Total assets increased by $7.8 million, or 1%, to $737.0 million at September 30, 2012 from $729.1 million at June 30, 2012. The increase in total assets was primarily due to a $7.6 million increase in total deposits which increased the amount of assets held in overnight funds.

Liquidity as measured by cash and cash equivalents, CDs held for investment and available for sale investments was 19.3% of total liabilities at September 30, 2012 compared to 18.9% at June 30, 2012 and 21.1% one year ago.

Net loans receivable increased $1.3 million to $538.5 million at September 30, 2012 from $537.2 million at June 30, 2012. The increase was primarily due to a $9.4 million increase in multi-family loan balances and a $7.8 million increase in construction and land development loans. “Our expertise in financing custom construction projects for owners and their contractors has been established for many years and we are benefitting from the emerging recovery in this segment of the market,” said Sand. These increases to net loans receivable were partially offset by a $3.5 million decrease in commercial business loan balances, a $2.6 million decrease in one-to four-family loan balances, a $2.3 million decrease in commercial real estate loan balances, a $1.6 million decrease in land loan balances, a $1.5 million decrease in consumer loan balances and a $4.1 million increase in the undisbursed portion of construction loans in process.

Timberland continued to reduce its exposure to land development and land loans. Land development loan balances decreased to $589,000 at September 30, 2012, a 73% decrease year-over-year. The Bank’s land loan portfolio decreased to $39.7 million at September 30, 2012, a 4% decrease from the preceding quarter and a 19% decrease year-over-year. The well diversified land loan portfolio consists of 314 loans on a variety of land types including individual building lots, acreage, raw land and commercially zoned properties. The average loan balance for the entire land portfolio was approximately $126,000 at September 30, 2012.

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LOAN PORTFOLIO

	September 30, 2012						June 30, 2012						September 30, 2011
($ in thousands)	Amount			Percent			Amount			Percent			Amount			Percent

Mortgage Loans:
One-to four-family	$	106,979			19	%	$	109,624			19	%	$	114,680			20	%
Multi-family		47,521			8			38,146			7			30,982			6
Commercial		256,254			45			258,545			46			246,037			44
Construction and land
development		56,406			10			48,639			9			52,484			9
Land		39,655			7			41,273			7			49,236			9
Total mortgage loans		506,815			89			496,227			88			493,419			88

Consumer Loans:
Home equity and second
mortgage		32,814			6			34,080			6			36,008			7
Other		6,183			1			6,413			1			8,240			1
Total consumer loans		38,997			7			40,493			7			44,248			8

Commercial business loans		22,588			4			26,052			5			22,510			4
Total loans		568,400			100	%		562,772			100	%		560,177			100	%
Less:
Undisbursed portion of
construction loans in
process		(16,325	)					(12,239	)					(18,265	)
Deferred loan origination
fees		(1,770	)					(1,761	)					(1,942	)
Allowance for loan losses		(11,825	)					(11,603	)					(11,946	)
Total loans receivable, net	$	538,480					$	537,169					$	528,024

CONSTRUCTION LOAN COMPOSITION

	September 30, 2012					June 30, 2012					September 30, 2011
($ in thousands)	Amount		Percent of Loan Portfolio			Amount		Percent of Loan Portfolio			Amount		Percent of Loan Portfolio

Custom and owner / builder	$	33,345		6	%	$	27,643		5	%	$	26,205		4	%
Speculative one- to four-
Family		1,880		--			2,122		1			1,919		1
Commercial real estate		20,247		4			17,920		3			12,863		2
Multi-family (including
condominium)		345		--			345		--			9,322		1
Land development		589		--			609		--			2,175		1
Total construction loans	$	56,406		10	%	$	48,639		9	%	$	52,484		9	%

Timberland’s loan originations increased 8% to $69.0 million during the quarter ended September 30, 2012 compared to $63.6 million for the preceding quarter and increased 86% from the $37.1 million originated during the 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, 2012, $28.5 million fixed-rate one-to four-family mortgage loans were sold compared to $21.2 million for the preceding quarter and $16.1 million for the comparable quarter ended one year ago.

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Timberland’s mortgage-backed securities (“MBS”) and other investments decreased by $332,000 during the quarter to $8.3 million at September 30, 2012 from $8.6 million at June 30, 2012, primarily due to prepayments and scheduled amortization. During the quarter ended September 30, 2012, other-than-temporary-impairment (“OTTI”) credit related write-downs and realized losses of $25,000 were recorded on the private label MBS that were acquired in the in-kind redemption from the AMF family of mutual funds in June 2008. At September 30, 2012 the Bank’s remaining private label MBS portfolio had been reduced to $2.8 million from an original acquired balance of $15.3 million.

DEPOSIT BREAKDOWN ($ in thousands)
	September 30, 2012					June 30, 2012					September 30, 2011
	Amount		Percent			Amount		Percent			Amount		Percent
Non-interest bearing	$	75,296		13	%	$	70,004		12	%	$	64,494		11	%
N.O.W. checking		150,139		25			149,821		25			155,299		26
Savings		87,493		15			88,210		15			83,636		14
Money market		79,549		13			73,857		13			61,028		10
Certificates of deposit under $100		127,909		21			130,233		22			141,899		24
Certificates of deposit $100 and over		77,540		13			78,241		13			86,322		15
Certificates of deposit – brokered		- -		--			- -		--			--		--
Total deposits	$	597,926		100	%	$	590,366		100	%	$	592,678		100	%

“Our deposit mix continues to improve through the transition to more transaction based accounts,” stated Dean Brydon, CFO. Total deposits increased $7.6 million, or 1% to $597.9 million at September 30, 2012, from $590.4 million at June 30, 2012 primarily as a result of a $5.7 million increase in money market account balances, a $5.3 million increase in non-interest bearing account balances and a $318,000 increase in N.O.W. checking account balances. These increases were partially offset by a $3.0 million decrease in certificate of deposit account balances and a $717,000 decrease in savings account balances.

Total shareholders’ equity increased $1.04 million to $90.32 million at September 30, 2012, from $89.28 million at June 30, 2012. The increase in shareholders’ equity was primarily a result of net income for the quarter. Book value per common share increased to $10.52 and tangible book value per common share increased to $9.68 at September 30, 2012.

Operating Results

Fiscal fourth quarter operating revenue (net interest income before provision for loan losses, plus non-interest income excluding OTTI charges and valuation allowances or recoveries on mortgage servicing rights (“MSRs”)), increased less than 1% to $9.12 million from $9.09 million for the preceding quarter and 6% from the $8.61 million for the comparable quarter one year ago. For fiscal 2012, operating revenue increased 4% to $35.64 million from $34.16 million for fiscal 2011.

Net interest income decreased 3% to $6.46 million for the quarter ended September 30, 2012 from $6.63 million for the preceding quarter and increased 2% from $6.34 million for the comparable quarter one year ago. The net interest margin for the current quarter decreased to 3.83% from 3.96% for the preceding quarter and increased from 3.75% for the comparable quarter one year ago. The decrease in net interest income and net interest margin was primarily a result of a decrease in late fees received and deferred loan origination fees taken into income (and classified as interest income) on loans that paid off during the current quarter. Late fees received and deferred loan origination fees taken into income for the quarter ended September 30, 2012 decreased $134,000 relative to the total recorded for the quarter ended June 30, 2012. The decrease in late fees and loan origination fees impacted the net interest margin by approximately eight basis points. For fiscal 2012, net interest income increased 1% to $25.66 million from $25.43 million for fiscal 2011. Timberland’s net interest margin for the year ended September 30, 2112 increased to 3.81% from 3.78% for the year ended September 30, 2011.

Non-interest income increased 7% to $2.50 million for the quarter ended September 30, 2012, from $2.34 million in the preceding quarter and increased 34% from $1.86 million for the comparable quarter one year ago. The increase in non-interest income compared to the preceding quarter was primarily due to a $182,000 increase in gain on sale of loans, which was partially offset by $52,000 increase in the valuation allowance on the Bank’s MSRs. For fiscal 2012, non-interest income increased $1.1 million, or 13%, to $9.78 million from $8.68 million for fiscal 2011, primarily due to an increase in gain on sale of loans, an increase in ATM and debit card interchange fee income and a decrease in OTTI and realized losses on MBS and

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other investments. These increases to non-interest income were partially offset by a decrease in the valuation recovery on MSRs and a decrease in service charges on deposits.

Total operating (non-interest) expenses increased 10% to $6.68 million for the fourth fiscal quarter from $6.10 million for the preceding quarter and 1% from $6.63 million for the comparable quarter one year ago. The increased expenses for the current quarter compared to the preceding quarter were primarily the result of a $321,000 increase in OREO and other repossessed assets expense and a $119,000 increase in loan administration and foreclosure expenses. For fiscal 2012, operating expenses decreased 2% to $25.57 million from $25.96 million for fiscal 2011, primarily due to decreased salaries and employee benefits expense, FDIC insurance expense, other insurance expense and loan administration and foreclosure expense. These decreases were partially offset by increased OREO and other repossessed assets expense.

The provision for income taxes decreased to $230,000 for the quarter ended September 30, 2012, from $624,000 for the preceding quarter primarily due to lower income before income taxes and a $205,000 recovery to the deferred tax valuation allowance based on the expected implementation of certain tax planning strategies. The deferred tax valuation allowance relates to a capital loss carryforward on the sale of securities in fiscal 2008.

About Timberland Bancorp, Inc.

Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank (“Bank”). The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 22 branches (including its main office in Hoquiam).

Disclaimer

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated, including, but not limited to: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Federal Reserve and our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; our compliance with regulatory enforcement actions, including regulatory memoranda of understandings (“MOUs”) to which we are subject; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; our ability to attract and retain deposits; further increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, the interpretation of regulatory capital or other rules and any changes in the rules applicable to institutions participating in the TARP Capital Purchase Program; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist 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 2013 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.

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TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS		Three Months Ended
($ in thousands, except per share amounts)			Sept. 30,	June 30,	Sept. 30,
(unaudited)			2012	2012	2011
	Interest and dividend income
	Loans receivable		$7,577	$7,842	$8,010
	MBS and other investments		81	89	127
	Dividends from mutual funds		6	6	7
	Interest bearing deposits in banks		86	82	87
	Total interest and dividend income		7,750	8,019	8,231

	Interest expense
	Deposits		822	925	1,331
	FHLB advances		472	466	562
	Total interest expense		1,294	1,391	1,893
	Net interest income		6,456	6,628	6,338

	Provision for loan losses		900	900	1,758
	Net interest income after provision for loan losses		5,556	5,728	4,580

	Non-interest income
	OTTI and realized losses on MBS
	and other investments, net		(25)	(37)	(111)
	Gain on sale of MBS and other investments		--	2	--
	Service charges on deposits		980	955	1,032
	Gain on sale of loans, net		749	567	336
	Bank owned life insurance (“BOLI”) net earnings		150	146	155
	Valuation allowance on MSRs		(134)	(82)	(298)
	ATM and debit card interchange transaction fees		551	564	526
	Other		232	226	221
	Total non-interest income, net		2,503	2,341	1,861

	Non-interest expense
	Salaries and employee benefits		3,061	3,006	3,186
	Premises and equipment		696	647	681
	Advertising		173	173	196
	OREO and other repossessed assets expense, net		684	363	443
	ATM		196	206	219
	Postage and courier		120	124	140
	Amortization of core deposit intangible (“CDI”)		37	37	42
	State and local taxes		148	159	147
	Professional fees		195	217	186
	FDIC insurance		239	237	242
	Other insurance		51	51	60
	Loan administration and foreclosure		201	82	248
	Data processing and telecommunications		346	303	326
	Deposit operations		183	177	227
	Other		347	315	284
	Total non-interest expense		6,677	6,097	6,627



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	Three Months Ended
	Sept. 30,	June 30,	Sept. 30,
	2012	2012	2011
Income (loss) before income taxes	$1,382	$1,972	$(186)
Provision (benefit) for income taxes	230	624	(113)
Net income (loss)	1,152	1,348	(73)

Preferred stock dividends	(208)	(208)	(208)
Preferred stock discount accretion	(61)	(61)	(58)
Net income (loss) to common shareholders	$ 883	$ 1,079	$(339)

Net income (loss) per common share:
Basic	$0.13	$0.16	$(0.05)
Diluted	0.13	0.16	(0.05)

Weighted average common shares outstanding:
Basic	6,780,899	6,780,516	6,745,633
Diluted	6,780,899	6,780,516	6,745,633

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TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME		Year Ended
($ in thousands, except per share amounts)			Sept. 30,	Sept. 30,
(unaudited)			2012	2011
	Interest and dividend income
	Loans receivable		$30,831	$32,976
	MBS and other investments		404	612
	Dividends from mutual funds		32	31
	Interest bearing deposits in banks		338	347
	Total interest and dividend income		31,605	33,966

	Interest expense
	Deposits		3,951	6,136
	FHLB advances		1,996	2,397
	Total interest expense		5,947	8,533
	Net interest income		25,658	25,433

	Provision for loan losses		3,500	6,758
	Net interest income after provision for loan losses		22,158	18,675

	Non-interest income
	OTTI and realized losses on MBS
	and other investments, net		(214)	(449)
	Gain on sale of MBS and other investments		22	79
	Service charges on deposits		3,795	3,907
	Gain on sale of loans, net		2,472	1,548
	BOLI net earnings		607	517
	Valuation recovery on MSRs		10	405
	ATM and debit card interchange transaction fees		2,172	1,911
	Other		917	763
	Total non-interest income, net		9,781	8,681

	Non-interest expense
	Salaries and employee benefits		12,050	12,578
	Premises and equipment		2,676	2,648
	Advertising		726	800
	OREO and other repossessed assets expense, net		1,982	1,374
	ATM		794	802
	Postage and courier		501	540
	Amortization of CDI		148	167
	State and local taxes		608	622
	Professional fees		822	753
	FDIC insurance		942	1,161
	Other insurance		212	359
	Loan administration and foreclosure		816	959
	Data processing and telecommunications		1,265	1,172
	Deposit operations		776	675
	Other		1,250	1,353
	Total non-interest expense		25,568	25,963




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	Year Ended
	Sept. 30,	Sept 30,
	2012	2011
Income before income taxes	$6,371	$1,393
Provision for income taxes	1,781	304
Net income	4,590	1,089

Preferred stock dividends	(832)	(832)
Preferred stock discount accretion	(240)	(225)
Net income to common shareholders	$3,518	$ 32

Net income per common share:
Basic	$0.52	$0.00
Diluted	0.52	0.00

Weighted average common shares outstanding:
Basic	6,780,612	6,745,347
Diluted	6,780,612	6,745,524

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TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts) (unaudited)		Sept. 30,	June 30,	Sept. 30,
		2012	2012	2011
Assets
Cash and due from financial institutions		$ 11,008	$ 12,489	$ 11,455
Interest-bearing deposits in banks		85,660	80,499	100,610
	Total cash and cash equivalents	96,668	92,988	112,065

Certificates of deposit (“CDs”) held for investment, at cost		23,490	22,781	18,659
MBS and other investments:
	Held to maturity, at amortized cost	3,339	3,503	4,145
	Available for sale, at fair value	4,945	5,113	6,717
FHLB stock		5,655	5,705	5,705

Loans receivable		548,878	544,708	535,926
Loans held for sale		1,427	4,064	4,044
Less: Allowance for loan losses		(11,825)	(11,603)	(11,946)
	Net loans receivable	538,480	537,169	528,024

Premises and equipment, net		17,886	17,723	17,390
OREO and other repossessed assets, net		13,302	9,997	10,811
BOLI		16,525	16,374	15,917
Accrued interest receivable		2,183	2,161	2,411
Goodwill		5,650	5,650	5,650
Core deposit intangible		249	286	397
Mortgage servicing rights, net		2,011	2,150	2,108
Prepaid FDIC insurance assessment		1,186	1,415	2,103
Other assets		5,385	6,121	6,122
	Total assets	$736,954	$729,136	$738,224

Liabilities and shareholders’ equity
Deposits: Non-interest-bearing demand		$ 75,296	$ 70,004	$ 64,494
Deposits: Interest-bearing		522,630	520,362	528,184
	Total deposits	597,926	590,366	592,678

FHLB advances		45,000	45,000	55,000
Repurchase agreements		855	826	729
Other liabilities and accrued expenses		2,854	3,669	3,612
	Total liabilities	646,635	639,861	652,019
Shareholders’ equity
Preferred stock, $.01 par value; 1,000,000 shares authorized; 16,641 shares, Series A, issued and outstanding $1,000 per share liquidation value		16,229	16,168	15,989
Common stock, $.01 par value; 50,000,000 shares authorized; 7,045,036 shares issued and outstanding		10,484	10,500	10,457
Unearned shares- Employee Stock Ownership Plan		(1,719)	(1,785)	(1,983)
Retained earnings		65,788	64,905	62,270
Accumulated other comprehensive loss		(463)	(513)	(528)
	Total shareholders’ equity	90,319	89,275	86,205
	Total liabilities and shareholders’ equity	$736,954	$729,136	$738,224

Timberland Q4 Earnings

November 8, 2012

Page 11

KEY FINANCIAL RATIOS AND DATA	Three Months Ended
($ in thousands, except per share amounts) (unaudited)		Sept. 30,	June 30,	Sept. 30,
		2012	2012	2011

PERFORMANCE RATIOS:
Return (loss) on average assets (a)		0.62%	0.74%	(0.04)%
Return (loss) on average equity (a)		5.14%	6.09%	(0.34)%
Net interest margin (a)		3.83%	3.96%	3.75%
Efficiency ratio		74.53%	67.98%	80.83%

		Year Ended
		Sept. 30,		Sept 30,
		2012		2011
PERFORMANCE RATIOS:
Return on average assets		0.62%		0.15%
Return on average equity		5.21%		1.26%
Net interest margin		3.81%		3.78%
Efficiency ratio		72.15%

		Sept. 30,	June 30,	Sept. 30,
		2012	2012	2011
ASSET QUALITY RATIOS AND DATA:
Non-accrual loans		$21,331	$24,018	$21,589
Loans past due 90 days and still accruing		1,198	945	1,754
Non-performing investment securities		2,442	2,484	2,796
OREO and other repossessed assets		13,302	9,997	10,811
Total non-performing assets (b)		$38,273	$37,444	$36,950


Non-performing assets to total assets (b)		5.19%	5.14%	5.01%
Net charge-offs during quarter		$ 679	$ 1,561	$ 1,603
Allowance for loan losses to non-accrual loans		55%	48%	55%
Allowance for loan losses to loans receivable, net (c)		2.15%	2.11%	2.21%
Troubled debt restructured loans on accrual status (d)		$13,410	$14,579	$ 18,166


CAPITAL RATIOS:
Tier 1 leverage capital		11.66%	11.59%	11.09%
Tier 1 risk based capital		15.51%	15.58%	15.19%
Total risk based capital		16.77%	16.85%	16.46%
Tangible capital to tangible assets (e)		11.55%	11.52%	10.95%


BOOK VALUES:
Book value per common share		$ 10.52	$ 10.38	$ 9.97
Tangible book value per common share (e)		9.68	9.53	9.11

__________________________________________________

(a) Annualized

(b) Non-performing assets include non-accrual loans, loans past due 90 days and still accruing, non-performing investment securities and OREO and other repossessed assets. Troubled debt restructured loans on accrual status are not included.

(d) Does not include troubled debt restructured loans totaling $10,093, $9,319 and $7,376 reported as non-accrual loans at September 30, 2012, June 30, 2012 and September 30, 2011, respectively.

(e) Calculation subtracts goodwill and core deposit intangible from the equity component and from assets.

Timberland Q4 Earnings

November 8, 2012

Page 12

AVERAGE CONSOLIDATED BALANCE SHEETS:	Three Months Ended
($ in thousands) (unaudited)		Sept. 30,		June 30,		Sept. 30,
		2012		2012		2011

Average total loans		$	547,028	$	548,450	$	537,612
Average total interest-bearing assets (a)			673,827		669,715		675,800
Average total assets			738,161		733,243		737,152
Average total interest-bearing deposits			523,461		524,250		526,659
Average FHLB advances and other borrowings			45,784		45,818		55,502
Average shareholders’ equity			89,695		88,535		86,465


	Year Ended
		Sept. 30,				Sept. 30,
		2012				2011

Average total loans		$	544,525			$	537,740
Average total interest-bearing assets			674,224				673,536
Average total assets			735,151				733,328
Average total interest-bearing deposits			525,873				528,961
Average FHLB advances and other borrowings			48,302				55,511
Average shareholders’ equity			88,088				86,631

_________________________________

(a) Includes loans and MBS on non-accrual status

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