Increases Quarterly Dividend by 14%

HOQUIAM, Wash., Jan. 25, 2016 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) (“Timberland” or “the Company”) today reported net income of $2.53 million, or $0.36 per diluted common share, for its first fiscal quarter ended December 31, 2015.  This compares to net income of $1.73 million, or $0.24 per diluted common share, for the quarter ended December 31, 2014.

Net income for the preceding quarter, ended September 30, 2015, was $2.96 million, or $0.42 per diluted common share.  Net income for the September quarter was increased by a $1.53 million negative loan loss provision (approximately $1.00 million after income taxes, or approximately $0.14 per diluted common share) that resulted from a significant improvement in asset quality and recoveries during that quarter.

Timberland’s Board of Directors also announced a 14% increase in the quarterly cash dividend to common shareholders to $0.08 per common share, payable on February 26, 2016 to shareholders of record on February 12, 2016.  

“We continued our strong performance in the first quarter of fiscal 2016,” said Michael R. Sand, President and CEO.  “Solid loan and deposit growth contributed to higher revenues, an increased net interest margin and growing profitability.  Our balance sheet is positioned to benefit from rising interest rates which we believe is appropriate given the Federal Reserve’s decision last month to begin raising rates.  The timing of further rate increases is widely discussed but remains uncertain.  What is certain, however, are the final maturities of three Federal Home Loan Bank advances, scheduled to occur in December of 2016 and August and September of 2017.  The average rate of these advances is 4.10% and represented 49% of our funding costs in the quarter just ended.  When they mature, the elimination, or significant reduction, of this interest expense will have a positive impact on our already strong net interest margin.”

First Fiscal Quarter 2016 Highlights (at or for the period ended December 31, 2015, compared to December 31, 2014, or September 30, 2015):

• Earnings per diluted common share increased 50% to $0.36 from $0.24 for the comparable quarter one year ago;
• Return on average equity was 11.26% for the current quarter;
• Return on average assets was 1.22% for the current quarter;
• Operating revenue increased 16% to $10.23 million from $8.78 million for the comparable quarter one year ago;
• Net interest margin increased to 4.00% for the current quarter, which included the collection of $475,000 of non-accrual interest contributing approximately 25 basis points to the net interest margin;
• Non-performing assets decreased 32% year-over-year and decreased 9% from the prior quarter;
• Total delinquent and non-accrual loans decreased 57% year-over-year and decreased 24% from the prior quarter;
• Total deposits increased 13% year-over-year and increased 3% from the prior quarter;
• Net loans receivable increased 9% year-over-year and increased 3% from the prior quarter; and
• Book and tangible book values per common share increased to $13.02 and $12.21, respectively, at December 31, 2015.

Operating Results

Operating revenue (net interest income before recapture of loan losses, plus non-interest income excluding gains or losses on the sale of investment securities and other than temporary impairment [“OTTI”] charges on investment securities) increased 5% to $10.23 million for the current quarter from $9.70 million for the preceding quarter and increased 16% from $8.78 million for the first fiscal quarter one year ago.

Net interest income increased 10% to $7.71 million for the first quarter of fiscal 2016, from $7.03 million for the preceding quarter and increased 15% from $6.70 million for the first fiscal quarter one year ago.  Net interest income improved in the current quarter primarily due to the increased level of average loans and average interest-earning assets and the collection of $475,000 of non-accrual interest.  The net interest margin for the current quarter improved to 4.00% from 3.76% for the preceding quarter and from 3.88% for the comparable quarter one year ago.  The $475,000 in non-accrual interest collected was related to the payoff of three non-accrual loans.  The net interest margin for the comparable quarter one year ago was increased by approximately seven basis points due to the collection of $125,000 in non-accrual interest during that quarter.

Non-interest income increased 19% to $2.52 million for the quarter ended December 31, 2015, from $2.12 million for the comparable quarter one year ago and decreased 5% from $2.66 million in the preceding quarter.  The decrease in non-interest income compared to the preceding quarter was primarily due to a $118,000 decrease in gain on sale of loans and smaller decreases in several other categories. The decrease in gain on sale of loans was primarily due to a decrease in the dollar volume of fixed-rate one- to four-family loans sold during the current quarter.

Total operating (non-interest) expenses decreased 3% to $6.48 million for the first fiscal quarter from $6.69 million for the preceding quarter and increased 3% from $6.27 million for the like quarter one year ago.  The decreased expenses for the current quarter compared to the preceding quarter were primarily due to decreases in the following expense line items: professional fees, loan administration and foreclosure, OREO and other repossessed assets, premises and equipment, advertising and FDIC insurance.  The decreases in professional fees and loan administration and foreclosure expenses were primarily due to the recovery of $80,000 in legal and foreclosure related expenses on three non-accrual loans that paid off during the quarter. These decreases were partially offset by an increase in salaries and employee benefit expense, which was primarily the result of annual salary adjustments and the hiring of addition lenders.  

The provision for income taxes decreased $343,000 to $1.22 million for the quarter ended December 31, 2015, from $1.56 million for the preceding quarter.  The tax provision was higher for the prior quarter primarily due to higher income related to the recognition of a negative loan loss provision of $1.53 million during that quarter.  The effective tax rate was 32.6% for the current quarter compared to 34.6% for the quarter ended September 30, 2015. 

Balance Sheet Management

Total assets increased $21.6 million, or 3%, to $837.4 million at December 31, 2015, from $815.8 million at September 30, 2015.  The increase was primarily due to an $18.5 million increase in net loans receivable, a $2.3 million increase in CDs held for investment and a $1.3 million increase in cash and cash equivalents.  The increase in total assets was funded primarily by an $18.9 million increase in total deposits.

Liquidity as measured by cash and cash equivalents, CDs held for investment and available for sale investments securities was 19.5% of total liabilities at December 31, 2015, compared to 19.6% at September 30, 2015, and 16.5% one year ago. 

Net loans receivable increased $18.5 million, or 3%, to $625.8 million at December 31, 2015, from $607.3 million at September 30, 2015.  The increase was primarily due to a $7.1 million increase in commercial business loans, a $5.9 million increase in construction and land development loans, a $4.3 million increase in commercial real estate loans, a $1.6 million increase in consumer loans and a $5.9 million decrease in the undisbursed portion of construction loans in process.  These increases to net loans receivable were partially offset by a $4.3 million decrease in multi-family loans, a $1.2 million decrease in one- to-four family loans, and an $882,000 decrease in land loans. 

LOAN PORTFOLIO

($ in thousands)	December 31, 2015								September 30, 2015								December 31, 2014
	Amount				Percent				Amount				Percent				Amount				Percent
Mortgage loans:
One- to four-family	$	118,507				17	%		$	119,715				18	%		$	103,021				17	%
Multi-family		47,980				7				52,322				8				45,423				7
Commercial		295,595				43				291,216				43				295,113				48
Construction and land
Development		116,843				17				110,920				16				69,235				11
Land		25,258				4				26,140				4				28,633				5
Total mortgage loans		604,183				88				600,313				89				541,425				88
Consumer loans:
Home equity and second
Mortgage		36,057				5				34,157				5				35,754				6
Other		4,387				1				4,669				1				4,453				1
Total consumer loans		40,444				6				38,826				6				40,207				7
Commercial business loans		40,886				6				33,763				5				32,957				5
Total loans		685,513				100	%			672,902				100	%			614,589				100	%
Less:
Undisbursed portion of
construction loans in
Process		(47,596	)							(53,457	)							(28,832	)
Deferred loan origination
Fees		(2,183	)							(2,193	)							(1,840	)
Allowance for loan losses		(9,889	)							(9,924	)							(10,322	)
Total loans receivable, net	$	625,845							$	607,328							$	573,595

CONSTRUCTION AND LAND DEVELOPMENT LOAN COMPOSITION

	December 31, 2015								September 30, 2015								December 31, 2014
($ in thousands)	Amount				Percent  of Loan Portfolio				Amount				Percent of Loan Portfolio				Amount				Percent   of Loan Portfolio
Custom and owner / builder	$	67,861				10	%		$	62,954				9	%		$	62,548				10	%
Speculative one- to four-
family		6,199				1				6,668				1				2,287				--
Commercial real estate		22,213				3				20,728				3				1,560				--
Multi-family (including
condominium)		20,570				3				20,570				3				2,840				1
Land development		--				--				--				--				--				--
Total construction loans	$	116,843				17	%		$	110,920				16	%		$	69,235				11	%

Timberland originated $53.8 million in loans during the quarter ended December 31, 2015, compared to $66.0 million for the preceding quarter and $50.1 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 December 31, 2015, fixed-rate one- to four-family mortgage loans totaling $12.6 million were sold compared to $16.5 million for the preceding quarter and $8.2 million for the comparable quarter one year ago.

Timberland’s investment securities decreased slightly during the quarter to $9.2 million at December 31, 2015, from $9.3 million at September 30, 2015, primarily due to scheduled amortization.

DEPOSIT BREAKDOWN ($ in thousands)
		December 31, 2015								September 30, 2015								December 31, 2014
		Amount				Percent				Amount				Percent				Amount				Percent
Non-interest bearing		$	142,279				20	%		$	141,388				21	%		$	105,941				17	%
N.O.W. checking			186,003				27				180,628				27				161,762				26
Savings			110,475				16				110,315				16				98,260				16
Money market			99,061				14				84,026				12				88,727				14
Money market – brokered			7,153				1				8,450				1				401				--
Certificates of deposit under $100			83,618				12				84,824				12				94,222				15
Certificates of deposit $100 and over			65,984				9				66,085				10				65,480				11
Certificates of deposit – brokered			3,197				1				3,196				1				3,193				1
Total deposits		$	697,770				100	%		$	678,912				100	%		$	617,986				100	%

Total deposits increased $18.9 million, or 3%, to $697.8 million at December 31, 2015, from $678.9 million at September 30, 2015.  The increase was primarily due to a $13.7 million increase in money market account balances, a $5.3 million increase in N.O.W. checking account balances and an $891,000 increase in non-interest bearing account balances.  These increases were partially offset by a $1.3 million decrease in certificates of deposit account balances.  

Shareholders’ Equity

Total shareholders’ equity increased $1.86 million to $91.05 million at December 31, 2015, from $89.19 million at September 30, 2015.  The increase in shareholders’ equity was primarily due to net income of $2.52 million for the quarter, which was partially offset by dividend payments of $839,000 to shareholders.  Book value per share increased to $13.02 and tangible book value per share increased to $12.21 at December 31, 2015.

Timberland did not repurchase any shares of its common stock during the quarter and had 287,893 shares remaining to be purchased on its existing stock repurchase plan at December 31, 2015.

Capital Ratios and Asset Quality

Timberland Bancorp remains well capitalized with a total risk-based capital ratio of 15.17%, a Tier 1 leverage capital ratio of 10.56% and a tangible capital to tangible assets ratio of 10.27% at December 31, 2015.

There was no provision for loan losses made for the quarter ended December 31, 2015, compared to a $1.53 million recapture of loan losses (which added approximately $0.14 to diluted earnings per share) for the quarter ended September 30, 2015.  Net charge-offs for the current quarter were $35,000 compared to a net recovery of $982,000 for the quarter ended September 30, 2015 and net charge-offs of $105,000 for the quarter ended December 31, 2014.  The non-performing assets to total assets ratio improved to 1.63% at December 31, 2015 from 1.84% three months earlier and 2.68% one year ago.  The allowance for loan losses was 1.56% of loans receivable at December 31, 2015.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 24% to $5.5 million at December 31, 2015, from $7.2 million at September 30, 2015 and decreased 57% from $12.8 million one year ago.  Non-accrual loans decreased 20% to $4.8 million at December 31, 2015, from $6.0 million at September 30, 2015 and decreased 55% from $10.8 million at December 31, 2014. 

NON-ACCRUAL LOANS	December 31, 2015						September 30, 2015						December 31, 2014
($ in thousands)	Amount				Quantity		Amount				Quantity		Amount				Quantity
Mortgage loans:
One- to four-family	$	2,694			17		$	2,368			16		$	4,296			20
Multi-family		--			--			760			1			--			--
Commercial		1,184			3			1,016			2			1,439			1
Construction		--			--			--			--			156			1
Land		546			4			1,558			5			4,357			6
Total mortgage loans		4,424			24			5,702			24			10,248			28
Consumer loans:
Home equity and second
mortgage		300			4			303			4			564			8
Other		34			1			35			1			--			--
Total consumer loans		334			5			338			5			564			8
Commercial business loans		73			1			--			--			--			--
Total loans	$	4,831			30		$	6,040			29		$	10,812			36

           
Other real estate owned (“OREO”) and other repossessed assets decreased 7% to $7.7 million at December 31, 2015, from $8.2 million at December 31, 2014 and decreased 2% from $7.9 million at September 30, 2015.  At December 31, 2015, the OREO and other repossessed asset portfolio consisted of 31 individual real estate properties and one mobile home.  During the quarter ended December 31, 2015, three OREO properties totaling $170,000 were sold for a net loss of $3,000.
               

OREO and OTHER REPOSSESSED ASSETS	December 31, 2015						September 30, 2015						December 31, 2014
($ in thousands)	Amount				Quantity		Amount				Quantity		Amount				Quantity
One- to four-family	$	2,763			10		$	2,868			11		$	1,976			9
Multi-family		--			--			--			--			142			1
Commercial		1,449			3			1,568			3			2,190			4
Land		3,388			18			3,351			20			3,912			23
Mobile home		67			1			67			1			--			--
Total	$	7,667			32		$	7,854			35		$	8,220			37

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.

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME			Three Months Ended
($ in thousands, except per share amounts)			Dec. 31,				Sept. 30,				Dec. 31,
(unaudited)				2015				2015				2014
	Interest and dividend income
	Loans receivable		$	8,429			$	7,780			$	7,509
	Investment securities			69				70				65
	Dividends from mutual funds and Federal Home Loan Bank (“FHLB”) stock			22				10				7
	Interest bearing deposits in banks			171				148				105
	Total interest and dividend income			8,691				8,008				7,686
	Interest expense
	Deposits			504				508				509
	FHLB advances			477				475				474
	Total interest expense			981				983				983
	Net interest income			7,710				7,025				6,703
	Recapture of loan losses			--				(1,525	)			--
	Net interest income after recapture of loan losses			7,710				8,550				6,703
	Non-interest income
	OTTI on investment securities, net			--				(8	)			--
	Gain on sale of investment securities, net			--				--				45
	Service charges on deposits			972				980				885
	Gain on sale of loans, net			394				512				236
	Bank owned life insurance (“BOLI”) net earnings			135				137				136
	ATM and debit card interchange transaction fees			700				699				630
	Other			317				342				191
	Total non-interest income, net			2,518				2,662				2,123
	Non-interest expense
	Salaries and employee benefits			3,471				3,324				3,396
	Premises and equipment			760				817				725
	Advertising			205				249				188
	OREO and other repossessed assets, net			244				301				76
	ATM and debit card processing			322				292				338
	Postage and courier			100				107				104
	State and local taxes			132				135				118
	Professional fees			130				223				176
	FDIC insurance			107				144				160
	Other insurance			32				33				37
	Loan administration and foreclosure			29				62				43
	Data processing and telecommunications			450				468				379
	Deposit operations			172				197				175
	Other			325				341				359
	Total non-interest expense			6,479				6,693				6,274
			Three Months Ended
			Dec. 31,				Sept. 30,				Dec. 31,
				2015				2015				2014
	Income before income taxes		$	3,749			$	4,519			$	2,552
	Provision for income taxes			1,221				1,564				825
	Net income		$	2,528			$	2,955			$	1,727
	Net income per common share:
	Basic		$	0.37			$	0.43			$	0.25
	Diluted			0.36				0.42				0.24
	Weighted average common shares outstanding:
	Basic			6,869,726				6,896,941				6,891,952
	Diluted			7,083,864				7,069,880				7,063,540

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts) (unaudited)			Dec. 31,				Sept. 30,				Dec. 31,
				2015				2015				2014
Assets
Cash and due from financial institutions			$	12,481			$	14,014			$	12,583
Interest-bearing deposits in banks				81,119				78,275				57,772
	Total cash and cash equivalents			93,600				92,289				70,355
Certificates of deposit (“CDs”) held for investment, at cost				50,865				48,611				37,997
Investment securities:
	Held to maturity, at amortized cost			7,824				7,913				5,201
	Available for sale, at fair value			1,362				1,392				1,494
FHLB stock				2,699				2,699				5,191
Loans receivable				634,430				614,201				582,722
Loans held for sale				1,304				3,051				1,195
Less: Allowance for loan losses				(9,889	)			(9,924	)			(10,322	)
	Net loans receivable			625,845				607,328				573,595
Premises and equipment, net				16,589				16,854				17,574
OREO and other repossessed assets, net				7,667				7,854				8,220
BOLI				18,306				18,170				17,769
Accrued interest receivable				2,234				2,170				1,967
Goodwill				5,650				5,650				5,650
Mortgage servicing rights, net				1,475				1,478				1,549
Other assets				3,263				3,407				3,355
	Total assets		$	837,379			$	815,815			$	749,917
Liabilities and shareholders’ equity
Deposits: Non-interest-bearing demand			$	142,279			$	141,388			$	105,941
Deposits: Interest-bearing				555,491				537,524				512,045
	Total deposits			697,770				678,912				617,986
FHLB advances				45,000				45,000				45,000
Other liabilities and accrued expenses				3,558				2,716				2,664
	Total liabilities			746,328				726,628				665,650
Shareholders’ equity
Common stock, $.01 par value; 50,000,000 shares authorized;
7,052,336 shares issued and outstanding – December 31, 2014
6,988,848 shares issued and outstanding – September 30, 2015
6,994,148 shares issued and outstanding – December 31, 2015				10,402				10,293				10,846
Unearned shares issued to Employee Stock Ownership Plan (“ESOP”)				(859	)			(926	)			(1,124	)
Retained earnings				81,823				80,133				74,909
Accumulated other comprehensive loss				(315	)			(313	)			(364	)
	Total shareholders’ equity			91,051				89,187				84,267
	Total liabilities and shareholders’ equity		$	837,379			$	815,815			$	749,917

KEY FINANCIAL RATIOS AND DATA	Three Months Ended
($ in thousands, except per share amounts) (unaudited)		Dec. 31,				Sept. 30,				Dec. 31,
			2015				2015				2014
PERFORMANCE RATIOS:
Return on average assets (a)			1.22	%			1.47	%			0.92	%
Return on average equity (a)			11.26	%			13.47	%			8.29	%
Net interest margin (a)			4.00	%			3.76	%			3.88	%
Efficiency ratio			63.35	%			69.09	%			71.09	%
		Dec. 31,				Sept. 30,				Dec. 31,
			2015				2015				2014
ASSET QUALITY RATIOS AND DATA:
Non-accrual loans		$	4,831			$	6,040			$	10,812
Loans past due 90 days and still accruing			285				151				--
Non-performing investment securities			891				932				1,057
OREO and other repossessed assets			7,667				7,854				8,220
Total non-performing assets (b)		$	13,674			$	14,977			$	20,089
Non-performing assets to total assets (b)			1.63	%			1.84	%			2.68	%
Net charge-offs (recoveries) during quarter		$	35			$	(982	)		$	105
Allowance for loan losses to non-accrual loans			205	%			164	%			95	%
Allowance for loan losses to loans receivable (c)			1.56	%			1.61	%			1.77	%
Troubled debt restructured loans on accrual status (d)		$	7,971			$	12,484			$	12,337
CAPITAL RATIOS:
Tier 1 leverage capital			10.56	%			10.64	%			10.72	%
Tier 1 risk-based capital			13.91	%			13.91	%			13.86	%
Total risk-based capital			15.17	%			15.16	%			15.12	%
Tangible capital to tangible assets (e)			10.27	%			10.31	%			10.56	%
BOOK VALUES:
Book value per common share		$	13.02			$	12.76			$	11.95
Tangible book value per common share (e)			12.21				11.95				11.15

__________________________________________________
(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.
(c)  Includes loans held for sale and is before the allowance for loan losses.
(d)  Does not include troubled debt restructured loans totaling $1,229, $1,233 and $2,034 reported as non-accrual loans at December 31, 2015, September 30, 2015 and December 31, 2014, respectively.
(e)  Calculation subtracts goodwill and core deposit intangible from the equity component and from assets.                                                                                                                                                                                                                         

AVERAGE BALANCES, YIELDS AND RATES - QUARTERLY
($ in thousands)
(unaudited)
	For the three months ended
	December 31, 2015								September 30, 2015								December 31, 2014
	Average				Average				Average				Average				Average				Average
	Balance				Yield/Rate				Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans	$	625,558				5.39	%		$	612,383				5.08	%		$	581,820				5.16	%
Investment securities and FHLB stock		11,955				3.04	%			12,062				2.63	%			13,266				2.15	%
Other interest-bearing assets		133,643				0.50	%			123,129				0.48	%			96,326				0.43	%
Total interest-bearing assets		771,156				4.51	%			747,574				4.28	%			691,412				4.45	%
Other assets		58,204								57,808								59,922
Total assets	$	829,360							$	805,382							$	751,334
Liabilities and Shareholders' Equity
N.O.W. checking accounts	$	179,611				0.25	%		$	171,764				0.27	%		$	159,498				0.28	%
Money market accounts		104,377				0.30	%			101,204				0.31	%			90,263				0.27	%
Savings accounts		110,356				0.05	%			107,250				0.05	%			96,653				0.05	%
Certificates of deposit accounts		153,866				0.76	%			154,856				0.76	%			163,016				0.79	%
Total interest-bearing deposits		548,210				0.36	%			535,074				0.38	%			509,430				0.40	%
FHLB advances		45,000				4.21	%			45,000				4.19	%			45,000				4.18	%
Total interest-bearing liabilities		593,210				0.66	%			580,074				0.67	%			554,430				0.70	%
Non-interest-bearing deposits		142,518								133,657								110,976
Other liabilities		3,788								3,883								2,629
Shareholders' equity		89,844								87,768								83,299
Total liabilities and shareholders' equity	$	829,360							$	805,382							$	751,334
Interest rate spread						3.85	%							3.61	%							3.75	%
Net interest margin (1)						4.00	%							3.76	%							3.88	%
Average interest-bearing assets to
average interest-bearing liablilities		130.00	%							128.88	%							124.71	%

_______________________________________
(1)Net interest margin = annualized net interest income / average interest-bearing assets 

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