• Earnings Per Share Increases 22% to $1.05 for the First Six Months of Fiscal 2018
• Total Assets Reach $1 Billion
• Announces $0.13 Regular Dividend and $0.10 Special Dividend

HOQUIAM, Wash., April 24, 2018 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) (“Timberland” or “the Company”) today reported net income increased 36% to $4.27 million, or $0.57 per diluted common share, for its second fiscal quarter ended March 31, 2018, from $3.13 million, or $0.42 per diluted common share, for the quarter ended March 31, 2017, and increased 18% from $3.61 million, or $0.48 per diluted common share, for the preceding quarter ended December 31, 2017.

For the first six months of fiscal 2018, Timberland earned $7.88 million, or $1.05 per diluted common share, an increase in net income of 26% and an increase in earnings per diluted common share (“EPS”) of 22% from $6.28 million, or $0.86 per diluted common share, reported for the first six months of fiscal 2017.

Timberland’s Board of Directors also declared a quarterly cash dividend to shareholders of $0.13 per common share and a special one-time dividend of $0.10 per common share payable on May 25, 2018, to shareholders of record on May 11, 2018. 

“We have continued to emphasize our operations along Western Washington’s economically important I-5 corridor and, correspondingly, have continued to significantly and consistently improve the Company’s financial metrics year over year,” said Michael Sand, President and CEO.  “We have expended considerable efforts developing and profitably growing our franchise within our primary markets and have specifically focused on increasing core deposits.  Particular attention has been devoted to growing transaction account balances, and we have successfully expanded this segment of our funding base.  Strong economic conditions persist in the northwest markets we serve, and we see ample opportunity for the continued profitable growth of our franchise.”

“Additionally, based on a number of factors, including the Company’s sustained strong financial performance, Timberland’s Board of Directors voted to pay a one-time special dividend of $0.10 per share in addition to the regular $0.13 per share quarterly dividend.  This special dividend marks the third special dividend the Company has paid in the past three years.”

Second Fiscal Quarter 2018 Earnings and Balance Sheet Highlights (at or for the period ended March 31, 2018, compared to December 31, 2017, or March 31, 2017):

   Earnings Highlights:

• Net income increased 36% to $4.27 million from $3.13 million for the comparable quarter one year ago and increased 18% from $3.61 million for the preceding quarter;
• EPS for the first six months of fiscal 2018 increased 22% to $1.05 from $0.86 for the first six months of fiscal 2017;
• Return on average equity and return on average assets for the current quarter increased to 14.79% and 1.75%, respectively;
• Operating revenue increased 13% from the comparable quarter one year ago;
• Net interest margin improved to 4.19% from 3.88% for the comparable quarter one year ago; and
• Efficiency ratio improved to 56.83% for the current quarter from 60.67% for the comparable quarter one year ago.

   Balance Sheet Highlights:

• Total assets increased 6% year-over-year reaching $1 billion;
• Increased net loans receivable 5% year-over-year;
• Increased total deposits 9% year-over-year;
• Decreased non-performing assets 18% year-over-year and 16% from the prior quarter; and
• Increased book and tangible book (non-GAAP) values per common share to $15.95 and $15.18, respectively, at March 31, 2018.

Operating Results

Operating revenue (net interest income before the 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 (recoveries) on investment securities) increased 12% for the current quarter to $12.69 million from $11.30 million for the comparable quarter one year ago and increased 1% from $12.55 million for the preceding quarter.  Operating revenue increased 11% to $25.24 million for the first six months of fiscal 2018 from $22.83 million for the comparable period one year ago.

Net interest income for the current quarter increased 14% to $9.62 million from $8.45 million for the comparable quarter one year ago and increased 2% from $9.43 million for the preceding quarter.  The increase in net interest income compared to the preceding quarter was primarily due to an increase in average total interest-earning assets and an increase in the yield earned on average total interest-earning assets and was partially offset by an increase in the cost of interest-bearing deposits.  The increase in net interest income relative to the comparable quarter one year ago was also partially due to paying off FHLB borrowings and eliminating the associated interest expense.  For the first six months of fiscal 2018 net interest income increased 14% to $19.06 million from $16.76 million for the first six months of fiscal 2017.

The net interest margin (“NIM”) for the current quarter improved to 4.19% from 3.88% for the comparable quarter one year ago and matched the 4.19% recorded for the preceding quarter.  The NIM for the current quarter was increased by approximately six basis points due to the collection of a $134,000 loan prepayment penalty and the collection of $2,000 of non-accrual interest.  The NIM for the comparable quarter one year ago was increased by approximately nine basis points due to the collection of $204,000 of non-accrual interest and the NIM for the preceding quarter was increased by approximately two basis points due to the collection of $45,000 of non-accrual interest. Timberland’s net interest margin for the first six months of fiscal 2018 improved to 4.19% from 3.90% for the first six months of fiscal 2017. 

Non-interest income increased 8% to $3.08 million for the current quarter from $2.85 million for the comparable quarter one year ago and decreased 2% from $3.14 million for the preceding quarter.  The decreased non-interest income for the current quarter compared to the preceding quarter was primarily due to a decrease in service charges on deposits and a decrease in gain on sales of loans, which was partially offset by an increase in ATM and debit card interchange transaction fees.  Fiscal year-to-date non-interest income increased 2% to $6.22 million from $6.07 million for the first six months of fiscal 2017.

Total operating expenses for the current quarter increased 5% to $7.22 million from $6.86 million for the comparable quarter one year ago and increased 1% from $7.18 million for the preceding quarter.  The increased expenses for the current quarter compared to the preceding quarter were primarily due to an increase in salaries and employee benefits and smaller increases in several other categories.  These increases were partially offset by a $113,000 gain on the sale of excess land.  The efficiency ratio for the current quarter improved to 56.83% compared to 57.08% for the preceding quarter and 60.67% for the comparable quarter one year ago.  Fiscal year-to-date operating expenses increased 5% to $14.40 million from $13.67 million for the first six months of fiscal 2017.  The efficiency ratio improved for the first six months of fiscal 2018 to 56.96% from 59.86% for the first six months of fiscal 2017.

The provision for income taxes decreased $565,000 to $1.22 million from $1.78 million for the preceding quarter and was impacted by the Tax Cuts and Jobs Act Legislation which was signed into law on December 22, 2017.  As a result of the new legislation (which decreases the federal corporate income tax rate to 21.0% from 35.0%), Timberland recorded a one-time income tax expense of $548,000 in conjunction with writing down its net deferred tax asset (“DTA”) during the quarter ended December 31, 2017.  Since Timberland is a September 30^th fiscal year-end corporation, it will use a blended tax rate of 24.5% for the fiscal year ending September 30, 2018, and a 21.0% rate thereafter.  Timberland’s effective tax rate for the quarter ended March 31, 2018, was 22.2%.

Balance Sheet Management

Total assets increased $7.31 million, or 1%, to $1.00 billion at March 31, 2018, from $993.90 million at December 31, 2017. The increase was primarily due to a $3.87 million increase in net loans receivable and loans held for sale, and a $3.20 million increase in total cash and cash equivalents. These increases were primarily funded by increased deposits.

Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment and available for sale investment securities, was 25.3% of total liabilities at March 31, 2018, compared to 25.1% at December 31, 2017, and 24.0% one year ago. 

Net loans receivable increased $3.30 million, or 1%, to $708.57 million at March 31, 2018, from $705.27 million at December 31, 2017.  The increase was primarily due to an $8.76 million increase in commercial real estate loans, a $3.62 million increase in speculative one- to four-family loans, a $3.17 million increase in commercial construction loans, a $2.95 million increase in land development loans, a $1.34 million decrease in the undisbursed portion of construction loans in process and smaller increases in several other categories.  These increases were partially offset by a $6.21 million decrease in multi-family loans, a $4.14 million decrease in one- to four-family construction loans, a $4.11 million decrease in one- to four-family mortgage loans and smaller decreases in several other categories. 

LOAN PORTFOLIO

($ in thousands)	March 31, 2018							December 31, 2017								March 31, 2017
	Amount				Percent			Amount					Percent			Amount				Percent
Mortgage loans:
One- to four-family (a)	$	112,862			14	%		$	116,976				15	%		$	122,889			16	%
Multi-family		55,157			7				61,366				8				63,181			8
Commercial		341,845			43				333,085				42				325,120			44
Construction - custom and
owner/builder		119,230			15				123,365				15				99,304			13
Construction - speculative   one-to four-family		10,876			1				7,253				1				5,311			1
Construction - commercial		25,166			3				22,000				3				10,762			2
Construction - multi-family		24,812			3				24,601				3				11,057			2
Construction – land
development		2,950			--				--				--				--			--
Land		20,602			3				21,122				2				25,866			3
Total mortgage loans		713,500			89				709,768				89				663,490			89
Consumer loans:
Home equity and second
mortgage		38,124			5				38,975				5				38,024			5
Other		3,646			1				4,050				--				3,527			--
Total consumer loans		41,770			6				43,025				5				41,551			5
Commercial business loans (b)		43,465			5				43,993				6				42,603			6
Total loans		798,735			100	%			796,786				100	%			747,644			100	%
Less:
Undisbursed portion of
construction loans in
process		(78,108	)						(79,449	)							(59,724	)
Deferred loan origination
fees		(2,515	)						(2,504	)							(2,251	)
Allowance for loan losses		(9,544	)						(9,565	)							(9,590	)
Total loans receivable, net	$	708,568						$	705,268							$	676,079

_______________________

1. Does not include one- to four-family loans held for sale totaling $3,981, $3,236 and $5,542 at March 31, 2018, December 31, 2017, and March 31, 2017, respectively. 
2. Does not include commercial business loans held for sale totaling $171 and $256 at December 31, 2017, and March 31, 2017, respectively. 

Timberland originated $78.99 million in loans during the quarter ended March 31, 2018, compared to $79.50 million for the comparable quarter one year ago and $82.51 million for the preceding quarter.  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.  Timberland also (on a much smaller volume) periodically sells the guaranteed portion of U.S. Small Business Administration (“SBA”) loans.  During the second quarter of fiscal 2018 fixed-rate one- to four-family mortgage loans and SBA loans totaling $15.31 million were sold compared to $15.01 million for the comparable quarter one year ago and $15.91 million for the preceding quarter.
                                            
Timberland’s investment securities and other investments increased $965,000, or 9%, to $12.26 million at March 31, 2018, from $11.30 million at December 31, 2017, primarily due to the purchase of a $1.11 million agency investment security.

DEPOSIT BREAKDOWN ($ in thousands)
		March 31, 2018						December 31, 2017						March 31, 2017
		Amount			Percent			Amount			Percent			Amount			Percent
Non-interest-bearing demand		$	222,302		25	%		$	210,108		24	%		$	186,239		23	%
NOW checking			227,075		26				218,422		25				214,488		27
Savings			147,750		17				142,660		16				138,518		17
Money market			130,844		15				156,665		18				118,791		15
Money market – brokered			10,363		1				10,796		1				8,665		1
Certificates of deposit under $250			121,157		14				118,017		14				123,671		15
Certificates of deposit $250 and over			17,720		2				16,208		2				15,268		2
Certificates of deposit – brokered			3,200		--				3,198		--				3,212		--
Total deposits		$	880,411		100	%		$	876,074		100	%		$	808,852		100	%

Total deposits increased $4.34 million, or 1%, to $880.41 million at March 31, 2018, from $876.07 million at December 31, 2017.  This increase was primarily due to a $13.19 million increase in non-interest-bearing demand account balances, an $8.65 million increase in NOW checking account balances, a $5.09 million increase in savings account balances and a $4.65 million increase in certificates of deposit account balances.  These increases were partially offset by a $25.82 million decrease in money market account balances.  The decrease in money market account balances was primarily due to a commercial customer withdrawing funds in January 2018 that were initially deposited in December 2017.

Shareholders’ Equity

Total shareholders’ equity increased $3.73 million to $117.84 million at March 31, 2018, from $114.11 million at December 31, 2017.  The increase in shareholders’ equity was primarily due to net income of $4.27 million for the quarter, which was partially offset by dividend payments to shareholders of $959,000. 

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 18.01% and a Tier 1 leverage capital ratio of 11.66% at March 31, 2018.

No provision for loan losses was made for the quarters ended March 31, 2018, and December 31, 2017.  Timberland recorded a $250,000 loan loss reserve recapture during the comparable quarter one year ago.  Net charge-offs totaled $21,000 for the current quarter compared to a net recovery of $12,000 for the preceding quarter and net charge-offs of $3,000 for the comparable quarter one year ago.  The allowance for loan losses was 1.33% of loans receivable at March 31, 2018, compared to 1.34% at December 31, 2017, and 1.40% at March 31, 2017.

Total delinquent loans (past due 30 days or more) and non-accrual loans increased 5% to $3.29 million at March 31, 2018, from $3.12 million at December 31, 2017, and increased 23% from $2.66 million one year ago.  Non-accrual loans decreased 9% to $1.93 million at March 31, 2018, from $2.11 million at December 31, 2017, and increased 2% from $1.89 million one year ago.

NON-ACCRUAL LOANS	March 31, 2018					December 31, 2017						March 31, 2017
($ in thousands)	Amount			Quantity		Amount			Quantity			Amount			Quantity
Mortgage loans:
One- to four-family	$	801		6		$	947		8			$	820		6
Commercial		370		3			402		3				314		1
Land		395		4			395		4				296		2
Total mortgage loans		1,566		13			1,744		15				1,430		9
Consumer loans:
Home equity and second
mortgage		185		4			188		4				383		5
Other		--		--			--		--				27		1
Total consumer loans		185		4			188		4				410		6
Commercial business		181		2			181		2				54		2
Total loans	$	1,932		19		$	2,113		21			$	1,894		17

           
OREO and other repossessed assets decreased 23% to $2.22 million at March 31, 2018, from $2.89 million at December 31, 2017, and decreased 26% from $3.01 million at March 31, 2017.  At March 31, 2018, the OREO and other repossessed asset portfolio consisted of 13 individual real estate properties.  During the quarter ended March 31, 2018, one OREO property and one recreational vehicle were sold for a net gain of $81,000.

OREO and OTHER REPOSSESSED ASSETS	March 31, 2018					December 31, 2017					March 31, 2017
($ in thousands)	Amount			Quantity		Amount			Quantity		Amount			Quantity
One- to four-family	$	--		--		$	516		1		$	411		2
Commercial		287		1			332		1			637		3
Land		1,934		12			2,026		12			1,957		12
Consumer		--		--			13		1			--		--
Total	$	2,221		13		$	2,887		15		$	3,005		17

               

The non-performing assets to total assets ratio improved to 0.46% at March 31, 2018, from 0.55% at December 31, 2017, and 0.60% one year ago.

Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures.  Timberland believes that certain non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with GAAP results as reported.

Financial measures that exclude intangible assets are non-GAAP measures.  To provide investors with a broader understanding of capital adequacy, Timberland provides non-GAAP financial measures for tangible common equity, along with the GAAP measure.  Tangible common equity is calculated as shareholders’ equity less goodwill.  In addition, tangible assets equal total assets less goodwill.

The following table provides a reconciliation of ending shareholders’ equity (GAAP) to ending tangible shareholders’ equity (non-GAAP), and ending total assets (GAAP) to ending tangible assets (non-GAAP).

($ in thousands)		March 31, 2018				December 31, 2017				March 31, 2017
Shareholders’ equity		$	117,843			$	114,112			$	104,829
Less goodwill			(5,650	)			(5,650	)			(5,650	)
Tangible common equity		$	112,193			$	108,462			$	99,179
Total assets		$	1,001,201			$	993,895			$	946,682
Less goodwill			(5,650	)			(5,650	)			(5,650	)
Tangible assets		$	995,551			$	988,245			$	941,032

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 2018 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)		March 31,				Dec. 31,			March 31,
(unaudited)			2018			2017				2017
	Interest and dividend income
	Loans receivable	$	9,484			$	9,328		$	8,840
	Investment securities		39				58			68
	Dividends from mutual funds and FHLB stock		26				26			12
	Interest bearing deposits in banks		741				623			379
	Total interest and dividend income		10,290				10,035			9,299
	Interest expense
	Deposits		666				601			545
	FHLB borrowings		--				--			302
	Total interest expense		666				601			847
	Net interest income		9,624				9,434			8,452
	Recapture of loan losses		--				--			(250	)
	Net interest income after recapture of loan losses		9,624				9,434			8,702
	Non-interest income
	Service charges on deposits		1,132				1,179			1,090
	ATM and debit card interchange transaction fees		883				845			793
	Gain on sale of loans, net		470				521			406
	Bank owned life insurance (“BOLI”) net earnings		137				136			136
	Servicing income on loans sold		117				116			99
	Recoveries on investment securities, net		13				22			--
	Other		330				318			327
	Total non-interest income		3,082				3,137			2,851
	Non-interest expense
	Salaries and employee benefits		4,001				3,950			3,755
	Premises and equipment		799				768			776
	Gain on disposition of premises and equipment, net		(113	)			--			--
	Advertising		176				209			167
	OREO and other repossessed assets, net		91				113			(12	)
	ATM and debit card processing		318				331			350
	Postage and courier		131				105			120
	State and local taxes		168				161			152
	Professional fees		243				218			199
	FDIC insurance		75				65			107
	Loan administration and foreclosure		92				79			(1	)
	Data processing and telecommunications		495				467			464
	Deposit operations		252				278			240
	Other, net		493				432			540
	Total non-interest expense, net		7,221				7,176			6,857
	Income before income taxes		5,485				5,395			4,696
	Provision for income taxes		1,216				1,781			1,568
	Net income	$	4,269			$	3,614		$	3,128
	Net income per common share:
	Basic	$	0.58			$	0.49		$	0.44
	Diluted		0.57				0.48			0.42
	Weighted average common shares outstanding:
	Basic		7,328,127				7,312,531			7,135,083
	Diluted		7,512,058				7,508,169			7,379,353

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME		Six Months Ended
($ in thousands, except per share amounts)		March 31,				March 31,
(unaudited)			2018				2017
	Interest and dividend income
	Loans receivable	$	18,812			$	17,628
	Investment securities		96				138
	Dividends from mutual funds and FHLB stock		52				37
	Interest bearing deposits in banks		1,364				660
	Total interest and dividend income		20,324				18,463
	Interest expense
	Deposits		1,266				1,088
	FHLB borrowings		--				610
	Total interest expense		1,266				1,698
	Net interest income		19,058				16,765
	Recapture of loan losses		--				(250	)
	Net interest income after recapture of loan losses		19,058				17,015
	Non-interest income
	Service charges on deposits		2,310				2,195
	ATM and debit card interchange transaction fees		1,727				1,593
	Gain on sale of loans, net		992				1,095
	BOLI net earnings		273				274
	Servicing income on loans sold		233				196
	Recoveries on investment securities, net		36				--
	Other		648				715
	Total non-interest income		6,219				6,068
	Non-interest expense
	Salaries and employee benefits		7,950				7,435
	Premises and equipment		1,567				1,531
	Gain on disposition of premises and equipment, net		(113	)			--
	Advertising		386				329
	OREO and other repossessed assets, net		204				18
	ATM and debit card processing		648				662
	Postage and courier		237				214
	State and local taxes		329				308
	Professional fees		460				399
	FDIC insurance		141				221
	Loan administration and foreclosure		171				93
	Data processing and telecommunications		962				914
	Deposit operations		530				549
	Other, net		925				995
	Total non-interest expense, net		14,397				13,668
	Income before income taxes	$	10,880			$	9,415
	Provision for income taxes		2,997				3,140
	Net income	$	7,883			$	6,275
	Net income per common share:
	Basic	$	1.08			$	0.90
	Diluted		1.05				0.86
	Weighted average common shares outstanding:
	Basic		7,320,243				6,997,420
	Diluted		7,510,092				7,306,644

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts) (unaudited)			March 31,				Dec. 31,				March 31,
				2018				2017				2017
Assets
Cash and due from financial institutions			$	15,508			$	16,952			$	17,060
Interest-bearing deposits in banks				153,897				149,255				130,980
	Total cash and cash equivalents			169,405				166,207				148,040
Certificates of deposit (“CDs”) held for investment, at cost				52,938				53,528				52,934
Investment securities:
	Held to maturity, at amortized cost			8,070				7,077				7,326
	Available for sale, at fair value			1,193				1,221				1,272
FHLB stock				1,107				1,107				2,307
Other investments, at cost				3,000				3,000				--
Loans held for sale				3,981				3,407				5,798
Loans receivable				718,112				714,833				685,669
Less: Allowance for loan losses				(9,544	)			(9,565	)			(9,590	)
	Net loans receivable			708,568				705,268				676,079
Premises and equipment, net				18,053				18,307				18,013
OREO and other repossessed assets, net				2,221				2,887				3,005
BOLI				19,539				19,402				18,994
Accrued interest receivable				2,655				2,743				2,443
Goodwill				5,650				5,650				5,650
Mortgage servicing rights, net				1,910				1,871				1,710
Other assets				2,911				2,220				3,111
	Total assets		$	1,001,201			$	993,895			$	946,682
Liabilities and shareholders’ equity
Deposits: Non-interest-bearing demand			$	222,302			$	210,108			$	186,239
Deposits: Interest-bearing				658,109				665,966				622,613
	Total deposits			880,411				876,074				808,852
FHLB borrowings				--				--				30,000
Other liabilities and accrued expenses				2,947				3,709				3,001
	Total liabilities			883,358				879,783				841,853
Shareholders’ equity
Common stock, $.01 par value; 50,000,000 shares authorized;   7,390,227 shares issued and outstanding – March 31, 2018   7,367,327 shares issued and outstanding – December 31,2017   7,345,477 shares issued and outstanding – March 31, 2017				13,891				13,540				12,986
Unearned shares issued to Employee Stock Ownership Plan (“ESOP”)				(265	)			(331	)			(529	)
Retained earnings				104,349				101,039				92,550
Accumulated other comprehensive loss				(132	)			(136	)			(178	)
	Total shareholders’ equity			117,843				114,112				104,829
	Total liabilities and shareholders’ equity		$	1,001,201			$	993,895			$	946,682

KEY FINANCIAL RATIOS AND DATA			Three Months Ended
($ in thousands, except per share amounts) (unaudited)			March 31,				Dec. 31,				March 31,
				2018				2017				2017
PERFORMANCE RATIOS:
Return on average assets (a)				1.75	%			1.50	%			1.35	%
Return on average equity (a)				14.79	%			12.90	%			12.24	%
Net interest margin (a)				4.19	%			4.19	%			3.88	%
Efficiency ratio				56.83	%			57.08	%			60.67	%
			Six Months Ended
			March 31,								March 31,
				2018								2017
PERFORMANCE RATIOS:
Return on average assets (a)				1.63	%							1.37	%
Return on average equity (a)				13.86	%							12.55	%
Net interest margin (a)				4.19	%							3.90	%
Efficiency ratio				56.96	%							59.86	%
			March 31,				Dec. 31,				March 31,
				2018				2017				2017
ASSET QUALITY RATIOS AND DATA:
Non-accrual loans			$	1,932			$	2,113			$	1,894
Loans past due 90 days and still accruing				--				--				135
Non-performing investment securities				470				500				638
OREO and other repossessed assets				2,221				2,887				3,005
Total non-performing assets (b)			$	4,623			$	5,500			$	5,672
Non-performing assets to total assets (b)				0.46	%			0.55	%			0.60	%
Net charge-offs (recoveries) during quarter			$	21			$	(12	)		$	3
Allowance for loan losses to non-accrual loans				494	%			453	%			506	%
Allowance for loan losses to loans receivable (c)				1.33	%			1.34	%			1.40	%
Troubled debt restructured loans on accrual status (d)			$	2,970			$	3,282			$	6,428
CAPITAL RATIOS:
Tier 1 leverage capital				11.66	%			11.45	%			10.89	%
Tier 1 risk-based capital				16.76	%			16.49	%			15.77	%
Common equity Tier 1 risk-based capital				16.76	%			16.49	%			15.77	%
Total risk-based capital				18.01	%			17.74	%			17.02	%
Tangible common equity to tangible assets (non-GAAP)				11.27	%			10.98	%			10.54	%
BOOK VALUES:
Book value per common share			$	15.95			$	15.49			$	14.27
Tangible book value per common share (e)				15.18				14.72				13.50

________________________________________________

(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)  Does not include loans held for sale and is before the allowance for loan losses.
(d)  Does not include troubled debt restructured loans totaling $155, $199 and $404 reported as non-accrual loans at March 31, 2018, December 31, 2017 and March 31, 2017, respectively.
(e)  Tangible common equity divided by common shares outstanding (non-GAAP).                                                                                                                                                                                                                           

AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
($ in thousands)
(unaudited)

	For the Three Months Ended
	March 31, 2018							December 31, 2017							March 31, 2017
	Amount				Rate			Amount				Rate			Amount				Rate
Assets
Loans receivable and loans held for sale	$	717,502			5.29	%		$	709,079			5.26	%		$	688,506			5.14	%
Investment securities and FHLB stock (1)		13,190			1.97				12,451			2.70				10,866			2.94
Interest-bearing deposits in banks and CD’s		187,181			1.61				180,038			1.37				171,203			0.90
Total interest-earning assets		917,873			4.48				901,568			4.45				870,575			4.27
Other assets		58,590							60,128							59,561
Total assets	$	976,463						$	961,696						$	930,136
Liabilities and Shareholders’ Equity
NOW checking accounts	$	217,734			0.21	%		$	212,550			0.21	%		$	208,736			0.22	%
Money market accounts		141,594			0.53				136,466			0.38				127,935			0.34
Savings accounts		143,449			0.06				141,266			0.06				134,073			0.06
Certificates of deposit accounts		139,620			1.01				138,687			0.96				144,021			0.86
Total interest-bearing deposits		642,397			0.42				628,969			0.38				614,765			0.35
FHLB borrowings		--			--				--			--				30,000			4.08
Total interest-bearing liabilities		642,397			0.42				628,969			0.38				644,765			0.52
Non-interest-bearing demand deposits		214,722							216,907							178,977
Other liabilities		3,868							3,732							4,208
Shareholders’ equity		115,476							112,088							102,186
Total liabilities and shareholders’ equity	$	976,463						$	961,696						$	930,136
Interest rate spread					4.06	%						4.07	%						3.75	%
Net interest margin (2)					4.19	%						4.19	%						3.88	%
Average interest-earning assets to
average interest-bearing liabilities		142.88	%						143.34	%						135.02	%

          _____________________________________
(1) Includes other investments
(2) Net interest margin = annualized net interest income /
     average interest-earning assets
               

AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE
($ in thousands)
(unaudited)

	For the Six Months Ended
	March 31, 2018								March 31, 2017
	Amount				Rate				Amount				Rate
Assets
Loans receivable and loans held for sale	$	713,245			5.28	%			$	686,689			5.13		%
Investment securities and FHLB Stock (1)		12,816			2.31					10,929			3.18
Interest-bearing deposits in banks and CD’s		183,572			1.49					162,433			0.81
Total interest-earning assets		909,633			4.47					860,051			4.29
Other assets		59,366								58,317
Total assets	$	968,999							$	918,368
Liabilities and Shareholders’ Equity
NOW checking accounts	$	215,113			0.21	%			$	205,526			0.23		%
Money market accounts		139,002			0.46					124,081			0.33
Savings accounts		142,346			0.06					130,829			0.06
Certificate of deposit accounts		139,148			0.98					145,746			0.84
Total interest-bearing deposits		635,609			0.40					606,182			0.36
FHLB borrowings		--			--					30,000			4.08
Total interest-bearing liabilities		635,609			0.40					636,182			0.54
Non-interest-bearing demand deposits		215,826								177,860
Other liabilities		3,800								4,363
Shareholders’ equity		113,764								99,963
Total liabilities and shareholders’ equity	$	968,999							$	918,368
Interest rate spread					4.07	%							3.76		%
Net interest margin (2)					4.19	%							3.90		%
Average interest-earning assets to
average interest-bearing liabilities		143.11	%							135.19	%

          _____________________________________
(1) Includes other investments
(2) Net interest margin = annualized net interest income /
     average interest-earning assets

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