• Net Income Increases 17% for the First Nine Months of Fiscal 2018
• Earnings Per Share Increases 14% to $1.64 for the First Nine Months of Fiscal 2018
• Reports Quarterly Return on Average Equity of 14.87%
• Reports Quarterly Return on Average Assets of 1.78%
• Announces $0.13 Quarterly Cash Dividend

HOQUIAM, Wash., July 24, 2018 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) (“Timberland” or “the Company”) today reported record quarterly net income of $4.42 million, or $0.59 per diluted common share, for the quarter ended June 30, 2018.  This compares to net income of $4.27 million, or $0.57 per diluted common share, for the preceding quarter and net income of $4.28 million, or $0.58 per diluted common share, for the quarter ended June 30, 2017 which quarter’s earnings per share was increased by approximately $0.13 due to a significant loan loss reserve recapture and the collection of non-accrual interest partially offset by the cost of prepaying two FHLB borrowings. 

For the first nine months of fiscal 2018, Timberland earned $12.30 million, or $1.64 per diluted common share, an increase in net income of 17% and an increase in earnings per diluted common share (“EPS”) of 14% from $10.55 million, or $1.44 per diluted common share, for the first nine months of fiscal 2017.

Timberland’s Board of Directors declared a quarterly cash dividend to shareholders of $0.13 per common share payable on August 24, 2018, to shareholders of record on August 10, 2018. 

“We continue to expect the acquisition of South Sound Bank to occur in the fourth calendar quarter of this year subject to regulatory approvals, the approval of South Sound Bank’s shareholders and other customary closing conditions,” said Michael Sand, President and CEO.  “The first of these approvals was obtained on July 10, 2018 when the State of Washington’s Department of Financial Institutions, Division of Banks granted its approval for the merger.  The acquisition will enhance Timberland’s presence along Washington State’s economically important and rapidly growing I-5 corridor.  During the quarter just ended, Timberland incurred approximately $147,000 in merger related expenses reducing the quarter’s EPS by approximately $0.01.”

“We also are looking forward to the benefit of a lower federal income tax rate effective upon the conclusion of our next fiscal quarter,” Sand also stated.  “Since the enactment of the Tax Cuts and Jobs Act legislation, Timberland has employed a blended federal income tax rate of 24.5%.  This tax rate will decline to 21.0% beginning October 1, 2018 and the benefit will be impactful to net income.  Had the lower tax rate been available to Timberland for the quarter just ended, EPS would have been higher by approximately $0.02.”

Third Fiscal Quarter 2018 Earnings and Balance Sheet Highlights (at or for the period ended June 30, 2018, compared to March 31, 2018, or June 30, 2017):

   Earnings Highlights:

• Net income increased 17% for the first nine months of fiscal 2018;
• EPS for the first nine months of fiscal 2018 increased 14% to $1.64 from $1.44 for the first nine months of fiscal 2017;
• EPS increased to $0.59 from $0.57 for the preceding quarter and $0.58 for the comparable quarter one year ago; 
• Return on average equity and return on average assets for the current quarter remained strong at 14.87% and 1.78%, respectively;
• Operating revenue increased 4% from the comparable quarter one year ago;
• Net interest margin remained strong at 4.18% for the current quarter; and
• Efficiency ratio improved to 55.33% for the current quarter from 56.83% for the preceding quarter.

   Balance Sheet Highlights:

• Total assets increased 8% year-over-year to $1.01 billion;
• Total deposits increased 8% year-over-year;
• Net loans receivable increased 4% year-over-year; and
• Book and tangible book (non-GAAP) values per common share increased to $16.35 and $15.58, respectively, at June 30, 2018.

Operating Results

Operating revenue (net interest income before the recapture of loan losses, plus non-interest income excluding other than temporary impairment (“OTTI”) charges (recoveries) on investment securities) increased 4% to $12.85 million for the current quarter from $12.40 million for the comparable quarter one year ago and increased 1% from $12.69 million for the preceding quarter.  Operating revenue increased 8% to $38.09 million for the first nine months of fiscal 2018 from $35.24 million for the comparable period one year ago.

Net interest income for the current quarter increased 5% to $9.73 million from $9.25 million for the comparable quarter one year ago and increased 1% from $9.62 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 partially due to paying off FHLB borrowings and eliminating the associated interest expense.  For the first nine months of fiscal 2018 net interest income increased 11% to $28.79 million from $26.01 million for the first nine months of fiscal 2017.

The net interest margin (“NIM”) for the current quarter was 4.18% compared to 4.19% for the preceding quarter and 4.29% for the comparable quarter one year ago.  The NIM for the preceding 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 22 basis points due to the net effect of collecting $748,000 of non-accrual interest and paying $282,000 in FHLB borrowing prepayment penalties.  Timberland’s net interest margin for the first nine months of fiscal 2018 improved to 4.19% from to 4.03% for the first nine months of fiscal 2017. 

Non-interest income increased 2% to $3.15 million for the current quarter from $3.08 million for the preceding quarter and decreased slightly from $3.16 million for the comparable quarter one year ago.  The increased non-interest income for the current quarter compared to the preceding quarter was primarily due to an increase in ATM and debit card interchange transaction fees and smaller increases in several other categories.  These increases were partially offset by a decrease in gain on sale of loans.  Fiscal year-to-date non-interest income increased 2% to $9.36 million from $9.22 million for the first nine months of fiscal 2017.

Total operating expenses for the current quarter decreased 1% to $7.12 million from $7.22 million for the preceding quarter and increased 3% from $6.94 million for the comparable quarter one year ago.  The decreased expenses for the current quarter compared to the preceding quarter were primarily due to a decrease of $183,000 in net OREO related expenses and smaller decreases in several other categories.  These decreases were partially offset by a $125,000 increase in professional fees and smaller increases in several other categories.  The decrease in net OREO related expenses was primarily due to a $124,000 gain on the sale of an OREO property during the current quarter.  The increase in professional fees was primarily due to $147,000 in merger related expenses associated with Timberland’s announced acquisition of South Sound Bank.  The efficiency ratio for the current quarter improved to 55.33% from 56.83% for the preceding quarter and 55.94% for the comparable quarter one year ago.  Fiscal year-to-date operating expenses increased 4% to $21.52 million from $20.61 million for the first nine months of fiscal 2017.  The efficiency ratio improved for the first nine months of fiscal 2018 to 56.41% from 58.48% for the first nine months of fiscal 2017.

The provision for income taxes for the current quarter increased by $118,000 to $1.33 million from $1.22 million for the preceding quarter, primarily due to higher pre-tax income.  The fiscal year-to-date provision for income taxes decreased $997,000 to $4.33 million from $5.33 million for the first nine months of fiscal 2017, primarily due to the Tax Cuts and Jobs Act legislation which was signed into law on December 22, 2017.  As a result of the new legislation (which decreased 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 and began using a lower tax rate for the current fiscal year.  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 June 30, 2018, was 23.2%.

Balance Sheet Management

Total assets increased $5.18 million, or 1%, to $1.01 billion at June 30, 2018, from $1.00 billion at March 31, 2018.  The increase was primarily due to a $7.10 million net increase in net loans receivable and loans held for sale, which was partially offset by a $2.39 million net decrease in total cash and cash equivalents and CDs held for investment. 

Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment and available for sale investment securities, was 25.0% of total liabilities at June 30, 2018, compared to 25.3% at March 31, 2018, and 21.3% one year ago. 

Net loans receivable increased $8.76 million, or 1%, to $717.32 million at June 30, 2018, from $708.57 million at March 31, 2018.  The increase was primarily due to a $3.70 million increase in commercial real estate loans, a $3.06 million increase in land loans, a $3.01 million increase in multi-family loans, a $1.29 million increase in one- to four-family loans, a $1.18 million increase in commercial construction loans, a $12.43 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 $9.59 million decrease in multi-family construction loans, a $5.76 million decrease in one- to four-family construction loans and smaller decreases in several other categories. 

LOAN PORTFOLIO

($ in thousands)	June 30, 2018							March 31, 2018							June 30, 2017
	Amount				Percent			Amount				Percent			Amount				Percent
Mortgage loans:
One- to four-family (a)	$	114,148			14	%		$	112,862			14	%		$	121,705			16	%
Multi-family		58,169			7				55,157			7				61,051			8
Commercial		345,543			44				341,845			43				331,901			43
Construction - custom and      owner/builder		113,468			14				119,230			15				109,578			14
Construction - speculative      one-to four-family		10,146			1				10,876			1				8,002			1
Construction - commercial		26,347			3				25,166			3				20,067			3
Construction - multi-family		15,225			2				24,812			3				11,057			1
Construction - land      development		3,190			1				2,950			--				--			--
Land		23,662			3				20,602			3				24,333			3
Total mortgage loans		709,898			89				713,500			89				687,694			89
Consumer loans:
Home equity and second      Mortgage		38,143			5				38,124			5				36,320			5
Other		3,674			1				3,646			1				3,789			--
Total consumer loans		41,817			6				41,770			6				40,109			5
Commercial business loans		43,284			5				43,465			5				43,407			6
Total loans		794,999			100	%			798,735			100	%			771,210			100	%
Less:
Undisbursed portion of      construction loans in      process		(65,674	)						(78,108	)						(72,133	)
Deferred loan origination      fees		(2,469	)						(2,515	)						(2,309	)
Allowance for loan losses		(9,532	)						(9,544	)						(9,610	)
Total loans receivable, net	$	717,324						$	708,568						$	687,158

_______________________

(a) Does not include one- to four-family loans held for sale totaling $2,321, $3,981 and $3,523 at June 30, 2018, March 31, 2018, and June 30, 2017, respectively. 

Timberland originated $70.46 million in loans during the quarter ended June 30, 2018, compared to $92.93 million for the comparable quarter one year ago and $78.99 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 periodically sells the guaranteed portion of U.S. Small Business Administration (“SBA”) loans.  During the third quarter of fiscal 2018 fixed-rate one- to four-family mortgage loans and SBA loans totaling $17.74 million were sold compared to $19.34 million for the comparable quarter one year ago and $15.31 million for the preceding quarter.
                                            
Timberland’s investment securities and other investments decreased $136,000, or 1%, to $12.13 million at June 30, 2018, from $12.26 million at March 31, 2018, primarily due to scheduled amortization.   Timberland’s CDs held for investment increased $10.19 million, or 19%, to $63.13 million at June 30, 2018, from $52.94 million at March 31, 2018.

DEPOSIT BREAKDOWN
($ in thousands)

		June 30, 2018						March 31, 2018						June 30, 2017
		Amount			Percent			Amount			Percent			Amount			Percent
Non-interest-bearing demand		$229,201			26	%		$222,302			25	%		$197,527			24	%
NOW checking		222,203			25			227,075			26			216,719			26
Savings		148,690			17			147,750			17			136,750			17
Money market		129,559			15			130,844			15			119,025			15
Money market – brokered		10,084			1			10,363			1			8,506			1
Certificates of deposit under $250		120,156			14			121,157			14			121,505			15
Certificates of deposit $250 and over		17,637			2			17,720			2			15,590			2
Certificates of deposit – brokered		3,197			--			3,200			--			3,196			--
Total deposits		$880,727			100	%		$880,411			100	%		$818,818			100	%

Total deposits increased $61.91 million, or 8%, to $880.73 million at June 30, 2018, from $818.82 million one year ago, and increased slightly from $880.41 million at March 31, 2018.

Shareholders’ Equity

Total shareholders’ equity increased $3.05 million to $120.89 million at June 30, 2018, from $117.84 million at March 31, 2018.  The increase in shareholders’ equity was primarily due to net income of $4.42 million for the quarter, which was partially offset by dividend payments to shareholders of $1.70 million. 

Capital Ratios and Asset Quality

Timberland remains well capitalized with a total risk-based capital ratio of 18.24% and a Tier 1 leverage capital ratio of 11.80% at June 30, 2018.

Asset quality remains strong with the non-performing assets to total assets ratio at 0.56% at June 30, 2018, compared to 0.65% one year ago and 0.46% at March 31, 2018.

No provision for loan losses was made for the quarters ended June 30, 2018 and March 31, 2018.  Timberland recorded a $1.0 million loan loss reserve recapture during the comparable quarter one year ago.  Net charge-offs totaled $12,000 for the current quarter compared to net charge-offs of $21,000 for the preceding quarter and a net recovery of $1.02 million for the comparable quarter one year ago.  The allowance for loan losses was 1.31% of loans receivable at June 30, 2018, compared to 1.33% at March 31, 2018, and 1.38% at June 30, 2017.

Total delinquent loans (past due 30 days or more) and non-accrual loans increased $139,000, or 4%, to $3.43 million at June 30, 2018, from $3.29 million at March 31, 2018, and increased $985,000, or 40%, from $2.44 million one year ago.  The increase in delinquencies is primarily a result of two one- to four-family loans becoming delinquent.  Non-accrual loans increased $774,000, or 40%, to $2.71 million at June 30, 2018, from $1.93 million at March 31, 2018, and increased $651,000, or 32%, from $2.06 million one year ago.

NON-ACCRUAL LOANS	June 30, 2018					March 31, 2018						June 30, 2017
($ in thousands)	Amount			Quantity		Amount			Quantity			Amount			Quantity
Mortgage loans:
One- to four-family	$	1,361		7		$	801		6			$	896		7
Commercial		598		3			370		3				403		1
Land		295		3			395		4				496		2
Total mortgage loans		2,254		13			1,566		13				1,795		10
Consumer loans:
Home equity and second mortgage		278		6			185		4				260		3
Total consumer loans		278		6			185		4				260		3
Commercial business		174		2			181		2				--		--
Total loans	$	2,706		21		$	1,932		19			$	2,055		13

OREO and other repossessed assets decreased 38% to $2.11 million at June 30, 2018, from $3.42 million at June 30, 2017, and decreased 5% from $2.22 million at March 31, 2018.  At June 30, 2018, the OREO and other repossessed asset portfolio consisted of 13 individual real estate properties.  During the quarter ended June 30, 2018, one OREO property was sold for a net gain of $124,000.

OREO and OTHER REPOSSESSED ASSETS	June 30, 2018					March 31, 2018					June 30, 2017
($ in thousands)	Amount			Quantity		Amount			Quantity		Amount			Quantity
One- to four-family	$	--		--		$	--		--		$	927		3
Commercial	448			2		287			1		587			2
Land	1,664			11		1,934			12		1,903			12
Consumer	--			--		--			--		--			--
Total	$	2,112		13		$	2,221		13		$	3,417		17

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)		June 30, 2018				March 31, 2018				June 30, 2017
Shareholders’ equity		$	120,894			$	117,843			$	108,616
Less goodwill			(5,650	)			(5,650	)			(5,650	)
Tangible common equity		$	115,244			$	112,193			$	102,966
Total assets		$	1,006,383			$	1,001,201			$	931,009
Less goodwill			(5,650	)			(5,650	)			(5,650	)
Tangible assets		$	1,000,733			$	995,551			$	925,359

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)		June 30,					March 31,				June 30,
(unaudited)			2018					2018				2017
	Interest and dividend income
	Loans receivable	$	9,530				$	9,484			$	9,652
	Investment securities		51					39				69
	Dividends from mutual funds and FHLB stock		31					26				23
	Interest bearing deposits in banks		845					741				421
	Total interest and dividend income		10,457					10,290				10,165
	Interest expense
	Deposits		730					666				549
	FHLB borrowings		--					--				369
	Total interest expense		730					666				918
	Net interest income		9,727					9,624				9,247
	Recapture of loan losses		--					--				(1,000	)
	Net interest income after recapture of loan losses		9,727					9,624				10,247
	Non-interest income
	Service charges on deposits		1,137					1,132				1,153
	ATM and debit card interchange transaction fees		921					883				855
	Gain on sale of loans, net		435					470				561
	Bank owned life insurance (“BOLI”) net earnings		134					137				133
	Servicing income on loans sold		121					117				106
	Recoveries on investment securities, net		19					13				--
	Other		378					330				348
	Total non-interest income		3,145					3,082				3,156
	Non-interest expense
	Salaries and employee benefits		3,912					4,001				3,741
	Premises and equipment		795					799				764
	Gain on disposition of premises and equipment, net		--					(113	)			3
	Advertising		205					176				170
	OREO and other repossessed assets, net		(92	)				91				4
	ATM and debit card processing		334					318				375
	Postage and courier		104					131				109
	State and local taxes		169					168				176
	Professional fees		368					243				230
	FDIC insurance		101					75				99
	Loan administration and foreclosure		76					92				20
	Data processing and telecommunications		465					495				480
	Deposit operations		285					252				301
	Other, net		400					493				466
	Total non-interest expense, net		7,122					7,221				6,938
	Income before income taxes		5,750					5,485				6,465
	Provision for income taxes		1,334					1,216				2,188
	Net income	$	4,416				$	4,269			$	4,277
	Net income per common share:
	Basic	$	0.60				$	0.58			$	0.59
	Diluted		0.59					0.57				0.58
	Weighted average common shares outstanding:
	Basic		7,345,618					7,328,127				7,269,564
	Diluted		7,535,157					7,512,058				7,432,171
TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME		Nine Months Ended
($ in thousands, except per share amounts)		June 30,					June 30,
(unaudited)		2018					2017
	Interest and dividend income
	Loans receivable	$	28,342				$	27,280
	Investment securities	147					207
	Dividends from mutual funds and FHLB stock	83					60
	Interest bearing deposits in banks	2,209					1,081
	Total interest and dividend income	30,781					28,628
	Interest expense
	Deposits	1,996					1,637
	FHLB borrowings	--					979
	Total interest expense	1,996					2,616
	Net interest income	28,785					26,012
	Recapture of loan losses	--					(1,250		)
	Net interest income after recapture of loan losses	28,785					27,262
	Non-interest income
	Service charges on deposits		3,447				3,348
	ATM and debit card interchange transaction fees		2,648				2,448
	Gain on sale of loans, net		1,427				1,656
	BOLI net earnings		407				407
	Servicing income on loans sold		354				302
	Recoveries on investment securities, net		55				--
	Other		1,026				1,063
	Total non-interest income		9,364				9,224
	Non-interest expense
	Salaries and employee benefits		11,862				11,176
	Premises and equipment		2,361				2,295
	Gain on disposition of premises and equipment, net		(113	)			3
	Advertising		591				499
	OREO and other repossessed assets, net		114				22
	ATM and debit card processing		982				1,036
	Postage and courier		340				324
	State and local taxes		498				484
	Professional fees		829				629
	FDIC insurance		242				319
	Loan administration and foreclosure		247				113
	Data processing and telecommunications		1,427				1,394
	Deposit operations		815				850
	Other, net		1,324				1,462
	Total non-interest expense, net		21,519				20,606
	Income before income taxes	$	16,630				$	15,880
	Provision for income taxes		4,331				5,328
	Net income	$	12,299				$	10,552
	Net income per common share:
	Basic	$	1.68				$	1.49
	Diluted		1.64				1.44
	Weighted average common shares outstanding:
	Basic		7,328,702				7,088,134
	Diluted		7,518,447				7,348,486

TIMBERLAND BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts) (unaudited)			June 30,				March 31,				June 30,
				2018				2018				2017
Assets
Cash and due from financial institutions			$	19,552			$	15,508			$	17,476
Interest-bearing deposits in banks				137,274				153,897				114,964
	Total cash and cash equivalents			156,826				169,405				132,440
Certificates of deposit (“CDs”) held for investment, at cost				63,132				52,938				41,187
Investment securities:
	Held to maturity, at amortized cost			7,951				8,070				7,244
	Available for sale, at fair value			1,176				1,193				1,260
FHLB stock				1,190				1,107				1,107
Other investments, at cost				3,000				3,000				3,000
Loans held for sale				2,321				3,981				3,523
Loans receivable				726,856				718,112				696,768
Less: Allowance for loan losses				(9,532	)			(9,544	)			(9,610	)
	Net loans receivable			717,324				708,568				687,158
Premises and equipment, net				18,515				18,053				18,465
OREO and other repossessed assets, net				2,112				2,221				3,417
BOLI				19,673				19,539				19,127
Accrued interest receivable				2,797				2,655				2,437
Goodwill				5,650				5,650				5,650
Mortgage servicing rights, net				1,980				1,910				1,781
Other assets				2,736				2,911				3,213
	Total assets		$	1,006,383			$	1,001,201			$	931,009
Liabilities and shareholders’ equity
Deposits: Non-interest-bearing demand			$	229,201			$	222,302			$	197,527
Deposits: Interest-bearing				651,526				658,109				621,291
	Total deposits			880,727				880,411				818,818
FHLB borrowings				--				--				--
Other liabilities and accrued expenses				4,762				2,947				3,575
	Total liabilities			885,489				883,358				822,393
Shareholders’ equity
Common stock, $.01 par value; 50,000,000 shares authorized;    7,395,927 shares issued and outstanding – June 30, 2018    7,390,227 shares issued and outstanding – March 31, 2018    7,354,577 shares issued and outstanding – June 30, 2017				14,162				13,891				13,223
Unearned shares issued to Employee Stock Ownership Plan (“ESOP”)				(199	)			(265	)			(463	)
Retained earnings				107,065				104,349				96,018
Accumulated other comprehensive loss				(134	)			(132	)			(162	)
	Total shareholders’ equity			120,894				117,843				108,616
	Total liabilities and shareholders’ equity		$	1,006,383			$	1,001,201			$	931,009

KEY FINANCIAL RATIOS AND DATA			Three Months Ended
($ in thousands, except per share amounts) (unaudited)			June 30,				March 31,				June 30,
				2018				2018				2017
PERFORMANCE RATIOS:
Return on average assets (a)				1.78	%			1.75	%			1.86	%
Return on average equity (a)				14.87	%			14.79	%			16.14	%
Net interest margin (a)				4.18	%			4.19	%			4.29	%
Efficiency ratio				55.33	%			56.83	%			55.94	%
			Nine Months Ended
			June 30,								June 30,
				2018								2017
PERFORMANCE RATIOS:
Return on average assets (a)				1.68	%							1.53	%
Return on average equity (a)				14.21	%							13.80	%
Net interest margin (a)				4.19	%							4.03	%
Efficiency ratio				56.41	%							58.48	%
			June 30,				March 31,				June 30,
				2018				2018				2017
ASSET QUALITY RATIOS AND DATA:
Non-accrual loans			$	2,706			$	1,932			$	2,055
Loans past due 90 days and still accruing				428				--				--
Non-performing investment securities				433				470				590
OREO and other repossessed assets				2,112				2,221				3,417
Total non-performing assets (b)			$	5,679			$	4,623			$	6,062
Non-performing assets to total assets (b)				0.56	%			0.46	%			0.65	%
Net charge-offs (recoveries) during quarter			$	12			$	21			$	(1,020	)
Allowance for loan losses to non-accrual loans				352	%			494	%			468	%
Allowance for loan losses to loans receivable (c)				1.31	%			1.33	%			1.38	%
Troubled debt restructured loans on accrual status (d)			$	2,960			$	2,970			$	3,360
CAPITAL RATIOS:
Tier 1 leverage capital				11.80	%			11.66	%			11.42	%
Tier 1 risk-based capital				16.98	%			16.76	%			16.05	%
Common equity Tier 1 risk-based capital				16.98	%			16.76	%			16.05	%
Total risk-based capital				18.24	%			18.01	%			17.30	%
Tangible common equity to tangible assets (non-GAAP)				11.52	%			11.27	%			11.13	%
BOOK VALUES:
Book value per common share			$	16.35			$	15.95			$	14.77
Tangible book value per common share (e)				15.58				15.18				14.00

_____________________________________

(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, $155 and $252 reported as non-accrual loans at June 30, 2018, March 31, 2018 and June 30, 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
	June 30, 2018							March 31, 2018							June 30, 2017
	Amount				Rate			Amount				Rate			Amount				Rate
Assets
Loans receivable and loans held for sale	$	727,807			5.24	%		$	717,502			5.29	%		$	693,931			5.56	%
Investment securities and FHLB stock (1)		13,378			2.45				13,190			1.97				12,482			2.98
Interest-bearing deposits in banks and CDs		189,120			1.79				187,181			1.61				156,507			1.08
Total interest-earning assets		930,305			4.50				917,873			4.48				862,920			4.71
Other assets		60,395							58,590							57,841
Total assets	$	990,700						$	976,463						$	920,761
Liabilities and Shareholders’ Equity
NOW checking accounts	$	214,256			0.21	%		$	217,734			0.21	%		$	207,060			0.22	%
Money market accounts		142,557			0.57				141,594			0.53				125,787			0.35
Savings accounts		147,881			0.06				143,449			0.06				137,108			0.06
Certificates of deposit accounts		142,285			1.12				139,620			1.01				141,254			0.87
Total interest-bearing deposits		646,979			0.45				642,397			0.42				611,209			0.36
FHLB borrowings		--			--				--			--				8,571			17.57
Total interest-bearing liabilities		646,979			0.45				642,397			0.42				619,780			0.59
Non-interest-bearing demand deposits		220,511							214,722							190,631
Other liabilities		4,456							3,868							4,379
Shareholders’ equity		118,754							115,476							105,971
Total liabilities and shareholders’ equity	$	990,700						$	976,463						$	920,761
Interest rate spread					4.05	%						4.06	%						4.12	%
Net interest margin (2)					4.18	%						4.19	%						4.29	%
Average interest-earning assets to     average interest-bearing liabilities		143.79	%						142.88	%						139.23	%

_____________________________________
(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 Nine Months Ended
	June 30, 2018							June 30, 2017
	Amount				Rate			Amount				Rate
Assets
Loans receivable and loans held for sale	$	718,099			5.26	%		$	688,936			5.29		%
Investment securities and FHLB Stock (1)		13,003			2.36				11,447			3.11
Interest-bearing deposits in banks and CDs		185,405			1.59				160,458			0.90
Total interest-earning assets		916,507			4.48				860,841			4.43
Other assets		59,704							58,324
Total assets	$	976,211						$	919,165
Liabilities and Shareholders’ Equity
NOW checking accounts	$	214,828			0.21	%		$	206,037			0.22		%
Money market accounts		140,186			0.50				124,650			0.34
Savings accounts		144,191			0.06				132,922			0.06
Certificate of deposit accounts		140,194			1.03				144,249			0.85
Total interest-bearing deposits		639,399			0.42				607,858			0.36
FHLB borrowings		--			--				22,857			5.73
Total interest-bearing liabilities		639,399			0.42				630,715			0.55
Non-interest-bearing demand deposits		217,388							182,117
Other liabilities		3,997							4,368
Shareholders’ equity		115,427							101,965
Total liabilities and shareholders’ equity	$	976,211						$	919,165
Interest rate spread					4.06	%						3.88		%
Net interest margin (2)					4.19	%						4.03		%
Average interest-earning assets to     average interest-bearing liabilities		143.34	%						136.49	%

_____________________________________
(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