Safe and Sound

Timberland Bank

Hoquiam, WA
5
Star Rating
Started in 1915, Timberland Bank is an FDIC-insured bank headquartered in Hoquiam, WA. The bank has equity of $111.1 million on assets of $991.9 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $876.5 million on deposit at 22 offices in WA run by 266 full-time employees. With that footprint, the bank has amassed loans and leases worth $708.7 million, including $672.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Timberland Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders when a bank is experiencing financial trouble. Therefore, a bank's level of capital is an essential measurement of an institution's financial resilience. When it comes to safety and soundness, more capital is better.

Timberland Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Timberland Bank's Tier 1 capital ratio was 16.05 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Timberland Bank held equity amounting to 11.20 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets means a bank could have to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

Timberland Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.29 percent of Timberland Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Timberland Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Timberland Bank scored 22 out of a possible 30, exceeding the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Timberland Bank's most recent annualized quarterly return on equity was 14.06 percent, above the national average of 8.10 percent.

The bank earned net income of $14.6 million on total equity of $111.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.54 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.