Timberland Bank Agrees to Buy Seven Venture Bank Branches

Business Wire, June 24, 2004

HOQUIAM, Wash. -- Timberland Bancorp, Inc. (Nasdaq:TSBK), and its subsidiary Timberland Bank, today announced that Timberland Bank has signed an agreement to acquire seven branch offices and related deposits in three Western Washington counties from Venture Bank, the subsidiary of Venture Financial Group. As part of its strategy to expand its brand of full-service community banking into southwest Washington and the Olympic peninsula, Timberland Bank will acquire approximately $91 million in deposits which represents a 29% increase in its deposit base. In addition, Timberland Bank will acquire real estate, branch infrastructure, and employees for seven offices in Toledo, Winlock, Elma, Montesano, Hoquiam, Aberdeen and Panorama City. A premium of 9.0% will be paid for all deposits transferred with the exception of certain public deposits that will transfer with no premium. The transaction also includes $1.8 million for land and premises.

"This acquisition complements our branching strategy and is a very good fit for us, adding additional in-market branches, a solid customer base, productive employees and stable low-cost deposits," said Michael R. Sand, President and CEO. "The branch locations offer an ideal mix of in-market offices and new territory. Five of the branches are located within our existing geographic footprint and show solid prospects for generating operating synergies with our current system. The two branches in Toledo and Winlock allow us to expand into Lewis County. Entering this new market reflects our commitment to the continued growth of our community banking philosophy, where decisions are made locally, and community involvement is encouraged."

The transaction is scheduled to close early in the fourth calendar quarter of 2004 and is subject to regulatory approval. "We look forward to welcoming the new customers and employees into the Timberland family," continued Sand. "We are confident that the customer relationships established in these seven branches will continue to deepen and grow. We also expect the new employees that want to continue their careers in banking will find good opportunities within our system."

Of the approximately $91 million in acquired deposits, 53% are in NOW, savings and money market accounts, 17% are non-interest-bearing deposits and 30% are time certificates. "The mix of deposits is expected to reduce our cost of funds and increase core deposits," said Dean J. Brydon, Chief Financial Officer. "It also will improve our market position significantly in Grays Harbor County, giving us a 23% (up from 16%) share of the deposit market. As we deploy deposits into loans in the communities we serve, we anticipate this transaction will contribute to our net interest margin and earnings. We believe the acquisition will be accretive within one year following full integration of the new branches into our system. This acquisition, which is the first we have done since going public, brings solid potential to generate long-term earnings growth and also complements our efforts to enhance shareholder value through dividends and share repurchases."

Timberland Bank was founded in Hoquiam, WA, in 1915 and has grown to a 15-branch network of full-service community banking locations in five counties, with its 16th branch opening in Gig Harbor this month. At March 31, 2004, Timberland Bancorp had $446 million in assets and $317 million in deposits. The Bank's core values are centered on providing exceptional, customer-focused products and services that meet the needs of individuals, families and businesses in the communities it serves. This includes a full range of traditional banking products such as checking, savings, CDs, IRAs, home and consumer loans. In addition, the bank has capitalized on niche lending products such as land and construction loans, and financing for businesses. Financial planning services are available through its subsidiary, Timberland Financial Services Center.

Except for the historical information in this new release, this release contains certain "forward-looking statements." The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protection of such safe harbor with forward-looking statements. These forward-looking statements may describe future plans or strategies and include the Company's expectations of future financial results. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated objectives. These risk factors include but are not limited to the ability of the Company to effectively integrate acquired branches and employees into its systems, effect of interest rate changes, competition in the financial services market for both deposits and loans as well as regional and general economic conditions. The words "believe," "expect," "anticipate," "estimate," "scheduled" and similar expressions identify forward-looking statements. The Company's ability to predict results or the effect of future plans or strategies is inherently uncertain and undue reliance should not be placed on such statements.