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Timberland Bancorp’s Second Fiscal Quarter Earnings Per Diluted Share Increases 43% to $0.86
المصدر: Nasdaq GlobeNewswire / 27 أبريل 2021 17:30:31 America/New_York
- Second Fiscal Quarter Net Income Increases 44% to $7.25 Million
- Quarterly Return on Average Assets of 1.75%
- Quarterly Return on Average Equity of 14.89%
- Announces $0.21 Quarterly Cash Dividend
HOQUIAM, Wa., April 27, 2021 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”) today reported that net income increased 44% to $7.25 million for the quarter ended March 31, 2021 from $5.05 million for the comparable quarter one year ago, which quarter was affected by a $2.00 million ($1.58 million after income taxes) provision to the loan loss reserves, and decreased slightly from $7.29 million for the preceding quarter. Earnings per diluted common share (“EPS”) increased 43% to $0.86 for the current quarter from $0.60 for the comparable quarter one year ago and decreased 1% from $0.87 for the preceding quarter.
For the first six months of fiscal 2021, Timberland earned a record $14.54 million, or $1.73 per diluted common share, a 24% increase in net income and a 25% increase in EPS from $11.70 million, or $1.38 per diluted common share for the first six months of fiscal 2020, which six month period was affected by a $2.20 million ($1.74 million after income taxes) to the loan loss reserves.
Timberland’s Board of Directors declared a quarterly cash dividend to shareholders of $0.21 per common share payable on May 28, 2021, to shareholders of record on May 14, 2021.
“We are pleased to report strong financial metrics for the recently concluded quarter and, for the first six months of fiscal 2021, record Company profitability,” stated Michael Sand, President and CEO. “Paycheck Protection Program (“PPP”) loan proceeds and federal stimulus payments contributed to strong deposit growth of $106.7 million for the quarter and $356.2 million during the past twelve months. The 32% increase in deposits year-over-year has increased the Bank’s liquidity significantly beyond the level we would normally hold. While loan originations have been strong we have chosen to sell most fixed-rate conforming mortgage loans in this extended low-rate interest environment and have been subject to prepayment activity typically expected during a period of lower interest rates. Given Federal Reserve Chairman Powell’s recent assertion that tapering would begin well before the Fed raises the overnight rate, we anticipate generally rising interest rates, a slowing of prepayment activity and fixed income investment opportunities more palatable than have been available during the past year. We are encouraged by the level of increased business activity in our markets and the increased activity we are seeing in our loan pipeline.”
“Our focus since the onslaught of the pandemic has been to support the businesses and their employees in our communities. To this end, staff has worked diligently throughout these difficult times to originate new PPP loans and to also file applications for PPP loan forgiveness,” said Sand. “During the quarter, we originated $58.70 million in PPP loans under the new round of PPP. This new round of funding offers assistance to companies that did not receive PPP funding last calendar year and also makes available additional loans targeted at hard hit businesses that previously obtained a PPP loan and need further assistance. We continue to actively submit forgiveness requests in support of our clients that received PPP loans in 2020, with nearly all forgiveness applicants obtaining full forgiveness from the Small Business Administration (“SBA”). With state mandated phased COVID guidelines allowing businesses in Washington State to move towards more normal operations and a robust vaccine rollout, we are encouraged by the potential for hard hit individuals and businesses to begin recovering financially during the remainder of the year.”
“To provide needed support to businesses in our communities, we continue to work with COVID affected borrowers to appropriately defer loans and provide them with the much-needed economic relief,” added Sand. “At March 31, 2021, we had eight loans remaining in a deferred payment status representing approximately 1.3% of net loans outstanding.” Five of the remaining deferred loans are receiving interest payments monthly.”
Second Fiscal Quarter 2021 Earnings and Balance Sheet Highlights (at or for the period ended March 31, 2021, compared to December 31, 2020 or March 31, 2020):
Earnings Highlights:- Net income increased 44% to $7.25 million for the current quarter from $5.05 million for the comparable quarter one year ago and decreased 1% from $7.29 million for the preceding quarter; EPS increased 43% to $0.86 for the current quarter from $0.60 for the comparable quarter one year ago and decreased 1% from $0.87 for the preceding quarter;
- Net income increased 24% to $14.54 million for the first six months of fiscal 2021 from $11.70 million for the first six months of fiscal 2020; EPS increased 25% to $1.73 for the first six months of fiscal 2021 from $1.38 for the first six months of fiscal 2020;
- Return on average equity (“ROE”) and return on average assets (“ROA”) for the current quarter were 14.89% and 1.75%, respectively;
- Net interest margin was 3.21% for the current quarter compared to 3.48% for the preceding quarter and 4.27% for the comparable quarter one year ago; and
- The efficiency ratio was 48.99% for the current quarter compared to 47.83% for the preceding quarter and 50.04% for the comparable quarter one year ago.
Balance Sheet Highlights:
- Total assets increased 28% year-over-year and 7% from the prior quarter;
- Total deposits increased 32% year-over-year and 8% from the prior quarter;
- Net loans receivable increased 14% year-over-year and 2% from the prior quarter;
- Non-performing assets to total assets ratio improved to 0.16%; and
- Book and tangible book (non-GAAP) values per common share increased to $23.75 and $21.76, respectively, at March 31, 2021.
Operating Results
Operating revenue (net interest income before the provision for loan losses plus non-interest income) increased 5% to $17.46 million for the current quarter from $16.56 million for the comparable quarter one year ago and decreased 1% from $17.58 million for the preceding quarter. Operating revenue increased 5% to $35.04 million for the first six months of fiscal 2021 from $33.50 million for the comparable period one year ago.
Net interest income decreased 4% to $12.57 million for the current quarter from $13.02 million for the preceding quarter and decreased 2% from $12.88 million for the comparable quarter one year ago. Timberland’s net interest margin (“NIM”) for the current quarter was 3.21% compared to 3.48% for the preceding quarter and 4.27% for the comparable quarter one year ago. NIM compression has largely been a result of the low interest rate environment and an increase in the level of liquidity being held in overnight funds. The NIM for the current quarter was increased by approximately six basis points due to the accretion of $86,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $129,000 in pre-payment penalties, non-accrual interest, and late fees. The NIM for the preceding quarter was increased by approximately nine basis points due to the accretion of $120,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $196,000 in pre-payment penalties, non-accrual interest and late fees. The NIM for the comparable quarter one year ago was increased by approximately 15 basis points due to the accretion of $107,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $320,000 in pre-payment penalties, non-accrual interest and late fees. Also affecting the net interest income comparisons are PPP loans, which have a 1.00% interest rate and associated loan origination fees, which are accreted into interest income over the life of each loan. During the quarter ended March 31, 2021, Timberland recorded interest income of $306,000 on PPP loans and accreted PPP loan origination fees of $1.14 million into income. During the quarter ended December 31, 2020, Timberland recorded interest income of $295,000 on PPP loans and accreted PPP loan origination fees of $1.14 million into income. At March 31, 2021, Timberland had PPP deferred loan origination fees of $3.86 million remaining to be accreted into interest income during the remaining life of the loans. Net interest income decreased 1% to $25.59 million for the first six months of fiscal 2021 from $25.88 million for the first six months of fiscal 2020. Timberland’s net interest margin for the first six months of fiscal 2021 was 3.34% compared to 4.35% for the first six months of fiscal 2020.
No provision for loan losses was made during the current and preceding quarter compared to a $2.00 million provision for loan losses for the comparable quarter one year ago.
Non-interest income increased 33% to $4.89 million for the current quarter from $3.68 million for the comparable quarter one year ago and increased 7% from $4.56 million for the preceding quarter. The increase in non-interest income compared to the preceding quarter was primarily due to a $438,000 valuation recovery on servicing rights for the current quarter (compared to a $236,000 valuation allowance on servicing rights for the preceding quarter) and an $81,000 increase in ATM and debit card interchange transaction fees. Partially offsetting these increases was a $244,000 decrease in gain on sales of loans and a $114,000 decrease in service charges on deposits. The recovery on servicing rights was primarily due to a decrease in mortgage prepayment speeds as mortgage interest rates increased during the quarter. The increase in ATM and debit card interchange transaction fee income was primarily due to increased volumes of debit card transactions. The decrease in gain on sales of loans was primarily due to a decrease in the dollar amount of fixed rate one- to four-family loans sold during the current quarter and a decrease in the average pricing spread. The decrease in service charges on deposits was primarily due to a decrease in overdraft fee income. Fiscal year-to-date non-interest income increased 24% to $9.45 million from $7.62 million for the first six months of fiscal 2020.
Total operating expenses for the current quarter increased 2% to $8.55 million from $8.41 million for the preceding quarter and increased 3% from $8.29 million for the comparable quarter one year ago. The increase in operating expenses compared to the preceding quarter was primarily due to a $165,000 increase in salaries and employee benefits, a $41,000 increase in premises and equipment and smaller increases in several other categories. These increases were partially offset by a $50,000 decrease in professional fees, a $42,000 decrease in OREO expense and smaller decreases in several other expense categories. The efficiency ratio for the current quarter was 48.99% compared to 47.83% for the preceding quarter and 50.04% for the comparable quarter one year ago. Fiscal year-to-date operating expenses increased 2% to $16.96 million from $16.66 million for the first six months of fiscal 2020. The efficiency ratio for the first six months of fiscal 2021 improved to 48.41% from 49.73% for the first six months of fiscal 2020.
The provision for income taxes for the current quarter decreased $231,000 to $1.65 million from $1.88 million for the preceding quarter, primarily due to a $166,000 tax benefit from the disposition of stock options and lower income before income taxes. Timberland’s effective income tax rate was 18.6% for the quarter ended March 31, 2021 compared to 20.5% for the quarter ended December 31, 2020.
Balance Sheet Management
Total assets increased $110.84 million, or 7%, to $1.70 billion at March 31, 2021 from $1.59 billion at December 31, 2020. The increase was primarily due to an $84.13 million increase in total cash and cash equivalents and a $23.37 million increase in net loans receivable, and smaller increases in several other categories. The increase in total assets was funded primarily by an increase in total deposits and by retained net income.
Loans
Net loans receivable increased $23.37 million, or 2%, to $1.031 billion at March 31, 2021 from $1.007 billion at December 31, 2020. The increase during the current quarter was primarily due to a $34.71 million increase in PPP loan balances, and smaller increases in several other categories. These increases were partially offset by smaller decreases in several other categories.
Loan Portfolio
($ in thousands)March 31, 2021 December 31, 2020 March 31, 2020 Amount Percent Amount Percent Amount Percent Mortgage loans: One- to four-family (a) $ 117,184 10 % $ 115,613 10 % $ 125,285 13 % Multi-family 92,435 8 89,413 8 81,298 8 Commercial 461,966 40 463,670 41 444,276 44 Construction - custom and owner/builder 105,305 9 117,872 10 119,175 12 Construction - speculative one-to four-family 17,289 2 20,291 2 14,679 1 Construction - commercial 42,340 4 41,491 4 37,446 4 Construction - multi-family 44,266 4 29,410 3 34,026 3 Construction - land development 2,238 -- 6,943 1 5,774 1 Land 19,041 2 22,635 2 29,333 3 Total mortgage loans 902,064 79 907,338 81 891,292 89 Consumer loans: Home equity and second Mortgage 32,026 3 35,446 3 38,972 4 Other 2,756 -- 2,979 -- 3,829 -- Total consumer loans 34,782 3 38,425 3 42,801 4 Commercial loans: Commercial business loans 66,645 6 71,257 7 73,622 7 SBA PPP loans 138,175 12 103,468 9 -- -- Total commercial loans 204,820 18 174,725 16 73,622 7 Total loans 1,141,666 100 % 1,120,488 100 % 1,007,715 100 % Less: Undisbursed portion of construction loans in process (90,550 ) (94,298 ) (85,474 ) Deferred loan origination fees (6,999 ) (5,449 ) (2,694 ) Allowance for loan losses (13,434 ) (13,432 ) (11,890 ) Total loans receivable, net $ 1,030,683 $ 1,007,309 $ 907,657 _______________________
(a) Does not include one- to four-family loans held for sale totaling $8,455, $10,871 and $5,798 at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.The following table highlights eight commercial real estate (“CRE”) segments generally presumed to have the potential to be more adversely affected by work at home and COVID related social distancing practices than other segments of the loan portfolio.
CRE Portfolio Breakdown by Collateral
($ in thousands)Collateral Type Amount Percent of CRE Portfolio Percent of Total Loan Portfolio Office buildings $ 74,067 16 % 6 % Medical/dental offices 64,081 14 6 Other retail buildings 40,775 9 4 Hotels/motels 26,481 6 2 Restaurants 25,120 5 2 Nursing homes 18,990 4 2 Shopping centers 14,341 3 1 Churches 12,214 3 1 Additional CRE 185,897 40 16 Total CRE $ 461,966 100 % 40 % Within Timberland’s commercial business loan portfolio (non-CRE) resides a segment of restaurant loans totaling $10.96 million in outstanding balances at March 31, 2021. As additional security for these loans, Timberland holds cash collateral of 25% of the segment’s associated outstanding loan balances. Unless prior arrangements are made, and Timberland consents, loans falling more than four weeks delinquent are eligible for purchase from Timberland’s portfolio in accordance with a Marketing and Servicing Agreement in existence since March 6, 2014.
Timberland originated $167.15 million in loans (including $58.70 million of SBA PPP loans) during the quarter ended March 31, 2021, compared to $100.47 million for the comparable quarter one year ago and $156.57 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 SBA loans. During the current quarter, fixed-rate one- to four-family mortgage loans totaling $41.29 million were sold compared to $27.49 million for the comparable quarter one year ago and $43.84 million for the preceding quarter.
Timberland’s investment securities and CDs held for investment increased $5.41 million, or 4%, to $146.28 million at March 31, 2021, from $140.87 million at December 31, 2020. The increase was primarily due to the purchase of additional mortgage-backed investment securities and was partially offset by CDs maturing during the quarter.Timberland’s liquidity continues to remain strong. Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment, and available for sale investment securities, was 36.1% of total liabilities at March 31, 2021, compared to 33.4% at December 31, 2020, and 25.5% one year ago.
Deposits
Total deposits increased $106.74 million, or 8%, during the current quarter to $1.48 billion at March 31, 2021, from $1.38 billion at December 31, 2020. The quarter’s increase consisted of a $61.59 million increase in non-interest-bearing account balances, a $23.78 million increase in savings account balances, a $16.65 million increase in NOW checking account balances and a $13.67 million in money market account balances. These increases were partially offset by an $8.95 million decrease in certificates of deposit account balances.
Deposit Breakdown
($ in thousands)March 31, 2021 December 31, 2020 March 31, 2020 Amount Percent Amount Percent Amount Percent Non-interest-bearing demand $ 499,541 34 % $ 437,953 32 % $ 316,328 28 % NOW checking 403,811 27 387,158 28 308,165 27 Savings 250,736 17 226,955 16 182,321 16 Money market 171,896 11 158,928 12 133,839 12 Money market – reciprocal 13,094 1 12,389 1 11,794 1 Certificates of deposit under $250 119,388 8 124,789 9 138,906 13 Certificates of deposit $250 and over 23,393 2 26,944 2 31,088 3 Certificates of deposit – brokered -- -- -- -- 3,207 -- Total deposits $ 1,481,859 100 % $ 1,375,116 100 % $ 1,125,648 100 % Shareholders’ Equity and Capital Ratios
Total shareholders’ equity increased $5.22 million, or 3%, to $198.54 million at March 31, 2021, from $193.33 million at December 31, 2020. The increase in shareholders’ equity was primarily due to net income of $7.25 million for the quarter, which was partially offset by the payment of $2.58 million in dividends to shareholders. On February 24, 2021, the Company announced a new stock repurchase program. Under the new repurchase program, the Company may repurchase up to 5% of the Company’s outstanding shares, or 415,970 shares. The new stock repurchase program replaced the existing stock repurchase program, which had 141,952 shares available to be repurchased. There were no shares repurchased during the quarter ended March 31, 2021.
Timberland remains well capitalized with a total risk-based capital ratio of 20.72% and a Tier 1 leverage capital ratio of 11.19% at March 31, 2021.
Asset Quality and Loan Deferrals
Timberland’s non-performing assets to total assets ratio improved to 0.16% at March 31, 2021 from 0.38% one year ago and 0.19% at December 31, 2020. There were net recoveries of $2,000 for the current quarter compared to net recoveries of $18,000 for the preceding quarter and net recoveries of $8,000 for the comparable quarter one year ago. No provisions for loan losses were made during the current and preceding quarters compared to a $2.0 million provision for loan losses for the comparable quarter one year ago.
Timberland continues to work with borrowers affected by the COVID-19 pandemic with loan deferral and forbearance plans. As of June 30, 2020, Timberland had granted deferrals (primarily 90-day payment deferrals with interest continuing to accrue or be paid monthly) for loans with balances aggregating to $135.83 million (13.4% of net loans receivable). However, the vast majority of borrowers that were granted deferrals have resumed making regular payments and as of March 31, 2021, only eight loans with balances totaling $12.88 million (1.3% of net loans receivable) remained on deferral status. The following table details the COVID-19 loan modifications still on deferral status as of March 31, 2021:
COVID-19 Loan Modifications
($ in thousands)
Industry / Collateral TypeAmount Percent of
Net Loans ReceivableHotel $ 8,789 0.85 % Industrial warehouse 2,385 0.23 Construction – commercial (hotel) 1,517 0.15 Restaurant 142 0.02 Entertainment facility 33 -- Other consumer 18 -- Total loan modifications $ 12,884 1.25 % The allowance for loan losses (“ALL”) as a percentage of loans receivable was 1.29% at March 31, 2021 compared to 1.29% one year ago and 1.32% at December 31, 2020. If PPP loans, which are 100% SBA guaranteed, are excluded, the ALL to loans receivable (excluding PPP loans) at March 31, 2021 was 1.48% (non-GAAP).
The ALL as a percentage of loans receivable is also impacted by the loans acquired in the South Sound Acquisition. Included in the recorded value of loans acquired in acquisitions are net discounts which may reduce the need for an allowance for loan losses on such loans because they are carried at an amount below their outstanding principal balance. The initial recorded value of loans acquired in the South Sound Acquisition was $123.62 million and the related fair value discount was $2.08 million, or 1.68% of the loans acquired. The remaining fair value discount on loans acquired in the South Sound Acquisition was $583,000 at March 31, 2021. The allowance for loan losses to loans receivable (excluding PPP loan balances and the remaining aggregate balance of the loans acquired in the South Sound Acquisition) was 1.56% (non-GAAP) at March 31, 2021.
The following table details the ALL as a percentage of loans receivable:
March 31, Dec. 31, March 31, 2021 2020 2020 ALL to loans receivable 1.29 % 1.32 % 1.29 % ALL to loans receivable (excluding PPP loans) (non-GAAP) 1.48 % 1.46 % 1.29 % ALL to loans receivable (excluding PPP loans and South Sound
Acquisition loans) (non-GAAP)
1.56
%
1.56
%
1.42
%Total delinquent loans (past due 30 days or more) and non-accrual loans increased $495,000, or 14%, to $3.93 million at March 31, 2021, from $3.43 million one year ago, and increased $1.11 million, or 39%, from $2.82 million at December 31, 2020. Non-accrual loans decreased $911,000, or 28%, to $2.31 million at March 31, 2021 from $3.22 million one year ago and decreased $276,000, or 11%, from $2.58 million at December 31, 2020.
Non-Accrual Loans
($ in thousands)March 31, 2021 December 31, 2020 March 31, 2020 Amount Quantity Amount Quantity Amount Quantity Mortgage loans: One- to four-family $ 415 2 $ 419 2 $ 941 5 Commercial 643 2 643 3 947 3 Land 173 2 405 4 193 2 Total mortgage loans 1,231 6 1,467 9 2,081 10 Consumer loans Home equity and second mortgage 539 6 607 7 581 6 Other 8 1 9 1 11 1 Total consumer loans 547 7 616 8 592 7 Commercial business loans 527 7 498 8 543 8 Total loans $ 2,305 20 $ 2,581 25 $ 3,216 25 OREO and other repossessed assets decreased 90% to $157,000 at March 31, 2021, from $1.62 million at March 31, 2020, and decreased 41% from $268,000 at December 31, 2020. At March 31, 2021, the OREO and other repossessed asset portfolio consisted of three individual land parcels. During the quarter ended March 31, 2021, one OREO property was sold, resulting in a $71,000 gain.
OREO and Other Repossessed Assets
($ in thousands)March 31, 2021 December 31, 2020 March 31, 2020 Amount Quantity Amount Quantity Amount Quantity Land $ 157 3 $ 268 4 $ 1,623 10 Total $ 157 3 $ 268 4 $ 1,623 10
Acquisition of South Sound Bank
On October 1, 2018, the Company completed the acquisition of South Sound Bank, a Washington-state chartered bank, headquartered in Olympia, Washington (“South Sound Acquisition”). The Company acquired 100% of the outstanding common stock of South Sound Bank, and South Sound Bank was merged into Timberland Bank and the Company. Pursuant to the terms of the merger agreement, South Sound Bank shareholders received 0.746 of a share of the Company’s common stock and $5.68825 in cash per share of South Sound Bank common stock. The Company issued 904,826 shares of its common stock (valued at $28,267,000 based on the Company’s closing stock price on September 30, 2018 of $31.24 per share) and paid $6,903,000 in cash in the transaction for total consideration paid of $35,170,000.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 24 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. These statements relate to our financial condition, results of operations, plan, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions 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 economic 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 or implied by our forward-looking statements, including, but not limited to: the effect of the novel coronavirus of 2019 (“COVID-19”) pandemic, including the Company’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; 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 which 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; uncertainty regarding the future of the London Interbank Offered Rate (“LIBOR”), and the potential transition away from LIBOR toward new interest rate benchmarks; 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 Federal Reserve 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 against us or our bank subsidiary which could 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 on us, any of 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 implementing regulations; our ability to attract and retain deposits; 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 work force and potential associated charges; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; 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 (“FASB”), 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 including the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), the Consolidated Appropriations Act, 2021 (“CAA”), and the American Rescue Plan Act of 2021; 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 do not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements included in this report to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements 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. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur and we caution readers not to place undue reliance on any forward-looking statements. These risks could cause our actual results for fiscal 2021 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 consolidated financial condition and results of operations as well as its stock price performance.
TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOMEThree Months Ended ($ in thousands, except per share amounts) March 31, Dec. 31, March 31, (unaudited) 2021 2020 2020 Interest and dividend income Loans receivable $ 12,791 $ 13,318 $ 12,823 Investment securities 284 301 489 Dividends from mutual funds, FHLB stock and other investments 28 28 35 Interest bearing deposits in banks 258 310 784 Total interest and dividend income 13,361 13,957 14,131 Interest expense Deposits 764 904 1,243 Borrowings 29 29 8 Total interest expense 793 933 1,251 Net interest income 12,568 13,024 12,880 Provision for loan losses -- -- 2,000 Net interest income after provision for loan losses 12,568 13,024 10,880 Non-interest income Service charges on deposits 941 1,055 1,078 ATM and debit card interchange transaction fees 1,237 1,156 1,015 Gain on sales of loans, net 1,758 2,002 736 Bank owned life insurance (“BOLI”) net earnings 146 149 147 Servicing income (expense) on loans sold, net (10 ) 15 62 Valuation recovery (allowance) on servicing rights, net 438 (236 ) -- Recoveries on investment securities, net 3 5 3 Other 373 413 639 Total non-interest income, net 4,886 4,559 3,680 Non-interest expense Salaries and employee benefits 4,778 4,613 4,621 Premises and equipment 998 957 943 Gain on disposition of premises and equipment, net -- -- (3 ) Advertising 155 156 159 OREO and other repossessed assets, net (68 ) (26 ) 51 ATM and debit card processing 445 431 359 Postage and courier 150 138 145 State and local taxes 255 283 233 Professional fees 181 231 210 FDIC insurance expense 105 96 -- Loan administration and foreclosure 90 80 78 Data processing and telecommunications 635 606 515 Deposit operations 245 284 274 Amortization of core deposit intangible (“CDI”) 90 90 102 Other, net 492 471 599 Total non-interest expense, net 8,551 8,410 8,286 Income before income taxes 8,903 9,173 6,274 Provision for income taxes 1,652 1,883 1,225 Net income $ 7,251 $ 7,290 $ 5,049 Net income per common share: Basic $ 0.87 $ 0.88 $ 0.61 Diluted 0.86 0.87 0.60 Weighted average common shares outstanding: Basic 8,331,121 8,313,493 8,344,201 Diluted 8,444,798 8,412,744 8,456,659 TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOMESix Months Ended ($ in thousands, except per share amounts) March 31, March 31, (unaudited) 2021 2020 Interest and dividend income Loans receivable $ 26,108 $ 25,587 Investment securities 585 928 Dividends from mutual funds, FHLB stock and other investments 55 72 Interest bearing deposits in banks 569 1,735 Total interest and dividend income 27,317 28,322 Interest expense Deposits 1,668 2,432 Borrowings 58 8 Total interest expense 1,726 2,440 Net interest income 25,591 25,882 Provision for loan losses -- 2,200 Net interest income after provision for loan losses 25,591 23,682 Non-interest income Service charges on deposits 1,996 2,278 ATM and debit card interchange transaction fees 2,393 2,109 Gain on sales of loans, net 3,760 1,688 Bank owned life insurance (“BOLI”) net earnings 295 294 Servicing income on loans sold, net 5 136 Valuation recovery (allowance) on servicing rights, net 202 (23 ) Recoveries on investment securities, net 8 106 Other 786 1,030 Total non-interest income, net 9,445 7,618 Non-interest expense Salaries and employee benefits 9,391 9,343 Premises and equipment 1,955 1,837 Gain on disposition of premises and equipment, net -- (102 ) Advertising 311 342 OREO and other repossessed assets, net (94 ) 50 ATM and debit card processing 876 799 Postage and courier 287 279 State and local taxes 538 449 Professional fees 412 480 FDIC insurance expense (credit) 201 (27 ) Loan administration and foreclosure 171 167 Data processing and telecommunications 1,240 1,099 Deposit operations 529 591 Amortization of core deposit intangible (“CDI”) 180 203 Other, net 964 1,149 Total non-interest expense, net 16,961 16,659 Income before income taxes 18,075 14,641 Provision for income taxes 3,534 2,940 Net income $ 14,541 $ 11,701 Net income per common share: Basic $ 1.75 $ 1.40 Diluted 1.73 1.38 Weighted average common shares outstanding: Basic 8,322,210 8,342,828 Diluted 8,428,595 8,465,894 TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31, 2021 2020 2020 Assets Cash and due from financial institutions $ 21,707 $ 24,226 $ 22,862 Interest-bearing deposits in banks 411,635 325,987 145,286 Total cash and cash equivalents 433,342 350,213 168,148 Certificates of deposit (“CDs”) held for investment, at cost 39,674 49,629 82,472 Investment securities: Held to maturity, at amortized cost 36,465 24,509 36,667 Available for sale, at fair value 69,184 65,762 41,470 Investments in equity securities, at fair value 957 974 969 FHLB stock 2,303 1,922 1,922 Other investments, at cost 3,000 3,000 3,000 Loans held for sale 8,455 10,871 5,798 Loans receivable 1,044,117 1,020,741 919,547 Less: Allowance for loan losses (13,434 ) (13,432 ) (11,890 ) Net loans receivable 1,030,683 1,007,309 907,657 Premises and equipment, net 22,763 22,753 23,072 OREO and other repossessed assets, net 157 268 1,623 BOLI 21,891 21,745 21,299 Accrued interest receivable 4,471 4,490 3,595 Goodwill 15,131 15,131 15,131 CDI 1,444 1,535 1,828 Servicing rights, net 3,604 3,036 2,724 Operating lease right-of-use assets 2,436 2,512 2,759 Other assets 3,284 2,746 2,967 Total assets $ 1,699,244 $ 1,588,405 $ 1,323,101 Liabilities and shareholders’ equity Deposits: Non-interest-bearing demand $ 499,541 $ 437,953 $ 316,328 Deposits: Interest-bearing 982,318 937,163 809,320 Total deposits 1,481,859 1,375,116 1,125,648 Operating lease liabilities 2,499 2,565 2,759 FHLB borrowings 10,000 10,000 10,000 Other liabilities and accrued expenses 6,343 7,399 6,686 Total liabilities 1,500,701 1,395,080 1,145,093 Shareholders’ equity Common stock, $.01 par value; 50,000,000 shares authorized;
8,361,457 shares issued and outstanding – March 31, 2021
8,317,793 shares issued and outstanding – December 31, 2020
8,309,193 shares issued and outstanding – March 31, 2020
42,949
42,480
42,258Retained earnings 155,473 150,801 135,929 Accumulated other comprehensive income (loss) 121 44 (179 ) Total shareholders’ equity 198,543 193,325 178,008 Total liabilities and shareholders’ equity $ 1,699,244 $ 1,588,405 $ 1,323,101
KEY FINANCIAL RATIOS AND DATAThree Months Ended ($ in thousands, except per share amounts) (unaudited) March 31, Dec 31, March 31, 2021 2020 2020 PERFORMANCE RATIOS: Return on average assets (a) 1.75 % 1.84 % 1.56 % Return on average equity (a) 14.89 % 15.39 % 11.39 % Net interest margin (a) 3.21 % 3.48 % 4.27 % Efficiency ratio 48.99 % 47.83 % 50.04 % Six Months Ended March 31, March 31, 2021 2020 PERFORMANCE RATIOS: Return on average assets (a) 1.80 % 1.84 % Return on average equity (a) 15.14 % 13.37 % Net interest margin (a) 3.34 % 4.35 % Efficiency ratio 48.41 % 49.73 % March 31, Dec 31, March 31, 2021 2020 2020 ASSET QUALITY RATIOS AND DATA: Non-accrual loans $ 2,305 $ 2,581 $ 3,216 Loans past due 90 days and still accruing -- -- -- Non-performing investment securities 188 205 238 OREO and other repossessed assets 157 268 1,623 Total non-performing assets (b) $ 2,650 $ 3,054 $ 5,077 Non-performing assets to total assets (b) 0.16 % 0.19 % 0.38 % Net charge-offs (recoveries) during quarter $ (2 ) $ (18 ) $ (8 ) ALL to non-accrual loans 583 % 520 % 370 % ALL to loans receivable (c) 1.29 % 1.32 % 1.29 % ALL to loans receivable (excluding PPP loans) (d) (non-GAAP) 1.48 % 1.46 % 1.29 % ALL to loans receivable (excluding PPP loans and South Sound Acquisition loans) (d) (e) (non-GAAP)
1.56
%
1.56
%
1.42
%Troubled debt restructured loans on accrual status (f) $ 2,864 $ 2,868 $ 2,877 CAPITAL RATIOS: Tier 1 leverage capital 11.19 % 11.36 % 12.75 % Tier 1 risk-based capital 19.47 % 20.23 % 18.53 % Common equity Tier 1 risk-based capital 19.47 % 20.23 % 18.53 % Total risk-based capital 20.72 % 21.48 % 19.78 % Tangible common equity to tangible assets (non-GAAP) 10.81 % 11.24 % 12.33 % BOOK VALUES: Book value per common share $ 23.75 $ 23.24 $ 21.42 Tangible book value per common share (g) 21.76 21.24 19.38 ________________________________________________
(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 PPP loans totaling $138,175, $103,468 and $0 at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
(e) Does not include loans acquired in the South Sound Acquisition totaling $46,626, $56,874 and $80,619 at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
(f) Does not include troubled debt restructured loans totaling $192, $197 and $343 reported as non-accrual loans at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
(g) Tangible common equity divided by common shares outstanding (non-GAAP).
AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
($ in thousands)
(unaudited)For the Three Months Ended March 31, 2021 December 31, 2020 March 31, 2020 Amount Rate Amount Rate Amount Rate Assets Loans receivable and loans held for sale $ 1,044,476 4.90 % $ 1,030,289 5.17 % $ 922,011 5.56 % Investment securities and FHLB stock (1) 101,675 1.23 94,033 1.40 81,925 2.56 Interest-earning deposits in banks and CDs 422,286 0.24 374,376 0.33 203,936 1.54 Total interest-earning assets 1,568,437 3.41 1,498,698 3.73 1,207,872 4.68 Other assets 85,203 84,077 85,226 Total assets $ 1,653,640 $ 1,582,775 $ 1,293,098 Liabilities and Shareholders’ Equity NOW checking accounts $ 394,612 0.16 % $ 377,760 0.19 % $ 303,403 0.31 % Money market accounts 178,768 0.30 168,503 0.33 143,817 0.58 Savings accounts 236,504 0.08 222,866 0.08 178,688 0.12 Certificates of deposit accounts 146,065 1.19 155,125 1.38 169,293 1.78 Total interest-bearing deposits 955,949 0.32 924,254 0.39 795,201 0.63 Borrowings 10,003 1.17 10,000 1.15 2,747 1.17 Total interest-bearing liabilities 965,952 0.33 934,254 0.40 797,948 0.63 Non-interest-bearing demand deposits 482,528 448,350 306,907 Other liabilities 10,365 10,687 10,982 Shareholders’ equity 194,795 189,484 177,261 Total liabilities and shareholders’ equity $ 1,653,640 $ 1,582,775 $ 1,293,098 Interest rate spread 3.08 % 3.33 % 4.05 % Net interest margin (2) 3.21 % 3.48 % 4.27 % Average interest-earning assets to average interest-bearing liabilities 162.37 % 160.42 % 151.37 % _____________________________________
(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, 2021 March 31, 2020 Amount Rate Amount Rate Assets Loans receivable and loans held for sale $ 1,037,304 5.03 % $ 916,931 5.58 % Investment securities and FHLB stock (1) 97,812 1.31 73,893 2.71 Interest-earning deposits in banks and CDs 398,067 0.29 200,107 1.73 Total interest-earning assets 1,533,183 3.56 1,190,931 4.76 Other assets 84,635 84,311 Total assets $ 1,617,818 $ 1,275,242 Liabilities and Shareholders’ Equity NOW checking accounts $ 386,093 0.17 % $ 299,884 0.30 % Money market accounts 173,579 0.31 138,758 0.57 Savings accounts 229,610 0.08 176,628 0.10 Certificates of deposit accounts 150,645 1.29 168,039 1.78 Total interest-bearing deposits 939,927 0.36 783,309 0.62 Borrowings 10,002 1.16 1,367 1.17 Total interest-bearing liabilities 949,929 0.36 784,676 0.62 Non-interest-bearing demand deposits 465,251 306,175 Other liabilities 10,528 9,394 Shareholders’ equity 192,110 174,997 Total liabilities and shareholders’ equity $ 1,617,818 $ 1,275,242 Interest rate spread 3.20 % 4.14 % Net interest margin (2) 3.34 % 4.35 % Average interest-earning assets to average interest-bearing liabilities 161.40 % 151.77 % _____________________________________
(1) Includes other investments
(2) Net interest margin = annualized net interest income /
average interest-earning assetsNon-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 and CDI. In addition, tangible assets equal total assets less goodwill and CDI.
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, 2021 December 31, 2020 March 31, 2020 Shareholders’ equity $ 198,543 $ 193,325 $ 178,008 Less goodwill and CDI (16,575 ) (16,666 ) (16,959 ) Tangible common equity $ 181,968 $ 176,659 $ 161,049 Total assets $ 1,699,244 $ 1,588,405 $ 1,323,101 Less goodwill and CDI (16,575 ) (16,666 ) (16,959 ) Tangible assets $ 1,682,669 $ 1,571,739 $ 1,306,142 Contact:
Michael R. Sand,
President & CEO
Dean J. Brydon, CFO
(360) 533-4747
www.timberlandbank.com
- Second Fiscal Quarter Net Income Increases 44% to $7.25 Million