Market Overview

Timberland Bancorp Earnings Per Share Increases 12% to $0.48 for First Fiscal Quarter of 2018

Share:
  • Increases Quarterly Cash Dividend by 18%
  • Increases Net Income 15%
  • Increases Operating Revenue 9%
  • Writes Down Net Deferred Tax Asset by $548,000 Reducing EPS by $0.07

HOQUIAM, Wash., Jan. 22, 2018 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company") today reported net income of $3.61 million, or $0.48 per diluted common share, for its first fiscal quarter ended December 31, 2017. This compares to net income of $3.15 million, or $0.43 per diluted common share, for the quarter ended December 31, 2016, and net income of $3.62 million, or $0.48 per diluted common share for the preceding quarter ended September 30, 2017.

Timberland's Board of Directors also announced an 18% increase in the quarterly cash dividend to shareholders to $0.13 per common share, payable on February 28, 2018 to shareholders of record on February 14, 2018. 

"The recently enacted tax reform legislation will materially reduce Timberland's 2018 fiscal year income tax expense.  Fiscal year companies, such as Timberland, were able to use a reduced tax rate for the recently completed December quarter," said Michael Sand, President and CEO.  "For the December quarter, a blended tax rate of 24.5% was applicable to the Company's current taxable income rather than the previously employed 35% rate.  This blended rate will also apply to the Company's taxable income for each of the next three quarters, after which the Company will cease using the blended rate and revert to the newly legislated 21% corporate tax rate.  During the quarter, the Company incurred a one-time tax expense of $548,000 to write down its net deferred tax asset and that expense was fully offset by a $551,000 tax benefit gained by using the blended rate.  We have continued to grow our franchise by increasing loans and deposits, expanding net interest margin and maintaining solid asset quality," stated Sand.  "Additionally, based on a number of factors including the Company's sustained strong financial performance, its Board of Directors voted to increase the quarterly cash dividend by 18% to $0.13 per share from the $0.11 per share dividend declared for each of the previous four quarters."

First Fiscal Quarter 2018 Earnings and Balance Sheet Highlights (at or for the period ended December 31, 2017, compared to December 31, 2016, or September 30, 2017):

   Earnings Highlights:

  • Net income increased 15% to $3.61 million from $3.15 million for the comparable quarter one year ago;
  • Earnings per diluted common share ("EPS") increased 12% to $0.48 from $0.43 for the comparable quarter one year ago;
  • Return on average equity and return on average assets for the current quarter remained strong at 12.90% and 1.50%, respectively;
  • Operating revenue increased 9% from the comparable quarter one year ago and 3% from the preceding quarter; and
  • Net interest margin improved to 4.19% from 3.91% for the comparable quarter one year ago and from 4.18% for the preceding quarter.

   Balance Sheet Highlights:

  • Increased total assets 8% year-over-year and 4% from the prior quarter;
  • Increased net loans receivable 5% year-over-year and 2% from the prior quarter;
  • Increased total deposits 11% year-over-year and 5% from the prior quarter;
  • Decreased non-performing assets 15% year-over-year and 4% from the prior quarter; and
  • Increased book and tangible book (non-GAAP) values per common share to $15.49 and $14.72, respectively, at December 31, 2017.

Operating Results

Operating revenue (net interest income before provision for loan losses, plus non-interest income excluding gains or losses on the sale of investment securities and recoveries or other than temporary impairment ("OTTI") charges on investment securities) increased 9% for the current quarter to $12.55 million from $11.53 million for the comparable quarter one year ago and increased 3% from $12.24 million for the preceding quarter. 

Net interest income for the current quarter increased 13% to $9.43 million from $8.31 million for the comparable quarter one year ago and increased 3% from $9.13 million for the preceding quarter.  The increases were primarily due to increases in average total interest-earning assets and increases in the yield earned on average total interest-earning assets.

The net interest margin ("NIM") for the current quarter improved to 4.19% from 3.91% for the comparable quarter one year ago and from 4.18% for the preceding quarter.  The NIM for the current quarter was increased by approximately two basis points due to the collection of $45,000 of non-accrual interest.  The NIM for the comparable quarter one year ago was increased by approximately one basis point due to the collection of $21,000 of non-accrual interest and the NIM for the preceding quarter was increased by less than one basis point due to the collection of $8,000 of non-accrual interest.   

Non-interest income decreased slightly to $3.14 million for the current quarter from $3.15 million for the preceding quarter and decreased 2% from $3.22 million for the comparable quarter one year ago.  The decreased non-interest income for the current quarter compared to the preceding quarter was primarily due to a decrease in the ATM and debit card interchange transaction fees, which was partially offset by an increase in gain on sales of loans.

Total operating expenses for the current quarter increased 4% to $7.18 million from $6.91 million for the preceding quarter and increased 5% from $6.81 million for the comparable quarter one year ago.  The increased expenses for the current quarter compared to the preceding quarter were primarily due to increases in the salaries and employee benefits and OREO and other repossessed assets categories.  The increase in salaries and employee benefits was primarily due to typical annual salary adjustments and the hiring of additional lending personnel.  The increase in OREO and other repossessed assets expense was primarily due to market value write-downs on two real estate properties and one personal property during the quarter.  The efficiency ratio for the current quarter was 57.08% compared to 56.31% for the preceding quarter and 59.07% for the comparable quarter one year ago.

The provision for income taxes for the current quarter increased to $1.78 million from $1.75 million for the preceding quarter, and was impacted by the Tax Cuts and Jobs Act Legislation which was signed into law on December 22, 2017.  As a result of the new legislation (which decreases the federal corporate income tax rate to 21.0% from 35.0%), Timberland recorded a one-time income tax expense of $548,000 in conjunction with writing down its net deferred tax asset ("DTA").   Since Timberland is a September 30th fiscal year-end corporation, it will use a blended tax rate of 24.5% for the fiscal year ending September 30, 2018 and then use a 21.0% rate thereafter.  The impact of using the 24.5% blended tax rate for the current quarter versus a 35.0% tax rate reduced the provision for income tax expense by approximately $551,000 and offset the one-time $548,000 DTA write-down.

Balance Sheet Management

Total assets increased $41.87 million, or 4%, during the first fiscal quarter to $993.90 million at December 31, 2017 from $952.02 million at September 30, 2017.  The increase was primarily due to a $28.51 million increase in cash and cash equivalents and CDs held for investment and a $14.90 million increase in net loans receivable which were funded by increased deposits. 

Liquidity, as measured by the sum of cash and cash equivalents, CDs held for investment and available for sale investment securities, was 25.1% of total liabilities at December 31, 2017, compared to 22.9% at September 30, 2017, and 23.1% one year ago. 

Net loans receivable increased $14.90 million, or 2%, to $705.27 million at December 31, 2017, from $690.36 million at September 30, 2017.  The increase was primarily due to a $5.72 million increase in custom and owner/builder one- to four-family construction loans, a $4.16 million increase in commercial real estate loans, a $3.27 million increase in multi-family construction loans, a $2.96 million decrease in the amount of undisbursed construction loans in process, a $2.76 million increase in multi-family mortgage loans, a $2.37 million increase in commercial construction loans and smaller increases in several other categories.  These increases were partially offset by a $2.79 million decrease in land loans, a $2.67 million decrease in speculative one- to four-family construction loans, a $1.17 million decrease in one- to four-family mortgage loans and smaller decreases in several other categories. 

 
LOAN PORTFOLIO
($ in thousands) December 31, 2017   September 30, 2017   December 31, 2016
  Amount   Percent   Amount   Percent   Amount   Percent
                       
Mortgage loans:                      
  One- to four-family (a) $   116,976     15 %   $   118,147     15 %   $  119,485     16 %
  Multi-family     61,366            8         58,607       7         52,062       7  
  Commercial     333,085       42         328,927       42         323,496       44  
  Construction - custom and                      
owner/builder     123,365       15         117,641         15          96,292       13  
  Construction - speculative
         one- to four-family
    7,253       1         9,918       1         6,133       1  
  Construction - commercial     22,000       3         19,630       3         8,627       1  
  Construction - multi-family     24,601       3         21,327       3         22,092       3  
  Land     21,122       2         23,910       3         22,359       3  
Total mortgage loans     709,768       89         698,107       89         650,546       88  
                       
Consumer loans:
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