Skip to main content

Market Overview

Timberland Bancorp's First Fiscal Quarter Earnings Per Share Increases 12% to $0.87

Share:

Announces a 5% Increase in the Quarterly Cash Dividend and a $0.10 Special Dividend

  • First Fiscal Quarter Net Income Increases 10% to $7.29 Million
  • Quarterly Return on Average Assets of 1.84%
  • Quarterly Return on Average Equity of 15.39%

HOQUIAM, Wash., Jan. 25, 2021 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ:TSBK) ("Timberland" or "the Company") today reported net income increased 10% to $7.29 million for the quarter ended December 31, 2020 from $6.65 million for the comparable quarter one year ago and increased 15% from $6.36 million for the preceding quarter. Earnings per diluted common share ("EPS") increased 12% to $0.87 for the current quarter from $0.78 for the comparable quarter one year ago and increased 14% from $0.76 for the preceding quarter.

Timberland's Board of Directors announced a $0.01 increase (5%) in the quarterly cash dividend to shareholders to $0.21 per common share and a special cash dividend of $0.10 per common share. Both dividends are payable on February 26, 2021, to shareholders of record on February 12, 2021.

"We are pleased to report record quarterly income and continued strong financial metrics for our first fiscal quarter," stated Michael Sand, President and CEO.  "We are encouraged the vast majority of our borrowers are effectively managing through a difficult economy over which COVID-19 continues to cast a shadow.  We are also encouraged by the possibility of vaccine availability during the next several months and the potential for hard hit individuals and businesses to begin recovering financially from very challenging circumstances."

"In support of businesses and their employees in our communities, staff members have worked diligently to process and file Paycheck Protection Program ("PPP") applications for forgiveness," said Sand.  During the quarter, PPP loan balances decreased $23.4 million with nearly all forgiveness applicants obtaining full forgiveness from the Small Business Administration ("SBA").  We continue to actively submit forgiveness requests in support of our clients and have begun accepting applications from businesses seeking support from the newly authorized round of PPP financing.  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 will actively participate in this extended program in order to provide needed support to businesses in our communities."

"During the quarter we continued to work with COVID-19 affected borrowers to appropriately defer loans to provide them with economic relief.  We have found the number of deferral requests to be modest.  At December 31, 2020 we had 12 loans remaining in a deferred payment status representing approximately 1.43% of net loans outstanding.  Borrowers were paying interest monthly on 8 of these 12 deferred loans."

First Fiscal Quarter 2021 Earnings and Balance Sheet Highlights (at or for the period ended December 31, 2020, compared to December 31, 2019 or September 30, 2020):
  
Earnings Highlights:

  • Net income increased to $7.29 million for the current quarter from $6.36 million for the preceding quarter and $6.65 million for the comparable quarter one year ago; EPS increased to $0.87 for the current quarter from $0.76 for the preceding quarter and $0.78 for the comparable quarter one year ago;
  • Return on average equity ("ROE") and return on average assets ("ROA") for the current quarter were 15.39% and 1.84%, respectively;
  • Net interest margin was 3.48% for the current quarter compared to 3.44% for the preceding quarter and 4.43% for the comparable quarter one year ago; and
  • The efficiency ratio improved to 47.83% from 50.73% for the preceding quarter and 49.43% for the comparable quarter one year ago.

Balance Sheet Highlights:

  • Total assets increased 25% year-over-year and 1% from the prior quarter;
  • Total deposits increased 27% year-over-year and 1% from the prior quarter;
  • Net loans receivable increased 10% year-over-year and decreased slightly from the prior quarter;
  • Non-performing assets to total assets improved to 0.19%; and
  • Book and tangible book (non-GAAP) values per common share increased to $23.24 and $21.24, respectively, at December 31, 2020.

Operating Results

Operating revenue (net interest income before the provision for loan losses plus non-interest income) increased 4% to $17.58 million for the first fiscal quarter from $16.94 million for the comparable quarter one year ago and increased 2% from $17.24 million for the preceding quarter.

Net interest income increased 4% to $13.02 million for the current quarter from $12.52 million for the preceding quarter and increased slightly (less than 1%) from $13.00 million for the comparable quarter one year ago.   Timberland's net interest margin ("NIM") for the current quarter was 3.48% compared to 3.44% for the preceding quarter and 4.43% for the comparable quarter one year ago.   The NIM for the current 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 preceding quarter was increased by approximately ten basis points due to the accretion of $173,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $181,000 in pre-payment penalties, non-accrual interest and late fees. The NIM for the comparable quarter one year ago was increased by approximately 13 basis points due to the accretion of $146,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $233,000 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 have loan origination fees, which are accreted into interest income over the life of each loan. During the quarter ended December 31, 2020, Timberland recorded $295,000 in interest income on PPP loans and accreted $1.14 million in PPP loan origination fees into income.   During the quarter ended September 30, 2020, Timberland recorded $316,000 in interest income on PPP loans and accreted $599,000 in PPP loan origination fees into income.   At December 31, 2020, Timberland had $2.58 million in PPP deferred loan origination fees remaining to be accreted into interest income during the remaining life of the loans.

No provision for loan losses was made during the current quarter compared to a $500,000 provision for loan losses for the preceding quarter and a $200,000 provision for loan losses for the comparable quarter one year ago.

Non-interest income increased 16% to $4.56 million for the current quarter from $3.94 million for the comparable quarter one year ago and decreased 3% from $4.72 million for the preceding quarter. The decrease in non-interest income compared to the preceding quarter was primarily due to a $147,000 decrease in gain on sales of loans and smaller decreases in several other categories. 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. Also affecting non-interest income for the current quarter was a $236,000 valuation allowance on servicing rights, which was primarily due to prepayment speeds increasing on mortgages being serviced in the current low interest rate environment.

Total operating expenses for the current quarter decreased 4% to $8.41 million from $8.74 million for the preceding quarter and increased slightly (less than 1%) from $8.37 million for the comparable quarter one year ago.   The decrease in operating expenses compared to the preceding quarter was primarily due to a $241,000 decrease in OREO expense, a $111,000 decrease in professional fees and smaller decreases in several other expense categories. These decreases were partially offset by a $175,000 increase in salaries and employee benefits and smaller increases in several other expense categories. The decrease in OREO expense was primarily due to a market value write-down in the preceding quarter and expense recoveries in the current quarter. The decrease in professional fees was primarily due to the timing of several consulting and auditing engagements that increased expenses in the preceding quarter. The increase in salaries and employee benefits was primarily due to annual salary adjustments that became effective in October 2020.   The efficiency ratio for the current quarter improved to 47.83% from 50.73% for the preceding quarter and 49.43% for the comparable quarter one year ago.

The provision for income taxes for the current quarter increased $248,000 to $1.88 million from $1.64 million for the preceding quarter, primarily due to higher income before income taxes.   Timberland's effective income tax rate was 20.5% for both the quarter ended December 31, 2020 and the quarter ended September 30, 2020.

Balance Sheet Management

Total assets increased $22.43 million, or 1%, to $1.59 billion at December 31, 2020 from $1.57 billion at September 30, 2020. The increase was primarily due to an increase in total cash and cash equivalents, which was partially offset by a decrease in CDs held for investment. The increase in total assets was funded primarily by an increase in total deposits and by retained net income.

Loans

Net loans receivable decreased $6.57 million to $1.007 billion at December 31, 2020 from $1.014 billion at September 30, 2020. The decrease during the current quarter was primarily due to a $23.35 million decrease in PPP loan balances, and smaller decreases in several other categories.   These decreases were partially offset by a $10.10 million increase in commercial real estate mortgage loans, a $6.26 million decrease in the undisbursed portion of construction loans in process and smaller changes in several other categories.

Loan Portfolio
($ in thousands)

  December 31, 2020   September 30, 2020   December 31, 2019
  Amount   Percent   Amount   Percent   Amount   Percent
Mortgage loans:                      
One- to four-family (a) $ 115,613     10 %   $ 118,580     10 %   $ 129,373     13 %
Multi-family   89,413     8       85,053     8       78,326     8  
Commercial   463,670     41       453,574     40       439,024     44  
Construction - custom and                      
owner/builder   117,872     10       129,572   12       124,530     12  
Construction - speculative
one-to four-family
  20,291     2       14,592     1       18,764     2  
Construction - commercial   41,491     4       33,144     3       36,670     4  
Construction - multi-family   29,410     3       34,476     3       33,290     3  
Construction - land                      
development   6,943     1       7,712     1       1,656     --  
Land   22,635     2       25,571     2       29,419     3  
Total mortgage loans   907,338     81       902,274     80       891,052     89  
                       
Consumer loans:                      
Home equity and second                      
Mortgage   35,446     3       32,077     3       39,103     4  
Other   2,979     --       3,572     --       4,093     --  
Total consumer loans   38,425     3       35,649     3       43,196     4  
                       
Commercial loans:                      
Commercial business loans   71,257     7       69,540     6       73,790     7  
SBA PPP loans   103,468     9       126,820     11       --     --  
Total commercial loans   174,725     16       196,360     17       73,790     7  
Total loans   1,120,488     100 %     1,134,283     100 %     1,008,038     100 %
Less:                      
Undisbursed portion of                      
construction loans in                      
process   (94,298 )         (100,558 )         (82,172 )    
Deferred loan origination                      
fees   (5,449 )         (6,436 )         (2,834 )    
Allowance for loan losses   (13,432 )         (13,414 )         (9,882 )    
Total loans receivable, net $ 1,007,309         $ 1,013,875         $ 913,150      
                                   

_______________________
(a)   Does not include one- to four-family loans held for sale totaling $10,871, $4,509 and $5,420 at December 31, 2020, September 30, 2020 and December 31, 2019, 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   $ 76,817   17 %   7 %        
Medical/dental offices     62,965   14     6          
Other retail buildings     41,144   9     4          
Hotels/motels     27,223   6     2          
Restaurants     25,331   5     2          
Nursing homes     19,088   4     2          
Shopping centers     14,421   3     1          
Churches     12,384   2     1          
Additional CRE     184,297   40     16          
Total CRE   $ 463,670   100 %   41 %        
                           

Within Timberland's commercial business loan portfolio (non-CRE) resides a segment of restaurant loans totaling $13.53 million in outstanding balances at December 31, 2020. During the quarter, loan balances attributable to this segment decreased $3.29 million from the September 30, 2020 balance of $16.82 million. 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. As an accommodation, Timberland has agreed to temporarily extend the purchase requirement to 12 weeks before a purchase is required from the portfolio.  

Timberland originated $156.57 million in loans during the quarter ended December 31, 2020, compared to $132.55 million for the comparable quarter one year ago and $114.15 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 $43.84 million were sold compared to $34.56 million for the comparable quarter one year ago and $46.85 million for the preceding quarter.
        
Timberland's investment securities and CDs held for investment decreased $11.45 million, or 8%, to $140.87 million at December 31, 2020, from $152.32 million at September 30, 2020. The decrease was primarily due to CDs maturing during the quarter and was partially offset by the purchase of additional mortgage-backed investment securities.

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 33.4% of total liabilities at December 31, 2020, compared to 31.8% at September 30, 2020, and 21.3% one year ago.  

Deposits

Total deposits increased $16.71 million, or 1%, during the current quarter to $1.38 billion at December 31, 2020, from $1.36 billion at September 30, 2020. The quarter's increase consisted of a $10.26 million increase in NOW checking account balances, a $10.09 million increase in money market account balances, and a $7.09 million increase in savings account balances. These increases were partially offset by a $6.79 million decrease in certificates of deposit account balances and a $3.94 million decrease in non-interest-bearing demand account balances.

Deposit Breakdown
($ in thousands)
      December 31, 2020   September 30, 2020   December 31, 2019
      Amount   Percent   Amount   Percent   Amount   Percent
Non-interest-bearing demand     $437,953   32%     $441,889   32%     $297,676   27%  
NOW checking       387,158   28       376,899   28       303,493   28  
Savings       226,955   16       219,869   16       175,610   16  
Money market       158,928   12       149,922   11       134,131   13  
Money market – reciprocal       12,389   1       11,303   1       8,159   1  
Certificates of deposit under $250       124,789   9       129,579   10       133,271   12  
Certificates of deposit $250 and over       26,944   2       28,945   2       28,933   3  
Certificates of deposit – brokered       --   --       --   --       3,204   --  
Total deposits     $1,375,116   100%     $1,358,406   100%     $1,084,477   100%  
                                 

Shareholders' Equity and Capital Ratios

Total shareholders' equity increased $5.70 million to $193.33 million at December 31, 2020, from $187.63 million at September 30, 2020. The increase in shareholders' equity was primarily due to net income of $7.29 million for the quarter, which was partially offset by the payment of $1.66 million in dividends to shareholders and the repurchase of 2,900 shares of the Company's common stock for $58,000 (an average price of $20.04 per share). Timberland had 141,952 shares available to be repurchased under the existing stock repurchase plan at December 31, 2020.

Timberland remains well capitalized with a total risk-based capital ratio of 21.48% and a Tier 1 leverage capital ratio of 11.36% at December 31, 2020.

Asset Quality and Loan Deferrals

Timberland's non-performing assets to total assets ratio improved to 0.19% at December 31, 2020 from 0.39% one year ago and 0.27% at September 30, 2020. There were net recoveries of $18,000 for the current quarter compared to net recoveries of $20,000 for the preceding quarter and net charge-offs of $8,000 for the comparable quarter one year ago.   No provision for loan losses was made during the current quarter compared to a $500,000 provision for the preceding quarter and a $200,000 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 December 31, 2020, only 12 loans with balances totaling $14.39 million (1.4% of net loans receivable) remained on deferral status. The following table details the COVID-19 loan modifications still on deferral status as of December 31, 2020:

     COVID-19 Loan Modifications
                   ($ in thousands)


Industry / Collateral Type
 
Amount
  Percent of
Net Loans Receivable
Hotel   $ 7,086   0.70%  
Industrial warehouse     2,631   0.26  
Restaurant     1,964   0.20  
Construction – commercial (hotel)     1,439   0.14  
Church     1,067   0.11  
Entertainment facility     184   0.02  
Other consumer     18   --  
Total loan modifications   $ 14,389   1.43%  
             

The allowance for loan losses ("ALL") as a percentage of loans receivable increased to 1.32% at December 31, 2020 from 1.07% one year ago and 1.31% at September 30, 2020. If PPP loans, which are 100% SBA guaranteed, are excluded, the ALL to loans receivable (excluding PPP loans) at December 31, 2020 was 1.46% (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 $669,000 at December 31, 2020. 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 December 31, 2020.

The following table details the ALL as a percentage of loans receivable:

    Dec. 31,   Sept. 30,   Dec. 31,
    2020     2020     2019  
ALL to loans receivable   1.32 %   1.31 %   1.07 %
ALL to loans receivable (excluding PPP loans) (non-GAAP)   1.46 %   1.49 %   1.07 %
ALL to loans receivable (excluding PPP loans and South Sound Acquisition loans) (non-GAAP)   1.56 %   1.60 %   1.18 %

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased $1.05 million, or 27%, to $2.82 million at December 31, 2020, from $3.87 million one year ago, and decreased $926,000, or 25%, from $3.75 million at September 30, 2020.   Non-accrual loans decreased $489,000, or 16%, to $2.58 million at December 31, 2020 from $3.07 million one year ago and decreased $324,000, or 11%, from $2.91 million at September 30, 2020.

Non-Accrual Loans
($ in thousands)

  December 31, 2020   September 30, 2020   December 31, 2019
  Amount   Quantity   Amount   Quantity   Amount   Quantity
Mortgage loans:                      
One- to four-family $ 419   2   $ 659   3   $ 942   4
Commercial   643   3     858   4     736   3
Land   405   4     394   3     198   2
Total mortgage loans   1,467   9     1,911   10     1,876   9
                       
Consumer loans                      
Home equity and second                      
mortgage   607   7     555   6     581   6
Other   9   1     9   1     12   1
Total consumer loans   616   8     564   7     593   7
                       
Commercial business loans   498   8     430   6     601   9
Total loans $ 2,581   25   $ 2,905   23   $ 3,070   25
                             

OREO and other repossessed assets decreased 84% to $268,000 at December 31, 2020, from $1.66 million at December 31, 2019, and decreased 74% from $1.05 million at September 30, 2020. At December 31, 2020, the OREO and other repossessed asset portfolio consisted of four individual land parcels. During the quarter ended December 31, 2020, two OREO properties were sold, resulting in a $21,000 gain.

OREO and Other Repossessed Assets
($ in thousands)

  December 31, 2020   September 30, 2020   December 31, 2019
  Amount   Quantity   Amount   Quantity   Amount   Quantity
Land $ 268   4   $ 1,050   6   $ 1,659   11
Total $ 268   4   $ 1,050   6   $ 1,659   11
                             

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") and the Consolidated Appropriations Act, 2021 ("CAA"); 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 INCOME
  Three Months Ended
($ in thousands, except per share amounts)   Dec. 31,   Sept. 30,   Dec. 31,
(unaudited)     2020       2020       2019  
  Interest and dividend income            
  Loans receivable   $13,318     $12,884     $12,764  
  Investment securities     301       305       439  
  Dividends from mutual funds, FHLB stock and other investments     28       33       37  
    Interest bearing deposits in banks     310       371       951  
  Total interest and dividend income     13,957       13,593       14,191  
               
  Interest expense            
  Deposits     904       1,044       1,189  
  Borrowings     29       29       --  
  Total interest expense     933       1,073       1,189  
  Net interest income     13,024       12,520       13,002  
  Provision for loan losses     --       500       200  
  Net interest income after provision for loan losses     13,024       12,020       12,802  
               
  Non-interest income            
  Service charges on deposits     1,055       1,011       1,200  
  ATM and debit card interchange transaction fees     1,156       1,200       1,094  
  Gain on sales of loans, net     2,002       2,149       953  
  Bank owned life insurance ("BOLI") net earnings     149       149       147  
  Servicing income on loans sold     15       22       74  
  Valuation allowance on servicing rights, net     (236)       (197)       (23)  
  Recoveries on investment securities, net     5       7       103  
  Other     413       374       390  
  Total non-interest income, net     4,559       4,715       3,938  
               
  Non-interest expense            
  Salaries and employee benefits     4,613       4,438       4,722  
  Premises and equipment     957       1,048       894  
  Gain on disposition of premises and equipment, net     --       --       (99)  
  Advertising     156       138       183  
  OREO and other repossessed assets, net     (26)       215       (1)  
  ATM and debit card processing     431       425       440  
  Postage and courier     138       152       135  
  State and local taxes     283       293       216  
  Professional fees     231       342       269  
  FDIC insurance expense (credit)     96       88       (27)  
  Loan administration and foreclosure     80       89       89  
  Data processing and telecommunications     606       583       584  
  Deposit operations     284       278       317  
  Amortization of core deposit intangible ("CDI")     90       102       101  
  Other, net     471       552       550  
  Total non-interest expense, net     8,410       8,743       8,373  
               
  Income before income taxes     9,173       7,992       8,367  
  Provision for income taxes     1,883       1,635       1,715  
  Net income   $7,290     $6,357     $6,652  
               
  Net income per common share:            
  Basic   $0.88     $0.76     $0.80  
  Diluted     0.87       0.76       0.78  
               
  Weighted average common shares outstanding:            
  Basic     8,313,493       8,310,793       8,341,470  
  Diluted     8,412,744       8,379,170       8,475,029  


TIMBERLAND BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 
($ in thousands, except per share amounts) (unaudited)   Dec. 31,   Sept. 30,   Dec. 31,
      2020       2020       2019  
Assets            
Cash and due from financial institutions   $24,226     $21,877     $24,322  
Interest-bearing deposits in banks     325,987       292,575       94,529  
  Total cash and cash equivalents     350,213       314,452       118,851  
               
Certificates of deposit ("CDs") held for investment, at cost     49,629       65,545       76,249  
Investment securities:            
  Held to maturity, at amortized cost     24,509       27,890       39,080  
  Available for sale, at fair value     65,762       57,907       37,873  
Investments in equity securities, at fair value     974       977       953  
FHLB stock     1,922       1,922       1,437  
Other investments, at cost     3,000       3,000       3,000  
Loans held for sale     10,871       4,509       5,420  
             
Loans receivable     1,020,741       1,027,289       923,032  
Less: Allowance for loan losses     (13,432)       (13,414)       (9,882)  
  Net loans receivable     1,007,309       1,013,875       913,150  
               
Premises and equipment, net     22,753       23,035       22,588  
OREO and other repossessed assets, net     268       1,050       1,659  
BOLI     21,745       21,596       21,152  
Accrued interest receivable     4,490       4,484       3,665  
Goodwill     15,131       15,131       15,131  
CDI     1,535       1,625       1,930  
Servicing rights, net     3,036       3,095       2,599  
Operating lease right-of-use assets     2,512       2,587       2,823  
Other assets     2,746       3,298       2,982  
  Total assets   $1,588,405     $1,565,978     $1,270,542  
               
Liabilities and shareholders' equity            
Deposits: Non-interest-bearing demand   $437,953     $441,889     $297,676  
Deposits: Interest-bearing     937,163       916,517       786,801  
  Total deposits     1,375,116       1,358,406       1,084,477  
               
Operating lease liabilities     2,565       2,630       2,823  
FHLB borrowings     10,000       10,000       --  
Other liabilities and accrued expenses     7,399       7,312       7,589  
  Total liabilities     1,395,080       1,378,348       1,094,889  
             
Shareholders' equity            
Common stock, $.01 par value; 50,000,000 shares authorized;
         8,317,793 shares issued and outstanding – December 31, 2020
         8,310,793 shares issued and outstanding – September 30, 2020
        8,346,394 shares issued and outstanding – December 31, 2019
    42,480       42,396       43,246  
Retained earnings     150,801       145,173       132,553  
Accumulated other comprehensive income (loss)     44       61       (146)  
  Total shareholders' equity     193,325       187,630       175,653  
  Total liabilities and shareholders' equity   $1,588,405     $1,565,978     $1,270,542  
                           


KEY FINANCIAL RATIOS AND DATA           Three Months Ended
($ in thousands, except per share amounts) (unaudited)   Dec. 31,   Sept. 30,   Dec. 31,
      2020       2020       2019  
PERFORMANCE RATIOS:            
Return on average assets (a)     1.84%       1.65%       2.12%  
Return on average equity (a)     15.39%       13.78%       15.40%  
Net interest margin (a)     3.48%       3.44%       4.43%  
Efficiency ratio     47.83%       50.73%       49.43%  
             
ASSET QUALITY RATIOS AND DATA:            
Non-accrual loans   $2,581     $2,905     $3,070  
Loans past due 90 days and still accruing     --       --       --  
Non-performing investment securities     205       209       254  
OREO and other repossessed assets     268       1,050       1,659  
Total non-performing assets (b)   $3,054     $4,164     $4,983  
             
Non-performing assets to total assets (b)     0.19%       0.27%       0.39%  
Net charge-offs (recoveries) during quarter   $       (18)     $        (20)     $     8  
ALL to non-accrual loans     520%       462%       322%  
ALL to loans receivable (c)     1.32%       1.31%       1.07%  
ALL to loans receivable (excluding PPP loans) (d) (non-GAAP)     1.46%       1.49%       1.07%  
ALL to loans receivable (excluding PPP loans and South Sound Acquisition loans) (d) (e) (non-GAAP)     1.56%       1.60%       1.18%  
Troubled debt restructured loans on accrual status (f)   $2,868     $2,868     $2,894  
             
CAPITAL RATIOS:            
Tier 1 leverage capital     11.36%       11.26%       12.91%  
Tier 1 risk-based capital     20.23%       20.08%       18.31%  
Common equity Tier 1 risk-based capital           20.23%       20.08%       18.31%  
Total risk-based capital     21.48%       21.34%       19.47%  
Tangible common equity to tangible assets (non-GAAP)     11.24%       11.03%       12.65%  
             
BOOK VALUES:            
Book value per common share   $23.24       $22.58       $21.05  
Tangible book value per common share (g)     21.24       20.56       19.00  

________________________________________________

(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 PPP loans totaling $103,468, $126,820 and $0 at December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
(e) Does not include loans acquired in the South Sound Acquisition totaling $56,874, $63,721 and $85,365 at December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
(f) Does not include troubled debt restructured loans totaling $197, $203 and $354 reported as non-accrual loans at December 31, 2020, September 30, 2020 and December 31, 2019 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 
  December 31, 2020    September 30, 2020    December 31, 2019 
  Amount Rate   Amount Rate   Amount        Rate
                   
Assets                  
Loans receivable and loans held for sale $ 1,030,289   5.17 %   $ 1,031,689   5.00 %   $ 911,905     5.60 %
Investment securities and FHLB stock (1)   94,033   1.40       84,756   1.59             65,949     2.89  
Interest-earning deposits in banks and CDs   374,376   0.33       339,224   0.44       196,322     1.93  
Total interest-earning assets        1,498,698   3.73       1,455,669   3.74            1,174,176     4.83  
Other assets         84,077         87,140         83,405      
Total assets $ 1,582,775       $ 1,542,809       $ 1,257,581      
                   
Liabilities and Shareholders' Equity                  
NOW checking accounts $ 377,760   0.19 %   $ 360,622   0.23 %   $ 296,402     0.30 %
Money market accounts   168,503   0.33       159,951   0.38       133,755     0.56  
Savings accounts   222,866   0.08       214,080   0.09       174,590     0.08  
Certificates of deposit accounts   155,125   1.38       161,674   1.55       166,799     1.78  
Total interest-bearing deposits   924,254   0.39       896,327   0.47       771,546     0.61  
Borrowings   10,000   1.15       10,000   1.15       --     --  
Total interest-bearing liabilities   934,254   0.40       906,327   0.47       771,546     0.61  
                   
Non-interest-bearing demand deposits   448,350         440,950         305,452      
Other liabilities                 10,687         10,966         7,825      
Shareholders' equity   189,484         184,566         172,758      
Total liabilities and shareholders' equity $ 1,582,775       $ 1,542,809       $ 1,257,581      
                   
Interest rate spread   3.33 %     3.27 %       4.22 %
Net interest margin (2)   3.48 %     3.44 %       4.43 %
Average interest-earning assets to                  
average interest-bearing liabilities   160.42 %       160.61 %       152.18 %    
                               

           _____________________________________
(1) Includes other investments
(2) Net interest margin = annualized net interest income / average interest-earning assets

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 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)   December 31, 2020   September 30, 2020   December 31, 2019
             
Shareholders' equity   $ 193,325     $ 187,630     $ 175,653  
Less goodwill and CDI     (16,666 )     (16,756 )     (17,061 )
Tangible common equity   $ 176,659     $ 170,874     $ 158,592  
             
Total assets   $ 1,588,405     $ 1,565,978     $ 1,270,542  
Less goodwill and CDI     (16,666 )     (16,756 )     (17,061 )
Tangible assets   $ 1,571,739     $ 1,549,222     $ 1,253,481  
                         

Contact: Michael R. Sand,
President & CEO
Dean J. Brydon, CFO                      
(360) 533-4747
www.timberlandbank.com


Primary Logo

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com