News Details

Earns $0.13 Per Diluted Common Share in Fourth Fiscal Quarter

HOQUIAM, Wash.--(BUSINESS WIRE)-- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”) today reported earnings of $4.59 million for fiscal 2012 compared to earnings of $1.09 million for fiscal 2011. Net income available to common shareholders for fiscal 2012, after the preferred stock dividends and the preferred stock discount accretion, was $3.52 million, or $0.52 per diluted common share, compared to $32,000, or $0.00 per diluted common share for fiscal 2011.

Timberland reported net income of $1.15 million for its fiscal fourth quarter ended September 30, 2012. The quarter’s net income to common shareholders, after adjusting for the preferred stock dividend and the preferred stock discount accretion, was $883,000, or $0.13 per diluted common share, compared to net income of $1.08 million, or $0.16 per diluted common share for the quarter ended June 30, 2012 and a net loss of $(339,000), or $(0.05) per diluted common share for the quarter ended September 30, 2011.

“Profitability increased significantly year over year as historically low interest rates and the improving economy contributed to an increase in the gain on sale of loans and a reduction in provision expense,” said Michael R. Sand, President and CEO. “We will continue to focus on reducing non-performing assets and on maintaining the Bank’s net interest margin during the new fiscal year.”

Fiscal 2012 Highlights (at or for the period ended September 30, 2012, compared to September 30, 2011, or June 30, 2012):

• Fiscal 2012 net income increased to $4.59 million compared to $1.09 million for fiscal 2011;
• Fiscal 2012 earnings per diluted common share increased to $0.52 compared to $0.00 for fiscal 2011;
• Net income for the current quarter was $1.15 million compared to $1.35 million for the preceding quarter and a loss of $(73,000) for the comparable quarter one year ago;
• Earnings per diluted common share for current quarter was $0.13 compared to $0.16 for the preceding quarter and a loss of $(0.05) for the comparable quarter one year ago;
• Net interest margin was 3.83% for the current quarter and 3.81% for fiscal 2012;
• Total delinquent and non-accrual loans decreased 12% during the quarter and 30% year-over-year;
• Net charge-offs for the current quarter decreased 56% from the preceding quarter and decreased 58% from the comparable quarter one year ago;
• Capital levels remain very strong: Total Risk Based Capital of 16.77%; Tier 1 Leverage Capital Ratio of 11.66%; Tangible Capital to Tangible Assets Ratio of 11.55%; and
• Book value per common share increased to $10.52, and tangible book value per common share increased to $9.68 at year end.

Capital Ratios and Asset Quality

Timberland Bancorp remains very well capitalized with a total risk-based capital ratio of 16.77%, a Tier 1 leverage capital ratio of 11.66% and a tangible capital to tangible assets ratio of 11.55% at September 30, 2012. On August 21, 2012 Timberland received approval and paid $1.2 million in dividends on the preferred shares issued to the U.S. Treasury in December 2008. This payment brought Timberland current on all dividend payments owed. The dividend payment did not reduce Timberland’s reported capital ratios since appropriate accruals for the dividends were recorded in prior quarters. On November 1, 2012 the U.S. Treasury successfully auctioned the preferred shares it had purchased from Timberland in December 2008. The clearing price in the auction was $862.50 per preferred share. Upon the closing of the sale which is projected to occur prior to November 13, 2012, Timberland will no longer be a participant in the Treasury’s TARP program since the preferred shares will be owned by private investors. The sale of the preferred shares will have no effect on Timberland’s capital ratios as the terms of the preferred shares did not change in connection with the sale.

Timberland provisioned $900,000 to its loan loss allowance during the quarter ended September 30, 2012 compared to $900,000 in the preceding quarter and $1.76 million in the comparable quarter one year ago. In fiscal 2012, the loan loss provision totaled $3.50 million, down 48% from $6.76 million in fiscal 2011. Net charge-offs for the fourth fiscal quarter, decreased to $679,000 compared to $1.56 million for the preceding quarter and $1.60 million for the comparable quarter one year ago. Net charge-offs for fiscal 2012 decreased 40% to $3.62 million from $6.08 million for fiscal 2011.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 12% to $30.4 million at September 30, 2012 from $34.7 million at June 30, 2012 and decreased 30% from $43.7 million one year ago. The non-performing assets to total assets ratio was 5.19% at September 30, 2012 compared to 5.14% three months earlier and 5.01% one year ago.

Non-accrual loans decreased to $21.3 million at September 30, 2012 from $24.0 million at June 30, 2012 and $21.6 million at September 30, 2011. The non-accrual loans at September 30, 2012 were comprised of 58 loans and 47 credit relationships. By dollar amount per category: 43% of non-accrual loans are secured by land and land development properties; 28% are secured by commercial properties; 24% are secured by residential properties; and 5% are secured by residential construction projects.

Other real estate owned (“OREO”) and other repossessed assets increased to $13.3 million at September 30, 2012 from $10.0 million at June 30, 2012 and $10.8 million at September 30, 2011. At September 30, 2012 the OREO portfolio consisted of 56 individual properties. The properties consisted of eight commercial real estate properties totaling $6.5 million, 35 land parcels totaling $4.2 million, 12 single family homes totaling $1.7 million and a condominium project of $842,000. During the quarter ended September 30, 2012 ten OREO properties totaling $863,000 were sold for a net loss of $83,000.

Balance Sheet Management

Total assets increased by $7.8 million, or 1%, to $737.0 million at September 30, 2012 from $729.1 million at June 30, 2012. The increase in total assets was primarily due to a $7.6 million increase in total deposits which increased the amount of assets held in overnight funds.

Liquidity as measured by cash and cash equivalents, CDs held for investment and available for sale investments was 19.3% of total liabilities at September 30, 2012 compared to 18.9% at June 30, 2012 and 21.1% one year ago.

Net loans receivable increased $1.3 million to $538.5 million at September 30, 2012 from $537.2 million at June 30, 2012. The increase was primarily due to a $9.4 million increase in multi-family loan balances and a $7.8 million increase in construction and land development loans. “Our expertise in financing custom construction projects for owners and their contractors has been established for many years and we are benefitting from the emerging recovery in this segment of the market,” said Sand. These increases to net loans receivable were partially offset by a $3.5 million decrease in commercial business loan balances, a $2.6 million decrease in one-to four-family loan balances, a $2.3 million decrease in commercial real estate loan balances, a $1.6 million decrease in land loan balances, a $1.5 million decrease in consumer loan balances and a $4.1 million increase in the undisbursed portion of construction loans in process.

Timberland continued to reduce its exposure to land development and land loans. Land development loan balances decreased to $589,000 at September 30, 2012, a 73% decrease year-over-year. The Bank’s land loan portfolio decreased to $39.7 million at September 30, 2012, a 4% decrease from the preceding quarter and a 19% decrease year-over-year. The well diversified land loan portfolio consists of 314 loans on a variety of land types including individual building lots, acreage, raw land and commercially zoned properties. The average loan balance for the entire land portfolio was approximately $126,000 at September 30, 2012.

Timberland’s loan originations increased 8% to $69.0 million during the quarter ended September 30, 2012 compared to $63.6 million for the preceding quarter and increased 86% from the $37.1 million originated during the quarter one year ago. 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. During the quarter ended September 30, 2012, $28.5 million fixed-rate one-to four-family mortgage loans were sold compared to $21.2 million for the preceding quarter and $16.1 million for the comparable quarter ended one year ago.

Timberland’s mortgage-backed securities (“MBS”) and other investments decreased by $332,000 during the quarter to $8.3 million at September 30, 2012 from $8.6 million at June 30, 2012, primarily due to prepayments and scheduled amortization. During the quarter ended September 30, 2012, other-than-temporary-impairment (“OTTI”) credit related write-downs and realized losses of $25,000 were recorded on the private label MBS that were acquired in the in-kind redemption from the AMF family of mutual funds in June 2008. At September 30, 2012 the Bank’s remaining private label MBS portfolio had been reduced to $2.8 million from an original acquired balance of $15.3 million.

“Our deposit mix continues to improve through the transition to more transaction based accounts,” stated Dean Brydon, CFO. Total deposits increased $7.6 million, or 1% to $597.9 million at September 30, 2012, from $590.4 million at June 30, 2012 primarily as a result of a $5.7 million increase in money market account balances, a $5.3 million increase in non-interest bearing account balances and a $318,000 increase in N.O.W. checking account balances. These increases were partially offset by a $3.0 million decrease in certificate of deposit account balances and a $717,000 decrease in savings account balances.

Total shareholders’ equity increased $1.04 million to $90.32 million at September 30, 2012, from $89.28 million at June 30, 2012. The increase in shareholders’ equity was primarily a result of net income for the quarter. Book value per common share increased to $10.52 and tangible book value per common share increased to $9.68 at September 30, 2012.

Operating Results

Fiscal fourth quarter operating revenue (net interest income before provision for loan losses, plus non-interest income excluding OTTI charges and valuation allowances or recoveries on mortgage servicing rights (“MSRs”), increased less than 1% to $9.12 million from $9.09 million for the preceding quarter and 6% from the $8.61 million for the comparable quarter one year ago. For fiscal 2012, operating revenue increased 4% to $35.64 million from $34.16 million for fiscal 2011.

Net interest income decreased 3% to $6.46 million for the quarter ended September 30, 2012 from $6.63 million for the preceding quarter and increased 2% from $6.34 million for the comparable quarter one year ago. The net interest margin for the current quarter decreased to 3.83% from 3.96% for the preceding quarter and increased from 3.75% for the comparable quarter one year ago. The decrease in net interest income and net interest margin was primarily a result of a decrease in late fees received and deferred loan origination fees taken into income (and classified as interest income) on loans that paid off during the current quarter. Late fees received and deferred loan origination fees taken into income for the quarter ended September 30, 2012 decreased $134,000 relative to the total recorded for the quarter ended June 30, 2012. The decrease in late fees and loan origination fees impacted the net interest margin by approximately eight basis points. For fiscal 2012, net interest income increased 1% to $25.66 million from $25.43 million for fiscal 2011. Timberland’s net interest margin for the year ended September 30, 2112 increased to 3.81% from 3.78% for the year ended September 30, 2011.

Non-interest income increased 7% to $2.50 million for the quarter ended September 30, 2012, from $2.34 million in the preceding quarter and increased 34% from $1.86 million for the comparable quarter one year ago. The increase in non-interest income compared to the preceding quarter was primarily due to a $182,000 increase in gain on sale of loans, which was partially offset by $52,000 increase in the valuation allowance on the Bank’s MSRs. For fiscal 2012, non-interest income increased $1.1 million, or 13%, to $9.78 million from $8.68 million for fiscal 2011, primarily due to an increase in gain on sale of loans, an increase in ATM and debit card interchange fee income and a decrease in OTTI and realized losses on MBS and other investments. These increases to non-interest income were partially offset by a decrease in the valuation recovery on MSRs and a decrease in service charges on deposits.

Total operating (non-interest) expenses increased 10% to $6.68 million for the fourth fiscal quarter from $6.10 million for the preceding quarter and 1% from $6.63 million for the comparable quarter one year ago. The increased expenses for the current quarter compared to the preceding quarter were primarily the result of a $321,000 increase in OREO and other repossessed assets expense and a $119,000 increase in loan administration and foreclosure expenses. For fiscal 2012, operating expenses decreased 2% to $25.57 million from $25.96 million for fiscal 2011, primarily due to decreased salaries and employee benefits expense, FDIC insurance expense, other insurance expense and loan administration and foreclosure expense. These decreases were partially offset by increased OREO and other repossessed assets expense.

The provision for income taxes decreased to $230,000 for the quarter ended September 30, 2012, from $624,000 for the preceding quarter primarily due to lower income before income taxes and a $205,000 recovery to the deferred tax valuation allowance based on the expected implementation of certain tax planning strategies. The deferred tax valuation allowance relates to a capital loss carryforward on the sale of securities in fiscal 2008.

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 22 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. Forward-looking statements are not statements of historical fact 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 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, including, but not limited to: 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 and 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 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; 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, 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, which could adversely affect our liquidity and earnings; our compliance with regulatory enforcement actions, including regulatory memoranda of understandings (“MOUs”) to which we are subject; 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; our ability to attract and retain deposits; further increases in premiums for deposit insurance; 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 balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, the interpretation of regulatory capital or other rules and any changes in the rules applicable to institutions participating in the TARP Capital Purchase Program; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; 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, 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; 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 undertake no obligation to publicly update or revise any forward-looking statements included in this report 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. We caution readers not to place undue reliance on any forward-looking statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2013 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 operations and stock price performance.

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(a) Includes loans and MBS on non-accrual status

Timberland Bancorp, Inc.
Michael R. Sand, President & CEO
Dean J. Brydon, CFO
360-533-4747
www.timberlandbank.com

Source: Timberland Bancorp, Inc.