News Details

Delinquencies Decrease, Net Interest Margin Stable, Capital Ratios Remain Strong

HOQUIAM, Wash.--(BUSINESS WIRE)-- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”) today reported fiscal 2012 second quarter net income of $808,000. Net income available to common shareholders, after adjusting for the preferred stock dividend and the preferred stock discount accretion was $540,000, or $0.08 per diluted common share. This compares to net income to common shareholders of $1.02 million, or $0.15 per diluted common share, for the quarter ended December 31, 2011 and net income to common shareholders of $819,000, or $0.12 per diluted common share, for the quarter ended March 31, 2011.

Net income of $2.09 million was recorded for first half of fiscal 2012 compared to net income of $2.44 million for the first six months of fiscal 2011. Net income available to common shareholders for the first half of fiscal 2012 after the preferred stock dividend and the preferred stock discount accretion was $1.56 million, or $0.23 per diluted common share, compared to $1.92 million, or $0.28 per diluted common share, in the like period one year ago.

“Our fiscal second quarter profits demonstrate the ongoing improvement in our core operations with both loans and deposits increasing, asset quality improving, capital levels remaining strong and net interest margin remaining stable,” said Michael R. Sand, President and Chief Executive Officer. “Our local economic recovery is gaining traction with accelerating shipments at the Port of Grays Harbor, where export vehicle volumes are expected to triple this year. In addition, the $367 million construction project to build the massive concrete pontoons for the floating bridge that connects Seattle and Bellevue is on schedule to complete the first six of the thirty-three sections this spring.”

Fiscal Second Quarter 2012 Highlights (at or for the period ended March 31, 2012, compared to March 31, 2011, or December 31, 2011):

• Recorded net income of $808,000;
• Earned $0.08 per diluted common share;
• Capital levels remain very strong: Total Risk Based Capital of 16.54%; Tier 1 Leverage Capital Ratio of 11.42%; Tangible Capital to Tangible Assets Ratio of 11.13%;
• Non-interest income increased 18% to $2.49 million from $2.11 million for the comparable quarter one year ago;
• Net interest margin remained strong at 3.72%;
• Total delinquent loans and non-accrual loans decreased 11% during the quarter and 17% year-over-year;
• Non-performing assets ratio improved to 5.40%;
• Total deposits increased $15 million during the quarter;
• Net loans increased $6 million during the quarter; and
• Book value per common share increased to $10.20, and tangible book value per common share was $9.35 at quarter end.

Capital Ratios and Asset Quality

Timberland Bancorp remains very well capitalized with a total risk-based capital ratio of 16.54%, a Tier 1 leverage capital ratio of 11.42% and a tangible capital to tangible assets ratio of 11.13% at March 31, 2012.

Timberland provisioned $1.05 million to its loan loss allowance during the quarter ended March 31, 2012 compared to $650,000 in the preceding quarter and $700,000 in the comparable quarter one year ago. Approximately $135,000 of the increased provision was attributable to the growth in the loan portfolio.

Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 11% to $44.0 million at March 31, 2012 from $49.1 million at December 31, 2011 and decreased 17% from $52.8 million one year ago. The non-performing assets to total assets ratio was 5.40% at March 31, 2012 compared to 5.55% three months earlier and 5.04% one year ago.

Non-accrual loans totaled $26.6 million at March 31, 2012 and were comprised of 64 loans and 56 credit relationships. By category: 41% of non-accrual loans are secured by land and land development properties; 36% are secured by commercial properties; 18% are secured by residential properties; 3% are secured by residential construction projects; and 2% are secured by commercial real estate construction projects.

Other real estate owned (“OREO”) and other repossessed assets increased by $310,000, or 4%, to $8.0 million at March 31, 2012 from $7.7 million at December 31, 2011 and decreased by 21% from $10.1 million at March 31, 2011. The OREO portfolio consisted of 51 individual properties and two other repossessed assets at March 31, 2012. The properties consisted of 35 land parcels totaling $4.2 million, 11 single family homes totaling $1.6 million, four commercial real estate properties totaling $1.4 million and a condominium project of $842,000. The two other repossessed assets totaled $44,000. During the quarter ended March 31, 2012, 11 OREO properties and other repossessed assets totaling $667,000 were sold for a net loss of $24,000.

Balance Sheet Management

Total assets increased by $6.9 million, or 1%, to $742.7 million at March 31, 2012 from $735.8 million at December 31, 2011. The increase in total assets was primarily the result of a $6.0 million increase in net loans receivable.

Liquidity as measured by cash and cash equivalents, CDs held for investment and available for sale investments was 20.9% of total liabilities at March 31, 2011 compared to 21.2% at December 31, 2011 and 22.0% one year ago.

Net loans receivable increased $6.0 million to $535.0 million at March 31, 2012 from $529.0 million at December 31, 2011. The increase was primarily due to a $9.5 million increase in commercial real estate loan balances and a $5.8 million decrease in the undisbursed portion of construction loans in process. These increases to net loans receivable were partially offset by a $4.9 million decrease in one-to four-family loan balances, a $1.6 million decrease in land loan balances, a $1.1 million decrease in consumer loan balances, a $734,000 decrease in construction and land development loan balances and a $545,000 decrease in commercial business loan balances.

Timberland continued reducing its exposure to land development and land loans. Land development loan balances decreased to $1.0 million at March 31, 2012, a 46% decrease from the preceding quarter and a 77% decrease year-over-year. The Bank’s land loan portfolio decreased to $44.6 million at March 31, 2012, a 4% decrease from the preceding quarter and a 23% decrease year-over-year. The well diversified land loan portfolio consists of 352 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 $127,000 at March 31, 2012.

Timberland’s loan originations decreased 2% to $50.4 million during the quarter ended March 31, 2012 compared to $51.6 million for the preceding quarter and increased 32% from the $38.3 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 March 31, 2012, $23.9 million fixed-rate one-to four-family mortgage loans were sold compared to $22.9 million for the preceding quarter and $11.4 million for the quarter ended one year ago.

Timberland’s mortgage-backed securities (“MBS”) and other investments decreased by $1.2 million during the quarter to $9.0 million at March 31, 2012 from $10.2 million at December 31, 2012, primarily due to the sale of a $722,000 agency MBS, prepayments and scheduled amortization. During the quarter ended March 31, 2012, other-than-temporary-impairment (“OTTI”) credit related write-downs and realized losses of $94,000 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 March 31, 2012 the Bank’s remaining private label MBS portfolio had been reduced to $3.0 million from an original acquired balance of $15.3 million.

Total deposits increased 3% to $604.6 million at March 31, 2012, from $589.2 million at December 31, 2011 primarily as a result of an $8.5 million increase in non-interest bearing account balances, a $4.3 million increase in savings account balances, a $3.1 million increase in money market account balances and a $1.8 million increase in N.O.W. checking account balances. These increases were partially offset by a $2.3 million decrease in certificates of deposit account balances.

Federal Home Loan Bank (“FHLB”) advances decreased by $10.0 million to $45.0 million at March 31, 2012 from $55.0 million at December 31, 2011 as two maturing advances were repaid.

Total shareholders’ equity increased $654,000 to $87.98 million at March 31, 2012, from $87.33 million at December 31, 2011. The increase in shareholders’ equity was primarily a result of net income for the quarter. Book value per common share was $10.20 and tangible book value per common share was $9.35 at March 31, 2012.

Operating Results

Fiscal second 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”)), totaled $8.72 million which was consistent with the $8.72 million total reported for the preceding quarter and an increase from the $8.29 million total reported for the comparable quarter one year ago.

Net interest income decreased to $6.27 million for the quarter ended March 31, 2012, from $6.30 million for the preceding quarter and from $6.35 million for the comparable quarter one year ago. The net interest margin for the current quarter of 3.72% decreased slightly from the 3.73% margin reported for the preceding quarter and the 3.78% margin reported for the comparable quarter one year ago. For the first six months of fiscal 2012, net interest income decreased 1% to $12.57 million from $12.68 million for the first six months of fiscal 2011. Timberland’s net interest margin for the first six months of fiscal 2012 was 3.73% compared to 3.80% for the first six months of 2011.

Timberland provisioned $1.05 million to its loan loss allowance for the quarter ended March 31, 2012, compared to $650,000 in the preceding quarter and $700,000 in the comparable quarter one year prior. For the first six months of fiscal 2012, the provision for loan losses totaled $1.7 million compared to $1.6 million in the first six months of fiscal 2011. Net charge-offs for the quarter ended March 31, 2012 totaled $758,000 compared to $624,000 for the quarter ended December 31, 2011 and $651,000 for the quarter one year ago. Fiscal year-to-date, net charge-offs were $1.4 million compared to $1.1 million for the first six months of fiscal 2011.

Non-interest income increased 2% to $2.49 million for the quarter ended March 31, 2012, from $2.44 million in the preceding quarter and increased 18% from $2.11 million for the comparable quarter one year ago. The increase in non-interest income compared to the preceding quarter was primarily due to a $58,000 increase in the valuation recovery of the Bank’s MSRs and a $36,000 increase in gain on sale of loans. Year to date, non-interest income decreased $123,000, or 2%, to $4.9 million from $5.06 million for the first six months of fiscal 2011, primarily due to a reduction in the valuation recovery on MSRs.

Total operating (non-interest) expenses increased 6% to $6.57 million for the second fiscal quarter from $6.22 million for the preceding quarter and 6% from $6.18 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 $211,000 increase in loan administration and foreclosure expenses and a $126,000 increase in salaries and employee benefits expense. The salaries and benefits expense comparison was impacted by a one-time benefit from changing employee medical insurance providers in the preceding quarter, which decreased salaries and benefits expense by $99,000 for the quarter ended December 31, 2011. Year to date, operating expenses increased 2% to $12.79 million from $12.55 million for the first six months of fiscal 2012, primarily due to increased OREO related expenses, increased deposit operation expenses and increased loan administration and foreclosure related expenses.

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 2012 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.

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

Source: Timberland Bancorp, Inc.