Timberland Bancorp Announces Second Fiscal Quarter Earnings
· *Second Fiscal Quarter Net Income of $5.33 Million*
· *Quarterly Return on Average Equity of 10.10%*
· *Loan Portfolio (Excluding PPP Loans) Increased 6% During Quarter*
· *Announces $0.22 Quarterly Cash Dividend*
HOQUIAM, Wash., April 26, 2022 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”), the holding company for Timberland Bank (the “Bank”), today reported net income of $5.33 million, or $0.63 per diluted common share, for the quarter ended March 31, 2022. This compares to net income of $5.49 million, or $0.65 per diluted common share, for the preceding quarter and $7.25 million, or $0.86 per diluted common share, for the comparable quarter one year ago.
For the first six months of fiscal 2022, Timberland earned $10.81 million, or $1.28 per diluted common share, compared to $14.54 million or $1.73 per diluted common share for the first six months of fiscal 2021.
Timberland’s Board of Directors declared a quarterly cash dividend to shareholders of $0.22 per share, payable on May 27, 2022, to shareholders of record on May 13, 2022.
“We are pleased to report strong growth during the past quarter,” stated Michael Sand, CEO. “Net loans receivable, excluding Paycheck Protection Program loans (“PPP”), increased 5.7% (22.8% annualized) primarily due to increases in commercial real estate and commercial business loans originated within our western Washington market footprint. We continue to see opportunities for loan originations within our local markets and are pleased to observe reduced prepayment activity which has allowed loan originations to be more additive to net loans receivable.”
“In addition to using excess liquidity to fund loan growth, we also deployed funds into short and moderate duration investments to supplement interest income,” said Sand. “The Bank continues to be positioned to benefit from Federal Reserve actions to increase interest rates and we anticipate continued opportunities to invest excess liquidity during the next several quarters as the Fed begins reducing its balance sheet in conjunction with anticipated rate increases.”
*Second Fiscal Quarter 2022 Earnings and Balance Sheet Highlights *(at or for the period ended March 31, 2022, compared to March 31, 2021, or December 31, 2021): Earnings Highlights:
· Net income was $5.33 million for the current quarter compared to $5.49 million for the preceding quarter and $7.25 million for the comparable quarter one year ago; EPS was $0.63 for the current quarter compared to $0.65 for the preceding quarter and $0.86 for the comparable quarter one year ago;
· Net income was $10.81 million for the first six months of fiscal 2022 compared to $14.54 million for the first six months of fiscal 2021; EPS was $1.28 for the first six months of fiscal 2022 compared to $1.73 for the first six months of fiscal 2021;
· Return on average equity (“ROE”) and return on average assets (“ROA”) for the current quarter were 10.10% and 1.16%, respectively;
· Net interest margin (“NIM”) was 2.95% for the current quarter compared to 2.92% for the preceding quarter and 3.21% for the comparable quarter one year ago; and
· The efficiency ratio was 58.42% for the current quarter compared to 57.40% for the preceding quarter and 48.99% for the comparable quarter one year ago. Balance Sheet Highlights:
· Total assets increased 10% year-over-year and 3% from the prior quarter;
· Total deposits increased 12% year-over-year and 3% from the prior quarter;
· Net loans receivable (excluding SBA PPP loans) increased 15% year-over-year and 6% from the prior quarter;
· Net loans receivable (including SBA PPP loans) increased 4% from the prior quarter;
· Non-performing assets to total assets ratio improved to 0.16% from 0.17% at December 31, 2021; and
· Book and tangible book (non-GAAP) values per common share increased to $25.56 and $23.60, respectively, at March 31, 2022.
*
*
*Operating Results*
Operating revenue (net interest income before the provision for loan losses plus non-interest income) decreased 1% to $15.98 million for the first fiscal quarter from $16.14 million for the preceding quarter and decreased 8% from $17.45 million for the comparable quarter one year ago. The decrease in operating revenue compared to the preceding quarter was primarily due to a $259,000 decrease in PPP loan income and a $247,000 decrease in gain on sales of loans. Operating revenue decreased 8% to $32.11 million for the first six months of fiscal 2022 from $35.04 million for the comparable period one year ago, primarily due to a $2.68 million decrease in gain on sales of loans and a $1.15 million decrease in PPP loan income.
Net interest income increased 2% to $12.89 million for the current quarter from $12.70 million for the preceding quarter and increased 3% from $12.57 million for the comparable quarter one year ago.* * Timberland’s NIM for the current quarter was 2.95% compared to 2.92% for the preceding quarter and 3.21% for the comparable quarter one year ago.* * The NIM for the current quarter was increased by approximately six basis points due to the accretion of $34,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $246,000 in pre-payment penalties, non-accrual interest, and late fees. The NIM for the preceding quarter was increased by approximately four basis points due to the accretion of $57,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $114,000 in pre-payment penalties, non-accrual interest and late fees. The NIM for the comparable quarter one year ago was increased by approximately six basis points due to the accretion of $86,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $129,000 in pre-payment penalties, non-accrual interest and late fees. Net interest income was $25.59 million for both the first six months of fiscal 2022 and fiscal 2021. Timberland’s net interest margin for the first six months of fiscal 2022 was 2.93% compared to 3.34% for the first six months of fiscal 2021.
U.S. Small Business Administration (“SBA”) PPP loans contributed to interest income through the 1.00% interest rate earned on outstanding loan balances and also through the accretion of loan origination fees into interest income over the life of each PPP loan. At March 31, 2022, Timberland had SBA PPP deferred loan origination fees of $199,000 remaining to be accreted into interest income over the remaining life of the loans. The following table details the interest income recognized from SBA PPP loans:
*SBA PPP Loan Income*
($ in thousands)
Three Months Ended March 31, 2022 Dec. 31, 2021 March 31, 2021
Interest income $ 31 $ * * 71* * $ 306
Loan origination fee accretion 708 927 1,143
Total SBA PPP loan income $ 739 $ * * 998 $ * * * * 1,449
No provision for loan losses was made during the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021.
Non-interest income decreased 10% to $3.08 million for the current quarter from $3.44 million for the preceding quarter and decreased 37% from $4.89 million for the comparable quarter one year ago. The decrease in non-interest income compared to the preceding quarter was primarily due to a $247,000 decrease in gain on sales of loans, a $119,000 decrease in the valuation recovery on loan servicing rights, and smaller decreases in several other categories.* *These decreases were partially offset by a $101,000 increase in service charges on deposits. The year-over-year decrease in non-interest income was primarily due to a $1.34 million decrease in gain on sales of loans and a $438,000 decrease in the valuation recovery on loan servicing rights. 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 originated and sold during the current quarter (as refinance demand slowed) and a decrease in the average pricing margin compared to the same period last year. Fiscal year-to-date non-interest income decreased 31% to $6.53 million from $9.45 million for the first six months of fiscal 2021, primarily due to a $2.68 million decrease in gain on sales of loans.
Total operating expenses for the current quarter increased $69,000, or 1%, to $9.33 million from $9.26 million for the preceding quarter and increased $782,000, or 9%, from $8.55 million for the comparable quarter one year ago.* * The increase in operating expenses compared to the preceding quarter was primarily due to a $73,000 increase in professional fee expense and smaller increases in several other expense categories. These increases were partially offset by smaller decreases in several expense categories. Fiscal year-to-date operating expenses increased 10% to $18.60 million from $16.96 million for the first six months of fiscal 2021. The year-to-date increase in operating expenses was primarily due to annual salary adjustments (effective October 1^st) and the hiring of additional lending personnel. The efficiency ratio for the current quarter was 58.42% compared to 57.40% for the preceding quarter and 48.99% for the comparable quarter one year ago. The efficiency ratio for the first six months of fiscal 2022 was 57.91% compared to 48.41% for the first six months of fiscal 2022.
The provision for income taxes for the current quarter decreased $73,000 to $1.32 million from $1.39 million for the preceding quarter, primarily due to lower taxable income. Timberland’s effective income tax rate was 19.8% for the quarter ended March 31, 2022 compared to 20.2% for the quarter ended December 31, 2021 and 18.6% for the quarter ended quarter ended March 31, 2021. Timberland’s effective income tax rate was 20.0% for the first six months of fiscal 2022 compared to 19.6% for the first six months of fiscal 2021.
*Balance Sheet Management*
Total assets increased $46.20 million, or 3%, to $1.88 billion at March 31, 2022 from $1.83 billion at December 31, 2021. The quarter’s increase was primarily due to a $72.80 million increase in investment securities and CDs held for investment, a $40.07 million increase in net loans receivable, and smaller increases in several other categories. These increases were partially offset by a $66.02 million decrease in total cash and cash equivalents, and smaller decreases in several other categories. The increase in total assets was funded primarily by an increase in total deposits.
*Loans*
Net loans receivable increased $40.07 million, or 4%, to $1.03 billion at March 31, 2022 from $994.01 million at December 31, 2021. This increase was primarily due to a $26.12 million increase in commercial real estate loans, a $23.64 million increase in commercial business loans (non-PPP), a $5.29 million decrease in the undisbursed portion of construction loans in process, a $4.77 million increase in one- to four-family loans and smaller increases in other loan categories. These increases to net loans receivable were partially offset by a $15.46 million decrease in SBA PPP loans, a $5.45 million decrease in construction loans, and smaller decreases in several other loan categories.
*Loan Portfolio*
($ in thousands)
March 31, 2022 December 31, 2021 March 31, 2021 Amount Percent Amount Percent Amount Percent
Mortgage loans:
One- to four-family (a) $ 133,925 12 % $ 129,151 12 % $ 117,184 10 %
Multi-family 82,526 7 84,180 7 92,435 8
Commercial 523,479 45 497,361 44 461,966 40
Construction - custom and
owner/builder 114,394 10 116,267 10 105,305 9
Construction - speculative one-to four-family 15,438 1 18,255 2 17,289 2
Construction - commercial 35,416 3 42,611 4 42,340 4
Construction - multi-family 64,141 6 54,710 5 44,266 4
Construction - land development 10,687 1 13,680 1 2,238 --
Land 22,192 2 18,568 2 19,041 2
Total mortgage loans 1,002,198 87 974,783 87 902,064 79
Consumer loans:
Home equity and second
mortgage 32,980 3 34,375 3 32,026 3
Other 2,277 -- 2,462 -- 2,756 --
Total consumer loans 35,257 3 36,837 3 34,782 3
Commercial loans:
Commercial business loans 108,644 9 85,006 8 66,645 6
SBA PPP loans 5,934 1 21,397 2 138,175 12
Total commercial loans 114,578 10 106,403 10 204,820 18
Total loans 1,152,033 100 % 1,118,023 100 % 1,141,666 100 %
Less:
Undisbursed portion of
construction loans in
process (100,719 ) (106,009 ) (90,550 )
Deferred loan origination
fees (3,801 ) (4,539 ) (6,999 )
Allowance for loan losses (13,433 ) (13,468 ) (13,434 )
Total loans receivable, net $ 1,034,080 $ 994,007 $ 1,030,683
_______________________
(a) Does not include one- to four-family loans held for sale totaling $2,772, $3,700 and $8,455 at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.
The following table provides a breakdown of commercial real estate (“CRE”) mortgage loans by collateral type as of March 31, 2022: * CRE Loan Portfolio Breakdown by Collateral* ($ in thousands)
Collateral Type
Amount Percent
of CRE
Portfolio Percent of
Total Loan
Portfolio
Industrial warehouse $ 101,045 19 % 9 %
Office buildings 72,613 14 6
Medical/dental offices 65,500 12 5
Other retail buildings 47,518 9 4
Restaurants 29,532 6 3
Hotel/motel 26,152 5 2
Mini-storage 23,226 4 2
Convenience stores 22,645 4 2
Nursing homes 18,591 4 2
Shopping centers 10,655 2 1
Churches 8,173 2 1
Additional CRE 97,829 19 8 Total CRE $ 523,479 100 % 45 %
Timberland originated $130.41 million in loans during the quarter ended March 31, 2022, compared to $167.15 million for the comparable quarter one year ago and $178.84 million in loans 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 $16.88 million were sold compared to $41.29 million for the comparable quarter one year ago and $22.56 million for the preceding quarter. The decrease in loans sold during the current quarter compared to the prior year was primarily due to a decrease in single-family refinance loans originated as mortgage refinance activity diminished.
Timberland’s investment securities and CDs held for investment increased $72.80 million, or 37%, to $269.55 million at March 31, 2022, from $196.75 million at December 31, 2021. The increase was primarily due to the purchase of additional U.S Treasury securities, mortgage-backed investment securities, and CDs held in other financial institutions.
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 34.3% of total liabilities at March 31, 2022, compared to 39.5% at December 31, 2021, and 36.1% one year ago.
*Deposits*
Total deposits increased $49.80 million, or 3%, during the current quarter to $1.66 billion at March 31, 2022, from $1.61 billion at December 31, 2021. The quarter’s increase consisted of a $35.60 million increase in money market account balances, an $18.94 million increase in savings account balances, and a $1.97 million increase in non-interest bearing account balances. These increases were partially offset by a $5.51 million decrease in certificates of deposit account balances and a $1.21 million decrease in NOW checking account balances.
*Deposit Breakdown*
($ in thousands)
March 31, 2022 December 31, 2021 March 31, 2021 Amount Percent Amount Percent Amount Percent
Non-interest-bearing demand $525,488 32 % $523,518 33 % $499,541 34 %
NOW checking 457,874 28 459,079 28 403,811 27
Savings 288,361 18 269,423 17 250,736 17
Money market 251,631 15 211,837 13 171,896 11
Money market – reciprocal 6,426 -- 10,619 1 13,094 1
Certificates of deposit under $250 106,208 6 110,168 7 119,388 8
Certificates of deposit $250 and over 20,438 1 21,987 1 23,393 2
Total deposits $1,656,426 100 % $1,606,631 100 % $1,481,859 100 %
*Shareholders’ Equity and Capital Ratios*
Total shareholders’ equity increased $1.89 million, or 1%, to $212.27 million at March 31, 2022, from $210.37 million at December 31, 2021. The increase in shareholders’ equity was primarily due to net income of $5.33 million for the quarter, which was partially offset by the payment of $1.84 million in dividends to shareholders and the repurchase of 61,565 shares of common stock for $1.72 million (an average price of $27.88 per share). Timberland had 322,169 shares available to be repurchased on its existing stock repurchase plan at March 31, 2022.
Timberland remains well capitalized with a total risk-based capital ratio of 20.75% and a Tier 1 leverage capital ratio of 10.86% at March 31, 2022.
*Asset Quality*
Timberland’s non-performing assets to total assets ratio was 0.16% at March 31, 2022, compared to 0.17% at December 31, 2021 and 0.16% one year ago. There were net charge-offs of $35,000 for the current quarter compared to net charge-offs of $1,000 for the preceding quarter and net recoveries of $2,000 for the comparable quarter one year ago.* * No provisions for loan losses were made during the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021.
Timberland has consistently worked with borrowers affected by the COVID-19 pandemic by offering loan deferral and forbearance plans during the pandemic.* * Deferrals were primarily approved for 90-day periods with interest continuing to accrue or with interest scheduled to be paid monthly. All borrowers that were granted COVID-19 deferrals have resumed making regular payments as of March 31, 2022.
The allowance for loan losses (“ALL”) as a percentage of loans receivable was 1.28% at March 31, 2022, compared to 1.29% one year ago and 1.34% at December 31, 2021. If SBA PPP loans, which are 100% SBA guaranteed, are excluded, the ALL to loans receivable (excluding SBA PPP loans) at March 31, 2022 was 1.29% (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 $358,000 at March 31, 2022. The allowance for loan losses to loans receivable (excluding SBA PPP loan balances and the remaining aggregate balance of the loans acquired in the South Sound Acquisition) was 1.33% (non-GAAP) at March 31, 2022.
The following table details the ALL as a percentage of loans receivable:
March 31, Dec. 31, March 31, 2022 2021 2021
ALL to loans receivable 1.28 % 1.34 % 1.29 %
ALL to loans receivable (excluding SBA PPP loans) (non-GAAP) 1.29 % 1.37 % 1.48 %
ALL to loans receivable (excluding SBA PPP loans and South Sound Acquisition loans) (non-GAAP)
1.33
%
1.41
%
1.56
%
Total delinquent loans (past due 30 days or more) and non-accrual loans decreased $290,000, or 9%, to $2.95 million at March 31, 2022, from $3.24 million at December 31, 2021, and decreased $982,000, or 25%, from $3.93 million one year ago. Non-accrual loans decreased $202,000, or 7%, to $2.65 million at March 31, 2022, from $2.85 million at December 31, 2021 and increased $346,000, or 15%, from $2.31 million one year ago.
*Non-Accrual Loans*
($ in thousands)
March 31, 2022 December 31, 2021 March 31, 2021 Amount Quantity Amount Quantity Amount Quantity
Mortgage loans:
One- to four-family $578 3 $582 3 $415 2
Commercial 671 3 675 2 643 2
Land 723 4 676 3 173 2
Total mortgage loans 1,972 10 1,933 8 1,231 6
Consumer loans
Home equity and second
mortgage 269 2 456 4 539 6
Other 5 1 5 1 8 1
Total consumer loans 274 3 461 5 547 7
Commercial business loans 405 6 459 7 527 7
Total loans $2,651 19 $2,853 20 $2,305 20
* *
OREO and other repossessed assets were $157,000 at March 31, 2022, December 31, 2021 and March 31, 2021. At March 31, 2022, the OREO and other repossessed asset portfolio consisted of three individual land parcels. No OREO properties were sold during the quarter ended March 31, 2022.
*OREO and Other Repossessed Assets*
($ in thousands)
March 31, 2022 December 31, 2021 March 31, 2021 Amount Quantity Amount Quantity Amount Quantity
Land $ 157 3 $ 157 3 $ 157 3
Total $ 157 3 $ 157 3 $ 157 3
* *
*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. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 24 branches (including its main office in Hoquiam).
*Disclaimer*
Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plan, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future economic performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to: the effect of the novel coronavirus of 2019 (“COVID-19”) pandemic, including the Company’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets which may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our loan loss reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; uncertainty regarding the future of the London Interbank Offered Rate (“LIBOR”), and the potential transition away from LIBOR toward new interest rate benchmarks; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Federal Reserve and our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute a formal or informal enforcement action against us or our bank subsidiary which could require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules including as a result of Basel III; the impact of the Dodd Frank Wall Street Reform and Consumer Protection Act and implementing regulations; our ability to attract and retain deposits; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our consolidated balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our business strategies; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; our ability to pay dividends on our common and stock; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board (“FASB”), including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations; pricing, products and services including the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), the Consolidated Appropriations Act, 2021 (“CAA”), and the American Rescue Plan Act of 2021; and other risks detailed in our reports filed with the Securities and Exchange Commission.
Any of the forward-looking statements that we make in this press release and in the other public statements we make are based upon management’s beliefs and assumptions at the time they are made. We do not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements included in this report to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur and we caution readers not to place undue reliance on any forward-looking statements. These risks could cause our actual results for fiscal 2022 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) (unaudited) March 31, Dec. 31, March 31, 2022 2021 2021 *Interest and dividend income* Loans receivable $ 12,620 $ 12,622 $ 12,790 Investment securities 590 405 284 Dividends from mutual funds, FHLB stock and other investments 27 27 27 Interest bearing deposits in banks 283 288 259 * Total interest and dividend income* 13,520 13,342 13,360 *Interest expense* Deposits 625 631 764 Borrowings 2 15 29 * Total interest expense* 627 646 793 * Net interest income* 12,893 12,696 12,567 *Provision for loan losses* -- -- -- * Net interest income after provision for loan losses* 12,893 12,696 12,567 *Non-interest income* Service charges on deposits 1,014 913 941 ATM and debit card interchange transaction fees 1,247 1,277 1,237 Gain on sales of loans, net 416 663 1,758 Bank owned life insurance (“BOLI”) net earnings 152 154 146 Valuation recovery on loan servicing rights, net -- 119 438 Recoveries on investment securities, net 3 8 3 Other 251 308 363 * Total non-interest income, net* 3,083 3,442 4,886 *Non-interest expense* Salaries and employee benefits 5,192 5,171 4,778 Premises and equipment 988 928 998 Advertising 161 166 155 OREO and other repossessed assets, net 2 (18 ) (68 ) ATM and debit card processing 450 464 445 Postage and courier 164 136 149 State and local taxes 235 255 255 Professional fees 322 271 181 FDIC insurance expense 126 128 105 Loan administration and foreclosure 96 104 90 Data processing and telecommunications 669 613 634 Deposit operations 262 299 245 Amortization of core deposit intangible (“CDI”) 79 79 91 Other, net 587 668 493 * Total non-interest expense, net* 9,333 9,264 8,551 *Income before income taxes* 6,643 6,874 8,902 *Provision for income taxes* 1,316 1,389 1,651 * Net income* $ 5,327 $ 5,485 $ 7,251 *Net income per common share:* Basic $ 0.64 $ 0.66 $ 0.87 Diluted 0.63 0.65 0.86 *Weighted average common shares outstanding:* Basic 8,337,407 8,356,066 8,331,121 Diluted 8,421,875 8,448,900 8,444,798
*TIMBERLAND BANCORP INC. AND SUBSIDIARY*
*CONSOLIDATED STATEMENTS OF INCOME* Six Months Ended
($ in thousands, except per share amounts) (unaudited) March 31, March 31, 2022 2021 *Interest and dividend income* Loans receivable $ 25,242 $ 26,108 Investment securities 996 585 Dividends from mutual funds, FHLB stock and other investments 54 55 Interest bearing deposits in banks 571 569 * Total interest and dividend income* 26,863 27,317 *Interest expense* Deposits 1,257 1,668 Borrowings 17 58 * Total interest expense* 1,274 1,726 * Net interest income* 25,589 25,591 *Provision for loan losses* -- -- * Net interest income after provision for loan losses* 25,589 25,591 *Non-interest income* Service charges on deposits 1,927 1,996 ATM and debit card interchange transaction fees 2,523 2,393 Gain on sales of loans, net 1,079 3,760 Bank owned life insurance (“BOLI”) net earnings 305 295 Valuation recovery on loan servicing rights, net 119 202 Recoveries on investment securities, net 11 8 Other 561 791 * Total non-interest income, net* 6,525 9,445 *Non-interest expense* Salaries and employee benefits 10,363 9,391 Premises and equipment 1,916 1,955 Advertising 327 311 OREO and other repossessed assets, net (16 ) (94 ) ATM and debit card processing 914 876 Postage and courier 300 287 State and local taxes 489 538 Professional fees 593 412 FDIC insurance expense 254 201 Loan administration and foreclosure 200 171 Data processing and telecommunications 1,282 1,240 Deposit operations 561 529 Amortization of CDI 158 181 Other, net 1,256 963 * Total non-interest expense, net* 18,597 16,961 *Income before income taxes* 13,517 18,075 *Provision for income taxes* 2,705 3,534 * Net income* $ 10,812 $ 14,541 *Net income per common share:* Basic $ 1.30 $ 1.75 Diluted 1.28 1.73 *Weighted average common shares outstanding:* Basic 8,346,839 8,322,210 Diluted 8,435,536 8,428,595
*TIMBERLAND BANCORP INC. AND SUBSIDIARY*
*CONSOLIDATED BALANCE SHEETS*
($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31, 2022 2021 2021
*Assets*
Cash and due from financial institutions $ 26,500 $ 20,539 $ 21,707
Interest-bearing deposits in banks 465,802 537,789 411,635 Total cash and cash equivalents 492,302 558,328 433,342
Certificates of deposit (“CDs”) held for investment, at cost 28,619 24,648 39,674
Investment securities: Held to maturity, at amortized cost 189,405 114,600 36,465 Available for sale, at fair value 50,624 56,552 69,184
Investments in equity securities, at fair value 902 946 957
FHLB stock 2,194 2,103 2,303
Other investments, at cost 3,000 3,000 3,000
Loans held for sale 2,772 3,700 8,455
Loans receivable 1,047,513 1,007,475 1,044,117
Less: Allowance for loan losses (13,433 ) (13,468 ) (13,434 ) Net loans receivable 1,034,080 994,007 1,030,683
Premises and equipment, net 21,878 22,108 22,763
OREO and other repossessed assets, net 157 157 157
BOLI 22,498 22,347 21,891
Accrued interest receivable 3,927 3,938 4,471
Goodwill 15,131 15,131 15,131
CDI 1,106 1,185 1,444
Loan servicing rights, net 3,390 3,524 3,604
Operating lease right-of-use assets 2,129 2,206 2,436
Other assets 3,356 2,795 3,284 *Total assets* $ 1,877,470 $ 1,831,275 $ 1,699,244
*Liabilities and shareholders’ equity*
Deposits: Non-interest-bearing demand $ 525,488 $ 523,518 $ 499,541
Deposits: Interest-bearing 1,130,938 1,083,113 982,318 Total deposits 1,656,426 1,606,631 1,481,859
Operating lease liabilities 2,210 2,285 2,499
FHLB borrowings -- 5,000 10,000
Other liabilities and accrued expenses 6,565 6,984 6,343 *Total liabilities* 1,665,201 1,620,900 1,500,701
*Shareholders’ equity*
Common stock, $.01 par value; 50,000,000 shares authorized;
* * 8,305,826 shares issued and outstanding – March 31, 2022
* * 8,348,821 shares issued and outstanding – December 31, 2021
* * 8,361,457 shares issued and outstanding – March 31, 2021 40,988 42,436 42,949
Retained earnings 171,388 167,897 155,473
Accumulated other comprehensive income (loss) (107 ) 42 121 *Total shareholders’ equity* 212,269 210,375 198,543 *Total liabilities and shareholders’ equity* $ 1,877,470 $ 1,831,275 $ 1,699,244 *KEY FINANCIAL RATIOS AND DATA* Three Months Ended
($ in thousands, except per share amounts) (unaudited) March 31, Dec. 31, March 31, 2022 2021 2021
*PERFORMANCE RATIOS:*
Return on average assets (a) 1.16 % 1.20 % 1.75 %
Return on average equity (a) 10.10 % 10.55 % 14.89 %
Net interest margin (a) 2.95 % 2.92 % 3.21 %
Efficiency ratio 58.42 % 57.40 % 48.99 % Six Months Ended March 31, March 31, 2022 2021
*PERFORMANCE RATIOS:* 1.18 % 1.80 %
Return on average assets (a) 10.33 % 15.14 %
Return on average equity (a) 2.93 % 3.34 %
Net interest margin (a) 57.91 % 48.41 %
Efficiency ratio March 31, Dec. 31, March 31, 2022 2021 2021
*ASSET QUALITY RATIOS AND DATA:*
Non-accrual loans $ 2,651 $ 2,853 $ 2,305
Loans past due 90 days and still accruing -- -- --
Non-performing investment securities 127 140 188
OREO and other repossessed assets 157 157 157
Total non-performing assets (b) $ 2,935 $ 3,150 $ 2,650
Non-performing assets to total assets (b) 0.16 % 0.17 % 0.16 %
Net charge-offs (recoveries) during quarter $ 35 $ 1 $ (2 )
ALL to non-accrual loans, 507 % 472 % 583 %
ALL to loans receivable (c) 1.28 % 1.34 % 1.29 %
ALL to loans receivable (excluding SBA PPP loans) (d) (non-GAAP) 1.29 % 1.37 % 1.48 %
ALL to loans receivable (excluding SBA PPP loans and South Sound Acquisition loans) (d) (e) (non-GAAP)
1.33
%
1.41
%
1.56
%
Troubled debt restructured loans on accrual status (f) $ 2,496 $ 2,361 $ 2,864
*CAPITAL RATIOS:*
Tier 1 leverage capital 10.86 % 10.81 % 11.19 %
Tier 1 risk-based capital 19.50 % 20.24 % 19.47 %
Common equity Tier 1 risk-based capital 19.50 % 20.24 % 19.47 %
Total risk-based capital 20.75 % 21.49 % 20.72 %
Tangible common equity to tangible assets (non-GAAP) 10.53 % 10.69 % 10.81 %
*BOOK VALUES:*
Book value per common share $ 25.56 $ 25.20 $ 23.75
Tangible book value per common share (g) 23.60 23.24 21.76
*________________________________________________*
(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 $5,934, $21,397 and $138,175 at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
(e) Does not include loans acquired in the South Sound Acquisition totaling $28,459, $31,907 and $46,626 at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
(f) Does not include troubled debt restructured loans totaling $172, $177 and $192 reported as non-accrual loans at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
(g) Tangible common equity divided by common shares outstanding (non-GAAP).* *
*AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY*
($ in thousands)
(unaudited)
For the Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 Amount Rate Amount Rate Amount Rate
*Assets*
Loans receivable and loans held for sale $ 1,029,582 4.90 % $ 997,358 5.06 % $ 1,044,476 4.90 %
Investment securities and FHLB stock (1) 209,868 1.18 162,077 1.07 101,675 1.23
Interest-earning deposits in banks and CDs 510,211 0.22 580,337 0.20 422,286 0.24
Total interest-earning assets 1,749,661 3.09 1,739,772 3.07 1,568,437 3.41
Other assets 84,252 83,563 85,203
Total assets $ 1,833,913 $ 1,823,335 $ 1,653,640
*Liabilities and Shareholders’ Equity*
NOW checking accounts $ 441,259 0.13 % $ 440,744 0.13 % $ 394,612 0.16 %
Money market accounts 244,250 0.29 222,945 0.29 178,768 0.30
Savings accounts 277,888 0.08 264,651 0.08 236,504 0.08
Certificates of deposit accounts 128,588 0.80 132,590 0.83 146,065 1.19
Total interest-bearing deposits 1,091,985 0.23 1,060,930 0.24 955,949 0.32
Borrowings 677 1.18 5,000 1.20 10,003 1.17
Total interest-bearing liabilities 1,092,662 0.23 1,065,930 0.24 965,952 0.33
Non-interest-bearing demand deposits 521,284 538,865 482,528
Other liabilities 9,072 10,567 10,365
Shareholders’ equity 210,895 207,973 194,795
Total liabilities and shareholders’ equity $ 1,833,913 $ 1,823,335 $ 1,653,640
Interest rate spread 2.86 % 2.83 % 3.08 %
Net interest margin (2) 2.95 % 2.92 % 3.21 %
Average interest-earning assets to
average interest-bearing liabilities 160.13 % 163.22 % 162.37 %
_____________________________________
(1) Includes other investments
(2) Net interest margin = annualized net interest income / average interest-earning assets
*AVERAGE BALANCES, YIELDS, AND RATES *
($ in thousands)
(unaudited)
For the Six Months Ended March 31, 2022 March 31, 2021 Amount Rate Amount Rate
*Assets*
Loans receivable and loans held for sale $ 1,013,293 4.98 % $ 1,037,304 5.03 %
Investment securities and FHLB stock (1) 185,710 1.13 97,812 1.31
Interest-earning deposits in banks and CDs 545,651 0.21 398,067 0.29
Total interest-earning assets 1,744,654 3.08 1,533,183 3.56
Other assets 83,908 84,635
Total assets $ 1,828,562 $ 1,617,818
*Liabilities and Shareholders’ Equity*
NOW checking accounts $ 440,999 0.13 % $ 386,093 0.17 %
Money market accounts 233,480 0.29 173,579 0.31
Savings accounts 271,197 0.08 229,610 0.08
Certificates of deposit accounts 130,611 0.81 150,645 1.29
Total interest-bearing deposits 1,076,287 0.23 939,927 0.36
Borrowings 2,862 1.19 10,002 1.16
Total interest-bearing liabilities 1,079,149 0.24 949,929 0.36
Non-interest-bearing demand deposits 530,171 465,251
Other liabilities 9,824 10,528
Shareholders’ equity 209,418 192,110
Total liabilities and shareholders’ equity $ 1,828,562 $ 1,617,818
Interest rate spread 2.84 % 3.20 %
Net interest margin (2) 2.93 % 3.34 %
Average interest-earning assets to
average interest-bearing liabilities 161.67 % 161.40 %
_____________________________________
(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) March 31, 2022 December 31, 2021 March 31, 2021
Shareholders’ equity $ 212,269 $ 210,375 $ 198,543
Less goodwill and CDI (16,237 ) (16,316 ) (16,575 )
Tangible common equity $ 196,032 $ 194,059 $ 181,968
Total assets $ 1,877,470 $ 1,831,275 $ 1,699,244
Less goodwill and CDI (16,237 ) (16,316 ) (16,575 )
Tangible assets $ 1,861,233 $ 1,814,959 $ 1,682,669
*Contact:* *Michael R. Sand, CEO*
*Dean J. Brydon, President & CFO*
(360) 533-4747
*www.timberlandbank.com*