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Second Fiscal Quarter Net Income Increases 44% to $7.25 Million
Quarterly Return on Average Assets of 1.75%
Quarterly Return on Average Equity of 14.89%
Announces $0.21 Quarterly Cash Dividend
HOQUIAM, Wa., April 27, 2021 (GLOBE NEWSWIRE) -- Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”) today reported that net income increased 44% to $7.25 million for the quarter ended March 31, 2021 from $5.05 million for the comparable quarter one year ago, which quarter was affected by a $2.00 million ($1.58 million after income taxes) provision to the loan loss reserves, and decreased slightly from $7.29 million for the preceding quarter. Earnings per diluted common share (“EPS”) increased 43% to $0.86 for the current quarter from $0.60 for the comparable quarter one year ago and decreased 1% from $0.87 for the preceding quarter.
For the first six months of fiscal 2021, Timberland earned a record $14.54 million, or $1.73 per diluted common share, a 24% increase in net income and a 25% increase in EPS from $11.70 million, or $1.38 per diluted common share for the first six months of fiscal 2020, which six month period was affected by a $2.20 million ($1.74 million after income taxes) to the loan loss reserves.
Timberland’s Board of Directors declared a quarterly cash dividend to shareholders of $0.21 per common share payable on May 28, 2021, to shareholders of record on May 14, 2021.
“We are pleased to report strong financial metrics for the recently concluded quarter and, for the first six months of fiscal 2021, record Company profitability,” stated Michael Sand, President and CEO. “Paycheck Protection Program (“PPP”) loan proceeds and federal stimulus payments contributed to strong deposit growth of $106.7 million for the quarter and $356.2 million during the past twelve months. The 32% increase in deposits year-over-year has increased the Bank’s liquidity significantly beyond the level we would normally hold. While loan originations have been strong we have chosen to sell most fixed-rate conforming mortgage loans in this extended low-rate interest environment and have been subject to prepayment activity typically expected during a period of lower interest rates. Given Federal Reserve Chairman Powell’s recent assertion that tapering would begin well before the Fed raises the overnight rate, we anticipate generally rising interest rates, a slowing of prepayment activity and fixed income investment opportunities more palatable than have been available during the past year. We are encouraged by the level of increased business activity in our markets and the increased activity we are seeing in our loan pipeline.”
“Our focus since the onslaught of the pandemic has been to support the businesses and their employees in our communities. To this end, staff has worked diligently throughout these difficult times to originate new PPP loans and to also file applications for PPP loan forgiveness,” said Sand. “During the quarter, we originated $58.70 million in PPP loans under the new round of PPP. 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 continue to actively submit forgiveness requests in support of our clients that received PPP loans in 2020, with nearly all forgiveness applicants obtaining full forgiveness from the Small Business Administration (“SBA”). With state mandated phased COVID guidelines allowing businesses in Washington State to move towards more normal operations and a robust vaccine rollout, we are encouraged by the potential for hard hit individuals and businesses to begin recovering financially during the remainder of the year.”
“To provide needed support to businesses in our communities, we continue to work with COVID affected borrowers to appropriately defer loans and provide them with the much-needed economic relief,” added Sand. “At March 31, 2021, we had eight loans remaining in a deferred payment status representing approximately 1.3% of net loans outstanding.” Five of the remaining deferred loans are receiving interest payments monthly.”
Second Fiscal Quarter 2021 Earnings and Balance Sheet Highlights (at or for the period ended March 31, 2021, compared to December 31, 2020 or March 31, 2020):
Earnings Highlights:
Net income increased 44% to $7.25 million for the current quarter from $5.05 million for the comparable quarter one year ago and decreased 1% from $7.29 million for the preceding quarter; EPS increased 43% to $0.86 for the current quarter from $0.60 for the comparable quarter one year ago and decreased 1% from $0.87 for the preceding quarter;
Net income increased 24% to $14.54 million for the first six months of fiscal 2021 from $11.70 million for the first six months of fiscal 2020; EPS increased 25% to $1.73 for the first six months of fiscal 2021 from $1.38 for the first six months of fiscal 2020;
Return on average equity (“ROE”) and return on average assets (“ROA”) for the current quarter were 14.89% and 1.75%, respectively;
Net interest margin was 3.21% for the current quarter compared to 3.48% for the preceding quarter and 4.27% for the comparable quarter one year ago; and
The efficiency ratio was 48.99% for the current quarter compared to 47.83% for the preceding quarter and 50.04% for the comparable quarter one year ago.
Balance Sheet Highlights:
Total assets increased 28% year-over-year and 7% from the prior quarter;
Total deposits increased 32% year-over-year and 8% from the prior quarter;
Net loans receivable increased 14% year-over-year and 2% from the prior quarter;
Non-performing assets to total assets ratio improved to 0.16%; and
Book and tangible book (non-GAAP) values per common share increased to $23.75 and $21.76, respectively, at March 31, 2021.
Operating Results
Operating revenue (net interest income before the provision for loan losses plus non-interest income) increased 5% to $17.46 million for the current quarter from $16.56 million for the comparable quarter one year ago and decreased 1% from $17.58 million for the preceding quarter. Operating revenue increased 5% to $35.04 million for the first six months of fiscal 2021 from $33.50 million for the comparable period one year ago.
Net interest income decreased 4% to $12.57 million for the current quarter from $13.02 million for the preceding quarter and decreased 2% from $12.88 million for the comparable quarter one year ago. Timberland’s net interest margin (“NIM”) for the current quarter was 3.21% compared to 3.48% for the preceding quarter and 4.27% for the comparable quarter one year ago. NIM compression has largely been a result of the low interest rate environment and an increase in the level of liquidity being held in overnight funds. The NIM for the current quarter 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. The NIM for the preceding 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 comparable quarter one year ago was increased by approximately 15 basis points due to the accretion of $107,000 of the fair value discount on loans acquired in the South Sound Acquisition and the collection of $320,000 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 associated loan origination fees, which are accreted into interest income over the life of each loan. During the quarter ended March 31, 2021, Timberland recorded interest income of $306,000 on PPP loans and accreted PPP loan origination fees of $1.14 million into income. During the quarter ended December 31, 2020, Timberland recorded interest income of $295,000 on PPP loans and accreted PPP loan origination fees of $1.14 million into income. At March 31, 2021, Timberland had PPP deferred loan origination fees of $3.86 million remaining to be accreted into interest income during the remaining life of the loans. Net interest income decreased 1% to $25.59 million for the first six months of fiscal 2021 from $25.88 million for the first six months of fiscal 2020. Timberland’s net interest margin for the first six months of fiscal 2021 was 3.34% compared to 4.35% for the first six months of fiscal 2020.
No provision for loan losses was made during the current and preceding quarter compared to a $2.00 million provision for loan losses for the comparable quarter one year ago.
Non-interest income increased 33% to $4.89 million for the current quarter from $3.68 million for the comparable quarter one year ago and increased 7% from $4.56 million for the preceding quarter. The increase in non-interest income compared to the preceding quarter was primarily due to a $438,000 valuation recovery on servicing rights for the current quarter (compared to a $236,000 valuation allowance on servicing rights for the preceding quarter) and an $81,000 increase in ATM and debit card interchange transaction fees. Partially offsetting these increases was a $244,000 decrease in gain on sales of loans and a $114,000 decrease in service charges on deposits. The recovery on servicing rights was primarily due to a decrease in mortgage prepayment speeds as mortgage interest rates increased during the quarter. The increase in ATM and debit card interchange transaction fee income was primarily due to increased volumes of debit card transactions. 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 and a decrease in the average pricing spread. The decrease in service charges on deposits was primarily due to a decrease in overdraft fee income. Fiscal year-to-date non-interest income increased 24% to $9.45 million from $7.62 million for the first six months of fiscal 2020.
Total operating expenses for the current quarter increased 2% to $8.55 million from $8.41 million for the preceding quarter and increased 3% from $8.29 million for the comparable quarter one year ago. The increase in operating expenses compared to the preceding quarter was primarily due to a $165,000 increase in salaries and employee benefits, a $41,000 increase in premises and equipment and smaller increases in several other categories. These increases were partially offset by a $50,000 decrease in professional fees, a $42,000 decrease in OREO expense and smaller decreases in several other expense categories. The efficiency ratio for the current quarter was 48.99% compared to 47.83% for the preceding quarter and 50.04% for the comparable quarter one year ago. Fiscal year-to-date operating expenses increased 2% to $16.96 million from $16.66 million for the first six months of fiscal 2020. The efficiency ratio for the first six months of fiscal 2021 improved to 48.41% from 49.73% for the first six months of fiscal 2020.
The provision for income taxes for the current quarter decreased $231,000 to $1.65 million from $1.88 million for the preceding quarter, primarily due to a $166,000 tax benefit from the disposition of stock options and lower income before income taxes. Timberland’s effective income tax rate was 18.6% for the quarter ended March 31, 2021 compared to 20.5% for the quarter ended December 31, 2020.
Balance Sheet Management
Total assets increased $110.84 million, or 7%, to $1.70 billion at March 31, 2021 from $1.59 billion at December 31, 2020. The increase was primarily due to an $84.13 million increase in total cash and cash equivalents and a $23.37 million increase in net loans receivable, and smaller increases in several other categories. The increase in total assets was funded primarily by an increase in total deposits and by retained net income.
Loans
Net loans receivable increased $23.37 million, or 2%, to $1.031 billion at March 31, 2021 from $1.007 billion at December 31, 2020. The increase during the current quarter was primarily due to a $34.71 million increase in PPP loan balances, and smaller increases in several other categories. These increases were partially offset by smaller decreases in several other categories.
