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Timberland Bancorp Announces Fiscal First Quarter Results
HOQUIAM, WA--(MARKET WIRE)--Jan 26, 2009 -- Timberland Bancorp, Inc. (NasdaqGM:TSBK - News) ("Timberland"), the holding company for Timberland Bank ("Bank"), today reported that after a $1.32 million provision for loan losses and a $1.17 million impairment charge ($772,000 net of income tax, or $0.12 per diluted share) on investment securities it earned $361,000, or $0.05 per diluted share in its fiscal first quarter ended December 31, 2008, compared to $1.62 million, or $0.24 per diluted share for the fiscal first quarter of 2008.
Fiscal First Quarter 2009 Highlights: (quarter ended December 31, 2008 compared to the quarter ended December 31, 2007)
-- The Company participated in the Treasury's Capital Purchase Program
resulting in an increase in the total risk based capital ratio to 16.73%.
-- Net interest margin remained strong at 4.19%
-- Non-interest income (excluding the write down for securities)
increased 39%
-- The loan portfolio increased 4% to $558 million from $537 million
-- Total assets increased 4% to $672 million from $647 million
-- The one-to-four family speculative construction portfolio which
represents only 4.5% of the total loan portfolio decreased by 12% from the
prior quarter (September 30, 2008) and 34% from the prior year (December
31, 2007)."We continue to maintain a strong net interest margin and have significantly increased core non-interest income, which has contributed to continued profitability in spite of increased credit costs and the impairment charge taken during the quarter," said Michael Sand, President and CEO.
Capital Ratios and Asset Quality
Timberland remains very well capitalized with total risk-based capital of 16.73%. "By participating in the Treasury's Capital Purchase Program we augmented our already substantial capital position to support our lending initiatives and to support the growth of the Company when conditions and opportunities permit," stated Sand. "We have significantly increased our origination of residential mortgage loans since the Capital Purchase Program transaction was completed and have committed to sell to the Federal Home Loan Mortgage Corporation $14.8 million and $23.6 million of new mortgage loan production in January and February, respectively. The current interest rate environment presents a significant opportunity for us to help homeowners lower their monthly mortgage payments and generate additional non-interest income for Timberland Bank."
The non-performing assets ("NPAs") to total assets ratio was 2.20% at December 31, 2008 compared to 1.83% at September 30, 2008. During the quarter ended December 31, 2008 net charge-offs were $1.20 million compared to $526,000 during the quarter ended September 30, 2008. The allowance for loan losses totaled $8.2 million at December 31, 2008, or 1.44% of total loans and 60% of non-performing loans. The allowance for loan losses was $8.1 million, or 1.42% of loans receivable at September 30, 2008, and $6.0 million, or 1.11% of loans receivable at December 31, 2007.
Non-performing loans ("NPLs") increased to $13.52 million at December 31, 2008, and were comprised of 44 loans and 27 credit relationships. Included in NPLs are 15 single family speculative loans totaling $4.40 million (of which the largest has a balance of $395,000), a $2.60 million land development loan in Eastern Washington, a $1.36 million participation interest in a land development loan located in Clark County, Washington, 16 individual lot loans totaling $1.93 million, three commercial real estate loans totaling $1.18 million, a $1.39 million multi-family loan, three single family home loans totaling $328,000 and three home equity consumer loans totaling $317,000 and a $31,000 consumer loan.
Charge-offs for the quarter were associated with six relationships which primarily involved construction loans. In recognition of a real estate market that reflected lower valuations during the past quarter net charge-offs included the following:
-- $464,000 to reduce exposure to the speculative construction inventory
and land holdings of three contractors
-- $475,000 on one land development loan
-- $250,000 on one of the few unsecured loans in the portfolio
-- $6,000 on one auto loanOf the 19 loans added as non-performing loans during the quarter ended December 31, 2008, 15 had outstanding balances of $200,000 or less. Nine of the 15 had balances less than $75,000. No single family construction loans were added as non-performing loans during the quarter. Timberland's record of recovery on non-performing loans has resulted in a low historical charge-off ratio. Since quarter end one non-performing single family loan with a balance of $72,000 was paid in full, and an offer was accepted, which if closed would result in the full recovery of principal and interest on a $714,000 non-performing commercial real estate loan. In addition an offer was accepted on a $191,000 non-performing spec home, that if closed would result in the full recovery of principal balance and a portion of the interest owed. "We continue to see activity in the market due to historically low interest rates and moderating housing prices," Sand noted.
Other real estate owned ("OREO") and other repossessed assets increased to $1.27 million at December 31, 2008 and consisted of three single family residences in Pierce County totaling $1.13 million, one single family residence in Kitsap County with a $102,000 balance, one land loan in Grays Harbor County at $28,000 and one vehicle at $5,000.
Balance Sheet Management
Total assets decreased 2% during the quarter to $671.6 million at December 31, 2008 from $681.9 million at September 30, 2008. The decrease in assets during the current quarter was primarily a result of a $9.0 million decrease in cash equivalents and a $2.9 million decrease in investment securities.
LOAN PORTFOLIO
($ in thousands) Dec. 31, 2008 Sept. 30, 2008 Dec. 31, 2007
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- -------- -------
Mortgage Loans:
One-to-four
family (1) $114,169 19% $112,299 18% $102,133 17%
Multi-family 26,449 4 25,927 4 38,828 6
Commercial 151,630 25 146,223 24 124,634 20
Construction and
land development 172,828 29 186,344 31 205,943 34
Land 63,241 10 60,701 10 58,402 10
-------- ------- -------- ------- -------- -------
Total mortgage
loans 528,317 87 531,494 87 529,940 87
Consumer Loans:
Home equity and
second mortgage 49,895 8 48,690 8 47,071 8
Other 9,838 2 10,635 2 10,627 2
-------- ------- -------- ------- -------- -------
Total
consumer
loans 59,733 10 59,325 10 57,698 10
Commercial business
loans 18,700 3 21,018 3 18,642 3
-------- ------- -------- ------- -------- -------
Total loans $606,750 100% $611,837 100% $606,280 100%
Less:
Undisbursed
portion of
construction
loans in process (38,350) (43,353) (60,708)
Unearned income (2,678) (2,747) (2,928)
Allowance for
loan losses (8,166) (8,050) (5,997)
-------- -------- --------
Total loans
receivable, net $557,556 $557,687 $536,647
======== ======== ========
____________________
(1) Includes loans held for sale
CONSTRUCTION LOAN COMPOSITION
($ in Dec. 31, 2008 Sept. 30, 2008 Dec. 31, 2007
thousands) Percent Percent Percent
of Loan of Loan of Loan
Amount Portfolio Amount Portfolio Amount Portfolio
-------- --------- -------- --------- -------- ---------
Custom and
owner /
builder $ 43,832 7% $ 47,168 8% $ 50,586 8%
Speculative 27,117 5 30,895 5 41,251 7
Commercial
real estate 43,043 7 39,620 6 45,173 8
Multi-family
(including
condominium) 32,117 5 40,509 7 43,836 7
Land
development 26,719 4 28,152 5 25,097 4
-------- -------- --------
Total
construction
loans $172,828 $186,344 $205,943Net loans receivable increased 4% year-over-year to $557.6 million at December 31, 2008, from $536.6 million one year ago. The net loan portfolio remained consistent with the prior quarter as increases in commercial real estate loans, land loans, and one-to-four family loans were offset by decreases in construction and land development loans. During the current quarter the one-to-four family speculative construction portfolio decreased by 12% and the land development portfolio decreased by 5%.
Loan originations decreased to $43.9 million for the quarter ended December 31, 2008 from $50.0 million for the quarter ended September 30, 2008 and from $65.5 million for the quarter ended December 31, 2007. The Bank continues to sell fixed rate one-to four-family mortgage loans into the secondary market for asset-liability management purposes. During the quarter ended December 31, 2008, fixed rate one-to four-family mortgage loan sales totaled $10.5 million. "The origination of single family mortgage loans has increased significantly with current delivery commitments to the Federal Home Loan Mortgage Corporation of $14.8 million and $23.6 million in January and February 2009, respectively. We anticipate a significant increase in loan sales for the quarter ending March 31, 2009, as compared to recent prior quarters, reflecting lower mortgage rates and brisk demand for refinancing from consumers," said Sand.
Timberland's investment securities decreased by $2.9 million during the quarter to $28.4 million at December 31, 2008 from $31.3 million at September 30, 2008, primarily as a result of a $1.2 million other than temporary impairment ("OTTI") charge recorded on 18 private label mortgage-backed securities and regular amortization and prepayments on mortgage-backed securities. The securities on which impairments are being recognized were acquired with the in-kind redemption of the investment in the AMF family of mutual funds in June 2008.
DEPOSIT BREAKDOWN
($ in thousands)
Dec. 31, 2008 Sept. 30, 2008 Dec. 31, 2007
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- -------- -------
Non-interest
bearing $ 51,775 11% $ 51,955 11% $ 50,590 11%
N.O.W. checking 89,151 19 90,468 18 83,594 18
Savings 55,082 12 56,391 11 54,738 12
Money market 61,210 13 70,379 14 47,102 10
Certificates of
deposit under $100 129,867 27 130,313 26 133,676 29
Certificates of
deposit $100 and
over 64,281 13 73,107 15 68,527 15
Certificates of
deposit - brokered 25,975 5 25,959 5 23,020 5
-------- ------- -------- ------- -------- -------
Total deposits $477,341 100% $498,572 100% $461,247 100%
======== ======= ======== ======= ======== =======
Total deposits decreased $21.2 million to $477.3 million
at December 31,
2008, from $498.6 million at September 30, 2008 primarily
as a result of a
$9.2 million decrease in money market accounts, an $8.8
million decrease in
jumbo certificate of deposit accounts, a $1.3 million decrease
in N.O.W.
checking accounts and a $1.3 million decrease in savings
accounts. The
decrease in money market accounts was primarily due to a
large short-term
deposit made by a commercial customer in the prior quarter
that was
withdrawn for business purposes during the current quarter.
"The decrease
in jumbo certificates of deposit was primarily due to our
decision to
reduce our exposure to county government jumbo CD's in anticipation
of
receiving proceeds from the sale of preferred stock to the
Treasury under
the terms of its Capital Purchase Plan," stated Dean Brydon,
Timberland's
CFO. "The cost of holding these public deposits increased
significantly as
the Federal Reserve decreased the yield on short-term investments
dramatically. Reducing these deposits eliminated the negative
interest
carry associated with retaining them on the balance sheet."
Total shareholders' equity increased $16.1 million to $90.9 million at December 31, 2008, from $74.8 million at September 30, 2008. The increase in shareholders' equity was primarily due to the sale of $16.6 million in senior preferred stock to the U.S. Treasury Department as part of the Treasury's Capital Purchase Program. The transaction which closed on December 23, 2008, is part of the Treasury's program to encourage qualified financial institutions to build capital to increase the flow of financing to businesses and consumers and to support the U.S. economy.
Operating Results
Fiscal first quarter revenue (net interest income before provision for loan losses plus non-interest income), decreased 12% to $7.4 million compared with $8.4 million in the like quarter one year ago. The decrease was primarily the result of a $1.2 million OTTI write-down on mortgaged-backed securities and a $455,000 decrease in net interest income. These decreases were partially offset by an increase in service charges on deposit accounts and an increase in loan sale income.
Net interest income before the provision for loan losses decreased 6% to $6.5 million for the quarter ended December 31, 2008, from $6.9 million for the like quarter one year ago with interest and dividend income decreasing 13% and interest expense decreasing 22%. The decrease in net interest income was primarily due to an increase in non-accrual interest and margin compression due to the Federal Reserve forcing interest rates lower. In spite of the challenging interest rate environment, Timberland's net interest margin remained strong at 4.19% for the current quarter, a decrease of 17 basis points from 4.36% for the quarter ended September 30, 2008 and a decrease of 40 basis points from 4.59% for the quarter ended December 31, 2007.
In the first fiscal quarter Timberland made a provision of $1.32 million to its allowance for loan losses, compared to $1.50 million in the quarter immediately prior and $1.20 million in the like quarter in the prior fiscal year. Net charge-offs for the quarter ended December 31, 2008 totaled $1.20 million compared to $526,000 in the quarter ended September 30, 2008, and no charge-offs in the quarter ended December 31, 2007.
Non-interest income (excluding the $1.2 million OTTI write down on securities) increased 39% to $2.1 million for the first fiscal quarter from $1.5 million for the like quarter one year ago. The increase was primarily due to a $454,000 increase in service charges on deposit accounts and a $104,000 increase in loan sale income. The increase in service charge income was primarily a result of implementing an automated overdraft decisioning program in May 2008. The increase in income from loan sales was primarily due to the increased volume of fixed rate one-to-four family loans sold into the secondary market.
Timberland's total operating (non-interest) expenses increased by $686,000 to $5.54 million for the first fiscal quarter from $4.85 million from the like quarter one year ago. The increase was primarily due to a $219,000 increase in deposit related expenses, a $199,000 increase in premises and equipment expenses, a $153,000 increase in salaries and employee benefits, and a $62,000 increase in OREO related expenses. The increased deposit related expenses were primarily a result of expenses associated with several new deposit related programs implemented during the year and an increase in FDIC insurance expense. The increase reflected in premises and equipment expense was primarily a result of an insurance settlement received in December 2007 that reduced the Bank's premises and equipment expense by $172,000 for the quarter ended December 31, 2007. The increased salary and benefit expense was primarily the result of annual salary adjustments (effective October 1, 2008) and increased employee insurance expenses. Timberland's efficiency ratio (excluding the OTTI charge) was 64.84% for the quarter ended December 31, 2008, compared to 57.64% for the quarter ended December 31, 2007.
About Timberland Bancorp, Inc.
Timberland Bancorp operates 21 branches in the state of Washington in Hoquiam, Aberdeen, Ocean Shores, Montesano, Elma, Olympia, Lacey, Tumwater, Yelm, Puyallup, Edgewood, Tacoma, Spanaway (Bethel Station), Gig Harbor, Poulsbo, Silverdale, Auburn, Winlock, and Toledo.
TIMBERLAND BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
($ in thousands, except per Three Months Ended
share amounts) Dec. 31, Sept. 30, Dec. 31,
(unaudited) 2008 2008 2007
---------- ---------- ----------
Interest and dividend income
Loans receivable $ 9,570 $ 9,977 $ 10,764
Investments and mortgage-backed
securities 412 439 249
Dividends from mutual funds and
Federal Home Loan Bank ("FHLB")
stock 10 33 423
Federal funds sold 24 104 31
Interest bearing deposits in banks 9 14 10
---------- ---------- ----------
Total interest and dividend income 10,025 10,567 11,477
Interest expense
Deposits 2,496 2,609 3,334
FHLB advances 1,065 1,121 1,216
Other borrowings -- 2 8
---------- ---------- ----------
Total interest expense 3,561 3,732 4,558
---------- ---------- ----------
Net interest income 6,464 6,835 6,919
Provision for loan losses 1,315 1,500 1,200
---------- ---------- ----------
Net interest income after provision
for loan losses 5,149 5,335 5,719
Non-interest income
Service charges on deposits 1,150 1,201 696
Gain on sale of loans, net 164 68 92
Other than temporary impairment on
securities (1,170) -- --
Bank owned life insurance ("BOLI")
net earnings 121 126 120
Servicing income on loans sold 150 138 118
ATM transaction fees 288 321 299
Other 203 165 172
---------- ---------- ----------
Total non-interest income 906 2,019 1,497
Non-interest expense
Salaries and employee benefits 3,073 2,852 2,920
Premises and equipment 663 674 464
Advertising 191 218 182
Loss (gain) from other real estate
operations 62 (4) --
ATM expenses 125 150 148
Postage and courier 119 138 118
Amortization of core deposit intangible 54 62 62
State and local taxes 143 175 151
Professional fees 135 211 147
Other 972 921 659
---------- ---------- ----------
Total non-interest expense 5,537 5,397 4,851
Income before federal income taxes 518 1,957 2,365
Federal and state income taxes 157 607 750
---------- ---------- ----------
Net income $ 361 $ 1,350 $ 1,615
========== ========== ==========
Earnings (loss) per common share:
Basic $ 0.05 $ 0.21 $ 0.25
Diluted $ 0.05 $ 0.21 $ 0.24
Weighted average shares outstanding:
Basic 6,570,776 6,497,757 6,515,428
Diluted 6,575,933 6,520,971 6,674,773
TIMBERLAND BANCORP, INC.
CONSOLIDATED BALANCE SHEET
($ in thousands, except per share
amounts) (unaudited) Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007
---------- ---------- ----------
Assets
Cash equivalents:
Cash and due from financial
institutions $ 12,049 $ 14,013 $ 15,301
Interest-bearing deposits in
other banks 12,138 3,431 502
Federal funds sold 9,725 25,430 1,015
---------- ---------- ----------
33,912 42,874 16,818
Investments and mortgage-backed
securities:
Held to maturity 12,891 14,233 67
Available for sale 15,492 17,098 45,037
FHLB stock 5,705 5,705 5,705
---------- ---------- ----------
34,088 37,036 50,809
Loans receivable 563,312 563,964 542,644
Loans held for sale 2,410 1,773 --
Less: Allowance for loan losses (8,166) (8,050) (5,997)
---------- ---------- ----------
Net loans receivable 557,556 557,687 536,647
Accrued interest receivable 3,087 2,870 3,407
Premises and equipment 17,369 16,884 16,512
Other real estate owned ("OREO") and
other repossessed items 1,266 511 --
BOLI 13,023 12,902 12,535
Goodwill 5,650 5,650 5,650
Core deposit intangible 917 972 1,158
Mortgage servicing rights 1,336 1,306 1,071
Other assets 3,388 3,191 1,987
---------- ---------- ----------
Total Assets $ 671,592 $ 681,883 $ 646,594
========== ========== ==========
Liabilities and Shareholders' Equity
Non-interest-bearing deposits $ 51,775 $ 51,955 $ 50,590
Interest-bearing deposits 425,566 446,617 410,657
---------- ---------- ----------
Total deposits 477,341 498,572 461,247
FHLB advances 99,609 104,628 106,380
Other borrowings: repurchase
agreements 714 758 611
Other liabilities and accrued expenses 2,985 3,084 3,367
---------- ---------- ----------
Total Liabilities 580,649 607,042 571,605
---------- ---------- ----------
Shareholders' Equity
Preferred stock - $.01 par value;
1,000,000 shares authorized; -- -- --
Dec. 31, 2008 - 16,641 shares issued
and outstanding
Common stock - $.01 par value; 50,000,000
shares authorized; 70 70 69
Dec. 31, 2008 - 7,028,015 shares issued
and outstanding
Sept. 30, 2008 - 6,967,579 shares issued
and outstanding
Dec. 31, 2007 - 6,917,675 shares issued
and outstanding
Additional paid in capital 24,332 8,602 9,314
Unearned shares- Employee Stock
Ownership Plan (2,710) (2,776) (2,974)
Stock warrants 1,158 -- --
Retained earnings 69,000 69,406 69,300
Accumulated other comprehensive loss (907) (461) (720)
---------- ---------- ----------
Total Shareholders' Equity 90,943 74,841 74,989
---------- ---------- ----------
Total Liabilities and Shareholders'
Equity $ 671,592 $ 681,883 $ 646,594
========== ========== ==========
KEY FINANCIAL RATIOS AND DATA
($ in thousands, except per share amounts) (unaudited)
Three Months Ended
----------------------------------
Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007
-------- -------- --------
PERFORMANCE RATIOS:
Return on average assets (a) 0.22% 0.80% 0.99%
Return on average equity (a) 1.88% 7.22% 8.61%
Net interest margin (a) 4.19% 4.36% 4.59%
Efficiency ratio (b) 64.84% 60.96% 57.64%
Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007
-------- -------- --------
ASSET QUALITY RATIOS:
Non-performing loans $ 13,520 $ 11,990 $ 3,908
OREO and other repossessed assets 1,266 511 --
-------- -------- --------
Total non-performing assets $ 14,786 $ 12,501 $ 3,908
Non-performing assets to total
assets (c) 2.20% 1.83% 0.60%
Allowance for loan losses to
non-performing loans 60% 67% 153%
Troubled debt restructured loans $ -- $ 272 $ 2,462
CAPITAL RATIOS:
Tier 1 leverage capital 13.07% 10.28% 10.53%
Tier 1 risk based capital 15.47% 12.37% 12.39%
Total risk based capital 16.73% 13.62% 13.49%
BOOK VALUES:
Book value per common share (d) $ 10.58 $ 10.74 $ 10.84
Book value per common share (e) $ 11.16 $ 11.34 $ 11.50
Tangible book value per common
share (d) (f) $ 9.65 $ 9.79 $ 9.86
Tangible book value per common
share (e) (f) $ 10.17 $ 10.34 $ 10.46
(a) Annualized
(b) Calculation excludes the OTTI charge incurred the quarter ended
December 31, 2008. The efficiency ratio including the OTTI charge was
75.13% for the quarter ended December 31, 2008.
(c) Non-performing assets include non-accrual loans, other real estate
owned and other repossessed assets
(d) Calculation includes ESOP shares not committed to be released
(e) Calculation excludes ESOP shares not committed to be released
(f) Calculation subtracts goodwill and core deposit intangible from the
equity component
AVERAGE BALANCE SHEET: Three Months Ended
----------------------------------
Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007
-------- -------- --------
Average total loans $564,782 $564,145 $538,284
Average total interest earning assets 617,284 626,574 602,628
Average total assets 663,339 674,354 650,893
Average total interest bearing deposits 430,259 438,496 411,766
Average FHLB advances and other
borrowings 100,436 106,074 106,937
Average shareholders' equity 76,702 74,803 75,002Disclaimer
This report contains certain "forward-looking statements." The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protection of such safe harbor with forward looking statements. These forward-looking statements may describe future plans or strategies and include the Company's expectations of future financial results. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated objectives. These risk factors include but are not limited to the effect of interest rate changes, competition in the financial services market for both deposits and loans as well as regional and general economic conditions. The words "believe," "expect," "anticipate," "estimate," "project," and similar expressions identify forward-looking statements. The Company's ability to predict results or the effect of future plans or strategies is inherently uncertain and undue reliance should not be placed on such statements.
Contact:
Contact:
Michael R. Sand
President & CEO
Dean J. Brydon
CFO
(360) 533-4747
http://www.timberlandbank.com
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